We have repeatedly discussed in this space the ongoing debate among the federal courts about ascertainability—a red-hot topic in class action litigation these days. (For a more detailed look at our views on the ascertainability doctrine, see the amicus brief (pdf) that we filed on behalf of the National Association of Manufacturers in support of a pending cert petition.) That topic—and the debate among the lower courts—shows no sign of slowing down, as evidenced by new decisions issued by the Second, Sixth, and Third Circuits over the past two months. The central takeaway from these decisions is that while ascertainability is not a panacea for defendants facing consumer class actions, the doctrine (or variations on the ascertainability theme) should help defeat class actions in many circuits when class members cannot be identified without individualized inquiries.
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.
The Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed.
At its conference on January 10, the Supreme Court can get serious about fixing consumer class actions. The Justices should take up that challenge, because it will consider two certiorari petitions that seek review of class certifications—involving alleged “moldy odors” in high-tech front loading washing machines—that are prime examples of what has gone wrong with the lower federal courts’ application of Rule 23. We’re somewhat biased: along with our partner Steve Shapiro and our co-counsel at Wheeler Trigg, we represent the petitioners in Whirlpool Corporation v. Glazer, No. 13-431, and Sears, Roebuck & Co. v. Butler, No. 13-430; copies of our cert petitions are available here, and our reply is available here (pdf).
But we and our clients are by no means alone in thinking that these cases present excellent vehicles for the Justices to bring more rigor and fairness to the application of Rule 23(a) and (b)(3). A bevy of amici has filed briefs in support of certiorari, explaining to the Court why the technology industry, appliance and other manufacturers, retailers, and U.S. businesses in general need the Court to intervene. Commentators too have seen in these cases the chance for the Supreme Court to clean up the class action mess. See, for example:
- this op-ed in the Wall Street Journal by Governor John Engler, President of the Business Roundtable (subscription required);
- this editorial in the Washington Examiner;
- this article in the New York Law Journal by Michael Hoenig (subscription required); and
- this piece by Desmond Hogan and Erica Songer in InsideCounsel.
In Whirlpool, plaintiffs allege that Whirlpool front-loading washing machines have a design defect that makes it possible for the machines to produce moldy odors. In Sears, the plaintiffs allege that Kenmore-brand washers made by Whirlpool have the same design defect and that some also have a manufacturing defect that on occasion may produce a false error code. In both cases, the alleged odor and error-code issues have manifested for only a tiny portion of purchasers—less than five percent according to Whirlpool and Sears service records and independent surveys by Consumer Reports. Yet the Sixth Circuit in Whirlpool approved certification of a class of all Ohio residents who bought 21 differently designed washing machine models. And the Seventh Circuit did the same in Sears for a class of buyers of 27 different models in six different States, the relevant laws of which vary. Over the course of the class period not only did the design of the machines change, but so did the instructions given to consumers to protect against any moldy odors. Individual owners used their machines differently, cared for them differently, and operated them in varied conditions.
As we explain in our briefs, both courts of appeals ignored a raft of individualized issues that make it impossible for plaintiffs to satisfy the class-certification requirement that common issues predominate over individual ones. Only class-member-specific inquiries could determine the crucial questions of whether any particular buyer experienced the alleged issues with moldy odors or error codes at all, whether the alleged defect or other factors caused any such issues, whether the buyer followed care and use instructions, whether problems manifested during the warranty period, whether the buyer requested and received adequate warranty service, and whether any damages resulted from any alleged defect (among other questions). And the fact that the certified classes are filled with uninjured buyers fatally undermines constitutional standing to litigate the class claims and threatens to unfairly dilute the rights of the few class members who may actually have injuries.
The harms caused by the decisions of the Sixth and Seventh Circuits are not limited to the violence those decisions have done to Rule 23’s requirements. Indeed, the adverse social and economic consequences of certification of these sorts of cases cannot be overstated. The introduction of front-loading washers reflected years of innovation to improve water- and electrical-efficiency in response to regulatory mandates. Independent testing shows that front-loading washers perform very well both on those measures and on cleaning capability. Yet every manufacturer of front-loading washers is now the subject of class actions across the Nation.
Massive class action litigation of this sort is immensely costly. Those costs end up being absorbed by consumers. Class suits over products that for the vast majority of owners perform as advertised undermine the generous warranty programs that manufacturers and retailers offer to quickly address problems actually experienced by individual customers. And they deter innovation. Any manufacturer must think twice before creating an innovative product when the reward is an onslaught of class litigation. What technologically advanced new product does not have glitches or sporadic issues? That is what warranty programs are designed for—to keep customers happy and coming back despite the likelihood of teething troubles in advanced, innovative products that make all our lives better.
