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May 21, 2018 Articles

Class Actions 101: Tips for Early Motion Practice in Defending Class Actions

Learn what options you should consider at the outset of defending a class action lawsuit.

By Michael D. Leffel and Aaron R. Wegrzyn

A plaintiff’s motion for class certification is often the focal point of discussions regarding class action procedure, theory, and strategy. Federal courts recognize that denial of a class-certification motion can serve as the “death knell” to the individual claims of absent proposed class members, while certification of a class often imposes such an “in terrorem” effect on defendants as to effectively force a settlement. See Microsoft Corp. v. Baker, 137 S. Ct. 1702, 1708 (2017). Federal Rule of Civil Procedure 23, however, does not force defendants to sit on their hands until the named plaintiff files a certification motion.

Rule 23(c)(1) requires courts to determine class certification at “an early practicable time.” Yet, in practice, it often takes years to litigate a case through class discovery, related expert issues, and class-certification briefing. But there are a variety of strategic options available to a defendant facing a class action complaint. While the optimal approach depends on a variety of case-specific factors, such as the causes of action alleged, the nature of the factual allegations, and the client’s desired litigation strategy, the following options should at least be considered at the outset of defending a class action lawsuit.

Moving to Strike Deficient Class Allegations
Rule 23(d)(1)(D) authorizes courts to issue orders that “require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly,” and Rule 12(f) permits a court to strike “any redundant, immaterial, impertinent, or scandalous matter.” The Supreme Court has acknowledged the propriety of addressing class issues at the pleading stage in certain cases, even before the filing of a motion for class certification. Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982) (“Sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff’s claim, and sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.”).

Like a motion to dismiss, a motion to strike class allegations is ordinarily decided exclusively based on the allegations in the named plaintiff’s complaint. This means that a motion to strike class allegations is most likely to succeed in situations where “the unsuitability of class treatment is evident on the face of the complaint and incontrovertible facts.” See 1 McLaughlin on Class Actions § 3:4, Timing of class action determination—Motion to strike allegations (14th ed. 2017).

One example of where a motion to strike might be particularly useful is in situations where the complaint’s class allegations define a “fail-safe class”—a class defined in such a way that class membership hinges on the putative class members’ ultimate success on the merits of their individual claims. See, e.g., Martinez v. TD Bank USA, N.A., 2017 WL 2829601, at *12–13 (D.N.J. June 30, 2017) (granting motion to strike impermissible fail-safe class definition); Sherrod v. Enigma Software Grp. USA, LLC, No. 2:13-cv-36, 2016 WL 25979, at *3–5 (S.D. Ohio Jan. 4, 2016) (same). As an example of a fail-safe class definition, consider a complaint defining the class as “all individuals who were defrauded by the defendant.” In this example, an individual is a member of the class only if he or she is able to prove the elements of fraud on his or her individual claim. Fail-safe classes are particularly problematic because they allow a putative class to pursue their claims on a class basis, and if individual class members are unsuccessful on the merits of their claims, they are not bound by the judgment because they are, by definition, not a member of the class. See Sauter v. CVS Pharmacy, Inc., No. 2:2013-cv-846, 2014 WL 1814076, at 9* (S.D. Ohio May 7, 2014) (collecting case law and refusing to certify class where proposed class membership hinged on success on individual claim under the Telephone Consumer Protection Act). For defendants, a fail-safe class is a classic heads-plaintiff-wins-tails-defendant-loses scenario.

However, federal courts remain split regarding the use of motions to strike to attack class allegations. See 5C Wright & Miller, Federal Practice and Procedure, Civil, § 1383, Motion to Strike—Grounds Not Mentioned in Rule 12(f) (3d ed. 2017) (“District courts are divided as to the proper response to a motion to strike directed at class allegations.”). Defense counsel should evaluate whether the particular class-certification issues in the case are truly capable of being resolved at the pleading stage, as some courts have indicated that motions to strike class allegations are disfavored as a general matter of practice. See, e.g., Manning v. Bos. Med. Ctr. Corp., 725 F.3d 34, 59 (1st Cir. 2013) (stating that “courts should exercise caution when striking class action allegations based solely on the pleadings”); Maddison v. Comfort Sys. USA (Syracuse), Inc., No. 5:17-CV-0359 (LEK/ATB), 2018 WL 679477, at *7 (N.D.N.Y. Feb. 1, 2018) (noting that motions to strike are “disfavored” because they involve preemptively terminating the class aspects of litigation before the named plaintiff has had the benefit of class discovery).

