The American Antitrust Institute (AAI) seeks to preserve the effectiveness of antitrust class actions as a central and vital component of private antitrust enforcement.[1] As part of its efforts, AAI issues periodic updates on developments in the courts and elsewhere that may affect this important device for protecting competition, consumers, and workers. This update covers developments since our Summer 2023 update and includes the following new decisions:

• Ascertainability: Evans v. Brigham Young University (BYU), No. 22-4050, 2023 WL 3262012 (10th Cir. May 5, 2023), In re White, 64 F.4^th 302 (D.C. Cir. 2023).
• “Fail-Safe” Class Definitions: In re White, 64 F.4^th 302 (D.C. Cir. 2023), Fitzmorris v. Weaver, 2023 DNH 144 (D.N.H. 2023).
• Incentive Payments: Hawes v. Macy’s Inc., No. 1:17-CV-754, 2023 U.S. Dist. LEXIS 226617 (S.D. Ohio Dec. 20, 2023).
• Mandatory Arbitration Clauses: Fraga v. Premium Retail Services, Inc., No. 21-10751-WGY, 2023 U.S. Dist. LEXIS 215862 (D. Mass. Dec. 5, 2023), Bissonnette v. LePage Bakeries Park St., LLC, 144 S. Ct. 905 (2024).
• Motions to Intervene: Habelt v. iRhythm Techs., Inc., 83 F.4^th 1162 (9th Cir. 2023).
• Attorney’s Fees: In re Wawa, Inc. Data Sec. Litig., 85 F.4th 712 (3d Cir. 2023), Plaintiff-Appellee v. Fieldale Farms Corp. (In re Broiler Chicken Antitrust Litig. End User Consumer), 80 F.4th 797 (7th Cir. 2023).
• Cy Pres: Hyland v. Navient Corp., 48 F.4^th 110 (2d Cir. 2022), Jones v. Monsanto Co., 38 F.4^th 693 (8^th Cir. 2022), Joffe v. Google, Inc. (In re Google Inc. St. View Elec. Communs. Litig.), 21 F.4th 1102 (9th Cir. 2021).

Access the Class Action Issues Update Spring 2024 PDF.

I. CLASSES CONTAINING UNINJURED CLASS MEMBERS 

For several years, we have been following an ongoing debate in the federal courts over the certification of classes containing uninjured class members. In our Summer 2023 update, we noted that Google successfully petitioned for interlocutory appeal of a district court order certifying a class containing uninjured members in In re Google Play Antitrust Litigation, No. 23-15285 (9th Cir. 2023). Google claimed that the district court failed to conduct a “rigorous analysis” to determine whether the presence of uninjured class members defeats predominance under Rule 23. Google argued that, under a rigorous analysis, (1) the plaintiffs must carry the burden of proving the class does not include a “great number” of uninjured class members, and (2) the court must identify and evaluate any individualized issues.

The appeal will not be heard because the parties have settled. Google has agreed to pay Android users $700 million.

II. ASCERTAINABILITY

For several years, we have followed a circuit split over whether Rule 23 contains a heightened ascertainability requirement under which class plaintiffs must plead and prove an administratively feasible mechanism for identifying class members. In our Winter 2022 update, we noted that the Third Circuit, where the heightened ascertainability requirement first gained credence, had been steadily eroding the requirement in a series of cases. However, in our Summer 2023 update, we noted that the court in In re Niaspan Antitrust Litig., 67 F.4^th 119 (3d Cir. 2023), reaffirmed its heightened ascertainability requirement and upheld a denial of class certification on ascertainability grounds. Since that update, the Third Circuit has rejected a petition for en banc rehearing in Niaspan.

As we noted in our Winter 2022 update, the First and Fourth Circuits have joined the Third Circuit in adopting a heightened ascertainablity requirement.[2] The Second, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits, in contrast, have rejected any heightened ascertainability requirement.[3] The Fifth, Tenth, and D.C. Circuits have yet to explicitly adopt a position.

In May 2023, in an unpublished decision, the Tenth Circuit signaled its awareness of the issue in Evans v. Brigham Young University (BYU), No. 22-4050, 2023 WL 3262012 (10th Cir. May 5, 2023). In upholding a district’s refusal to certify a class of  2020 BYU students who were required to pay the full price of in-person classes despite being forced to attend online during the COVID-19 pandemic, the court alluded to the circuit split on heightened ascertainability. Because the class definition failed with or without a heightened ascertainability standard, however, the court declined to decide the applicable standard.

The D.C. Circuit, in In re White, 64 F.4^th 302 (D.C. Cir. 2023), also alluded to the heightened ascertainability requirement without addressing it. The court recognized a connection between the alleged requirement and the issue of so-called “fail-safe” classes, discussed below in Part III. The lower court had denied class certification for an allegedly fail-safe class of hotel workers who claimed they were improperly denied vested retirement interests, where the merits of the case turned on whether the interests were in fact vested. Citing to Afghan & Iraqi Allies Under Serious Threat Because of Their Faithful Service to the United States v. Pompeo, 334 F.R.D. 449 (D.D.C. 2020), the court observed that defendants’ arguments urging condemnation of fail-safe classes may “strain” against their arguments for adopting the “implied ascertainability requirement that this circuit has never addressed.”

III.       “FAIL-SAFE” CLASS DEFINITIONS

In In re White, the D.C. Circuit also breathed new life into a longstanding circuit split over the viability of fail-safe classes under Rule 23. A class is typically said to be fail-safe if a merits determination is required to determine class membership. Such classes create a risk of unfairness to defendants because individual class members may either win, or, by virtue of losing, be defined out of the class, thereby escaping the bars of res judicata and collateral estoppel.

Many circuits have expressed skepticism of fail-safe classes, but they differ in their treatment. Some, as in In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015), have implied there is a rule against fail-safe classes; some, as in Rodriguez v. Countrywide Home Loans, Inc. (In re Rodriguez), 695 F.3d 360 (5th Cir. 2012), reject a rule against fail-safe classes as atextual; and some, as in Messner v. Northshore Univ. HealthSystem, 669 F.3d 802 (7th Cir. 2012), recognize problems with fail-safe classes but encourage lower courts to cure them rather than deny class certification.

In In re White, the D.C. Circuit rejected a rule against fail-safe classes, citing the text of Rule 23. The court explained that “the textual requirements of Rule 23 are fully capable of guarding against unwise uses of the class action mechanism.” It also encouraged courts to cure fail-safe classes, explaining that “the solution for cases like these is for the district court either to work with counsel to eliminate the problem or for the district court to simply define the class itself.” Quoting the Seventh Circuit’s decision in Messner, the court held that “the problem can and often should be solved by refining the class definition rather than by flatly denying class certification.” It continued, “rather than reject a proposed class definition for a readily curable defect based on an unwritten criterion, a district court should either define the class itself or, perhaps most productively, simply suggest an alternate class definition and allow the parties to object or revise as needed.”

In November 2023, a district court in the First Circuit, which some have characterized as maintaining a rule against fail-safe classes, held that this rule, if it exists, does not apply to Rule 23(b)(2) classes in suits for injunctive or declaratory relief. In Fitzmorris v. Weaver, 2023 DNH 144 (D.N.H. 2023), the district court said, “the First Circuit has commented in dicta on the ‘inappropriateness of certifying what is known as a “fail-safe class,”’ but has never held that class certification can be denied on this basis where the requirements of Rule 23 are otherwise satisfied.” The court continued, “Regardless, even if there is an implied prohibition against fail-safe classes, there is no indication that such a prohibition would extend to (b)(2) classes.” The court noted that it could not find any circuit court cases “denying certification of a (b)(2) class that otherwise satisfies the requirements of Rule 23 solely because it constitutes a fail-safe class.” Although it recognized that certifying fail-safe (b)(2) classes can raise fairness concerns, the court held that “the way to guard against these concerns is to ‘apply the terms of Rule 23 as written,’ which are carefully designed to confer sufficient guarantees of fairness on class action defendants.” 

