Class Actions Trends - An Overview of Recent Trends Involving Class Actions

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Class Actions Trends
An overview of recent trends involving class actions
September 22, 2014
Paul J. Ferak| ferakp@gtlaw.com| 312.476.5013

Greenberg Traurig, LLP | gtlaw.com
Class Action Climate 2014
>Increased scrutiny on class actions
>Heightened standards of commonality and predominance
>Development of favorable case law on ascertainability and superiority/adequacy
>Encouraging trends for prediscovery/early resolution

Playing Field for Class Actions
Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011)
>Heightened the commonality standard
–“Claims must depend upon a common contention of such a nature that it is capable of classwide resolution . . . . What matters to class certification is not the raising of common ‘questions’ . . . but, rather the capacity of a classwide proceeding to generate common answers . . . .”
>Confirmed that merits will be considered at the class certification stage
–Court recognized the “necessity of touching aspects of the merits” in conducting a class certification analysis.
>Indicated that Daubert applies to class certification

Comcast v. Behrand, 133 S. Ct. 1426 (2013)
>Court reaffirms the need for “rigorous analysis”
–“Certification is proper only if ‘the trial court is satisfied, after a rigorous analysis,’ that [Rule 23's] prerequisites . . . . have been satisfied.”
>Heightened the focus on damages and predominance
–To establish a classwide measurement of damages, the model must “measure only those damages attributable to that theory for purposes of Rule 23(b)(3).”
–“The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event. . . .”

>Courts still working out the new decisions
>Wal-Mart not just for employment cases
>Comcast not just for antitrust cases
>Plaintiffs must have “evidence” and workable class liability and damages theories
>But also recognize that complete uniformity is not required

Recent Decisions
In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 722 F.3d 838 (6th Cir. 2013)
>The district court bifurcated liability and damages under Rule 23(c)(4), certifying a liability class under Rule 23(b)(3) and leaving damages for individual determination, and the 6th Circuit affirmed.
>"Where determinations on liability and damages have been bifurcated . . . the decision in Comcast—to reject certification of a liability and damages class because plaintiffs failed to establish that damages could be measured on a classwide basis—has limited application.”
>Common question in case related to same defect across 21 different models over 9 model years

Recent Decisions
Butler v. Sears, Roebuck and Co., 727 F.3d 796 (7th Cir. 2013)
>The district court bifurcated liability and damages and certified two liability-only classes under Rule 23(c)(4).
>Different products and difference changes in products did not matter because all had the same defect and complications due to changes and from different state laws “can be handled by the creation of subclasses.”
>“Common issues need only predominate, not outnumber individual issues”
>As did the 6th Circuit in Whirlpool, Judge Posner pointed to the fact that the court had certified only a liability class under Rule 23(c)(4) as distinguishing Butler from Comcast.

Recent Decisions
Leyva v. Medline Indus., Inc., 716 F.3d 510 (9th Cir. 2013)
>The 9th Circuit reversed class certification denial in an unpaid wages case, only individual issue was damages owed.
>“Damage calculations alone cannot defeat class certification.”
>"[U]nlike in Comcast, if putative class members prove Medline's liability, damages will be calculated based on the wages each employee lost due to Medline's unlawful practices." Id. at 514.
>Damages could be determined by defendant’s "computerized payroll and time-keeping database that would enable the court to accurately calculate damages and related penalties for each claim.”

Recent Decisions
Halvorson v. Auto-Owners Insurance Co., 718 F.3d 773 (8th Cir. 2013)
>District court certified a Rule 23(b)(3) class, finding that the central question was whether the policyholders' use of the third- party bill review process was reasonable and that this issue predominated over whether the result was a “usual and customary” charge.
>The 8th Circuit reversed, citing Comcast and holding that individual determinations of what was "usual and customary" would "overwhelm questions common to the class.”
>Rejected reliance upon standard review process to establish common questions/predominance
>Class members "incurred different injuries, which were treated by different medical providers charging different prices for their services," and this would necessitate individual fact inquiries to determine whether each class member had an injury.

