On September 16, 2016, I attended a conference in San Francisco regarding current class action issues. Below is a summary of some key takeaways from that event.
- The United States Supreme Court issued three significant class action rulings during its 2015-2016 term: (1) Tyson Foods, Inc. v. Bouaphakeo, 135 S.Ct. 2806 (plaintiffs can rely on representative or statistical evidence for issues common to the class); (2) Spokeo, Inc. v. Robins, 135 S.Ct. 1892 (Article III standing requires a concrete and particularized injury or risk of harm); and (3) Campbell-Ewald Co. v. Gomez, 135 S.Ct. 2311 (unaccepted settlement offer for full amount of lead plaintiff’s claim does not moot a class action). Collectively, these decisions keep the door wide open to class action litigation nationally.
- One of the proposed changes to Federal Rules of Civil Procedure (“FRCP”) Rule 23 is that no financial payment can be made to counsel for class members objecting to a proposed settlement unless such payment is disclosed and approved by the court after a noticed hearing. Further, no payment can be made to an objector’s counsel in connection with either withdrawing an objection or dismissing an appeal from a judgment approving the settlement. Collectively, these changes should reduce the likelihood that attorneys will object to a settlement or appeal a final judgment for the purpose of getting additional compensation from the settling parties in exchange for dropping their objection or appeal.
- Other proposed changes to FRCP Rule 23 include: (1) the court will give notice of a proposed settlement to all class members only after considering whether there has been adequate representation, arm’s length negotiations, adequate relief offered to all class members (side agreements have to be disclosed to the court), and all class members are equitably treated relative to each other; and (2) notice to class members can be given by email or posting notice on the company’s website instead of just U.S. Mail.
- Courts are more closely scrutinizing class action settlement agreements because: (1) parties want to expand the class and claims being released beyond the scope of the initial complaint following settlement discussions; (2) defendant’s agreement not to object to plaintiff counsel’s fees can be evidence of collusion; (3) if interests are divergent between FRCP Rule 23(b)(2) and FRCP Rule 23(b)(3) classes, both classes would need to have separate counsel or else there would be inadequate representation; (4) courts are rejecting “kicker” provisions, where any money reverts to defendant if the court does not approve plaintiff counsel’s entire fees or if class members do not cash checks; and (5) courts reject settlements when cy pres provision is not pertinent to the issue raised by the class. As such, counsel should no longer expect the court to rubber-stamp the parties preliminary settlement agreement.
- Even though the U.S. Supreme Court’s opinion in Clapper v. Amnesty, 133 S.Ct. 1138 (2013) stands for the proposition that no recovery is allowed for injuries that have not in fact occurred, even if they appear likely or probable, more circuit courts are allowing data breach class actions to proceed if there is an increased risk of fraudulent charges or identity theft. However, there has not yet been a single case where plaintiffs certified a class action in a data breach case, except for settlement purposes.
- Class members must be definite and ascertainable at class certification stage. There are three ways to achieve ascertainability: (1) easily identifiable class members; (2) objective criteria to define the class; or (3) class does not include people who did not suffer a common injury. Cases are currently pending in the 9th Circuit to further clarify this ascertainability analysis.
- Even though class actions are rarely tried to verdict, at trial, defense counsel should focus on any differences between named plaintiff’s claims and other class members to show lack of commonality and that individual interests predominate. Conversely, plaintiff’s counsel will want to have both named class representatives and absent class members testify to generate more sympathy with the jury.
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