On August 30, 2021, the U.S. Court of Appeals for the First Circuit issued a decision in Bais Yaakov of Spring Valley v. ACT, Inc. that addresses how plaintiffs can satisfy the predominance requirement in federal class actions. (The opinion (“Op.”) is available here). The decision held that on the facts of this case, the plaintiff could not establish predominance because individualized proof would be required on at least one element of the claim. The decision follows on the heels of an earlier decision where the First Circuit ruled against plaintiffs on a predominance dispute. In re Asacol Antitrust Litig., 907 F.3d 42 (1st Cir. 2018). These two cases create a high bar for plaintiffs to overcome defendants’ submission of declarations or other evidence substantiating an actual need to litigate an issue using individualized evidence.

Bais Yaakov arose under the Telephone Consumer Protection Act (TCPA). The TCPA prohibits sending advertisements by fax, unless the advertisement was either 1) sent pursuant to prior express permission or invitation of the recipient; or 2) the advertisement meets certain formatting requirements, including the presence of an opt-out notice in the advertisement. See 47 U.S.C. § 227(a)(5), 227(b)(1)(C). The statute provides for penalties of up to $1,500 per violation, which can quickly add up given the usually high volume of fax advertisements. 47 U.S.C. § 227(b)(3). Plaintiff, a small private high school, sent a request form to ACT in order to permit students’ ACT test scores to be reported to the school. Op. at 3. The school provided its fax number on the form and checked a box stating that the school wanted to receive SAT and ACT publications. Id.  Seven years later, ACT sent three faxes to Bais Yaakov. Id.  Two of the faxes promoted registration to take the ACT, while the third invited the school to sign up as an ACT test administration venue. Id. at 3-4. Bais Yaakov then brought a TCPA suit against ACT on behalf of a putative class of approximately 7,000 schools. Id. at 4. Bais Yaakov alleged that ACT sent approximately 28,000 faxes that transgressed the TCPA. Id.

The district court denied Bais Yaakov’s motion for class certification. Id. at 8. The court concluded that determining whether the faxes were sent with the prior express permission of the recipients would require individualized examination of the class members’ individual communications with ACT. Id. at 7. Thus, common issues would not predominate and the class could not be certified pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure. Op. at 7. The court reached this conclusion in large part based on declarations (submitted by ACT) from seventy-eight putative class members stating that they provided ACT with their fax numbers, that they received communications via fax that were integral to their relationship with ACT, and that they would have given permission to send such information via fax. Id. at 20-21.

Bais Yaakov appealed and the First Circuit affirmed the denial of class certification. The court held that the predominance inquiry turned on whether “the record reasonably shows that some putative class members” gave ACT permission to send the faxes and, if so, whether “there is a fair and efficient method for culling those consenting recipients from the class.” Id. at 16. The court emphasized the importance of the declarations from the seventy-eight putative class members, which highlighted the differing positions of different putative class members regarding whether they had given ACT permission to send faxes. Id. at 20-21. The court concluded that, based on this evidence, the district court did not abuse its discretion in holding that there would be putative class members that consented to the faxes. Id. at 24. The First Circuit further held that Bais Yaakov raised no argument that there was a feasible way to cull those members from the class. Id. at 24-25.

In a concurring opinion, Circuit Judge Barron addressed the implications of the court’s decision on plaintiffs’ ability to satisfy the predominance requirement more generally. In light of the First Circuit’s decision and its earlier, similar decision in In re Asacol Antitrust Litig., 907 F.3d 42 (1st Cir. 2018), some commentators have questioned whether plaintiffs could ever satisfy the predominance requirement if the defendant merely contends that it needs to challenge class members’ testimony on an individual basis. Judge Barron’s concurrence pushes back against that argument and identifies potential situations where he might hold that a plaintiff can establish predominance even though the defendant contends that individual proof is required. He contends that Asacol and Bais Yaakov do not establish a per se rule that predominance cannot be satisfied whenever a defendant announces an intent to contest class members’ testimony individually. Op. at 40. Rather, in Judge Barron’s view, the court must make a “predictive assessment” of how the case would actually be litigated. Id. at 41. In making that assessment, the concurrence says that the court must look at whether such litigation would actually result in inefficiency (such as a large number of class members needing to testify about individual issues) or unfairness (such as infringing defendants’ rights to present individualized evidence in order to avoid inefficiency). Id.

