House Republicans Push Radical Class Action Reforms

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Last Wednesday, Congressman Bob Goodlatte (R-Va.), Chairman of the House Judiciary Committee, introduced the Fairness in Class Action Litigation Act of 2017 (H.R. 985), a sweeping set of proposals that would effectively kill many class actions.

The bill proposes to:

  • require that “the party seeking to maintain such a class action affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives” (This poorly worded proposal was widely panned as the “Volkswagen Bailout Bill” when Rep. Goodlatte last introduced it in 2015, because it would have wiped away class actions and excused the worst corporate misconduct.)
  • require a class action complaint to identify whether the named plaintiff has ever been represented by class counsel before; if yes, no class action may be certified (Don’t we want plaintiffs to be represented by experienced counsel, and why does a prior representation automatically foreclose a future class proceeding where the same attorney represents the same client?)
  • restricts attorney fee awards (Courts, of course, already closely scrutinize class recoveries and attorney fee awards.)
  • limit a court’s authority to certify issue classes by requiring that “the entirety of the cause of action from which the particular issues arise satisfies all the class certification prerequisites” (Because Judge Posner is wrong that it is more efficient, “in terms both of economy of judicial resources and of the expense of litigation to the parties,” to decide some issues on a class basis rather than all issues in separate trials, see Butler v.
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When is Food “Defective”?

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Judge David Carter of the Central District of California answered this question recently in the Peterson v. Costco Wholesale Co.  In Peterson, a Hepatitis A outbreak in the western United States was linked to the consumption of a berry mix sold at Costco locations.  Plaintiffs sued Costco, asserting strict liability and other common law claims.  Judge Carter certified nine single-state subclasses for the purposes of determining liability.

Most recently, the question posed at summary judgment was whether plaintiffs could “demonstrate any defect in the berry mix.”  Petersen v. Costco Wholesale Co., 2017 WL 187134, at *4 (C.D. Cal. Jan. 17, 2017).  An answer in the affirmative was needed for plaintiffs’ strict liability claim to proceed.

Costco argued there was no evidence of a defect, contending that plaintiffs should have to demonstrate that they each “ate berry mix that was actually contaminated with hepatitis A and thus each … was actually exposed to hepatitis A.”  Plaintiffs countered that the berry mix was defective because, anyone who ate the berries urgently needed to obtain a hepatitis A vaccination. And Costco replied that, if plaintiffs’ theory was accepted, then the court would be saying that as a matter of law, “a recall alone demonstrates defect in the recalled products.”

Judge Carter sided with the plaintiffs:

the mere fact of a recall is insufficient to render a defendant liable under a theory of strict products liability to everyone who purchased a recalled product.

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9th Circuit Finds Art III Standing Under Spokeo in TCPA Case

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After a longer delay than several other circuits, the Ninth Circuit has again provided analysis of the Supreme Court’s Spokeo decision – this time in the TCPA context.

In the TCPA context, a strong majority of courts appear to be in agreement that statutory violations give rise to concrete harm.  The Ninth Circuit agrees.

The panel in Van Patten v. Vertical Fitness Group, began its Article III analysis by citing Spokeo for the proposition that “’both history and the judgment of Congress play important roles’ in supporting our conclusion that a violation of the TCPA is a concrete, de facto injury.”

The court elaborated:

The TCPA establishes the substantive right to be free from certain types of phone calls and texts absent consumer consent. Congress identified unsolicited contact as a concrete harm, and gave consumers a means to redress this harm. We recognize that Congress has some permissible role in elevating concrete, de facto injuries previously inadequate in law “to the status of legally cognizable injuries.” Spokeo, 136 S. Ct. at 1549 (quoting Lujan, 504 U.S. at 578). We defer in part to Congress’s judgment….

[T]he telemarketing text messages at issue here, absent consent, present the precise harm and infringe the same privacy interests Congress sought to protect in enacting the TCPA.

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How Will the 9th Circuit Rule in Spokeo?

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In-depth analyses on the Supreme Court’s Spokeo decision have now been handed down by the Third, Seventh, and other Circuits.  Little has come from the Ninth Circuit thus far, though that court recently heard oral argument in Spokeo itself on remand from the Supreme Court.  While we await that decision, a recent ruling from a different Ninth Circuit panel may impact or foreshadow the Spokeo panel’s ruling.