Of course, the Supreme Court has tried before to bring more rigor to Rule 23 analysis—but many lower federal courts have ignored the message. Take the Sears case, in which the Seventh Circuit thumbed its nose at a litany of Supreme Court precedents. After the Supreme Court GVR’d the Seventh Circuit’s initial certification decision in light of Comcast Corp. v. Behrend, Judge Posner seemed perplexed about why his ruling had been vacated. Despite the GVR, he concluded that there was “no possibility” that the holding in Comcast could apply. And although the Supreme Court in Wal-Mart Stores, Inc. v. Dukes ruled that “common answers,” not “common questions,” are the key to satisfying the Rule 23(a) commonalty requirement, Judge Posner wrote that asking for “common answers” would place too “heavy” a burden on plaintiffs to justify certification. And why the stretch to certify? Because, in his view, individual claims would be too “meager” to make “suing worthwhile.” But that “ends-justifies-the-means” rationale for class actions runs counter to the Supreme Court’s repeated teachings that substantive law cannot be modified to pave the way for employing the class device.
What explains this flouting of precedent? The Seventh Circuit’s realpolitik approach recognizes that once cases are certified they tend to “quickly settl[e]” without any adjudication of the merits and using some mechanical “schedule of damages”—a result the Seventh Circuit deemed “efficient” (never mind that the Supreme Court repeatedly has identified blackmail settlements as a problem, not a solution). Indeed, the Court has again and again admonished that “[t]he class action is ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only’”—as the Court said in both Dukes and Comcast. For that reason, Court said just last Term in American Express Co. v. Italian Colors Restaurant that Rule 23’s stringent requirements should “in practice exclude most claims” from class treatment; but federal trial and appeals courts still treat those requirements as authorizing class certification of “most claims.” So long as that departure from precedent continues, class actions will effectively impose a tax on every American, with the only beneficiaries being the plaintiffs’ bar, as a recent empirical study our colleagues conducted documents. Granting certiorari and reversing certification in the washer cases would go a long way indeed to putting the class action device back on track.
Today, Mayer Brown filed a pair of certiorari petitions that challenge efforts by two federal appellate courts to narrow the Supreme Court’s recent class-action decisions in Comcast Corp. v. Behrend and Wal-Mart Stores, Inc. v. Dukes to tickets good for a single ride only. The Supreme Court previously remanded both cases for reconsideration after Comcast, but both courts of appeals reinstated their decisions. The certiorari petitions explain why those decisions are wrong: both putative class actions are beset by individual liability and damages questions and are filled with uninjured class members.
In one case, Sears, Roebuck and Co. v. Butler (pdf), Sears challenges a Seventh Circuit decision allowing class actions to proceed based upon an allegation that Kenmore-brand front-loading clothes washers have a design defect that causes musty odors and a manufacturing defect that produces false error codes. In an opinion by Judge Posner, the Seventh Circuit ruled that the supposed efficiency of a class trial on the supposedly common “defect” issue justified class certification, even though only a small minority of class members experienced musty odors or false error codes, the suit raises numerous individual questions, claims are brought under the laws of six different states, and the supposedly common question would not yield common answers.
In the other case, Whirlpool Corporation v. Glazer (pdf), Whirlpool challenges a Sixth Circuit decision allowing a class action on behalf of Ohio residents based on allegations that Whirlpool front-loading clothes washers have a design defect that can cause moldy odors and that Whirlpool did not adequately warn buyers about the defect. The Sixth Circuit swept aside the many individual liability questions—including whether a class member was among the small percentage who experienced any moldy odors—by using a “premium price theory” never recognized by Ohio law that assumes that every purchaser paid a uniform overcharge regardless of the purchaser’s actual experience with the washer. One point is especially worthy of note: Even though the Supreme Court had vacated and remanded the original Sixth Circuit decision in light of Comcast, the Sixth Circuit’s opinion on remand focused far more heavily on a different Supreme Court precedent, Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, from the securities class action context.
These cases are of obvious importance to the growing number of suits seeking to litigate supposed product defects on behalf of all purchasers when the alleged defects have only manifested in a relative handful of products owned by a small fraction of putative class members. More broadly, the cases present the Supreme Court with an opportunity to clarify the confusion wrought by the Sixth and Seventh Circuit’s decisions over how to properly apply Comcast, Wal-Mart, and the Court’s other class-action decisions.
Before the Supreme Court’s decision last Term in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), the Ninth Circuit had held that a named plaintiff can continue to pursue a putative class action even after the defendant has extended that plaintiff an offer of judgment for the full individual relief sought in the complaint, including reasonable attorneys’ fees and costs. See Pitts v. Terrible Herbst, Inc., 653 F.3d 1081 (9th Cir. 2011). In a case that bears watching, a federal district judge in California recently certified for interlocutory review the question whether Pitts’s mootness holding remains good law. See Chen v. Allstate Ins. Co., No. 4:13-cv-00685-PJH (N.D. Cal. July 31, 2013).
