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Archive for the ‘Class Action Decisions’ Category

The Supreme Court issued its decision today in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that many commentators predicted would provide an opportunity for the Court to limit or bar the use of statistical evidence as a substitute for common proof in class actions.  The majority opinion, authored by Justice Kennedy, rejected the invitation to create a “broad rule” limiting the use of statistical evidence, however.  Instead, the Court offered practical guidance on the situations in which statistical evidence may or may not be appropriate.  The relevant portion of the opinion is short and succinct, so I have quoted it in its entirety below:

[P]etitioner and various of its amici maintain that the Court should announce a broad rule against the use in class actions of what the parties call representative evidence. A categorical exclusion of that sort, however, would make little sense. A representative or statistical sample, like all evidence, is a means to establish or defend against liability. Its permissibility turns not on the form a proceeding takes—be it a class or individual action—but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action. See Fed. Rules Evid. 401, 403, and 702.

It follows that the Court would reach too far were it to establish general rules governing the use of statistical evidence, or so-called representative evidence, in all class-action cases. Evidence of this type is used in various substantive realms of the law. Brief for Complex Litigation Law Professors as Amici Curiae 5–9; Brief for Economists et al. as Amici Curiae 8–10. Whether and when statistical evidence can be used to establish classwide liability will depend on the purpose for which the evidence is being introduced and on “the elements of the underlying cause of action,” Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. 804, 809 (2011).

In many cases, a representative sample is “the only practicable means to collect and present relevant data” establishing a defendant’s liability. Manual of Complex Litigation §11.493, p. 102 (4th ed. 2004). In a case where representative evidence is relevant in proving a plaintiff’s individual claim, that evidence cannot be deemed improper merely because the claim is brought on behalf of a class. To so hold would ignore the Rules Enabling Act’s pellucid instruction that use of the class device cannot “abridge . . . any substantive right.” 28 U.S.C. § 2072(b).

Those who were hoping for a rule barring statistical evidence as a proxy for common evidence in class actions will no doubt be disappointed, but Justice Kennedy’s opinion does go much further than it had to in beginning to develop standards that will govern resolution of the issue in future cases.  To summarize:

  1. There is no general rule barring the use of statistics to prove class-wide liability in a class action.
  2. The extent to which statistical evidence is allowable in a class action depends on whether the evidence is reliable in proving or disproving the elements of a relevant cause of action.
  3. Statistical evidence is admissible in a class action if it would be admissible in an individual action to prove or disprove elements of a plaintiffs’ claim.
  4. Whether statistical evidence can be used to establish class-wide liability depends on the purpose for which the evidence is being introduced and on “the elements of the underlying cause of action.”

As a final side-note, the decision in Tyson Foods does not appear to have been impacted at all by the recent death of Justice Scalia.  Only two of the eight remaining Justices, Justices Thomas and Alito, dissented.

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The Supreme Court issued its opinion today in the first of what will be several class-action-related decisions this term.  As noted in my Supreme Court preview post, the primary issue in Campbell-Ewald Co. v. Gomez, No. 14-857 was whether an unaccepted offer of complete relief to a named plaintiff in a class action had the effect of mooting the plaintiff’s claim, depriving a federal court of Article III jurisdiction.  The Court said no, agreeing with the now unanimous view of the Circuit Courts of Appeals.   Click this link for a copy of the slip opinion.  Justice Kennedy sided with the liberal wing of the Court in supporting Justice Ginsburg’s majority opinion, with Justice Thomas concurring in the judgment.  Perhaps the most interesting thing about the opinion from a practitioner’s point of view is the issue that the majority expressly decline to address despite having been discussed at some length during oral argument:

We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff ’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount. That question is appropriately reserved for a case in which it is not hypothetical.

 

So, just as we were left with a cliffhanger when the Court decided its previous case involving offers of judgment, Genesis Healthcare Corp. v. Symczyk, we’ll have to stay tuned for the third chapter of the trilogy to find out whether paying the full amount of a plaintiff’s claim into the registry of the Court moots a class action.  Be on the lookout for a preview of this issue at a District Court near you.

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Thomson Reuters contributor Alison Frankel interviewed me for an article she posted today on the class action cases pending during the current Supreme Court term.  Here is a link to her article.  For those who are not familiar with Frankel’s On the Case Blog, be sure to add it to your regular reading list.  She is one of the best in the business.