Recent Decisions
Chieftain v. XTO Energy, 528 Fed. Appx. 938 (10th Cir. 2013)
>District court certified class of 16,000 members, 14,300 contracts, and 2300 different wells
>10th Circuit remanded decision on predominance “in light of the Supreme Court's recent decision in [Comcast].”
>Existence of uniform payment methodology was not determinative on the record because certain contracts differed and contained language that would affect outcome
>District court also did not consider "the elements of the underlying causes of action" that related to an "array of theories, including contract, tort, and equity" (e.g., fraud)

Recent Decisions
IKO Roofing Shingle Prod. Liab. Litig., 757 F.3d 599 (7th Cir. 2014)
>District court read Comcast and Wal–Mart to require proof “that the plaintiffs will experience a common damage and that their claimed damages are not disparate.” District court wrote that “commonality of damages” is essential.
>“Wal–Mart has nothing to do with commonality of damages. It dealt instead with the need for conduct common to members of the class, and it concerned Rule 23(a)(2) [not] Rule 23(b)(3).”
>“Comcast, by contrast, does discuss the role of injury under Rule 23(b)(3), though not in the way the district court thought. [Comcast held only that] without a theory of loss that matched the theory of liability, the class could not get anywhere.”

Takeaway from Recent Cases
>Common answers, not common damages
>Need liability and damage theories to match
>Predominance is qualitative, not just “bean counting”
>More rigorous review of cases claiming the existence of a “uniform process”
>More liability classes, which still leaves open predominance issues, ascertainability, superiority, adequacy, and whether jurisdiction will allow partial certification (Gates v. Rohm, 655 F.3d 255 (3d Cir. 2011).

Ascertainability
>Threshold requirement of Rule 23 that members of the case be “readily identifiable” or “ascertainable” based on objective criteria
>Focuses on administrative burdens and efficiency to be gained through class action
>Protects absent class members by facilitating best notice practicable in a Rule 23(b)(3) class action
>Protects defendants by making sure those bound by the final judgment are identifiable
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Ascertainability – Recent Cases
Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013)
>Defendant had no records to identify class members and insufficient evidence that retailers had records
>Class was not viable because “extensive and individualized fact- finding or mini-trials” would be required to determine who purchased the specific product at issue — and therefore the class was not ascertainable.”
>Ascertainability is subject to “rigorous analysis.”
>Court recognized a fundamental due process right to challenge class membership: “[i]f this were an individual claim, a plaintiff would have to prove at trial he purchased” the product, and the right to raise such an individual defense is not extinguished just because the plaintiff seeks to proceed on a class basis.

Ascertainability – Recent Cases
EQT Prod. V. Adair, 2014 WL 4070457 (4th Cir. 2014)
>Class of landowners and owners of gas/coal rights
>District court “failed to rigorously analyze whether the administrative burden of identifying class members . . . would render class proceedings too onerous.”
>“The requirement that there be a class will not be deemed satisfied unless . . . it is administratively feasible for the court to determine whether a particular individual is a member.”
>Local land records existed for one of the proposed classes, but “resolving ownership based on land records can be a complicated and individualized process.” Plaintiffs “lack[ed] even a rough outline of the classes’ size and composition.”
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Superiority/Adequacy
>Rule 23 gives district court authority to decide whether a class action is the best way to resolve a given dispute
>Rule 23(b)(3) provides that certification is proper only if “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy”
>Refund offer / program may not be an “adjudication”
>Rule 23(b)(4) provides that a court may certify a class action only if “the representative parties will fairly and adequately protect the interests of the class” and allows the court to consider if class action is best available option
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Superiority/Adequacy
In re Aqua Dots Prods. Liab. Litig., 654 F.3d 748 (7th Cir. 2011)
>Defendant initiated refund/replacement program for claims; more than 600,000 class members responded before suit filed
>Court held that text of Rule 23(a)(4),which requires that the class representatives "will fairly and adequately protect the interests of the class" provided a basis for denying certification where refund program in place was better than a class action.
>Class representatives—who "want relief that duplicates a remedy that most buyers already have received, and that remains available to all members of the putative class"—were not adequate: “A representative who proposes that high transaction costs (notice and attorneys' fees) be incurred at the class members' expense to obtain a refund that already is on offer is not adequately protecting the class members' interests.”

