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Litigation News

Litigation News | 2020

Judgment Not Binding on Class Members Without Prior Notice

Laura W Givens


  • Dismissal after class certification, but before notice, does not bind class.
  • The case could have a significant impact on class action litigation.
  • Experts suggest that the moving party in class actions should consider asking for modification of scheduling orders to avoid a ruling that is not binding on the class.
Judgment Not Binding on Class Members Without Prior Notice
Helen King via Getty Images

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In a case that could have a significant impact on class action litigation, the U.S. Court of Appeals for the Sixth Circuit in Faber v. Ciox Health, LLC, held that an order granting the defendant’s summary judgment after class certification, but before absentee class members had been notified, only binds the named plaintiffs and not the class. Experts suggest that the moving party in class actions should consider asking for modification of scheduling orders to avoid a ruling that is not binding on the class.

Claims Against Ciox Dismissed

In Faber, the plaintiffs brought claims in a putative class action case against Ciox Health, LLC, alleging Ciox overcharged them for copies of their medical records. Ciox is a medical-records provider that contracts with hospitals to help patients access their medical records. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits charging patients more than reasonable fees for their records. The plaintiffs styled their HIPAA-based claims as common law claims because HIPAA does not provide a private right of action.

Three months before the district court certified the class, Ciox filed dispositive motions to dismiss the plaintiffs’ claims. The district court granted summary judgment to the defendant. The Sixth Circuit affirmed that dismissal, stating that under Tennessee common law no duty existed for Ciox to not overcharge the plaintiffs.

The plaintiffs also asserted claims under the Tennessee Medical Records Act of 1974 (TMRA). The Sixth Circuit held that, while TMRA provides a private right of action against hospitals, it did not provide a claim against not a third-party records provider such as Ciox. Accordingly, the Sixth Circuit also affirmed the district court’s dismissal of the plaintiffs’ TMRA claims.

Class Not Bound by Order

The district court had summarily dismissed common law claims after certifying the class, but before notice could be sent to the absentee class members. The district court held that under Federal Rule of Civil Procedure 23 and the Due Process Clause, parties are not bound to class action judgments until given a full and fair opportunity to litigate. Therefore, the class members were not bound by the ruling.

On appeal, Ciox argued that the Sixth Circuit should remand the case for the purpose of issuing opt-out notices to the class at the plaintiffs’ expense. The plaintiffs argued that the district court’s ruling should only bind the named plaintiffs. The Sixth Circuit stated this was an issue of first impression for the circuit. In making its decision, the Sixth Circuit relied on Federal Rule of Civil Procedure 23(b)(3), which requires that all class members receive notice. The appellate court held that the district court’s order granting summary judgment bound only the named plaintiffs.

The Sixth Circuit stated that post-judgment notice to class members would only invite class members to enter a fight they had already lost. Post-judgment notice would present no meaningful opportunity for class members to make their case.

Sixth Circuit Limits Ruling

The Sixth Circuit limited its ruling to the situation presented. It stated that other situations may call for a different balance of considerations. It distinguished a D.C. Circuit case, which allowed post-judgment certification and notice, because there the plaintiffs had succeeded on summary judgment. It also distinguished a Third Circuit case where the court held that the defendant could postpone class certification and notice until after the plaintiffs had proved a violation, because postponement of the certification and notice would only work to benefit the absentee class members. There, the defendant accepted the risk of a larger class.

“The court’s ruling reinforces the general rule that if the defendant wins summary judgment prior to the class being properly notified, the defendant waives the right to have notice sent to the class and the judgment only binds the named plaintiffs,” explains Adam E. Polk, San Francisco, CA, cochair of the ABA Section of Litigation’s Class Actions & Derivative Suits Committee.

“The appellate court affirmed summary judgment on the merits, so it seems unlikely that the defendant would face the same claims again by absent class members or that those individuals would prevail on the merits in another suit.” says Lindsay D. Breedlove, Philadelphia, PA, cochair of the Section of Litigation’s Class Actions and Derivative Suits Committee.

While the defendant would have benefited from having the class certified before winning summary judgment, Breedlove does not believe this ruling was a meaningful loss for the defendant. The Sixth Circuit also comments that Ciox “has still obtained something valuable here—a judgment in its favor on the merits that has been affirmed on appeal.” The appellate court further states that principles of stare decisis, and possibly preclusion, may be “valuable assets” to Ciox if absent class members were to bring similar claims.

“The ‘movant beware’ rule that the Sixth Circuit endorsed tracks Rule 23’s text and logic. However, it could present a practical conundrum for defendants facing a looming dispositive motion deadline. If that deadline falls before a class has been certified, or soon thereafter, the defendant may wish to seek a modification of the scheduling order, depending on other dynamics in the case,” advises Breedlove.