"On mounting a rising ground, which brought the figure of his fellow-traveller in relief against the sky, gigantic in height, and muffled in a cloak, Ichabod was horror-struck on perceiving that he was headless! -- but his horror was still more increased on observing that the head, which should have rested on his shoulders, was carried before him on the pommel of his saddle!"
-- Washington Irving, "The Legend of Sleepy Hollow"
The Class Action Racket (Cont'd)
HAYDEN RUSH WAS ON A ROLL the moment I pulled my Bay alongside his Paint at the trailhead for our regular Sunday ride up the western slope of the Palisades to Lamont Rock. The Rockleigh Woods Sanctuary was our "church." No other one would have us.
Like time or tide, the man waits for no one. "Goodness, so much hand-wringing over the so-called class action 'pickoff' play." He had a way of making you feel as if you'd just walked in on the middle of a conversation, even when he was alone. Hayden held no interest in small talk.
He went on to say that "the nattering nabobs bleat endlessly about the 'impact' of this perfectly legitimate defense strategy on the future of rule 23 class actions. 'End times,' they prophesy. 'The demise of class actions,' they fret. As if the planet might start wobbling, for crying out loud. As if being able to sue in a representative capacity were an 'unalienable right,' or that fewer class actions overall might not be such a bad thing." My horse shook its head and snorted loudly, sparing me the effort.
"Crikey, even old Beau gets it, friend. Not as if most of the business littering court dockets today is the stuff of class litigation's golden age," Hayden quipped. "More like a racket, I'd say." His horse groaned and unburdened itself on the trot. I marveled at the irony: like man, like beast. Who knew?
"Since when," he thundered, "does an uninjured plaintiff -- one whose alleged injury has been voluntarily redressed prior to a complaint actually being filed -- have standing to bring suit on behalf of an injured class? All this time I thought a would-be class representative was just an individual plaintiff until such time as a class is actually certified. Must have missed the memo explaining that a plaintiff suing in both an individual and representative capacity can fabricate article III standing for himself (as well as a proposed class, mind you) by simply refusing to accept a refund tendered for claimed damages in response to a pre-suit notice letter."
Heady conversation for a trail ride. "Morning, Hayden."
A Tale of Faux Classes and Fake Imbeciles
Readers of these chronicles will recall that Hayden's lately been defending consumer product companies in a raft of proposed class actions in federal courts across the country -- on claims too strange for words. Like the threatened pannicum effusum (or "hairy panic") class action featured recently, what these cases have in common is basically a "cause" and an enterprising lawyer in search of a nominal plaintiff. And that cause is nothing so great as to generate attorneys' fees on the back of allegations tending to suggest that law's hypothetical "reasonable person" -- the comparative standard used by courts for determining liability in various settings -- is in the terminal phase of a disease. In short, there is frankly nothing average about the care, skill, or judgment of the individuals drafted to serve as nominal plaintiffs in these cases.
For openers, litigation is not sport for the average Joe or plain Jane. Reasonable people don't file federal lawsuits (much less class actions) whenever their perceived expectations about a product's value or benefits have been dashed -- especially when small-dollar purchases are involved. Maybe we contact customer service to register our dissatisfaction, to exchange the product for another, or to demand a refund. Sometimes we might decide to take our business elsewhere. More often than not, though, we simply move on with our lives rather than make a fuss (much less a federal case) over the labeling of, say, a can of peas. Fool me once, shame on you; fool me twice, shame on me. But nowadays it seems too many people don't have enough shame.
If those who decide in such circumstances to lend their names (some on a serial basis) to deceptive food-labeling class actions are "reasonable people," we're in a fine mess indeed. Most people have more pressing cares or simply better things to do with their time than to spend it in litigation. The more Hayden explained what he and his clients were up against, the better I understood his sense of frustration with the whole class-action racket.
"Look," Hayden said, "I'm not advocating the death of class actions. But let's not fool ourselves. The deceptive food-labeling class litigation is stupid, makeweight stuff. These cases are not being filed to expand the rights or liberties of ordinary Americans, to police true food fraud, or anything genuinely altruistic at all. They're a different class-action animal altogether. Their chief distinguishing feature is that the lawyers who dreamed them up did so solely as a vehicle for generating large fee awards for themselves. That's what's really going on here, and for those on the sharp end of this stick -- courts, defendants, and consumers who ultimately foot the bill for these lawsuits -- it's an intolerable state of affairs."
