Can you have a class action if class members can’t reliably be found? That question is at the heart of the debate over ascertainability—one that has divided the federal courts. Earlier this week, the Ninth Circuit weighed in, holding in Briseno v. ConAgra Foods, Inc. (pdf) that plaintiffs need not demonstrate “an administratively feasible way to identify class members [as] a prerequisite to class certification.”

That conclusion is disappointing.

Continue Reading Ninth Circuit rejects meaningful ascertainability requirement for class certification, cementing deep circuit split

One of the hottest areas in class actions is litigation under the Telephone Consumer Protection Act (TCPA).  And one of the most significant issues in TCPA litigation is the existence and scope of vicarious liability.  The key question is to what extent are businesses liable for the actions of third-party marketers who, without the consent of the recipient, send text messages or place calls using autodialers or prerecorded voices or transmit faxes?

Some plaintiffs had argued that businesses are strictly liable for TCPA violations committed in their name by third-party marketers.  Last year, the FCC rejected that approach in a declaratory ruling.  As we explained in our report, the FCC instead concluded that plaintiffs instead must prove liability under “federal common law principles of agency.”

But that declaratory ruling was decided in the context of telemarketing.  Should the same rule apply to alleged TCPA violations involving unsolicited marketing faxes?  Can plaintiffs revive their old arguments that businesses are strictly liable for faxes advertising their services sent by others?  Or are businesses not liable for TCPA violations that they themselves don’t commit?

The Eleventh Circuit recently considered this issue in Palm Beach Golf Center-Boca, Inc. v. John G. Sarris, D.D.S., P.A.  In that case, a marketer had allegedly sent several thousand unsolicited faxes advertising the services of a dental practice.  When a recipient of a fax sued the dental practice under the TCPA, the district court granted summary judgment in part because the plaintiff had failed to show that the dental practice was vicariously liable for the marketers actions.

The Eleventh Circuit reversed.  The court explained that the FCC’s prior declaratory ruling that the limited scope of vicarious liability for TCPA violations applied only to telemarketing calls.  But rather than decide what the vicarious-liability standard should be for faxes, the court held—based on a letter brief (pdf) submitted by the FCC—that the recipient of the fax didn’t need to prove vicarious liability at all.  Instead, the court held that  the dental practice could be viewed as the sender itself and therefore the recipient could attempt to show that the dental practice had directly violated the TCPA itself.

That result is hard to swallow.  The dental practice, after all, hadn’t actually sent any faxes itself.  And although it had hired the marketer, the evidence presented to the district court apparently showed that the dental practice had no direct role in the fax campaign—it didn’t decide to whom to send faxes or even approve the final language of the fax itself.  And it certainly didn’t press the button to send the faxes.

Nonetheless, the court held—based on the FCC’s letter brief—that the recipient of the fax could proceed to trial on the theory that the dental practice had committed a direct violation of the TCPA.  The TCPA makes it unlawful “to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.”  Under a natural reading of this language, one would think that the dental practice itself neither “use[d]” a fax machine nor “sen[t]” a fax.  But in the FCC’s view, a business is the “send[er]” of a fax transmitted by a third party so long as the fax was either sent on the business’s “behalf” or if the fax “advertise[s] or promote[s]” the business’s “goods or service.”

The FCC’s position conflates direct and vicarious liability for alleged TCPA violations involving faxes.  There are accordingly strong reasons to think that other courts should refuse to defer to the FCC’s interpretation.  That said, businesses whose marketing activities may include third-party fax campaigns should be aware of the potential that courts will, like the Eleventh Circuit in Palm Beach Golf Center, adopt the FCC’s position and authorize claims for direct liability under the TCPA.

Over the years, the plaintiffs’ bar has used a wide variety of stratagems to try to prevent defendants from removing class actions to federal court. We’ve previously blogged about several of them. A recent Eleventh Circuit decision addresses yet another page from the plaintiffs’ playbook.

