Tag Archives: Damages

Congress Considering Major Class Action Reform Legislation

View Adam Doerr's Complete Bio at robinsonbradshaw.comRep. Bob Goodlatte (R-Va.), the Chairman of the House Judiciary Committee, recently introduced a bill that would make significant changes to federal class action litigation. The Fairness in Class Action Litigation Act of 2017 (H.R. 985) states that it is intended to allow prompt recoveries to plaintiffs with legitimate claims and “diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system.”

In its current form, the draft bill would likely eclipse the 2005 passage of the Class Action Fairness Act as the most significant legislation on class actions in decades. Rep. Goodlatte has introduced similar legislation in previous years, but passage is considerably enhanced with unified Republican control of the House, Senate, and Presidency. Among other changes, the bill would enact the following:

  • Prevent certification of a class seeking monetary relief unless the plaintiff “affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives.” (§ 1716) In other words, classes could not include individuals who have not suffered damage, or where damage is not yet clear.
  • Require class counsel to describe how the named plaintiff agreed to be included in the complaint, identify any other class action where the named plaintiff had a similar role, and disclose any family or employment relationship between class counsel and the named plaintiff (in which case certification must be denied). (§ 1717)
  • Require the party seeking certification to show a “reliable and administratively feasible mechanism” for (a) determining whether class members fall within the class definition and (b) distributing monetary relief to “a substantial majority of class members.” (§ 1718(a)). This provision appears to be an effort to impose a formal ascertainability requirement on class certification, as the Fourth Circuit has done in some cases.
  • Make significant changes to attorneys’ fees, including (1) preventing any payment or even determination of fees to class counsel until the distribution of monetary recovery to class members is complete, (2) limiting fee awards to “a reasonable percentage of any payments directly distributed to and received by class members,” and (3) limiting the payment of attorney’s fees based on equitable relief to “a reasonable percentage of the value of the equitable relief.” (§ 1718(b)).
  • Require courts to report, and the Federal Judicial Center to track, disbursements to class members. The Federal Judicial Center would prepare an annual report summarizing how funds paid by defendants in class actions have been distributed, including the largest and smallest amounts paid to any class member and payments to class counsel. (§ 1719) Alison Frankel of Reuters, who writes often and well on class actions, referred to this as “most intriguing idea in House Republicans’ bill to gut class actions.”
  • Bar certification of issue classes (§ 1720), an issue we have previously covered in both a district court case regarding the relationship between predominance and issue certification and when the Supreme Court declined to resolve a circuit split over issue certification.
  • Stay discovery while preliminary motions are pending. (§ 1721) (Interestingly, this provision formally recognizes a “motion to strike class allegations,” a motion that is not currently listed by name under Rule 23, although such motions may be permitted under Rule 23(d)(1)(D), which allows the Court to enter an order to “require that the pleadings be amended to eliminate allegations about representation of absent persons.”)
  • Provide for appellate review of orders granting or denying class certification as a matter of right. (§ 1722) This would be a significant departure from current practice under Rule 23(f), which gives Courts of Appeal substantial discretion in deciding whether to permit such interlocutory appeals.

The bill would also allow more personal injury cases to stay in federal court by changing the diversity jurisdiction analysis in multiple plaintiff cases, and it would make significant changes to multidistrict litigation practice, including barring the transferee judge from conducting a trial unless all parties consent.

The draft legislation is already generating controversy, and this will significantly increase as it advances. In particular, basing attorney’s fee awards on a percentage of the “value of the equitable relief” will be hotly debated. Equitable relief is, by nature, difficult or impossible to value in financial terms. The Washington Lawyers’ Committee for Civil Rights has already registered its opposition, noting the difficulty of putting a value on a class relief protecting disabled individuals from abusive conditions or providing them access to treatment, transportation, and community services.

The bill was introduced on February 9. On February 15, following a series of failed attempts by Democrats to introduce amendments, the Judiciary Committee voted on party lines (19-12) to forward to the bill to the full House. We’ll continue to track this legislation and bring you significant updates.

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Supreme Court Rebuffs Predominance Challenge to “Donning and Doffing Class”

View David Wright's Complete Bio at robinsonbradshaw.comYesterday, the Supreme Court issued its opinion in Tyson Foods, Inc. v. Bouaphakeo, voting 6 – 2 to uphold a jury verdict in favor of employees in a donning and doffing action. The class of employees, certified under Iowa Wage and Hour law pursuant to Rule 23, and as a collective action under the Fair Labor Standards Act, worked in the kill, cut and retrim departments of a pork processing plant. They were required to use protective gear and complained that they weren’t paid for the time spent to put on and take off the necessary protection equipment. Because Tyson didn’t keep records regarding this “donning and doffing” time, the employees (a 3,344 member class) relied on a study performed by an industrial relations expert to prove the average time spent on that activity.

