Eighth Circuit Creates New Class Action Fairness Act Requirement, Sends Case to State Court

Cruz-Alvarez_FFeatured Expert Contributor – Civil Justice/Class Actions

Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. (co-authored with Talia Zucker, Shook, Hardy & Bacon, L.L.P.)

On April 4, 2014, the U.S. Court of Appeals for the Eighth Circuit breathed new life into a proposed consumer class action lawsuit that was previously—and properly—dismissed with prejudice by the U.S. District Court for the District of Minnesota.     Instead of affirming the district court’s decision, the Eighth Circuit, in an attempt to save the lawsuit, reversed and remanded Melvin Wallace v. ConAgra Foods, Inc., — F.3d —-, 2014 WL 1356860 (8th Cir. Apr. 4, 2014), to the Minnesota state court where it originated. In doing so, the court’s ruling, either by design or by accident, undermined the framework and legislative purpose of the Class Action Fairness Act (“CAFA”).

The case originated in May of 2012, when a group of consumers purporting to represent a putative class sued ConAgra Foods, alleging that some of the company’s Hebrew National beef products are not 100% kosher, as the label claims. 2014 WL 1356860 at *1.ConAgra manufactures Hebrew National meat products using beef slaughtered by AER Services, Inc. (AER). Id. The slaughtering takes place in the facilities of American Foods Group, LLC (AFG), which sells kosher meat to ConAgra and any remaining meat to third parties. Id. AER employs the religious slaughterers, and a third party kosher certification entity named Triangle K, Inc., monitors whether AER, AFG, and ConAgra comply with the kosher rules. Id.

ConAgra promotes the kosher requirements as a reason to purchase Hebrew National products, which cost more than similar non-kosher products. Id. The consumers claim, however, that manufacturing quotas—not kosher rules—is the deciding factor in whether certain meat is certified as kosher; and with a quota of 70% for kosher meat, the kosher inspection process has become defective and unreliable. Id. at *2. Consequently, the consumers maintain they have been misled into paying an “unjustified premium for Hebrew National’s ostensibly kosher beef.” Id. at *1. Continue reading

WLF Briefing Focuses on U.S. Supreme Court at its Mid-Term Point

One of our speakers, Troutman Sanders’ Peter Glaser, and his authoring of WLF’s amicus brief in Utility Air Group v. EPA, were referenced in a New York Times story on the case.

Attendees of the briefing received printouts of the following WLF Supreme Court-related resources:

Update: Ninth Circuit Agrees to Reconsider Class Action Fairness Act Circumvention Ruling En Banc

9thCirLast November in Eighth Circuit Ruling Deepens Circuit Split on Class Action Fairness Act Circumvention Tactic, we discussed the latest in a series of federal appeals court decisions involving plaintiffs’ lawyers’ efforts to keep their class action lawsuits in state court despite CAFA (the Class Action Fairness Act). In Atwell v. Boston Scientific, the Eighth Circuit rejected an attempt to strategically break large numbers of plaintiffs with identical claims into groups less than 100 with the unstated goal of consolidation for trial. The court specifically departed from an approach taken by another federal appeals court, the Ninth Circuit, which endorsed that tactic and allowed a class action to remain in state court.

We noted at the end of that November post that the defendants in that Ninth Circuit case, Romo v. Teva, had filed a motion with the court for a rehearing en banc.  Washington Legal Foundation supported that request with an amicus brief.

Yesterday, the Ninth Circuit issued an order granting the Romo defendants’ request, and vacating the three-judge panel’s ruling. The en banc panel will hear oral arguments on the case June 16. In the meantime, plaintiffs can no longer cite to the Ninth Circuit’s September 2013 decision as precedent for their CAFA circumvention tactics, leaving the Eighth’s Circuit’s Atwell ruling as the most recent appellate statement on the matter.

Read WLF’s press release on the Ninth Circuit’s order here.

Supreme Court Observations: AU Optronics Ruling Empowers State Attorney General-Trial Lawyer Alliance

supreme courtCross-posted at WLF’s Forbes.com contributor page

In its unanimous Mississippi ex rel. Hood v. AU Optronics ruling, the Supreme Court on Tuesday refused to interpret the Class Action Fairness Act (CAFA) so as to allow the “mass action” removal of a parens patriae suit in which the State of Mississippi was the only named plaintiff.  The decision marks only the second time that the high court has considered the 2005 statute, which Congress enacted to expand a defendant’s ability to remove to federal court a class action that did not satisfy the traditional requirements of diversity jurisdiction.  (Last term, a unanimous Court in Standard Fire Insurance Co. v. Knowles ruled in favor of removal in a case where the class representative attempted to avoid CAFA jurisdiction by stipulating to damages below the threshold amount in controversy).

