Anticipating Decisions In Three Supreme Court Cases With Potential To Impact Class Action Litigation

Class Actions  •  Consumer Reporting  •  FCRA  •  Litigation  •  What You Need To Know - Background Info On Current Issues

Supreme Ct ExteriorThe US Supreme Court’s October 2015 term includes three cases that may have important implications for class action litigation: Spokeo Inc. v. Robins et al., 13-1339, Campbell-Ewald Co. v. Gomez, 14-857, and Tyson Foods, Inc. v. Bouaphakeo, 14-1146.   In each case, the Court will consider a procedural question whose answer could change the status quo in class action litigation, specifically: (1) in Spokeo, whether Congress, by virtue of creating a cause of action, can confer standing on a litigant, notwithstanding whether the litigant has been actually injured (standing without injury could make it easier for a class to be certified under Rule 23); (2) in Campbell, whether an offer for complete relief can moot the claims of a plaintiff when the plaintiff is a named representative in a putative class action; and (3) in Tyson, whether differences among individual class members may be ignored and a class certified under Rule 23(b)(3) when the class contains hundreds of members who were not injured and have no actual damages.

In anticipation of opinions in 2016, we will explore the history of the three cases and the status through oral arguments, and we will update this post as the opinions are handed down at the end of the term.   First up – the Court’s examination of standing in Spokeo.

Background

As reported previously in this blog, the Court in Spokeo considered the Ninth Circuit’s ruling that the petitioner, Robins, had standing to bring his suit against Spokeo under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C.§ 1681 et seq solely based on Robins’s statutory injury at law, with no need to show injury in fact.  Robins sued Spokeo, a search engine that aggregates publicly available information, on behalf of a putative class, for violations of FCRA when he discovered that Spokeo’s reports contained incorrect information regarding his age, marital status, and employment status, among others.   He further alleged that he had suffered harm through a diminution in employment prospects, loss of money, and stress.  The district court dismissed his complaint, eventually finding a lack of article III standing because Robins had not suffered an injury in fact.

The Ninth Circuit considered the case on appeal, and reversed, finding that, the “alleged violations of Robins’s statutory rights are sufficient to satisfy the injury-in fact requirement of Article III,” and specifically declined to decide whether the alleged harms could be sufficient injuries in fact. Robins v. Spokeo, 742 F.3d 409 (9th Cir. 2013). This decision brought the Ninth Circuit into an existing circuit split.  Specifically, the Ninth Circuit joined the Sixth and Seventh Circuits’ view that a violation of a statute was enough to create standing, whereas the Second, Third, and Fourth Circuits found that a plaintiff did not have standing if he did not allege an actual injury outside of a violation of a statue.

This case brought a fair amount of attention from various sources. The Solicitor General, various states, and public advocacy groups for privacy, all argued on behalf of Robins as amici.  Arguing for Spokeo was the business community, including the Chamber of Commerce, some of the major Silicon Valley tech companies (Google, Facebook), and the American Bankers Association, among others.   Spokeo, and its amici, argued vigorously that if the Supreme Court sided with the Ninth Circuit and found that no injury in fact was required to confer standing, it would become much easier for lawyers to bring frivolous but potentially damaging class actions against companies, where no actual harm has occurred.  Without injury in fact, more unharmed plaintiffs will survive the pleading stage, and, more importantly, Rule 23 certification will be much easier, as it essentially removes the causation and injury requirements.  In addition, this holding, and its effect on Rule 23, implicate a variety of statues outside of FCRA, including the Fair Debt Collection Practices Act, 47 U.S.C. § 227(b), The Employee Retirement Income Security Act, 29 U.S.C. § 1104(a)(1)(D)), The Real Estate Settlement Procedures Act, 12 U.S.C. § 2607.12, The Lanham Act, 15 U.S.C. § 1125.13, The Fair Housing Act, 42 U.S.C. § 3604(c),The Americans with Disabilities Act, 42U.S.C. § 12182(a), The Video Privacy Protection Act, 18 U.S.C.§ 2710(b).