IV. INCENTIVE AWARDS FOR CLASS MEMBERS 

Since our Fall 2020 update, we have been following unusual developments surrounding the legality of incentive awards for lead plaintiffs in class action settlements. In 2020, the Eleventh Circuit in Johnson v. NPAS Sols., LLC, 875 F.3d 1244 (11th Cir. 2020), unexpectedly held that incentive awards paid to lead class plaintiffs—a mainstay of antitrust and other class actions for decades—are unlawful under 19th century Supreme Court precedent. As discussed in our Fall 2022 and Summer 2023 updates, the Ninth Circuit rejected the Eleventh Circuit’s analysis and affirmed the legality of incentive awards in In re Apple Inc. Device Performance Litig., 50 F.4th 769 (9th Cir. 2022).

The First Circuit in Murray v. Grocery Delivery E-Servs. USA Inc., 55 F.4th 340 (1st Cir. 2022), also allowed for incentive payments, explaining that it was “follow[ing] the collective wisdom of courts over the past several decades.” The court reasoned that “incentive payments remove an impediment to bringing meritorious class actions and fit snugly into the requirement of Rule 23(e)(2)(D) that the settlement ‘treats class members equitably relative to each other.’”

As noted in our Summer 2023 update, the Second Circuit has also upheld the legality of incentive awards in the wake of Johnson, although at least one panel appeared to be persuaded by the Eleventh Circuit’s reasoning. In Fikes Wholesale, Inc. v. Visa U.S.A., Inc., 52 F.4th 704 (2d Cir. 2023), the panel found the challenged incentive payment legal under binding Second Circuit precedent but suggested the circuit should reconsider en banc whether incentive payments are legal in light of the precedent cited in Johnson. But in Moses v. The New York Times Company, 79 F.4th 235 (2d Cir. 2023), a different panel rejected the rationale of Johnson and affirmed the legality of an incentive award. Since our last update, the Second Circuit has not addressed the issue en banc. Other district courts in the Second Circuit have followed Moses and rejected Fikes, continuing to allow incentive awards.[4]

The Sixth Circuit has not considered incentive awards since the Eleventh Circuit’s Johnson ruling. However, the district court in Hawes v. Macy’s Inc., No. 1:17-CV-754, 2023 U.S. Dist. LEXIS 226617 (S.D. Ohio Dec. 20, 2023), recently rejected arguments that incentive awards lead to inequitable plaintiff treatment in violation of Rule 23. After surveying other circuit decisions, including Johnson, the court was “persuaded by the consensus of authority” that incentive awards are legal. The district court cited “pragmatic reasons” supporting the use of incentive awards, including inducing named plaintiffs to participate in suits when they would otherwise be economically disincentivized from bringing a legally valid claim.

The Supreme Court has declined to review cases involving the legality of incentive awards three times.

V. CLASS ACTION WAIVERS IN MANDATORY ARBITRATION CLAUSES 

Since our Fall 2016 update, we have been tracking the use of mandatory arbitration clauses in employment agreements, which the Supreme Court upheld in a 5-4 decision in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018). Mandatory arbitration agreements often include forced class action waivers that may prevent class litigation and class arbitration. In our Spring 2019 update, we addressed the Supreme Court’s decision in New Prime, Inc. v. Oliveria holding that the Federal Arbitration Act (FAA) does not compel courts to enforce private arbitration agreements involving “contracts of employment” with “transportation workers,” which are expressly excluded from the FAA’s coverage provided the workers are “engaged in foreign or interstate commerce.”

Since our Fall 2020 update, we have been tracking a circuit split over how the “foreign or interstate commerce” requirement affects the scope of the transportation-worker exclusion, particularly as applied to gig economy workers. In our Summer 2022 update, we noted that the Supreme Court unanimously affirmed the Seventh Circuit in Saxon v. Southwest Airlines, 142 S. Ct. 1783 (2022). Justice Thomas, writing for the Court, held that a “class of workers” under the FAA is defined by the work the workers perform, not the business of their employer. And the class is “engaged in foreign or interstate commerce” for purposes of the FAA exclusion if the workers are “directly involved in transporting goods across state or international borders.” The analysis, the Court held, requires a contextual inquiry into whether the employees “are actually engaged in interstate commerce in their day-to-day work.” To be “engaged in foreign or interstate commerce” under § 1, the class of workers must “play a direct and ‘necessary role in the free flow of goods’ across borders,” which is to say the workers must “be actively ‘engaged in transportation’ of those goods across borders via the channels of foreign or interstate commerce.” The Court said only that “[w]e recognize that the answer will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders.”

The First, Second, Fifth and Ninth Circuits have applied Saxon’s guidance on the FAA exclusion with varying outcomes. The Fifth Circuit in Lopez v. Cintas Corp., 47 F.4th 428 (5th Cir. 2022), held that last-mile delivery drivers did not qualify for the FAA exclusion because they were not involved in “interstate commerce.”  The court reasoned that once the goods at issue arrived at a Houston warehouse and were unloaded, “anyone interacting with those goods was no longer engaged in interstate commerce.”

In contrast, the Ninth Circuit, in Carmona v. Domino’s Pizza, LLC, 21 F.4th 627 (9th Cir. 2021), held that Domino’s last-mile delivery drivers qualified for the FAA exclusion because they are “engaged in a ‘single, unbroken stream of interstate commerce’ that renders interstate commerce a ‘central part’ of their job description.” In October 2022, the Supreme Court vacated and remanded Carmona for further consideration in light of Saxon. Since our last update, the Ninth Circuit, on remand, 73 F.4th 1135 (9th Cir. 2023), has again rejected Domino’s motion to compel arbitration, finding no conflict between the Supreme Court’s decision in Saxon and a previous Ninth Circuit precedent, Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020), which had informed the since-vacated opinion. The Ninth Circuit reasoned that the Domino’s drivers were engaged in interstate commerce because they, “like the Amazon package delivery drivers [in Rittmann], transport [interstate] goods for the last leg to their final destinations.”

As discussed in our Fall 2022 update, the Second Circuit in Bissonnette v. LePage Bakeries Park St.,, 49 F.4th 655 (2d Cir. 2022), on rehearing after Saxon, used a different rationale to hold that truck drivers transporting baked goods did not qualify for the FAA exclusion. The court found that moving goods between locations did not qualify the driver as a “transportation worker” under the FAA. According to the court, the decisive fact was that the purchasers of the products at issue were buying the goods, not the movement of them. Employment “in the transportation industry,” according to the Second Circuit, was a necessary (albeit not sufficient) condition for plaintiffs to successfully claim the FAA exclusion.

In March 2023, the First Circuit in Fraga v. Premium Retail Services, Inc., 61 F. 4th 228 (1st Cir. 2023), rejected Bissonnette, creating a circuit split. The court reversed and remanded a lower court decision compelling arbitration for a putative class of merchandisers who delivered their employer’s marketing materials to client stores. The court did not agree that working in the transportation industry is a threshold requirement to qualify for the FAA exclusion. Instead, it emphasized that Saxon focuses on the kind of work done, not the employer. An intrastate trip may be “part of an integrated interstate journey,” and “the contractual relationships among the various actors play an important role in determining” whether that is so.

