Whirlpool Corp. had major reason to celebrate last week; a federal jury rejected class-action claims that “Duet” front-load washing machines sold in Ohio between 2001 and 2009 were defective because of their alleged tendency to develop a moldy smell. This “smelly washer” case has drawn significant media attention in recent years after it twice reached the U.S. Supreme Court on the issue of whether the case should be certified as a class action. The High Court in 2013 vacated a U.S. Court of Appeals for the Sixth Circuit decision certifying a class of more than 100,000 Ohio consumers; but after the Sixth Circuit reaffirmed its decision on remand, the Supreme Court denied review this past February—thus setting the stage for the three-week trial that just ended last Thursday. But if history is any guide, plaintiffs’ lawyers will not willingly accept that the verdict binds all the absent class members (only two class members actually participated in the trial).
Indeed, the ongoing challenge Whirlpool faces underscores why plaintiff classes should rarely, if ever, be certified in consumer product defect cases. Federal Rule of Civil Procedure 23 states that suits seeking monetary damages are not appropriate for class action treatment unless common issues of fact and law “predominate” over individual issues of fact and law. As the Washington Legal Foundation explained in the brief it filed when this case was before the Supreme Court, individual issues (e.g., whether an individual plaintiff’s product was defective and whether that defect caused injury) will almost always overwhelm common issues of fact in the typical consumer product suit. Moreover, Rule 23 requires that the named plaintiffs demonstrate that they can adequately represent the interests of absent class members; if representation is inadequate (e.g., if their interests diverge from those of absent class members), due process case law dictates that absent class members are not bound by any judgment adverse to the class. Thus, the defendant in a certified consumer-product class action often faces a heads-you-win-tails-I lose dilemma: if a company goes to trial and loses to the class, it faces a massive liability award, but if it prevails at trial, absent class members are likely to resist any res judicata claim. Continue reading
Dart Cherokee Basin Operating Co. v. Owens, which raises right-of-removal issues under the Class Action Fairness Act (CAFA), is among the more important civil justice cases being heard by the Supreme Court this term. Legal commentators are virtually unanimous in concluding that the trial court adopted an overly restrictive standard governing removal of cases from state to federal court. Yet, as Columbia Law Professor Ronald Mann noted in a recent column for ScotusBlog, questioning during the October 7 oral argument revealed that the Court may be reluctant to decide the case at all. Every question posed to counsel for Petitioner focused on “vehicle” issues, not on the merits of his CAFA arguments. Several justices even suggested that the case might be dismissed as improvidently granted—which would be a terrible mistake.
On closer examination, the procedural posture issues that troubled the Court at oral argument turn out to be insubstantial; they should not dissuade the Court from addressing the Question Presented by the petition. Moreover, as explained in Washington Legal Foundation’s amicus brief, it is critical that the Court retain jurisdiction in this case to unwind the judicially created doctrine that motivated the mistake below in the first place. Dart Cherokee provides the Court an ideal opportunity to end the rule of construction whereby federal courts continue to narrowly construe federal removal statutes against the party seeking removal, contrary to Supreme Court precedent and despite the utter lack of any textual basis for doing so. Continue reading
Although the Supreme Court is scheduled to hear oral arguments on October 7 in a case addressing the scope of removal jurisdiction under the Class Action Fairness Act (CAFA)—Dart Cherokee Basin Operating Co. v. Owens—Public Citizen has urged the Court to dismiss the case as improvidently granted based on what it views as procedural roadblocks to reaching the merits. Last Friday, Columbia Law Professor Ronald Mann’s column for SCOTUSblog spotlighted Public Citizen’s amicus argument and stated, “[M]y sense is that the jurisdictional question [raised by Public Citizen] will seem a lot more contestable to the Justices than the issue on the merits,” adding that the Court might even consider dismissing the petition. Mann is probably correct that the Court is likely to be unimpressed by the lower courts’ merits decision—that a removal petition is deficient unless accompanied by documentary evidence supporting the petition’s allegations that the prerequisites for removal have been met. But the Court is likely to be equally unimpressed by Public Citizen’s “jurisdictional” argument, which has not been raised by the parties at any stage of these proceedings.
