Seventh Circuit Ties Class Counsel’s Recovery of Attorneys’ Fees to Amount Claimed by Class, in Context of a Judgment

On November 14, 2017, the Seventh Circuit issued its third opinion ending a class action that was almost a decade old. Holtzman v. Turza, No. 17-2330, 2017 WL 5450484 (7th Cir. Nov. 14, 2017).

The class action alleged that the defendant violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, by sending an “unsolicited facsimile advertisement” to the class. The district court certified the class of fax recipients in 2009, and later granted summary judgment in favor of the class, finding that the newsletter qualified as an unsolicited advertisement under the TCPA and ordering the defendant to pay $500 in statutory damages for each of the 8,430 faxes, totaling $4,215,000. The court stated it planned to distribute the sum to the class members and donate any remainder to a charity. Continue Reading

TCPA Class Denied Certification Due to Binding Authority of Yaakov and Proof of Individualized Issues of Consent

A recent order from the Northern District of Illinois granted a defendant’s motion to deny class certification regarding “unsolicited” fax advertisements allegedly sent in violation of the Telephone Consumer Protection Act (TCPA). The decision is notable in two respects. First, the court held that the D.C. Circuit’s recent decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017), which struck down the Federal Communications Commission’s (FCC) rule requiring opt-out notices on solicited faxes, is binding authority outside the D.C. Circuit. Second, while the issue of “consent” is a powerful defense against class certification of TCPA claims, a defendant must substantiate that defense. The decision is also a reminder that a defendant can move to deny or strike class allegations; it need not wait for a plaintiff to move for class certification.

In Yaakov, the D.C. Circuit addressed the FCC’s rule requiring both solicited and unsolicited faxes to include opt-out notices. Relying on the text of the TCPA statute, the D.C. Circuit held the FCC exceeded its authority in requiring solicited faxes to include an opt-out notice. We discussed Yaakov in a previous post, which can be found here. Continue Reading

Eleventh Circuit Outlines the Key to an Individual Arbitration Agreement

The Eleventh Circuit recently upheld an arbitration agreement in a consumer class action involving checking overdraft fees. In Johnson v. KeyBank N.A., 11th Cir. No. 15-10779 (Sept. 26, 2017), the plaintiffs brought a putative class action lawsuit claiming defendant KeyBank had improperly sequenced debit card transactions. KeyBank moved to compel arbitration on an individual basis pursuant to an arbitration agreement.

When the plaintiff converted a prior KeyBank account to a joint account, he signed a signature card, which required him to attest to the following:

I understand that all accounts opened under this Plan are subject to the Deposit Account Agreement. I acknowledge receiving a copy of the agreement, and a written disclosure of . . . terms and disclosures relating to the account opened at the time this Plan was signed.

The “Deposit Account Agreement” that was incorporated by reference contained an arbitration provision. It also preserved KeyBank’s right to make changes to the terms of the agreement after providing appropriate notice. The plaintiff argued he did not receive a copy of the Deposit Account Agreement when he signed the signature card and therefore did not bind himself to the arbitration agreement. In the alternative, the plaintiff challenged the arbitration agreement as unconscionable. The court ruled in favor of KeyBank on both arguments. Continue Reading

Global Fitness Not in Shape to Pay Fees and Expenses, Held in Contempt for Failing to Comply with Final Approval Order

Last month, Global Fitness Holdings LLC and its four managers were held in civil contempt for failure to comply with a final order approving a class action settlement. Gascho v. Global Fitness Holdings, LLC, S.D. Ohio No. 2:11-cv-436 (Aug. 8, 2017). Global Fitness entered into a class action settlement resolving claims that it had engaged in deceptive billing practices. As part of the settlement, Global Fitness agreed to pay $2.39 million in attorneys’ fees and to cover the administrator’s expenses. Just two days prior to the payment deadline, however, Global Fitness informed the court that it could not make those payments because it no longer had sufficient funds. The plaintiffs then sought and obtained the civil contempt order.