"Looking for their next big payday, these Robin Hoods allege that their clients (and thousands of similarly hapless and helpless folks) were hoodwinked into purchasing grocery items that were either not 'natural' enough for them, or allegedly mislabeled in some ultimately hyper-technical manner that the named plaintiffs can never manage to articulate with anything resembling coherence in deposition. Come on, really? Who thinks or acts that way in the real world?"
I interrupted Hayden's soliloquy to suggest a possible case theme. "How about this for a jury argument: 'While a just society must always protect its genuine imbeciles, we cannot allow the law to be gamed by those merely posing as imbeciles in order to steal from others.'" Pulling up his horse, Hayden grinned. "Oh, that's sweet. I just might steal that one from you, old man."
"Well if you do, be sure to credit the American Tort Reform Foundation's 'Judicial Hellholes' blog, because that's who I stole it from." We rode on in silence, save the occasional screech of a red-tailed hawk and the clop of hooves on rocks.
Individual Refunds, Would-Be Class Representatives, and Headless Class Actions
At Lamont Rock, we grazed the horses. "Last time, you told me that your strategy in these cases was to offer plaintiffs refunds, then move to dismiss for lack of standing. How are your adversaries responding?"
Without averting his gaze from the Hudson River in the distance, Hayden pulled off his gloves, crouched and spat. "Pretty much as expected: bunch of nonsense, a lot of obstinacy or madness -- can't tell which it is, and considerable confusion about the Supreme Court's opinion in Campbell-Ewald on offers of judgment under rule 68, the part where Ginsburg said 'a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.' Those words might as well be a lawyers' relief act. Seems a live claim is like beauty. Its meaning apparently lies in the eyes of the beholder."
I wondered if he could win his argument. "I think so," he said.
"Truth is that these cases carry the seeds of their own destruction. This is pretty apparent at the back end of things, given plaintiffs' inability so far to come up with a proper damages model for purposes of getting their proposed classes certified. Cases are collapsing like flies lately on that basis. Maybe it's because the bounty hunters behind them aren't willing to spend the kind of money needed to produce a statistical model stout enough to thread the needle for rule 23 certification purposes. Devil only knows. But look at all the time and treasure defendants are forced to spend exposing plaintiffs' bluff, not to mention the waste of judicial resources. I hate that plot device -- the big reveal -- waiting so long to expose plaintiff's trick."
He added his belief that "these cases need to be killed at the front end instead, before they can flourish into the proverbial bollix. Voluntary refunds serve that end. Show them the money and fight over standing at the threshold."
I bit. "This is where the 'live claim' issue comes into play."
Anatomy of the "Pickoff"
"Basically. Here's the setup. These cases are usually brought under state consumer-protection laws. Okay? And before a claimant can seek monetary damages in court for allegedly deceptive labeling, those statutes typically require a would-be plaintiff to send a pre-litigation letter, basically a demand that the defendant cure or remedy an alleged problem with a product by making restitution. It's kind of like an exhaustion requirement; the objective being to avoid needless judicial recourse. And that's the rub, the fulcrum of the fabled class-action 'pickoff' play."
The "kill shot," I ventured.
"Exactly, because these plaintiffs haven't joined the game for non-judicial recourse. Heck, they're not even really genuinely aggrieved plaintiffs at all. Pawns is more like it. Each one of them has been drafted by Sherwood Forest's finest to head a class action in exchange for the promise of an incentive award at the end of the rainbow. They don't want a refund. They don't want to take 'yes' for an answer. They want a class-action lawsuit. But the demand-letter requirement arguably ties their hands. And food class actions aggregating large numbers of small-dollar consumer purchases as well as those based on laws that offer statutory damages to successful plaintiffs on a strict-liability basis, are perfect vehicles for denying would-be class representatives standing to sue in federal court. Because a defendant can respond to these demand letters by sending refunds, or tendering an amount greater than the statutory damages named plaintiffs would be entitled to receive if their claims were successful."
