Class Action Litigation Newsletter | Fall 2021: First, Second, Third Circuits
This GT Newsletter summarizes recent class-action decisions from across the United States.
Highlights from this issue include:
First Circuit affirms ruling that individualized issues of consent prevent certification of TCPA “junk fax” class.
Southern District of New York denies certification of FDCA class, finding improper “fail-safe” class.
Third Circuit addresses standard for certification of issue classes under Rule 23(c)(4).
Fourth Circuit vacates certification of class of 35 purchasers and remands for numerosity analysis.
Fifth Circuit reverses remand to state court holding corporate defendant was a “primary defendant.”
Sixth Circuit addresses retroactivity of Supreme Court TCPA decision, reversing dismissal of claim.
Seventh Circuit applies comity abstention doctrine to remand claims removed under CAFA.
Eighth Circuit reverses class certification finding common issues do not predominate over individual questions of causation.
Ninth Circuit affirms order compelling arbitration, holding Uber drivers are not exempt from mandatory arbitration under Section 1 of the FAA because they are not a “class of workers engaged in foreign or interstate commerce.”
Ninth Circuit directs more probing inquiry for approval of class action settlement where attorneys’ fees dwarf anticipated monetary payout to the class.
D.C. Circuit holds that objectors’ appeal challenging settlement approval was premature.
Individualized issues of consent prevent certification of TCPA “junk fax” class.
A small private high school brought a claim against Act, Inc. under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, based on three facsimiles. Act, Inc. develops and administers the ACT college admission test. The school had provided Act, Inc. its facsimile number in a “High School Code Request Form.” Students use the High School Code number to have their ACT test scores reported to their high schools. On the form, the school checked a box indicating that it wanted to (i) administer certain standardized tests, (ii) receive its students’ test scores, and (iii) receive SAT or ACT publications. Other putative class members also may have provided their consent to receive such facsimiles, which, among other things, caused the district court to deny class certification on predominance grounds.
On appeal, the First Circuit affirmed the district court’s decision, as the school did not meet its burden to show how a court could cull from the proposed class those putative class members who may have provided the appropriate consent to receive the subject facsimiles. Instead, as found by the district court, Act, Inc. had presented sufficient evidence that the proposed class likely included members who invited Act, Inc. to send materials by facsimile. The district court further found that “to identify those members the court would have to ‘parse through each unique relationship’ between every class member” and ACT, Inc. Also, although the First Circuit did not need to address it, the district court concluded that a proposed class definition based on those class members who received an “unsolicited” facsimile was an impermissible fail-safe class.
Arbitration clause that did not expressly authorize class arbitration stalls class action arbitration.
Plaintiff—an institute placing au pairs with host families in the United States—sought injunctive relief against an au pair from Spain who had filed a class arbitration demand against the institute. When agreeing to be placed, the au pair signed an agreement with the institute that contained an arbitration clause, which provided: “I agree that any dispute with or claim against [the Institute] . . . will be exclusively resolved by binding arbitration[.]” Also, the agreement provided that the defendant waived the right to assert any “claims, in either an individual capacity or as a member of any class action, by any means and in any form other than arbitration[.]” The parties ultimately agreed that the agreement required the au pair to submit any individual claims to arbitration. The First Circuit concluded that the agreement “does not provide an affirmative basis to conclude that the parties agreed to class arbitration.” According to the First Circuit, the “arbitration clause is silent about class arbitration. And the waiver clause only mentions class actions in precluding the parties from litigating as a class.” Furthermore, the First Circuit rejected the au pair’s assertion that the “the waiver clause waives ‘only’ the right to litigate a class claim in court,” as well as her argument that “by negative inference  it was intended to preserve a right excluded from that waiver—the right to arbitrate a class action.” According to the First Circuit, “that reasoning entirely begs the question: Did she have a right to arbitrate as a class, which right might then be preserved by exclusion from the waiver clause? And as to that question, [the au pair] is back to square one: She can point to no ‘affirmative contractual basis for concluding’ that the parties agreed to arbitrate class claims.” As such, the First Circuit concluded that the district court did not err in granting injunctive relief to preclude class arbitration.
Southern District of New York denies class certification, finding an improper “fail-safe” class that cannot meet the requirements of Rule 23(a) or (b).
