Follow Up – Dish Network Denied New Trial and Slapped with Trebled Damages of $61 Million

View Amanda Pickens’ Complete Bio at robinsonbradshaw.com Today we provide you with an update on a previous blog post addressing Dish Network’s plea for a new trial after a jury awarded damages of $20.5 Million in a telemarketing class action lawsuit. After a five-day trial in January, a jury awarded damages by assigning $400.00 to each of the 51,119 distinct phone calls made in violation of the Telephone Consumer Protection Act (the “TCPA”).

Although Dish hoped for a new trial, Judge Eagles issued a text order denying Dish’s Motion for Judgment as a Matter of Law and Motion for a New Trial on May 16, 2017.

After the jury verdict, both parties submitted written closing arguments to the Court on whether Dish willfully violated the TCPA. Dish argued the Plaintiffs should not be entitled to treble damages because Dish complied with TCPA, had a business interest in preventing unwanted telemarketing calls, believed Satellite Systems Network (“SSN,” Dish’s terminated marketing retailer) complied with the TCPA, instructed SSN to scrub its call list against the National Do-Not-Call Registry and not to call the named plaintiff, received almost no complaints during the class period, and had no actual knowledge that SSN was not adhering to the applicable telemarketing laws during the class period.

In an order issued yesterday, Judge Eagles rejected Dish’s arguments and awarded treble damages, stating Dish “did nothing to monitor, much less enforce” SSN’s compliance with telemarketing laws, and it “repeatedly looked the other way” when it learned of SSN’s noncompliance.

Specifically, Judge Eagles found that Dish’s contracts with SSN gave it “virtually unlimited rights” to monitor and control SSN’s telemarketing efforts. And, although Dish was committed to monitoring SSN’s compliance on paper, in reality, it ignored SSN’s violations of telemarketing laws. When SSN received a customer complaint, it would send the complaint to Dish and wait for instruction. Dish disclaimed responsibility for any customer complaint and shifted blame to SSN, while making no effort to determine whether SSN was actually complying with the TCPA. According to the opinion, Dish also ignored several customer complaints about SSN between 2004 and 2010, and it was aware of three lawsuits against the telemarketer resulting in injunctive relief and monetary damages. Despite having actual knowledge of customer complaints and lawsuits, Dish continued its relationship with SSN, allowing SSN to market and sell Dish’s products. Dish did not restrict SSN’s authority to act on its behalf, and it never conducted an investigation to determine if SSN had solved its compliance problems.

The Court held Dish responsible for any willful or knowing violations of the TCPA by SSN because the jury found (and the Court agreed) that SSN was acting within the scope of its authority from Dish. The Court further held that even if Dish were not responsible for SSN’s violations, the result would be the same, because Dish willfully violated the TCPA. According to the opinion, Dish knew SSN had committed many TCPA violations, but it did nothing. Dish received numerous customer complaints about SSN, and it knew of three lawsuits alleging violations of the TCPA. Dish knew SSN was not scrubbing its call list against the Do-Not-Call Registry, yet Dish made no effort to monitor SSN’s compliance with telemarketing laws. Ultimately, the Court held Dish “simply did not care whether SSN complied with the law or not.”

Judge Eagles concluded treble damages were appropriate in this case to deter Dish from future violations and to give appropriate weight to the scope of the TCPA violations. The Court trebled the jury’s award of $400.00 per call to $1,200 per call, totaling approximately $61 Million in damages.

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Is a Class Representative Adequate if He Waives Viable Claims in Order to Preserve Commonality?

View David Wright's Complete Bio at robinsonbradshaw.comClass actions don’t work if the class representative has a conflict with the class he or she purportedly represents. As the United States Supreme Court noted over 70 years ago, “a selection of representatives for purposes of litigation, whose substantial interests are not necessarily or even probably the same as those whom they are deemed to represent, does not afford that protection to absent parties which due process requires.” Hansberry v. Lee, 311 U.S. 32, 45 (1940). A decision this week from Judge Higginson out of the Fifth Circuit provides an interesting commentary on this subject in the context of a consumer class action.

In Slade v. Progressive Insurance Co., No. 15-30010 (5th Cir. May 9, 2017), plaintiffs claimed that Progressive Insurance shorted its insureds when paying for vehicle losses. Progressive used something called “WorkCenter Total Loss” to calculate the base value of total loss vehicles. Plaintiffs said that “lawful sources” – such as the NADA Guidebook or the Kelly Blue Book – had higher values and therefore resulted in plaintiffs “receiving lower payouts on their insurance claims.”

The Fifth Circuit treated with dispatch a couple of aspects of the district court’s class certification decision. First, the Court held that the damages theory was in fact “class wide,” and therefore consistent with Comcast v. Behrend, 133 S. Ct. 1426 (2013). Second, the district court had inexplicably certified a fraud class. As the Court of Appeals observed, “[t]his court has held consistently that a ‘fraud class action cannot be certified when individual reliance will be an issue.’”

