Last year was a relatively quiet year for major class action news, especially in the Supreme Court, which addressed only a handful of cases that might have an impact on class actions and reached decisions only in a couple of those cases. However, there were at least enough noteworthy developments to put together a top 10 list. Here are my top 10 class-action-related developments of 2017:
1. Supreme Court Holds Class Certification Denials Not Immediately Appealable Following Voluntary Dismissal
In Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), the Court held that a plaintiff’s act of voluntarily dismissing individual claims following a denial of class certification did not entitle the plaintiff to immediately appeal the class certification ruling. The Court’s decision closed a loophole that some circuits had recognized to allow plaintiffs to seek immediate mandatory appeal of an adverse class certification decision, even though defendants are entitled only to discretionary review of an order granting class certification. The Court’s decision means that discretionary review under Rule 23(f), Federal Rules of Civil Procedure, is the only vehicle for appealing a federal district court’s class certification order, regardless of whether the appellant is a plaintiff or a defendant.
For an excellent summary of the Baker decision, see this Aug. 9, 2017, write-up by Andrew Serrao.
2. Supreme Court Tackles Tolling Effect of Class Actions
One key area affecting class actions in which the Supreme Court showed interest is the tolling effect of a pending class action on statutes of limitation or repose, often referred to as American Pipe tolling. In June, the Court decided CalPERS v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017), in which it held that suits by opt-outs to a class action under the Securities Act of 1933 were time-barred if their individual claims were not brought within the three-year statute of repose applicable to claims under Section 13 of the act and that American Pipe tolling did not apply.
More recently, the Court granted certiorari in China Agritech, Inc. v. Resh, __ S. Ct. __, 2017 WL 4224769 (Dec. 8, 2017), in which it is expected to decide whether American Pipe tolling applies to toll subsequent class action claims, rather than simply tolling the individual claims of the putative members of an earlier class action.
3. Neil Gorsuch Sworn in to Replace Antonin Scalia on Supreme Court
Before his death in 2016, Justice Scalia had emerged as an outspoken skeptic of class actions, authoring opinions in cases such as Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast, Inc. v. Behrend, 569 U.S. 27 (2013), in which he criticized with colorful and oftentimes caustic language the procedural shortcuts that lower courts had taken in certifying class actions, as well as opinions such as AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), which have had the effect of significantly curtailing the types of lawsuits that can proceed as class actions at all. Before the election of President Trump in November 2016, it appeared that Scalia’s voice would be replaced by that of a jurist with a more liberal philosophy. But that changed after Senate Republicans blocked the nomination of President Obama’s nominee, D.C. Circuit Judge Merrick Garland, and then Trump won the election and nominated a fellow textualist and avowed admirer of Scalia to replace him on the Court.
Conventional wisdom says that Gorsuch should follow a consistent approach to Scalia’s on both class-action-related issues. But history has shown time and time again that each new member of the Court develops his or her own voice, and it remains to be seen whether Gorsuch will carry Scalia’s torch as the Court’s most outspoken class-action skeptic.
4. Federal Bill Curtailing No-Injury Class Actions Passes the House, then Stalls
In March 2017, the U.S. House of Representatives passed H.R. 985, titled the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2017. If it becomes law, the bill would add certain requirements to class certification in federal court, including a requirement that damages claimed on behalf of class members be of the same type and degree. So far, the Senate has taken no action on the bill, and its future remains in doubt. For a more in-depth discussion of the bill, see my March article published in the ABA Section of Litigation Class Action and Derivative Suits quarterly newsletter (ABA membership required).
5. The Fate of Class Action Waivers in Employment Agreements Hangs in the Balance
In October, the Court held oral argument in a series of consolidated appeals of decisions by the National Labor Relations Board striking down class arbitration waivers (arbitration clauses that prohibit individuals from pursuing claims on a class basis) in employment agreements on the grounds that they violated workers’ rights to collective action under the National Labor Relations Act. The lead case is Ernst & Young LLP v. Morris, 137 S. Ct. 809 (2017). Employers argue that the waivers are valid arbitration agreements under the Federal Arbitration Act, which the Court has repeatedly held are enforceable despite arguments that they are unconscionable as a matter of both state and federal laws. Questioning during oral argument suggests a divided Court, and the case may be the first opportunity to test whether Justice Gorsuch will be carrying on Justice Scalia’s class-action legacy.
6. Judge Posner Retires Suddenly
Seventh Circuit Court of Appeals Judge Richard Posner may have had the most impact on class-action practice of any jurist not sitting on the Supreme Court. Judge Posner issued influential rulings affecting class actions throughout his career, from his 1995 decision reversing class certification of piecemeal issues in the mass-tort case In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995) to his decisions permitting innovative uses of the class action vehicle in Butler v. Sears Roebuck & Co., 727 F.3d 796 (7th Cir. 2013) and McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012); and then there’s his most recent string of decisions evaluating the fairness of class action settlements and attorneys’ fee awards in Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014) and Redman v. RadioShack Corp., 768 F.3d 622 (7th Cir. 2014). This past fall, Judge Posner announced his retirement after nearly 40 years on the federal bench.