This approach, the First Circuit explained, is consistent with circuit precedent. In Waithaka v. Amazon.com, Inc., 966 F.3d 10, 26 (1st Cir. 2020), where the last mile delivery drivers had a contractual relationship with Amazon (i.e. the entity engaged in interstate commerce), the deliveries were part of an “integrated” interstate journey. By contrast, in Cunningham v. Lyft, Inc., 17 F.4^th 244 (1st Cir. 2021), where Lyft drivers transporting airline passengers from Logan Airport had no contractual relationship with the airlines, the drivers did not participate in an integrated interstate journey.

Since our last update, the district court on remand in Fraga, No. 21-10751-WGY, 2023 U.S. Dist. LEXIS 215862 (D. Mass. Dec. 5, 2023), in an opinion by former Chief Judge William G. Young, held that the plaintiff class was not protected by the FAA exclusion. Applying the appellate court’s framework, the district court held that the frequency with which workers perform activities closely related to interstate transportation, as well as the intrastate or interstate character of the work, are both relevant. Here, the plaintiffs failed to prove they participated in such activities with “anywhere near the frequency” of the plaintiffs in Saxon, who performed up to three shifts per week, or in Canales v. CK Sales Co., LLC, 67 F.4th 38 (1st Cir. 2023), where the plaintiffs performed at least 50 hours per week. Moreover, the merchandisers’ transportation of advertising materials was an “incidental aspect of their job,” and accordingly it was “not ‘so closely related to interstate transportation as to be practically a part of it.’”

Despite ruling for the employer, the court criticized the current state of U.S. arbitration policy, observing that “[a] majority of the Supreme Court has barred the lower courts from any meaningful role in adjudicating most employer-employee disputes where there is an employer-imposed mandatory arbitration agreement.” The court further lamented that “[w]hat ought be a quick preliminary determination is becoming the main event,” and “[n]o principled distinction exists today among those rights which have unfettered access to courts and juries.” The court observed a “sad irony” insofar as two and one half years of “extensive judicial activity” have passed, none of which have addressed the merits of the dispute, yet “this case would long since have been resolved” if not for the “‘myth’ that arbitration is either faster or cheaper than a well-run federal district court where employees have access to a jury of their peers.”

On April 12, 2024, the Supreme Court ruled in Bissonnette. In a unanimous opinion by Justice Roberts, the Court rejected the Second Circuit’s reasoning, resolving the circuit split in favor of Fraga. Quoting from Saxon, the Court reiterated that the language of Section 1 of the FAA “focuses on ‘the performance of work’ rather than the industry of the employer,” and classes of workers “are connected by what they do, not for whom they do it.” Accordingly, the Court held, “A transportation worker need not work in the transportation industry to fall within the exemption from the FAA provided by §1 of the Act.” The Court vacated the Second Circuit’s opinion and remanded for consideration of alternative grounds raised in favor of arbitration.

VI. CLASS MEMBER MOTIONS TO INTERVENE IN CLASS PROCEEDINGS 

In our Fall 2022 update, we discussed the Fifth Circuit’s holding in Guenther v. BP Ret. Accumulation Plan, 50 F.4^th 536 (5^th Cir. 2022), which addressed grounds for intervention by class members who disagree with the litigation strategy of lead counsel for class plaintiffs. The court found that a successful motion to intervene under FRCP 24(a)(2) depended on overcoming a presumption that the movant and the class plaintiffs “share the same ultimate objective,” and strategic differences were insufficient to mount a successful challenge to the adequacy of the representation.

Since our last update, the Ninth Circuit in Habelt v. iRhythm Techs., Inc., 83 F.4^th 1162 (9th Cir. 2023), also addressed the issue of class member standing to intervene. Habelt was the first filer and original named plaintiff in a securities fraud class action brought under the Private Securities Litigation Reform Act (PLSA). Under the PLSA, the district court selects the lead plaintiff after determining which plaintiff is most capable of adequately representing the interests of the class members, and the court need not select the first filer or original named plaintiff. Here, the district court chose another plaintiff, the Public Employees’ Retirement System of Mississippi (PERSM), over Habelt, and PERSM subsequently amended the complaint. The case was dismissed prior to class certification, and PERSM did not appeal. Habelt then sought to intervene to file an appeal on behalf of the class.

The Ninth Circuit dismissed Habelt’s appeal for lack of jurisdiction. The court held that Habelt lacked standing because the class had not yet been certified, meaning Habelt was not a party when the case was dismissed. After a class is certified, the court explained, “an unnamed member of a certified class may be considered a party for the [particular] purpos[e] of appealing an adverse judgment.” But, the court held, “‘the definition of the term “party”’ does not cover an unnamed class member ‘before the class is certified.’”

Habelt also maintained he was a party insofar as he filed the initial complaint and was listed in the case caption, but the court disagreed. “[T]he caption of an action is only the handle to identify it,” the court explained, and “[f]or that reason, ‘[a] person or entity can be named in the caption of a complaint without necessarily becoming a party to the action.’” Habelt’s having filed the initial complaint was unavailing because the initial complaint was extinguished by PERSM’s amended complaint, which made clear that PERSM was the only operative plaintiff prior to class certification.

VII. CALCULATING ATTORNEYS’ FEES

In our last several updates, we have been following notable circuit court decisions addressing attorney fee awards in class action settlements. In our Fall 2020 update, we noted that the Sixth Circuit n Linneman v. Vita-Mix Corp., 970 F.3d 621 (6th Cir. 2020), aligned itself with the majority of jurisdictions in permitting lodestar calculations of attorney’s fees in coupon settlements. It nevertheless found several flaws with the district court’s approval of such an award. First, the district court gave too much weight to counsels’ affidavits describing their backgrounds, billing rates, and involvement in the case and too little weight to the pre-calculated local billing rates and requested rates claimed by class counsel. In addition, the Sixth Circuit faulted the district court for awarding a multiplier without the appropriate finding of exceptional circumstances, inappropriately including hours class counsel worked after rejecting an arguably reasonable settlement offer and failing to make specific findings about the value of the settlement.

In our Summer 2023 update, we noted that the Ninth Circuit in Lowery v. Rhapsody Int’l Inc., 69 F.4th 994 (9th Cir. 2023),  held that a district court must assess an award of attorney fees relative to the “the actual benefit provided to the class,” not the “maximum that hypothetically could have been paid.” By that metric, a fee award that was thirty times larger than the benefits received by plaintiffs, after adjustments, was unreasonable. In addition, the Second Circuit in Moses v. The New York Times Company, Docket No. 21-2556-cv (2d Cir. August 17, 2023), reversed a district court for finding attorney fees negotiated at arm’s length presumptively fair without due consideration of other independent factors.

Since our last update, the Third Circuit in In re Wawa, Inc. Data Sec. Litig., 85 F.4th 712 (3d Cir. 2023) offered “refreshed guidance” on fee petitions when it vacated a district court’s grant of a fee award based on an inadequate “reasonableness” determination. First, the court determined that the district court was incorrect in assuming that the reasonableness of the fee award must be measured against the entirety of the funds made available to the class. It instructed the lower court to consider a potentially smaller class benefit based on the “amounts distributed to and expected to be claimed by the class.” While the Third Circuit acknowledged that the practice of assessing actual recovery is not required by Rule 23, the court characterized it is a “sensible starting line to begin the fee award analysis.”

Second, the Third Circuit criticized the district court for insufficient scrutiny of side agreements between class counsel and the opposing party. A clear sailing provision that prevented Wawa from challenging class counsels’ fee request, while not an automatic bar to settlement, deserved a “closer look” because it raised concerns about collusion between defendants and class counsel. A fee reversion provision which would have allowed Wawa to reclaim any funds not distributed to the class also should have been investigated even though the provision was removed in the final settlement. The court instructed the lower court to explore whether the provision, even if temporary, “suggests coordinated rather than zealous advocacy.”

