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Judge Gorsuch’s Class Action Opinions After Shook

View Susan Huber's Complete Bio at robinsonbradshaw.com View Kevin Crandall’s’s Complete Bio at robinsonbradshaw.comToday we continue our analysis of Judge Gorsuch’s class action opinions from the Tenth Circuit in an effort to better understand how he may rule if confirmed for the Supreme Court. Last week, we examined Judge Gorsuch’s decision in Shook v. Board of County Commissioners, and we will take up his remaining class action opinions below.

McClendon v. City of Albuquerque, 630 F.3d 1288 (10th Cir. 2011)

In McClendon v. City of Albuquerque, decided three years after Shook, Judge Gorsuch again demonstrates judicial restraint. In McClendon, prisoners brought a class action against the City of Albuquerque, Bernalillo County, and various individuals involved in operating the Bernalillo County Detention Center. The parties entered into a pair of settlement agreements in 2005, but four years later the district court issued an order withdrawing its approval of the settlement and giving the plaintiffs permission to rescind those agreements after it found that the County misrepresented certain facts during settlement negotiations. The Tenth Circuit held that the order was not a “final decision,” subject to appeal under 28 U.S.C. § 1291. A final decision, Judge Gorsuch reasoned, dissociates the court from the case and ends the litigation on the merits, while the order withdrawing a settlement approval does “[j]ust the opposite: the order ensures litigation on the merits will continue in the district court.”

Judge Gorsuch empathized with the defendants’ desire for an appeal that might avoid further litigation in a previously settled case that was already fifteen years old: “the delays and costs associated with civil litigation in modern America are substantial and worrisome, and even the most hard-boiled litigator may raise an eyebrow at a case lasting as long as this one.” But neither the utility of the appeal nor the advanced age of the case swayed Judge Gorsuch to take an appeal beyond the bounds of the express authority in § 1291: “Congress’s direction demands our respect, not our rewriting.” Judge Gorsuch concluded his opinion by emphasizing the importance of judicial restraint:

[O]ne thing we may never do is disregard the bounds of our legal authority and assert § 1291 jurisdiction over an appeal where it doesn’t exist. To do so in this case would compound any error the defendants imagine with an impropriety of our own, making matters worse not better. It is, after all, a “central principle of a free society that courts,” no less than the other branches of government, “have finite bounds of authority.” . . . We must respect that principle and those bounds no less when it is hard to do so than when it is easy.

Hammond v. Stamps.com, Inc., 844 F.3d 909 (10th Cir. 2016)

The Tenth Circuit’s holding in Hammond v. Stamps.com, Inc.—that the minimum amount in controversy under the Class Action Fairness Act need only be legally possible and not factually probable—is hardly noteworthy, as it falls squarely in line with the law from other Courts of Appeals. But in Judge Gorsuch’s opinion, his most recent in the class action arena, we see the hallmarks of conservative jurisprudence: interpreting statutory text (here, “in controversy”) with its “traditional meaning”; citation to the Federal Judiciary Act of 1789; and a nod toward the late Justice Antonin Scalia’s textualist approach with a citation to his book, Reading Law. Indeed, it is only after a three-page textual and historical deep dive that Judge Gorsuch cites in the final paragraph of the opinion the “several courts [that] have held as we do today.”

For those of you who yearn to know the facts of the case, Elizabeth Hammond brought a putative class action in New Mexico state court, alleging that Stamps.com engaged in misleading and unlawful trade practices by insufficiently disclosing its subscription fees to customers. She alleged that “hundreds or thousands of persons” called to cancel their Stamps.com subscriptions as a result of Stamps.com alleged wrongdoing, and each class member would “likely” receive $31.98 in damages (the cost of subscribing for two months) or $300 in statutory damages. Stamps.com presented uncontested evidence that 312,680 customers had cancelled their subscriptions during the likely class period, and the company removed the case to federal court because the amount in controversy well exceeded the $5 million threshold for the Class Action Fairness Act. The trial court granted Ms. Hammond’s motion to remand, ruling that the company had not met its burden of establishing the minimum amount in controversy because it failed to exclude from its calculations those customers who cancelled their subscriptions for reasons unrelated to the allegations in the complaint, or as Judge Gorsuch put it, “without proof from Stamps.com establishing how many of its customers were actually deceived, the district court thought the company couldn’t satisfy the $5 million ‘in controversy’ requirement.” The Tenth Circuit vacated and remanded the district court’s remand order, ruling that federal jurisdiction was proper under CAFA: the proponent of jurisdiction should not have to “argue against himself, task[ed] with the job of proving his own likely liability in a sufficient number of individual cases simply to get a foot in the door of the federal courthouse.”

