Class Action Issues Update Summer 2015

Class actions play a critical role in the enforcement of the antitrust laws, ensuring that the private damages remedy serves its intended function of deterring antitrust violations and compensating victims.[1]  Indeed, a large swath of the harm inflicted by cartels would go unremedied (and hence undeterred) without class actions.  It is no secret that, for many years, the class-action device has been under assault from certain business groups, and that this assault has resulted in judicial decisions making class actions—antitrust and otherwise—more costly and difficult to bring.

II.        Offers Of Judgment And Mootness  
In the upcoming term, the Supreme Court will also consider whether defendants can defeat class actions by “picking off” the proposed class representatives with an offer of complete relief for the representative’s individual claim, even when the offer to settle is rejected.  Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (May 18, 2015) (No. 14-857) (granting certiorari petition).  Specifically, the Court will consider whether a class representative’s claim is mooted by an offer of complete individual relief before the class is certified, an issue left open in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013).  For the reasons stated in Justice Kagan’s dissent for four justices in Genesis Healthcare, an unaccepted offer is a legal nullity that should not moot a class representative’s claim, let alone the claims of the class. Campbell-Ewald involves statutory damages under the Telephone Consumer Protection Act for unwanted text messages.

III.      Ascertainability 
Some courts have adopted a demanding “ascertainability” requirement as a precondition for class certification, requiring not only that the class definition be based on objective criteria, but also that an “administratively feasible” method exists for identifying individual class members and ascertaining their class membership.  The heightened ascertainability requirement has no basis in Rule 23 and poses a particular threat to consumer class actions.

For example, a divided Third Circuit endorsed the heightened requirement in Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), in which it vacated certification of a consumer class that would have relied on affidavits of class members in the absence of receipts.  In In re Wellbutrin XL Antitrust Litigation, No. 08-2433, 2015 WL 3970858 (E.D. Pa. June 30, 2015), a pay-for-delay case, the court decertified the indirect-purchaser class because it was not convinced that sufficient records existed or were obtainable to ascertain whether individual consumers were members of the class.  In Jones v. ConAgra Foods, Inc., No. C 12-01633, 2014 WL 2702726 (N.D. Cal. June 13, 2014), the court also found ascertainability was not met in a consumer class that relied on affidavits.  But in Byrd v. Aaron’s Inc., 784 F.3d 154, 171 (3d Cir. 2015), the court reversed the denial of class certification, concluding that “Carrera does not suggest that no level of inquiry as to the identity of class members can ever be undertaken.”

IV.       Cy Pres
Some “tort reform” groups are on a campaign to eliminate or sharply restrict cy pres.[3] While cy pres can be subject to abuse, critics apparently see the elimination or restriction of cy pres as a way to eliminate small-dollar consumer class actions or make them less attractive (for example, by not including a cy pres award in the amount of the recovery for purposes of calculating attorneys’ fees).  Perhaps responding to the criticism, some courts have unnecessarily restricted the use of cy pres as part of class settlements.

For example, In re BankAmerica Corp. Securities Litig., 775 F.3d 1060 (8th Cir. 2015), the court held that the district court erred by not requiring that funds unclaimed after two distributions be redistributed to original claimants, because it was feasible to do so even though original claims process was riddled with problems and delays.  The Chief Justice has expressed skepticism of cy pres as part of class settlements, noting “fundamental concerns surrounding the use of such remedies in class action litigation,” and that in a “suitable case, this Court may need to clarify the limits on the use of such remedies.”  Marek v. Lane, 134 S. Ct. 8 (2013) (Roberts, C.J., concurring in the denial of certiorari).  The AAI has been active in urging a responsible approach to cy pres and will continue to do so in the courts and other forums.[4]

V.        Class-Action Waivers
The AAI has been active in trying to halt the Supreme Court’s march toward making class-action waivers in arbitration agreements per se enforceable.  Our efforts to date have not met with success.  After American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), some critics have predicted the eventual demise of direct purchaser antitrust class actions.  Professor Elhauge makes the point that “Given the Italian Colors decision, it is hard to see why all businesses would not at least insert arbitration clauses into their contracts that preclude class arbitration.”[5]  Others suggest that “producers of almost any product can now bind purchasers to contractual language,” even if the purchasers are indirect, although “empirical evidence does not yet bear out a flight to class action waivers in the consumer and employment context”.[6]

The Supreme Court will take up yet another class-action waiver case, DirecTV v. Imburgia, 135 S. Ct. 1547 (March 23, 2015) (No. 14-462) (granting certiorari petition), which involves the question of whether a class-action waiver is enforceable in an arbitration agreement that incorporates state law where the law would bar enforcement but is preempted.

VI.       Proposed Legislation 
The U.S. House of Representatives is considering H.R. 1927, the “Fairness in Class Action Litigation Act,” which would effectively eviscerate consumer, antitrust, employment, and civil rights class actions.  The bill bars class certification unless proponents demonstrate, based on a “rigorous analysis,” that each person in a class has suffered “the same type and scope of injury.”  The AAI has signed on to letters with numerous public-interest groups opposing the bill.

VII.     Advisory Committee on Civil Rules 
The Rule 23 subcommittee of the Advisory Committee on Civil Rules is considering whether to recommend that work begin on possible class action amendments.  Toward that end, in April 2015 the subcommittee presented “conceptual sketches” of some possible amendments, with the intention of presenting drafts for possible amendments to the full committee at its Fall 2015 meeting.  The sketches cover settlement approval criteria, settlement class certification, cy pres, objectors, Rule 68 offers and mootness, issue classes, and notice.

As referenced above, the AAI submitted a letter on cy pres to the subcommittee, and is participating with a coalition of like-minded groups to monitor and provide input into the process.  So far, the subcommittee’s approach seems even-handed, but critics of class actions have sharply criticized the conceptual sketches.[7]

******

Comments or suggestions for amicus participation should be directed to AAI Vice President and General Counsel Richard Brunell at rbrunell@antitrustinstitute.org or 202-600-9640.  For more information about AAI’s Private Enforcement Conference, go to www.antitrustinstitute.org.