Motions to strike are most likely to be successful where no amount of discovery would be able to remedy the class issues obvious on the face of the complaint. See Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 949 (6th Cir. 2011).

Moving to Dismiss Certain Claims on Personal Jurisdiction Grounds
When facing a class action complaint purporting to address claims of a nationwide class, defense counsel must assess whether there are any potential personal jurisdiction defenses available to the defendant with respect to the claims of some subset of the purported class. It is key to do this at the outset because personal jurisdiction defenses may be waived by a defendant who appears and actively litigates in response to a complaint. The Supreme Court’s decision last summer in Bristol-Myers Squibb Co. v. Superior Court of California., 137 S. Ct. 1773 (June 19, 2017), which is discussed elsewhere in this newsletter, highlights the limits on courts’ ability to exercise personal jurisdiction over a defendant as to claims of absent class members who are not residents of the forum state.

If a class action is filed in a forum where the defendant is not subject to general jurisdiction and if individual putative class members’ claims lack any factual connection to the forum, the court may not be allowed to adjudicate those individuals’ claims as a constitutional matter. See Practice Mgmt. Support Servs., Inc. v. Cirque du Soleil, Inc., No. 14-C-2032, 2018 WL 1255021, at *16–17 (N.D. Ill. Mar. 12, 2018) (applying the personal jurisdiction limitations for mass torts described in Bristol-Myers Squibb to a class action lawsuit in federal court and dismissing claims of out-of-state putative class members); see also DeBernardis v. NBTY, Inc., No. 17-C-6125, 2018 WL 461228, at *2 (N.D. Ill. Jan. 18, 2018) (same). In Practice Management the named plaintiff sought to represent a nationwide class of consumers who received telephone calls from the defendants, allegedly in violation of the Telephone Consumer Protection Act (TCPA). 2018 WL 1255021, at *3. The court ruled that, because it did not have general jurisdiction over the defendants and because the TCPA does not authorize nationwide service of process, it did not have personal jurisdiction over the defendants with respect to the TCPA claims of putative class members who were not residents of the forum. Id. at *16–17.

However, a split is already developing in the lower federal courts regarding application of the Supreme Court’s decision in Bristol-Myers. See Casso’s Wellness Store & Gym, L.L.C. v. Spectrum Lab. Prods., Inc., No. 17-2161, 2018 WL 1377608 (E.D. La. Mar. 19, 2018) (rejecting DeBernardis court’s interpretation of Bristol-Meyers and denying motion to dismiss claims of out-of-state putative class members).

Moving for Summary Judgment on Named Plaintiffs’ Claims
Another possibility for defense counsel to consider is whether to move for summary judgment on the individual claim or claims of the named plaintiff before the court certifies a class and considers whether the named plaintiff can serve as a class representative. Where the dispositive facts regarding the named plaintiff’s claim are relatively straightforward, it may make sense to try to dispose of it before class certification. See, e.g., Eller v. EquiTrust Life Ins. Co., 778 F.3d 1089 (9th Cir. 2015) (affirming district court’s grant of summary judgment in favor of defendant before reaching named plaintiff’s class-certification motion).

Defendants should be mindful about potentially waiving what is referred to as the “rule against one-way intervention” if they choose to move for summary judgment before class certification. The rule generally prohibits plaintiffs from moving for class certification after previously obtaining a positive adjudication on the substantive merits of the named plaintiff’s individual claim. See Costello v. BeavEx, Inc., 810 F.3d 1045, 1057–58 (7th Cir. 2016). The reason for the rule is that it is “unfair to allow members of a class to benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one.” Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 547 (1974). In certain circumstances, federal courts have found that defendants waived one-way intervention arguments where the defendant itself moved for summary judgment before class certification was decided. See, e.g., Schwarzchild v. Tse, 69 F.3d 293, 297 (9th Cir. 1995) (holding that the rationale for the rule against one-way intervention “disappears when the defendant himself moves for summary judgment before a decision on class certification”); Barfield v. Sho-Me Power Elec. Coop., No. 2-11-cv-04321-NKL, 2014 WL 1955107, at *2 (W.D. Mo. May 14, 2014) (rejecting one-way intervention argument where defendants had previously filed multiple motions for summary judgment). In light of this, a defendant considering whether to file a motion for summary judgment before a motion for class certification is ruled on should evaluate how an early summary judgment ruling might affect long-term litigation strategy. For example, putative class members may be able to use an adverse ruling against the defendant if a class is certified, but a prevailing defendant cannot use an early summary judgment decision for claim or issue preclusion effect against the absent class members.