BP America, Inc. v. Oklahoma ex rel. Edmondson, 613 F.3d 1029 (10th Cir. 2010)

In an earlier CAFA jurisdictional decision, the Tenth Circuit in BP America granted discretionary leave for the propane gas distributor to appeal an order remanding the case to Oklahoma state court. The merits of the jurisdictional question—whether the Attorney General’s lawsuit, brought on behalf of the state and not any individual consumers, constitutes a “mass action” involving monetary relief to 100 or more people under CAFA—were not at issue at this preliminary stage of the appeal.

Judge Gorsuch’s opinion adopts multiple factors to consider in deciding whether to grant discretionary leave to appeal under CAFA § 1453, including whether the appeal presents an important, unsettled, or at least “fairly debatable” CAFA-related question and a weighing of the relative harms to the parties should an appeal be refused or entertained.

Heller v. Quovadx, Inc., 245 F. App’x 839 (10th Cir. 2007)

Although it actually predates Shook, the unpublished decision of Heller v. Quovadx, Inc., is worth noting, if only to highlight the wry humor employed by Judge Gorsuch in dismissing a non-class member’s argument that denying him standing to object to a settlement would violate his Fifth Amendment rights. In addition to the fact that the non-class member presented “no evidence or relevant legal argument to support his contentions,” he also “spen[t] the bulk of his brief noting the inefficiencies and burdens of paper-based litigation.” Perhaps a sentiment with which class action lawyers and judges can relate all too well.

Substantively, the Tenth Circuit affirmed the district court’s determination that the non-class member lacked standing to object to the proposed settlement. Non-class members opposed to a proposed settlement cannot object directly and instead must seek to intervene under Rule 24.

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Recent Filings – February Digest

View Amanda Pickens’ Complete Bio at robinsonbradshaw.comNot every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of February’s filings:

Bradley, et al. v. Samsung Electronics, et al., No. 1:17-cv-00171 (M.D.N.C. February 28, 2017) (purported class action brought under various state consumer protection and trade practice laws alleging defendants manufactured home washing machines with a defect that caused explosion during normal use.)

Matthews, et al. v. TCL Communication Inc.,  No. 3:17-cv-00095 (W.D.N.C. February 27, 2017) (putative class action removed from Mecklenburg County state court to federal court brought under state consumer laws alleging defendants removed a key compatibility feature of a specific brand of Smartphone which rendered the phone defective).

Cash-Davis, et al. v. Access Community, et al.; No. 3:17-cv-00466 (D.S.C. February 16, 2017) (putative class action and collective action originally filed in Lexington County state court, removed to federal court and brought under FLSA and state wage and hour laws alleging defendants changed the terms of employees’ pay arrangements and failed to pay compensation due).

Holland, et al v. Fulenwider Enterprises, Inc., et al., No. 1:17-cv-00048 (W.D.N.C. February 15, 2017) (purported collective and class action brought under FLSA alleging defendants misclassified assistant managers working at local KFC, Taco Bell, and Long John Silver franchises and failed to pay overtime wages).

Helen Holland, et al v. Bojangles’ Restaurants, et al., No. 3:17-cv-00050 (W.D.N.C. February 6, 2017) (purported class action and collective action brought under FLSA by employees alleging defendants misclassified them and failed to pay overtime compensation).

King, et al. v. Smooth Sailing, et al., No. 4:17-cv-00309 (D.S.C. February 2, 2017) (collective and class action alleging defendants failed to pay wages owed to employees in violation of FLSA and state wage and hour laws).

E&G, et al. v. Mount Vernon Mills, et al., No. 6:17-cv-00318 (D.S.C. February 2, 2017) (putative class action alleging violations of the Telephone Consumer Protection Act based on unsolicited facsimile transmission advertisements to plaintiffs).

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How Will Justice Gorsuch Rule in Class Actions? A Look at Shook and Judicial Restraint

View John Wester's Complete Bio at robinsonbradshaw.comThe nomination of Tenth Circuit Judge Neil M. Gorsuch for the Supreme Court has jurists and reporters forecasting how, if confirmed, he will rule in cases raising “hot” Constitutional issues. The “hot” question for those of us who litigate class actions is how Justice Gorsuch would engage the next landmark class action, especially since he would replace Justice Antonin Scalia on the Court, author of two of the most significant class action opinions in recent years, Comcast Corp. v. Behrend and Wal-Mart Stores v. Dukes.