In Plaintiff-Appellee v. Fieldale Farms Corp. (In re Broiler Chicken Antitrust Litig. End User Consumer), 80 F.4th 797 (7th Cir. 2023), the Seventh Circuit endorsed a district court’s methodology for determining fee awards by “estimating the terms of the contract that private plaintiffs would have negotiated with their lawyers, had bargaining occurred at the outset of the case (that is, when the risk of loss still existed).” However, the court disagreed with the lower court’s factual evaluation of “what [fee] bargain would have been struck ex ante.” First, the court reasoned, the district court should not have discounted bids by class counsel in other cases on grounds that the bids (1) were made more than seven years prior and (2) were based on declining fee structures disfavored in the circuit. The court said that bids at the start of the litigation are “ordinarily good predictors” of an ex ante bargain. Moreover, it stated that the circuit “has never categorically rejected  […] declining fee scale award structures.” Rather, it has maintained that “the appropriateness of a declining fee scale award structure may depend on the particulars of the case.”

Even bids made by class counsel in the Ninth Circuit, which maintains a “megafund rule,” should not be ignored, according to the court. The Ninth Circuit’s megafund rule automatically limits fees when recovery exceeds a certain size threshold, and the district court found Ninth Circuit bids irrelevant because the Seventh Circuit rejects the megafund fule. The court found that, notwithstanding the artificial fee limits created by the rule, class counsels’ “economic choice” to bid for Ninth Circuit cases reflects a willingness to accept compensation levels that may be probative of the bargain class counsel would have struck ex ante.

VIII. CY PRES 

We last addressed courts’ treatment of cy pres awards in our Fall 2019 update, where we discussed the Supreme Court’s per curium decision in Frank v. Gaos, 139 S. Ct. 1041 (2019). The Gaos case presented the question of whether a settlement is compliant with FRCP 23(e)(2) if it includes a cy pres award but no direct compensation to unnamed class members. The Court did not reach the merits. Rather, it vacated and remanded for a determination whether the plaintiffs had standing. Justice Thomas, dissenting, would have reached the merits and reversed the Ninth Circuit decision approving the cy pres-only settlement. He argued that cy pres-only settlement classes should not be certified because cy pres payments do not benefit the class.

Since then, the Court has declined to take up the issue. In April and May of 2023, it denied cert in two cases raising the same issue, Hyland v. Navient Corp., 48 F.4^th 110 (2d Cir. 2022) and Jones v. Monsanto Co., 38 F.4^th 693 (8^th Cir. 2022). In Hyland, the Second Circuit affirmed the district court’s approval of a class action settlement that provided no monetary relief other than a cy pres award. The court rejected appellants’ arguments that cy pres awards have no benefit to class members. It followed the First, Third, and Ninth Circuits, which recognize and credit an indirect benefit to the class provided there is an appropriate “nexus” between the cy pres award and the plaintiff’s claims. Here, the court held, the nexus requirement was met.

The court also rejected appellants’ arguments that (1) the funds should have been distributed to the class insofar as the class members suffered damages, and (2) the award violates the First Amendment. Here, because the class members did not provide monetary damages releases, they remained free to pursue individual damage actions against the defendant. And this settlement between private parties lacked the requisite state action to support a First Amendment claim.

In Jones v. Monsanto Co., 38 F.4^th 693 (8^th Cir. 2022), the Eighth Circuit addressed challenges to a cy pres award based on the size of the award, First Amendment concerns, and the effect of the award on attorney fee calculations. The court rejected the size-based challenged because (1) sufficient efforts were made to locate more class members and (2) leftover funds need not go to existing class members. Here, the lower court had satisfied its obligation to determine “the measure of class members’ damages and whether they had been fully compensated before granting a cy pres distribution.”

As to the First Amendment challenge, the Eighth Circuit used different reasoning to reach the same result as the Second Circuit in Hyland. The court found that since the residual funds in the settlement did not belong to any individual class members, the distribution of these funds through a cy pres award did not constitute speech.

Finally, the court held that the cy pres award was appropriately included in the total settlement amount for purposes of calculating attorney fees. These funds were available to the class, and the attorneys should not be faulted because some class members did not file claims.

In the aftermath of the Supreme Court’s per curium opinion, the Ninth Circuit has maintained the same approach it adopted in Gaos. In 2021, in Joffe v. Google, Inc. (In re Google Inc. St. View Elec. Communs. Litig.), 21 F.4th 1102 (9th Cir. 2021), the court held that the “indirect benefits the class members enjoy through the cy pres provision,” together with injunctive relief, were sufficient for the district court to find the settlement ‘fair, reasonable, and adequate.’” The court categorically “reject[ed] the suggestion that a district court may not approve a class-action settlement that provides monetary relief only in the form of cy pres payments to third parties.”

In Joffe, the Ninth Circuit also rejected a First Amendment objection. The court held that cy pres awards do not compel class member speech because any member who disagrees may opt-out of the class. The opt-outs have no further claim on the settlement funds, so the award is not their speech. The court also held that cy pres awards may be properly included in the analysis for determining attorney’s fees.

Access the Class Action Issues Update Spring 2024 PDF.

[1] The American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society.  We serve the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.  For more information, see https://www.antitrustinstitute.org.  Comments on this update or suggestions for AAI amicus participation should be directed to Kathleen Bradish, kbradish@antitrustinstitute.org.

[2] See In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015); EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014).

[3] See In re Petrobas Sec. Litig., 862 F.3d 250, 265 (2d Cir. 2017); Rikos v. The Proctor & Gamble Co., 799 F.3d 497 (6th Cir. 2015); Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015); Sandusky Wellness Center, LLC v. Medtox Scientific, Inc., 821 F.3d 992, 996 (8th Cir. 2016); Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1132-33 (9th Cir. 2017); Cherry v. Dometic Corp., 986 F.3d 1296, 1304 (11th Cir. 2021).

[4] See, e.g., Reyes v. Summit Health Mgmt., LLC, No. 22-CV-9916 (VSB), 2024 U.S. Dist. LEXIS 21061 (S.D.N.Y. Feb. 6, 2024); Kurtz v. Kimberly-Clark Corp., No. 14-CV-1142 (PKC) (RML), 2024 U.S. Dist. LEXIS 8711 (E.D.N.Y. Jan. 17, 2024); Reynolds v. Marymount Manhattan Coll., No. 1:22-CV-06846-LGS, 2023 U.S. Dist. LEXIS 191993 (S.D.N.Y. Oct. 23, 2023).

The American Antitrust Institute (AAI) seeks to preserve the effectiveness of antitrust class actions as a central component of ensuring the vitality of private antitrust enforcement.[1] As part of its efforts, AAI issues periodic updates on developments in the courts and elsewhere that may affect this important device for protecting competition, consumers, and workers. This update covers developments since our Fall/Winter 2022 update.