Utilizing a “real-parties-in-interest” analysis, the U.S. Court of Appeals for the Fifth Circuit had agreed with the district court that the case constituted a “mass action” under CAFA.  But on the question of the applicability of CAFA’s “general public” exception, the appeals court reversed the district court, which had remanded the case back to state court on the basis that it was “asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class)” under 28 U.S.C §1332(d)(11)(B)(ii)(III).  Oddly, the Supreme Court didn’t bother weighing in on CAFA’s “general public” exception, holding instead that the suit failed even to meet the basic definition of a “mass action” because it did not involve 100 or more named plaintiffs.  The Court rejected the lower courts’ “real-parties-in-interest” approach in favor of a narrow reading of the statutory language.

As a result, state attorneys-general and their trial bar friends are now free to avoid federal court altogether by simply running their class and mass actions through an AG’s office as a parens patriae suit.  The trial lawyers will still receive their big contingent-fee awards, and they can continue to send AGs their out-of-state campaign contributions.  According to a recent report, for example, the Mississippi AG’s “plaintiffs’ firm contributors were all out of state, and they made no contributions to any other candidates for statewide office in Mississippi.”  In only two instances where contingent-fee law firms represented Mississippi in securities fraud class actions did the firms not make a previous contribution to the AG’s campaign.  They did so subsequently, however, according to the report.

If this staggering conflict of interest is ever to be reined in, the Court has left it up to Congress to do so.  That’s a shame, inasmuch as the Supreme Court should take a greater interest in cleaning up practices that treat courtrooms like cash registers and corrode the integrity of the judicial process.

Update: Frequent Flier Plaintiff in Food Court Crashes Again with Denial of Class Certification

ben-and-jerrys-berry-voluntaryCross-posted by Forbes.com at WLF’s contributor site

In September 2012, we commented on Northern District of California Judge Phyllis Hamilton’s rejection of a settlement of the food labeling class action Astiana v. Ben & Jerry’s Homemade (Update: Judge Rejects Settlement in Ben & Jerry’s “Natural” Class Action). Last  January, she requested briefs on class certification. On Tuesday, January 7, Judge Hamilton rejected class certification.

Ms. Astiana, a Food Court frequent flier, has had a rough go of it lately in her role as a named class action plaintiff. We noted here six months ago that Southern District of California Judge Marilyn Huff denied certification of Astiana’s lawsuit against Kashi.

In the suit against Ben & Jerry’s Ms. Astiana argued the company’s labeling of certain ice cream pints as “all natural” misled her into paying a premium for the product and “disrupted my vibe” (her words, not ours). The ice cream, she alleges, is not natural due to the presence of synthetic alkalized cocoa. Judge Hamilton rejected class certification on two grounds.

Ascertainability. Though not a formal part of Federal Rule of Civil Procedure 23, which governs federal class actions, courts have found that the class must be ascertainable—that is, it “must be sufficiently definite so that it is administratively feasible to determine whether a particular person is a class member.” The U.S. Court of Appeals for the Third Circuit enraged the plaintiffs’ bar last summer with two rulings on ascertainability, Hayes v. Wal-Mart Stores and Carrera v. Bayer CorpIn those cases, the defendants, both consumer product makers, argued that because the class members offered no reliable and administratively feasible way to prove they had purchased the targeted product (such as sales receipts), the class was not ascertainable. The court agreed, ruling that reliance upon a consumer’s “say so” that they purchased the product did not permit defendants an opportunity to challenge the evidence used to prove class membership. Continue reading

Trial Court Rules Offer of Judgment Before Class Certification Motion Moots Case

faxmachine_logo_2

Cross-posted at WLF’s Forbes.com contributor page

Three dentists, a pest control service, and two others received unsolicited faxes for tickets to a Tampa Bay Buccaneers’ home game. . . .

Looking for the punch line? This is not the beginning of a bad joke about a last place football team. It’s a scenario that gave rise to a class-action lawsuit in the U.S. District Court for the Middle District of Florida. The undeservedly overlooked October 24 opinion, which dismissed the case and accepted an unorthodox defense gambit, offers one judge’s candid thoughts on how the class-action mechanism can be abused.

