GT Class Action Litigation Newsletter | Fall 2021

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.

Seventh Circuit

City of Fishers v. DIRECTV, 2021 U.S. App. LEXIS 21549 (7th Cir. Jul. 21, 2021)

Seventh Circuit holds that the comity abstention doctrine applies to claims brought under CAFA.

Several Indiana cities filed suit in Indiana state court against various streaming platforms, claiming the platforms owed the cities past and future franchise fees under the Indiana Video Service Franchises Act of 2006 (IVSFA). The defendant-platforms removed to federal court, asserting that the court could exercise jurisdiction under CAFA. The plaintiffs moved to remand on the grounds that the district court should not exercise subject-matter jurisdiction over IVSFA claims. The district court agreed with the plaintiffs and remanded. The defendant-platforms appealed.

Holding that precedential jurisdictional limits applied to CAFA, the Seventh Circuit affirmed the remand to state court. Generally, federal courts decline to exercise federal jurisdiction over cases involving local revenue collection and taxation, applying what is referred to as the comity abstention doctrine. The defendants argued that because CAFA contains two express jurisdictional limitations without consideration of the comity abstention doctrine, Congress did not intend for the doctrine to apply to CAFA. The Seventh Circuit disagreed: “To be sure, CAFA’s express exceptions reflect Congress’s judgment that it would be unwise to reroute a class action with deep roots in a single state to federal court. But those exceptions complement—and do not displace—preexisting comity concerns.” Because abstention reflects “foundational features of our constitutional system,” such as state sovereignty and autonomy over state taxation, the Seventh Circuit determined that the doctrine was applicable to CAFA, warranting remand back to state court. Regardless, the defendants had failed to properly preserve this jurisdictional issue in the district court, thus waiving it on appeal.

Ware v. Best Buy Stores, L.P., 2021 U.S. App. LEXIS 22486 (7th Cir. Jul. 29, 2021)

Seventh Circuit holds that conclusory invocation of CAFA is insufficient to establish subject-matter jurisdiction in the face of the specific jurisdictional limits for a Magnuson-Moss Warranty Act claim.

Plaintiffs filed a putative class action in federal court under the Magnuson-Moss Warranty Act (MMWA), which provides consumer protection rights and establishes minimum criteria for different types of warranties and warranty-like products. Relying on arguments aimed at the merits, defendant filed a motion to dismiss, which the district court granted. Although the dismissal was not based on subject-matter jurisdiction, the Seventh Circuit was obligated to conduct an independent assessment of jurisdiction when the case was brought up on appeal. The Seventh Circuit determined that the federal court lacked subject-matter jurisdiction over the MMWA claims.

The MMWA has specific jurisdictional limitations that strip federal courts of subject-matter jurisdiction if: (1) the amount in controversy of any individual claim is less than $25; (2) the amount in controversy is less than $50,000 for all claims to be determined in the suit; or (3) the action is brought as a class action and the number of named plaintiffs is less than 100. Because these limitations were not satisfied, plaintiffs turned to CAFA. The Seventh Circuit rejected plaintiffs’ argument, noting that plaintiffs had failed to meet the pleading burden required to rely on CAFA for federal jurisdiction. First, plaintiffs’ complaint lacked any allegations supporting the $5 million amount in controversy requirement. Second, although the complaint alleged that damages were sufficient to overcome the MMWA $50,000 jurisdictional limitation, inferring that damages would meet the $5 million CAFA threshold was “entirely speculative.”

Tims v. Black Horse Carriers, Inc., 2021 IL App (1st) 200563 (Sept. 17, 2021)

Separate limitations periods apply to different violations of the Illinois Biometric Information Privacy Act.

Plaintiff filed a complaint under Section 15 of the Illinois Biometric Information Privacy Act (BIPA) nearly two years after his claims had arisen, alleging the defendant-employer (i) collected and disclosed his fingerprint data for timekeeping purposes without obtaining consent under Section 15(b), (ii) failed to have a retention and destruction policy in violation of Section 15(a), and (iii) disclosed his data in violation of Section 15(d). Defendant moved to dismiss, arguing that plaintiff’s claims were foreclosed by a one-year statute of limitations that applies to privacy-related actions. The plaintiff disagreed, asserting that a five-year limitations period applied. The circuit court agreed with plaintiff.

