CAFA, PART II?

Practice area:

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 class action requirements by seeking certification only of an “issue.”

If the bill passed in its current form, it would be almost certain to reduce the number of cases certified as class actions. The requirement that a damages class be certified only where the “type and scope of injury” is the same for all members of the class has gotten the most attention in this regard, with an active debate about whether the rule would effectively preclude any class action by requiring that all class members suffer an identical injury. It seems unlikely to me that many courts would interpret the language that way, but even a much less restrictive reading could be very helpful for defendants.

It would seem, for example, that the First Circuit’s 2015 In re Nexium decision would have come out differently under the Act. As we have previously noted, the First Circuit affirmed certification in that case based on a questionable conclusion that only a de minimis number of class members had suffered no injury at all. Even under the First Circuit’s analysis, the Court could not have found that “each” class member had suffered any injury at all, much less the same injury. And, since there was no apparent way to sort out the injured from the uninjured, certification would have been impermissible.

This change would have significant implications for many kinds of class actions. Product defect class actions are one prime example. In those cases, there has often been confusion about precisely what theory of liability and damages was being pursued and what the ramifications would be of a case under one theory going to judgment. That is, the named Plaintiff often asserted that he or she had an actual failed product but sought certification of a class that included all buyers whether or not the product had failed. The theory underlying such a broad request was that those people might be entitled to a refund of some or all of the purchase price paid regardless of whether the product had failed. Many courts have certified such claims, notwithstanding the serious problems posed by the fact that much (in many instances, most) of the product performed perfectly well. The Act would hopefully put an end to such overbroad cases.

Beyond these issues of injury and issue certification – which are likely to draw most of the attention – two seemingly unobjectionable procedural changes would also be of significant benefit to defendants. The right to appeal every class certification decision, combined with the rule ensuring that unnecessary and expensive discovery will not occur during the pendency of key motions, would significantly reduce the risk that a defendant is compelled to settle an unmeritorious case. And it is hard to see any significant reason not to make those changes. If the broader bill is not advanced in something close to its current form, the proponents ought to consider a narrower bill making some basic changes such as these.