Class Action Summary (Summer 2023)

Our Summer Class Action Update includes coverage of several new decisions from the first part of 2023, including:

• Uninjured Class Members: Van v. LLR, Inc., 61 F.4th 1053 (9th Cir. 2023), Black v. Occidental Petro. Corp., 69 F.4th 1161 (10th Cir. 2023)
• Ascertainability: In re Niaspan Antitrust Litig. 67 F.4th 118 (3d Cir. 2023).
• Incentive Payments: Fikes Wholesale, Inc. v. Visa U.S.A., Inc., 52 F.4th 704 (2d Cir. 2023); Maribel Moses v. The New York Times Company, Docket No. 21-2556-cv (2d Cir. August 17, 2023).
• Mandatory Arbitration Clauses: Fraga v. Premium Retail Services, Inc., 61 F. 4th 228 (1st Cir. 2023).
• Motions to Intervene: SEC v. LBRY, Inc., 26 F.4th 96 (1st Cir. 2023)
• Attorney’s Fees: Lowery v. Rhapsody Int’l Inc., 69 F.4th 994 (9th Cir. 2023): Maribel Moses v. The New York Times Company, Docket No. 21-2556-cv (2d Cir. August 17, 2023).

I. Classes Containing Uninjured Class Members

In our past several updates, we noted the recurring debate in the federal courts over the certification of classes containing uninjured class members. The landscape has not changed significantly since we last reported on the issue in Fall/Winter 2022, but recent Ninth Circuit decisions and current 23(f) appeals may result in new developments in the second half of this year.

As we noted in the Fall/Winter 2022 update, the Supreme Court denied certiorari of StarKist Co. v. Olean Wholesale Grocery Coop., Inc, leaving intact the Ninth Circuit decision granting class certification.  The Ninth Circuit rejected a “per se” rule that there can only be a de minimis number of uninjured members in favor of a case-by-case analysis of the impact of uninjured class members for class certification. See Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 31 F.4th 651, 669 (9th Cir. 2022).

Panels in the Ninth Circuit probed what is a sufficient case-by-case analysis under Olean Wholesale in two appeals decided earlier this year.  In Bowerman v. Field Asset Services, Inc., 39 F. 4th 652 (9th Cir. 2022), the court decertified a class of workers claiming withheld overtime pay, noting that it had taken eight days to determine damages for only 11 plaintiffs. It concluded that individualized issues on damage were “prohibitively cumbersome,” and plaintiffs failed to prove that class issues predominated over individualized ones.  In Van v. LLR, Inc., 61 F.4th 1053 (9th Cir. 2023), the Ninth Circuit reached differing conclusions on three arguments the defendant made for decertification based on uninjured class members.  In a case involving improper sales tax charges, the panel rejected an argument that individual damages could be too small to support Article III standing, and it found the defendant had not substantiated arguments that some class members voluntarily paid the incorrect sales tax.  On the other hand, the court found that the defendant had substantiated its argument that some class members received discounts that offset their sales tax payments.  Noting these potentially uninjured class members, it remanded the case to the district court to analyze whether “a class member by member analysis [would] be unnecessary or workable.”

We also note that the Ninth Circuit has certified a 23(f) appeal on class certification in the In re Google Play Antitrust Litigation.  As part of this appeal, the Ninth Circuit will address questions of how to measure the impact of uninjured class members.  Defendant claims that the lower court did not conduct a “rigorous analysis” of the impact of uninjured class members as required by Olean Wholesale.  Defendant’s petition claims that “rigorous analysis” means (1) plaintiffs bear the burden of proving that there are not a “great number” of uninjured class members and (2) the court must identify what individualized injury issues may exist and how they apply to class members. Briefing is expected to be completed this summer.

Other circuits have adopted more bright-line tests.  The First, Fourth, Seventh, Eleventh, and D.C. Circuits stated that a district court should not certify a class if uninjured putative class members exceeded a de minimis number. See e.g., In re Asacol Antitrust Litig., 907 F.3d 42, 47, 54 (1st Cir. 2018); Krakauer v. Dish Network Network, L.L.C., 925 F.3d 643, 658 (4th Cir. 2019); Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 825 (7th Cir. 2012); Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1277 (11th Cir. 2019); In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619, 624-25 (D.C. Cir. 2019).

Meanwhile, the Second, Third, Fifth, Sixth and Eighth have held that courts should not certify a class with any uninjured class members. See e.g., Barrows v. Becerra, 24 F.4th 116, 128 (2d Cir. 2022); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008); Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003); Rikos v. Procter & Gamble Co., 799 F.3d 497, 505 (6th Cir. 2015); Johannessohn v. Polaris Indus., 9 F.4th 981, 987 (8th Cir. 2021).

Since our last update, the Tenth Circuit has also weighed in on the issue of uninjured class members.  In Black v. Occidental Petro. Corp., the court upheld certification of a class of private landowners holding mineral and oil interests, explicitly rejecting the “no uninjured class member” standard.  69 F.4th 1161, 1185 (10th Cir. 2023) (noting that “[t]he presence of class members who experienced varying degrees of injury, including some who were altogether uninjured, does not bar class certification.”) The Black v. Occidental Petro opinion cites favorably to the Seventh Circuit decision in Messer v. Northshore Unitv. HealthSystem describing a de minimis standard, but the Tenth Circuit did not unambiguously adopt that criterion.

II. Ascertainability

In our previous several updates, we also discussed the circuit split over whether Rule 23 contains a heightened ascertainability requirement that demands class plaintiffs plead and prove an administratively feasible mechanism for identifying absent class members. As detailed in our Spring/Summer 2021 update, the First and the Fourth Circuits have continued to impose an ascertainability requirement.  On the other hand, the Second, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits have rejected an administrative feasibility prerequisite. As referenced in our Fall/Winter 2022 update, the Fifth, Tenth, and D.C. Circuits have yet to explicitly adopt a position over heightened ascertainability.

Since our last update, the Third Circuit revisited the ascertainability requirement in In re Niaspan Antitrust Litig. 67 F.4th 118 (3d Cir. 2023).  The decision confirms that administrative feasibility remains a prerequisite of ascertainability in the Circuit, despite the apparent softening of the Circuit’s approach in recent decisions.  Those earlier decisions are described in detail in our Fall 2020 and Fall 2017 updates. In the Niaspan decision, the Third Circuit panel wrote that “[t]he ascertainability standard, including the administrative feasibility principle it contains, is true to the text, structure, and purpose of Rule 23 . . . What we call ‘ascertainability’ and ‘administrative feasibility’ is merely the way courts perform that role, a practice familiar under the civil rules.” Id. at 132.  The decision further rejected Appellants’ arguments that other circuits, including the Sixth, Seventh, Eighth, and Ninth Circuits, have dropped the ascertainabilty requirement.  Instead, the decision interpreted those circuit courts as adopting “a separate administrative feasibility requirement . . . through a rigorous analysis of Rule 23’s ‘superiority’ requirement.” Id. at 133-34 n.10.

The plaintiffs in Niaspan have petitioned for reconsideration en banc, and AAI has filed an amicus brief in support of their position. AAI’s brief argues that the Third Circuit panel erred by departing from the Third Circuit’s practical approach to the “administrative feasibility” requirement.

III. Specific Personal Jurisdiction

Since 2017, we have been tracking the lower federal courts’ application of the Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017) (“BMS”). That decision requires specific jurisdiction over all plaintiffs’ claims in the forum state for a mass action to proceed if there is otherwise no general jurisdiction.  This has raised questions as to whether the same standard will apply to class actions. If so, plaintiffs may be required to bring suits on behalf of nationwide or multi-state classes in a defendant’s home state. This would result in significant litigation advantages for corporate antitrust defendants, as well as inefficiencies.

In our Spring 2020 update, we noted that the Fifth, Seventh, and D.C. Circuits all held that BMS did not bar nationwide class actions prior to class certification, notwithstanding that specific jurisdiction may be lacking for unnamed class members. The Seventh Circuit, in an opinion by Chief Judge Wood in Mussat v. IQVIA, went further than previous circuit courts’ rulings in holding affirmatively that BMS does not apply to class actions.  The Supreme Court denied certiorari in that case.

