Federal Authorities Continue to Monitor Proposed Class Action Settlements

Officials at the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) continue to scrutinize class settlements to ensure that neither defendants nor class action counsel are improperly benefiting at the expense of class members. As discussed below, at minimum, parties to class actions in federal court can expect federal authorities to increasingly monitor and review class actions and file amicus briefs or statements of interest in appropriate cases.

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D.C. Circuit vacates FCC’s definition of ATDS but upholds consent-revocation rule in ACA International v. Federal Communications Commission

In 2015, the FCC issued an order that addressed certain aspects of the Telephone Consumer Protection Act. Congress enacted the TCPA in 1991 to address perceived abuses of telephone equipment that allowed entities to autodial consumers’ phones.

Three of the issues addressed in ACA will affect all entities that call consumers. Specifically, the FCC’s 2015 order held that a device meets the statutory definition of “automatic telephone dialing system,” generally known as an ATDS, if it could be configured to autodial. The order also addressed two consent issues, holding that callers were permitted only one “safe harbor” call when a consumer had consented to be autodialed on his or her cellphone but the cellphone number had since been reassigned to a different consumer, and that consumers who consent to be autodialed may later revoke that consent by any reasonable means.

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Supremes Hold SLUSA Is Clear – 33 Act Class Claims Stay in State Court

Yesterday, the United States Supreme Court, in a unanimous decision, handed class action plaintiffs a victory by holding that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) allows them to pursue alleged violations of the Securities Act of 1933 (the 33 Act) in state court. Securing plaintiffs’ ability to pursue these claims in state court, the Supreme Court also held that defendants are barred from removing the claims to federal court.

As background, the 33 Act applies only to securities offerings and requires offerors to make full and fair disclosures related to such offerings. The 33 Act may be enforced through private suits and is often enforced through class actions, primarily through Section 11, which applies to registration statements. Initially, Congress authorized both state and federal courts to exercise jurisdiction over lawsuits alleging violations of the 33 Act. See § 22(a), 48 Stat. 86. Strangely, however, Congress barred the removal of such suits from state to federal court. Id. at 87.

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Ninth Circuit Vacates Final Approval of National Settlement Class Action Certification

Last month, the Ninth Circuit vacated the certification of a nationwide class for settlement in the In re Hyundai & Kia Fuel Economy Litigation, No. 15-56014, 881 F.3d 679 (9th Cir. Jan. 23, 2018). The Ninth Circuit concluded that the district court abused its discretion because it failed to “conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23,” specifically, whether variations in state law undermined the predominance requirement. Id. at 690. Parties involved in class actions, whether on a contested or a settlement basis, should carefully scrutinize Hyundai & Kia Fuel.

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The Fourth Circuit Refuses to Enforce Arbitration Clause and Class Action Waiver in Employment Contracts

As we have previously written, several Supreme Court decisions have upheld, in various contexts, arbitration agreements that waive the right to assert claims on a class basis. See, e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); American Express Corp. v. Italian Colors Restaurant, 570 U.S. 333 (2013); DIRECTV, Inc. v. Imburgia, 577 U.S. __, 136 S.Ct. 463 (2015). But the Fourth Circuit recently showed this trend does not mean an arbitration agreement will serve as a blanket protection against class claims. Degidio v. Crazy Horse Saloon and Restaurant, Inc., No. 17-1145, 2018 U.S. LEXIS App 1178 (4th Cir. Jan. 18, 2018).

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The Top 10 Class-Action-Related Developments of 2017

2017 was a relatively quiet year for major class action news, especially in the Supreme Court, which addressed only a handful of cases that might have an impact on class actions and reached decisions only in a couple of those cases. However, there were at least enough noteworthy developments to put together a top 10 list. Here are my top 10 class-action-related developments of 2017:

1. Supreme Court Holds Class Certification Denials Not Immediately Appealable Following Voluntary Dismissal

In Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), the Court held that a plaintiff’s act of voluntarily dismissing individual claims following a denial of class certification did not entitle the plaintiff to immediately appeal the class certification ruling. The Court’s decision closed a loophole that some circuits had recognized to allow plaintiffs to seek immediate mandatory appeal of an adverse class certification decision, even though defendants are entitled only to discretionary review of an order granting class certification. The Court’s decision means that discretionary review under Rule 23(f), Federal Rules of Civil Procedure, is the only vehicle for appealing a federal district court’s class certification order, regardless of whether the appellant is a plaintiff or a defendant.

For an excellent summary of the Baker decision, see this Aug. 9, 2017, write-up by Andrew Serrao. Continue Reading

Kentucky Federal Court Brushes Aside Pre-emptive Attack on Class Allegations in Phishing Case, Rejects Out-of-the-Box Defense Strategy

Brushing aside apparent flaws in a proposed class definition, a federal court in Kentucky declined to dismiss class allegations against North Carolina-based pharmacy services provider Pharm-Save Inc. (Pharm-Save) stemming from a W-2 phishing scam.

In its Dec. 1, 2017, decision denying in part Pharm-Save’s motion to dismiss, U.S. District Judge Thomas B. Russell declined to consider Pharm-Save’s comprehensive challenge to the plaintiffs’ proposed class definition – and the legal sufficiency of the class allegations in general – and reserved determination of those issues until the plaintiffs move to certify the class. Savidge, et al. v. Pharm-Save, Inc., 3:17-CV-00186-TBR (W.D. Ky. Dec. 1, 2017) [ECF 26]. Continue Reading

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

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