Mandatory Disclosure of Third-Party Funding Agreements for Proposed Class Action Lawsuits

For years, certain lenders have agreed to fund all or part of a party’s litigation costs, usually in exchange for an agreed share of any recovered proceeds, as part of a practice called “third-party litigation funding.”  This has spawned widespread debate over the propriety of such funding and the degree of transparency parties and courts should have as to the nature and amount of the funding (as well as the identity of the funders themselves).

Many types of third-party litigation funding arrangements exist, including investor-based class action funding. According to the U.S. Chamber of Commerce’s Institute of Legal Reform, third-party litigation financing from investors has been on the rise in the United States dating back to 2007.[1] Third-party funding of mass litigation and class actions is also on the rise in other countries.

Proponents of third-party litigation financing of class actions assert that it allows plaintiffs with limited resources to bring legitimate claims that otherwise might not be asserted. Opponents believe the practice unhinges litigation strategy and related considerations, including the plaintiffs’ motivations or willingness to settle. Opponents also question the adequacy of representation in the appointment of class counsel and if class counsel is motivated to protect the interest of the class, or to protect the investors bankrolling the suit. Continue Reading

Court Refuses to Certify Class Due to Lack of Adequacy of Class Counsel

Fed. R. Civ. P. 23(a)(4) requires that the representative parties – the class representatives and their counsel – will adequately protect the interest of the class.  Relatively few class-action decisions turn on the adequacy of class counsel, but in a post on BakerHostetler’s Employment Class Action Blog, Greg Mersol highlights a recent decision in which a class was denied certification because the attorneys were not adequate class representatives under Rule 23.

Bottom line: adequacy matters.

A Look at Potential Supreme Court Nominees’ Class Action Decisions

Tonight, President Donald Trump is expected to nominate one of three federal appellate judges to the Supreme Court: Judge William Pryor of the Eleventh Circuit, Judge Neil Gorsuch of the Tenth Circuit or Judge Thomas Hardiman of the Third Circuit. While their class action experience varies, all three judges have recently sided with class action defendants on frequently litigated issues: Pryor on predominance, Gorsuch on CAFA removal and Hardiman on ascertainability. Continue Reading

The Supreme Court Will Review Whether Putative Class Actions Toll the Statute of Repose for Class Members’ Individual Securities Act Claims

On January 13, 2017, the Supreme Court granted certiorari in California Public Employees’ Retirement System v. ANZ Securities, Inc., No. 16-373 (ANZ Securities), to resolve whether the filing of a putative class action tolls the statute of repose for individual class members’ claims brought under Section 13 of the Securities Act.

The California Public Employees’ Retirement System (CalPERS or Petitioner) was a member of a putative class action in the Southern District of New York alleging securities fraud in connection with stock losses prior to the bankruptcy of Lehman Brothers Holdings Inc. Before the district court had ruled on class certification, CalPERS filed an individual action in the Northern District of California, which later consolidated with the class action. See MDL Transferred In, Cal. Pub Emps.’s Ret. Sys. v. Fuld, No. 3:11-cv-01281-LAK (S.D.N.Y. Feb. 25, 2011). After the parties to the class action reached a settlement and the district court preliminarily certified the class, CalPERS opted out, deciding to pursue its individual claim. But because CalPERS had filed its individual action “more than three years after the securit[ies] [at issue] [were] offered to the public,” the district court dismissed its suit as beyond the Securities Act’s three-year statute of repose. The Second Circuit affirmed, ruling that the putative class action did not toll the Securities Act’s statute of repose for CalPERS’s individual suit. See In re Lehman Bros. Sec. & ERISA Litig., No. 15-1879, slip op. at 6 (2nd Cir. July 8, 2016), ECF No. 102. In doing so, it acknowledged that circuits are divided on this tolling question, noting a conflict between itself and the Tenth Circuit, based upon the rule in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974).   Continue Reading

“Administrative Feasibility” Rejected in the Ninth Circuit

On Jan. 3, in Briseno v. Conagra Foods, Inc., Case No. 15-55727, the Ninth Circuit Court of Appeals held that Fed. R. Civ. P. 23 does not require class representatives to demonstrate that there is an “administratively feasible” means of identifying absent class members in order to certify a class. In rejecting the “administrative feasibility” requirement, the Ninth Circuit joins the Sixth, Seventh and Eighth Circuits, which have come to the same conclusion. (See some of our recent coverage on this issue here, here and here).

The “administrative feasibility” test, also referred to as part of “ascertainability,” asks whether there is an administratively feasible way to identify class members or if costly individualized fact-finding or mini-trials will be required to prove class membership. If too much individual fact-finding is needed, then there is not an administratively feasible way to ascertain class members. Circuit courts, such as the Third and Eleventh, have applied this test as a means of ensuring that class issues can be adjudicated efficiently, ensuring notice to class members and protecting the defendant and honest claimants from fraudulent claims. Continue Reading

FTC to Collect and Analyze Class Settlement Data

On Nov. 14, 2016, the Federal Trade Commission (FTC) announced it issued orders to eight unidentified claims administrators, requiring them to divulge information on class settlement notification procedures and the response rates for various notification methods.[1] Citing its investigative powers for consumer protection matters under Section 6(b) of the FTC Act, the FTC stated that it issued the orders to understand the effectiveness of class action settlement notice programs.