In our Fall 2021 update, we noted that the Sixth Circuit, in Lyngaas v. Curaden AG, 992 F.3d 412 (6th Cir. 2021), had joined the Seventh Circuit in holding that “Bristol-Myers Squibb does not extend to federal class actions.” Quoting extensively from Chief Judge Wood’s opinion in Mussat, the circuit court noted that a class action is formally a single suit in which a defendant litigates against only the class representative, and the absent class members are therefore not “parties.” The court distinguished BMS by explaining that “[t]he different procedures underlying a mass-tort action and a class action demand diverging specific personal jurisdiction analyses.” Id. at 435.

As described in our Spring/Summer 2022 update, the First Circuit adopted the logic of the Sixth and the Seventh Circuit’s in its decision in Waters v. Day & Zimmermann NPS, Inc., 23 F.4th 84 (1st Cir. 2022).  The Waters decision found that BMS’s jurisdictional requirement did not apply to collective actions under the federal Fair Labor Standards Act (FLSA).  Such actions differ somewhat from Rule 23 class actions because they are “opt-in” rather than “opt-out” collective actions.  But the court cited favorably to the Sixth Circuit’s opinion in Lyngaas, adopting the logic that only the named plaintiff has “party” status.  This strongly suggests the First Circuit will follow Mussat and Lyngaas in refusing to extend BMS to class actions.

As discussed in our last update, the Third Circuit has joined with the First, Sixth and Seventh Circuit in stating that BMS does not apply to Rule 23 class actions, noting that the Supreme Court has “regularly entertained nationwide classes where the [named] plaintiffs relied on specific personal jurisdiction, without taking note of any procedural defects.” Fischer v. Fed. Express Corp., 42 F.4th 366, 375 (3d Cir. 2022). But in the same decision, the Third Circuit split from the First Circuit to find that BMS did apply to FLSA collective actions. It reasoned that the FLSA’s text, the FLSA’s legislative history, and the weight of caselaw favored treating FLSA collective actions “as ordinary in personam suits for purposes of personal jurisdiction” requiring “opt-in plaintiffs […] demonstrate the court has personal jurisdiction with respect to each of their claims Id. at 375.

The Ninth Circuit’s decisions in Moser v. Benefytt, 8 F.4th 872 (9th Cir. 2021) and Owino v. CoreCivic, Inc., 36 F.4th 839 (9th Cir. 2022), have created some confusion in this area with their rulings on waiver of personal jurisdiction when a class is certified.   A divided panel decision in Moser held that personal jurisdiction objections cannot be waived prior to class certification because it is only after certification that defendant can object to absent class members’ claims. Over the dissent of Judge Cardone, the panel majority left open the possibility that personal jurisdiction objections could be available at the class certification stage under Rule 23.  Moser was remanded, and plaintiffs filed a notice of settlement.

In Owino, three plaintiff-classes of immigrant detainees who alleged federal statutory and state labor code violations against the overseer of a private detention facility were certified by the district court. On appeal, the panel applied Moser to find that the district court erred in holding that its personal jurisdiction defense had been waived.  The panel declined to vacate the district court’s class certification order, however, holding that, on remand, the district court may consider the personal jurisdiction defense at the appropriate time.  The Ninth Circuit denied rehearing en banc.

To date, no circuit court has held that BMS bars nationwide class actions in forum states that lack personal jurisdiction over absent class members.

IV. Incentive Awards for Class Representatives

In our Fall/Winter 2022 update, we continued to follow developments related to the Eleventh Circuit’s decision Johnson v. NPAS Sols., LLC. 875 F.3d 1244 (11th Cir. 2020). Johnson held that incentive awards paid to lead class plaintiffs—a longstanding feature of antitrust and other actions—are unlawful under nineteenth-century Supreme Court precedent. In our Spring/Summer 2021, Fall 2021, and Spring/Summer 2022 updates, we noted that numerous district courts both within and outside the Eleventh Circuit, and numerous appellate panels outside the Eleventh Circuit, have rejected, distinguished, or narrowly construed Johnson to allow payment of incentive awards.

In August 2022, the Eleventh Circuit denied en banc rehearing in Johnson. Judge Pryor, joined by Judges Wilson, Jordan and Rosenbaum, authored a lengthy dissent, concluding that “[t]he panel majority opinion fundamentally undermined class action law based on a misinterpretation of two Supreme Court cases,” and “by denying rehearing en banc, our court has struck a lasting blow to class actions as a device for righting wrongs in this circuit.” The dissent also urged that, “[g]iven our failure to act, it will be up to the Supreme Court to overrule or clarify [the 1880s Supreme Court cases] to undo this problem of our making. If the Supreme Court does not act, then I urge either the Advisory Committee on Civil Rules to amend Rule 23 or Congress to enact a statute that explicitly authorizes incentive awards.” Over the dissent for rehearing en banc, the order staying the mandate in Johnson was lifted on October 17, 2022. Although the plaintiff petitioned the Supreme Court for certiorari, the Court denied certiorari in April 2023. As a result, Johnson remains the binding precedent in the Eleventh Circuit.

As we discussed in our Fall/Winter 2022 update, the Ninth Circuit rejected Johnson in In re Apple Inc. Device Performance Litig. 50 F.4th 769, 785 n.13 (9th Cir. 2022). The Ninth Circuit considered the same nineteenth-century cases and held that they did not bar incentive awards. Id. at 785. Rather, the court held that “incentive awards cannot categorically be rejected or approved,” and “[s]o long as they are reasonable, they can be awarded.” Id. at 787. The Ninth Circuit was joined by the First Circuit in affirming the permissibility of incentive awards. See Murray v. Grocery Delivery E-Servs. USA Inc., 55 F.4th 340, 353–54 (1st Cir. 2022).

Recently, the picture was complicated by the Second Circuit’s decision in Fikes Wholesale, Inc. v. Visa U.S.A., Inc., 52 F.4th 704 (2d Cir. 2023).  While the court refused to bar the class representative incentive awards, it did so only because it was compelled to follow its own precedents in Melito v. Experian Mktg. Sols. Inc. and Hyland v. Navient Co. The Second Circuit panel instead agreed in principle with the Eleventh Circuit position, and it concluded that “[s]ervice awards are likely impermissible under Supreme Court precedent,” setting the stage for future challenges. Id.

A different panel in the Second Circuit, however, affirmed the legality of incentive rewards in Maribel Moses v. The New York Times Company, Docket No. 21-2556-cv (2d Cir. August 17, 2023). That panel rejected an argument based on the Eleventh Circuit decision in Johnson not just because of the Circuit’s binding precedent in Melito, but also because it found the Eleventh Circuit’s reasoning unconvincing. The Moses panel wrote that the nineteenth century precedent relied on by the Eleventh Circuit “ha[s] been superseded, not merely by practice and usage, but by Rule 23, which creates a much broader and more muscular class action device than the common law predecessor that spawned the [earlier precedent.]” at 45.  Further, it noted that its decision is consistent with the “overwhelming majority” of circuits in agreeing that district courts are permitted to grant incentive awards.

Although the circuit split appears to be widening, the Supreme Court in April 2023 denied petitions for certiorari to review either the Eleventh Circuit or the Second Circuit’s Fikes decisions on incentive awards.