Oral Argument

During oral argument on Monday November 2, the class action issue did not take center stage, but it was raised sua sponte by the Court.  Justice Ginsburg specifically asked Spokeo’s counsel if businesses would have a way to fight certification if the court were to give consumers a right to redress for false credit reporting.  Spokeo’s counsel indicated a right to redress without requiring falsity or harm to be demonstrated would provide plaintiff’s a clear path to certification because all that would be left would be common issues.

The bulk of the argument concentrated on the issue of whether a plaintiff must show harm other than just a violation of the statute.  The Justices broke down along the usual liberal/conservative lines.  The more liberal wing represented by Sotomayor and Ginsburg appeared to side with Robins, and accepted that standing could be conferred by Congress.  Justice Roberts and Scalia, on the other hand, pushed Robins’s counsel hard on the issue of whether an actual injury was required to have standing, or more specifically, whether the plaintiff must suffer some concrete harm to establish standing.  Justice Roberts in particular created hypotheticals to highlight what he appeared to view as the ridiculousness of allowing cases to go forward where the plaintiff has suffered no harm.  For instance, he hypothesized that, under Robins’s and the government’s theory, Congress could pass a law conferring standing on any unemployed worker in a border state, so they could sue any illegal immigrant who had a job.   The hypothetical served well to illustrate the potential dangers of finding that no injury in fact is required for standing.

But not all the judges seemed to accept the premise that the Court had to decide whether article III standing demands an injury in fact.   A third line of questioning from Justice Kagan and Breyer emerged almost as a compromise.   The questions appeared to dismiss Robins’s argument that harm is not a component of standing, but suggested that that Robins had standing because he had alleged sufficient harm (loss of income, stress, etc)Justice Alito also chimed in on Robins’s actual harm, but noted that  his harm was “quintessential[ly] speculative,” especially absent any indication “that anybody other than Mr. Robins [himself] ever did a search” on Spokeo’s website for information about him.

Justice Kennedy, the eternal swing vote, certainly did not seem much in favor of finding of Robins, going calling Robins’s reasoning circular. However, Kennedy was also interested in finding out if there was a way to save the statute—whether  Congress could have drafted a statute that sued for an inaccuracies in a credit report, and further asked whether a credit reporting agency may have a greater duty to report accurate information.

It is unclear how the opinion, when it finally comes, will play out, but it seems unlikely that this conservative leaning Court would affirm the Ninth Circuit’s reasoning and open up the possibility of damaging class actions to various kinds of business.  Based on the questions, the conservative wing of the court, and even Justices Breyer and Kagan, think that in order to find that the plaintiff had standing, there has to be more than a bare statutory violation.

On the other hand, the Court could choose not to decide the question presented as they did in First American Financial Corp. v. Edwards (2012).  There, the Court heard arguments on whether a bare violation of the Real Estate Settlement Procedures Act (RESPA) conferred  standing, without an injury in fact, almost a twin to the issue before the Court in Spokeo, but ultimately dismissed the petition as improvidently granted, with no further explanation.

Ultimately, it seems likely that having taken this question of whether a “bare violation” of a statute confers standing up again, the court will make some kind of ruling.  We will update this post when the case is decided, likely sometime in 2016.

Next – Campbell-Ewald Co. v. Gomez.  The Court examined the effect of complete relief on standing–does an offer of complete relief moot a case?