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I just received my courtesy copy to the latest edition of the Akron Law Review, a symposium issue titled The Class Action After a Decade of Roberts Court Decisions, Volume 48, Issue 4 (2015).  My colleague Dustin Dow and I contributed an article entitled The Practical Approach: How the Roberts Court Has Enhanced Class Action Procedure by Strategically Carving at the Edges.  The contributors to the issue are academics, students, and practitioners from both sides of the bar, including Professor Bernadette Bollas Genetin, Professor Richard Freer, Elizabeth Cabraser, Professor Michael Selmi & Sylvia Tsakos, Andrew Trask, Professor Mark Moller, and Eric Alan Isaacson.  The articles range in perspective from theoretical to historical to practical, with some surveying the Roberts Court’s class action decisions generally, and others focusing on the Roberts Court’s contributions in key areas of the law.

For anyone who follows the Supreme Court’s decisions on class action issues, this is a must-read issue.  Check it out by clicking the link on the symposium title above.

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The October 2015 United States Supreme Court Term is already well underway, and there are several cases on the docket that could have a significant impact on class action practice.  Here is a summary of the three cases this term that I think could have the biggest impact on class action practice going forward:

Campbell-Ewald Co. v. Gomez, No. 14-857

The Campbell-Ewald case addresses the tactic known as “picking-off” named plaintiffs in class actions, and deals with the question whether an offer of judgment that would provide a named plaintiff complete relief is sufficient to moot the plaintiffs’ claim, even if it is not accepted.  The case follows the Court’s 2013 decision in Genesis Healthcare v. Symczyk, where the majority opinion assumed, without deciding, that an offer of judgment had mooted the named plaintiffs’ claim in an FLSA collective action, based on a finding that the issue had been waived below.

Oral argument in Campbell-Ewald was held in October.  Justices Alito, Scalia, and Chief Justice Roberts all displayed open hostility to the plaintiffs’ position that she should be allowed to litigate the case even after the defendant had offered everything she hoped to achieve for herself in the case.  Despite these views, however, it remains to be seen whether a majority of the court will ultimately hold that any unaccepted offer of settlement is sufficient to actually moot the plaintiffs’ claim under Article III, or whether the decision will fall short of reaching that sweeping question.  Some of the questions posed by likely swing voter, Justice Kennedy, suggest that he agrees with his conservative colleagues that a litigant who has been offered full relief should not be permitted to proceed with the case, but other questions reflected a reluctance to treat an unaccepted offer the same as a judgment.  This suggests that the Court’s ultimate decision could turn on a more technical procedural analysis rather than the broader and more abstract question of whether a controversy can ever exist following an offer of full relief, but of course the questions posed during oral argument do not always signal the Court’s ultimate analysis.

When the Supreme Court originally granted cert in Campbell-Ewald, there appeared to be a split in the circuits on this question, but since then, the circuits have become aligned with the view that an unaccepted offer in a proposed class action does not moot the named plaintiffs’ claims.  A contrary ruling by the Supreme Court would revive a powerful tool that defendants could wield to effectively preempt many types of consumer class actions, especially those seeking statutory damages for small individual amounts.

Spokeo, Inc. v. Robins, No. 13-1339

Spokeo has been hailed as a case with the potential to end “no-injury” class actions.  Ostensibly at issue is whether Congress has the power to enact legislation that gives a private plaintiff the right to seek statutory damages despite the lack of any concrete injury.  A decision could therefore potentially have a significant impact on class actions brought under a variety of federal statutes that provide a private right of action to recover statutory damages upon proof of a violation, one that goes beyond the Fair Credit Reporting Act, the statute at issue in Spokeo.

However, during today’s oral argument, much of the questioning focused on whether the named plaintiff had, in fact, suffered an injury by alleging that false information had been published on his credit report, and the extent to which Congress actually intended to limit the private right of action under the Fair Credit Reporting Act to persons who could show an actual injury.  It seems likely that the outcome of the case will turn on the majority’s view of those two factors.

Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146

Tyson Foods offers the Court an opportunity to further elaborate on the concept of “trial by formula”, discussed in Justice Scalia’s 2011 opinion in Wal-Mart Stores, Inc. v. Dukes, as well as the standards governing expert testimony at the class certification phase, which the Court touched upon but did not  ultimately address directly in both Wal-Mart and again in the 2013 decision in Comcast Corp. v. Behrend.  It also raises the question whether it is ever proper to certify a damages class that includes individual plaintiffs that undisputedly lack any injury or damages.