Plaintiff alleged that defendants attempted to collect private student loans discharged in bankruptcy, misrepresenting the character and legal status of those loans in violation of the Fair Debt Collection Practices Act (FDCPA). The case turned on whether plaintiff’s loans and those of the putative class members were discharged in bankruptcy or were “qualified educational loans” and thus non-dischargeable.
On a motion for class certification, plaintiff sought to certify a class of borrowers in various states who (1) filed for bankruptcy in any of the U.S. district courts, (2) were issued discharge orders since April 20, 2005, and who also (3) “(a) obtained Consumer Education Loans that were discharged in bankruptcy by virtue of any of the [following] three characteristics: (1) were made to students attending non-Title IV schools; (2) were made in excess of the ‘cost of attendance’; (3) were made to ineligible students under the Higher Education Act” and who “(b) have nonetheless been subjected to Defendants’ attempts to induce payment or discharge debts.” The court denied plaintiff’s motion on four separate grounds.
In assessing whether plaintiff could meet the requirements of Rule 23(a), the court found there were “serious questions as to whether Plaintiff is a member of the proposed class he purports to represent.” Although plaintiff attended a Title IV university at the time he received his loans and asserted that the loans exceeded the cost of attendance, “the certifications that Plaintiff made in connection with his loan applications and promissory notes . . . may preclude him from denying that the[se loans] . . . are qualified education loans.” Both these facts and “conflicting statements” made by plaintiff, which “rais[ed] questions about his credibility,” resulted in a finding that the typicality requirement was not satisfied.
The proposed class also could not be certified under Rule 23(b)(1)(A) or Rule 23(b)(3). Plaintiff sought individualized monetary damages. But because potential class members would not have the opportunity to opt out and litigate their entitlement to, and amount of, individualized damages, the court denied certification under Rule 23(b)(1)(A). And despite finding some common issues, the court noted that individual issues surrounding the dischargeability of each potential class member’s student loans predominated.
Finally, the court found that the proposed class was a “fail-safe”—that is, the proposed class definition “shields the putative class members from receiving an adverse judgment.” Further, the “class may be unmanageable because a determination on the merits would be required to identify class members who would receive notice and an opportunity to opt out.” The court noted that, although “at first blush these issues are not as problematic because the FDCPA is a strict liability statute and the criteria for class membership are seemingly objective, . . . contested issues nevertheless may arise and require resolution,” like those involving the lead plaintiff. These necessarily “giv[e] rise to the fairness and manageability objections to fail-safe classes.”
Third Circuit addresses standard for certification of issue classes.
Plaintiffs filed a putative class action against the Educational Commission for Foreign Medical Graduates (the “Commission”) alleging negligent infliction of emotional distress due to the Commission’s alleged improper certification of a foreign medical doctor who treated plaintiffs. The district court certified an issue class under Rule 23(c)(4) as to whether the Commission owed and breached a duty to plaintiffs, hospitals, or state medical boards.
The Third Circuit vacated and remanded for further proceedings. The panel reiterated prior rulings that a plaintiff seeking to certify an issue class must satisfy the prerequisites for certification under Rule 23(a) and under Rule 23(b)(1), (2) or (3), but prior decisions lacked “clear guidance” as to when an issue class was “appropriate” or what types of “issues” may or may not be suitable for class treatment. The court’s 2011 decision in Gatesv. Rohm & Haas Co., 655 F.3d 255 (3d Cir. 2011) included a non-exhaustive list of nine factors for courts to consider, but Gates did not decide whether the issues to be certified could include claim elements and defenses or if those issues “must be limited to questions that would resolve a defendant’s liability.” The panel decided that district courts may certify “particular issues” for class treatment “even if those issues, once resolved, do not resolve a defendant’s liability, provided that such certification substantially facilitates the resolution of the civil dispute, preserves the parties’ procedural and substantive rights and responsibilities, and respects the constitutional and statutory rights of all class member and defendants.”
The Third Circuit found that the district court erred because it did not determine whether the issues satisfied Rule 23(b)(3) and it failed to “rigorously consider” the Gates factors and the efficiencies that would be gained by resolution of the certified issues.
David G. Thomas, Ashley A. LeBlanc, Gregory A. Nylen, Aaron Van Nostrand, Kara E. Angeletti, Andrea N. Chidyllo, Gregory Franklin, and Brian D. Straw also contributed to this content.