2016-17 Securities Class Actions by the Numbers

2016 was an unprecedented year in securities class actions filings.

According to a report published by NERA Economic Consulting, a record 300 securities class action complaints were filed in 2016 in federal courts, a 32 percent increase from 2015. This number represents the highest pace of filings since the 2000 dot-com crash.

The median time to file – the time between the alleged class period and filing date – remained near record lows at 13 days, up only two days from the 2015 time frame. The median class period length increased from the 10-year low of under a year in 2015 to more than 1.26 years in 2016.  In other words, allegedly wrongful conduct is being challenged quickly and over a longer period. Continue Reading

The D.C. Circuit Denies Motion to Stay Issuance of Mandate in Yaakov v. FCC Opt-Out Notification Case, but Petition for Certiorari Looms

On March 31, 2017, the D.C. Circuit entered its ruling in the closely watched Yaakov v. FCC case, holding that the Federal Communications Commission (FCC) had exceeded the authority given to it by Congress when it promulgated a rule requiring that opt-out notices be included in fax advertisements sent with prior permission of the recipient. See https://www.classactionlawsuitdefense.com/2017/04/03/d-c-circuit-may-have-finally-killed-tcpa-class-actions-over-solicited-faxes-without-opt-out-notices/. Many have speculated that the D.C. Circuit’s ruling will be the final word on this issue, especially given a statement issued by the chairman of the FCC, Ajit Pai, on the same day as the Yaakov opinion, indicating that the decision “highlight[ed] the importance of the FCC adhering to the rule of law” and stating that “[g]oing forward, the Commission will strive to follow the law and exercise on the authority that [it] has been granted . . . by Congress.” However, a handful of intervenors and petitioners have continued to challenge the ruling. Continue Reading

Eighth Circuit Provides Important Guidance in Class Settlement Approvals

The Eight Circuit provided some useful guidance for district courts and practitioners in obtaining and reviewing final approval of class settlements in its July 5, 2017, decision in Keil v. Lopez. In that case, the court affirmed approval of a consumer class action settlement by Blue Buffalo Co. Ltd. involving ingredients of pet food. Here are the four key takeaways from this decision:

  • Explain why the settlement is fair, reasonable and adequate.

The Eight Circuit had adopted a four-part test, in Van Horn v. Trickey, 840 F.2d 604, 607 (1988), to determine whether a settlement is fair, reasonable and adequate. The court of appeals found fault with the district court’s lack of analysis of this test as “conclusions, not reasons.” However, because of the strength of the record, the court found sufficient facts to approve the settlement under the Van Horn test. The court of appeals distinguished review of a class settlement approval from a disputed class certification decision for contested class certification – the latter of which requires a statement of reasons for satisfying Rule 23 to meet the rigorous analysis standard – implying that an inadequate explanation alone may justify remand of a class certification decision. Continue Reading

Ninth Circuit Narrows Already Slim Exception to Rule Barring Post-Removal Amendments to Avoid CAFA Jurisdiction

A plaintiff will rarely be permitted to amend its class action complaint after removal to avoid federal jurisdiction under the Class Action Fairness Act (CAFA). That is the takeaway from the Ninth Circuit Court of Appeals’ decision in Broadway Grill, Inc. v. Visa Inc., 856 F.3d 1274 (9th Cir. 2017), which further narrowed the already slim exception to the general rule that a plaintiff is bound by its pre-removal jurisdictional allegations.

The Broadway Grill court addressed a class action complaint, originally filed in a California state court against credit card companies, that alleged certain charges violated antitrust laws. The proposed class included “all California individuals, businesses and others” that accepted the companies’ credit cards in California; the class definition was interpreted to include both California and non-California citizens. The case was subsequently removed to the District Court for the Northern District of California under CAFA, which provides for federal jurisdiction where a matter in controversy exceeds $5 million, the plaintiffs number more than 100 and “minimal diversity” exists because at least one class member is a citizen of a state different from that of any defendant. “Minimal diversity” existed because the defendant credit card companies were California citizens and the proposed class included non-California citizens. Relying on a “very narrow” exception set forth in Benko v. Quality Loan Serv. Corp., 789 F.3d 1111 (9th Cir. 2015) to the general rule barring post-removal amendments to avoid CAFA jurisdiction, the district court in Broadway Grill permitted the plaintiff to amend the complaint and limit the class to only “California citizens,” thus eliminating minimal diversity under CAFA and requiring remand to state court.    Continue Reading

District of New Jersey Further Defines the Evolving Boundaries of Injury-in-Fact After Spokeo

On June 6, 2017, in Kamal v. J. Crew Grp, Inc., No. CV 2:15-0190, 2017 WL 2443062 (D.N.J. June 6, 2017), the United States District Court for the District of New Jersey dismissed a plaintiff’s second attempt to assert a claim for violations of the Fair and Accurate Credit Transactions Act (FACTA) for lack of standing in a decision that highlights the evolving boundaries of injury-in-fact in the wake of Spokeo.

The plaintiff alleged that three different J. Crew stores provided him with purchase receipts that violated the FACTA amendment to the Fair Credit Reporting Act (FCRA). Specifically, he alleged that the receipts included the first six and last four digits of his credit card number—more than “the last five digits” of his card number authorized to be printed under FACTA. Plaintiff’s first amended complaint (FAC) initially survived a Fed. R. Civ. P. 12(b)(6) challenge; however, the court subsequently stayed the case pending the outcome of Spokeo, Inc. v. Robins.