After Asacol, many commentators viewed the First Circuit as a difficult place for class action plaintiffs to win class certification. The Bais Yaakov decision will likely reinforce that view. ACT effectively used declarations from putative class members to establish that different class members were differently situated regarding an element of the claim and to illustrate that individualized proof would be required on that element. By observing that courts should not just rest on defendants’ word that individualized issues defeat predominance, the concurring opinion further highlights how important it is for defendants to supplement their class certification evidence with declarations or other supporting evidence, where appropriate. Whether and if plaintiffs can successfully rebut an argument against certification that is supported with such evidence remains to be seen in future cases. But the First Circuit’s decisions so far suggest that where defendants’ evidence demonstrates a real need for individualized assessments, the predominance standard is difficult for class action plaintiffs to satisfy.

Last Friday, the U.S. Supreme Court issued a new decision on the requirement that plaintiffs have “standing” to sue in federal court. More specifically, the Court addressed what is required for a plaintiff to demonstrate “concrete harm.” Following this decision, defendants in class actions will have significant strategic decisions to make about whether and when to challenge the standing to sue of class members.

In TransUnion LLC v. Ramirez, Sergio Ramirez learned that TransUnion, one of the major credit reporting agencies, identified him as a “potential match” to someone on the Office of Foreign Assets Control (OFAC) list of terrorists, drug traffickers and other criminals with whom it is unlawful to do business. Although by all accounts Ramirez was a law-abiding citizen, a car dealership refused to sell a car to him because TransUnion identified him as a potential match to the OFAC list simply because he shared the same first and last names with someone on the list (without checking any other information). Ramirez brought a class action suit under the Fair Credit Reporting Act, alleging that TransUnion failed to “follow reasonable procedures to assure maximum possible accuracy” in credit reports, as required by that statute. He also alleged that disclosures made to him by TransUnion after he requested his credit report were inaccurate.  Ultimately a class was certified, the case was tried to a jury, and the jury awarded over $60 million, later reduced by the Ninth Circuit to about $40 million.

The Supreme Court addressed whether all or only some of the class members were entitled to recover. Out of a total of 8,185 class members, TransUnion issued credit reports to third parties on 1,853 of them during the relevant time period. The remaining 6,332 did not have credit reports issued to any third party, but complained about inaccurate disclosures made to themselves. The Supreme Court concluded that only the 1,853 had suffered “concrete harm” and thus had standing to sue. Doing some quick math, it appears the Court reduced TransUnion’s liability by about 80%.

Justice Kavanaugh wrote the majority opinion. He explained that, even where Congress has created a right to sue under a statute, Article III of the Constitution, which provides for courts to decide “cases” or “controversies,” requires courts to “assess whether the alleged injury to the plaintiff has a ‘close relationship’ to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.” (Opinion, at 9.) This is straightforward when there is physical or monetary harm, and can also include “reputational harms, disclosure of private information and intrusion upon seclusion,” but overall is less clear when the harm is intangible. (Id.) Applying this test, the Court concluded that the class members whose credit reports were provided to third parties had standing to sue because their harm was similar to the longstanding tort of defamation. (Id. at 17.) But the bulk of the class, whose credit reports were inaccurate but never disseminated during the class period, did not have standing on the “reasonable procedures” claim because publication of the false information is a traditional requirement for defamation (although they might have had standing to sue for injunctive relief). (Id. at 19-20.) The risk of future harm, the Court wrote, was too speculative and unproven because there was no evidence that many of this group of class members were even aware that TransUnion had identified them as a potential match to the OFAC list. “[M]any of them would first learn that they were ‘injured’ when they received a check compensating them for their supposed ‘injury.’” (Id. at 23.) With respect to the claims about inaccuracies in disclosures made when credit reports were requested, the Court characterized these as “formatting violations” and mere “procedural” violations that failed to meet the test of “a harm with a close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts.” (Id. at 25.) The Court sent the case back to the Ninth Circuit for reconsideration of the class certification decision and other issues. (Id. at 27.)

Four justices dissented. In brief, Justice Thomas’s view is that any violation of private, individual rights where Congress creates a private right and a cause of action is sufficient to confer standing. Stressing how the majority took the law in a new direction, he wrote that “never before has this Court declared that legislatures are constitutionally precluded from creating legal rights enforceable in federal court if those rights deviate too far from their common-law roots.” (Thomas, J., dissenting, at 12-13.) Justice Kagan (joined by Justices Breyer and Sotomayor) joined Justice Thomas’s dissent with a qualification. They would not alter the Court’s prior precedent under which “Article III requires a concrete injury even in the context of a statutory violation,” but would find standing to sue on all of the claims in this case, and would give substantial deference to Congress. Justice Kagan wrote that “[o]verriding an authorization to sue is appropriate when but only when Congress could not reasonably have thought that a suit will contribute to compensating or preventing the harm at issue.” (Kagan, J., dissenting, at 3.)