The federal courts of appeals continue to scrutinize class-action settlements closely when the direct benefits to class members are overshadowed by the attorneys’ fees that flow to plaintiffs’ counsel. The most recent example is Greenberg v. Procter & Gamble Co. (pdf), No. 11-4156 (6th Cir. Aug. 2, 2013). In its decision, the Sixth Circuit provided guidance to practitioners regarding the fee awards and incentive payments to named plaintiffs.
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
The Fourth Circuit recently weighed in on a technical question involving the process for removing a case against multiple defendants to federal court—namely, whether every defendant must actually sign the notice of removal. The Fourth Circuit concluded that “[w]e can see no policy reason why removal in a multiple-defendant case cannot be accomplished by the filing of one paper signed by at least one attorney, representing that all defendants have consented to the removal.” Mayo v. Bd. of Educ., Nos. 11-1816, 11-2037 (4th Cir. Apr. 11, 2013).
The Fourth Circuit is correct. That said, at least some courts are apparently willing to impose pointless technical requirements despite the lack of justification. The fact that there’s a circuit split on this issue is a perfect example. In the wrong court, the failure to get all defendants in a multi-defendant case to confirm their consent to removal in the correct way can open a trapdoor through which the case will fall back into state court.
In most class actions, this issue does not arise because the Class Action Fairness Act (CAFA) allows a single defendant to remove a qualifying class or mass action even without the other defendants’ consent. 28 U.S.C. § 1453(b). But CAFA isn’t always the basis for removal. Perhaps the lawsuit involves a federal question or satisfies the test for classic diversity jurisdiction, but doesn’t satisfy CAFA’s definition of a class or mass action or its $5 million amount-in-controversy requirement (or the defendant doesn’t want to have to demonstrate that at least $5 million is at stake). Or perhaps the class action falls into CAFA’s local-controversy or home-state exception. If so, the notice of removal must satisfy the requirement in 28 U.S.C. § 1446(b)(2) that “all defendants who have been properly joined and served must join in or consent to the removal of the action.” And typically that joinder or consent must be done no later than 30 days after the last-served defendant received the complaint. Id. § 1446(b)(2)(B)-(C).
Unfortunately, the removal statute doesn’t outline in detail how each defendant’s “consent” must be indicated. The Sixth and Ninth Circuits—now joined by the Fourth Circuit—agree that it’s enough for the filing defendant’s attorney to confirm in the notice of removal that all defendants consent. See Proctor v. Vishay Intertechnology Inc., 584 F.3d 1208, 1225 (9th Cir. 2009); Harper v. AutoAlliance Int’l, Inc., 392 F.3d 195, 201-02 (6th Cir. 2004). That rule makes perfect sense; Rule 11 and ethics rules make the signing attorney accountable for the truth of the representation that all defendants join in the removal.
But the Seventh Circuit some years ago adopted an apparently bright-line rule that “[a] petition for removal is deficient” unless “all served defendants * * * support the petition in writing, i.e., sign it.” Gossmeyer v. McDonald, 128 F.3d 481, 489 (7th Cir. 1997). And although the Fifth and Eighth Circuits don’t require every defendant to sign the notice of removal, they do call for “some timely filed written indication from each served defendant * * * that it has actually consented to” the removal. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262 n.11 (5th Cir. 1988); see also Pritchett v. Cottrell, Inc., 512 F.3d 1057, 1062 (8th Cir. 2008).
It’s difficult to imagine the need for that requirement. How often is there such a severe miscommunication between defendants that the lawyer filing the notice of removal mistakenly certifies that a defendant that prefers to stay in state court consents to removal? And of that tiny fraction of cases, in how many are the defendants that prefer to remain in state court so helpless or oblivious to the filing of the notice of removal that they can’t file an objection? Given the extreme remoteness of the risk of wrongful removal, it’s hard to see why courts should adopt a prophylactic rule requiring all defendants to sign the notice of removal or to file a written consent in order for a removal to be valid.
After all, that prophylactic rule isn’t costless. Just ask a defendant that is facing a motion to remand on the ground that not every co-defendant signed the notice of removal or filed a joiner within the 30-day limit. That’s what happened in Mayo—although the defendant school board certified in its notice of removal that it had consulted with its co-defendant, a union, and obtained its consent to removal, the union hadn’t also contemporaneously filed a separate joinder in the removal. Instead, the union simply dropped a footnote confirming the school board’s representation in its first substantive filing in federal court. Thankfully, the courts in that case saw reason and denied the motion to remand. But not every court would have done so—even though there is no doubt that all defendants in fact consented to removal.