In Syed v. M-I, LLC, — F.3d —-, No. 14-17186, 2017 WL 242559 (9th Cir. Jan. 20, 2017), the Ninth Circuit briefly addressed Spokeo in the context of the Fair Credit reporting act.  Here’s the full analysis:

Syed has established Article III standing. A plaintiff who alleges a “bare procedural violation” of the FCRA, “divorced from any concrete harm,” fails to satisfy Article III’s injury-in-fact requirement. Spokeo, Inc. v. Robins, — U.S.—, 136 S. Ct. 1540, 1549 (2016). However, Syed alleges more than a “bare procedural violation.” The disclosure requirement at issue, 15 U.S.C. § 1681b(b)(2)(A)(i), creates a right to information by requiring prospective employers to inform job applicants that they intend to procure their consumer reports as part of the employment application process. The authorization requirement, § 1681b(b)(2)(A)(ii), creates a right to privacy by enabling applicants to withhold permission to obtain the report from the prospective employer, and a concrete injury when applicants are deprived of their ability to meaningfully authorize the credit check.

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Spokeo Circuit Split?

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In the past week, panels from the Third and Seventh Circuits have issued rulings that interpret the Supreme Court’s Spokeo decision on Article III standing. The decisions reflect a possible circuit split concerning the test for determining when the violation of a federal statute gives rise to a “concrete” harm under Spokeo.

In the Supreme Court’s decision, there are several references to “risk of harm” in the discussion of when a statutory violation causes concrete harm.  For example, toward the end of the opinion, the Court wrote:

A violation of one of the FCRA’s procedural requirements may result in no harm. For example, even if a consumer reporting agency fails to provide the required notice to a user of the agency’s consumer information, that information regardless may be entirely accurate. In addition, not all inaccuracies cause harm or present any material risk of harm. An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.

(emphasis added).

In its recent Horizon decision, the Third Circuit held that the “material risk of harm” language in Spokeo should not be read to raise the bar for pleading concrete injury:

Although it is possible to read the Supreme Court’s decision in Spokeo as creating a requirement that a plaintiff show a statutory violation has caused a “material risk of harm” before he can bring suit, 17 id.

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9th Circuit Refuses to Compel Arbitration in Samsung Litigation

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In a published decision handed down on Thursday, the Ninth Circuit affirmed a denial of a motion to compel arbitration in a class action about the performance of the Galaxy S4 phone.

The court’s analysis hinged in large part on the circumstances surrounding the purchase, including the location of the arbitration language.  Plaintiff bought the phone at a Verizon Wireless store. Inside the box, a warranty brochure purported to require the plaintiff to arbitrate any disputes with Samsung arising from the “warranty or the sale, condition or performance of the product[].”  Plaintiff did not read the brochure and left it, along with the box, at the Verizon store when he left with his new phone. The receipt plaintiff received said that he agreed to arbitrate any disputes with Verizon, but did not mention Samsung.

Samsung tried to force arbitration under two theories.  First, by arguing that the inclusion of the arbitration provision in the warranty brochure created a contract between plaintiff and Samsung. Second, Samsung argued that by signing his agreement with Verizon, plaintiff agreed to arbitrate his claims against Samsung. The Ninth Circuit rejected both arguments.

On the first, the panel rejected Samsung’s theory that the warranty brochure created a binding contract between plaintiff and Samsung to arbitrate, relying on the general California rule that an offeree’s silence does not constitute consent.  … Read more

9th Circuit Declines to Adopt Separate “Administrative Feasibility” Requirement for Rule 23

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Does Federal Rule of Civil Procedure 23 require class representatives to demonstrate that there is an administratively feasible way of identifying absent class members, in order to obtain class certification? In a major ruling, the Ninth Circuit declined to impose such a requirement, finding it incompatible with Rule 23 and not otherwise required by due process. Briseno v. ConAgra Foods, Inc., No. 15-55727 (9th Cir. Jan. 3, 2017).