Public Citizen bases its argument on the fact that the Tenth Circuit did not directly address the district court’s decision to remand a case removed from state court by the Petitioners under CAFA. CAFA permits defendants in class actions to appeal remand decisions, but they first must petition the appeals court for an order accepting the appeal. In this case, the Tenth Circuit (by an equally divided 4-4 vote) denied the defendants’ petition for permission to appeal. Public Citizen contends that the only issue properly before the Supreme Court is whether the Tenth Circuit abused its discretion in denying permission for an appeal, not whether the district court erred in remanding the case.
That contention is without merit. First, the issue raised by Public Citizen cannot even remotely be deemed “jurisdictional” in nature. The Supreme Court has appellate jurisdiction over any case that has come before a federal appeals court, whether “before or after rendition of judgment or decree.” 28 U.S.C. § 1254(1). Supreme Court jurisdiction does not depend on whether the appeals court has rendered a judgment on the merits of the trial court’s determination. Because this appeal came before the Tenth Circuit, the Supreme Court has jurisdiction to review it. Continue reading
The Supreme Court press and other court observers have spilled a lot of ink this past month discussing the cases the Supreme Court took and decided during October Term 2013. Relatively little was said about the cases the court chose not to decide—and it passed over some doozies. But as Rush drummer and lyricist Neil Peart put it so eloquently, “If you choose not to decide, you still have made a choice.”
Pro-Business? Journalists like to portray the Roberts Court as particularly business friendly (see, e.g., here , here, and here; but see here), but businesses asked the Court to take plenty of cases this past term that it instead declined. When the Court denies cert in cases of such importance to business at the same time that it has a historically light docket, it can hardly be said to be pro-business. Companies crave legal certainty, so even if the Court took these cases and decided them against business interests, many times simply settling contested questions would be better than leaving them up in the air.
Wanted: More Business Cases. The Court needs to hear more business cases than it currently is, for at least two reasons. First, the unprecedented proliferation of new regulations by this administration has given rise to many more conflicts of the kind that produce Supreme Court cases. Second, to the extent the Clinton-and-Obama-appointee-dominated lower courts are predisposed against business litigants (or, more charitably, deciding close questions consistently against them), businesses will appeal more cases to the Supreme Court when they believe a lower court has denied them justice. Of course the Supreme Court justices take neither of these criteria into consideration when assessing individual cases, but surely these factors matter when assessing whether the Court leans in favor of business in forming its docket. Continue reading
Concerns that businesses were being victimized by abusive lawsuits filed in state courts—in particular, nationwide class actions and mass actions—led Congress to adopt the Class Action Fairness Act (CAFA) in 2005. Congress intended that CAFA ease removal of class and mass actions from state to federal court. The law has had mixed results in that regard, , as plaintiffs’ lawyers have devised a variety of clever ways to evade CAFA and thereby ensure that their nationwide suits can remain in state court. If a recent Oklahoma state-court decision is any indication, however, the plaintiffs’ bar may finally have met its match: the Supreme Court’s January 2014 decision in Daimler AG v. Bauman. That decision imposed strict limitations on a court’s exercise of general jurisdiction over out-of-state defendants. The Oklahoma court invoked Daimler to dismiss hundreds of plaintiffs from a mass action that the U.S. Court of Appeals for the Tenth Circuit already had deemed not removable under CAFA.
The case involved product liability claims by 702 individuals from 26 States, each of whom alleged that she had suffered injuries from pelvic mesh surgical devices manufactured by Ethicon, Inc. (a subsidiary of Johnson & Johnson). CAFA permits removal to federal court of “mass actions” filed by 100 or more plaintiffs raising substantially similar claims. To reduce the risk of removal, the plaintiffs’ lawyers grouped the claims into 11 separate lawsuits, each containing fewer than 100 plaintiffs. Nonetheless, it was obvious that the plaintiffs wanted the cases tried together: they filed the lawsuits in a tiny Oklahoma county with only a single trial judge, thereby ensuring that all 702 claims would be heard by a single judge. They also took steps to prevent removal based on diversity of citizenship: they included at least one New Jersey resident as a plaintiff in each of the 11 lawsuits. Because the defendants have their principal places of business in New Jersey, the inclusion of one New Jersey plaintiff in each case eliminated complete diversity of citizenship and thus precluded removal based on diversity. Continue reading
“This settlement is so unfair, it cannot be fixed.”
