Takeaway: To prevail on the predominance issue, an evidentiary showing is required. Defense counsel should prove – either through declaration or deposition testimony – that a particular defense (such as consent under the TCPA) applies to individual class members. Simply arguing that a defense might apply is insufficient to defeat a class plaintiffs’ showing that common issues predominate.
The Sixth Circuit addressed this issue in a “junk fax” case filed under the Telephone Consumer Protection Act (TCPA). Bridging Communities, Inc. v. Top-Flite Financial Inc., 843 F.3d 1119 (6th Cir. 2016). There, the TCPA plaintiffs alleged that a “fax blasting” company hired by the defendant (a residential mortgage firm) “blasted” more than 4,000 unsolicited fax ads to the plaintiffs and others across the United States, in violation of the TCPA. On the issue of consent under the TCPA, both plaintiffs asserted that the faxes they received were unsolicited and also that they did not have “established business relationships” with the defendant (an unsolicited fax ad does not run afoul of the TCPA where the sender and recipient have an “established business relationship,” the recipient voluntarily made its fax number available to the sender, and the unsolicited fax contains a notice satisfying various requirements under the TCPA and its corresponding regulations).
The district court denied class certification. Focusing its analysis exclusively on predominance under Federal Rule of Civil Procedure 23(b)(3), the district court “expressed concern that individual class members might have solicited or consented to receiving the challenged faxes,” which would require a class member-by-class member investigation. The district court further stated it was “not persuaded” the issue of TCPA consent could be established by common proof. The district court refused to certify a class, ruling that the TCPA plaintiffs had not carried their burden of showing that common questions predominated over individual ones.
The TCPA plaintiffs successfully petitioned for an interlocutory appeal under Federal Rule of Civil Procedure 23(f). The Sixth Circuit then reversed the district court’s denial of class certification, finding that the district court had abused its discretion.
The Sixth Circuit observed that the TCPA plaintiffs had submitted evidence showing that the consent issue was subject to “generalized proof,” including that the faxes were sent to numbers obtained from a single list of fax numbers purchased by the fax blasting company, and also that the fax blasting company failed to contact anyone on the list to verify consent. In response, the defendant did not submit any evidence but “merely raised the possibility of consent.”
The Sixth Circuit held: “[T]here the mere mention of a defense is not enough to defeat the predominance requirement,” further holding “that speculation alone regarding individualized consent was insufficient to defeat plaintiffs’ showing of predominance under Rule 23(b)(3).”
Posted on Friday, January 13 2017 at 9:46 am by Kilpatrick Townsend
Ninth Circuit Rejects Ascertainability as a Requirement for Class Certification Under Rule 23 by Joe Reynolds
A potent weapon for defending against class actions is the requirement that class members be “ascertainable.” Circuit courts phrase this requirement differently, but at bottom, it is two-fold: (1) the class must be objectively defined and (2) the court must be able to identify class members in an administratively feasible way. See, e.g., Brecher v. Republic of Argentina, 806 F.3d 22, 24 (2d Cir. 2015); Karhu v. Vital Pharm., Inc., 621 F. App’x 945, 947-48 (11th Cir. 2015); EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014); Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 2013).
The ascertainability requirement has been particularly important in consumer class actions. Where a class representative attempts to define a class based solely on the purchase of a low-cost product—such as a diet supplement (Carrera and Karhu)—a defendant can readily cry foul. How can the defendant be sure that absent class members actually purchased the product? Consumers typically don’t keep grocery receipts and are unlikely to remember the details about an otherwise routine purchase of a low-cost product. While members of a consumer class could submit affidavits swearing that they purchased the product at issue, this is viewed as an administratively infeasible way to determine class membership. Because a defendant has the right to challenge each claimant’s class membership, this would devolve into a “series of mini-trials just to evaluate the threshold issue of which [persons] are class members.” Karhu, 621 F. App’x at 949; see also Carrera, 727 F.3d at 307 (“A plaintiff does not satisfy the ascertainability requirement if individualized fact-finding or mini-trials will be required to prove class membership.”).