7. Spokeo’s Impact on Class Actions Limited So Far
One of the key Supreme Court developments from 2016 that had a potentially significant impact on class actions was its ruling in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), recognizing a “concreteness” element to Article III standing and holding that litigants lacked standing to assert a claim for statutory damages unless they could satisfy that element. However, rather than deciding whether the injury alleged in Spokeo itself—dissemination of false information about the plaintiff that actually improved his credit profile—was sufficiently concrete, the Court remanded the case to the 9th Circuit for further proceedings. In August 2017, the Ninth Circuit issued its ruling on remand, finding that the plaintiff had alleged a sufficiently concrete injury notwithstanding that the misreported information may have been favorable, because the court found it was not a mere technical violation and had the theoretical potential to cause harm. With a few notable exceptions, most other lower courts to address the Spokeo concreteness requirement have declined to dismiss cases for lack of standing, suggesting that the decision will have a much more limited lasting impact than many had hoped.
For more on the Ninth Circuit’s Spokeo decision, see Justin Winquist’s Aug. 23, 2017, summary here.
8. The Plot Thickens on Ascertainability, but No Uniformity or Clarity
One of the key questions facing federal courts in deciding whether to certify a case as a class action is whether the class has to be defined in such a way that the class members are ascertainable. The “ascertainability” requirement is not an express element of Rule 23(a) or (b), but some courts have held that it is implied. The federal circuit courts of appeals have been split for several years on whether and to what extent ascertainability is a prerequisite to class certification, especially in the context of a class action for money damages. This past year, the Ninth Circuit issued a ruling in Briseno v. ConAgra Foods Inc., 844 F.3d 1121 (9th Cir. 2017), declining to recognize an ascertainability requirement. See Rand McClellan’s article discussing the decision here.
Meanwhile, different panels of the 2nd Circuit issued arguably conflicting rulings on the ascertainability question in In re Petrobras Securities Litigation, 862 F.3d 250 (2nd Cir. 2017), rejecting the argument that the ascertainability standard previously recognized in the circuit required a showing of administrative feasibility in identifying class members, and Leyse v. Lifetime Entertainment Services LLC, 679 F. App’x 44 (2nd Cir. 2017), affirming a district court’s denial of class certification on ascertainability grounds. Finally, the 1st Circuit in Carter v. The Dial Corporation, 869 F.3d 13 (1st Cir. 2017) declined to grant review of a Rule 23(f) petition raising ascertainability issues, as discussed in this Aug. 15 summary authored by Bill Devinney.
So, while there were developments on the ascertainability question in 2017, the circuit split persists, and in some cases there is little clarity even within a particular circuit.
9. Arbitration Agreements in Financial Services Contracts Outlawed, Almost
In July, the Consumer Financial Protection Bureau (CFPB) published a final rule that would have banned pre-litigation class arbitration waivers in contracts issued by providers of consumer financial products or services. The rule would have opened the doors to significant class action litigation against the banking industry. For more, see this July 18, 2017, article from the BakerHostetler Financial Services Blog.
However, the ban never went into effect, as the Senate voted in October to kill the proposed rule. The vote was 50-50, with Vice President Pence casting the tie-breaking vote.
10. The TCPA Class Action Litigation Floodgates Remain Open Notwithstanding D.C. Circuit Review of FCC Rulemaking
One of the hottest areas of consumer class action litigation is litigation brought under the Telephone Consumer Protection Act (TCPA), which prohibits a variety of telephone, fax and text message communications without prior consent. The TCPA is an appealing statute for plaintiffs’ class action attorneys because it applies to industries that make large volumes of calls or other communications and provides for statutory damages of between $500 and $1,500 per violation.
Adding to these factors are a series of changing interpretations by the Federal Communications Commission (FCC) in recent years, which have made compliance with the statute increasingly difficult and confusing for potential defendants. Several of these FCC rulings have been the subject of legal challenges, and this past year, the District of Columbia issued a decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017), striking down an FCC ruling that had required senders of faxes to include opt-out notices on both solicited and non-solicited fax messages. For more, see Rand McClellan’s November 2017 summary of a subsequent Northern District of Illinois order applying Yaakov to deny class certification.
Many TCPA litigants are awaiting another challenge to FCC rules promulgated under the TCPA, now pending before the D.C. Circuit in ACA International v. FCC, Case No. 15-1211 (D.C. Cir. filed Nov. 25, 2015). At issue in ACA International is the FCC’s broad interpretation of what constitutes an Automatic Telephone Dialing System (ATDS or “autodialer”) and its rule imposing constructive knowledge of reassigned telephone numbers following the first call made after reassignment. Although the case was argued in October 2016, the court has yet to issue its ruling.
Meanwhile, TCPA class action litigation continues to flood the courts.