As we bridled the horses and returned to our saddles, I muttered, "the pickoff."
"Sure, but just make sure next time to layer it with the right amount of contemptuous ridicule, because you know 'everyone in America is entitled to have their day in court.' Folks might try tackling the implications of that sort of silliness instead. Anyway, people can call this strategy by whatever pejorative name they like -- the pickoff or the buy off -- but a plaintiff seeking monetary relief who has been given complete restitution for alleged individual damages in the form of a refund or the like has no standing under article III, because …"
"HE HAS BEEN MADE WHOLE," we said in unison. What about the class claims, though, I asked.
"Dead," he said, and turned his horse for home. "Prior to class certification, the named plaintiff's personal stake in the dispute's outcome (i.e. his individual claim) is attributed to the proposed class, not vice-versa. And if a person purporting to represent a class cannot satisfy the requirements of article III, he cannot seek relief either alone or in a representative capacity: because he's stakeless -- without a live claim of his own. Can't fathom all the controversy. It's not as if we're dealing with a blank slate. For some forty-odd years now, the high court has consistently said that standing cannot be acquired through the back door of a class action, that class claims add nothing to the question of standing pre-certification."
"Look at U.S. Parole Comm'n v. Geraghty," he added, "where the court said that a procedural right to have a class certified, if rule 23's requirements are met, is not really the type of interest traditionally thought to satisfy the 'personal stake' requirement of article III. OrWarth v. Seldin, where it said that a plaintiff can't assert standing through the claims of absent putative class members. An uninjured plaintiff might be able to continue litigating a class action in certain circumstances -- post-certification, say, after losing his personal stake because of an intervening mootness event -- but he can't institute one. The majority opinion in Campbell-Ewald changes none of that. It simply rejects the notion that an unaccepted Rule 68 offer of judgment can moot an otherwise live claim, and leaves the implications of actual payment on the question of article III standing for another day."
The False Hope of Rule 68 and Legend of Rockleigh Woods
THE HORSES SPOOKED at the appearance of a couple of unleashed dogs yelping ahead of us at the ford leading out of the woods. They wouldn't budge, so I pressed Beau -- a calf-penning rodeo champion in another life -- splashing ahead to clear the way. This incident, coupled with Hayden's talk of "stakeless" plaintiffs and "dead" class claims, and perhaps too our surroundings not far from Sleepy Hollow across the river, awakened in me an image of Ichabod Crane.
"So, how does rule 68 figure in this, Hayden?"
"Not a whit far as I can tell, if winning is your game. Unless of course plaintiff accepts your offer. And no Robin Hood worth his salt is going to let that happen. It's a false hope. Those ventriloquists are never going to throw their voices that way. Against the type of cases we've been talking about, it's a bad argument -- no way to preemptively protect a client from potential class-wide liability based on satisfaction, least not without a willing party on the other side. Like those dogs Beau just made turn tail."
So, forget about rule 68.
"Right. And since we can't bring Beau to court, answer the pre-suit notice or demand letter with actual payment of the claimed damages: show plaintiffs the money. Erase the runner before he can move into scoring position." I flashed back to our days as battery mates in Legion ball. His stuff was junk, but he won with guile and a sneaky-fast move to first that baserunners were not accustomed to seeing from a righty, which kept their leads real short, no matter how often they faced him.
Hayden continued: "Reverse charges made to a credit card or send a certified check -- before the complaint is filed. And then move to dismiss for lack of subject matter jurisdiction based on plaintiff's lack ofstanding to sue either alone or in a representative capacity, because his own claim expired with the unconditional tender of redress -- before the action was filed. If a complaint has already been filed, do the same thing before plaintiff is able to move for class certification, and seek dismissal for lack of standing based on mootness, which requires a plaintiff's personal stake in a dispute to remain 'live' throughout the course of a case."
"And failing that, war."
Back at the barn, we unsaddled the horses and turned them out. After Hayden left for the office, I dwelled on the Legend of Rockleigh Woods, and the specter of the Headless Class Action -- the ghost of a mercenary named plaintiff, and aspiring class representative, who had his head shot off by a rule 12(b)(1) motion during "some nameless battle," and who "rides forth to the scene of battle in nightly quest of his head."