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.

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

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