In an opinion issued today by the U.S. Court of Appeals for the D.C. Circuit, the court held that the Consumer Financial Protection Bureau is “unconstitutionally structured.” The court found that the “CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director” violates the separation of powers and Article II, which vests in the President “the authority to supervise, direct, and remove at will subordinate officers in the Executive Branch.” The court’s opinion was written by Judge Kavanaugh and joined in full by Senior Judge Randolf, who also issued a separate concurrence. Judge Henderson concurred in part and dissented in part. In total, the panel’s opinions run 110 pages. Bring coffee and an interest in constitutional policy-making.
The practical import of this decision is minor, however, because the remedy ordered for this constitutional flaw does not affect the CFPB’s ongoing operations. “As before, the CFPB will continue to operate and perform its many critical responsibilities, albeit under the ultimate supervision and direction of the President.” So, our current or future President can fire the CFPB’s Director–or not.
This is welcome news. The petitioner had asked the court to “shut down the entire CFPB (if not invalidate the entire Dodd-Frank Act) until Congress, if it chooses, passes new legislation fixing the constitutional flaw.” But the court didn’t bite.… Read more
In an important ruling, Morris v. Ernst & Young, the U.S. Court of Appeals for the Ninth Circuit held that employment contracts requiring employees to arbitrate suits individually, rather than on a class or collective basis, violate employees’ right to engage in “concerted activity” under the National Labor Relations Act (NLRA). The decision is one of several in the past few months invalidating class action waivers in employment agreements.
Employees of Ernst & Young brought a class action in federal court alleging the accounting firm denied them overtime wages in violation of the Fair Labor Standards Act (FLSA) and California labor laws. In the district court, Ernst & Young successfully moved to compel individual arbitration because the employment contract required employees to arbitrate disputes in “separate proceedings,” and the action was dismissed. The Ninth Circuit, however, reversed.
Writing for himself and Judge Hurwitz, and over the dissent of Judge Ikuta, Chief Judge Thomas concluded that an employer violates § 7 and § 8 of the National Labor Relations Act by requiring employees to sign an agreement precluding them from bringing, in any forum, work-related legal claims together. The court agreed with the National Labor Relations Board that the NLRA establishes a federal right of employees to pursue work-related legal claims together in some forum—arbitration, court, or elsewhere.… Read more
A recent post by Adam Feldman at Emprical SCOTUS entitled “Cert Filing Leaders” demonstrates that the defense bar’s interest in Supreme Court review of arbitration and class action issues has not abated, despite the passing of Justice Scalia, who often provided a fifth and decisive vote on such issues.
Feldman has reviewed cert petitions pending before the Supreme Court with an eye towards who is filing. He finds that Gibson Dunn, Sidley Austin, WilmerHale, Bancroft PLLC, Jones Day, Kellogg Huber, Latham & Watkins, and Mayer Brown “combine for 46 docket filings so far this year.” More interesting is that “[t]he most petitions from these firms so far this year are in the class action and arbitration areas,” with patent law taking third place.
At least insofar as class actions are concerned, this was a bit surprising. For one, recent efforts to secure a Supreme Court ruling which kills off class actions–think Spokeo, Inc. v. Robins or Campbell-Ewald Co. v. Gomez or Tyson Foods, Inc. v. Bouaphakeo–have largely failed (Robins, Gomez) or backfired (Bouaphakeo). For another, the Supreme Court may remain an 8-member court for a substantial portion of its October 2016 Term. Without a ninth Justice, the Court is unlikey to grant cert in cases which stand a high chance of resulting in a tie vote.… Read more
The Department of Education has issued newly revised draft regulations proposing to amend regulations governing the William D. Ford Federal Direct Loan Program in part to “prohibit participating schools from using certain contractual provisions regarding dispute resolution processes, such as mandatory pre-dispute arbitration agreements or class action waivers, and to require certain notifications and disclosures by schools regarding their use of arbitration.” The proposed rule, which was issued in advance of a third (and possibly final) round of negotiated rulemaking, is here. Comments are due 45 days from June 16, and may be submitted electronically at www.regulations.gov.
This is an important development that would deal directly with the all-too-frequent situation where a predatory, for-profit school engages in fraudulent recruitment practices, provides substandard education which does not yield career advancement, and bars students from seeking redress in court through pre-dispute arbitration agreements which students are required to sign at the time of enrollment.
This particular rulemaking was first requested by Public Citizen, Inc., and is consistent with efforts of certain members of Congress to condition Title IV funding–about $128 billion annually–on a school’s agreement not to force students to agree to waive their right to sue in court, including as part of a class action.… Read more
As has been widely reported, the Consumer Financial Protection Bureau is soliciting public comment on whether to establish regulations concerning arbitration agreements for consumer financial products and services. The formal comment period closes on August 22, 2016, and you can comment by following this link.
The proposed rule would accomplish two things. First, it would prohibit the consumer finance industry from using arbitration agreements which block class action lawsuits and force consumers to seek relief on an individual basis in arbitration. Second, it would require the consumer finance industry to turn over arbitral records to the CFPB.
The proposed rule is without question in the best interests of consumers. The consumer finance industry has used arbitration agreements to block consumers from banding together to obtain relief in court. This has effectively given the industry a “free pass”; as the CFPB notes, “companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm countless consumers.”
