Class action defendants usually prefer to have their cases heard in federal court, where the protections of Federal Rule of Civil Procedure 23 apply and where courts and juries are less likely to disfavor an out-of-state business. And as every class action defense lawyer knows, the Class Action Fairness Act of 2005 (“CAFA”) puts a significant thumb on the scale in favor of having large class actions heard in federal court, allowing for removal of most class actions in which the amount in controversy exceeds $5 million and there is minimal diversity of citizenship between the defendants and the members of the putative class. But how should CAFA apply when one business sues a consumer and the consumer files as a counterclaim a class action against a different business? Today, the Supreme Court heard oral arguments in Home Depot U.S.A., Inc. v. Jackson, a case presenting that question. (One of us attended the oral argument.)
On December 1, 2018, the amendments to the Federal Rule of Civil Procedure 23 took effect. These amendments primarily alter rules governing federal class action notice, settlement, and appeal. The following is an overview of key changes.
Plaintiffs frequently seek to certify class actions where the proposed classes contain a significant number of uninjured persons. The First Circuit recently reversed the certification of such a class in In re Asacol Antitrust Litigation, concluding that a class cannot be certified where the “individual inquiries” necessary to resolve whether each class member has suffered an injury-in-fact “overwhelm common issues.” When such inquiries are needed to ensure that a defendant’s due process and jury trial rights are honored, a plaintiff cannot satisfy Rule 23(b)(3)’s predominance requirement. The court also rejected the plaintiff’s proposal to outsource these individualized inquiries to claims administrators.
We discuss the opinion in detail after the jump, but here are key takeaways for busy readers:
- The decision explains why a proposed damages class likely fails the predominance test—and therefore cannot be certified—if there are more than a negligible number of uninjured class members and there is no administratively feasible way to weed out those uninjured class members without individualized inquiries.
- The use of affidavits by class members to establish injury (or any other element of their claim) does not suffice to avoid individualized inquiries so long as the defendant plans to contest those affidavits, because a class cannot be certified on the premise that a defendant will not be entitled to challenge a class member’s ability to prove the elements of his or her claim.
- Policy justifications for consumer class actions cannot relax the requirements of Rule 23 or defendants’ due process and jury trial rights.
The Supreme Court kicked off its October 2017 Term yesterday with a spirited oral argument in the three cases involving the enforceability of arbitration agreements in employment contracts.
As we have explained, these cases—Epic Systems v. Lewis, Ernst & Young LLP v. Morris, and NLRB v. Murphy Oil USA—present the question whether an arbitration agreement in an employment contract that requires bilateral arbitration, and prohibits class procedures, is invalidated by Section 7 of the National Labor Relations Act (NLRA), which gives employees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” According to the National Labor Relations Board, Section 7 protects employees’ right to seek relief on a class-wide basis, and therefore renders unenforceable arbitration agreements that bar class procedures—even though the Supreme Court has twice held that the Federal Arbitration Act (FAA) protects the enforceability of such agreements, in AT&T Mobility LLC v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013).
The four Justices who dissented in either Concepcion or Italian Colors (or both) aggressively defended the NLRB’s determination. When the dust settled, however, it was not at all clear that they will be able to attract a fifth Justice to their position.
Today’s decision by the Supreme Court in Microsoft Corp. v. Baker puts an end to a tactic used by plaintiffs in the Ninth Circuit to manufacture an immediate appeal of an order denying class certification. When a federal district court grants or denies class certification, Federal Rule of Civil Procedure 23(f) allows the losing party to ask the court of appeals for permission to appeal immediately. Otherwise, the parties must litigate the case to a final judgment—the named plaintiffs’ individual claims if certification has been denied, or the class claims if certification has been granted—to obtain appellate review of the district court’s class certification determination. But the Ninth Circuit created an exception to this rule by authorizing a plaintiff who has had class certification denied to dismiss his or her individual claims with prejudice and then file an appeal from that self-generated judgment.