So what does all this mean for defending against class certification in putative class actions? What I found most significant was that the Court confirmed that “[e]very class member must have Article III standing in order to recover individual damages,” a proposition that Chief Justice Roberts had previously endorsed in a concurring opinion, but which had not previously been stated by a majority of the Court. (Opinion, at 15.) In a footnote, however, the Court stated that “[w]e do not here address the distinct question whether every class member must demonstrate standing before a court certifies a class,” citing an Eleventh Circuit decision that requires district courts to consider whether individual issues of standing predominate over common issues when deciding class certification.  (Id. at 15 n.4.) The Eleventh Circuit stated in that case that, in some circumstances, it might be appropriate for a district court to certify a class in which some class members would not have standing and deal with that issue later in the proceeding (while noting that such an approach may be inappropriate where many class members do not have standing). The courts of appeals are split on whether plaintiffs in class actions must establish standing of class members at the class certification stage, with some circuits saying that only the named plaintiffs need to have standing, and others requiring that all class members have standing. The Supreme Court may well take that issue up in a future case.

Significantly, footnote 9 in Justice Thomas’s opinion suggested that there may be circumstances in which, based on the Court’s decision, state courts, some of which have less rigorous standing requirements, might have jurisdiction over claims (even under federal statutes) that cannot be brought in federal court. In some instances, federal courts finding a lack of standing have remanded cases to state court where a defendant would prefer to litigate in federal court. This presents significant strategic considerations for defendants. In some circuits, defendants may be able to defeat class certification because a substantial portion of the class does not have standing. But there also could be cases where a defendant might decide it is better off not challenging the issue of whether a portion of the class has standing until after class certification is decided, or not challenging the standing issue at all and instead challenging those claims on the merits. If a class is likely to be certified, a final judgment against a portion of the class on the merits could be more advantageous to a defendant than a finding of lack of standing in federal court that may leave open the possibility for state court litigation.

A recent decision by the Eleventh Circuit struck down a practice that is commonplace in class action settlements—providing a modest incentive award to a named plaintiff. In Johnson v. NPAS Solutions, LLC, No. 18-12344, 2020 WL 5553312 (11th Cir. Sept. 17, 2020), the district court, as part of the final approval of a class action settlement, approved a $6,000 incentive award for the named plaintiff. An objector to the settlement challenged the incentive award along with other objections, and the Eleventh Circuit held (with one judge dissenting) that the incentive award was improper. The court found that, although such awards are routine, no court had thoroughly evaluated the basis for its authority to approve them. The court relied on two 1880s decisions of the U.S. Supreme Court, which held, prior to invention of the modern class action, that plaintiffs who recovered on behalf of others (such as a trustee who sued on behalf of himself and other bondholders) could not recover an allowance for “personal expenditures” or “personal services” out of a common fund that was obtained. Id. at *8. The Eleventh Circuit majority concluded that, under these decisions, “[a] plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses,” and “the modern-day incentive award” was “roughly analogous to a salary” or “payment for ‘personal services.’” Id. at *9. The majority further concluded that the same result would be warranted if the incentive award were characterized as a “bounty.” According to the majority, such awards, although they have been routine, can be authorized only if the Supreme Court overrules its old precedent, Rule 23 is amended to authorize such awards, or Congress enacts a statute authorizing such awards. Id. at *9, 10-12.

Judge Martin dissented from this portion of the opinion, concluding that the majority’s decision was inconsistent with a 1983 decision of the Eleventh Circuit that had set forth a fairness test for such awards, similar to the approach taken by other circuits (albeit without thoroughly evaluating the authority to make such awards). Judge Martin wrote that: “By prohibiting named plaintiffs from receiving incentive awards, the majority opinion will have the practical effect of requiring named plaintiffs to incur costs well beyond any benefits they receive from their role in leading the class. As a result, I expect potential plaintiffs will be less willing to take on the role of class representative in the future.” Id. at *15 (Martin, J., dissenting).