This is exactly what ConAgra argued in Briseno v. ConAgra Foods, Inc., No. 15-55727, 2017 WL 24618 (9th Cir. Jan. 3, 2017). Plaintiffs essentially sought to define their class as all persons who purchased Wesson-brand cooking oils labeled “100% Natural”—a label Plaintiffs claim is false or misleading because the product contains bioengineered ingredients. ConAgra, which markets and sells the product, argued that the district court erred by not requiring Plaintiffs to proffer a reliable way to identify class members. Again, “consumers do not generally save grocery receipts and are unlikely to remember details about individual purchases of a low-cost product like cooking oil.” Id. at *3. The Ninth Circuit readily dismissed ConAgra’s argument, refusing to even use the term “ascertainability.” Id. at *2 n.3. Instead, the Ninth Circuit focused only on the second portion of the ascertainability requirement: whether class representatives must demonstrate an administratively feasible way to identify class members. Id. at *3 n.4. After employing the rules of statutory construction, the Ninth Circuit held that “the language of Rule 23 does not impose a freestanding administrative feasibility prerequisite to class certification.” Id. at *4.
After its interpretation of Rule 23, the Ninth Circuit spent the remainder of its opinion reviewing and rejecting the reasons the Third Circuit has proffered for requiring that class members be identified in an administratively feasible manner. In doing so, the Ninth Circuit joined the likes of the Sixth, Seventh, and Eighth Circuits, which have all criticized the Third Circuit’s reasoning for such a requirement. See, e.g., Sandusky Wellness Ctr., LLC v. Medtox Sci., Inc., 821 F.3d 992, 996-97 (8th Cir. 2016); Mullins v. Direct Digital, LLC, 795 F.3d 654, 657-58 (7th Cir. 2015); Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015). The Seventh and Eighth Circuits in particular have characterized the Third Circuit’s approach as a “heightened” ascertainability requirement. Sandusky, 821 F.3d at 996; Mullins, 795 F.3d at 661-62.
At bottom, the Ninth Circuit reasoned that the factors enumerated in Rule 23 “already address” the policy concerns underlying any “separate administrative feasibility requirement.” 2017 WL 24618, at *1. The Ninth Circuit leaned heavily on one factor in particular: Rule 23(b)(3)(D), “the likely difficulties in managing a class action.” This is one of the four factors courts should consider in determining whether a class action is the superior vehicle for adjudicating the controversy. By invoking the superiority requirement—which entails a “comparative assessment of the costs and benefits of class adjudication, including the availability of ‘other methods’ for resolving the controversy”—the Ninth Circuit appears to be instructing courts to assess any potential administrative burdens alongside and compared to any potential benefits of using the class action vehicle. 2017 WL 24618, at *6.
This may be the upside of the opinion. The Ninth Circuit clearly had the low-value consumer class action in mind, noting there is no “realistic alternative to class treatment” for a class action involving “inexpensive consumer goods.” Id. Therefore, the Ninth Circuit might have less tolerance for administrative burdens related to identifying class members outside of thelow-value consumer class action context. Moving forward, a defendant should (1) consider framing arguments regarding these administrative burdens under the superiority requirement and (2) pay close attention to how other factors used to assess superiority might impact a court’s tolerance of these burdens.
Takeaway: The Ninth Circuit joins the Sixth, Seventh, and Eighth Circuits in disposing of the “heightened” ascertainability requirement. If a defendant must defend a class action in the Ninth Circuit, this is all the more reason to consider early defenses such as personal jurisdiction. But to the extent these defenses are unavailable, a defendant must be careful to frame an argument based upon potential administrative burdens in such a way that the argument will be recognized by the courts in the Ninth Circuit.
Posted on Wednesday, January 4 2017 at 2:57 am by Kilpatrick Townsend
It is a bedrock principle of American jurisprudence that you can’t have your cake and it eat too.
In class action litigation, plaintiffs often strive to avoid removal to federal court because they perceive state courts as more plaintiff-friendly. So class action plaintiffs frequently advance allegations designed to frustrate CAFA removals to federal court.
But plaintiffs also want to recover as much money as possible, so they naturally want to include allegations preserving the ability to recover the maximum amount of damages.
Courts in “fuel surcharge” class actions recently have grappled with this tension in addressing motions to remand CAFA removals. In these cases, plaintiffs allege the defendants collect unreasonable or excessive fees or surcharges, such as fuel charges, environmental charges, or delivery charges. To avoid removal to federal court, however, a plaintiff might argue that it is only challenging the portion of these charges that exceed the defendants’ related costs (claiming, for example, that a defendant collected more in fuel charges than it incurred in fuel costs).
In 2015, a Georgia federal court granted a motion to remand a class action challenging the reasonableness of various surcharges. The defendant presented evidence of the total amount of its charges and offered arguments (but not evidence) as to the amount of such charges that should be considered “unreasonable” under the theory articulated in the class action plaintiff’s complaint. But the defendant also refused to produce evidence of the costs that allegedly offset the collected charges. The federal court, distinguishing federal appellate authorities holding that the entire amount of the disputed charges should be considered under CAFA’s $5 million jurisdictional threshold, remanded the case to state court, reasoning that the defendant’s removal evidence did not show that $5 million was at stake, in light of plaintiff’s allegations. All-South Subcontractors, Inc. v. Sunbelt Rentals, Inc., No. 1:14-CV-124-WLS, 2015 WL 4255781 (M.D. Ga. July 14, 2015).