Background

In Campbell-Ewald Co, the Supreme Circuit reviewed the Ninth Circuit’s holding that Defendant Petitioner Campbell-Ewald’s offer of what it characterized as “complete relief” to Plaintiff did not moot the case, since Defendant’s offer remains unaccepted.   Moreover, Plaintiff Gomez was allowed to continue the putative class action. Specifically, the Plaintiff sued Campbell-Ewald, a national marketing firm the Navy hired to spearhead its mobile advertising campaign, for violations of the Telephone Consumer Protection Act (“TCPA”).  Defendant worked with the Navy to help them recruit individuals.   As part of that effort, Plaintiff received a text message from navy recruiting without having given prior consent.  He subsequently filed suit against Campbell-Edwards, on an individual basis and on behalf of a class of  “unconsenting recipients of the Navy’s recruiting messages.”   Prior to any class being certified and before Plaintiff even moved for certification, Campbell-Ewald offered to settle the case pursuant to Rule 68 and a separate settlement offer.   Both offers consisted of the following terms:

  1. pay Plaintiff $1503 for each unsolicited text message that Plaintiff allegedly received from or on behalf of Campbell-Ewald (over three times the statutory amount of $500 per violation set by Congress); 
  2. pay all reasonable costs that Plaintiff would recover if he were to prevail; and 
  3. stipulate to an injunction prohibiting it from the alleged wrongs.

Petition for Certification, January 1, 2015 at 6.  Plaintiff moved to strike the Rule 68 offer and to certify a class.  In response, Campbell-Ewald move to dismiss for lack of jurisdiction, arguing that its offers of complete relief mooted both Plaintiff’s individual and class claims.

The district court denied Campbell-Ewald’s motion, finding that, although the offer would have fully satisfied the claims asserted by the Plaintiff, it did not moot the individual or class claim because: (1) the class claim could relate back to the filing of the class complaint; and (2) the settlement was not accepted by the Plaintiff and could not be forced on Plaintiff.  The court, however, dismissed the Plaintiff’s claim because of derivative sovereign immunity.  Plaintiff appealed, and Campbell-Ewald moved to dismiss for lack of jurisdiction on mootness grounds.

The Ninth Circuit reached the mootness question and found that, despite Campbell-Ewald’s offer of complete relief, the Plaintiff’s claim, individually and as a class representative, was not moot. With this verdict, the Ninth Circuit entered a Circuit split, joining the Eleventh Circuit (and as reported on the blog, the Seventh Circuit later joined the split on this side ).  In contrast, the majority of circuits, including the Third, Fourth, Fifth, and Sixth Circuits, held that if the Defendant’s settlement offer would completely satisfy plaintiff’s claim, the case is moot.

The key issue on appeal is the fact that, during the pendency of the appeal, the Supreme Court decided  Genesis HealthCare Corp. v. SymczykGenesis was a collective action case, which is similar to a class action in the fair labor context, where the named plaintiff was offered a settlement that mooted the case.  In a five to four decision authored by Justice Thomas, split along the usual party lines, the Genesis court held that, where a defendant offered a named plaintiff complete relief, and, if the named plaintiff’s individual interest becomes moot, the mootness extended to the collective action and concluded the case entirely.  Importantly, because of the procedural posture of the case, the Court assumed, without deciding, that a Rule 68 offer mooted plaintiff’s individual claim.

In addition, as in Spokeo, class action repercussions loomed large for the Defendants in this case.  The TCPA, and other statutes like it, offer a small amount in damages, but because of the technical nature of the allegations at issue, the potential classes are enormous, and consequently, the potential damages as a class action are enormous as well. Having the option to cut the class action off by offering the plaintiff complete relief is an important mechanism for companies who do not want to be at the mercy of class action lawyers. Accordingly, various interests are represented in the amici filing, including the Chamber of Commerce, the Consumer Data Industry Data Association, and various legal advocacy groups on behalf of Campbell-Ewald.  For the Plaintiff, the amici consisted of the Solicitor General, the AFL-CIO, the National Right to Work Foundation, among others.