Defendants often can remove significant class actions under the Class Action Fairness Act (CAFA) when there is at least minimal diversity of parties and the amount in controversy exceeds $5 million. In South Florida Wellness, Inc. v. Allstate Insurance Co. (pdf), the plaintiffs tried to prevent the defendant from satisfying CAFA’s $5 million amount-in-controversy requirement by suing for only a classwide declaratory judgment. The plaintiffs’ theory of liability apparently would have put roughly $68 million at stake—the difference between the formula for reimbursement that the defendant insurance company had used and the formula the plaintiffs alleged should have been used. But the plaintiffs argued that because they weren’t directly seeking money damages, it would be “too speculative” to value the declaratory relief at issue as exceeding CAFA’s $5 million threshold; not every class member necessarily would capitalize on the declaratory judgment, the plaintiffs contended.

The district court agreed with the plaintiffs’ argument and remanded the case. But the Eleventh Circuit reversed, holding that the value of the declaratory judgment sought could be calculated concretely enough. The appropriate touchstone for that value is “how much will be put at issue,” not the expected value of the plaintiff’s claims “discounted by the chance[s] that the plaintiffs will lose on the merits,” that “the putative class will not be certified, or that some of the unnamed class members will opt out.” “[F]or amount in controversy purposes,” the Eleventh Circuit reaffirmed, “the value of injunctive or declaratory relief is the value of the object of the litigation measured from the plaintiff’s perspective.”

The defendant insurance company had offered unrebutted evidence that the difference between the amount in claims that it in fact had paid to class members and the amount that class members could receive if the theory outlined in plaintiffs’ complaint was entirely successful was $68 million. That calculation, the Eleventh Circuit held, satisfied CAFA’s $5 million amount-in-controversy requirement. In so holding, the Eleventh Circuit rejected the plaintiffs’ contention that the additional steps needed to convert the declaratory judgment into dollars in each class member’s pockets—i.e., mailing a demand letter and potentially filing a lawsuit supported by proof on some elements—made the value of the declaratory judgment too speculative for removal purposes.

The Eleventh Circuit’s decision in South Florida Wellness should be helpful to businesses trying to remove class actions that seek only declaratory relief. In fact, the court’s reminder that CAFA’s amount-in-controversy requirement looks to the maximum potential value of the claims rather than the discounted expected value following litigation should be helpful in explaining why removal is proper under CAFA in cases seeking all kinds of relief.

Plaintiffs routinely bring consumer class actions under statutes that allow only consumers—not businesses—to bring claims, or that are limited to transactions solely for personal or household purposes. See, e.g., Electronic Funds Transfer Act, 15 U.S.C. § 1693a(2); Real Estate Settlement Procedures Act, 12 U.S.C. § 2606(a)(1); California’s Consumer Legal Remedies Act, Cal. Civ. Code § 1780. But in some cases, the “consumer” requirement can be the Achilles’ heel for class certification. If it is difficult to determine whether a particular customer is a “consumer” without individualized inquiries, a proposed class action may flunk the predominance, ascertainability, and manageability requirements for class certification.

For example, in a recent zip-code class action, Leebove v. Wal-Mart Stores, Inc., the retailer was accused of improperly requiring customers paying by credit card to provide their phone numbers and addresses in violation of California’s Song-Beverly Credit Card Act. But that statute creates a private right of action only for a “natural person to whom a credit card is issued for consumer credit purposes.” Cal. Civ. Code § 1747.02(d). Business entities and people who use corporate credit cards are not eligible to sue.

That fact was crucial for defeating class certification in Leebove. As the court explained, “before liability could be established with respect to each class member, individualized proof regarding whether each class member’s credit card was issued as a consumer or as a business card would have to be produced.” Although the court also identified other defects in the proposed class, the need for mini-trials as to whether each class member qualified as a “consumer” under the statute was key to the court’s holding that the plaintiffs had failed to establish predominance.

There should be many other opportunities to make this kind of argument either in opposing a motion for class certification or in moving to strike class allegations at the very outset of the case. Here are some ideas (and helpful authority):

