Supreme Court

Supreme Court Skips on Ascertainability

Consumer Class Action, False Advertising, Food, Supreme Court, , , , ,

** High Court Won’t Weigh in on Whether “All Natural” Class Requires Ascertainability **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

By: Brent E. Johnson                                                                                                                      

In federal court, Civil Procedure Rule 23 governs the question of whether a class may be certified.  The rule specifically identifies four primary requirements for certification: numerosity, commonality, typicality and adequacy.  But many courts have added a further requirement – whether the putative class is “ascertainable.”  While the question posed by this requirement is phrased differently from court to court, it can be distilled to this:  Is there a reasonable and reliable way to identify the members of the proposed class?  The Ninth Circuit recently rejected the application of this standard.  And, on  request for certiorari, the Supreme Court has refused to weigh in on this important issue.

Many federal courts were quick to adopt the ascertainability standard after it found its way into case law, particularly some of the district courts of California, which bear the brunt of the dramatic rise in consumer class actions.  See, e.g., Lukovsky v. San Francisco, No. C 05–00389 WHA, 2006 WL 140574, *2 (N.D.Cal. Jan. 17, 2006) (“‘Although there is no explicit requirement concerning the class definition in FRCP 23, courts have held that the class must be adequately defined and clearly ascertainable before a class action may proceed”) (quoting Schwartz v. Upper Deck Co., 183 F.R.D. 672, 679–80 (S.D.Cal.1999)); Thomas & Thomas Rodmakers, Inc. v. Newport Adhesives & Composites, Inc., 209 F.R.D. 159, 163 (C.D.Cal.2002) (“Prior to class certification, plaintiffs must first define an ascertainable and identifiable class. Once an ascertainable and identifiable class has been defined, plaintiffs must show that they meet the four requirements of Rule 23(a), and the two requirements of Rule 23(b)(3)” (citation and footnote omitted)).  Generally speaking, a class is sufficiently defined and ascertainable if it is “administratively feasible for the court to determine whether a particular individual is a member.” O’Connor, 184 F.R.D. at 319.

The ascertainability rule appeals to common sense – particularly in consumer class actions.  Courts don’t want to certify classes without some reasonable assurance that aggrieved class members will be compensated for the wrong they suffered.  Equally important, courts don’t want to create vehicles for petty fraud.  As the court observed in Sethavanish v. ZonePerfect Nutrition Co., No. 12–2907–SC, 2014 WL 580696, *56 (N.D.Cal. Feb. 13, 2014), “Plaintiff has yet to present any method for determining class membership, let alone an administratively feasible method.  It is unclear how Plaintiff intends to determine who purchased ZonePerfect bars during the proposed class period, or how many ZonePerfect bars each of these putative class members purchased.  It is also unclear how Plaintiff intends to weed out inaccurate or fraudulent claims. Without more, the Court cannot find that the proposed class is ascertainable.”

In In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 969 (C.D. Cal. 2015), consumers brought a putative class action against Con Agra, alleging that the manufacturer deceptively and misleadingly marketed its cooking oils, made from genetically-modified organisms (GMO), as “100% Natural.”  A class was certified , inter alia, on the basis that the proposed class was ascertainable.  The District Court held that:  (i) ascertainability was the law of the Circuit; and (ii) ascertainability was satisfied because membership was governed by a single, objective, criteria – whether an individual purchased the cooking oil during the class period.  Id. at 969.

ConAgra, understandably unhappy with the result, appealed the factual basis for the district court’s ascertainability determination.  It argued before the Ninth Circuit that plaintiffs did not propose any way to identify class members and could not prove that an administratively feasible method existed for doing so – because, for example, consumers do not generally save grocery receipts and are unlikely to remember details about individual purchases of cooking oil.  Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1125 (9th Cir. 2017).  The Ninth Circuit, however — rather than analyzing whether the plaintiffs satisfied the ascertainability standard — ruled that it has no place in certification proceedings at all.  “A separate administrative feasibility prerequisite to class certification is not compatible with the language of Rule 23 . . . Rule 23’s enumerated criteria already address the policy concerns that have motivated some courts to adopt a separate administrative feasibility requirement, and do so without undermining the balance of interests struck by the Supreme Court, Congress, and the other contributors to the Rule.”  In short, according to the Ninth Circuit, Rule 23 does not mandate that proposed classes be ascertainable and the lower courts are bound to apply Rule 23 as written.