A jury found Tyson liable for failure to pay the employees and awarded damages of $2.9 million, significantly less than the amount provided for in the expert’s study. The Eighth Circuit, over a dissent, affirmed the verdict in a decision we previously commented on in this post.

By direct contrast to the Supreme Court’s 2011 decision in Dukes v. Wal-Mart Stores, Inc., the parties in Tyson did “not dispute that there are important questions common to all class members, the most significant of which is whether time spent donning and doffing the required protective gear is compensable work under the FLSA.” (Wal-Mart held that the absence of a common question doomed the class). But the difficulty arose from the fact that each person in the class needed to establish that the amount of time spent donnng and doffing, when added to his regular hours, amounted to more than 40 hours in a given week, so that overtime was owed. How can this be resolved, Tyson suggested, on a class-wide basis?

The key question, as Justice Kennedy framed it, was whether it could be inferred – based on the evidence – that “each employee donned and doffed for the same average time observed in the [expert’s] sample.” Six justices held that it could, and rejected the notion that so-called “representative evidence” was always impermissible to establish liability in favor of a class. Instead, the court determined that “in many cases, a representative sample is ‘the only practicable means to collect and present relevant data’ establishing a defendant’s liability.”

Distinguishing Wal-Mart, the Court emphasized that representative evidence could not be used as a “means to overcoming [the] absence of a common policy.” In Wal-Mart, the “employees were not similarly situated,” and the evidence submitted in favor of one employee’s claim was not probative of another’s. In Tyson, by contrast to Wal-Mart (where “the experiences of the employees . . . bore little relationship to one another”), each employee “worked in the same facility, did similar work and was paid under the same policy.”

The Court gave short shrift to the second question upon which it had accepted certiorari, namely whether a class may be certified if it contains “members who were not injured and have no legal right to any damages.” In its brief, Tyson had reframed its argument and, in the Court’s estimation, abandoned the argument from its petition. The Court acknowledged that “whether uninjured class members may recover is one of great importance,” but found it was not fairly presented in the case before it, principally because the “damages award has not yet been disbursed nor does the record indicate how it will be disbursed.” In a concurrence, Chief Justice Roberts – who observed that “hundreds of class members suffered no injury” – expressed skepticism that the District Court could devise any means to distribute the aggregate award only to injured class members.

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Fourth Circuit Upholds (B)(2) Settlement Covering 200 Million People

View David Wright's Complete Bio at RBH.com Since the Supreme Court’s decision in Wal-Mart, courts have been struggling to breathe life into Rule 23(b)(2) when monetary damages are a possibility. Wal-Mart held that back pay constituted the kind of individualized monetary relief that was hardly “incidental” to claims of injunctive relief, upon which (b)(2) classes are essentially founded. In Berry v. LexisNexis Risk and Information Analytics Group, Inc., No. 14-2006 (4th Cir. Dec. 4, 2015), the Fourth Circuit grappled with this issue, albeit in the context of a nonmonetary (b)(2) settlement that, by its terms, continued to allow class members to pursue certain claims for monetary relief. Continue reading Fourth Circuit Upholds (B)(2) Settlement Covering 200 Million People

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Preview of Significant Class Action Cases Pending in the U.S. Supreme Court

View Mark Hiller’s Complete Bio at RBH.comThe Supreme Court began its new Term on October 5, and already the Court is slated to hear several cases that could have major impacts on class-action litigation. Among the issues facing the Court are:

▪ whether a defendant can render a putative class action moot by offering the named plaintiff all the relief the plaintiff could recover individually if the plaintiff were to prevail, even if the plaintiff rejects the offer (Campbell-Ewald Company v. Gomez);

▪ whether a plaintiff has standing to bring a claim (including a class claim) where the plaintiff’s statutory rights were violated, but the plaintiff did not suffer any “real world” injury (Spokeo, Inc. v. Robins);

▪ whether a class may be certified under Federal Rule of Civil Procedure 23(b)(3) where the plaintiff relies on statistical evidence that assumes that each class member is identical to the average observed in a sample, and where some class members did not suffer any injuries at all (Tyson Foods, Inc. v. Bouaphakeo); and

▪ the extent to which courts may strike down arbitration agreements as unenforceable, thereby allowing plaintiffs to proceed in the courts through class actions (MHN Government Services, Inc. v. Zaborowski and DIRECTV, Inc. v. Imburgia).

In this post we describe what is at stake in each case. We will follow the cases throughout the Term and update you in future posts as they are decided or if the Supreme Court grants additional cases of interest.

