Will the Supreme Court Address the Growing Uncertainty in Class Certification Injury Standards?

Recent years have seen some upheaval in the lower courts on whether classes may be certified when they include members who lack actual injury. So far, however, the Supreme Court has declined to address this issue, thus increasing uncertainty and risks for litigants.

Class action cases are often brought pursuant to Rule 23(b)(3), which requires that district courts find “questions of law or fact common to class members predominate over any questions affecting only individual members.” This “predominance” inquiry is designed to ensure that class members’ claims are sufficiently similar to justify class treatment. When a proposed class includes persons who have not been injured by the challenged conduct, however, individual issues may preclude establishing that common issues predominate as required by Rule 23(b)(3).  Continue Reading

Substantial Risk of Harm in Data Breach Class Actions Ripe for Supreme Court Review

Early in May, the U.S. Court of Appeals for the Second Circuit in Whalen v. Michaels Stores, Inc., No. 16-260 (L) (2d Cir. May 2, 2017), affirmed the dismissal of a data breach class action brought against Michaels Stores Inc. (Michaels) for failing to sufficiently allege an injury to support standing. This decision is significant because it widens the existing circuit split on what allegations constitute an injury-in-fact, particularly where a plaintiff seeks standing by alleging a substantial risk of harm resulting from a data breach.

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Ninth Circuit Dismisses Consumer Claims Challenging Scientific Substantiation

On April 21, 2017, the Ninth Circuit affirmed the dismissal of two putative class actions against manufacturers of human growth hormone (HGH) supplements. The actions centered on allegations that the defendant falsely advertised the benefits of the supplements. Specifically, the plaintiffs alleged defendants falsely represented that their product, SeroVital, increased HGH levels, was clinically tested, and that ‘peak growth hormone levels’ are associated with various health benefits. Plaintiff also alleged that these claims were not supported by scientific studies, and that the study included on defendant’s website was “riddled with flaws” and “would not be accepted by any credible, peer-reviewed scientific journal.”

The Ninth Circuit agreed with the trial court that the plaintiffs failed to specifically allege facts to support a finding that the defendants advertising claims were actually false. Instead, the Court determined that plaintiffs were alleging defendants’ advertising claims (e.g., “clinically tested”) were unsubstantiated. California law, however, does not provide for a private cause of action to enforce the substantiation requirements of California’s unfair competition and consumer protection laws. Continue Reading

Game On: Supreme Court to Decide Whether Xbox Plaintiffs Can Create Appellate Review

Recently, the United States Supreme Court heard argument in Microsoft Corp. v. Baker,[1] a case that may significantly impact class-action defense and appellate jurisdiction. Plaintiff classes frequently want to immediately appeal orders denying class certification. But because these orders are interlocutory and not “final” under the relevant statute,[2] plaintiff classes cannot appeal until their individual claims are resolved and a final judgment is entered, which could be expensive and time-consuming. Consequently, some plaintiff classes bypass this process by voluntarily dismissing their claims with prejudice after class certification is denied, effectively converting the interlocutory order into a final, appealable order. In Baker, the Supreme Court may decide whether this tactic is permissible.

Prior to 1978, appellate courts would allow plaintiff classes to immediately appeal orders denying class certification if they “end[ed] the lawsuit for all practical purposes.”[3] This practice was known as the “death knell” doctrine. But in 1978, the Supreme Court in Coopers & Lybrand v. Livesay[4] unanimously rejected the death-knell doctrine, and held that an order denying class certification is interlocutory and not appealable as of right.[5] Continue Reading

D.C. Circuit May Have Finally Killed TCPA Class Actions Over Solicited Faxes Without Opt-Out Notices!

On Friday, in a split decision, the United States Court of Appeals for the District of Columbia Circuit entered its long-awaited ruling in Yaakov v. Federal Communications Commission, holding that “the FCC’s 2006 Solicited Fax Rule is [] unlawful to the extent that it requires opt-out notices on solicited faxes.” Order, Yaakov v. Federal Communications Commission, No. 14-1234, at 4 (D.C. Cir. Mar. 31, 2017) [hereinafter Yaakov Opinion].

The court’s decision, if not appealed, will finally resolve the confusion and controversy surrounding an FCC order issued in 2006 (2006 FCC Order) announcing that the Telephone Consumer Protection Act (TCPA) requires opt-out notifications in fax advertisements sent with prior express invitation or permission (“solicited fax advertisements”), notwithstanding the fact that, by its express terms, the TCPA applies only to unsolicited faxes. 47 U.S.C. § 227(b)(1)(C) & (a)(5); 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). Continue Reading

2016 Class Action Year-End Review

We are pleased to share BakerHostetler’s 2016 Class Action Year-End Review, which offers a summary of key developments in class action litigation during the past year. Class action litigation moved to the forefront of the Supreme Court’s docket in 2016 and promises to remain there in 2017, as class action doctrine continues to evolve in federal and state courts.

This comprehensive analysis of last year’s developments in class action procedure and jurisdiction, as well as developments by subject matter, will provide context and insight into expected trends in class action law as you look ahead to 2017. We hope you find this review a useful tool.

Video: Class Action Trends: What to Expect in 2017

House Passes Fairness in Class Action Litigation Act of 2017

Yesterday, the U.S. House of Representatives passed the Fairness in Class Action Litigation Act of 2017 (H.R. 985) (the Act).

The Act – introduced by Chairman of the House Judiciary Committee Bob Goodlatte – makes several significant changes to class action practice. In passing this Act, the House asserted these changes were intended to “diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system” and “ensure Federal court consideration of interstate controversies of national importance consistent with diversity jurisdiction principles.” Continue Reading

The Unwelcome Guest at the Class Settlement Table: Serial Objectors

Finally, the end is in sight. After motions to dismiss, discovery, hearings, a highly contested motion for class certification and mediation, the parties have reached a class settlement. The parties are relieved to end the uncertainty and burdens of a class action, and now turn their attention to obtaining court approval. But suddenly the settlement faces another obstacle – the serial objector.

Because class action settlements bind absent class members, due process requires that class members be given the opportunity to object to a proposed settlement. Rule 23(e)(5). This is a sensible rule, but it can be abused by “serial objectors.” While class counsel and defense counsel work to negotiate a settlement in good faith, the serial objector threatens to delay or even derail settlement via (often last-minute) objections that are usually frivolous and overruled. But the serial objector is not actually interested in winning in court. Instead, the serial objector’s purpose is to extract money from class counsel in exchange for withdrawing the objection, which otherwise could take years to resolve. Often class counsel is forced to agree to settle (i.e., pay) the objector to avoid lengthy delays. Serial objectors have been described by one court as “remoras.” A remora is a small fish with a sucker-like organ that attaches itself to larger fish. In re UnitedHealth Group Inc. PSLRA Litigation, 643 F. Supp. 2d 1107, 1108 (D. Minn. 2009). Continue Reading

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.

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