A Florida federal court recently reached a different result in 2016, denying a motion to remand a class action challenging fuel and environmental surcharges. In that Florida case, the complaint advanced contradictory allegations. On the one hand, the complaint challenged the fuel and environmental charges in their entirety, arguing the surcharges constituted “double dipping” by the defendant (under the theory the defendant was already reimbursed for its fuel and environmental costs through its base price). On the other hand, the complaint alleged the plaintiff sought only to recover the “excessive portion” of the charges, rather than the entire amount of those charges.
The federal court rejected this purported limitation and denied the plaintiff’s motion to remand. Pointing to the “double dipping” allegations, which attacked the charges in their entirety, the court ruled that the defendant’s evidence – which showed that the charges in their entirety exceeded $5 million – supported removal under CAFA. Vision Construction Ent., Inc. v. Argos Ready Mix, LLC, No. 3:15cv00534-MCR/CJK, 2016 WL 6987009 (N.D. Fla. Nov. 7, 2016).
Takeaway: CAFA has changed the jurisdictional analysis. It used to be that removal jurisdiction was strictly construed and that all jurisdictional doubts were to be resolved in favor of remand. No longer. The U.S. Supreme Court confirmed in Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547, 554 (2014), that “no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” See also Dudley v. Eli Lilly and Co., 778 F.3d 909, 912 (11th Cir. 2014) (“we may no longer rely on any presumption in favor of remand in deciding CAFA jurisdictional questions.”)
In this context, “it must appear to a legal certainty that the claim is really less than the jurisdictional amount to justify dismissal.” Federated Mut. Ins. Co. v. McKinnon Motors, LLC, 329 F.3d 805, 807 (11th Cir. 2003) (emphasis added). Accordingly, when faced with a complaint that purports to challenge only the “unreasonable” or “excessive” portion of an alleged fee or charge, while at the same time preserving the ability to attack the fee or charge in its entirety, the defendant should emphasize the allegations that put all of the charges at issue and submit detailed evidence showing the charges well exceed CAFA’s $5 million threshold.
Recent Orders in Two California Class Actions Highlight the Need for a Well-Crafted Discovery Strategy by Nancy Stagg
Recent decisions in two federal consumer class actions in California show how the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes 564 U.S. 338 (2011) is a double-edged sword for class action defendants. While Wal-Mart is routinely heralded as a victory for class action defendants – because it finally put teeth into Rule 23’s commonality requirement – the case poses a different reality for class action defendants in the discovery trenches. Just as often, Wal-Mart is cited by plaintiffs’ counsel to justify broad, merits-based discovery requests to defendants pre-certification. In our experience, the key to handling overly-broad discovery requests is to first seek to limit the scope of those requests, particularly where a production involves too much effort and expense. If that fails, a defendant should utilize the information and documents produced to defeat class certification. These two recent class actions illustrate this point.
In the first case, In re Coca-Cola Prods. Mktg. and Sales Practices Litig., Case No. 14-md-2555-JSW 2016 WL 6245899 (N.D. Cal. Oct. 26, 2016), Magistrate Judge Maria-Elena James ordered the defendants in a food-additive mislabeling action to produce three broad categories of documents pre-certification, finding that “the line between merits and class certification discovery is not always bright,”… “because discovery going to the merits of a plaintiff’s claim also often has ‘significant bearing on issues such as predominance and commonality under Rule 23.’” (citing Lindell v. Synthes U.S.A., 2013 WL 3146806 at *6 (E.D. Cal. June 18, 2013)). Among other requests, the court ordered the defendants to produce all of their communications with the FDA and other governmental agencies regarding the legality of defendants’ labeling regarding phosphoric acid. Defendants argued that these documents did not go to consumers’ decision-making and therefore were irrelevant to class certification. The court disagreed and found that if government entities warned defendants their labeling was misleading, such evidence would be “useful common proof to determine what consumers were likely to understand.” The court did, however, limit production in response to two other broad requests, including internal market share data and communications between the defendants and their marketing and advertising consultants. Finding those pre-certification discovery requests as too broad and imposing a burden “not proportional to the needs of the case,” the court declined to require defendants to produce all of the requested documents. Instead, the court ordered the parties to meet and confer, “tailoring and narrowing the production” to exclude any irrelevant and unhelpful materials and lessen Defendants’ burden.” While probably not as much relief as the defendants and their counsel hoped for, the court appeared sensitive to arguments regarding proportionality and burden, especially in the pre-certification context.