Oral Argument

The Ninth Circuit relied entirely on Justice Kagan’s dissent in Genesis in reaching its decision that an offer of complete relief cannot moot an individual or collective claim. Accordingly, the justices who joined her dissent, Ginsburg, Breyer and Sotomayor, had previously signed on to the idea that a defendant’s offer does not moot a case.  Unsurprisingly, their questions at oral argument were consistent in questioning why mootness was appropriate.  Justice Kagan pressed Campbell-Ewald’s counsel on the issue of whether Defendants had actually offered “complete relief,” particularly because of the dispute over attorney’s fees that Plaintiff sought.  Similarly, Justice Sotomayor wanted to know whether the proper vehicle for dealing with an unaccepted offer of complete relief was summary judgment. She further questioned why the defendant should be able to get a case dismissed on its terms, rather than the Plaintiff’s.  In the same vein, Justice Ginsberg wondered why Rule 68 wasn’t the answer (instead of mootness), and questioned whether in a class case, the defendant is really offering complete relief, where the plaintiff wants a class action.

When it was the Plaintiff’s turn to argue, the line of questions came from the Genesis majority instead.  They pushed the Plaintiff hard on why a plaintiff should be allowed to use the federal courts when he has obtained the monetary relief sought.  Scalia asked if Plaintiff’s position was that a plaintiff is always entitled to a trial even when he or she obtained relief.  Alito pressed Plaintiff as to whether this strategy was really for the class action attorneys, so they can get lots of money.  Justice Roberts had similar questions, relating to whether the Plaintiff’s push to avoid mootness was solely so that class certification could go forward.  He also pressed Plaintiff on how there could be a case or controversy where the plaintiff has received everything he wanted

But as in Spokeo, there appears to be a twist involving Kennedy.  He and Justice Breyer indicated that they may possibly diverge from their Genesis position.  Although Justice Kennedy echoed Chief Justice Robert’s logic when he asked Plaintiff what the concrete injury is where the Plaintiff has the money, he also did not seem to agree with Campbell-Ewald’s position.  Kennedy noted that Defendant wants the Court to write an opinion that a judgment is the same as a settlement offer and, he indicated that was not the case under the federal rules.  Similarly Justice Breyer, who had signed off on Kagan’s rejection of mootness, seemed persuaded by the AFL-CIO’s argument.  He wanted to know why the AFL-CIO’s theory was not right.  The AFL-CIO argued that the defendant should tender the money, deposit the money in the court, and the court then issues a judgment saying this case is over.   He thought that “the practical thing is the defendant wants to pay off the plaintiff by giving him what he wants – only thing left is the class certification.”  Why should this plaintiff, who has obtained the relief he sought, be able to continue to litigate?

Looking Ahead

It is entirely possible that the court decides the issue on whether complete relief was offered in this case, as that was a point of contention for the Justices, and does not reach the larger mootness question. Equally plausible is the possibility that Justice Breyer could bring four votes for the AFL-CIO’s mechanism to end a case, which would answer the question of mootness a slightly different way, but still serve to end the class action issue troubling defendants. What does seem unlikely is any holding that allows a case to go forward where a defendant has offered the plaintiff complete relief, as imagined by Justice Kagan’s dissent.

Finally – Tyson Foods, Inc. v. Bouphakeo  The role of identifying an injury in certifying a class action.

Background

Lastly, the Supreme Court heard arguments in the Tyson case about how class actions should be tried.  Specifically, the questions in Tyson were: whether either collection actions under the Fair Labor Standards Act (“FLSA”) or a class action under Rule 23, (1) individual class members may be ignored and a class action certified where liability and damages will be determined using statistics and an average observed in a sample; and (2) whether a class/collective action may be certified or maintained when the class contains hundreds of members who were not injured and have no legal right to any damages.

Plaintiffs are workers at a Tyson plant, who complained they were not paid properly, and who sued under the FLSA.  The case adjudicated whether the time workers spent donning protective gear and walking to their stations was compensable work, and how much payment the individual workers would be entitled to.  Specifically, Plaintiffs provided two experts, one (Dr. Mericle) who purported to show the average amount of time the class members spent putting on protective gear and going to their stations and one (Dr. Fox) who calculated the entitlement to overtime compensation and wages using the “average” time calculated by the first expert.   Dr. Fox then totaled the numbers to obtain an aggregate damage award for the class.  The jury found for Plaintiffs based on their statistics, but only gave them part of what they sought.