In so ruling, the Ninth Circuit joined the Sixth, Seventh, and Eighth Circuits. See Sandusky Wellness Ctr., LLC, v. Medtox Sci., Inc., 821 F.3d 992, 995–96 (8th Cir. 2016); Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015); Mullins v. Direct Digital, LLC, 795 F.3d 654, 658 (7th Cir. 2015), cert. denied, ––– U.S. ––––, 136 S.Ct. 1161, 194 L.Ed.2d 175 (2016).  On the opposite side of the ascertainability issue are the Third, Fourth and Eleventh Circuits.  Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 593 (3d Cir. 2012); EQT Production Co. v. Adair, 764 F.3d 347, 359 (4th Cir. 2014); Karhu v. Vital Pharm., Inc., — F. App’x —, 2015 WL 3560722 at *3 (11th Cir. June 9, 2015).

ConAgra petitioned the Supreme Court to grant a writ of certiorari on May 10, 2017.  It had reason to hope with the Supreme Court recently showing willingness to rule on class action and certification issues.  (See prior posts).  However, on October 10, 2017, the Supreme Court denied the petition without comment.  Conagra Brands, Inc. v. Briseno, No. 16-1221, 2017 WL 1365592 (U.S. Oct. 10, 2017).

With the circuit split still alive, this is not the last we’ll hear on ascertainability.  And no doubt defense counsel in affected jurisdictions will find ways to re-shape the reasoning applied in their ascertainability arguments to other parts of the Rule 23 analysis.  But, no doubt, with this line of defense gone (for now) in the Ninth Circuit – many more consumer class actions will have their day in California courts.

Will Trucking Case Drive New Federal Arbitration Act Case to the Supreme Court?

Arbitration, Class Waiver, Federal Preemption, Supreme Court, ,

** Gas Company Looks for Post-Iskanian Certiorari After California Appeals Court Invalidates Arbitration and Class Waiver Provision in its Wage and Hour case with its Truck Drivers **            

By: Brent E. Johnson

                                                                                                                                                                                                                                                                                                                                                   California courts are known for their distaste for arbitration provisions – and for butting heads with the Supreme Court who has (on a number of occasions now) made clear that that the Federal Arbitration Act (FAA) (9 U.S.C. § 1) preempts California judicial rulings regarding the unconscionability of class arbitration waivers.  See e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).  The Supreme Court may get another chance to make the point, as courts in California continue with a “where there is a will – there is a way” approach to invalidating arbitration contracts.  See discussion, James v. Conceptus, Inc., 851 F. Supp. 2d 1020, 1036-37 (S.D. Tex. 2012) (concluding that, even after Concepcion, California courts continue to find arbitration forum-selection clauses unenforceable under far more stringent tests than other states).  One of the latest defendants to have their arbitration provision deemed unenforceable is Air Liquide in Garrido v. Air Liquide Indus. U.S. LP, 194 Cal. Rptr. 3d 297 (Cal. Ct. App. 2015).  However, Air Liquide has not taken it lying down – on May 3, 2016, it filed a writ of certiorari in the U.S. Supreme Court. Air Liquide Indus. U.S. LP v. Garrido, No. 15-1336, 2016 WL 2605541 (U.S.) (“Writ”).

A quick bit of history for context on the Garrido Court of Appeal decision.  Recall in Gentry v. Superior Court, 42 Cal. 4th 443 (Cal. 2007), the California Supreme Court held that a class-action waiver in an employment contract was unenforceable when the waiver would prevent employees from vindicating their rights.  The Gentry court concluded that even though individual arbitration could be a tool to enforce legal rights, in the context of the employment relationship – if each individual recovery would be modest, if an individual might be retaliated against if bringing a suit individually (rather than by merely joining a class) and if there are other real world obstacles in going it alone – then the provision would be invalid.  The practical effect of these Gentry factors made it highly unlikely that an employer arbitration provision would survive.  However, Gentry was overruled by Iskanian v. CLS Transportation Los Angeles, LLC, 327 P.3d 129 (Cal. 2014) (applying the then new rule from Concepcion).  The finding of Iskanian was that any California law that invalidated an arbitration provision was contrary to the FAA and therefore preempted.

However, in Garrido, the Court of Appeals deftly side-stepped Iskanian.  First, it determined that the FAA did not even apply to the case at hand.  194 Cal. Rptr. 3d at 302. Citing Section 1 of the FAA, which states that the FAA does not cover “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce,” the California Court of Appeals held that “transportation workers” fell within this exception.  (Citing Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109 (2001)).  More specifically, the Garrido court held that the FAA carve-out did not apply to interstate truck drivers. 194 Cal. Rptr. 3d at 303.  And second, the Court of Appeals held that because the basis of the Iskanian decision was its nexus to the FAA – with that connection severed – Gentry not Iskanian governed. 194 Cal. Rptr. 3d at 304.  Finally (and not surprisingly), after applying the factor test from Gentry, the court held that the arbitration provision failed.

