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May 01, 2017 Articles

Stay in Your Lane and Stick to the Text: Justice Gorsuch on Class Actions

What litigators need to know about the newly minted justice's opinions in class action cases.

By Ashley Bruce Trehan

On April 10, 2017, former Tenth Circuit Judge Neil Gorsuch was sworn in as Associate Justice for the United States Supreme Court. Legal news outlets have extolled Justice Gorsuch’s writing style. Partisan commentators have praised or condemned—depending, obviously, on their political leanings—his view of the Constitution. But for class action practitioners, what impact might his confirmation have?

While the Tenth Circuit is not known for having an extensive repertoire of class action opinions compared with, for example, the Seventh or Ninth Circuits, Justice Gorsuch has written opinions that shed light on the position he might take in class action disputes before the high court. This article highlights a handful of opinions that confirm that—at the very least and true to his reputation—Justice Gorsuch will interpret statutes and rules strictly and will endeavor to ensure the U.S. Supreme Court does not overstep its bounds.

Hammond v. Stamps, Inc. (10th Cir. 2016): Reverses Remand Order; Finds CAFA Matter “In Controversy” to Be Met
Last year, Justice Gorsuch dug through the “old soil” of jurisdictional jurisprudence to unequivocally hold that the amount “in controversy” refers to the amount “a fact-finder might legally conclude” is at issue in the case, as opposed to the amount that is probably or likely at issue, thus deciding that the matter in controversy threshold under the Class Action Fairness Act (CAFA) was satisfied. Hammond v., Inc., 844 F.3d 909, 912 (10th Cir. 2016).

In Hammond, the court looked to term’s “traditional meaning,” citing sources dating back to the eighteenth century and noting that the term “in controversy” was “heavily encrusted with meaning.” In the opinion, Justice Gorsuch observed that reliance on history and plain meaning was “not some empty formalism” but was also pragmatic: “At this stage, we’re just trying to decide the forum for the dispute, not liability or damages.”

BP America, Inc. v. Oklahoma (10th Cir. 2010): Grants Defendants Leave to Appeal Remand Order under CAFA
Justice Gorsuch also had the opportunity to analyze appellate jurisdiction over remand orders under CAFA in BP America, Inc. v. Oklahoma, 613 F.3d 1029 (10th Cir. 2010). There, the state of Oklahoma, through its attorney general, sued BP. The district court ordered the case to be remanded to state court, thereby disagreeing with BP’s argument that the case was a “mass action” under CAFA.

On appeal, the court decided that it had jurisdiction to decide the district court’s remand order. Justice Gorsuch’s appellate opinion cited 28 U.S.C. § 1453(c)(1) (the section governing removal of class actions under CAFA) for the proposition that the appellate court “may” accept an appeal of an order remanding a putative class action. The court noted that this section of CAFA serves as an exception to the general rule remand orders generally are not reviewable. (See 28 U.S.C. § 1447(d).)

To reach that conclusion, Justice Gorsuch first analyzed the court’s jurisdiction to consider BP’s appeal, noting that “[w]hen we interpret a statute we begin, of course, with its plain terms.” Id. BP America, 613 F.3d at 1033. Then, moving to the substance, he acknowledged the lack of Tenth Circuit authority addressing its discretion to review remand orders and looked instead to factors enumerated by the First Circuit. Those factors included the presence of an important CAFA-related question, whether the question is unsettled, and whether the question is likely to recur. Ultimately, applying those factors, the court found that each of the factors favored granting appellate review of the district court’s remand order.

Howard v. Ferrellgas Partners, L.P. (10th Cir. 2014): Remands so District Court Will Try Issue of Arbitration—Quickly
Unlike the other opinions discussed in this article, Howard does not squarely address a class action issue. Instead, it addresses arbitration, a subject often intertwined with class actions and currently before the U.S. Supreme Court. Howard v. Ferrellgas Partners, L.P., 748 F.3d 975 (10th Cir. 2014).

In Howard, there was a factual dispute as to whether the parties to the putative class action agreed to arbitrate. The district court found as much. However, rather than trying the factual issue as to whether the parties did or did not agree to arbitrate, the district court entered an order denying arbitration outright—almost a year and a half after the defendant filed its motion to compel arbitration.

The Tenth Circuit held that the determination of whether parties agreed to arbitrate is an issue that should be (and should have been) decided “quickly”—and, if necessary, should be tried as opposed to decided on the papers.