On appeal, the First District Illinois Appellate Court determined that not all BIPA violations are created equally and thus should be subject to separate limitations periods. The court noted that, based on the plain language of the Illinois Code of Civil Procedure, 735 ILCS 5/13-201, the defendants’ privacy-based limitations theory could only apply to those actions in which private information was actually published. Applying this to the BIPA, only certain violations implicated any form of publication: Section 15(c) to sell, lease, trade, or profit from a person’s biometric data; and Section 15(d) to disclose or disseminate biometric data. Consequently, the one-year limitations period would apply to these alleged violations. Alternatively, the remaining violations – Section 15(a) for failing to develop a publicly available retention and destruction policy for biometric data; 15(b) for collecting or obtaining biometric data without written notice and release; and 15(e) for failing to take reasonable steps to store, transmit, or protect biometric data – made no reference to publication. Because publication was not a necessary element, the five-year limitations period under 735 ILCS 5/13-205 applied. The court then remanded for application of the distinct statute of limitations periods.

Eighth Circuit

Hudock v. LG Elecs. U.S.A., Inc., 12 F.4th 773 (8th Cir. 2021)

Eighth Circuit reverses trial court’s grant of class certification, finding common issues would not predominate over individual questions of causation.

This appeal arose from the trial court’s grant of class certification under Federal Rule of Civil Procedure 23(b)(3). The district court certified classes related to claims of unjust enrichment and under the consumer protection statutes of Minnesota and New Jersey.

On appeal, the Eighth Circuit noted that both Minnesota and New Jersey law require evidence of causation. Defendants presented evidence that “some consumers did not see, or did not rely on, the allegedly false representations—here, assertions about refresh rates for their televisions.” The companies presented evidence making clear that some of the products at issue were not advertised as the plaintiffs asserted. The companies also presented testimony making clear that consumers frequently made their decisions based on other features and some referred to enhanced refresh rates as a “[w]aste of money.” Based on this evidence, the Eighth Circuit concluded that “[b]ecause determination of the companies’ liability would require individual determinations on causation and reliance, ‘common issues will not predominate’ in the case.”

Johannessohn v. Polaris Indus. Inc., 9 F.4th 981 (8th Cir. 2021)

In an undisclosed-defects case, the Eighth Circuit affirms a decision denying class certification, holding that individual issues of reliance and causation predominated.

Plaintiff all-terrain vehicle (ATV) buyers brought a class action against defendant Polaris Industries, Inc., claiming it failed to disclose heat defects, which artificially inflated the price of their ATVs. Plaintiffs in six states sought to certify a nationwide class under Minnesota consumer protection laws for four different models. The Eighth Circuit affirmed the denial of class certification.

Under Minnesota law, Polaris was allowed to present evidence rebutting plaintiffs’ allegations that they relied on certain representations and omissions. Here, Polaris had evidence that some of the named plaintiffs had owned prior Polaris vehicles and had prior knowledge of the alleged defect (and even had sold used ATVs with knowledge of the alleged defect without mentioning it). Given these facts, individual questions regarding reliance and causation predominated.

The Eighth Circuit also held that the district court did not abuse its discretion by denying class certification based on superiority. First, the proposed subclasses “w[ould] require application of the laws of four different states to forty-three different vehicle configurations, including at least four different engines, with changing exhaust standards through the years, and various attempts by Polaris to remedy the problems.” Second, because many Polaris owners either resold their ATVs or purchased them used, these sales would require “vehicle-specific litigation.”

Finally, plaintiffs’ class definition was too broad, as it included everyone who had a risk of a product defect manifesting. The Eighth Circuit found that not all ATVs had the alleged product defect and that a risk of a product defect manifesting is insufficient to support standing. The Eighth Circuit rejected plaintiffs’ argument that a price premium was sufficient to establish standing in a product defect case.