After the oral arguments in Baker, it seemed likely that the Supreme Court would reject that exception. And that is exactly what the Court decided today. Much more interesting is how they got there: Although all eight participating Justices agreed on the outcome, they took different approaches to the question presented. Continue Reading Supreme Court rejects end runs around Rule 23(f) by use of “voluntary dismissal” tactic
The recent decision in Cholly v. Uptain Group, No. 15 C 5030, 2017 WL 449176 (N.D. Ill. Feb. 1, 2017), drives home the point—as we’ve discussed on the blog before—that sometimes the pleadings alone reveal that the requirements for class certification cannot possibly be met. In Cholly, the plaintiff alleged the defendant debt collector violated the Telephone Consumer Protection Act (“TCPA”) by calling her mobile phone using an automatic telephone dialing system (“ATDS”) after she had told the defendant to stop calling. The plaintiff sought to represent (i) a class of persons who received calls from the defendant where it did not have consent, and (ii) a subclass of persons who received calls after they revoked consent. But the district court struck all of the plaintiff’s class allegations under Federal Rule of Civil Procedure 12(f)—at the pleading stage and before discovery—and ordered that the case proceed on an individual basis.
At the outset, the court recognized that Rule 23(c)(1)(a) requires that it “determine whether to certify an action as a class action ‘[a]t an early practicable time’” and that a motion to strike class allegations under Rule 12(f) is an appropriate device to determine if the case will proceed as a class action. The court concluded that the plaintiff couldn’t satisfy the “typicality” requirement under Rule 23(a)(3) because she originally consented to the defendant’s calls and, thus, “cannot represent a class of persons who received calls from [the defendant] where [it] did not have express consent.”
The court held the plaintiff couldn’t represent the subclass either because she couldn’t meet the predominance requirement under Rule 23(b)(3). In particular, the court found that individual inquiries as to whether the putative class members revoked consent would predominate over any common questions of fact:
In order to determine whether each potential class member did in fact revoke his or her prior consent at the pertinent time, the [c]ourt would have to conduct class-members specific inquiries for each individual. The class members would not be able to present the same evidence that will suffice for each member to make a prima facie showing at the recipients of defendants’ telemarketing calls had validly revoked his or her prior consents.
The plaintiff has filed a petition for leave to appeal under Rule 23(f), and the Seventh Circuit directed the defendant to respond. We’ll report on any major developments.
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.
A peculiar thing happened after the Supreme Court announced its decision in Spokeo, Inc. v. Robins (pdf) on Monday.
Even though the Court ruled in favor of Spokeo—vacating the Ninth Circuit’s ruling that the plaintiff had standing to sue and holding that the court of appeals had applied a legal standard too generous to plaintiffs—both sides declared victory. (Full disclosure: I argued on behalf of Spokeo in the Supreme Court.)
What’s going on?
The Supreme Court on Tuesday heard oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that has been closely watched for its potential to narrow the circumstances in which a class action may be certified under Federal Rule of Civil Procedure 23 and a collective action for unpaid wages certified under the Fair Labor Standards Act (FLSA). We previously described this case in prior blog posts. One of us attended the argument, and the other closely reviewed the transcript (pdf). Our combined reaction: The anticipated decision in this case may focus on an FLSA issue and, if so, then it seems unlikely to mark a sea change in the rules governing Rule 23 class actions. Continue Reading Supreme Court Hears Argument in Tyson Foods v. Bouaphakeo—and a Blockbuster Class Certification Ruling Seems Less Likely
Can a named plaintiff press ahead with a class action if he or she “won’t take ‘yes’ for an answer”? That colorful question, which Chief Justice Roberts asked counsel for the respondent during oral arguments yesterday in Campbell-Ewald Co. v. Gomez, is at the heart of the debate over whether offers of judgment can moot class actions. By the end of the oral argument (pdf), it seemed clear that a number of the Justices were concerned about allowing a plaintiff whose individual claims would be fully satisfied by an offer of judgment to nonetheless invoke the machinery of the federal courts.