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Seventh Circuit Weighs In on “White or No Underwear” Policy

View David Wright's Complete Bio at robinsonbradshaw.comOccasionally, we see something outside of the Carolinas that is quirky enough to merit a mention in this space.  Such is the Seventh Circuit’s recent decision in Mulvania v. Sheriff of Rock Island County, No. 16-1711 (7th Cir. Mar. 9, 2017).  According to Wikipedia, “In 2015 Rock Island (Illinois) was ranked the 32nd ‘Best Small City’ in the country.”  Not influencing those rankings, apparently, was the policy of the Rock Island County Jail, which “requires female detainees to wear either white underwear or no underwear at all.”  What, you ask, might be the “compelling government interest” that allegedly supports such a policy?  As the Seventh Circuit described, “[t]he Sheriff’s sole stated rationale for the underwear policy was to prevent detainees from extracting ink from colored underwear.”  This was a problem, in the Sheriff’s mind, because “detainees could use that ink to make tattoos.”   Despite the dearth of examples of such tattoo creation by detainees, the Sheriff testified that the policy was founded on such “security concern[s].”  This policy apparently has not been confined to Rock Island County; indeed, the defense argued that the white underwear policy was “within the correctional mainstream.”

The district court denied certification of the “underwear class” and granted summary judgment in favor of defendants.  On the merits, the Seventh Circuit reversed, holding that the record supported the inference that “the asserted security concern about tattoo ink from underwear is not genuine.”

The district court’s class certification decision was based on predominance and numerosity.  As to predominance, the court found that the “damages would vary for individual class members based on factors such as how long a detainee was deprived of her underwear, whether she was on her menstrual cycle or pregnant and other considerations.”  The absence of a “simple or formulaic method to calculate damages,” in the view of the lower court, precluded class certification.

The Seventh Circuit summarily reversed this determination, noting that “this reasoning was a mistake.”  According to the Court of Appeals, “it has long been recognized that the need for individual damages determinations at [a] later stage of the litigation does not itself justify the denial of certification.”

Alas, however, there were not enough underwear detainees to mount a class challenge.  After observing that “a forty-member class is often regarded as sufficient to meet the numerosity requirement,” the Seventh Circuit held that the class period only yielded 29 members–there was no basis upon which the plaintiffs’ amended complaint “related back” to the initial complaint, which might have supported a higher number.

It remains unclear, as of this post, whether Rock Island’s policy has been amended and whether this case will impact its ranking as the “Best Small City.”

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Recent Filings – March 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 March’s filings:

Angeles-Gomez, et al. v. Rick Wolf Landscape, LLC, et al., No. 2:17-cv-00009 (E.D.N.C. March 31, 2017) (putative collective and class action brought under FLSA and state wage and hour laws by current and/or former employees of the defendant landscaping and lawn care business and its managing members for alleged unpaid overtime compensation).

Isaman, et al. v. Housekeeping Services of Hilton Head, LLC, et al., No. 9:17-cv-00800 (D.S.C. March 26, 2017) (putative class action and purported collective action brought under FLSA and state wage and hour laws alleging Housekeeping Services of Hilton Head, the low country’s largest cleaning service, failed to pay hourly wages due including overtime compensation).

Oldfield Community Association, et al. v. TI Oldfield Development, LLC, et al., No. 9:17-cv-00794 (D.S.C. March 24, 2017) (purported class action removed from South Carolina state court to federal court brought by a non-profit corporation formed for the benefit of homeowners and lot owners of Oldfield, a Beaufort County community, alleging defendant board and director members misappropriated funds, breached fiduciary duties, etc. and requesting a preliminary injunction).

Beasley, et al. v. Bojangles Restaurants, Inc., et al., No. 1:17-cv-00255 (M.D.N.C. March 21, 2017) (purported class action and collective action brought under FLSA by employees alleging defendants misclassified them and failed to pay overtime compensation).

Blue Ridge Podiatry Assocs., P.A. v. Annexmed Billing Servs. Inc., et al., No. 1:17-cv-00078 (W.D.N.C. March 20, 2017) (putative class action brought under the Telephone Consumer Protection Act alleging the defendants sent unsolicited fax advertisements to plaintiff and the proposed class in June 2016 without prior express consent).

Sandviks v. PhD Fitness, LLC, No. 1:17-cv-00744 (D.S.C. March 17, 2017) (products liability class action lawsuit alleging defendant, a manufacturer of sports-oriented dietary supplement products, has marketed their products in a systematically misleading manner and these misrepresentations regarding ingredients and proper dosing have injured plaintiffs).

Bobiak, et al. v. The Morgan Group, Inc., No. 3:17-cv-00142 (W.D.N.C. March 17, 2017) (putative collective and class action brought by employees of The Morgan Group, a high-end multifamily development, construction and property management company, for recovery of unpaid wages and unpaid overtime/bonus compensation under FLSA and state wage and hour laws).

Indian Harbor Insurance Co. v. Kriewaldt, et al., No. 2:17-cv-00732 (D.S.C. March 17, 2017) (putative class and declaratory judgment action brought by Indian Harbor Insurance Co. seeking a determination from the federal court of its defense and coverage obligations based on two underlying South Carolina state court lawsuits, one a class action, which allege construction defects caused by the defendants in a Charleston townhome development).

Fuerte, et al. v. Convergys Corp., et al., No. 4:17-cv-00701 (D.S.C. March 14, 2017) (putative collective and class action brought under FLSA and state wage and hour laws by at-home customer representative employees of Convergys, a customer outsourcing company, who performed required “off the clock” and computer technical malfunction work but allege not to have been compensated for this time).

Mauer v. Argos Therapeutics, Inc., et al., No. 1:17-cv-00216 (M.D.N.C. March 14, 2017) (putative class action brought by shareholders of Argos, an immune-oncology company, alleging the company violated federal securities laws by making false statements in its securities filings).

Hegeman v. Babcock & Wilcox Enters., et al., No. 3:17-cv-00125 (W.D.N.C. March 13, 2017) (putative class action on behalf of shareholders of Babcock & Wilcox, a provider of energy and environmental technologies and services for power and industrial markets, asserting federal securities violations for the company providing alleged false and misleading statements and failing to provide material facts about the company).

Lawrence, et al. v. General Panel Corp., No. 2:17-cv-00600 (D.S.C. March 3, 2017) (putative class action removed from South Carolina state court and brought by homeowners alleging structures known as SIPS, manufactured by Defendant using sheets of oriented strand board, were defective and have caused damage to their homes and buildings).

Ollila, et al. v. Babcock & Wilcox Enters., Inc. et al.; No. 3:17-cv-00109 (W.D.N.C March 3, 2017) (putative class action brought by shareholders of Babcock & Wilcox Enterprises, Inc., a technology-based provider of power generation equipment, alleging violations of securities laws claiming the company’s officers and/or directors made false and misleading statements in press releases, analyst conference calls and SEC filings starting in 2015).

Speights, et al. v. Blue Cross and Blue Shield of South Carolina; No. 9:17-cv-594 (D.S.C. March 3, 2017) (putative class action removed from South Carolina state court brought by consumers alleging Blue Cross and Blue Shield denied requests to pay for healthcare that was approved and/or requested by physicians).

Jeffers, et al.v.Toyota Motor Corporation, et al., No. 4:17-cv-00577 (D.S.C. March 2, 2017) (purported class action brought under consumer protection laws alleging defendants manufactured defective dashboards in various car models and have not adequately handled a warranty program that was promised in previous litigation relating to the same issue).

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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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