What’s Happening in the Past Year at District Court
>Commonality and predominance arguments winning class certification denials due to more rigorous scrutiny
>Increased emphasis on ascertainability and manageability – expert issue
>Efforts to avoid predominance issues by seeking injunctive relief classes being rejected
>Nationwide classes more difficult

Recent Mortgage Cases
>In re Bank of America HAMP Contract Litig., 2013 WL 4759649 (D. Mass. Sept. 4, 2013)
–Class ascertainable because plaintiff presented expert testimony that objective criteria can be identified by efficient searches on BOA internal databases.
–Liability class denied based on predominance – each class member would need to show compliance with contract and “endless series of individual questions” – and superiority/unmanageability for same reasons.
>Gustafson v. BAC Home Loans Serv., LP, 2013 WL 5911252 (C.D. Cal. Nov. 3, 2013)
–Class denied based on commonality and predominance – “mortgage contracts at issue here contain numerous material variations of the [key term],” differences in state law, and knowledge of each member mattered for certain claims (unjust enrichment).
>Mahon v. Chicago Title Ins., 2013 WL 5434614 (D. Conn. Sept. 30, 2013)
–Class granted where court found existence of uniform procedures for selling title insurance and question of whether class was entitled to refinance discount predominated
–“[E]ven if it takes a substantial amount of time to review files and determine who is eligible for the discount, that work can be done during discovery”
–Central question – “proper interpretation of the language in Chicago Title’s rate manuals”

>Huyer v. Wells Fargo, 2013 WL 5754885 (S.D. Iowa Oct. 23, 2013)
–Class granted based on uniform inspection policy applied to entire class. Individual inquiries not necessary; UCL/RICO violation alleged, not contract breach.
>Slapikas v. First Am. Title, 2014 WL 899355 (W.D. Pa. Mar. 7, 2014)
–Class decertified based on commonality and predominance since each class member will need to show entitlement to the refinancing rate and justifiable reliance on disclosures relating to title insurance; plaintiffs also failed to “provide a system for finding damages that does not include individual fact finding”
>Diaz v. Res. Credit Sol., Inc., 2014 WL 279473 (E.D.N.Y. Jan. 23, 2014)
–Class would be granted involving form letter alleged to be in violation of the FDCPA; defendants records would easily identify class members
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>Gooden v. SunTrust Mort., 2013 WL 6499250 (E.D. Cal. Dec. 11, 2013)
–Class denied (six classes and subclasses) because “ascertaining the classes and ultimately determining Defendant’s liability would require the Court to examine the individual replacement value of each class member’s home to determine if they suffered actual injury from the forced placement of policies.”
–“[B]ecause replacement value cannot be determined on a class wide basis, the claims are not capable of proof at trial through evidence common to the class. Individual issues would predominate, negating the commonality and superiority requirements.”
–Because underlying basis for TILA claims depended individual transactions and individual state rules, “variations in state law may swamp any common issues and defeat predominance” and plaintiff failed to rebut defendant’s showing of variations in state law.
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Takeaways
>Importance of pre-litigation planning – contract clauses (venue) / policy
>Importance of factual development early on during cases
>Know what arguments you have available
>Need for expert testimony
>Know your adversary (counsel and plaintiff)

Early Class Resolution
>Motions to strike class actions
–Being used more frequently
–Gaining traction with the courts
>“Picking off” named plaintiffs (mooting claims)
–Option still available in several jurisdictions
–Eliminates putative class action and subsequent attempts by same lawyers
>Summary judgment of individual plaintiff
–Early summary judgment filings against named plaintiff
–May eliminate class action, possibly in its entirety

Motions to Strike
Federal Rule of Civil Procedure 23(d)(1)(D)
>Court may “require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly.”
>Tool focuses on complaint – allegations and class definition