Campbell-Ewald Company v. Gomez

Sometimes referred to as the “pick off” case, Campbell-Ewald Company v. Gomez addresses the following scenario: What happens if, before a class is certified, the defendant offers to pay the named plaintiff everything the plaintiff could recover individually if the plaintiff prevailed in the lawsuit, but the plaintiff rejects the offer? In particular, does the defendant’s unaccepted offer moot the plaintiff’s individual claim? And if so, does it also moot the class claim? These questions are highly consequential to the many class actions in which a plaintiff’s individual damages are a fraction of the defendant’s prospective litigation costs and class-wide liability, giving the defendant a strong incentive to “pick off” the named plaintiff with an offer of complete relief.

The case arises from a putative class action that the plaintiff filed under the Telephone Consumer Protection Act after he received an unwanted text message from a company hired to recruit for the U.S. Navy. The statute caps damages at $1,500 for each unsolicited message a defendant sends, but because of the large size of the putative class (some 100,000 individuals), the defendant’s potential liability in this case could stretch well into the nine figures. Before the plaintiff moved to certify the class, the defendant offered him $1,503 (just over the statutory cap for damages). The plaintiff rejected the offer, but the defendant argued that the offer nonetheless mooted both the plaintiff’s individual claim and the class claim. In the defendant’s view, because the plaintiff was being offered everything he could recover if he prevailed in the lawsuit, there was no longer any dispute to resolve, and hence no “case or controversy” under Article III of the U.S. Constitution.

The district court and Ninth Circuit rejected the defendant’s argument, and the Supreme Court heard oral argument on October 14. This is the second time in as many years that the Supreme Court has faced the question whether an offer of complete relief moots a plaintiff’s claim. In Genesis Healthcare Corporation v. Symczyk, 133 S. Ct. 1523 (2013), which involved a collective action under the Fair Labor Standards Act, a five-Justice majority (consisting of Chief Justice Roberts and Justices Scalia, Kennedy, Thomas, and Alito) declined to decide the issue, holding that it was not properly presented. Justice Kagan issued a heated dissent, joined by Justices Ginsburg, Breyer, and Sotomayor. She said that the Court should have reached the question and held that an unaccepted offer “will never” moot a plaintiff’s individual claim. On October 14, the Justices squared off again, with Justice Kagan peppering the defendant’s counsel with skeptical questions, and the Chief Justice and Justice Alito doing the same of the plaintiff’s counsel. Justice Breyer expressed interest in a possible middle ground: Whether, even if the defendant’s mere act of offering complete relief to a plaintiff does not moot the plaintiff’s claim, the claim would become moot if the defendant actually deposits with the court the amount of money representing complete relief.

(In addition to the knotty class action questions above, Campbell-Ewald also presents an entirely separate question relating to the somewhat obscure topic of derivative sovereign immunity. Although the Court expressed little interest in this issue at oral argument, it is possible that the Court could once again skirt the class action questions by holding that the defendant in Campbell-Ewald (a U.S. Navy contractor) is immune from suit.)

Spokeo, Inc. v. Robins

Like Campbell-Ewald, Spokeo, Inc. v. Robins also presents a question of constitutional standing: Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.

The plaintiff in Spokeo alleged that the defendant, a website operator that provides users with personal information about other individuals, violated the Fair Credit Reporting Act (FCRA) by publishing false information about him and by failing to send certain required notices to third parties. The plaintiff brought an action on behalf of himself and a putative class of millions of members, putting the defendant’s prospective damages in the billions of dollars.

In his complaint, the plaintiff alleged that the defendant’s actions injured him by harming his employment prospects and by causing him related anxiety. The district court held that these asserted injuries were insufficient to confer standing on the plaintiff. The Ninth Circuit reversed, but on much broader grounds. It held that the defendant’s alleged violation of the statute was itself sufficient to confer standing, even if the plaintiff did not suffer the injuries alleged in his complaint, or any other injury beyond the statutory violation.

The defendant argues that such “injury in law” is insufficient to create standing, unless it is accompanied by a real-world “injury in fact.” The Supreme Court faced this same question three years ago in First American Financial Corporation v. Edwards, 132 S. Ct. 2536 (2012), but the Court dismissed that case as improvidently granted. (As is customary, the Court provided no explanation for why it dismissed the case.) The defendant in Spokeo argues that the issue has only grown in importance since then, as evidenced by the numerous FCRA class actions that have been filed, the large damages at stake, and the number of other federal statutes that, like FCRA, provide for statutory damages apart from actual damages. Oral argument took place on November 2.

Tyson Foods, Inc. v. Bouaphakeo

In Tyson Foods, Inc. v. Bouaphakeo, the Supreme Court will probe the scope of Rule 23(b)(3) class actions and its recent, high-profile decisions in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and Comcast Corporation v. Behrend, 133 S. Ct. 1426 (2013). This case arises from an overtime pay dispute brought by employees at a meat-packing plant in Iowa. A jury awarded class-wide damages of some $3 million after finding that the defendant failed to pay the plaintiffs for time spent putting on (donning) and taking off (doffing) their work equipment, as well as for time spent walking to their work stations.