Air Liquide’s certiorari writ notes that the Court of Appeal’s severing of the relevant employment contract from the FAA was improper – foremost because the contract itself says that the FAA applies.  Air Liquide’s briefing notes that “the application of the Section 1 exemption directly contradicted the parties’ clear and expressly-stated intent to apply the FAA to their dispute. The Court of Appeal’s conclusion that the parties somehow intended to apply an exemption to the FAA to vitiate the very choice of law provision that they entered into, when in fact their intention was directly opposite, defied reason.” Writ at 5 – 6.  Air Liquide also criticizes the Court of Appeals decision for applying the “transport worker” exception outside of the trucking industry to it – a gas company – that just happens to transport its material from time to time.  Writ at 18 – 19.

This latter point raises an important issue that will apply to all companies who move their own products around the country – are their employees “transport workers”?  The more interesting and broader question, however, arises if Air Liquide fails on that question:  Can parties force the FAA to apply where it otherwise has no force?  Does an agreement that says the FAA “governs” carry with it those circumstances where it otherwise wouldn’t (because the FAA exempts it)? Interesting questions . . . and again – as we have blogged in the past – one that will be a test of the legacy of the arbitration jurisprudence of which the late Justice Scalia was the chief architect.

Supreme Court Alert

Article III Standing, Supreme Court, TCPA, , ,

No standing street sign in New York.

** Supreme Court Holds in TCPA Case That a Rule 68 Offer or Relief Does Not Moot Class Claims Under Rule 23 ** . . .                                                              

By: Brent E. Johnson                                          

In the case of Campbell-Ewald Co. v. Gomez (No. 14-857), the Supreme Court issued a writ of certiorari to  the Ninth Circuit to resolve a circuit split on the issue of whether a Rule 68 offer of judgment for complete relief to a putative class representative moots his claim thereby preventing him from serving as a class representative under Rule 23.  See previous post.  The underlying case concerns unsolicited text messages from an advertising company prohibited by the Telephone Consumer Protection Act (TCPA) 47 U.S.C. § 227.  The defendant company offered Mr. Gomez the statutory TCPA remedy (trebled) and even agreed to a stipulated injunction prohibiting it from further violations the TCPA.   Gomez rejected the offer.  The defendant argued that its offer, which provided complete relief, mooted Gomez’s claim and he therefore did not have Article III standing.  The Supreme Court ruled on January 20, 2016 (in a 6-3 decision) that an unaccepted settlement offer does not moot a plaintiff’s case.  Campbell-Ewald Co. v. Gomez, 577 U. S. ____ (2016).  The conservative-leaning court in recent years has issued rulings that put restrictions on class action lawsuits but did not continue that trend in this case.  Justice Ginsburg delivered the opinion of the Court joined by Justices Kennedy, Breyer, Sotomayor, and Kagan with Justice Thomas concurring.  Chief Justice Roberts filed a dissenting opinion, in which Justices Scalia and Alito joined.  Notably, the ruling is limited in scope, with Justice Ginsburg  pointing out that the Court was not deciding how a case would be resolved if the settlement funds had been deposited into an account payable to the plaintiff and the trial court then entered judgment in that amount.  In reaching its determination that a rejected settlement offer does not moot a complaint, the majority pointed to Rule 68’s sanction – that the offeree must pay the offeror’s costs after the offer was made.  This may turn out to be a silver lining for defendants in certain types of class actions, such as consumer cases, where it is unlikely that the class representative will obtain the full amount of his claim if the case were to proceed to trial.  Costs in class action litigation are no small matter.

All Eyes on the Supreme Court for Consumer Class Action Lawyers

Article III Standing, Ascertainability, Rule 23, Supreme Court, , , , , , , , , , , ,

supreme-court

**The Supreme Court’s 2015 Term Opens With a Series of Cases Important for Consumer Class Action Defendants: Campbell-Ewald v Gomez, Spokeo v Robins and Tyson Foods v Bouaphakeo** . . .                                                                                                                                              

By: Brent E. Johnson                                                                                                         

In recent years, the Supreme Court has handed down victories to the class action defense bar.  In Wal-Mart v. Dukes, 564 U.S. ___ (2011), the Court reversed a California district court certification of a gender discrimination class – raising the bar on commonality questions for plaintiffs.  In Comcast v. Behrend, 569 U.S. __ (2013), the Court again reversed a district court certification – heightening scrutiny on plaintiffs’ methods for alleging class wide damages.  As the 2015 term opens this week, defense counsel around the country eye further potential victories in three key cases.

