In February 2017, Representative Goodlatte introduced the Fairness in Class Action Litigation Act of 2017. The Act, as with its 2015 predecessor, covers a lot of ground. It permits certification of damages classes only where “each proposed class member suffered the same type and scope of injury.” It precludes certain conflicts of interest between class counsel and the named plaintiff. It resolves the Circuit split on ascertainability, adopting the view of the Third and Eleventh Circuits (and perhaps the First Circuit as well, as my colleague Katherine Kayatta recently noted) that the named plaintiff has the burden to show that identifying the class members is administratively feasible. It alters or creates certain procedural and disclosure requirements, such as giving a party an interlocutory appeal as of right of the class certification decision and staying all discovery during the pendency of certain motions. And it clarifies that Rule 23(c)(4) is an administrative tool for making class actions work, not a mechanism to permit evasion of the
On this blog, we have previously written about the growing split among the federal circuits concerning courts’ approaches to ascertainability. The Third Circuit, in a string of cases within the last five years, adopted a test requiring that class members must be identifiable without extensive and individualized fact-finding or “mini-trials,” and a plaintiff must present evidentiary support to demonstrate that a model it proposes to satisfy Rule 23’s requirements will be effective. The Eleventh Circuit in Karhu v. Vital Pharmaceutical, Inc. similarly found that a plaintiff must establish an administratively feasible method by which class members can be identified.
In Mullins v. Direct Digital, LLC, the Seventh Circuit rejected the Third Circuit’s approach, finding that the Third Circuit’s test was a “heightened” requirement above and beyond Rule 23’s requirements. The Seventh Circuit adopted a more lenient approach and looks only at whether a class can be ascertained by objective criteria, not whether there’s an administratively feasible way to identify
Last week, the Supreme Court consolidated and agreed to hear three appeals of Circuit Court decisions concerning whether class action waivers contained in employment arbitration agreements infringe on employees’ rights under Section 7 of the National Labor Relations Act. According to the schedule currently in place, briefing on these cases will commence in late February 2017. Unless a ninth Supreme Court justice is appointed, confirmed, and seated before oral argument in this consolidated appeal, the possibility of a 4-4 decision—and resulting preservation of the status quo–looms large.
Fifth Circuit Reaffirms Enforceability of Class Action Waivers in Employment Arbitration Agreements, But Their Fate Remains Unclear
Employers commonly use arbitration agreements to minimize the expense and exposure of employment-related claims. By mandating arbitration of employment disputes, they hope to ensure that these matters are resolved in a cost-effective and confidential manner. Many arbitration agreements go a step further, requiring employees to pursue their claims individually, and to waive their right to proceed on a class or collective basis. Unfortunately, the certainty employers have striven to achieve with such agreements has proven elusive in recent years, as the National Labor Relations Board (NLRB) and several courts have found that class action waivers violate employees’ rights.
Although the U.S. Supreme Court’s 2011 decision in AT&T Mobility LLC v. Concepcion upheld the enforceability of class action waivers in the consumer context, in the years since, the NLRB has repeatedly rejected the use of class action waivers in the employment context. In In re D.R. Horton, the NLRB held that class action waivers inherently infringe on employees’
On the May morning that the Supreme Court handed down its ruling in Spokeo, Inc. v. Robins, I was among those who read the case as a bellwether. The Spokeo appeal addressed a long-festering issue about whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm (and therefore cannot otherwise invoke federal jurisdiction) by authorizing a private right of action based on a bare violation of a federal statute. Spokeo is a Fair Credit Reporting Act (FCRA) case, but its standing issue infects many other statutory privacy cases. FCRA is part of a growing regime of statutes creating per-violation monetary penalties for consumers to pursue whenever a business strays from the particular statute’s procedural requirements. The Telephone Consumer Protection Act (TCPA), the Fair Debt Collection Practices Act (FDCPA), and the Fair and Accurate Credit Transactions Act (FACTA) are examples of the federal regime, while California’s Invasion of Privacy Act (CIPA) and Song-Beverly Act are two state
On November 30th, in Brown v. Saint-Gobain Performance Plastics Corp., United States District Judge Joseph Laplante of the District of New Hampshire denied plaintiffs’ motion to remand two related class action lawsuits based on allegations that defendants had caused a release of toxic chemicals from a manufacturing plant that contaminated nearby wells and water supplies. One lawsuit was brought on behalf of a putative class of current owners of residential properties with private groundwater wells within two miles of the manufacturing site, and sought damages for the alleged diminished values of their properties. The other lawsuit was brought on behalf of a putative class of current and former residents of such properties, and sought to recover the costs of medical monitoring. The defendants are the company that owns the plant and the individual plant manager. They removed the case to federal court under CAFA, and plaintiffs moved to remand, citing CAFA’s local controversy exception.
