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January 22, 2021 |
Year-End and Fourth Quarter 2020 Update on Class Actions

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Our year-end 2020 report provides an update on the application of Article III in class and other complex litigation. First, we discuss the significance of the Supreme Court’s recent grant of certiorari in TransUnion LLC v. Ramirez, No. 20-297, __ S. Ct. __, 2020 WL 7366280 (U.S. Dec. 16, 2020), which concerns the propriety of certifying class actions with uninjured class members.

Second, we review recent cases in which courts have continued to grapple with issues of Article III standing in the wake of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), often reaching divergent conclusions in similar cases involving claims under consumer credit, privacy, and related laws.

I. The Supreme Court Will Resolve Whether Uninjured Class Members Can Be Part of a Certified Class Action

On December 16, 2020, the Supreme Court granted certiorari in TransUnion LLC v. Ramirez to resolve a very important class action issue that has split the federal courts of appeals for years: “whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.”

In Ramirez, the plaintiff asserted that TransUnion violated the Fair Credit Reporting Act (FCRA) by inaccurately labelling class members as potential terrorists, drug traffickers, and other threats to national security on their consumer credit reports. See Ramirez v. TransUnion LLC, 951 F.3d 1008, 1017 (9th Cir. 2020). After a jury awarded $60 million in damages, TransUnion appealed, arguing that the verdict “cannot stand because only Sergio Ramirez, the representative plaintiff, suffered a concrete and particularized injury as a result of TransUnion’s unlawful practice.” Id.

As discussed in a prior update, the Ninth Circuit agreed with TransUnion on this point and held that “each member of a class certified under Rule 23 must satisfy the bare minimum of Article III standing at the final judgment stage of a class action in order to recover monetary damages in federal court.” Id. at 1023. Citing Chief Justice Roberts’s observation that “‘Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not,’” the Ninth Circuit reasoned that a contrary rule would “transform the class action—a mere procedural device—into a vehicle for individuals to obtain money judgments in federal court even though they could not show sufficient injury to recover those judgments individually.” Id. at 1023–24 (quoting Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1053 (2016) (Roberts, C.J., concurring)); see also Castillo v. Bank of Am., NA, 980 F.3d 723, 730 (9th Cir. 2020) (reiterating that a district court has the duty to ensure that any proposed “class is not defined so broadly as to include a great number of members who for some reason could not have been harmed by the defendant’s allegedly unlawful conduct”).

Nonetheless, the Ninth Circuit upheld the verdict upon finding that each class member had Article III standing. Ramirez, 951 F.3d at 1017. The court reasoned that even though plaintiff had stipulated that more than 75% of the absent class members did not have a credit report disseminated to any third party during the class period, FCRA was enacted to protect consumers’ concrete interests and “the fact that TransUnion made the reports available to numerous potential creditors,” along with “the highly sensitive and distressing nature of the [Office of Foreign Assets Control] alerts,” was “sufficient to show a material risk of harm to the concrete interests of all class members.” Id. at 1027.

In a separate opinion, Judge McKeown disagreed with the certification of absent class members’ claims. In particular, she was troubled by the lack of evidence that any absent class members were injured at all: although the named plaintiff and “a limited number of class members” had their “credit report[s] disclosed to third parties, there was no evidence of any harm or damages to remaining class members.” Id. at 1038 (McKeown, J., concurring-in-part and dissenting-in-part). Thus, not only did the named plaintiff’s “stark atypicality as the lone class representative” “strain Rule 23’s typicality requirements,” but the absence of evidence regarding the actual experiences of the absent class members made the “harm as to the bulk of the class … conjectural,” and therefore falling far short of showing a constitutionally cognizable injury. Id. at 1038–40.

The disagreement between the majority panel’s decision in Ramirez and Judge McKeown’s dissent highlights an issue that frequently arises in class litigation: whether and to what extent (including at what stage of the case) absent class members must satisfy Article III standing requirements. Different courts have reached different conclusions on this question. Compare Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006) (“[N]o class may be certified that contains members lacking Article III standing.”), with Kohen v. Pac. Inv. Mgmt. Co., 571 F.3d 672, 676 (7th Cir. 2009) (“[A]s long as one member of a certified class has a plausible claim to have suffered damages, the requirement of standing is satisfied.”). By agreeing to review Ramirez, the Supreme Court will have an opportunity to address this important issue and provide guidance on whether uninjured class members can be part of a certified class action.