It will be interesting to see whether this decision results in a decrease in class action filings in the Eleventh Circuit, or if plaintiffs’ attorneys are still able to recruit named plaintiffs without the possibility of an incentive award. It seems unlikely that this decision will make class actions more difficult to settle, although perhaps that could happen if named plaintiffs cannot obtain more than a small amount that absent class members are receiving. Given that the old Supreme Court decisions are focused on circumstances in which a “common fund” was created, perhaps the Eleventh Circuit would reach a different result if the settlement is on a claims-made basis, and provides for the incentive award to be paid by the defendant separately, not as part of a “common fund.” In those circumstances, the court is simply approving the parties’ agreement and not involved in the allocation of a “fund.”

The Eleventh Circuit also found that the district court erred in two other respects that demonstrate some good practice tips for class action lawyers. First, the court of appeals found that the district court improperly set the deadline for objections to the plaintiff’s attorneys’ fee award prior to the filing of the plaintiff’s attorneys’ motion for the fee award, which the court concluded was not in compliance with Fed. R. Civ. P. 23(h). The court concluded, however, that this was harmless error because the objector to the settlement had adequate opportunity to present its position in the district court after the fee motion was filed and on appeal. This problem can easily be avoided when the parties propose a schedule for the class action settlement process to the district court. Such a schedule can require the fee motion to be filed sufficiently in advance of the objection deadline. Second, the court of appeals concluded that the district court failed to make sufficient findings or conclusions to support its decision granting final approval of the settlement and the proposed fee award. Given that it is common practice in most federal courts for the parties to submit a proposed order to the district court, this problem also potentially can be avoided by presenting a thorough proposed order for the district court’s consideration.

Over the last several weeks, numerous putative class actions have been filed against insurers seeking coverage for business interruption claims arising from the COVID-19 pandemic. On May 21, 2020, I will be a panelist, along with Robert M. Cooper of Boies Schiller Flexner LLP and Mark P. Rapazzini of Heffler Claims Group, in a Perrin Conferences webinar entitled “Coronavirus Business Interruption Insurance Class Action Lawsuits: Coverage and Certification Issues.” The webinar will highlight the insurance coverage issues raised in these newly-filed cases and the class certification issues likely to arise. A small number of complimentary registrations are available for Robinson & Cole clients and friends on a first-come, first-served basis. If you are interested in one of those, please email me.

This week the D.C. Circuit and Seventh Circuit issued decisions addressing a question that has been hotly debated by class action lawyers on the plaintiffs’ and defense sides: whether the Supreme Court’s decision on personal jurisdiction in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017) (blog post) applies to class actions, and if so, how. Bristol-Myers held that in a mass action, a California state court lacked personal jurisdiction (specific jurisdiction) over claims made by non-California residents that involved no harm in California and no harm to California residents. Following that decision, defendants have argued that trial courts lack jurisdiction over putative class members, or over claims alleged on their behalf, that lack sufficient connection to the forum jurisdiction. The first appellate decisions on these issues came down this week. Thus far, defendants have not prevailed, but I think the litigation of these issues is far from over.

In Molock v. Whole Foods Market Group, Inc., No. 18-7162, 2020 WL 1146733 (D.C. Cir. Mar. 10, 2020), the plaintiff employees sought to bring a nationwide class action for alleged lost wages. The district court denied the defendants’ motion to dismiss based on Bristol-Myers, and an interlocutory appeal was allowed. The D.C. Circuit, in a 2-1 decision, ruled that the question of whether and how Bristol-Myers applies to class actions is premature prior to a decision on class certification because, until a class is certified, putative class members are not parties. The majority relied on Smith v. Bayer Corp. and Standard Fire Ins. Co. v. Knowles, both of which recognized that putative class members cannot be bound by decisions made or actions taken in a putative class suit that has not yet been certified as a class action. The majority did not interpret Whole Foods’ position as asserting that there was a lack of jurisdiction over specific claims, and therefore did not address that question. I read Molock as potentially supporting an argument by defendants that, at class certification, the scope of any certified class should be limited to claims arising out of harm in jurisdictions where a named plaintiff was harmed. The line of argument would be that a class action must be litigated in a manner that ultimately leads to a binding outcome on the absent class members, which logically requires personal jurisdiction over the absent class members and the claims asserted on their behalf.