Ninth Circuit

Capriole v. Uber Technologies, Inc., 7 F.4th 854 (9th Cir. 2021)

Ninth Circuit holds that 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.”

Plaintiffs Uber drivers brought a class action suit, alleging Uber misclassified them as independent contractors rather than as employees under Massachusetts law. Before becoming Uber drivers, all potential drivers must sign Uber’s 2015 Technology Services Agreement (the “Agreement”), which contains a mandatory arbitration provision. Uber brought a motion to compel arbitration, which the district court granted. Plaintiffs appealed, arguing they were exempt from mandatory arbitration under Section 1 of the FAA because they were a “class of workers engaged in foreign or interstate commerce.” The Ninth Circuit disagreed, holding that Uber drivers as a class of workers do not fall within the “interstate commerce” exemption of the FAA. The court held that Uber drivers “are not engaged in interstate commerce” because their work “predominantly entails intrastate trips,” even though some Uber drivers undoubtedly cross state lines in the course of their work and rideshare companies do contract with airports “to allow Uber drivers . . . to pick up arriving passengers.” In reaching this decision, the Court cited United States v. Yellow Cab Co., 332 U.S. 218, 228-29 (1947), which held that “when local taxicabs merely convey interstate train passengers between their homes and the railroad station in the normal course of their independent local service, that service is not an integral part of interstate transportation.” The court added that “interstate trips, even when combined with trips to the airport, represent a very small percentage of Uber rides, and only occasionally implicate interstate commerce.”

Hodges v. Comcast Cable Commc’ns., LLC, No. 19-16483, 2021 U.S. App. LEXIS 27268 (9th Cir. Sept. 10, 2021)

Ninth Circuit holds that public injunctive relief under McGill is limited to forward-looking injunctions that aim to restrain future violations of law for the general public’s benefit as a whole, rather than a discrete subset of similarly situated persons.

Plaintiff brought a putative class action challenging Comcast’s alleged privacy and data-collection practices, seeking a variety of monetary and equitable remedies. The district court held that because plaintiff’s complaint sought “public injunctive relief” as one of its requested remedies, it implicated California’s McGill rule, under which an arbitration provision that waives the right to seek “public injunctive relief” in all forums is unenforceable.

The Ninth Circuit reversed. Taking into account Blair v. Rent-A-Center, Inc., which held that the Federal Arbitration Act did not preempt McGill, the panel held that, under California law, non-waivable public injunctive relief is limited to forward-looking injunctions that seek to prevent future violations of law for the benefit of the general public as a whole. The panel concluded that, under this standard, plaintiff’s complaint did not seek public injunctive relief because it sought only to benefit Comcast cable subscribers with respect to their personal information, not the public as a whole. The panel also found that administering the injunctive relief plaintiff sought would entail the consideration of the individualized claims of numerous cable subscribers. Accordingly, the panel held that the arbitration agreement at issue should have been enforced.

Kim v. Allison, No. 2:18-cv-3093-JFW-AS, 2021 U.S. App. LEXIS 24495 (9th Cir. Aug. 17, 2021)

More probing inquiry required for approval of class action settlement where the attorneys’ fees dwarf anticipated monetary payout to the class.

Plaintiff brought a putative class action under California’s Unruh Civil Rights Act and Unfair Competition Law (UCL) based on the allegation that Tinder offered reduced pricing to subscribers under 30 years old. After the case was compelled to arbitration, the parties reached a settlement that applied to the putative class. Several class members objected, arguing the settlement terms offered too little in cash payouts, credits that premium Tinder subscribers did not need, and subscriptions that former subscribers did not want. Objectors also pointed to recent victories in related cases where the court determined the plaintiff had stated a claim for age discrimination under the Unruh Act. The district court rejected the objections and certified a settlement class, awarding plaintiff a $5,000 incentive payment and $1.2 million in attorneys’ fees to plaintiff’s counsel.