Motions to Strike - Applicable Standards
>“Sometimes the issues are plain enough from the pleadings to determine whether the interests of the absent parties are fairly encompassed within the named plaintiff’s claims.” Labou v. Cellco P’ship, 2014 WL 824225 (E.D. Cal. Mar. 3, 2014 (typicality, predominance, and adequacy based on named plaintiff’s experience).
>“It is procedurally proper to strike futile claims at the outset of litigation to preserve time and resources.” Stearns v. Select Comfort Retail Corp., 2009 WL 4723366 (N.D. Cal. Dec. 4, 2009) (predominance based on unmanageability and individual issues).
>“Where the complaint demonstrates that a class action cannot be maintained on the facts alleged, a defendant may move to strike class allegations prior to discovery.” Sanders v. Apple Inc., 672 F. Supp. 2d 978 (N.D. Cal .2009) (predominance since warranty claims required reliance).
>“The problem for the plaintiffs is that we cannot see how discovery or for that matter more time would have helped them. To this day, they do not explain what type of discovery . . . would alter the central defect in this class claim.” Pilgrim v. Universal Health Card LLC, 660 F.3d 943 (6th Cir. 2011) (nationwide selling program differed across states).

Motions to Strike – Mortgage Cases
>Alqaq v. CitiMortgage, Inc., 2014 WL 1689685 (N.D. Ill. Apr. 29, 2014)
–Granted motion where plaintiff claimed that class was subject to dispossession before court order.
–No predominance where “resolution of the issues . . . will require individual inquiry into each purported class member’s circumstances . . . . What harm occurred? Was the property entered?” No need for class action since class involved in foreclosure actions and AG sought injunction.
>Trunzo v. CitiMortgage, Inc., 2014 WL 1317577 (W.D. Pa. Mar. 31, 2014)
–Granted motion where plaintiff claimed improper collection of payments under mortgage and note.
–No Rule 23(b)(2) class because requested relief related predominantly to damages. No Rule 23(b)(3) class based on typicality and predominance where Citi had unique causation defenses based on timing of when collection letter sent.
>Hills v. Wells Fargo Bank, 946 F. Supp. 2d 817 (N.D. Ill. 2013) (same as Algag)
–“[L]awsuit presents a slew of legal and factual questions that are unique to each class member. . . . Whether the Hills [have a claim] will not determine[if] one way or another, whether any other putative class member also [has a claim].”

“Picking Off” the Named Plaintiff
Damasco v. Clearwire Corporation, 662 F.3d 891 (7th Cir. 2011)
>Damasco files TCPA against Clearwire suit based on text messages
>Within the next month, Clearwire sends letter offering to settle by giving Damasco and ten others $1,500, court costs, and offering to stop sending unsolicited messages and took position that this rendered the case moot.
>Four days later Clearwire removed the lawsuit after sending the letter.
>Damasco moved for class certification within a few hours of removal.
>Following day, Clearwire moved to dismiss the case as moot.

>“Once the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Fed. R. Civ. P. 12(b)(1), because he has no remaining stake.”
>“To allow a case, not certified as a class action and with no motion for class certification even pending, to continue in federal court when the sole plaintiff no longer maintains a personal stake defies the limits on federal jurisdiction expressed in Article III. That the complaint identifies the suit as a class action is not enough by itself to keep the case in federal court. Even when a complaint clearly and in great detail described the suit as a class action suit, if the plaintiff does not seek class certification, then dismissal of the claim terminates the suit.”
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>Rejected the following arguments:
–Defendants should be precluded from buying off named plaintiffs through involuntary settlements
–Class actions claims such as Damasco’s are “inherently transitory” – bound to become moot before class is certified.
–Damasco should receive a ten-day window to respond as he would under Rule 68.
>Solution: “Class-action plaintiffs can move to certify the class at the same time that they file their complaint.” “We have long held that a defendant cannot moot a case by making an offer after a plaintiff moves to certify a class . . . .”
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Picking Off Named Plaintiff – Points to Consider
>Rule 68 or settlement offer used to moot claims
>Genesis Healthcare, 133 S. Ct. 1523 (2013), did not resolve the Circuit split. Some jurisdictions allow, some do not:
–Yes: Seventh, Sixth, Fourth, and Second
–Maybe: Eighth, Eleventh, First
–No: Third, Fifth, Ninth, and Tenth Circuits have held that a plaintiff may still move to certify a class and avoid mootness despite receiving an offer of complete relief
>Some jurisdictions differ on the extent of relief that must be offered

