Splitting the Difference: Recent Developments in Circuit Splits Over Class Action Lawsuits

It has been a busy summer for federal appellate courts deciding class action issues.  Amidst all the sound and fury, this summer’s decisions so far highlight two splits among the federal circuits, while also diminishing if not eliminating a third split on an issue that is currently before SCOTUS.  Here is a brief summary of the ebbs and flows.

Ascertainability.  Last week I posted about the Seventh Circuit’s July 28th decision in Mullins v. Direct Digital, LLC, in which the court expressly rejected the two-pronged approach to ascertainability adopted by the Third Circuit in a string of recent cases, most prominently Carrera v. Bayer Corp.  The Seventh Circuit favors a more lenient approach to ascertainability that looks only at whether class membership can be ascertained by objective criteria, and not at whether there is a reliable and administratively feasible way to identify class members.  It doesn’t entirely jettison the administrative feasibility test, however, but directs courts to evaluate the issue under the manageability factor of Rule 23(b)(3)’s superiority requirement.  Nevertheless, the two Circuits are now diametrically opposed on the implied requirement of ascertainability, leading one to wonder whether the issue will make its way to SCOTUS next term.

American Pipe Tolling.  In decisions issued one month apart, the Sixth and Eleventh Circuits highlight a pre-existing split on an aspect of American Pipe tolling that has been kicking around for quite some time.  American Pipe tolling is the doctrine, based on the 1974 Supreme Court decision of the same name and the Court’s 1983 decision in Crown, Cork & Seal Co. v. Parker, that holds that the claims of putative class members are tolled during the pendency of a putative class action encompassing their claims.  Some courts following these decisions have held that only individual claims are tolled, and that American Pipe does not permit the filing of subsequent class actions once the tolling ends and statutes of limitations have run.  Other courts have permitted successive class actions where the issue of class certification was not addressed in the earlier suit or, if it had been addressed, class certification was denied in the earlier case only because of a deficiency with the class representative.

In its July 7th decision in Phipps v. Wal-Mart Stores, Inc., the Sixth Circuit rejected a blanket rule that all follow-on class actions are barred despite American Pipe after a denial of class certification in the earlier filed caseThe case involved a complex procedural history.  Plaintiffs were members of the Rule 23(b)(2) employee class that the Ninth Circuit had approved in Dukes v. Wal-Mart Stores, Inc., but that decision was overturned by the Supreme Court.  The 6th Circuit recited a number of cases that had found that a follow-on class action could benefit from American Pipe tolling where the earlier case had been unsuccessful for a variety of reasons unrelated to any overall inappropriateness of class treatment.  It held that, because no prior decision had rejected Rule 23(b)(3) class treatment for these employees, and because Dukes had rejected certification of a nationwide (b)(2) class but not of a smaller, regional class, the follow-on class action was not barred.  In rejecting the blanket rule against follow-on class actions, the court focused on the principle underlying the American Pipe doctrine: to avoid creating an incentive for putative class members to file individual claims during the pendency of a not-yet-certified class action in order to preserve them.  It found that, on the facts presented, that principle would be undermined if the regional class action were deemed barred, and that applying American Pipe tolling to the plaintiffs’ claims would not result in an abuse of the doctrine.

Approximately one month later, on August 3rd, the Eleventh Circuit followed the blanket rule that the Sixth Circuit had disavowed.  In Ewing Industries Corp. v. Bob Wines Nursery, Inc., a Florida state court had entered summary judgment in favor of the defendant in a putative class action brought under the Telephone Consumer Protection Act.  The basis for the decision was that the named plaintiff lacked standing, and the court never ruled on the appropriateness of class certification.  Subsequently, a different plaintiff filed a similar class complaint against the same defendants containing similar allegations.  Unless American Pipe tolling could save the claims, they would be time barred.

The court held that it was bound by its 1994 decision in Griffin v. Singletary, 17 F.3d 356 (11th Cir. 1994)(“Griffin II“).  In that Title VII case, an earlier class action had been rejected because two of the three named plaintiffs lacked standing and the third had not properly exhausted his administrative remedies.  When follow-on class actions were filed, the 11th Circuit held that they were untimely, and were not salvaged by American Pipe.  The Griffin II court held that “plaintiffs may not ‘piggyback one class action onto another’ and thereby engage in endless rounds of litigation in the district court and in this Court over the adequacy of successive named plaintiffs to serve as class representatives.”  In this month’s decision in Ewing, the court explained that “Griffin II was concerned about the very issue we confront here:  the potential for multiple rounds of litigation as the class seeks an adequate class representative.”  The Ewing panel cited other circuits that had disagreed with its decision in Griffin II, but expressed rejected those courts’ efforts to distinguish Griffin II, noted that the merits of Griffin II were not before it, and observed that one panel of the court could not overturn a prior panel’s ruling.

Rule 68 Offers of Judgment.  Just as these decisions have highlighted circuit splits, the Seventh Circuit may have reduced one.  That court had held that a defendant’s offer of full compensation to a named plaintiff in a class action through a Rule 68 offer of judgment mooted both the individual and class claims.  In Chapman v. First Index, Inc., decided on August 6th, the court overruled its own precedent, holding now that a rejected Rule 68 offer does not moot the named plaintiff’s claim (and by implication, would not moot the class claims).  The court relied on a Supreme Court holding that “[a] case becomes moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party,” and the dissenting opinion of Justice Kagan in Genesis Healthcare Corp. v. Symczyk that, because the rejection of a Rule 68 offer of judgment does not deprive the district court of the ability to grant relief in the case, it does not moot the plaintiff’s claims.

The Second Circuit recently reached the same conclusion, while highlighting a circuit split on the issue whether a Rule 68 offer of complete relief moots an individual plaintiffs’ claim.  Tanasi v. New Alliance Bank (2nd Cir. May 14, 2015).  And, building on the momentum, the Fifth Circuit on August 12th reached the same conclusion in Hooks v. Landmark Industries, Inc.  In that case, the court expressed concern at the defense tactic of using Rule 68 offers of judgment to “pick off” named plaintiffs and stop class actions in their tracks.  On the issue of mootness, the court was influenced by Justice Kagan’s dissenting opinion in Genesis Healthcare, and agreed with a 2014 District of Massachusetts case (Yaakov v. Act, Inc., 987 F. Supp. 2d 124) holding that, while an accepted offer of judgment can end a putative class action (pre-certification, of course), an unaccepted offer cannot.

Whether a rejected Rule 68 offer moots a class action is currently before the Supreme Court in Campbell-Ewald v. Gomez.  Perhaps this new wave of appellate decisions, and particularly the Seventh Circuit’s reversal of its prior holdings, will influence the court to reconsider its grant of certiorari in that case.  If not, the issue should be finally resolved next term.

Written by former litigation partner, Donald R. Frederico.