Judge Silberman of the D.C. Circuit dissented on various grounds, and would have ruled in favor of the defendant. He viewed Whole Foods’ argument as focusing not on whether there was personal jurisdiction over the absent putative class members, but rather seeking dismissal of those claims alleged by the named plaintiffs that related to injuries occurring outside the District of Columbia. He pointed out that courts have generally recognized and decided motions to dismiss or strike a portion of alleged class claims. Judge Silberman expressed a practical concern that, if adjudication of the scope of the class in this respect is postponed until class certification, a defendant can be subjected to unduly burdensome discovery (the majority opinion recognizes, however, that the district court could decide the Bristol-Myers issue in the context of a discovery dispute). Judge Silberman would have reached the merits of the Bristol-Myers issue and held that a named plaintiff cannot pursue claims of putative class members with no connection to the forum state. His reasoning included that: (1) personal jurisdiction must be analyzed on a claim-by-claim basis; (2) logically, a class action is a type of joinder and should not be treated differently than a mass action on this issue; (3) Rule 23 cannot alter jurisdictional requirements; and (4) Congress, in Rule 4(k)(1)(A), has limited federal district courts’ exercise of personal jurisdiction to that of a state court where the district court is located. Judge Silberman also would have concluded that absent class members are parties for purposes of personal jurisdiction over a defendant.

In Mussat v. IQVIA, Inc., No. 19-1204 (7th Cir. Mar. 11, 2020), the plaintiff filed a putative nationwide class action under the Telephone Consumer Protection Act. The district court granted the defendant’s motion to strike the class definition insofar as it alleged a nationwide class, based on Bristol-Myers. The Seventh Circuit agreed to hear an appeal from this ruling under Fed. R. Civ. P. 23(f), and held that Bristol-Myers did not apply to a nationwide class action in federal court under a federal statute. The Seventh Circuit wrote that “[o]nce certified, the class as a whole is the litigating entity, and its affiliation with a forum depends only on the named plaintiffs.” Slip op. at 5 (citation omitted). The Seventh Circuit did not address the issue raised by the D.C. Circuit about whether adjudication of this issue was premature where no class had been certified. The Seventh Circuit noted that the Supreme Court had repeatedly adjudicated nationwide class action cases without addressing the Bristol-Myers issue (although the issue does not appear to have been raised by parties in any of those cases), and that the Supreme Court stated in Bristol-Myers that it was applying “settled principles of personal jurisdiction.” Slip op. at 7. The Seventh Circuit also noted that absent class members are not treated as parties for ordinary diversity jurisdiction purposes, or in determining venue. The Seventh Circuit also analogized class actions to situations where an executor, administrator or trustee sues in a representative capacity, and courts analyze personal jurisdiction only with respect to the representative.

These are complicated issues and it will be interesting to see how the law develops as additional circuits are asked to weigh in. I expect the Supreme Court will take this up within the next few years. There are additional issues in play that were not raised or addressed by the D.C. Circuit or the Seventh Circuit. One of those that comes to mind is the fact that the Class Action Fairness Act (which is the basis for subject matter jurisdiction in many federal court class actions) requires consideration of the citizenship of putative class members for various purposes, including exceptions to jurisdiction. See 28 U.S.C. 1332(d)(3), (4). Putative class member claims are also aggregated for determining whether the amount in controversy requirement is satisfied. Id. § 1332(d)(6). These provisions seem to run counter to part of the Seventh Circuit’s reasoning that putative class members should be treated as irrelevant for jurisdictional purposes.

As highlighted by these decisions, there are strategic decisions defendants need to make in deciding how (and whether) to litigate this issue. One strategic decision is whether to present the question as an issue of personal jurisdiction over the absent class members themselves, or over a certain portion of the claims asserted by the named plaintiff against the defendant (i.e., the “out-of-state” claims), or both. Another strategic consideration is whether or how any positions taken might impact a class action settlement later in the litigation.



Believe it or not, the Supreme Court of the United States just decided whether “to have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.” The Court said “yes,” and it was unanimous. Most non-lawyers (and even some lawyers) would probably be surprised that this issue was even being debated. But it was a question that had divided the lower courts, with the Sixth Circuit ruling that “actual knowledge” did not require actually seeing or reading a document that was provided. The Supreme Court agreed with the six other circuits that had concluded that “actual knowledge” means what it says. The Court’s opinion potentially holds a silver lining for defendants though when it comes to class certification.