A lot of money gets wasting litigating over senseless technicalities. The amount of time and effort that has been wasted in litigating the validity of removals because of the everyone-must-sign rule that a few circuits have adopted is just more money down the drain. Congress fixed some ambiguities in the removal statutes in the Federal Courts Jurisdiction and Venue Clarification Act of 2011 (pdf). Assuming that the Supreme Court doesn’t eventually resolve this issue, it is worth putting on the wish list for the next time Congress amends these statutes.
The Fair Labor Standards Act of 1938 (“FLSA”) permits an employee to file a “collective action” for damages against an employer individually and on behalf of other “similarly situated” employees who later choose to join the lawsuit. 29 U.S.C. § 216(b). In Genesis Healthcare Corp. v. Symczyk, before any other employee had opted to join the suit, the defendant made an offer of judgment to the named plaintiff for the full relief sought by her individual claims. Today, the Supreme Court held—by a 5-4 vote—that the district court had properly dismissed the FLSA collective action for lack of standing. Writing for the majority, Justice Thomas explained that once the offer of judgment had mooted the named plaintiff’s individual claims: “A straightforward application of well-settled mootness principles compels” the conclusion that the entire action “became moot, because she lacked any personal stake in representing” other employees, and thus there no longer was any “case or controversy” for decision, as required by Article III of the U.S. Constitution.
The court of appeals had reversed the dismissal, reasoning that to allow the defendant to “pick off” the named plaintiff with an offer of judgment before the collective action could be certified would “frustrate” the goals of FLSA collective-action provisions. In the Supreme Court, the majority rejected this argument because it rested on distinguishable cases involving class actions. In those cases, the majority explained, either it would be impossible for any other class member to pursue claims for injunctive relief if the class action were dismissed (because of the claims’ transitory nature) or the putative class already had acquired “independent legal status” before the offer of judgment was made. Neither is true of an FLSA collective action for damages that no other employee had yet joined.
The plaintiff also had relied on a statement in Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), criticizing the use of offers of judgment to “pick off” the named plaintiff in a class action before class certification. But the majority explained that Roper’s holding turned on the fact that the plaintiff in that case had a continuing interest in trying to reduce his share of attorneys’ fees by splitting them among an entire certified class. By contrast, in this case, the offer of judgment included the named plaintiff’s attorneys’ fees and thus “provided complete relief on [the plaintiff’s] individual claims.” Moreover, the majority suggested that Roper may have been abrogated by a later decision holding that an interest in seeking attorneys’ fees is insufficient to confer standing.
Justice Kagan, joined by Justices Ginsburg, Breyer and Sotomayor, dissented, taking issue with the majority’s reliance on what they saw as the lower courts’ “mistake” that the plaintiff’s claim was mooted by the unaccepted offer of judgment. The dissenters noted that the Court had simply assumed that the named plaintiff’s individual claims were moot because she had conceded that fact in the litigation. But because plaintiffs in future cases will not make the same concession, the dissenters contended that the Court’s holding was a “one-off” result involving a situation “that should never arise again.”
Symczyk is of substantial importance to any business that faces collective or class actions of any stripe. Despite the dissent’s assertion that the Court’s holding is limited to this case only, the logic of the Court’s decision applies to all FLSA collective actions—and potentially to class actions in general. Symczyk thus promises to give businesses a powerful method of settling named plaintiffs’ claims in the context of meritless collective and class actions. If a business is willing to pay the named plaintiff’s demand in full at the very outset of the case, the Supreme Court’s decision suggests that a plaintiff may be barred from pursuing a collective or class action and subjecting the business to the enormous costs of class-wide discovery in an effort to coerce a settlement.
Plaintiffs in future cases can be expected to argue, as did the dissent, that such an offer of judgment does not moot their individual claims. Defendants may wish to point out that, in a footnote, the majority signaled that although it was not reaching the issue, if it did, it likely would agree with the unanimous conclusion of the courts of appeals that such an offer does have that effect. See Szymczak, slip op. at 6 n.4 (citing O’Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 575 (6th Cir. 2009); McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir. 2005); Weiss v. Regal Collections, 385 F.3d 337, 340 (3d Cir. 2004); Greisz v. Household Bank (Ill.), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999)). Defendants also can defend that conclusion by explaining that, as a matter of first principles, there is no Article III case or controversy for the court to resolve if the defendant is willing to agree to the relief the plaintiff seeks.
In any event, defendants should remain aware that making an offer of judgment to a named plaintiff to moot a collective or class action likely would not impede any government enforcement action based on the underlying allegations.