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.

Continue Reading

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).

Continue Reading

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

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