At the heart of the court’s contempt decision is the principle that, when the terms of a settlement agreement are approved and incorporated into a court order, a breach of the agreement is also a violation of the court order. Most settlement agreements are not approved by or incorporated into a court order; thus a breach is typically limited to the parties to the settlement contract. But class action settlements are different; they must be approved by the court under Rule 23(e). And final approval of the settlement agreement had been entered in Gaucho. Continue Reading

Seventh Circuit Rejects Subway Footlong Class Settlement as a “Racket”

A recent Seventh Circuit decision pushed back on a proposed settlement of the Subway “footlong sub” class action, finding the proposed settlement a “racket” designed to benefit class counsel without any benefit to the class. The story begins in 2013 when a Facebook post showing a Subway footlong sandwich measuring just 11 inches went viral. Shortly thereafter, the plaintiffs’ attorneys filed nine class actions seeking damages and injunctive relief against Subway.

While the plaintiffs may have thought their class claims had merit, initial discovery demonstrated their case did not measure up. Subway showed that it used standard, equally weighted dough sticks for its footlong sandwiches, thus ensuring that each customer received the same quantity of food. Moreover, discovery confirmed that the “overwhelming majority” of sandwiches were indeed 12 inches long. Certification – and injury – under Rule 23(b)(3) therefore proved impossible: Only mini-trials could determine which customers received undersize sandwiches.

Nevertheless, the plaintiffs’ lawyers persisted, jettisoning their Rule 23(b)(3) damages classes and seeking to certify an injunction-only class under Rule 23(b)(2). Following mediation, Subway agreed to commit to a menu of quality control measures, and the plaintiffs’ attorneys received $520,000 in fees in the proposed class settlement.  Continue Reading

Ninth Circuit again finds Article III standing in Spokeo: The injury was particularized in round one, and it’s concrete in round two.

The Spokeo saga continues. As our sister blog, the Data Privacy Monitor, reported here, the United States Supreme Court’s May 2016 decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1550 (2016) (Spokeo II) vacated and remanded a Ninth Circuit decision (Spokeo I) for failure to consider the concreteness prong of the “concrete and particularized” test for constitutional Article III standing. Other courts have since grappled with Spokeo II’s impact on standing analysis, for example, as reported here. But on Aug. 15, 2017, on remand from the Supreme Court, the Ninth Circuit applied the Spokeo II framework to the case and ultimately came out the same way – finding again that the plaintiff has standing. Robins v. Spokeo, Inc., No. 11-56843, 2017 WL 3480695 (9th Cir. Aug. 15, 2017) (Spokeo III).

As those familiar will recall, Spokeo operates a website that searches various sources to compile profiles on individuals that contain details about the person’s life. The plaintiff sued Spokeo in a putative class action claiming that a consumer profile Spokeo created and published on him contained inaccurate information on his age, marital status, wealth, education level and profession. His suit was based on the Fair Credit Reporting Act (FCRA), which imposes certain procedural requirements on consumer reporting agencies and gives affected consumers a right to sue for statutory damages (otherwise viewed as statutory penalties).

On remand from the Supreme Court, the Ninth Circuit set out to analyze whether the plaintiff’s alleged statutory violation was a sufficiently concrete injury to confer standing. The court concluded that it was. Continue Reading

Sixth Circuit Requires Actual Economic Injury for Price Comparison Class Actions

Earlier this week, the Sixth Circuit flatly rejected a bid by a consumer to recover damages allegedly caused by Wish.com’s advertised price comparisons (opinion available here). The online marketplace uses struck-through manufacturers’ suggested retail prices next to products’ purchase prices, which plaintiff Gerboc alleged are misleading and caused him injury when he purchased a pair of $27 speakers that appeared to have been marked down from $300.