What landed the case in the Supreme Court is the method the plaintiffs used to prove class-wide liability and damages. The problem the plaintiffs faced was that the class members spent different amounts of time donning, doffing, and walking. As a result, they were entitled to different amounts of overtime pay, and in some cases, to none at all. The plaintiffs accounted for these differences by having one of their experts study a sample of employees and compute an “average” amount of time that plaintiffs spent donning, doffing, and walking. Another expert then calculated damages on a class-wide basis by assuming that every employee spent the average amount of donning, doffing, and walking time, even though any particular employee may have spent more or less time than the average. The plaintiffs’ expert acknowledged that this methodology resulted in there being at least 212 members in the class who did not suffer any damages because they were not entitled to overtime.

The defendant argues that the class should not have been certified because common questions of fact or law did not predominate over individual ones, as required by Rule 23(b)(3). The Court will hear oral argument on November 10, and it has granted cert on two issues: First, whether a class action may be certified under Rule 23(b)(3) where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and second, whether a class may be certified when it contains members who were not injured and thus have no legal right to damages. The Court has further agreed to hear these issues as they relate to the certification of collective actions under the Fair Labor Standards Act.

The Arbitration Cases: MHN Government Services, Inc. v. Zaborowski and DIRECTV, Inc. v. Imburgia

Finally, the Supreme Court will hear two cases dealing with the intersection of class actions and arbitration agreements. In both cases, California courts (one state, one federal) held that the defendant’s arbitration agreement was unenforceable, and thus that the plaintiffs’ class actions could proceed in court.

In MHN Government Services, Inc. v. Zaborowski, the Ninth Circuit held that certain provisions of the arbitration agreement were unconscionable under California law. Instead of severing those provisions, however, the court affirmed the district court’s decision not to enforce any part of the arbitration agreement.

In DIRECTV, Inc. v. Imburgia, the arbitration agreement prohibited class-wide arbitration, but further provided that if “the law of your state” would find this prohibition unenforceable, then the entire arbitration agreement is unenforceable. Prior to 2011, California case law treated such class-arbitration bans as unenforceable, but in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Supreme Court held the case law preempted by the Federal Arbitration Act. Nonetheless, in Imburgia, the California state court held that the words “the law of your state” refer to California law without regard to whether the law is invalid (which it is, in light of Concepcion). Accordingly, the court declined to enforce the arbitration agreement.

The defendants in Zaborowski and Imburgia argue that the decisions reflect a judicial hostility to arbitration agreements held by California state and federal courts. Oral argument in Zaborowski has not yet been scheduled. Oral argument in Imburgia took place on October 6. The Justices made little effort to hide their view that the California court misinterpreted the meaning of the words “law of your state.” (As Justice Kagan put it: “[The state court] probably got the answer wrong. Strike the ‘probably.’ Got the answer wrong.”) But the bulk of oral argument was spent on the threshold question whether the Supreme Court has authority to hear this case in the first place, since the meaning of the words “law of your state” is a matter of state law, and the Supreme Court reviews federal law. The plaintiffs suggested in their briefing that the Court therefore may wish to dismiss the case as improvidently granted, which, given the tenor of oral argument, may be the best outcome the plaintiffs can hope for.

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Court Certifies State Wage and Hour Claims Alongside FLSA Collective Claims

View David Wright's Complete Bio at RBH.com We have reported recently in this space on the certification of state wage and hour claims. Judge Gergel recently continued with this trend, certifying a class of Jamaican workers at the Kiawah Island Golf Resort who contend they weren’t paid enough by the Resort. See Moodie v. Kiawah Island Inn Co., LLC, No. 2:15-cv-1097 (D.S.C. Aug. 24, 2015). Defendants argued that the differences in class members were such that the court would have to certify six classes, but the Court rejected that notion, saying the argument stemmed from a “novel proposition that Plaintiffs must propose [a] separate class for every claim in the complaint.” Immediately following that, Judge Gergel gave a nod to “issue certification” in dicta, citing the language of Rule 23(c)(4) without wrestling with the difficulties looming in a surface analysis of that question, something which we have dealt with before here. The Court found that the legality of deductions made from the wages of the putative class was “central to the validity of each one of the claims,” and rejected the defense argument that a conflict arose by virtue of the representation of former employees by current employees. Citing Gunnells v. Healthplan Servs., Inc., Judge Gergel also rejected the argument that difficulties in determining damages resulted in a predominance problem for the class. In so holding, the Court did not grapple with the numerous cases post-Gunnells, including Comcast and its progeny that illustrate how individual damages issues can threaten the viability of class relief. In certifying the class, the Court paid particular attention to the difficulties associated with some 500 workers filing individual claims, noting that “class members are residents of a foreign country, likely to have limited financial resources, unfamiliar with the U.S. Court system, and have relatively small claims.”

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