Moving to Deny Class Certification
While, in most cases, class certification issues are teed up via a motion for certification brought by the named plaintiff, nothing in Rule 23 says that this is the only way that such issues may be brought to the fore. It is appropriate for a defendant to file a motion to deny class certification on its own initiative, before any motion seeking certification of a class has been filed. See Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 941 (9th Cir. 2009) (“A defendant may move to deny class certification before a plaintiff files a motion to certify a class.”). The factual universe relevant to a motion to deny class certification, unlike a motion to strike, is not limited to the four corners of the named plaintiff’s complaint: A defendant may bring in evidence acquired through discovery (e.g., documents or early deposition testimony of the named plaintiff).

However, federal authority exists indicating that a motion to deny class certification is improper if filed before an adequate amount of discovery has occurred to permit the named plaintiff to develop his or her certification arguments and to allow the court to evaluate the Rule 23 issues. See Martinelli v. Johnson & Johnson, No. 2:15-cv-01733-MCE-DB, 2017 WL 2257171, at *4 (E.D. Cal. May 23, 2017) (granting motion to deny class certification because “substantial discovery” had been completed); see also Myers v. MedQuist, Inc., No. 05-4608 (JBS), 2006 WL 3751210, at *5 (D.N.J. Dec. 20, 2006) (noting that courts frequently require an opportunity for discovery before addressing class certification issues).

At the same time, if a defendant can demonstrate that no amount of class discovery will alleviate the obstacles to class certification, the court may decide to simply cut to the chase and grant a defendant’s preemptive motion to deny class certification. See, e.g., Thornhill v. Aylor, No. 3:15-CV-00024, 2016 WL 8737358, at *14 (W.D. Va. Feb. 19, 2016) (noting that a court can grant a motion to deny class certification if it finds that “discovery will not overcome the deficiencies in the putative class”); Labou v. Cellco P’ship, No. 2:13-cv-00844-MCE-EFB, 2014 WL 824225, at *3 (E.D. Cal. Mar. 3, 2014) (requiring plaintiff to make a prima facie showing on the Rule 23 requirements before permitting the case to proceed to discovery).

Some examples of when a motion to deny class certification may be warranted include the following:

  1. where there are clear issues with respect to the named plaintiff’s standing, see, e.g., Mansfield v. Midland Funding, LLC, No. 09-cv-358 L(WVG), 2011 WL 1212939, at *3 (S.D. Cal. March 30, 2011) (granting motion to deny class certification where named plaintiff lacked standing);
  2. where there are questions about the representatives’ ability to represent the putative class, see, e.g., Banarji v. Wilshire Consumer Capital, LLC, No. 14-cv-2967, 2016 WL 595323, at *3 (S.D. Cal. Feb. 12, 2016) (granting defendant’s motion to deny class certification on typicality grounds);
  3. where early class discovery has yielded evidence clearly demonstrating that one or more of Rule 23’s certification requirements cannot possibly be met, see, e.g., Johnson v. Q.E.D. Envtl. Sys. Inc., No. 16-cv-01454-WHO, 2017 WL 1685099, at *6 (N.D. Cal. May 3, 2017) (granting defendant’s motion to deny class certification where discovery proved that the numerosity requirement could not be satisfied); or
  4. where the very nature of the plaintiff’s theory of the case creates manageability problems, see, e.g., Alpha Tech Pet Inc. v. LaGasse, LLC, No. 16-C-513, 2017 WL 5069946, at *8 (N.D. Ill. Nov. 3, 2017) (granting motion to deny class certification where individualized issues regarding consent would preclude a finding of Rule 23 predominance or superiority).

The need to apply materially different state laws to a proposed multi-state class, which raises predominance issues, may also be apparent on the face of a complaint seeking representation of a nationwide class. See, e.g., Martinelli, 2017 WL 2257171, at *6 (granting motion to deny class certification because case would have required application of the law of all 50 states such that predominance could not be established).

Class-certification motions get all of the attention, but defense counsel should consider whether class issues are best raised at earlier points in a case, depending on the particular circumstances. In some instances, the facts and the law may simply not present a ripe issue for the defendant to present to the judge based only on the pleadings. But in many cases, class counsel can shape the scope of a lawsuit, or get class allegations dismissed in their entirety, by raising Rule 23 issues at the outset. Whether a motion to strike class allegations, a motion to dismiss for lack of personal jurisdiction, a motion for summary judgment, or a motion to deny certification is appropriate at a given stage in any particular case will vary, but at every stage of the putative class action case, defense counsel should weigh these and other alternatives.

Michael D. Leffel and Aaron R. Wegrzyn – May 21, 2018