V. Class Action Waivers in Mandatory Arbitration Clauses

Beginning with our Fall 2016 update, we have been tracking the use of mandatory arbitration clauses in employment agreements, which the Supreme Court upheld in a 5-4 decision in Epic Systems Corp. v. Lewis. 138 S. Ct. 1612 (2018). Mandatory arbitration agreements often include forced-class action waivers that may prevent class litigation and class arbitration. In our Spring 2019 update, we addressed that the Supreme Court’s decision in New Prime, Inc. v. Oliveria held that the Federal Arbitration Act (FAA) does not compel courts to enforce private arbitration agreements involving “contracts of employment” with transportation workers, which are expressly excluded from the FAA’s coverage provided the workers are “engaged in foreign or interstate commerce.” 139 S. Ct. 532 (2019).

Since our Fall 2020 update, we have been tracking a circuit split over how the “foreign or interstate commerce” requirement affects the scope of the transportation-worker exclusion, particularly as applied to gig economy workers. In our Spring/Summer 2022 update, we noted that the Supreme Court unanimously affirmed the Seventh Circuit in Saxon v. Southwest Airlines. 142 S.Ct. 1783 (2022). Justice Thomas, writing for the Supreme Court, held that a “class of workers” under the FAA is defined by the work the workers perform, not the business their employer is in. Id. at 1788–89. And the class is “engaged in foreign or interstate commerce” for purposes of the FAA exclusion if the work renders the workers “directly involved in transporting goods across state or international borders.” Id. at 1789–90. The analysis, the Court held, requires a contextual inquiry into whether the employees “are actually engaged in interstate commerce in their day-to-day work.” Id. at 1788. To be “engaged in foreign or interstate commerce” under § 1, the class of workers must “play a direct and ‘necessary role in the free flow of goods’ across borders,” which is to say the workers must “be actively ‘engaged in transportation’ of those goods across borders via the channels of foreign or interstate commerce.” Id. at 1790. The Court said only that “[w]e recognize that the answer will not always be so plain when the class of workers carries out duties further removed from the channels of interstate commerce or the actual crossing of borders.” Id. at 1789 n.2.

Our Spring/Summer 2022 update noted that the Ninth Circuit’s Carmona v. Domino’s Pizza, LLC held that Domino’s delivery drivers qualify for the FAA exclusion because they are “engaged in a ‘single, unbroken stream of interstate commerce’ that renders interstate commerce a ‘central part’ of their job description.” 21 F.4th 627 (9th Cir. 2021). The losing defendant petitioned for certiorari. In October 2022, the Supreme Court granted the petition but immediately vacated and remanded back to the circuit court for further consideration in light of Saxon. Just recently, the Ninth Circuit ruled on the remanded case, . U.S. App. LEXIS 18578, at *1, *3 (9th Cir. July, 21 2023.  The court again rejected defendant-appellee Domino’s motion to compel arbitration,  finding that the Supreme Court’s decision in Saxon was not irreconcilable with its circuit precedent, Rittmann v. Amazon.com, Inc., 971 F.3d 904 (9th Cir. 2020). As a result, the Ninth Circuit reaffirmed its view that the Domino’s drivers, “like the Amazon package delivery drivers [in Rittmann], transport [interstate] goods for the last leg to their final destinations,” thereby engaging them in interstate commerce. No, 21-55009 2023 U.S. App. LEXIS 18578 at *7

In our Fall/Winter 2022 update, we discussed three decisions that narrowed the kinds of employees covered by the FAA exclusion in light of Saxon. 

First, the Second Circuit vacated a May 2022 panel opinion in light of Saxon and granted panel rehearing in Bissonnette v. LePage Bakeries Park St., LLC. 49 F.4th 655 (2d Cir. 2022). On panel rehearing, the Second Circuit affirmed that the truck drivers did not qualify for the FAA exclusion. Bissonnette v. LePage Bakeries Park St., LLC, No. 20-1681, 2022 U.S. App. LEXIS 27628, at *1 (2d Cir. 2022). The Second Circuit reasoned that, “[a]lthough the plaintiffs spend appreciable parts of their working days moving goods from place to place by truck, the decisive fact is that the stores and restaurants are not buying the movement of the baked goods, so long as they arrive. Customers pay for the baked goods themselves; the movement of those goods is at most a component of total price. The commerce is in breads, buns, rolls, and snack cakes—not transportation services.” Id. at *13.

Second, the Fifth Circuit applied Saxon to limit the scope of the FAA exclusion in Lopez v. Cintas Corp. 47 F.4th 428 (5th Cir. 2022). The Fifth Circuit held that once the goods at issue arrived at a Houston warehouse and were unloaded, “anyone interacting with those goods was no longer engaged in interstate commerce.” Id. at 433. The Fifth Circuit also noted that, unlike either seamen or railroad employees, “the local delivery drivers here have a more consumer-facing role.” Id.

Finally, we reported on the First Circuit’s decision in Immediato v. Postmates, Inc. 54 F.4th 67 (1st Cir. 2022). The First Circuit held that couriers who deliver goods from local restaurants and retailers in trips that typically span a few miles are not exempt under the FAA. Id. at 76. Applying First Circuit precedent and considering Supreme Court precedent contemporary with congressional enactment of the FAA, the First Circuit held that “once an interstate shipment arrives at a local retailer and is ‘there held solely for local disposition and use,’ the goods are no longer considered to be ‘in interstate commerce.’” Id. The court also explained that “engaged in interstate commerce” does not “extend to the intrastate sale of locally manufactured goods.” Id. at 77.

Since our last update, there has been some pushback on this trend, with the 1st and 9th circuits adopting a widened view of the FAA exclusion post-Saxon.  The First Circuit recently issued a decision that breaks with the Second Circuit to clarify that, post-Saxon, a worker need not be in a transportation industry to qualify as a transportation worker for purposes of the FAA exclusion.  In Fraga v. Premium Retail Services, Inc., 61 F. 4th 228 (1st Cir. 2023), the First Circuit emphasized that “the contractual relationships among the various actors play an important role in determining whether an intrastate trip is part of an integrated interstate journey.” It distinguished between FAA excluded workers involved in “last mile” deliveries for Amazon, where Amazon had a contractual relationship with both the transportation service and the end customer, and non-excluded Lyft drivers transporting passengers from Logan Airport, where there was no contractual relationship between the airlines and Lyft.  The Ninth Circuit decision in Caroma v. Domino’s Pizza, LLC is described above.

Since Epic Systems was decided in 2018, several legislative proposals that would fully or partially overturn the decision have circulated, including the Forced Arbitration Injustice Repeal Act (FAIR Act). The FAIR Act was reintroduced in the 118th Congress on April 27, 2023 and is substantially similar to the FAIR Act introduced by Sen. Richard Blumenthal (D-CT) and Rep. Hank Johnson (D-GA) in February 2019, and which we discussed in our Spring 2019 update. Our Spring/Summer 2022 update noted that the FAIR Act was reported out of the House Judiciary Committee on March 11, 2022, and a week later, on March 17, it passed the House 220-209, with one Republican, Rep. Matt Gaetz (FL), joining House Democrats in the majority. The 117th Congress’s FAIR Act was not acted upon in the Senate. The recent iteration of the FAIR Act remains in committee awaiting action.

VI. CLASS MEMBER MOTIONS TO INTERVENE IN CLASS PROCEEDINGS

In our Fall/Winter 2022 update, we addressed the Fifth Circuit’s standard for resolving motions to intervene by class members who disagree with the litigation strategy of counsel for class representatives.

In Guenther v. BP Ret. Accumulation Plan, class plaintiffs sued BP Corporation alleging ERISA violations stemming from BP’s acquisition of Standard Oil and the subsequent conversion of Standard Oil’s employee retirement benefits to BP retirement benefits. 50 F.4th 536 (5th Cir. 2022). After five years of litigation, on the eve of class certification, a class member who had also been involved in separate litigation against BP moved to intervene as of right. The district court, applying the circuit’s four-factor test for evaluating intervention as of right under FRCP 24(a)(2), denied the motion. The class member appealed, challenging only the district court’s finding that the fourth factor—inadequate representation—was unsatisfied. The Fifth Circuit affirmed the district court’s denial of the intervention of right.