But the bulk of Judge Higginson’s opinion discusses a more complicated issue. The insurance company used two basic factors to determine a vehicle’s value. First, it used a “base value” based on the WorkCenter Total Loss calculation. Second, it used a “condition adjustment,” recognizing that the value of the automobile in question might have either a higher or lower value based on its particular condition. The former sounds like a class-wide issue, but the latter looks to be quite individualistic.

Recognizing this dilemma, the named plaintiffs decided not to challenge the “condition adjustment.” As the Court of Appeals observed, “Plaintiffs’ class certification motion may have run into predominance problems because condition adjustments appear to be highly individualized.” But this waiver, the Fifth Circuit noted, comes with a potential cost. Although the plaintiffs’ waiver solved the predominance problems, it raised questions about the adequacy of the class representatives. “When the class representative proposes waiving some of the class’s claims, the decision risks creating an irreconcilable conflict with the class.” As the Court observed, citing a Seventh Circuit opinion, “A representative can’t throw away what would be a major component of the class’s recovery.”

But simply because a class plaintiff decides, as a strategic matter, to waive a claim does not necessarily mean she is inadequate. The court must inquire into, at least, “(1) the risk that unnamed class members will forfeit their right to pursue the waived claim in future litigation”; (2) the value of the waived claim; and (3) the strategic value of the waiver, which can include the value of proceeding as a class (if the waiver is key to certification).” In its opinion, the Fifth Circuit directed the district court to undertaken this analysis on remand. A central aspect of this inquiry is the res judicata effect of the waiver, which the Fifth Circuit said was “uncertain here.” Indeed, the Court observed that “courts have inconsistently applied claim preclusion to class actions.”

The Court of Appeals provided a bit of a road-map to the district court, identifying – as possible options on remand –

  • declining to certify the class because of preclusion risks
  • certifying the class, but tailoring the notice and opt-out procedure to alert the class to the risk of preclusion
  • concluding that the benefits of proceeding as a class outweigh any preclusion risks or
  • defining the class in a way to exclude individuals who have a quarrel with the condition adjustment.

Stay tuned, and consider carefully how class representatives and courts resolve the tension between waiving the claims of absent class members and strategically limiting the class to claims that can actually be certified.

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Recent Filings – April 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 April’s filings:

Sanda, et al. v. Samsung Electronics America, Inc., et al., No. 6:17-cv-00988 (D.S.C. April 17, 2017) (putative class action brought under federal and various state consumer protection laws alleging defendants manufactured defective home washing machines that caused damage during normal usage and additionally had a flawed recall of this product.)

Krebs, et al. v. Charlotte School of Law, LLC, et al., (originally filed in M.D.N.C. on December 22, 2016 – Case No. 1:16-cv-1437 and transferred to W.D.N.C. on April 10, 2017 – Case No. 3:17-cv-190) (putative class action brought by law students alleging the school misrepresented its compliance with ABA requirements and seeking refund/reimbursement of tuition and loan discharge.)

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NC Class Certification Appeals Bill Becomes Law

View Adam Doerr's Complete Bio at robinsonbradshaw.comHouse Bill 239, which reduces the number of judges on the North Carolina Court of Appeals and provides for direct appeals of decisions regarding class action certification to the North Carolina Supreme Court, is now law. On April 26, the General Assembly voted to override Governor Cooper’s veto, and the bill has been enacted as Session Law 2017-7.

Our earlier analysis of the law did not address when the provision regarding appeals of class certification decisions would become effective. Similar legislative changes have generally informed practitioners and courts that they apply to “appeals filed on or after” a specific date. The provision in this same bill regarding direct appeals of orders terminating parental rights does this, stating that it shall “become effective January 1, 2019, and apply to appeals filed on or after that date.” Rules and jurisdictional changes can also apply to cases filed after a certain date, or, as with appeals to the Supreme Court under the Business Court Modernization Act, based on the date of designation to the Business Court.

But House Bill 239 has no such language for appeals of decisions regarding class certification. Section 5 of the law simply gives the 2019 effective date for appeals in parental rights cases and states that the “remainder of this act is effective when it becomes law.”

This leaves unclear how the law will apply to any pending appeals of class certification decisions. The operative language states that “[a]ppeals of right lie directly to the Supreme Court … [from] [a]ny trial court’s decision regarding class action certification under G.S. 1A-1, Rule 23.” The most straightforward interpretation would be that, after April 26, a class certification appeal must be filed with the Supreme Court, but cases currently pending in the Court of Appeals would stay there. A party could file a bypass petition under Appellate Rule 15, asking the Supreme Court to take the case directly, but otherwise the Court of Appeals would keep the case. Given the ambiguity in the statute, however, it’s also possible the appellate courts could read the revised Section 7A-27 as requiring transfer of pending class action appeals to the North Carolina Supreme Court, or even as raising issues regarding the jurisdiction of the Court of Appeals in a pending case.

The answers to these issues, if they are presented, may be some time in coming. It could take much longer for the Supreme Court to address to some of the questions we pointed out in our earlier post, such as what qualifies as a “decision regarding class action certification” under the new law. We will keep you posted.