We will be examining some of Judge Gorsuch’s opinions in an attempt to answer this question, beginning with the 2008 opinion he wrote for a unanimous panel of the Tenth Circuit, denying class certification, in Shook v. Board of County Commissioners, 543 F. 3d 557. The linchpin of the outcome in Shook was adherence to the abuse of discretion standard of review. Indeed, twice in his opinion, Judge Gorsuch observes that, were the court evaluating whether to certify the class in the first instance, it may well have allowed a class action to proceed. For example, he observed:

In this case, we believe the district court’s decision fell within the boundaries set out by Rule 23(b)(2), governing case law, and the facts as alleged. While we very well may have made a different decision had the issue been presented to us as an initial matter, and while other district courts perhaps could have chosen, or could choose, to certify similar classes, we cannot say the district court’s assessment was beyond the pale.

What comes through as a lodestar for Judge Gorsuch’s reasoning is his vigilance for honoring the rubric of Rule 23, separate from a merits analysis. Shook is a suit alleging violations of the Prison Litigation Reform Act. The 2008 opinion marked a return trip to the Tenth Circuit for the parties. In the first ruling denying class relief, the district court had “conflated” an analysis of the merits of the relief available to the plaintiffs with threshold class certification requirements of Rule 23. Judge Gorsuch was specific in describing this error: “the court focused entirely on the PLRA, reasoning that the relief plaintiffs sought was beyond its jurisdictional competence after the passage of the PLRA and that class certification is properly denied when the court lacks the authority to order the prospective remedy requested.” On remand, the district court repeated the outcome on class certification, denying it again, but, as Judge Gorsuch described the second round: “[the district court] did so this time with reference to Rule 23’s strictures. We find that the district court’s analysis of the Rule 23 framework is free of the legal errors we identified in its first effort.”

Judge Gorsuch’s opinion in Shook reflects careful scholarship—drawing support from leading Supreme Court class action precedent, from decisions by five other circuit courts, and from five law review articles—all evaluating detailed features of Rule 23—to explain why the present case, under an abuse of discretion standard, should remain in the “certification denied” column: “It is precisely these features that distinguish our case from the many and diverse civil rights cases whose certifications we have upheld and will continue to uphold.” His approach in Shook fits the overall reputation for scholarship, judicial restraint, and “rules-following” that Judge Gorsuch has earned during his judicial service.

Taking into account this reputation and his reasoning in Shook, those who labor in class action cases might wonder how far will Justice Gorsuch’s deference to trial court discretion run when the next Wal-Mart-themed case reaches the Supreme Court. Recognizing that the record for each case is distinctive, the trial court ruling in Wal-Mart stood on a significant volume of evidence—statistical and anecdotal—pointing to gender discrimination. As Justice Ginsburg observed in dissent, focusing on the commonality requirement:

The District Court’s identification of a common question, whether Wal-Mart’s pay and promotions policies gave rise to unlawful discrimination, was hardly infirm. The practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects. Managers, like all humankind, may be prey to biases of which they are unaware. The risk of discrimination is heightened when those managers are predominantly of one sex, and are steeped in a corporate culture that perpetuates gender stereotypes.

Would Judge Gorsuch’s adherence to abuse of discretion standard of review and his recognition that trial judges operate within a range of acceptable determinations lead to his siding with Justice Ginsburg’s dissenting view? Or, was Judge Gorsuch’s application of the abuse of discretion standard in Shook influenced by its context, an appeal arising from the district court’s denial of certification? Perhaps we’ll learn the answer with the next Supreme Court class action that pits judicial restraint against an inclination toward denial of certification.

We will continue our analysis of Judge Gorsuch’s class action opinions in future posts.

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Seventh Circuit Weighs in on Offers of Judgment

View David Wright's Complete Bio at robinsonbradshaw.comIn this space, we concentrate on class action decisions in the Carolinas, as well as Fourth Circuit and United States Supreme Court precedent. Occasionally, though, we venture beyond these jurisdictions to highlight issues of particular note, including those where courts are divided. We’ve previously reported here how offers of judgment interact with mootness. In Campbell-Ewald Co. v. Gomez, the United States Supreme Court held that an unaccepted settlement offer, even if it offers all relief sought in the case, does not render a case moot when the affected party seeks relief on behalf of a class. Last Friday, the Seventh Circuit considered a question not resolved by Gomez: What happens when the named representative accepts a Rule 68 offer of judgment? Can he still appeal the denial of class certification? Like the question of appellate standing upon which the Supreme Court accepted certiorari in Microsoft, the answer is significant.

