I’ve been delayed a bit in reporting on this, but the October 2015 term of the U.S. Supreme Court is shaping up to be a blockbuster one for class action law. Perhaps even bigger than the October 2010 term, which brought us Wal-Mart v. Dukes, Smith v. Bayer Corp. and AT&T v. Concepcion. I previously reported on the Court’s grant of certiorari in Spokeo v. Robins, to decide whether a plaintiff who does not suffer any injury has Article III standing to sue for violation of a federal statute. The Court recently granted certiorari in two more class action cases. The rulings that will be issued next Term (probably not until sometime in 2016) could mean effectively the end of class actions as we know them. Or they could mean a reinvigoration of the class action device in a manner quite favorable to the plaintiffs’ bar. Or the outcome could be, as it often is, somewhere in between those extremes.
Settlement Offers to Named Plaintiffs
In Campbell-Ewald Co. v. Gomez, No. 14-857 (SCOTUSblog page), the Court granted certiorari on the following issues: “(1) Whether a case becomes moot, and thus beyond the judicial power of Article III, when the plaintiff receives an offer of complete relief on his claim; (2) whether the answer to the first question is any different when the plaintiff has asserted a class claim under Federal Rule of Civil Procedure 23, but receives an offer of complete relief before any class is certified; and (3) whether the doctrine of derivative sovereign immunity recognized in Yearsley v. W.A. Ross Construction Co., for government contractors is restricted to claims arising out of property damage caused by public works projects.”
The Court will review the Ninth Circuit’s decision in Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), which vacated and remanded a summary judgment ruling in favor of the defendant in a case brought under the Telephone Consumer Protection Act (TCPA). The plaintiff alleged that the defendant violated the TCPA by sending (through a third-party vendor) unsolicited text messages on behalf of the U.S. Navy. The defendant offered the named plaintiff full relief on his claims — $1503 per violation, plus reasonable costs. That’s a pretty nice payday for the inconvenience of a single allegedly unauthorized text message. But that offer was rejected. The Ninth Circuit held that the unaccepted offer did not moot the named plaintiffs’ individual claims or the putative class claims. It relied on its prior decision that agreed with Justice Kagan’s dissent in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013). The Supreme Court majority in Symczyk, which involved a Rule 68 offer of judgment to the named plaintiff, assumed that the unaccepted offer of full relief had mooted the named plaintiff’s claim, because that issue had not been disputed below. The majority held that the collective-action allegations were moot, noting that “[w]hile settlement [with the named plaintiff] may have the collateral effect of foreclosing unjoined claimants from having their rights vindicated in respondent’s suit, such putative plaintiffs remain free to vindicate their rights in their own suits. They are no less able to have their claims settled or adjudicated following respondent’s suit than if her suit had never been filed at all.” Id. at 1531. This language suggests that there is nothing wrong with a defendant forcing a settlement of the named plaintiff’s claim in a manner that renders the putative class action claims moot, at least for purposes of that one case (a new plaintiff can always bring another putative class action, but the defendant can always make an offer of complete relief to that plaintiff). Justice Kagan’s dissent in Genesis Healthcare (joined by Justices Ginsburg, Breyer and Sotomayor) concluded that an unaccepted offer of judgment was a nullity under the plain language of Rule 68. The dissent conceded, however, that an “unconditional surrender” could allow a court to enter judgment for the plaintiff. Justice Kagan further concluded, however, that a judgment for only the named plaintiff would not be complete relief where class treatment was sought.
This case seems to present more cleanly the question the Court did not quite reach in Genesis Healthcare—whether a defendant can effectively defeat a putative class action by offering complete relief to the named plaintiff. If the Court rules in favor of the defendant, that could make it relatively easy for a defendant, in a case involving a named plaintiff’s claim with a relatively small dollar amount, to defeat a class action. Plaintiffs’ lawyers in such cases likely will have to bring “mass joinder” cases, in which they would have to sign up large numbers of clients (and they also might try to sue for injunctive or declaratory relief, where such relief is viable and a defendant is not likely to concede it). But I would not hold your breath for this result (and that’s not merely because I may need to find a new line of work if the case is decided that way). If the Court rules in favor of the plaintiff, that will be, in baseball parlance, a save more than a win for the Plaintiffs’ bar. It will largely be business as usual in the class action world, given that most circuits have generally not permitted defendants free reign to use this tactic, with some exceptions.
Statistical Sampling and Class Member Standing
In Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (SCOTUSblog page), the Court granted certiorari to decide: “(1) Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and (2) whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.”
This is an employment class action that was tried to a jury verdict after a class was certified. The plaintiffs claimed that Tyson failed to pay overtime wages allegedly due under the Fair Labor Standards Act (FLSA) and Iowa Wage Payment Collection Law for time spent by employees putting on and taking off (donning and doffing) their personal protective equipment and walking time. In Bouaphakeo v. Tyson Foods, Inc., 765 F.3d 791 (8th Cir. 2014), the Eighth Circuit affirmed, in a 2-1 decision, the district court’s order certifying a class action on the state-law claim and a collective action under the FLSA. Tyson argued that differences in clothing used and duties for different jobs and differences in employees’ routines made class certification inappropriate under Wal-Mart v. Dukes. The Eighth Circuit majority rejected this argument on the grounds that Tyson had a companywide policy that applied to all class members. The court found it proper to use the average time it took employees to put on and take off the protective equipment and walk to decide the case. Id. at 797. The Eighth Circuit majority also rejected Tyson’s contention that some class members who did not work overtime did not have standing to sue. The majority characterized that as a question of individualized damages rather than standing, and concluded that Tyson waived this argument by asking for the jury to be instructed to treat employees with no damages as members of the class, and thereby inviting error. Id. at 797-98. The majority also rejected Tyson’s argument that damages were improperly based on the type of “Trial by Formula” that was disapproved of in Dukes. The court attempted to distinguish Dukes on the grounds that “[h]ere, plaintiffs do not prove liability only for a sample set of class members,” but rather “[t]hey prove liability for the class as a whole, using employee time records to establish individual damages. Using statistics or samples in litigation is not necessarily trial by formula.” Id. at 798. The court found it proper for the jury to use average times for donning, doffing and walking, but apply those to class members individually based on their timesheets, in order to reach its verdict. Id.
Judge Beam dissented. He concluded that class members did not suffer the “same injury” under Dukes because of their individualized damages. Id. at 802-03 (Beam, J., dissenting). Judge Beam further concluded that variations among individual class members in donning and doffing times, how they were paid, sickness, vacation, etc. should have resulted in decertification of the class. He also noted that the jury’s verdict likely meant that more than half of the putative class suffered either no damages or less than $1 in damages. Id. at 804. He viewed Tyson’s requested jury instruction, after the class was certified, as not waiving any of its contentions with respect to class certification. Id. at 803.
If the Supreme Court ultimately rules in favor of Tyson, on the grounds that every class member must have standing, and/or that the method used to try this case based on statistical evidence violated the Court’s prohibition on “Trial by Formula,” the decision could be quite helpful in defending class actions. Plaintiffs commonly propose class definitions that include class members without standing. While some circuits have found such classes improper, others have allowed certification of classes that include uninjured class members (see my February 6 blog post for more on this). The “Trial by Formula” issue is critical because plaintiffs often propose to try class actions based on statistical sampling of some kind. A strong reaffirmance of Dukes on this point could be very helpful to defendants. On the other hand, if the majority of the Court were to conclude that class certification in this case was proper, that could potentially be a significant win for the plaintiffs’ bar, depending on how the decision is written.