In the second case, In Re MyFord Touch Consumer Litigation, Case No. 13-cv-03072-EMC (N.D. Cal. November 22, 2016), the defendants put to good use what had clearly been extensive pre-certification discovery to thwart the plaintiffs’ effort to certify a class. There, plaintiffs alleged that defendants’ in-car communication and entertainment system (“MFT”) was defective and that the defendants had made false and misleading statements to consumers in numerous states, either by mispresenting, or entirely omitting, key information about the system.
In an order by U.S. District Court Judge Edward Chen, which denied plaintiffs’ motion for reconsideration (seeking to certify additional classes) and granted defendants’ motion for reconsideration (to decertify certain classes), the court ruled that plaintiffs were not entitled to a class-wide presumption of reliance on Ford’s alleged misrepresentations and omissions. Instead, the court found that the information produced by Ford in discovery showed that information about the MFT system’s problems was widely available to the public almost as soon as the system was released, including news reports, consumer surveys, and Ford’s public statements. The district court also pointed to Ford’s evidence that the MFT software was updated several times during the class period to address the problems, including three years’ worth of internal communications about the MFT system. Given the evolving nature of the MFT software, the district court found there was too much variability in the material facts throughout the class period to permit a class-wide inference with respect to Ford’s state of mind about the alleged MFT defects. As a result, the district court ruled that all of the plaintiffs’ fraud-based claims requiring a showing of reliance could not be certified due to “predominance and manageability” concerns. This order shows how a class defendant can take advantage of extensive pre-certification discovery to defeat class certification.
Today’s lesson? Try to limit pre-certification discovery at the outset on proportionality and burden grounds. But if that’s not possible, and the discovery is ordered to be produced, be ready to pivot and use that same discovery to attack class certification by showing that common issues do not predominate, and that plaintiffs are not entitled to a class-wide presumption of reliance.
If you want more information, contact Nancy Stagg at firstname.lastname@example.org.
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Posted on Wednesday, December 14 2016 at 2:43 pm by Kilpatrick Townsend
Beating Class Certification in the Ninth Circuit on the Damages/Restitution Issue by Jay Bogan
The Ninth Circuit has emphasized time and again that the need for individualized inquiries on the issue of damages does not itself defeat class certification. But, in light of the U.S. Supreme Court’s decision in Comcast Corp. v. Behrend, the Ninth Circuit has made it clear – in two recent “not for publication” decisions – that this principle only applies when there is a common methodology for calculating damages. Where the class representative does not or cannot show that damages can be measured on a class-wide basis, class certification should be denied.
In Brazil v. Dole Packaged Foods, LLC, the plaintiff alleged that Dole deceptively advertised its fruit products as “All Natural Fruit,” despite the fact that the products contained synthetic citric and absorbic acid. The plaintiff sought a full refund on behalf of himself and the class. But, according to the Ninth Circuit, the plaintiff could only seek a full refund where the product purchased had no value whatsoever. Because the plaintiff could not prove that Dole’s fruit products were valueless, he could only recover the “price premium” – the difference between the price a consumer paid and the actual value of the fruit purchased. Because the plaintiff did not explain how the price premium could be calculated on a class-wide basis, the Ninth Circuit affirmed the district court’s decertification of the class.
Brazil v. Dole Packaged Foods, LLC, No. 14-17480, 2016 WL 5539863 (9th Cir. Sep. 30, 2016)
In Doyle v. Chrysler Group, LLC, the plaintiff sued Chrysler for failure to disclose a defect in its window regulator replacements. The plaintiff bought a replacement regulator for $100. Even though his replacement regulator never failed, he sought a partial reimbursement of the purchase price, based on the undisclosed defect (in other words, the $100 price tag was too high because the replacement regulator was prone to failure). Plaintiff, however, did not offer a damages model for determining what percentage of the purchase price the reimbursement should be. Because the plaintiff did not show that “partial reimbursement damages” could be measured on a class-wide basis, the predominance requirement was not satisfied and the district court abused its discretion in certifying a class.
Doyle v. Chrysler Group, LLC, No. 15-55107, 2016 WL 6156062 (9th Cir. Oct. 24, 2016)
Takeaway: Brazil and Doyle demonstrate the need to contest class certification on the damages/restitution issue, especially where a class plaintiff relies on a partial refund or reimbursement damages theory.