Tyson appealed the judgment to the Eight Circuit, arguing that the class was improperly certified, as the differences in the class members was not accounted for by the averages and uninjured plaintiffs were included in the aggregate damages award.  The Eight Circuit affirmed the verdict, and the certification of the class, relying on a  1940s case, Anderson v. Mount Clements Pottery Co., which allows representative proof specifically  in wage-and-hour cases.

Tyson’s appeal of the verdict is very broad, and includes cases outside of the FLSA context.  Tyson argues that the lower courts wrongly allowed Plaintiffs to prove their case through a “trial by formula,” in contravention of the holding in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541, 2561 (2011).  Indeed, Tyson’s appeal broadly questions whether plaintiffs may use statistics to  prove their case with common evidence which masks individual differences.  Further, Tyson’s second question, whether a class can be certified where there are members with no injuries or damages, brings forward the jurisdictional questions that have played out in all the class action cases discussed here–the need for an injury.   It brings the case into a much broader context and possible application; unsurprisingly, the business community showed up in droves, including Wal-Mart Stores, the Chamber of Commerce, the Consumer Data Industry, and the Association of American Railroads.  On the Plaintiff’s side amici include the United States government (making it three for three), labor unions, and other advocacy organizations.

Oral Argument

The surprise here, given Tyson’s generalized certification question and its reliance on Dukes, was the Court’s focus on Mt. Clemens (and total disregard of Dukes). This took Tyson’s case squarely out of the general Rule 23 class certification context, and placed it on the much narrower FLSA context.  In fact, Justices Kagan very specifically said “Mr. Phillips, you say the question is whether it can proceed as a class. But it seems as though that’s really not the question in this case because of Mt. Clemens.”   Justice Breyer, and more interestingly Justice Kennedy, both made very pointed remarks that made it clear that they agreed with Justice Kagan that Mt. Clemens is the controlling precedent, and that Mt. Clemens allows for representative proof in FLSA case.  Kennedy further indicated that if Mt. Clements did not apply, the Plaintiff would have a more difficult time with any certification. (The government, arguing on behalf of the Plaintiff, conceded as much).

The rest of the questions suggested that the conservative justices were supportive of Defendant. Specifically, Alito, Scalia, and Roberts pushed the Plaintiff hard on the issue of making sure the mechanisms plaintiffs had would provide only injured plaintiff’s relief. While some thought that the issue of damage apportionment could be dealt with on remand, this did not seem to appease this bunch. Roberts was also troubled by the variations of time the different class of workers expended on donning the protective gear that were averaged, appearing to buy into Tyson’s argument that Plaintiff’s use of averages wiped out too much of the difference that would typically be a defense against class actions.  Finally, both Roberts and Scalia questioned the fact that the jury only gave the Plaintiff’s half of what the experts said was owed, and this fact seemed to weigh against allowing the class certification to stand.

Of the remaining actively questioning judges, Justice Sotomayor told Tyson that “she was at a complete loss as to what you’re complaining about.” Her questions suggested she disagreed with Tyson’s argument that a plaintiff could not use an expert to come up with an average where there is no other proof. Ginsburg’s questioning suggested she did not agree that there really were vast differences among class members as suggested by Tyson.

Looking Ahead

This case in particular looks like it will avoid making any law with respect to class actions generally, or at least it will not affect class actions that do not arise under the FLSA, despite Tyson’s best effort to obtain a decision that would be generally applicable to class certification.  It is unclear whether the Mt. Clemens presumption will win the day with the required  five justices, though a win for the workers likely would be narrowly construed given the specificity of the controlling precedent in Mt. Clemens.

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