In Briseno, the district court certified a class of consumers who purchased Wesson-brand cooking oil products labeled “100% Natural.” The class representatives alleged the “100% Natural” label was false or misleading because Wesson oils are made from
bio-engineered ingredients which, according to plaintiffs, are not natural.

On appeal, defendant ConAgra sought reversal, arguing the district court should have denied class certification because plaintiffs had failed to offer an administratively feasible way to identify absent class members. According to ConAgra, the obligation to show administrative feasibility is part of a threshold “ascertainability” prerequisite to class certification. Slip op., at 7 n.4.

In a lengthy decision written by Judge Friedland, and joined by Judge W. Fletcher and Judge Christen, the Ninth Circuit refused to impose any such requirement. The Court began by noting that the issue was one of first impression in this circuit.… Read more

Another California Court Declines to Require Privity for Breach of Warranty Claims

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A recent post noted that several recent decisions have undermined the privity requirement that has been applied to breach of implied warranty claims under the U.C.C. in California.  A recent Central District of California opinion continues that trend.

In Michael v. Honest Co., No. 15-cv-07059 (C.D. Cal. Dec. 6, 2016), Judge John A. Kronstadt declined to dismiss both express and implied warranty claims under California law.  Plaintiffs brought their implied warranty claims under California’s U.C.C. provision, rather than under the Song Beverly Consumer Warranty Act (which does not have a privity requirement).

The court held first that “Plaintiffs’ express warranty claim is sufficiently alleged because vertical privity is not required for such claims.”  The court then recognized that while privity is required under the California U.C.C. provision for implied warranty claims, there is a recognized exception for when the plaintiff is a third-party beneficiary of the contract between the manufacturer and retailer.  Because plaintiffs had bought a consumer product (sunscreen), the court had no trouble holding plaintiffs were third-party beneficiaries and that the privity requirement did not apply.… Read more

Second Circuit Interprets Spokeo

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As district courts continue to grapple with Spokeo on a daily basis, the Second Circuit has finally weighed in on how to understand the Supreme Court’s ruling. The decision comes in the context of claims brought under the Truth In Lending Act (TILA).

In Strubel v. Comenity Bank, — F.3d —-, 2016 WL 6892197 (2d Cir. Nov. 23, 2016), the Second Circuit analyzed consumer claims that a bank failed to provide four types of disclosures purportedly required by TILA.  The court held that two of the alleged non-disclosures gave rise to concrete injuries under TILA, and two did not.

Perhaps of greatest interest, the court affirmed that under Spokeo, “violations of statutorily mandated procedures” can qualify “as concrete injuries supporting standing.”  To determine whether violation of a statutory procedure gives rise to standing, the Second Circuit instructed courts to consider “whether Congress conferred the procedural right in order to protect an individual’s concrete interests.” If so, the procedural violation will suffice to give rise to standing as long as “the procedural violation presents a ‘risk of real harm’ to that concrete interest.”

The Second Circuit recognized that a core objective of TILA is to protect consumers’ concrete interest in avoiding the uninformed use of credit.  … Read more

SD FL Spokeo Decision

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Courts around the country continue to grapple with the Supreme Court’s Spokeo decision – particularly as nearly every Rule 12(b)(6) motion filed these days raises Article III standing as a basis for dismissal.

U.S. District Court Judge Cecilia M. Altonaga recently analyzed Spokeo in Flaum v. Doctor’s Associates, Inc., 2016 WL 7015823 (S.D. Fla. Aug. 29, 2016).  Plaintiff brought suit alleging a single claim under the Fair and Accurate Credit Transactions Act (“FACTA”).

Undertaking a close look at the statute and its legislative history, Judge Altonaga concluded that Congress created a “substantive right” under FACTA for consumers to have their personal credit card information truncated on printed receipts:

Courts have … considered a FACTA violation to be concrete as soon as a company prints the offending receipt, as opposed to requiring a plaintiff actually suffer identity theft.

The FACTA’s legislative history supports the Court’s finding Congress desired to create a substantive legal right for consumers to utilize in protecting against identity theft. In particular, the “FACTA arose from a desire to prevent identity theft that can occur when card holders’ private financial information, such as a card holder’s complete credit card number, is exposed on electronically printed payment card receipts.” Creative Hosp.

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