The Fifth Circuit explained that the that the movant’s burden in satisfying the fourth factor is “minimal.” Id. at 543. The movant “must only show that the existing representation ‘may be inadequate.’” Id. Here, however, the movant did not make the requisite showing. To ensure that the fourth factor “has some teeth,” the movant “must establish ‘adversity of interest, collusion, or nonfeasance on the part of the existing party.’” Id. To establish adversity of interest, the movant must establish that “its interests diverge from the putative representative’s interests in a manner germane to the case.’” Id. As relevant here, “[d]ifferences of opinion regarding an existing party’s litigation strategy or tactics used in pursuit thereof, without more, do not rise to an adversity of interest.” Id. The court held that intervention as of right was inappropriate because the movant and the class plaintiffs “shared the same ultimate objective” and the movant “lack[ed] a distinct interest that is at risk of being adversely represented.” Id.

The Ninth Circuit in W. Watersheds Project v. Haaland held that the presumption of adequate representation when the intervenor shares the same “ultimate objective” as a party is overcome by a showing “that an existing party cannot or will not make ‘any reasonable argument’ that the intervenor would make if it were a party.” 22 F.4th 828, 841 (9th Cir. 2022).  In that case, the intervenor was able to identify three relevant arguments that the parties had not addressed.

Similar logic was used by the First Circuit to opposite effect in SEC v. LBRY, Inc. Upholding the denial of a motion to intervene, the court held that “[w]hen a proposed intervenor’s objective aligns seamlessly with that of an existing party [,] a rebuttable presumption of adequate representation attaches.” 26 F.4th 96, 99 (1st Cir. 2023). Other circuit courts generally require some showing of conflict to warrant intervention. See e.g., Planned Parenthood of Wisconsin, Inc. v. Kaul, 942 F.3d 793, 799 (7th Cir. 2019); Wineries of the Old Mission Peninsula Ass’n v. Twp. Of Peninsula, Michigan, 41 F.4th 767, 774 (6th Cir. 2022).

Across circuits, it is generally the norm that class members seeking to intervene must make a showing of “conflict” or “adversity” to demonstrate that the existing representation is inadequate.

VII. CALCULATING ATTORNEYS’ FEES

In our Fall 2020 update, we discussed recent case developments governing calculation of  attorneys’ fees. The Sixth Circuit’s decision in Linneman v. Vita-Mix Corp., 970 F.3d 621 (6th Cir. 2020) considered several questions regarding the calculation of attorneys’ fees in class-action settlements. In Linneman, the district court used a lodestar calculation to award $3.9 million ($2.2 million plus a 75 percent upward multiplier) in coupon settlement.

On appeal, defendant argued that district court erred by using a lodestar calculation to calculate fees under a coupon settlement because of § 1712 of the Class Action Fairness Act (“CAFA”). CAFA requires that, “[i]f a proposed settlement in a class action provides for a recovery of coupons to a class member, the portion of any attorney’s fee award to class counsel that is attributable to the award of the coupons shall be based on the value to class members of the coupons that are redeemed.” The Sixth Circuit disagreed and held that the CAFA inquiry “centers on the meaning of the phrase ‘attributable to the award of the coupons’ because only that ‘portion’ of the fees award must be ‘based on the value to class members of the coupons that are redeemed.’” The court recognized a circuit split but noted that the majority of circuits construe the “attributable to” language narrowly and allow lodestar calculations in coupon settlements. A minority view is expressed by the Ninth Circuit which holds that lodestar calculations are not permissible.

Defendant further argued that the district court abused its discretion in calculating the billing rate. The Sixth Circuit agreed. The Sixth Circuit follows the “community market rule,” under which the billing rate “should not exceed what is necessary to encourage competent lawyers within the relevant community to undertake legal representation.”  The court held that the district court ran afoul of the community market rule by relying on counsels’ affidavits describing their backgrounds, billing rates, and involvement in the case, and opting to split the difference between pre-calculated local billing rates and requested rates claimed to “reflect [ ] the national practice and experience” of class counsel.

The Sixth Circuit also concluded that the district court erred in three other respects. First, the district court awarded a multiplier without making a finding of “rare and exceptional circumstances” as required by Perdue v. Kenny A. ex rel. Winn, 599 U.S. 542 (2010). Second, the district court did not exclude hours that class counsel worked after they rejected an arguably reasonable settlement offer. Third, the district court did not make any specific findings about the value of the settlement. Finally, the Sixth Circuit found that awarding counsel post-judgment interest pursuant to 28 U.S.C. § 1961 was not error.

Since our last update, the Ninth Circuit clarified its position on attorney’s fees in Lowery v. Rhapsody Int’l Inc., 69 F.4th 994 (9th Cir. 2023). On appeal, the Ninth Circuit reversed and remanded to the district court that it “should rigorously evaluate the actual benefit provided to the class and award reasonable attorneys’ fees considering that benefit.” Id. at 997. The Ninth Circuit stated that district court “should consider [the] actual or anticipated value to the class members, not the maximum that hypothetically could have been paid to the class.” Id. Furthermore, district courts “should also consider engaging in a ‘cross-check’ analysis of the lodestar method to ensure that the fees are reasonably proportional to the benefit received by the class members.” Id. Ultimately, the Ninth Circuit reminded that “the key factor” is “assessing the reasonableness of the attorneys’ fees” to the benefit to the class members, not that “class action attorneys may devote hundreds or even thousands to a case.” Id. at 1002.

In Lowery, a plaintiffs-class of copyright owners sued defendant for infringement of their musical compositions. As settlement negotiations progressed, the amount the plaintiffs-class would receive decreased to $52,841.05.  Assessing class counsel’s request for $6 million in fees using the lodestar method, the magistrate judge decided to lower fees to  $1.7 million. The Ninth Circuit rejected the $1.7 million in attorneys’ fees because it was thirty times larger than the benefit received by plaintiffs, making it unreasonable in light of FRCP 23. The appeals court also instructed the district court to disregard the “illusory $20 million settlement cap” and instead base its lodestar calculation of attorneys’ fees on the actual $52,841.05 received.

The Second Circuit in the Moses case discussed above also addressed attorney’s fees.  See Maribel Moses v. The New York Times Company, Docket No. 21-2556-cv (2d Cir. August 17, 2023.  Several class members there objected to the award of attorney’s fees in a settlement by the New York Times of claims that its subscription renewal practices violated California disclosure law.  The Second Circuit remanded to the district court for failure to conduct a review of the substantive fairness of the attorney’s fees as required by (1) the 2018 revision of Rule 23(e)(2) and (2) the traditional factors outlined by City of Detroit v. Grinnell Corp., 495 F. 2d 448 (2d Cir. 1974).  The Second Circuit concluded that the district court erred specifically in presuming fairness based on the settlement’s arm’s-length negotiation, and in “not considering the attorneys’ and incentive awards in evaluating the fairness of the settlement.”

Further, the Second Circuit found, contrary to the district court, that CAFA’s coupon settlement provisions applied to the free “access codes” for NYT subscriptions provided to certain class members. It reasoned that the codes were akin to coupons because (1) they required the class members to continue to do business with the defendant, (2) they are valid only for “select products or services,” and (3) lacked the flexibility and the transferability of cash payments.

Access the Class Action Issues Update Summer 2023 PDF.

[1] The American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. We serve the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.