That statement marked the beginning of the end of a federal district court judge’s opinion, as well as the class-action settlement to which the opinion referred. U.S. District Court for the Northern District of California Judge William Alsup’s May 29 opinion in Daniels v. Aéropostale West, Inc. provides a tutorial on how not to win judicial approval of a class-action settlement.
Ms. Daniels alleged that she and other employees of the trendy apparel retailer Aéropostale were denied non-discretionary bonus pay (i.e., overtime) in violation of the federal Fair Labor Standards Act (FLSA). Judge Alsup conditionally certified the class in April 2013. Daniels provided notice to all employees in the class, and 594 opted into the suit. The parties filed a motion on April 24, 2014 seeking preliminary approval of a proposed settlement.
For reasons we will elaborate, Judge Alsup refused to grant approval. On June 12, the court entered an order decertifying Daniels, dismissing the claims, and extending the statute of limitations for 30 days so dismissed plaintiffs could pursue individual suits if they wish. The order noted that the parties agreed to the decertification, and that Aéropostale would make payment to any class member “who did not receive full payment for the overtime adjustment on any non-discretionary bonus earned during the collective action period.” The plaintiff’s lawyers agreed to provide notice of the action’s decertification at their own expense.
Lessons. In just 12 pages, Daniels offers litigants and their lawyers at least five lessons on how to undo your own class-action settlement.
Lesson #1: Be unresponsive to the court’s requests
In just the second paragraph of the opinion, Judge Alsup took the unusual step of noting the name and affiliation of all counsel of record in the case. This was not done to recognize their brilliant advocacy. As the rest of the opinion reveals, the lawyers, among other things, failed to provide the court with expert damage reports as required by federal procedural rules. After the parties filed their proposed settlement, the court had to ask twice for more information or corrections to the document. When pressed by Judge Alsup, Daniels’s lawyer could not state how much the plaintiff would ask the jury to reward. In addition, “Plaintiff’s counsel also failed to provide any specific information about overtime hours worked and non-discretionary bonuses paid.” Continue reading
Lawsuits alleging harm from either a business’s failure to protect personal information from a data breach or from its allegedly unauthorized sharing of data with third parties were supposed to be the “next big thing” for the Litigation Industry. But, as we’ve noted on previously (here and here, for instance), few of these suits have made it past the motion-to-dismiss stage. Plaintiffs consistently fail to demonstrate that they suffered an injury-in-fact, which is a constitutional prerequisite known as “standing.”
Lawyers who work in the Litigation Industry are nothing if not persistent, as former Washington Attorney General Rob McKenna and his Orrick, Herrington & Sutcliffe LLP colleague Scott Laidlaw explained in a February WLF Legal Backgrounder, “Targeting Harm From A Breach: Plaintiffs’ Lawyers Get Creative In Data Privacy Suits.” For example, some class action attorneys sue under federal statutes, such as the Wiretap Act and the Stored Communications Act. Those laws purport to provide “statutory standing” to private individuals and thus relieve them of the need to establish constitutional standing.
But as the U.S. Court of Appeals for the Ninth Circuit reminded a class of plaintiffs last week, litigants with standing to sue still must prove they have a claim. On May 9, the Ninth Circuit affirmed a district court’s dismissal of two separate class actions filed under the Wiretap and Stored Communications Acts against Facebook and Zynga Game Network.
In re: Zynga Privacy Litigation involved claims that Facebook and Zynga unlawfully disclosed the information contained in “referer headers” to third parties such as advertisers. Referer headers, the court explained, display “the user’s Facebook ID and the address of the Facebook webpage the user was viewing.”
The Ninth Circuit had to determine whether the record information contained in the referer header constituted the “contents” of a communication under the two federal laws. The court examined the plain language and design of the statutes and concluded that “the term ‘contents’ refers to the intended message conveyed by the communication, and does not include record information regarding the characteristics of the message that is generated.” That conclusion is consistent with the reasoning in similar cases from the First and Third Circuits. The plaintiffs argued that third parties could utilize information from a referer header and determine a person’s specific identity and access his or her Facebook content. The court responded that neither the Wiretap Act nor the Stored Communications Act “preclude[s] the disclosure of personally identifiable information; indeed they expressly allow it.” Continue reading