In Oklahoma, Class Action Fairness Act Comes Up Short, But Daimler v. Bauman Does The Trick

OklahomaConcerns 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

Five Ways to Undo your Own Class-Action Settlement

zero dollars“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

Ninth Circuit “Unfriends” Privacy Class Action Despite Finding Statutory Standing

likefacebookLawsuits 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

Update: Two Food Labeling Suits Settle after Judge Certified Narrowed Classes

kellogg'sLast November, while assessing several losses by plaintiffs in “all natural” food labeling class actions, we discussed two opinions issued by the same Southern District of California judge (Marilyn Huff) on the same day (July 30, 2013). Both opinions certified far narrower classes of plaintiffs than the lawyers in each case sought.

The defendants in these cases—Bear Naked and Kashi (both owned by Kellogg’s)—unsuccessfully sought the U.S. Court of Appeals for the Ninth Circuit’s permission to immediately appeal Judge Huff’s certification orders. With Kellogg’s facing trial in both cases, albeit against smaller classes of plaintiffs, it entered into negotiations which resulted in proposed settlements to be presented to Judge Huff in consecutive hearings on May 27. We describe the proposed settlements below and offer some thoughts on them.

Astiana v. Kashi Company. Frequent plaintiff Skye Astiana, who complained in a suit against Ben & Jerry’s that the company’s alleged mislabeling of its ice cream “disrupted my vibe,” will be $4,000 richer thanks to the proposed settlement’s “incentive award” for the named plaintiffs. The company is creating a settlement fund of $5 million, out of which the incentive awards will be paid, as will the $1,250,000 in attorneys’ fees and costs. What will the “absent” class members recover? That depends on the proof they offer. Those with proof of purchase can recover $.50 for each item, with no limit on the total amount of recovery as long as receipts are presented. Those with no proof of purchase can file claims for $.50 per item with a maximum recovery of $25. In addition, Kashi will remove from certain products’ labels and advertisements the terms “All Natural” and “Nothing Artificial.”

Thurston v. Bear Naked. The proposed settlement terms in Thurston largely mirror those in Astiana. The named plaintiffs are to receive $2,000 incentive awards. The settlement fund is $325,000. Absent class members with receipts can receive $.50 for each product with no maximum recovery limit. Those who can’t prove they purchased the supposedly offending Bear Naked products can claim $.50 for each item with a $10 maximum. Bear Naked agrees to remove “100% Natural” and “100% Pure and Natural” from its labels and ads. And the attorneys’ fees? The Class Counsel will only be seeking “an award of reasonable, actual out-of-pocket expenses.” Why so modest? Many of the same law firms which sued Bear Naked were also counsel to the Astiana class. Because Thurston and Astiana involved nearly identical issues, it’s doubtful that Judge Huff would award substantial fees for the law firms’ work in Thurston. Continue reading

Third Circuit’s Denial of Rehearing in Class Action Strengthens “Ascertainability” Criterion

Third Circuit_LS_option1_1In a February 21, 2014 post we discussed a U.S. Court of Appeals for the Third Circuit decision, Carrera v. Bayer Corp. The court denied certification to a class of multivitamin purchasers because the plaintiffs offered no reliable and administratively feasible way to prove they had purchased the targeted product (and were thus members of the class). 

On May 2, the Third Circuit denied rehearing en banc in Carrera. The written opinions accompanying the court’s denial of rehearing reflect the rancor this issue can inspire among federal judges.

Denial of Rehearing Opinion. Nine judges voted to deny rehearing. Judges Smith, Chargares, and Scirica, all of whom sat on the panel that decided Carrera last August, signed an “Opinion Sur Denial of Panel Rehearing.” The opinion reiterated that Carrera failed to meet his ascertainability burden. The judges also noted that the panel remanded the case to the district court where Carrera would have an opportunity to “submit a screening model specific to this case that can reliably distinguish between accurate affidavits and fraudulent or inaccurate ones.”

Dissent from Denial of Rehearing. Judges Ambro, Rendell, Fuentes, and Chief Judge McKee voted to rehear Carrera. Judge Ambro penned an “Opinion Dissenting Sur Denial.” Judge Ambro was the author of a 2012 opinion, Marcus v. BMW of NA, on which Carerra relied. In his dissent from rehearing denial, Judge Ambro stated that “Carerra goes too far” in applying the principles laid out in Marcus. He contrasted the “prolix” parameters of the Marcus class with the “simple” class definition in Carerra, implying that simplicity eases the ascertainability burden.

Judge Ambro was also troubled that because Bayer did not sell its multivitamins directly to consumers (which he termed “a fortuity”), it would not have sales records. He explained that in situations where “the defendant’s actions—a defendant’s lack of records and business practices,” as the judge put it—”cause the difficulty, we should be flexible with our application” of ascertainability requirements. This is quite at odds with the Third Circuit’s rationale in another August 2013 class-action decision, Hayes v. Wal-Mart. Judges Ambro, Fuentes, and Scirica presided over that appeal. In remanding the case back to the district court to determine ascertainability, Judge Scirica wrote, “the nature or thoroughness of a defendant’s recordkeeping does not alter the plaintiff’s burden to fulfill Rule 23’s requirements.” Judge Ambro did not dissent in Hayes.

Call for Judicial Conference Review. In addition to calling for rehearing en banc in Carrera, Judge Ambro urged the Judicial Conference’s Committee on Rules of Practice and Procedure to “look into . . . how easy (or hard) must this identification [i.e. if class members can be reasonably ascertained] be?” Continue reading

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