In Wright v. Calumet City, Illinois, No. 14-cv-10351 (7th Cir. Feb. 17, 2017), the Seventh Circuit acknowledged a split of authority on this question: “Where the Rule 68 offer is accepted but by its terms exempts the class certification issue, courts are divided as to whether the plaintiff retains a concrete interest sufficient to meet the case or controversy requirement of Article III.” The Seventh Circuit noted that Wright’s claim to standing was particularly strained because he accepted the Rule 68 offer without reservation, and he preserved no interest in receiving an incentive award. Wright argued that he had a sufficient interest in the case because his offer of judgment did not include attorney’s fees for the class claim (as opposed to his individual claim), but – as the Seventh Circuit observed – Lewis v. Continental Bank Corp.,  494 U.S. 472, 480 (1990) holds that “an interest in attorneys’ fees is, of course, insufficient to create an Article III case or controversy where none exists.” The court noted that there is some tension between Lewis and Deposit Guaranty National Bank v. Roper, 445 U.S. 326 (1980), in which the Supreme Court allowed plaintiffs, whose individual claims had been satisfied, to appeal the denial of class certification based on their asserted interest in shifting attorney’s fees to the class members. But the court distinguished Wright’s case from Roper on the ground that Wright had accepted the Rule 68 offer “as satisfaction of all of the relief that he sought in the district court.” In Roper, by contrast, the district court entered judgment for the plaintiffs in the amount tendered by the defendant, even though the plaintiffs had refused that offer. Thus, even under Roper, Wright’s claims are moot.

There will likely be more permutations on the Rule 68/mootness issues, so stay tuned.

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Recent Filings – January Digest

View Amanda Pickens’ Complete Bio at robinsonbradshaw.com Not every class action court filing in North and South Carolina becomes a full-length post on our blog. Here is a recap of January’s filings:

Hieber v. The Asset Recovery Group, LLC, et al., No. 3:17-cv-00214 (D.S.C. January 24, 2017) (putative class action brought on behalf of consumers residing in South Carolina alleging violations of the Fair Debt Collection Practices Act).

Hart v. Barbeque Integrated., No. 2:17-cv-00227 (D.S.C. January 24, 2017) (collective and class action alleging defendant restaurant failed to pay tipped employees minimum wage and overtime compensation in violation of FLSA and state wage and hour laws).

Foster, et al. v. Livanova PLC, et al., No. 3:17-cv-00218 (D.S.C. January 24, 2017) (products liability class action lawsuit alleging defendants’ medical device exposed plaintiffs to potentially fatal bacteria during open chest surgery).

Turner, et al. v. Condustrial, Inc., et al., No. 3:17-cv-00205 (D.S.C. January 23, 2017) (putative class action and purported collective action brought under FLSA and state wage and hour laws alleging defendants misclassified employees as independent contractors to avoid paying overtime compensation or providing benefits).

Williams, et al. v. G4S Secure Solutions (USA) Inc., No. 1:17-cv-00051 (M.D.N.C. January 20, 2017) (collective and class action alleging defendant failed to pay straight time and overtime compensation to non-exempt hourly security officers in violation of FLSA and state wage and hour laws).

Jones, et. al. v. Wectec Global Project Services, et al., No. 3:17-cv-31 (W.D.N.C. January 20, 2017) (putative class action and purported collective action brought under FLSA and state wage and hour laws alleging defendants failed to pay current and former hourly employees overtime compensation).

Jones v. Wectec Global Project Servs., et. al., No. 3:17-cv-00031 (W.D.N.C. January 20, 2017) (putative class action and purported collective action alleging defendant’s 9/80 workweek plan violates FLSA and state wage and hour laws).

Levy, et. al. v. Charlotte School of Law, LLC, et. al., No. 3:17-cv-00026 (W.D.N.C. January 19, 2017) (in addition to Barchiesi, this is the second putative class action against Charlotte School of Law for alleged misrepresentation of its ABA accreditation status to prospective and current students).

Strak, et. al. v. Managed Recovery Systems, Inc., et. al., No. 6:17-cv-00159 (D.S.C. January 18, 2017) (purported class action alleging Managed Recovery Systems improperly used mail, telephone and facsimile in its debt collection efforts in violation of the Fair Debt Collection Practices Act).

Cunningham v. ShopperLocal, LLC, No. 1:17-cv-00024 (M.D.N.C. January 10, 2017) (putative class action brought under the Telephone Consumer Protection Act alleging defendant called plaintiffs using an auto-dialer to sell advertising space without plaintiffs’ consent).

English, et. al. v. Café Enterprises, Inc., No. 3:17-cv-00038 (D.S.C. January 5, 2017) (putative class action and purported collective action brought under FLSA and state wage and hour laws alleging defendant restaurant failed to pay tipped employees minimum wage while performing side work at the beginning and end of their shifts).

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