The local controversy exception requires district courts to decline
First Circuit Affirms Tough Standard for Alleging Securities Fraud; Revives One Claim Against Local Drug Maker
On November 28, 2016, the First Circuit upheld the dismissal of all but one of the class action securities fraud claims against Cambridge, MA drug company, ARIAD Pharmaceuticals, Inc., reaffirming the exacting pleading standards that enable defendants to put an early end to reflexive stock-drop lawsuits. In doing so, the First Circuit also adopted strict requirements for asserting claims that defendants misled investors in a common stock offering.
In In re ARIAD Pharmaceuticals, Inc. Securities Litigation, shareholder plaintiffs appealed the District of Massachusetts’ dismissal of the federal securities fraud claims against ARIAD based on optimistic statements the company’s executives made about the prospects of ARIAD’s experimental leukemia drug, ponatinib, which ultimately did not fare so well in FDA trials. The First Circuit largely affirmed the district court’s dismissal, holding that the complaint failed to raise a compelling inference that the company’s executives acted with scienter—or intent to defraud. The appellate court did, however, revive a claim related to “one particular alleged
One of the least disputed elements of class certification is Rule 23(a)(1) numerosity, and so there is relatively little analysis from the courts about it. Last month, however, a divided panel of the Third Circuit provided a detailed analysis of the purposes of numerosity and the factors that district courts should employ in making numerosity determinations. In doing so, the court has broken new ground, and its decision will likely be cited by other courts and parties for years to come.
Plaintiffs in In re: Modafinil Antitrust Litigation, No. 15-3475, 2016 WL 4757793 (3d Cir. Sept. 13, 2016) were direct wholesale purchasers of Provigil, a wakefulness-promoting agent used to treat narcolepsy and other sleep disorders. Defendant Cephalon owned the patent for modafinil and had FDA approval for the branded version. Plaintiffs alleged an antitrust conspiracy between Cephalon and the four generic modafinil manufacturers for entering into reverse-payment settlements. Plaintiffs also brought a monopoly claim against Cephalon.
The district court
Court Denies Uber Motion to Compel Arbitration of Class Antitrust Claims Because Mobile App’s Terms of Service Were Inconspicuous
Late last week, influential federal judge Jed Rakoff of the Southern District of New York denied a motion to compel arbitration of an antitrust class action complaint pending against ride-hailing pioneer Uber Technologies. The case, Meyer v. Kalanick and Uber Technologies, Inc., Case No. 15 Civ. 9796 (S.D.N.Y. July 29, 2016), may represent an installment in the pendulum swing against mandatory arbitration and class action waiver clauses in consumer contracts.
Uber’s mobile app contains a hyperlink to terms and conditions that include a mandatory arbitration clause. But Judge Rakoff, applying California law, ruled that consumers registering for Uber service were not obligated to visit or click through those terms in the app version at issue, and therefore never assented to arbitration. The court also found that Uber’s terms of service hyperlink was presented to Android users in “barely legible” fine print at the bottom of the screen, and that its arbitration clause was buried in “nine pages of highly legalistic
In 2014, we posted about the Massachusetts Supreme Judicial Court’s decision in Bellermann v. Fitchburg Gas & Electric Light Co. In that case, plaintiffs sought relief under the Massachusetts consumer protection statute, G.L. c. 93A, because of the defendant utility’s alleged failure properly to prepare and plan for a major winter storm, and its allegedly deceptive communications made to consumers before and during the storm. The SJC affirmed the trial court’s denial of class certification because plaintiffs could not establish that defendant’s conduct caused similar injury to consumers on a class-wide basis.
On remand, plaintiffs filed a renewed motion for class certification relying on a different liability theory – that they had suffered economic injury by overpaying for a level of emergency preparedness, required by Department of Public Utility regulations, which the defendant allegedly failed to provide. This time a different trial court judge certified two classes under this diminution-in-value theory (a business customers class and a residential customers class), but