One of our long-standing objectives for this blog is to provide in-depth analysis of recent court rulings and developing trends that impact class action practice. That remains a driving tenet. In an effort to expand our coverage, we are phasing in a regular Monday column that provides more succinct updates on recent decisions. These short-form recaps will supplement, rather than replace, our traditional deep-dive posts.
Without further ado, here’s a look back at a few notable recent decisions:
Hybrid Certification under Rule 23(b): The District Court for the District of Columbia applied a hybrid approach to Rule 23(b) certification when allowing a group of tax preparers to proceed as a class in pursuing their claims against the IRS based on allegedly excessive fees. The court held that the plaintiffs’ claim for a judgment declaring that the IRS lacked authority to charge a fee for the issuance or renewal of a tax identification number should be certified under Rule 23(b)(2), and that the plaintiffs’ claim for restitution of fees paid should be certified under Rule 23(b)(3). The court had previously held that the plaintiffs’ attempt to recover these fees was a claim for monetary damages barred by sovereign immunity, but reversed course last week, holding that the relief plaintiffs sought was more properly construed as a claim for restitution that fell under the limited waiver of sovereign immunity contained in the Administrative Procedure Act. The court held that class-wide issues predominated with regard to the restitution claim because the question of whether the fees were excessive or authorized “will be answered in the same way for every class member.”
Potential Injury Not Enough: The Massachusetts Supreme Court reversed a state Superior Court order granting the plaintiffs’ motion for class certification on claims that a power company was not adequately prepared for winter storms. The Superior Court had granted certification based on the theory that the putative class had paid for a level of emergency preparedness prior to an anticipated 2008 storm that the power company failed to provide. The Supreme Court reversed, noting that the plaintiffs failed to allege that they actually lost power during the relevant time period, and a claim of “economic injury based on a potential inadequacy in emergency protection does not support class certification.”
Looking at Market Conditions when Enforcing Arbitration Provisions: The push by the plaintiffs’ bar to encourage courts to retain jurisdiction in class actions rather than deferring to arbitration provisions containing class-action waivers is well-documented. Whether it will result in a substantial change in courts’ interpretation of these clauses remains to be seen. A California Superior Court judge’s decision last week in a proposed class action alleging overpricing in the field of online food delivery suggests that class action waivers are still alive and well. The court granted the defendant’s motion to compel arbitration, reasoning that including the clause in the company’s online terms and conditions amounted to a clear disclosure, and that the number of competitors operating in the field meant the consumer had a meaningful choice to accept or not.
A Percentage-Based Approach to Fees: The California Supreme Court upheld a trial court’s approval of a $19 million settlement in a class action employment lawsuit that allocated one third of that recovery to attorney fees. The Court rejected an objecting class member’s contention that this method of fee calculation was improper, holding that in those cases where an attorney fee is awarded out of a common fund, a fee calculated as a percentage of that common fund is not per se unreasonable—particularly when the court uses the lodestar-multiplier method as a crosscheck on the reasonableness of that percentage calculation. The court’s opinion includes a helpful historical review of the several methods for calculating attorneys’ fees in class actions that courts have used through the years.