Specifically, the Court granted certiorari on the following two questions:

I. Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and

II. Whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.

Oral argument in Tyson Foods is set for next Monday, November 10.

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Yesterday, U.S. District Judge Paul Magnuson issued an order granting certification in the consolidated MDL proceeding brought on behalf of issuing banks claiming damages resulting from Target’s 2013 payment card hacking incident.  Click Here for a copy of the order.  The BakerHostetler Class Action Lawsuit Defense Blog will feature a more detailed write-up on the decision soon.

In the way of initial reaction, I don’t think the decision will be impactful in cases outside the specific context of issuing bank class actions against retailers in payment card breach cases because of unique issues having to do with common injury and causation of loss.  In particular, in evaluating whether variations in injury and causation should prevent certification, Judge Magnuson distinguished the issuing bank case from the class actions brought on behalf of individual consumers arising from the same breach.  Judge Magnuson observed that while the injuries alleged by consumers are largely potential future injuries that may or may not occur, the banks claimed to have already suffered concrete injuries in the form of the cost of reissuing cards to customers.  Thus, he reasoned that the any individualized issues regarding causation and injury were not present with regard to the financial institutions’ claims, and any issues regarding variations in the amount of damages did not prevent class certification.  This distinction means that the decision will be of limited value to plaintiffs in consumer data breach class actions.

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Whirlpool Corporation made headlines yesterday when a Ohio federal court jury issued a verdict finding that the manufacturer’s washers did not have a defect that caused them to develop mold.  The verdict comes in the first of the “moldy washer” cases to reach a trial, following the Sixth Circuit Court of Appeals’ decision in 2013 that the case should be certified as a class action despite the inability to resolve the question of damages on a class wide basis.  Along with the Seventh Circuit’s decision in Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013), the Sixth Circuit’s decision in  In re Whirlpool Corp. Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013) have come to epitomize the concept of “issue certification,” where a class is certified for the purpose of resolving some, but not all, of the issues in the a case.  Both the Sixth and Seventh Circuits held that classes should be certified to decide the question whether the washers had a defect, despite strong objection from the defendants, who presented evidence showing that a vast majority of washing machine purchasers had never complained about any mold problems.  Last year, the Supreme Court declined certiorari review in both cases.

The Whirlpool jury’s decision that the washers were not, in fact, defective is seemingly a huge win for the defense bar, but the verdict also provides fodder for courts to justify granting class certification on isolated issues in other cases where it is clear that individual damages trials would be necessary.  As Judge Posner rationalized in reaffirming the original decision in Butler following remand by the Supreme Court to reconsider in light of the Court’s Comcast decision:

Sears argued that most members of the plaintiff class had not experienced any mold problem. But if so, we pointed out, that was an argument not for refusing to certify the class but for certifying it and then entering a judgment that would largely exonerate Sears—a course it should welcome, as all class members who did not opt out of the class action would be bound by the judgment.

Butler, slip op. at 4.  Certainly, that is the scenario that has played out for Whirlpool, at least as to a class of Ohio purchasers (with more trials of other state-wide class claims to come).

But at what cost?  Before the litigation sees any final resolution, Whirlpool will have paid its legion of outside attorneys to defend it in MDL proceedings, motions to dismiss, class certification discovery,  class certification proceedings, two trips to the Seventh Circuit, two trips to the Supreme Court, trial preparation, trial, post-trial motions, and inevitably more appeals, all to achieve “exoneration” in the face of allegations that a small number of their customers experienced mold in their washing machines.  The plaintiffs’ attorneys will have spent a similar amount of time and efforts on their side of all of these proceedings.  And, with the plaintiffs’ attorneys vowing to press ahead with more statewide class trials, the parties are still no closer to having any clear process for resolving the dispute on a global basis.  It doesn’t take a law and economics expert to spot the inefficiencies in this process.

Although the Whirlpool verdict arguably illustrates Judge Posner’s point that the defendant could very well win on the class issue and bind the entire class, that is small consolation for other defendants facing the prospect of expensive class trial proceedings for the purpose of giving a shot at redress to a tiny fraction of its customers who may claim some small injury from a product defect, data breach, misleading label, or any other general business practice.  As much as it serves to “largely exonerate” Whirlpool, the jury’s rejection of the claimed defect calls into question the wisdom of allowing the product defect issue go forward on a class wide basis in the first place rather than requiring the individual claimants to press forward with their claims individually.

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