  • If the class is defined to include only consumers, does the need for individualized inquiries into whether a purchaser qualifies as a consumer or a business render the class non-ascertainable? See, e.g., Walewski v. Zenimax Media, Inc., 502 F. App’x 857, 861 (11th Cir. 2012).
  • Alternatively, is the class overbroad because it includes businesses? See, e.g., Mazur v. eBay Inc., 257 F.R.D. 563, 567 (N.D. Cal. 2009).
  • Or is the question whether the putative class member qualifies as a consumer so individualized as to either defeat predominance or make a classwide trial unmanageable? See, e.g., Kennedy v. Natural Balance Pet Foods (pdf), 361 F. App’x 785, 787 (9th Cir. 2010); Johnson v. Harley-Davidson Motor Co. Group, LLC (pdf), 285 F.R.D. 573, 583 (E.D. Cal. 2012); Ballard v. Branch Banking & Trust Co., 284 F.R.D. 9, 13-16 (D.D.C. 2012); Ewert v. eBay Inc., 2010 WL 4269259, at *9 (N.D. Cal. Oct. 25, 2010).
  • Finally, if the named plaintiff himself or herself arguably is not a “consumer” under the applicable law, are his or her claims typical of those of the absent class members? See, e.g., Aberdeen v. Toyota Motor Sales, U.S.A. (pdf), 2009 WL 7715964, at *6 (C.D. Cal. June 23, 2009), aff’d in relevant part, 422 F. App’x 617 (9th Cir. 2011).


The Class Action Fairness Act of 2005 (“CAFA”) provides that defendants may remove certain mass actions—cases that are proposed to be tried jointly—so long as the aggregate amount at stake is at least $5 million and there are 100 or more plaintiffs in the case. 28 U.S.C. § 1332(d)(11). But what if plaintiffs’ counsel try to avoid removal by splitting up a 100-plaintiff mass action into two smaller mass actions?

That was the situation facing Carnival. After a cruise ship ran aground off the coast of Italy, plaintiffs’ lawyers filed a mass action in state court on behalf of 39 plaintiffs. When an additional 65 plaintiffs indicated an intent to join that action—which would nudge it across the 100-plaintiff threshold for removal under CAFA—the plaintiffs voluntarily dismissed that action. The plaintiffs then re-filed two new mass actions in state court: one on behalf of 56 plaintiffs, and one on behalf of 48 plaintiffs. The two suits appeared to turn on common questions of law or fact, and otherwise seemed to satisfy CAFA’s mass-action removal provisions if taken together. So Carnival removed them to federal court.

The federal district court, however, granted the plaintiffs’ motion to remand. And the Eleventh Circuit recently affirmed. Scimone v. Carnival Corp. (pdf), No. 13-12291.

The Eleventh Circuit concluded that “the plain language of CAFA” deprived the district court of “subject-matter jurisdiction over the plaintiffs’ two separate actions unless they proposed to try 100 or more persons’ claims jointly.” But the plaintiffs asserted that they intended to try the two batches of related claims in two separate trials. CAFA itself bars the defendant from creating jurisdiction by proposing a single joint trial. And the state trial judge hadn’t consolidated the two actions. That was enough to require a remand, the Eleventh Circuit reasoned, even though the plaintiffs were clearly engaged in jurisdictional maneuvering in splitting up the plaintiffs between two mass actions. For example, some plaintiffs who were traveling on the cruise on the same ticket were split up between the two actions. The idea that the plaintiffs would really try their claims separately is hard to swallow.

The Eleventh Circuit isn’t alone in taking a literalist approach. Three other circuits have also allowed plaintiffs’ lawyers to avoid the removal of 100-plaintiff mass actions by splitting up their clients among multiple smaller actions. See Abrahamsen v. ConocoPhillips, Co., 503 F. App’x 157, 160 (3d Cir. 2012); Anderson v. Bayer Corp., 610 F.3d 390, 392 (7th Cir. 2010); Tanoh v. Dow Chem. Co., 561 F.3d 945, 950-51 (9th Cir. 2009).

But are these decisions consistent with the principle that plaintiffs’ artful pleading can’t eliminate federal jurisdiction and CAFA’s purpose of ensuring a federal forum for significant class and mass actions? After all, even if plaintiffs stick to their story and never move to consolidate the cases as a formal matter, they nonetheless would effectively be tried jointly because the judgment in the first action might well have preclusive effect on the trial in the second action, which surely would be presided over by the same judge and involve similar witnesses and evidence.