In Intel Corp. Investment Policy Committee v. Sulyma, No. 18-1116, the Court was asked to construe a statute of limitations for breach of fiduciary duty claims under the Employee Retirement Income Security Act  (ERISA), which requires that suit must be filed within three years of “the earliest date on which the plaintiff had actual knowledge of the breach or violation.” The plaintiff in this putative class action was a former Intel employee who claimed that retirement plans that he participated in had poor investment options with high fees and high risks. Various disclosures were made available to him on a website that he had access to, and in fact visited, but he did not remember reviewing the relevant disclosures, and claimed he was unaware that his money was being invested in hedge funds or private equity. He brought suit more than three years after receiving the disclosures.

Justice Alito wrote the opinion for a unanimous Court holding that “actual knowledge” under this statute means that you have to actually be aware of something. The opinion cited various dictionary definitions of “actual” and “knowledge” (even noting that the meaning of those words has not changed since ERISA was enacted in 1974), and explained how Congress in other parts of ERISA used a “should have known” type of standard instead of an “actual knowledge” standard, thereby choosing its words carefully.

What I found most interesting from a class certification perspective though is Part III. In that section, the Court explained how defendants could go about proving that plaintiffs had “actual knowledge”:

Nothing in this opinion forecloses any of the “usual ways” to prove actual knowledge at any stage in the litigation. [Citation omitted.] Plaintiffs who recall reading particular disclosures will of course be bound by oath to say so in their depositions. On top of that, actual knowledge can be proved through “inference from circumstantial evidence.” . . . Evidence of disclosure would no doubt be relevant, as would electronic records showing that a plaintiff viewed the relevant disclosures and evidence suggesting that the plaintiff took action in response to the information contained in them. . . . Today’s opinion also does not preclude defendants from contending that evidence of “willful blindness” supports a finding of “actual knowledge.”

In the context of a putative class action like this one, defendants will no doubt argue that they must be entitled to depose every putative class member regarding which disclosures or other relevant information he or she read, and to present at trial electronic records of every time a class member viewed the disclosures or other relevant information on a website or called to inquire about his or her account. Unless the proposed class is limited to the shortest possible three-year period, this would seem to be a potentially strong defense to class certification.

When a business is sued in a proposed class action and there is only a small amount at stake on the named plaintiff’s claim, often one of the first thoughts that comes to mind is: can’t we just pay the full value of the named plaintiff’s claim and make the case go away? As you might imagine, this is a tactic that has been attempted for decades, since the advent of modern class actions. It’s largely been unsuccessful, but the Illinois Supreme Court clarified last week that defendants can defeat a class action in that state’s courts by “tendering” full relief. According to the Illinois Supreme Court, this requires paying the full amount potentially owed into the court’s registry, agreeing to pay whatever the court awards for reasonable attorney’s fees and costs (if applicable), and effectively admitting liability. And this only works if a motion for class certification has not been filed before the amount is tendered. If there is injunctive or other non-monetary relief sought, the defendant may have to agree to that relief unconditionally as well.

In Joiner v. SVM Management, LLC, Docket No. 124671, 2020 IL 124671 (Ill. Feb. 21, 2020), the Illinois Supreme Court revisited its prior precedent on this issue in light of the U.S. Supreme Court’s decision in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016) (blog post). The Illinois Supreme Court had previously found that a tender of full relief prior to a motion for class certification being filed would moot a putative class action. In Gomez, the U.S. Supreme Court held that an offer of judgment under Federal Rule of Civil Procedure 68 that was not accepted did not render a class action moot because an unaccepted offer was a nullity under basic principles of contract law. The Court suggested that depositing the funds into an account might lead to a different result, but federal courts of appeals addressing that tactic have thus far rejected that approach, as far as I’m aware.

The Illinois Supreme Court distinguished Gomez on the grounds that a tender is actually forking over the money, not just offering it, the Illinois Code of Civil Procedure expressly provides for such a tender, and such a tender admits liability and is unconditional. The court explained:

When a defendant tenders the relief sought by a named plaintiff prior to a motion for class certification, it does not force the plaintiff to accept a settlement against her will, as plaintiffs argue, but admits liability and satisfies plaintiff’s demand. A live controversy therefore no longer exists, and the court must dismiss the case if no other plaintiff steps into the named plaintiff’s shoes to represent the class.

In Joiner, the tender was made by the defendant’s attorney sending a cashier’s check to the plaintiff’s attorney, but the court explained that future tenders should be made by paying the funds to the court:

We hold that future tenders made to satisfy a demand if made after filing of suit, should be made to the court. If the tender fully satisfies the plaintiffs’ demand absent costs and attorney fees, the court could then hold a hearing on costs and, if applicable, attorney fees before dismissing the case contingent upon payment of costs and fees.