Affirming in full the Northern District of Ohio’s dismissal, the Sixth Circuit emphasized that Gerboc suffered no injury (as required by each of his claims for unjust enrichment, breach of the Ohio Consumer Sales Practices Act (OCSPA), and fraud) because the product he purchased and received was exactly what he bargained for: a pair of speakers at a price of $27. He did not allege that the speakers were defective or of lower quality than advertised, or that he was in any way unhappy with the speakers themselves. And even if Wish.com had never sold the speakers for $300 and the price comparison was determined to be misleading, Gerboc could litigate that issue only as an individual OCSPA claim where noneconomic damages are available; OCSPA class actions allow recovery only of economic damages, which the court determined the plaintiff could not establish. The court stated:

[Gerboc] got what he paid for: a $27 item that was offered as a $27 item and that works like a $27 item. A 90% discount from $27 was not part of the deal; no line struck through the speakers’ purchase price, and none of the various website images that Gerboc has attached to his filings mention such a discount. At most, he bargained for the right to have the speakers for 90% less than $300, not the right to have them for that much less than what (even he agrees) they were actually worth. Continue Reading

Carter v. The Dial Corporation: The First Circuit Washes Its Hands of Clarifying Ascertainability in Class Actions

We previously wrote about the split among the circuit courts of appeal over the ascertainability requirement for class certification and whether self-identifying consumer affidavits—e.g., an affidavit in which a consumer attests that he or she is a class member and suffered injury—can satisfy that requirement.

Recently, the First Circuit denied, over a strong dissent, a Rule 23(f) petition to appeal a district court’s order certifying a class on the grounds that the plaintiffs could demonstrate ascertainability through consumer affidavits. Carter v. The Dial Corporation, No. 17-8009, 2017 WL 3225164 (1st Cir. July 31, 2017). In Carter, the district court certified a class of consumers from eight states who purchased antibacterial soap from 2001 to the present. The defendants lacked any records to identify class members, and class members were unlikely to possess records demonstrating that they purchased the product. Nevertheless, the district court, relying on the First Circuit’s recent decision In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015), held that the plaintiffs satisfied ascertainability because class members could submit affidavits or declarations to establish that they purchased the product during the 16-year class period.

Judge Kayatta, who also dissented in Nexium, dissented from the denial of the Rule 23(f) petition. Kayatta stated that the Nexium majority held that plaintiffs could establish classwide injury through affidavits from each class member stating that he or she was not a brand loyalist, i.e., would not have purchased a cheaper generic version of the drug if available—an approach suggested by neither party. 2017 WL 3225164 at *1 (citing Nexium, 777 F.3d at 20). Kayatta observed there was no record in either Nexium or Carter to evaluate whether the defendant would have had a meaningful opportunity to refute the proposed affidavits. Kayatta noted that “[s]ooner or later, this court will have to wrestle with the issues raised by the district court’s approach” on a full record and briefing. 2017 WL 3225164, at *1.

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Game Over: Supreme Court Unanimously Rejects Xbox Plaintiffs’ Attempt to Create Appellate Review

In April, we reported on the oral argument in Microsoft Corp. v. Baker, a Supreme Court case addressing whether putative class members may obtain appellate review of orders denying class certification by voluntarily dismissing their individual claims with prejudice. Recently, the Supreme Court gave its unanimous answer: no. See Microsoft Corp. v. Baker, 137 S. Ct. 1702, 1707 (2017). The Court’s ruling ends a long-standing practice that class plaintiffs used as an end run around procedural restraints to create appellate review, and affirms the use of a Federal Rule of Civil Procedure 23 (Rule 23) petition as the sole vehicle to obtain interlocutory review of an order denying (or granting) class certification.

Under a 1978 Supreme Court decision, orders denying class certification are interlocutory and not appealable as of right. See Coopers & Lybrand v. Livesay, 437 U.S. 463, 477 (1978). Twenty years later, Rule 23 was amended with paragraph (f), which gives appellate courts discretion to review, upon petition, orders granting or denying class certification. But if their Rule 23(f) petition is denied, putative class members would sometimes voluntarily dismiss their claims with prejudice to artificially create a final order from which to appeal. This is what happened in Baker.

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Revisiting the Enforceability of Class Action Waivers in Consumer Financial Contracts

The Consumer Financial Protection Bureau (CFPB) has published the final Arbitration Agreements Rule, which impacts the way claims involving consumer financial products and services are handled in the future, including a prohibition against providers of such products and services from relying on a predispute arbitration agreement that includes an arbitration clause barring a consumer from filing or participating in a class action. BakerHostetler’s Financial Services Team just released an Executive Alert and blog post regarding this development.  The blog post can be found here.

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