We’re reminded of Chief Justice Roberts’s hypothetical during oral argument in Standard Fire Insurance Co. v. Knowles, which involved a related problem under CAFA’s class-action removal provisions—whether a defendant can remove a class action when the plaintiff stipulates that the case is worth less than CAFA’s $5 million amount-in-controversy threshold. Chief Justice Roberts asked plaintiffs’ counsel: “What if you had a case where a lawyer brings an action in Miller County and says: I want to represent the class of people with these claims and these claims, whose names begin with A to K. It turns out that’s $4 million. And in the next county, at the same time, he files a case saying, I’d like to represent these people whose names begin L to Z. In each of those cases, it’s $4 million. I take it you don’t have any objection to that?” Knowles’ counsel responded that “for federal jurisdiction purposes . . . that kind of legal strategy is perfectly appropriate. . . .” This answer caused Justice Breyer to remark that an artificial limit on the amount of damages claimed “is just a loophole because it swallows up all of Congress’s statute . . . we have 30 or 40 or $50 million cases being tried in whatever counties Congress liked the least . . . .” Justice Breyer wondered whether to avoid such a “mechanical method of avoiding the purpose of the statute,” the Court should adopt a reading of CAFA that “you should aggregate the real value” of the claims “that the class is likely to have.”

And that is ultimately what the Court did in Knowles, in an opinion by Justice Breyer that explained that subdividing “a $100 million action into 21 just-below-$5-million state-court actions” would “squarely conflict” with CAFA’s objectives. Shouldn’t the courts take a similarly pragmatic approach to the mass-action removal provisions of CAFA? Otherwise, as Justice Breyer observed during argument in Knowles, “all that is required” to avoid the federal forum that Congress intended to provide “is a few extra pieces of paper that will soon become standardized, and a lot of postage stamps.”

A quick tip to employers facing class actions brought by the Equal Employment Opportunity Commission (EEOC)—don’t forget about the EEOC’s statutory duty to investigate the claim before filing suit.

Before the EEOC may file a lawsuit, an employee must have made a timely charge of discrimination of which the EEOC timely notified the employer and the EEOC must have investigated the charge, determined that there was reasonable cause to sue, and attempted conciliation with the employer. 42 U.S.C. § 2000e-5(b), (e).

Courts generally have rejected attempts by employers to call into question the sufficiency of the EEOC’s pre-suit investigation. See, e.g., EEOC v. Keco Indus., Inc., 748 F.2d 1097 (6th Cir. 1984). But a district court recently authorized a Rule 30(b)(6) deposition of the EEOC to determine whether the EEOC actually investigated the charge of discrimination at all before filing a class action. See EEOC v. Grane Healthcare Co., No. 3:10-cv-250 (W.D. Pa. Mar. 15, 2013). If the EEOC has failed to satisfy its pre-suit obligations, courts have the discretion to dismiss the case—in fact, the Eleventh Circuit has upheld an award of attorneys’ fees and costs to the defendant in one such case. See EEOC v. Asplundh Tree Expert Co., 340 F.3d 1256 (11th Cir. 2003).

The next time you’re facing a dubious EEOC class action, remember that you can ask the EEOC whether it did its homework before filing suit. And if it didn’t, you may be able to get the lawsuit bounced before having to spend the money on a full-blown summary-judgment motion

Plaintiffs who wish to bring product-liability and consumer-fraud class actions against businesses often overreach when defining the proposed class in order to raise the stakes—and hence the settlement pressure—on the defendant.  A recent unpublished decision by the Eleventh Circuit, Walewski v. Zenimax Media, Inc. (pdf), No. 12-11843, is yet another example of the growing consensus rejecting these overly broad putative classes.

In Walewski, a Florida purchaser of a fantasy video game (Elder Scrolls IV: Oblivion) alleged that after he had played the game for 450 hours, a software defect prevented him from “cast[ing] spells,” “open[ing] doors and gates,” or taking other in-game actions.  In response, the disappointed wizard conjured a class-action lawsuit in federal court, in which he purported to sue on behalf of all purchasers nationwide.  In an attempt to cloak the individualized nature of the claims and defenses implicated by his allegations, he argued that the company’s failure to disclose the alleged glitch gives every purchaser a fraud claim for having overpaid for the game, even if the glitch never manifested in that customer’s game.  And by suing only under the law of Maryland—the state in which the game manufacturer is located—he sought to sidestep the numerous individualized issues that would be raised by the varying consumer-protection laws of the other 49 states.