The Ninth Circuit reversed, holding that although the district court applied the correct fairness factors under Fed. R. Civ. P. 23(e)(2), it understated the strength of plaintiff’s claims and substantially overstated the settlement’s worth given that (a) Tinder’s agreement to eliminate age-based pricing going forward only applied to new California-based subscribers (which did not include the class members), (b) the claims rate at the time of final approval was 0.745% (which meant Tinder stood to pay less than $45,000 to the class members, not the $6 million claimed by plaintiffs), and (c) most importantly, the district court failed to consider evidence of collusion in the form of a request for attorneys’ fees that dwarfed the anticipated payout to the class.

Moser v. Benefytt, Inc., No. 19-56224, 2021 U.S. App. LEXIS 23661 (9th Cir. Aug. 10, 2021)

Defendant did not waive objection under Bristol-Myers to nationwide certification by failing to move to dismiss claims of non-resident class members.

The court considered whether defendant waived an objection under Bristol-Myers Squibb Co. v. Superior Court of California to the district court’s certification of nationwide classes because defendant had not moved to dismiss the non-resident putative class members’ claims for lack of personal jurisdiction. In Bristol-Myers, the United States Supreme Court held that the Fourteenth Amendment’s Due Process Clause prohibited a California state court from exercising specific personal jurisdiction over nonresident plaintiffs’ claims in a mass action against a non-resident company. The Supreme Court did not reach whether Bristol-Myers would apply to a class action in federal court.

In Moser, the plaintiff, a California resident, sued defendant in federal court, alleging nationwide class claims for TCPA violations. Defendant is incorporated in Delaware, with its principal place of business in Florida. Defendant moved to dismiss on various grounds, but not for lack of personal jurisdiction over the non-California class members. Plaintiff later moved for certification of two nationwide classes, and defendant then argued lack of personal jurisdiction under Bristol-Myers. The district court found that defendant had waived the argument by not moving to dismiss.

The Ninth Circuit reversed. The court observed that, under Rule 12(h)(1)(A), a party “waives any defense” under Rule 12(b)(2) by “omitting it from a motion in the circumstances described in Rule 12(g)(2).” Rule 12(g)(2) provides that “a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.” In rejecting the district court’s waiver conclusion, the court reasoned that the personal jurisdiction argument as to non-California class members was not “available” within the meaning of Rule 12(g)(2) for purposes of a motion to dismiss. Rather, with respect to personal jurisdiction, only the named plaintiff’s own claims were at issue, and unnamed class members were not yet parties to the case.

Wesson v. Staples The Office Superstore, LLC, 68 Cal. App. 5th 746 (2021)

Addressing an issue of first impression, California Court of Appeal holds that trial courts have inherent authority to ensure claims under the Private Attorneys General Act will be manageable at trial.

Plaintiff asserted various claims, including a representative claim under the Private Attorneys General Act of 2004 (PAGA), for himself and 345 other current and former general managers of Staples stores in California. Plaintiff alleged that Staples misclassified general managers as exempt executives (who are not entitled to overtime pay and off-duty meal and rest periods), when they should have been classified as nonexempt, hourly employees.

Throughout the course of the proceedings, Staples argued that, given the number of employees covered and the nature of plaintiff’s allegations, the action would be unmanageable and would violate its due process rights. Specifically, Staples contended its affirmative defense – i.e., that it properly classified general managers as exempt and, thus, committed no Labor Code violations – would require individualized proof as to each general manager, and the claim could not be fairly and efficiently litigated. In response, plaintiff argued, among other things, that the trial court lacked authority to make a manageability determination on a PAGA claim. The trial court ultimately found the claim unmanageable and struck it.

On appeal, the court concluded that: “(1) [trial] courts have inherent authority to ensure PAGA claims can be fairly and efficiently tried and, if necessary, may strike claims that cannot be rendered manageable; [and] (2) as a matter of due process, defendants are entitled to a fair opportunity to litigate available affirmative defenses, and a court’s manageability assessment should account for them.”

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.