The orders are part of the FTC’s Class Action Fairness Project – a program to “ensure that class action settlements in consumer protection and competition matters provide appropriate benefits to consumers and that class counsel or defendants are not inappropriately benefiting at the expense of class members.”[2] As part of this project, the FTC files amicus briefs or intervenes in class actions; advises state, federal and private groups and seeks suggestions on matters that merit FTC attention; and monitors legislation and class action rule changes.[3] For well over a decade, the FTC has been filing amicus briefs in state[4] and federal[5] class actions opining on issues ranging from excessive attorneys’ fees to the fairness, reasonableness and adequacy of class settlements. Continue Reading

Newsfeeds and Notice – How Social Networks Might Affect Class Action Litigation

The resources from which people obtain, and choose to obtain, information have changed dramatically. A recent and highly publicized discussion of how information is exchanged might be the so-called filter bubble that many social media users experience. This bubble has reportedly caused “autonomous decision-making,” which hypothesizes that people pay attention to only those sources of information with which they agree and that reinforce their beliefs. These theories are seemingly supported by data regarding how U.S. adults utilize services like Facebook, Twitter, Snapchat and Reddit, and how these and other social media sites are now among the primary sources of news and other information for U.S. adults.

The way people receive and believe information matters in the class action context. Judges are instructed that notices must effectively reach and come to the attention of the class – that is, command the attention of the intended recipients. The ways in which notice may be given are codified in Federal Rule of Civil Procedure 23(c)(2)(B), which provides that “[f]or any class certified under Rule 23(b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” Continue Reading

“Yes, I Agree”: With a Click, Uber Drivers Can Waive Right To Bring Class Action Suits

Recently, in a major win for employers and companies that transact business on the internet, the Ninth Circuit upheld the use of arbitration class-action waivers in so-called clickwrap agreements. These types of agreements are commonplace—consumers installing software or signing up for a service are presented with a company’s terms and conditions on their screen, and are required to click “I agree” to proceed.

Like many other modern agreements, clickwrap agreements often include arbitration clauses, including arbitration clauses containing class-action waivers. Such is the case with certain contracts used by Uber Technologies, Inc. (“Uber”), a popular car service that connects customers with drivers through a cell phone application. Recently, former Uber drivers brought suit against Uber concerning the termination of their employment, and the validity of their agreements with Uber was questioned. In Mohamed v. Uber Technologies, Inc., — F.3d —-, Nos. 15-16178, 15-16181, 15-16250, 2016 WL 4651409 (9th Cir. Sept. 7, 2016), the Ninth Circuit held that the drivers’ contracts with Uber were valid, and that the parties were required to resolve their disputes in arbitration. Continue Reading

Yaakov v. FCC – Will TCPA Opt-Out Requirements Be Stricken for Permissive Faxes?

Fax machineBy its express terms, the Telephone Consumer Protection Act (TCPA) applies only to unsolicited faxes. 47 U.S.C. § 227(b)(1)(C) & (a)(5). However, in May 2006, the FCC promulgated new rules concerning fax advertisement transmissions that stated that “[a] facsimile advertisement . . . sent to a recipient that has provided prior express invitation or permission to the sender must include an opt-out notice.” In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991 Junk Fax Prevention Act of 2005, 21 F.C.C. Rcd. 3787, 3820–21 (2006). Confusingly, the 2006 FCC rule change also included a footnote stating that “the opt-out notice requirement only applie[d] to communications [constituting] unsolicited advertisements.” Id. at 3818 n.154.

In October 2014, the FCC issued an order (2014 FCC Order) recognizing ensuing confusion and ambiguity caused by the 2006 FCC rule change. In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 29 F.C.C. Rcd. 13998, 13998 (2014). The 2014 FCC Order stated that “some parties who have sent fax ads with the recipient’s prior express permission may have reasonably been uncertain about whether [the] requirement for opt-out notices applied to them.” Id. Due to this reasonable uncertainty, the 2014 FCC Order provided for the issuance of retroactive waivers of compliance with the opt-out requirement when the sender had express prior permission to send a fax advertisement. Id. The waivers were provided retroactively to those who failed to comply with these requirements up to six months prior to Oct. 30, 2014. Id. at 14012. Applications for waivers were accepted until April 2015. Id. Continue Reading

District Court Adopts “Weak” Test of Ascertainability, Certifies Class of Corn Producers in Suit Against Syngenta over Commercialization of Genetically Modified Corn Seed Products

corn fieldA District Court in Kansas added to an increasing debate in the federal courts over class ascertainability when it certified a class of 440,000 U.S. corn producers in a suit against Swiss global agribusiness Syngenta AG (Syngenta) over the company’s commercialization of genetically modified corn seed products. In re: Syngenta Ag Mir 162 Corn Litig., No. 14-MD-2591-JWL, 2016 WL 5371856 (D. Kan. Sept. 26, 2016).

In the multi-district litigation, producers and nonproducers of corn in the U.S. brought claims against Syngenta and its affiliates under the Federal Lanham Act and various state laws in connection with Syngenta’s commercialization of certain corn seed products. The products in question contained a genetic trait known as MIR 162 and were allegedly commingled throughout the U.S. corn supply. A major export market for corn is China, but Syngenta never obtained China’s approval for MIR 162. China subsequently rejected MIR 162 corn for import, which caused a market oversupply that led to a dramatic drop in corn prices, thus allegedly causing significant losses to the plaintiffs’ businesses.

Plaintiffs moved to certify a nationwide class and eight state law classes, comprising nearly half a million corn producers in the U.S. (for the nationwide class) or in a particular state (for the statewide classes) who “priced their corn for sale after November 18, 2013,” excluding certain categories of producers such as those who purchased the seed product in question and those who had filed individual claims in state court.

Court holds that “ascertainability” does not require administrative feasibility

In its opinion, the court first took up the issue whether plaintiffs’ proposed class definitions were properly “ascertainable.” Noting the “critical importance” of a carefully crafted class definition, the court explained that the definition must be “precise, objective, and presently ascertainable.” The Tenth Circuit, however, has not adopted a specific test for ascertainability and so the District Court sought guidance from other Circuits, which are split. Continue Reading

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