Will defendants decline to remove cases to federal court in Illinois where this strategy is available? Keep in mind that Plaintiffs still appear to be able to defeat this strategy under the Joiner decision by filing an appropriate motion for class certification simultaneously with the complaint. And defendants may need to consider whether there are any potential collateral consequences of admitting liability by making a tender.

The issue still remains open at the Supreme Court level in the federal system, so stay tuned.

A recent decision by a Washington federal district court caught my eye because it involved a circumstance I often see—a new development in the law results in a class action lawsuit being filed before the defendant has an opportunity to change its practices in response to the change (or clarification) in the law. This decision highlights several arguments that defendants can make in defending against class certification in this type of case.

Morrison v. Esurance Ins. Co., 2020 WL 583824 (W.D. Wash. Feb. 6, 2020), arises from a Washington Supreme Court decision concluding that an insurer was not permitted to deny a claim for personal injury protection benefits under an automobile insurance policy solely based on a finding of maximum medical improvement. The court’s denial of class certification focused on two issues: the injunctive relief claim, and superiority under Rule 23(b)(3). First, the court found that a Rule 23(b)(2) class seeking injunctive relief was inappropriate for two reasons: (1) the claim for monetary relief was not incidental to the claim for injunctive or declaratory relief; and (2) the defendant had brought its procedures into compliance with the new decision, and thus “[a]ny request for injunctive relief is therefore moot” because “Plaintiff has failed to show any likelihood of the harm reoccurring.” Id. at *5. This is a key argument that defendants can make when a putative class action attempts to capitalize on a recent development in the law and the defendant has brought its procedures into compliance.

Second, the court found that certification of a damages class under Rule 23(b)(3) was not appropriate because superiority was not satisfied. The court first concluded that because individual suits could seek between $10,000 and $35,000 plus the possibility of treble damages and attorney’s fees, this “will provide substantial incentive for class members and their attorneys to prosecute claims individually.” Id. at *6. This can be a strong argument, particularly where the defendant can show that plaintiffs’ attorneys frequently file individual suits making claims similar to those alleged in the putative class action.

The court also concluded that the superiority requirement was not satisfied because determining who was in the class (which ultimately would have to be done in order to determine who is bound by any final judgment) would require mini-trials. This was because the insurer’s claim denial letters were not a sufficient basis to determine whether benefits were denied, or whether the denial was based on maximum medical improvement. The Ninth Circuit does not have a separate ascertainability requirement, but this is a good example of how a defendant can effectively make an argument about the class definition under the superiority criterion for class certification.

Class action settlements are complicated. They often take months to negotiate. The last thing the lawyers or their clients on either side want to happen is for the trial court to deny approval or, even worse, for an appellate court to overturn a decision approving the settlement when an objector appeals. That happened earlier this week in the Ninth Circuit. Its decision provides some guidance on how counsel can help the trial court through the approval process.

The Ninth Circuit is a hotbed of class action litigation, and it seems to apply a higher level of scrutiny than other circuits in reviewing settlement approval decisions. In Roes v. SFBSC Management, LLC, No. 170079 (9th Cir. Dec. 11, 2019), objectors appealed from a Northern District of California decision approving a settlement of an employment class action alleging that exotic dancers were misclassified as independent contractors rather than employees. The Ninth Circuit found problems with both the notice to the class and the extent of the district court’s scrutiny of the settlement terms.

Notice to the Class: Approximately 12% of the notices mailed to class members (560 out of 4,681) were undeliverable, even after the administrator searched for new addresses. The Ninth Circuit concluded that there should have been additional means attempted to try to reach former employees, for whom the only means of notice was by mail. It suggested that some form of electronic notice to the former employees should have been used. The lesson here? If it turns out that notice has not reached more than 10% of the class (depending on the circumstances), consider a supplemental form of notice before final approval is sought.

The Ninth Circuit rejected an argument that the notice to the class should have informed class members about other pending putative class cases against defendants involving the same issues. It found that is simply not required by Rule 23.

Settlement Terms: The Ninth Circuit requires a “higher level of scrutiny” and “a more probing inquiry” by district courts when a settlement is reached before a ruling on class certification (although that is very common). The district court’s opinion, however, did not cite this precedent, and suggested that there was a presumption of fairness. (Slip op. at 26.) The lesson here: the parties should make sure that they are citing the correct standard under the most recent case law in the circuit, and helping the district court apply it.

