Supreme Court Class Action Litigation Summary, Fall 2019
Counterclaim defendants not permitted to remove under the Class Action Fairness Act (CAFA).
In this case, Citibank filed a debt-collection action against George Jackson in North Carolina state court. Jackson answered and added a counterclaim against Citibank, as well as claims and class allegations against Home Depot. These class allegations arose out of an alleged scheme by Home Depot to induce homeowners to buy water treatment systems at inflated prices, alleging unlawful referral sales and deceptive and unfair trade practices in violation of North Carolina law. Citibank dismissed its claims against Jackson and Home Depot filed a notice of removal a month later. Jackson moved to remand and amended his class allegations to remove references to Citibank and limit the claims to Home Depot. The district court granted Jackson’s motion to remand, and the Fourth Circuit granted Home Depot permission to appeal but affirmed.
In its decision, the Supreme Court ruled that 28 U.S.C. § 1441(a) only permits “the defendant or the defendants” to remove, not counterclaim defendants. The court evaluated the term “defendant” in other contexts and concluded that its use “bolster[ed its] determination that Congress did not intend for the phrase ‘the defendant or the defendants’ in § 1441(a) to include third-party counterclaim defendants.” 139 S. Ct. at 1749. The Supreme Court also ruled that CAFA’s removal provision, 28 U.S.C. § 1453(b), which uses the language “any defendant,” does not “alter § 1441(a)’s limitation on who can remove” to federal court. Id. at 1750.
Supreme Court declines to address cy pres recovery in class actions.
This case involved a class action against Google for alleged violations of the Stored Communications Act, which ultimately resulted in a settlement. Among other things, the settlement required Google to make certain disclosures and pay $8.5 million, the majority of which would be distributed to six cy pres recipients – all nonprofits who “were selected by class counsel and Google to ‘promote public awareness and education, and/or to support research, development, and initiatives, related to protecting privacy on the Internet.’” 139 S. Ct. at 1045.
Following preliminary approval, five class members, including the petitioners, objected to the settlement, arguing that the cy pres relief violated the requirements of Rule 23(e)(2) and that “conflicts of interest infected the selection of the cy pres recipients.” Id. The district court granted final approval notwithstanding these objections and the Ninth Circuit affirmed.
After granting certiorari, the Supreme Court had been expected to decide whether and the extent to which cy pres settlements were permissible. Instead, the Court determined that “there remain substantial questions about whether any of the named plaintiffs has standing to sue” and remanded the standing question to the district court.
Ambiguous arbitration provision does not permit class arbitration.
In this case, a hacker tricked a Lamps Plus employee to disclose tax information related to other employees. A fraudulent income tax return was then filed in the name of Frank Varela, who was a Lamps Plus employee at the time. Like other employees, Varela had signed an arbitration agreement when he began working at the company. When Varela filed a proposed class action on behalf of employees whose tax information had been compromised, Lamps Plus moved to compel arbitration on an individual basis. The district court granted the motion, but denied the request for individual arbitration, instead authorizing arbitration on a class-wide basis. Lamps Plus appealed and the Ninth Circuit affirmed.
The Supreme Court reversed and remanded, holding that an ambiguous agreement cannot provide the necessary “contractual basis” for compelling class arbitration consistent with Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp, 559 U.S. 662 (2010). The Court emphasized that the Federal Arbitration Act requires courts to enforce arbitration agreements according to their terms, and that, without mutual consent to class arbitration, it cannot be compelled. As in Stolt-Nielsen, where the Supreme Court held that silence on class arbitration is not enough, ambiguity also is not enough to permit class arbitration.
Supreme Court confirms that Rule 23(f)’s 14-day deadline is not subject to equitable tolling.
In this case, Lambert sued Nutraceutical Corp., alleging that its dietary supplement marketing violated California consumer protection laws. The district court granted certification, but later decertified on February 20, 2015. At a March 2, 2015, status conference, Lambert’s counsel informed the court that he intended to file a motion for reconsideration, but did not mention an appeal. Twenty days after the class decertification order issued, Lambert filed a motion for reconsideration, which was denied. Lambert then filed a request for permission to appeal the decertification order 14 days after the reconsideration denial. The Ninth Circuit deemed Lambert’s petition timely by tolling the 14-day deadline based on his pursuit of the reconsideration motion and reversed the decertification order.
The Supreme Court reversed and remanded the matter for further proceedings, holding that Rule 23(f)’s 14-day deadline is not subject to equitable tolling because it is “a nonjurisdictional claim-processing rule” without any room in the text for flexibility. 139 S. Ct. at 714-15. The Court highlighted how “the Federal Rules of Appellate Procedure single out Civil Rule 23(f) for inflexible treatment” and thus “express a clear intent to compel rigorous enforcement of Rule 23(f)’s deadline, even where good cause of equitable tolling might otherwise exist.” Id. at 715.
Part of the Fall 2019 Class Action Litigation Newsletter available here.