Regarding the parties’ (and, generally, civil litigants’) willingness to let the case linger, Justice Gorsuch observed that the parties “seemed content enough to haggle along together in the usual way of contemporary civil litigation . . . with only the most glancing consideration given the possibility of trial.” Id. at 978. The district court was also to blame: Justice Gorsuch wrote that the proceedings “veer[ed] badly off course [and] ended in an impermissible place” and that “[o]ne thing the district court may never do is find a material dispute of fact does exist and then proceed to deny any trial to resolve that dispute of fact.” Id. Howard demonstrates Justice Gorsuch’s pointedness and pragmatism.

McClendon v. City of Albuquerque (10th Cir. 2011): Dismisses Appeal of Order Withdrawing Approval of Class Settlement
Despite a lengthy and convoluted history, McLendon answers the straight-forward question of whether an order withdrawing approval of a class settlement constitutes a “final” order under 28 U.S.C. § 1291. McClendon v. City of Albuquerque, 630 F.3d 1288 (10th Cir. 2011). This opinion demonstrates Justice Gorsuch’s views of the courts and of statutory construction: He begins his analysis by stating that “[t]he courts of appeals are creations of Congress and the boundaries of their jurisdiction are staked by statute.” Id. at 1292.

Even though the court ultimately ruled in favor of the plaintiffs-appellees, Justice Gorsuch gave a nod to the defendant’s practical concerns, noting that “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” (at that time, for over 15 years). Still, in dismissing the appeal, Justice Gorsuch and the Tenth Circuit made no exception to section 1291 or to the court’s “finite bounds of authority.”

Shook v. Board of County Commissioners (10th Cir. 2008): Affirms Denial of Certification under Rule 23(b)(2)
In what appears to be his only opinion directly ruling on a class-certification appeal, Justice Gorsuch affirmed the district court’s denial of class certification under Federal Rule of Civil Procedure 23(b)(2) in Shook v. Board of County Commissioners, 543 F.3d 597 (10th Cir. 2008).

The 2008 Shook opinion was the Tenth Circuit’s second opinion regarding class certification in that matter.

In the first opinion, the Tenth Circuit reversed the district court’s denial of 23(b)(2) certification of the inmate-plaintiffs’ section 1983 claims because the district court had failed to address the Rule 23 requirements, focusing instead on the Prison Litigation Reform Act (PLRA). Following remand, the district court again denied class certification. And even though it still focused on the PLRA, it also conducted the appropriate analysis under Rule 23(b)(2). Back at the Tenth Circuit, the appellate court analyzed the district court’s Rule 23(b)(2) analysis, focusing primarily on the required “cohesiveness” of the class, and found that the district court did not abuse its discretion in denying class certification.

Justice Gorsuch’s opinion in that second appeal explored class certification from a variety of angles, from courts’ general willingness to certify Rule 23(b)(2) classes to issues regarding ascertainability and the extent to which a court can delve into the merits of a case. In dicta, the opinion notes that the plaintiffs may have been able to meet the class-certification requirements if they had sought certification of subclasses under Rule 23(c)(5), instead of “choosing to seek certification of a single broad class” and “an even broader alternative [class]. . . .” Id. at 607.

Heller v. Quovadx, Inc. (10th Cir. 2007): Affirms Order Denying Objection to Proposed Class Settlement
In this pithy opinion by Justice Gorsuch, which at times reflects what might be a faint amusement, the court denied a shareholder’s objection to a class action settlement. Heller v. Quovadx, Inc., 245 F. App’x 839 (10th Cir. 2007). The case centered on the defendant’s allegedly false and misleading financial statements during the period between October 22, 2003, and March 15, 2004.

The problem was that, while the objector was a shareholder of the defendant, he was not—and did not even purport to be—a member of the proposed settlement class. The crux of his objection was that, in his view, the defendant corporate officers, and not the corporation, should have to pay the settlement or judgment. In addition to filing his objection, he filed a number of motions with the court seeking various types of relief.

The district court denied all of the objector’s motions but deferred ruling on his objections until the fairness hearing, at which time the district court denied the objection. The court later issued a written order denying the objections on the grounds that (1) the objector lacked standing because he failed to disclose that he purchased shares of stock during the class period, and (2) his statements to the district court did not constitute valid objections.

On appeal, the objector asserted that the denial of standing violated his Fifth Amendment right of due process and violated the Takings Clause of the Fifth Amendment.

The Tenth Circuit affirmed the district court’s denial of the objection based on three independent reasons. First, the objector failed to challenge the district court’s second, independent ground for denying the objection. Second, the appellate court agreed with the district court that the objector lacked standing under Rule 23(e)(4), which provides that only class members may object to a proposed settlement and, thus, non-class members have no standing to object. Finally, Justice Gorsuch noted that the shareholder’s filings “fail[ed] to identify any relevant evidence or legal authority supporting his various theories about class action litigation” and that the shareholder’s objection was the only objection to the settlement.

Ashley Bruce Trehan – May 1, 2017