The Telephone Consumer Protection Act, passed in 1991 when fax machines were used for more than collecting dust, imposed a $500 fine per unsolicited fax sent, which rose to $1,500 if plaintiffs could prove “willful or knowing” spamming activity. Not surprisingly, the Act has been popular with class action lawyers. The lawyers plaintiffs in Stein v. Buccaneers Limited Partnership claimed to be suing on behalf of over 100,000 people who received the ticket solicitation via fax.

The plaintiffs filed suit in state court, and Buccaneers Limited Partnership (BLP) removed it to federal court on August 16. Three days later, BLP offered judgment to six of the plaintiffs under Federal Rule of Civil Procedure 68, which constituted complete relief for their alleged injuries. On August 21, BLP moved to dismiss the class action because its offer of judgment removed the plaintiffs’ interest in the case, and thus they no longer had Article III standing to proceed. The following day, the plaintiffs moved for class certification. The sequence of these events critically influenced the court’s reasoning.

On the question of mootness after an offer of judgment, presiding Judge Steven Merryday lacked binding precedent from the U.S. Court of Appeals for the Eleventh Circuit. Two opinions from the Southern District of Florida had previously found class actions moot in similar circumstances. One circuit, the Seventh, had also upheld mootness previously, while four others (the ThirdFifthNinth, and Tenth) had rejected it. Judge Merryday found the Seventh Circuit’s reasoning in Damasco v. Clearwater Corp. most compelling. Continue reading

Eighth Circuit Ruling Deepens Circuit Split on Class Action Fairness Act Circumvention Tactic

8th CircuitCross-posted at WLF’s Forbes.com contributor page

Twice in the last six weeks, we have addressed an increasingly popular trial lawyer tactic aimed at keeping class action lawsuits in state court (see here and here). The lawyers strategically break large numbers of plaintiffs with identical claims into groups less than 100 with the unstated goal of consolidation for trial. Why less than 100? Because the Class Action Fairness Act (CAFA) allows defendants to seek removal of certain class actions, including “mass actions,” which are “monetary relief claims of 100 or more persons . . . proposed to be tried jointly.”

Yesterday, the U.S. Court of Appeals for the Eighth Circuit construed the most contested phrase in cases involving this CAFA provision—”proposed to be tried jointly”—in a way that allowed the defendant to removed the suits to federal court. The opinion embraced the Seventh Circuit’s approach in a 2012 ruling (In re Abbott Labs) and rejected a Ninth Circuit decision from September 24, 2013 (Romo v. Teva).

Atwell v. Boston Scientific involved three groups of less than 100 plaintiffs suing Boston Scientific in a state court in St. Louis. The suits alleged common facts and issues. After the defendant removed the three cases to federal court, two federal trial judges remanded two of the suits back to state court. Boston Scientific invoked the CAFA provision which allows immediate appeal of such decisions. Even though the plaintiffs never explicitly proposed that the state court jointly try the remanded cases, the Eighth Circuit concluded that was their goal. The court looked at “the necessary consequence of their request” along with “plaintiffs’ candid explanation of their objectives” in reaching that conclusion. Continue reading

High Stakes in High Court’s Review Today of State Attorney General’s CAFA Circumvention

mississippiThe justices of the U.S. Supreme Court welcomed Mississippi today, in the person of Attorney-General Jim Hood, who was the “named plaintiff” in Mississippi ex rel Hood v. AU Optronics.  Hood claims that he, standing in the shoes of the state, is the only actual plaintiff in a class action prosecuted by private contingent-fee lawyers, and thus the suit cannot be removed from state to federal court under the Class Action Fairness Act (CAFA).

WLF filed an amicus brief in support of the Respondent in AU Optronics, and The Legal Pulse’s class action expert, Frank Cruz-Alvarez, blogged on the case when the Court granted review in June.

The stakes for free enterprise in AU Optronics are substantial. A Mississippi victory would blow a gaping hole in CAFA. As the Wall Street Journal argued in an editorial today:

Mr. Hood and his trial-bar friends are trying to evade federal law by running their class-action through the AG’s office. Mr. Hood’s retention agreement with Zimmerman Reid and another firm, Abraham & Rideout, reads: ‘Assume Recovery by the State of Mississippi of a monetary, [sic] sum, benefit, or value equal to $600,000,000.00.’ Yes, $600 million.

The conflicts of interest in such arrangements are quite breathtaking. According to a recent report, for example, General Hood’s “plaintiffs’ firm contributors were all out-of-state, and they made no contributions to other candidates for statewide office in Mississippi.” In only two instances where contingent-fee law firms represented Mississippi in securities fraud class actions did the firms not make a previous contribution to General Hood’s campaign. They did so subsequently, however, according to this report.