The first case up is Campbell-Ewald Co. v. Gomez (No. 14-857) on appeal from the Ninth Circuit where the Court will deal with two frequently litigated questions as yet unresolved by the circuits.  Namely, does a Rule 68 offer of complete relief to a plaintiff moot his or her claim and, if so, does it also moot the resulting class claim under Rule 23?  The underlying case concerns unsolicited text messages prohibited by the Telephone Consumer Protection Act (TCPA) 47 U.S.C. § 227.  The TCPA contains a statutory remedy and defendants argued that, to the extent they had offered Plaintiff  the full amount of the statutory remedy (per Rule 68) as relief,  the plaintiff suffered no cognizable Article III damages.  Thus, defendants argue that because the plaintiff suffered no injury,  he has no right to represent a class of people who may have been damaged.  From a practical perspective, the case addresses the question:  Can a defendant “pick off” would be class representatives through Rule 68 offers of judgment thereby destroying the foundation of the class action claim?  As anyone who has defended corporations receiving required pre-litigation notices under consumer protection statutes has observed, plaintiff law firms have become increasingly reticent to disclose the identity of their clients at the notice stage in order to forestall Rule 68 offers of judgment until the putative class action lawsuit has been filed.

The second case is Spokeo Inc. v. Robins, (No. 13-1339) also on appeal from the Ninth Circuit.  This case involves a related question of Article III standing for class representatives.  Spokeo concerns the  Fair Credit Reporting Act, 15 U.S.C. § 1681 (FCRA), which requires consumer credit agencies to take reasonable steps to ensure the accuracy of their published reports.  Plaintiff in a putative class action argued in the Central District of California that results for his name on the Spokeo website contained inaccurate information about plaintiff’s education and professional experience – and that this inaccuracy harmed his employment prospects.   The District Court dismissed, finding that the alleged damages – based on hypothetical impact on his employment – were too speculative to satisfy Article III standing.  The Ninth Circuit reversed, holding that the statutory violation implicitly creates a private cause of action to enforce and that this violation of a statutory right was an “injury” sufficient to confer standing.  The Ninth Circuit Spokeo decision was the latest in a circuit split – on one side the Second and Fourth circuits, which have rejected standing arguments from plaintiffs who alleged bare statutory violations that did not result in any actual harm (Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112 (2d Cir. 2009); David v. Alphin, 704 F.3d 327 (4th Cir. 2013)); and the Ninth Circuit joining the Sixth and Seventh Circuits, which have come out on the side of recognizing “damages” for private plaintiffs with respect to minor statutory violations.  Beaudry v. TeleCheck Servs, 579 F.3d 702 (6th Cir. 2009); Murray v. GMAC Mortg. Corp., 434 F.3d 948 (7th Cir, 2006).  If the Supreme Court recognizes damages irrespective of actual harm, the impact could be felt more broadly than FCRA – there are numerous similar statutory schemes, including truth-in-lending legislation (15 U.S.C. § 1640(a)); debt collection statutes, (15 U.S.C. § 1692k(a)); as well as various privacy laws (18 U.S.C. § 2710(c)(1); 47 U.S.C. § 551(f)(1)-(2)).

The third case is Tyson Foods v. Bouaphakeo (No. 14-1146) – a challenge to a $5.8 million wage-and-hour judgment in favor of a class of employees at Tyson’s meat packing plant in Iowa.  Tyson’s petition seeks a reversal of the district court and Eight Circuit’s decision to permit liability and damages verdicts to be based – not on an individual analysis of each purported class member – but by extrapolating a statistical average across the board based on the discrepancies observed in a sample class of workers’ hours and pay.  Tyson further appeals on the lack of ascertainability of the class itself – that is, that the certified group (even according to the Plaintiffs’ own expert) included a significant number of people who weren’t underpaid at all.  If successful, the Tyson case will build upon the Court’s disapproval in Wal-Mart of “trial by formula” and provide a significant bulwark against plaintiffs in putative class actions glossing over differences amongst their claimed class in order to achieve certification.

Not surprisingly, this trifecta of cases has generated a significant amount of interest, amicus briefing, and optimistic thinking from the defense bar that momentum is on its side.  The implications are not insubstantial if defendants prevail:  the type of de facto strict liability for statutory compliance created by such class actions will diminish, there will be new avenues to derail cases pre-certification, and the barrier of ascertainable and reliable class wide damages that plaintiff s must hurdle will be reinforced.