Class Definition in Class Action Settlement Must Be Limited to Class Members That Have Standing According to Eleventh Circuit
Last week the Eleventh Circuit addressed an issue that many class action practitioners probably haven’t thought much about: whether approval of a class action settlement requires that each class member obtaining relief have Article III standing to sue. Defendants typically want a broad class definition because they are focused on finality and buying peace. Plaintiffs are more concerned about the relief class members are getting than whether everyone falling within the class definition would have standing. But the Eleventh Circuit vacated and remanded a settlement because a relatively small part of the class as defined would not have standing.
In Drazen v. Pinto, No. 21-10199, — F.4th –, 2022 WL 2963470 (11th Cir. July 27, 2022), the Eleventh Circuit heard an appeal by an objector from a final approval of a class action settlement in a case under the Telephone Consumer Protection Act (TCPA). The issue raised by the objector was whether the settlement qualified as a “coupon settlement” under the Class Action Fairness Act and therefore required that the request for attorneys’ fees be analyzed differently. But the Eleventh Circuit never reached that issue, instead raising on its own and deciding a separate question: whether all class members had Article III standing.
The issue arose because a prior Eleventh Circuit decision had held that receiving a single unwanted text message is not a sufficiently concrete injury to establish standing under Supreme Court precedent. Approximately 7% of the class fell in that category, along with potentially those class members who received only a single unwanted telephone call. (Members of Congress who enacted the TPCA in 1991, in the days of landlines, wasted fax paper and unwanted interruptions during family dinnertime, surely did not expect that three decades later millions of dollars of attorneys’ fees and hundreds of hours of judicial time would be spent on resolving just how many unwanted texts or cell phone calls labeled “potential spam” are necessary for standing to sue). Under the Supreme Court’s decision in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), “[e]very class member must have Article III standing in order to recover individual damages.” But some lower courts have concluded that this does not need to be determined at the pleadings stage and can potentially be addressed at class certification, or perhaps even later than that but it must happen before damages are recovered. Applying this principle to a class action settlement, the Eleventh Circuit held that “when a class seeks certification for the sole purpose of a damages settlement under Rule 23(e), the class definition must be limited to those individuals who have Article III standing.” This is because “[o]therwise, individuals without standing would be receiving what is effectively damages, in violation of TransUnion.” So those who were hoping for potentially $35 (depending on how many class members make claims) as compensation for an unwanted text message will be out of luck. The case returns to the district court for redefinition of the class, including resolution of the nettlesome question of “whether a single cellphone call is sufficient to meet the concrete injury requirement,” an issue on which the Eleventh Circuit had not yet opined, and so it left that to the district court to resolve.
So what is the lesson for lawyers settling class actions in federal court? Don’t forget to think about whether everyone in the class will have standing, along with everything else.