The CFPB’s comprehensive study on the use of arbitration agreements for financial products and services fully supports this rule-making. The study found that very few consumers even seek relief through arbitration, and those who do rarely receive any recovery.… Read more
In an important decision, the Ninth Circuit has rejected defendant Allstate’s attempt to moot a putative class action under the Telephone Consumer Protection Act, by depositing, in an escrow account, sufficient funds to satisfy the named plaintiff’s individual monetary and injunctive relief claims.
The Ninth Circuit’s ruling in Chen v. Allstate Insurance Co. follows closely on the heels of the Supreme Court’s decision in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), which reserved for another day the question whether a defendant could render a case moot if it “deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.” Id. at 672. About a week after the Supreme Court issued its decision in Campbell-Ewald, Allstate sought to “pick off” the named plaintiff in the Chen case. It deposited $20,000 into an escrow account pending entry of a final order by the district court ordering the escrow agent to pay the money to the plaintiff. The issuance of this order, as well as entry of judgment for the plaintiff, Allstate maintained, would require dismissal of the putative class claims as moot.… Read more
According to Justice Thomas, who (along with Justice Alito) dissented in Tyson Foods v. Bouaphakeo, 555 U.S. ___ (2016), the answer is ‘yes’:
The majority begins by redefining the predominance standard. According to the majority, if some “‘central issues’” present common questions, “ ‘the action may be considered proper under Rule 23(b)(3) even though other important matters will have to be tried separately, such as damages or some affirmative defenses peculiar to some individual class members.’ ” Ante, at 9 (quoting, 7AA C. Wright, A. Miller, & M. Kane, Federal Practice & Procedure §1778, pp. 123–124 (3d ed. 2005; footnotes omitted)). We recently—and correctly—held the opposite. In Comcast, we deemed the lack of a common methodology for proving damages fatal to predominance because “[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class.” 569 U. S., at ___ (slip op., at 7).
Slip op. at 8-9 (Thomas, J., dissenting). To drive this point home, Justice Thomas observes in a footnote that “[t]he majority relies on the same treatise citations that the Comcast dissent invoked to argue that individualized damages calculations should never defeat predominance. 569 U. S., at ___–___ (slip op., at 3–4) (opinion of Breyer, J.).” Id.… Read more
We thought we’d flag two aspects of yesterday’s Ninth Circuit ruling in Beaver v. Tarsadia Hotels. We will refrain from providing any commentary on this case because GLG is one of the firms representing plaintiffs, but here are the basics.
The case concerns a suit by purchasers of non-residential condo units in the Hard Rock Hotel & Condo Project in San Diego. The plaintiffs claimed the developers failed to make certain disclosures in the course of sale transactions, as required by the Interstate Land Sales Full Disclosure Act (ILSA), 15 U.S.C. § 1701 et seq. The district court awarded partial summary judgment on the portion of plaintiffs’ California Unfair Competition Law claim premised on a violation of ILSA, and the Ninth Circuit affirmed.
In a unanimous decision written by Judge Milan Smith and joined by Judge Paul Watford and Judge Michelle Friedland, the Ninth Circuit held that the UCL’s four-year statute of limitations (and its accrual rule) applied, even though the UCL claim was premised on a violation of ILSA, which has a three-year statute of limitations and a different accrual rule. The court explained, “as a general matter, the UCL statute of limitations will apply to a UCL claim, even when that claim is based on an underlying law with its own separate statute of limitations.” Slip op.… Read more
In consumer class actions, it is not uncommon for named plaintiffs to assert state-law claims arising under the laws of states in which no named plaintiff resides. After all, many consumer suits concern products sold nationwide, and there often may be close parity between the laws of states in which named plaintiffs and unnamed plaintiffs reside.
When faced with a class action complaint structured in this way, defendants typically argue, at the pleadings stage, that named plaintiffs lack Article III standing to assert claims based on these other state laws. This is a threshold issue, according to defendants, which must be decided at the outset of the case. Plaintiffs often respond that differences between a named plaintiff’s claims and unnamed class members’ claims should be treated as an issue of adequacy and typicality under Federal Rule of Civil Procedure 23, and should be resolved at the class certification stage.
District courts in the Ninth Circuit have issued conflicting rulings on this question. Some hold that standing analysis must precede class certification, while others hold that class certification may be decided before standing is addressed. Compare Los Gatos Mercantile, 2014 WL 4774611, *4 (adopting the former approach), with Jepson v. Ticor Title Ins.… Read more
Three years after Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), lower courts continue to certify classes for liability purposes only, thereby reserving consideration of damages for individual determination during subsequent phases of litigation. These courts reason that Comcast’s predominance and superiority concerns are “largely irrelevant” to this approach, which is permitted by Rule 23(c)(4). E.g., In re Deepwater Horizon, 739 F.3d 790, 817 (5th Cir. 2014); Butler v. Sears, Roebuck and Co., 727 F.3d 796, 800 (7th Cir. 2013).
A recent order granting class certification in Peterson v. Costco Wholesale Co., Inc., 2016 WL 304299 (C.D. Cal. Jan. 26, 2016), exemplifies the trend. Following a Hepatitis A outbreak in the western United States “linked to the consumption of Townsend berry mix sold to consumers at various Costco locations in early 2013,” id. at *1, individuals from nine different states filed a class action in California state court, seeking damages in part on strict liability theories. The case was then removed to federal district court, where it was assigned to Judge David O. Carter.
At the class certification stage, the Court inquired whether the use of subclasses can account for variations in state law, and whether individual inquiries, such as differences in emotional distress damages, impact the Court’s predominance inquiry.… Read more