Members of the plaintiffs’ bar often try these tactics when bringing consumer class actions against manufacturers.  But an increasing number of courts are rejecting them—with last year’s landmark Ninth Circuit decision in Mazza v. American Honda Motor Co.(pdf), which was briefed and argued by my colleague Don Falk, being a prime example.  (Here is our report on Mazza.)  The Eleventh Circuit is now part of that chorus.

In Walewski, the Eleventh Circuit affirmed the district court’s denial of class certification, pointing out several defects in the class action.  For example, the attempt to apply Maryland law nationwide failed as to the named plaintiff himself:  Because the plaintiff was a Florida resident who purchased and played the game in Florida (and thus would have been exposed to the alleged misrepresentations and injury there), the court held that Florida law governs his claims.  Similarly, the court determined, the varying laws of all 50 states would govern the laws of the putative class members from those states, which precludes the plaintiff from showing (as he must under Rule 23(b)(3)) that common issues predominate over individualized ones.  In addition, the class definition was overbroad because it included purchasers who (for a number of different reasons) had not experienced the claimed defect or been exposed to the alleged misrepresentations.

Together with Mazza, Walewski is a powerful antidote to the curse of nationwide class actions seeking application of the law of the state of the defendant’s place of business.  And it likewise should help in defending against the dark art of recharacterizing inherently individualized product-liability and warranty claims as false-advertising claims for loss in the economic value of the product.

Although the class action bar in general is eagerly awaiting the Supreme Court argument in Comcast Corp. v. Behrend (No. 11-864)—which will be argued November 5th—antitrust practitioners in particular have a keen interest in the case. The issue presented is whether a district court may certify a class action without first resolving whether an expert witness’s testimony that the case can be tried on a class-wide basis passes muster under Daubert, the standard for admissibility at trial.
Continue Reading Comcast Corp. v. Behrend: Upcoming Supreme Court Case Is Critical to Antitrust Class Actions

Since the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, the Eleventh Circuit has consistently enforced agreements to arbitrate with class waivers. Earlier this week, it did so again in a case involving Sprint’s arbitration agreement in its service contracts. See Pendergast v. Sprint Nextel Corp. (pdf), No. 09-10612 (11th Cir. Aug. 20, 2012).

Businesses should pay close attention to Pendergast for two reasons. First, the decision closes a door that—at least according to some plaintiffs—had been left wide open in the Eleventh Circuit. Specifically, the Eleventh Circuit issued the first post-Concepcion federal appellate decision in Cruz v. Cingular Wireless LLC (pdf), 648 F.3d 1205 (11th Cir. 2011) (pdf), which involved the same AT&T Mobility provision upheld in Concepcion. Plaintiffs thus argued that Cruz did not apply to arbitration clauses that lacked the pro-consumer incentives of AT&T’s arbitration provision. See Concepcion, 131 S. Ct. at 1753 & n.3. Because the Sprint provision at issue in Pendergast does not contain similar features, Pendergast makes clear that Concepcion and Cruz extend to a broad array of arbitration agreements with class waivers.

Second, Pendergast rejects the attack on arbitration agreements that is currently in vogue among the plaintiffs’ bar: that without the class action device, a plaintiff will not be able to “effectively vindicate” his or her statutory rights. At the eleventh hour—or, to be more precise, just a few weeks before the Eleventh Circuit issued its opinion— the plaintiff filed a motion (pdf) attempting to invoke In re American Express Merchants Litigation (pdf), 667 F.3d 204 (2d Cir. 2012) (“Amex III”). In Amex III, the Second Circuit refused to enforce the arbitration provision in the agreements between the plaintiff and American Express after concluding that the plaintiffs could not vindicate their federal antitrust claims on an individual basis in arbitration. (Please see our more detailed reports on the Amex III decision (pdf) and the Second Circuit’s denial of rehearing en banc (pdf).) By enforcing Sprint’s arbitration clause, the Eleventh Circuit’s decision tacitly rejects the plaintiff’s attempt to invoke this “vindication of statutory rights theory” in the context of Florida’s consumer-protection statute.

Continue Reading Pendergast v. Sprint: Eleventh Circuit Holds That Federal Arbitration Act Preempts State-Law Attacks On Class-Action Waiver In Sprint’s Arbitration Agreement