On May 16, 2016, the Supreme Court decided Spokeo, holding that, under Article III, an injury-in-fact must be “concrete and particularized” as well as “actual or imminent, not conjectural or hypothetical.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). The Court further observed that a “violation of a procedural right granted by statute can [alone] be sufficient in some circumstances to constitute injury in fact.” Id. at 1549. Continue Reading

DC Circuit Denies Intervenors’ Petition for Rehearing En Banc After Striking Down FCC Regulations Requiring Opt-out Notifications on Solicited Fax Advertisements

On March 31, 2017, the D.C. Circuit struck down FCC regulations requiring that solicited fax advertisements include opt-out notifications, holding that the TCPA did not grant the FCC the authority to impose such a requirement when, by its express terms, the TCPA applies only to unsolicited fax advertisements. Order, Yaakov v. Federal Communications Commission, No. 14-1234, at 4 (D.C. Cir. Mar. 31, 2017) [hereinafter Yaakov Opinion]; see also 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).

While the Yaakov decision was a big win for several petitioner businesses that took part in the suit, impacted parties have continued to watch the case closely to see whether the FCC will petition for certiorari. Such action seems unlikely, given a statement issued by the chairman of the FCC, Ajit Pai, on the same day as the Yaakov Opinion: Continue Reading

Fifth Circuit Questions the Use of Claim-splitting Tactic by Plaintiff; Orders District Court to Consider Whether Plaintiff’s Proposal Destroys Adequacy

On May 9, the Fifth Circuit Court of Appeals issued a decision in Slade v. Progressive Sec. Ins. Co, Case No. 15-300010, 2017 WL 1843737 (5th Cir. May 9, 2017), in which the court discussed how the practice of claim splitting can create an adequacy bar to class certification.

The appeal was taken from a putative class action filed in the United States District Court for the Western District of Louisiana against Progressive Security Insurance Company (Progressive).

The lawsuit asserts claims for breach of contract, Louisiana state law claims and fraud brought by policyholders who allege they were underpaid on their total-loss automobile insurance claims. For total-loss claims, Progressive calculates the value of a vehicle by assigning a vehicle a base value and then adjusting for the condition of the vehicle. The plaintiff alleges that Progressive improperly used valuation software (WorkCenter Total Loss) – rather than the National Automobile Dealers Association Guidebook or the Kelly Blue Book – to calculate the base value of total-loss vehicles and that the software assigned vehicles a lower base value, which ultimately lowered the payments on the insurance claims. Continue Reading

Sixth Circuit Adds to Circuit Split About the Enforceability of Class and Collective Action Waivers in Employment Arbitration Agreements

The Sixth Circuit just became the third federal court of appeals to hold that an arbitration provision requiring employees covered by the National Labor Relations Act (NLRA) to arbitrate individually all employment-related claims is not enforceable. Nat’l Labor Relations Bd. v. Alternative Entm’t, Inc., No. 16-1385, 2017 WL 2297620, at *9 (6th Cir. May 26, 2017). The court’s decision sides with the Seventh and Ninth Circuits, which have reached similar holdings, to create a slight majority in the circuit split on the enforceability of such provisions. See Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), cert. granted (U.S. Jan. 13, 2017); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016), cert. granted (U.S. Jan. 13, 2017). The Fifth and Eighth Circuits have reached the opposite conclusion, holding that class and collective action waivers are indeed enforceable. See NLRB v. Murphy Oil USA, Inc., 808 F.3d 1013 (5th Cir. 2015) (upholding its earlier holding in D.R. Horton, Inc. v. NLRB, 737 F.3d 344 (5th Cir. 2013)), cert. granted (U.S. Jan. 13, 2017); Cellular Sales of Mo., LLC v. NLRB, 824 F.3d 772, 776 (8th Cir. 2016) (upholding its earlier holding in Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013)). Continue Reading

‘Excessive’ Shipping Fees May Be Next Target of Consumer Class Actions

Packages delivery, packaging service and parcels transportation system conceptRetailers offering online, telephone or catalog purchases may want to review the shipping fees charged to their customers in the wake of several class actions recently filed in California. Multiple retailers have been hit with consumer class actions challenging their shipping fees as exceeding the actual shipping costs incurred by retailers in fulfilling customer orders.

These cases typically rely on Article 11 of the Data and Marketing Association’s Guidelines for Ethical Business Practice, which provides that “[p]ostage, shipping, or handling charges, if any, should bear a reasonable relationship to actual costs incurred.” Plaintiffs also frequently cite a Federal Trade Commission consent judgment in which an auto dealer consented to stop charging customers “freight” charges in excess of the actual cost to the dealer to transport vehicles to its showroom. In the Matter of Bill Crouch Foreign, Inc. d/b/a Bill Crouch Imports, Inc. (Formerly Mazda of Boulder, Inc.), 96 F.T.C. 111, 1980 WL 339028 (July 31, 1980). These two sources, plaintiffs argue, establish a public policy requiring retailers to charge customers no more in shipping fees than the actual costs incurred in shipping goods to customers. Continue Reading

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

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