State attorneys-general were well aware of how CAFA would curb the trial lawyer/state AG alliance. As The Journal notes, 46 attorneys-general sought a specific exemption in CAFA for suits filed on behalf of the state, but Congress defeated that amendment. AU Optronics presents state officials with a second opportunity to achieve through judicial fiat what they could not obtain eight years ago via legislation.

It’s no surprise then that 46 other states’ attorneys-general signed onto an amicus brief supporting Mississippi.

Plaintiffs’ Bar Effort To Game Class Action Fairness Act Expands To Tenth Circuit

10th CircuitCross-posted at WLF’s Forbes.com contributor site

Last month in Ninth Circuit Endorses Gaming of Class Action Fairness Act & Creates Circuit Split, we discussed the U.S. Court of Appeals for the Ninth Circuit’s decision in Romo v. Teva Pharmaceuticals USA, Inc.. The two-judge majority in that case allowed plaintiffs’ lawyers to divide their 1,500 clients into groups of less than 100 for the sole purpose of evading the Class Action Fairness Act’s (CAFA) dictate that such mass actions be removed to federal court. Thanks to an October 18 ruling from the Western District of Oklahoma, the Tenth Circuit will be the next venue to consider this CAFA circumvention strategy.

In Halliburton et al. v. Johnson & Johnson et al., Federal District Court Judge Tim Leonard ordered the remand of eleven essentially identical cases to Oklahoma state court. Each case alleged the same violations of Oklahoma state law and featured at least one Oklahoma and one New Jersey plaintiff. Each suit was filed by the same lawyers in front of the same state judge. Before Judge Leonard, the defendants argued that the plaintiffs’ act of filing their 11 suits in a one-judge county court reflected their intention that the cases be tried jointly. Johnson & Johnson also argued that the judge should give no weight to the plaintiffs’ declaration that no two suits would be tried jointly. The defendants further urged Judge Leonard to sever the claims of the New Jersey plaintiffs as they were fraudulently joined for the purpose of defeating diversity jurisdiction (Johnson & Johnson is a New Jersey company).

Judge Leonard rejected each of the defendants arguments and ordered the 11 suits remanded to the state judge. On October 28, Johnson & Johnson filed a permission to appeal the District Court’s decision to the Tenth Circuit. Under CAFA, the appeals court must accept or deny the defendant’s permission to appeal within ten days.

On a related note, the defendants in Romo v. Teva have sought rehearing en banc in the Ninth Circuit. WLF has filed an amicus brief supporting their arguments.

Additional WLF resource:

Gaming Of CAFA’s Jurisdiction Exemption For “Mass Actions”: How It Can Be Stopped
WLF Legal Opinion Letter, by Victor E. Schwartz, Co-Chairman, and Cary Silverman, Counsel, of the Washington, D.C.-based Public Policy Group of Shook, Hardy & Bacon L.L.P.

Will California’s New Data Breach Notification Duty Stimulate Class Action Litigation?

securityCross-posted at WLF’s Forbes.com contributor page

Several years ago, class action lawsuits over the failure of businesses to secure consumers’ personal data looked like the plaintiffs’ bar’s next big thing. In a January 2009 WLF Legal Opinion Letter, former University of Houston Law Center Dean Raymond Nimmer acknowledged that a wave of such “data breach” suits was likely, but he questioned whether plaintiffs could establish actual harm in such cases. As we’ve written here at The Legal Pulse previously, Professor Nimmer’s academic doubts have been borne out in reality, as data breach class actions have mostly failed for lack of standing.

But when things are looking down, the trial bar can normally count on California.

Governor Jerry Brown signed amendments to California’s Security Breach Notification Act on September 27. The amendments require consumer notification if “a user name or email address, in combination with a password or security question and answer that would permit access to an online account” was compromised. The law applies even if that information is not combined with a name, and applies to all types of online accounts (i.e. log-in information for a bank and a social media platform treated equally). Sounds like fresh class action lawsuit claims, right?

Plaintiffs’ lawyers should not get their hopes up, however, as the amendments do not obviate their need to prove injury in data breach suits. A September 3 decision from the Northern District of Illinois, In re Barnes & Noble Pin Pad Litigation, is instructive on this point. Barnes & Noble was the victim of a theft of credit and debit card data from store PIN pad terminals. The company publicly announced the theft six weeks after discovering it, and did not inform customers personally. Customers initiated a class action lawsuit under Illinois and California laws, including California’s breach act. Continue reading