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Pending Bill Would Permit Interlocutory Appeals of Class Certification Decisions Directly to NC Supreme Court

View Adam Doerr's Complete Bio at robinsonbradshaw.comGovernor Cooper vetoed House Bill 239 on April 21, rejecting the General Assembly’s effort to reduce the number of judges on the North Carolina Court of Appeals from 15 to 12. The bill has been quite controversial, and four former North Carolina Supreme Court justices have said it would “seriously harm our judicial system.”  Although the bill does not speak in partisan terms, its practical effect would be to prevent Governor Cooper from appointing three (or perhaps two) new judges to the Court of Appeals to replace Republican judges who will reach the mandatory retirement age during his term.1

Mostly overlooked in the public and legislative debate is a major change to appeals in class actions. The bill contains a provision that allows for an appeal of right from “Any trial court’s decision regarding class action certification under G.S. 1A-1, Rule 23.”

As we explained in our analysis of the Supreme Court’s decision in Fisher, North Carolina currently takes an unusual approach to appeals in class actions. An order denying class certification is immediately appealable because the courts have held that it affects a substantial right under N.C. Gen. Stat. 7A-27. An order granting class certification, by contrast, is generally not immediately appealable. Although the appellate courts have sometimes permitted such appeals, including in Fisher, the courts have avoided stating that orders granting class certification affect a substantial right. In Fisher, for example, the Court held that “that the subject matter of this case implicates the public interest to such a degree that invocation of our supervisory authority is appropriate.”

Our firm’s amicus brief for the NC Chamber in Fisher advocated for a ruling that an order granting class certification could affect a substantial right, permitting interlocutory review. The rationale for this approach is that an order granting class certification is often dispositive because defendants face enormous pressure to settle. Indeed, we have not identified a single post-judgment appeal of an order granting class certification against a private party since North Carolina’s enactment of Rule 23 in 1967.

The substantial rights approach, if adopted, would have been similar to the rule in federal courts, where Rule 23(f) provides that a “court of appeals may permit an appeal from an order granting or denying class-action certification.” To obtain review, the party seeking to appeal must file a petition requesting permission to appeal. Such appeals are infrequently granted; published studies estimate that appellate courts grant less than one in four Rule 23(f) petitions.2

This legislation would go further than the federal approach, and further than the law in other states with which we are familiar, in three important ways. First, appeals under this statute would not be discretionary, in contrast to federal Rule 23. All orders would be appealable, regardless of whether the appellate court thought that interlocutory review was appropriate.

Second, appeals would go directly to the North Carolina Supreme Court, bypassing the Court of Appeals. There are currently only two kinds of appeals that go directly to the Supreme Court: a death penalty conviction and decisions from the North Carolina Business Court. N.C. Gen. Stat. 7A-27(a).  And interlocutory appeals from the Business Court are limited to orders that affect a substantial right, effectively determine or discontinue the action, or grant or refuse a new trial.

Third, House Bill 239 would permit an appeal of “[a]ny trial court’s decision regarding class action certification.” Note the contrast with federal Rule 23(f), which permits appeal from an “order granting or denying class-action certification.” A “decision regarding” class action certification could be significantly broader. For example, is an order denying a motion for decertification a “decision regarding class action certification” that would allow an interlocutory appeal? How about a motion to strike class allegations? Even in federal court, with Rule 23(f)’s more limited language and the appellate court’s discretion as a check, there is litigation over the scope of the right to appeal.3 Here, given the breadth of the language and the Supreme Court’s lack of discretion to reject an appeal, there is significant potential for extensive litigation over the scope of the right to appeal, repetitive appeals, and gamesmanship.

House Bill 239 now goes back to the General Assembly. If it overrides Governor Cooper’s veto, as it did with a recent bill applying party labels to elections of District and Superior Court judges, major changes are coming to class action litigation in North Carolina state courts.

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1 One of the Republican judges, Judge McCollough, announced his retirement on April 24, just over a month early. If he had waited until reaching his mandatory retirement on May 28, the legislature might have overridden the Governor’s veto and the law would have prevented appointment of a successor. As Judge McCullough told the Raleigh News & Observer, he did not want his legacy to be an “impairment to the appeals court” by reducing its size. Governor Cooper has appointed Charlotte attorney John Arrowwood to fill the seat.

2 We have found that existing research misses a significant number of 23(f) petitions in the Fourth Circuit. These petitions are difficult to research, as the orders are generally not published and require significant effort in PACER to uncover. We plan to share the results of our own research on this issue in a future post.

3 Compare In re Complaint of Ingram Barge Co., 517 F.3d 246, 247 (5th Cir. 2008) (refusing to hear a 23(f) petition from an order granting a motion to strike class action allegations because it was not an order “granting or denying” certification) with In re Bemis Co., Inc., 279 F.3d 419, 421 (7th Cir. 2002) (accepting review of an order granting a motion to strike class allegations because it was the “functional equivalent of denying a motion to certify a case as a class action, a denial that Rule 23(f) makes appealable (at our discretion).”).

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