Summary Judgment
>Having court focus on individual case or threshold legal issues (e.g., contract interpretation)
>Particularly helpful where known problems exist with plaintiff or where case involves key legal issue
>No time restrictions on when motion can be brought
>Focusing litigation on individual plaintiff also eliminates costs and burdens associated with class discovery

Summary Judgment / Individual Claim
>First phase of discovery limited to individual merits so that plaintiff’s theory can be tested through an early MSJ before parties engage in costly and burdensome discovery.
>Helpful in mortgage class action litigation because strong MSJ arguments often exist.
>Discovery record and judicial findings of inherently individualized issues may doom class without need to submit client to cost and risks associated with class discovery and briefing.
>Individual settlement is more easily achieved before class information is produced.
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>Support for focusing on individual claim found in Rule 23 amendments
>Rule 23(c)(1) (A) provides that a court “must-at an early practicable time- determine by order whether to certify the action as a class action.”
>Previous language said: “[a]s soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained.” Chavez v. Ill. State Police, 251 F.3d 612, 630 (7th Cir.2001).
>Amendments explain that the language was changed because the previous phrase “neither reflect[ed] prevailing practice nor capture[d] the many valid reasons that may justify deferring the initial certification decision.”
>The notes provide examples of “valid reasons” for deferring the class certification decision, including that “[o]ther considerations may affect the timing of the certification decision. The party opposing the class may prefer to win dismissal or summary judgment as to the individual plaintiffs without certification and without binding the class that might have been certified.”
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>“If Plaintiffs cannot prove the merits of their case by showing a willful violation by Cerasimo, then valuable time and resources will be spent on discovery for the class certification issue when Plaintiffs' claim will be meritless . . . . Further, if Plaintiffs have not suffered any loss, which, as Cerasimo alleges, Plaintiffs have failed to allege in their Complaint, then bifurcation will help to expedite the proceedings and greatly reduce expenses to both sides. Brittingham v. Cerasimo, Inc., 2008 WL 5156645 (N.D. Ind. Dec. 8, 2008)
>“Thus, it appears that if deciding the merits would help to determine whether the certification is proper based upon the claims of the named representative, bifurcation may be proper.” Stavroff v. Midland Credit Management, Inc., 2005 WL 6329149 (N.D. Ind. June 8, 2005)
>“‘[F]irst order of business” should be to “take a very careful look at the plaintiffs' theory on how they were injured.’” “If Plaintiffs truly have not suffered any loss, bifurcation will in fact help to expedite these proceedings and greatly reduce the expense to both sides.” In re Guidant Corp. ERISA Litigation, 2008 WL 4810743 (S.D. Ind. Oct. 29, 2008).
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>When To Raise? – Rule 26(f) Report, separate motion, or during discovery
>How To Raise?
–The purpose of allowing individual merits to proceed first is to allow the defendant to make an early summary judgment motion.
–Explain why addressing the individual claim is likely to end or narrow the case.
–Offer a relatively short time frame for Phase I discovery and MSJ.
>Can rely on Rule 23 note - acknowledges that defendants may prefer to win dismissal or summary judgment without binding the class that plaintiff seeks to represent.
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New Trends
>Predatory lending
–Baltimore v. Wells Fargo, N.A. – city accuses bank of reverse-redlining, targeting areas with subprime credits.
–Miami v. JPMorgan Chase – city accuses of bank of reverse-redlining, extending higher terms to non-white customers and then refusing to refinance those loans as the bank does for white customers.
>Discriminatory lending
–Los Angeles v. JPMorgan Chase – city accuses bank of refusing to extend mortgages to a disproportionate number of minorities and refusing to open branches in minority areas.
–New York v. Evans Bancorp. – city accuses bank of denying access to mortgage loans in African-American neighborhoods, city says this is part of an “ongoing, wider investigation” into mortgage redlining.

Class Actions Trends - An Overview of Recent Trends Involving Class Actions

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