The Ninth Circuit found that the district court had not adequately explained why $950,000 of attorneys’ fees were justified, where the total available settlement cash was $2 million and the valuation of a $1 million dance fee payment pool for class members was not sufficiently justified in the Ninth Circuit’s view. The court noted that the district court had not made any specific findings regarding that valuation, or regarding why the attorneys’ fees would be reasonable even if the value of that portion of the class relief were disregarded. This is another area where the parties potentially could aid the trial court by proposing such findings.

The Ninth Circuit also found problematic that the settlement provided for $20,000 payments to two named plaintiffs in exchange for a general release. The court expressed concerns about “draw[ing] such large amounts from the common fund to pay the named plaintiffs for what is essentially a side settlement,” further stating that “the handsome amounts of those incentive payments, relative to the size of the cash payments that can be claimed by class members, raise serious red flags . . . .” (Slip op. at 41, 43.) The lesson here: incentive payments should not be a minor afterthought in negotiations; they need to be carefully justified.

The Ninth Circuit also expressed concerns about reversionary aspects of the settlement, where funds would revert to the defendants rather than be distributed to the class in some other manner, or by cy pres relief. This is another area for parties to consider carefully in structuring their deal, and in their briefing to the district court.

The Ninth Circuit noted in an footnote that the Northern District of California has published procedural guidance on class action settlements, which recommends that the parties provide various pieces of information to the district court in seeking settlement approval. (Slip op. at 47 n.22.) Even if you are not in the Northern District of California, that is a useful checklist for what you might need or want to include in your preliminary and final approval papers.

Next time you have a class settlement, don’t just take your last brief in support of preliminary or final approval and reframe it for your newest settlement. Study the most recent authority in your circuit, think through potential objections, and help the trial court through the approval process. That can save you and your client some headaches down the road.

A recent decision by the U.S. Court of Appeals for the Sixth Circuit provides an important reminder that if defendants want absent class members to be bound by a summary judgment ruling in their favor, generally they must insist that notice be given to the class before that ruling is made.

In Faber v. Ciox Health, LLC, No. 18-5896, 2019 WL 6596501 (6th Cir. Dec. 5, 2019), the plaintiffs sued a medical-records provider, alleging that it overcharged them for providing copies of their records. Because HIPAA does not provide a private right of action, the plaintiffs brought common-law claims under Tennessee law, and a claim under a Tennessee medical records statute. The plaintiffs moved for class certification and the parties cross-moved for summary judgment, with all three motions pending at the same time. The district court certified a class and then, before ordering notice to the class, granted summary judgment in favor of the defendant. The Sixth Circuit affirmed the district court’s summary judgment ruling, finding that none of the causes of action were viable under state law. But it also ruled that the class certification ruling in effect was a nullity due to the failure to give notice, and the judgment would apply only to the named plaintiffs. The Sixth Circuit rejected the defendant’s suggested approach of remanding so that post-judgment notice could be provided to the class because “post-judgment notice would present no meaningful opportunity for class members to make their case”; rather, it “would only invite parties to enter a fight that they already lost.”  Id. at *7. But what if the district court (or the Sixth Circuit) had vacated the summary judgment ruling too, and then let the class members make whatever additional arguments they wanted to make? It might be difficult to change the district judge’s mind, but the issue could still have gone either way on appeal at that point.

The practice pointer for defendants and their counsel here, in my view, is that if there is both a motion to certify a class and motions for summary judgment pending, you may need to provide a strong recommendation for the district court as to which order the motions should be decided in. If the plaintiff moves for summary judgment, the defendant often will want to invoke the rule against one-way intervention, so the ruling is not binding as to the class unless a class is certified first. With respect to a defendant’s motion for summary judgment, it’s a strategy call as to whether you want to push for class certification to be decided first. And if class certification is granted before your motion for summary judgment is decided, it might make sense to request that notice be given promptly, and your motion be held in abeyance, so it if it is granted you have a judgment against the whole class. But that might not be the best strategy if your argument on the merits is a longshot. And here the ruling in favor of the defendant might well have been perceived as a longshot, given that the Sixth Circuit departed from a Tennessee Court of Appeals decision on the state statutory claim, predicting that the Tennessee Supreme Court would not follow it. These are the kinds of tough calls that defendants in class actions must make in deciding whether to use the class action mechanism as a sword, or just fend it off.