II. Courts Continue to Reach Diverging Results on What Constitutes a Concrete Injury Sufficient to Establish Standing Under Spokeo, Inc. v. Robins

As reported in our second quarter 2019 update, in Muransky v. Godiva Chocolatier, Inc., a three-judge panel of the Eleventh Circuit held that a retailer’s failure to truncate a credit card number on a receipt in violation of the Fair and Accurate Credit Transactions Act (FACTA) was sufficient to create standing. 922 F.3d 1175 (11th Cir. 2019). In October 2020, the Eleventh Circuit reversed that decision en banc, holding that a bare procedural violation of FACTA, devoid of any claim of individual injury, is insufficient to confer Article III standing. Muransky v. Godiva Chocolatier, 979 F.3d 917 (11th Cir. 2020) (en banc).

The panel had noted that Congress set forth the remedial procedures in FACTA to minimize a risk of harm to a concrete interest (namely, preventing identity theft), and held that any violation presenting even a marginal risk of harming that interest should be “sufficient to constitute a concrete injury.” 922 F.3d at 1188. The en banc Eleventh Circuit disagreed, and criticized the panel’s standard as essentially adopting a presumption that statutory injury alone can constitute Article III injury, which was what the Supreme Court had rejected in Spokeo. 979 F.3d at 930. Instead, the en banc court focused on whether the violation in question caused actual harm or posed a material risk of harm to the plaintiff.

The en banc court concluded that even though the plaintiff had received a noncompliant receipt that contained his private information, he had not alleged any actual harm more concrete than time spent “safeguarding” his receipt and experiencing a “breach of confidence.” Id. at 931. The court rejected both theories. As for “safeguarding” the receipt, the court noted that under Clapper v. Amnesty International USA, 568 U.S. 398, 416 (2013), self-inflicted harm alone cannot constitute injury under Article III. Id. at 931. As for the “breach of confidence,” the court was skeptical that the analogy to the common law breach of confidence was appropriate, and even if it were, it would require third-party disclosure of private information, and the plaintiff had not alleged that anyone else had seen the receipt. Id. at 931–32.

The Sixth Circuit took a markedly different approach when addressing similar facts in Donovan v. FirstCredit, Inc., 983 F.3d 246 (6th Cir. 2020). The plaintiff alleged that a creditor sent a letter inside an envelope with an envelope window that revealed language describing the plaintiff as a debtor. Id. at 249. The plaintiff sued under the Fair Debt Collection Practices Act’s (FDCPA) provisions regulating the language and symbols debt collectors may employ on envelopes when communicating with consumers, alleging that the letter had violated these provisions by revealing the plaintiff’s status as a debtor. Id.

The Sixth Circuit held that the exposure of information through an envelope window, even if “benign,” created a sufficient risk that the plaintiff’s status as a purported debtor would be disclosed, which established an injury-in-fact under the FDCPA. Id. at 252–53. The court reasoned that because the letter had actually been sent in the mail, and an invasion of privacy is a “harm that has traditionally been regarded as providing a basis for a lawsuit,” the mailing of the letter with the exposed information provided “a degree of risk sufficient to meet the concreteness requirement” under Spokeo. Id. at 253.

The Seventh and Ninth Circuits this past quarter also addressed standing in putative class actions. In Fox v. Dakkota Integrated Systems, LLC, 980 F.3d 1146 (7th Cir. 2020), the Seventh Circuit addressed allegations that the defendant had failed to develop, publicly disclose, and comply with a data-retention schedule and guidelines for the permanent destruction of biometric data under the Illinois Biometric Information Privacy Act (BIPA). In particular, the plaintiff alleged that the defendant had retained her biometric data after her employment ended, in violation of BIPA’s requirements. Id. at 1149.

The Seventh Circuit acknowledged that in a prior related case, it had held that merely alleging the non-disclosure of data-retention and data-destruction policies was insufficient to show injury-in-fact under Article III. Id. at 1153–54 (citing Bryant v. Compass Grp. US, Inc., 958 F.3d 617, 619 (7th Cir. 2020)). But the court noted that in this specific case, the defendant’s alleged failure to disclose those policies had led to an unlawful retention of the plaintiff’s handprint and also to her biometric data being unlawfully shared with a third party. Id. at 1154. Analogizing this unlawful retention of data to the unlawful collection of data (which the court had previously found conferred standing in Bryant), the court reasoned that “the invasion of a legally protected privacy right, though intangible, is personal and real,” and therefore sufficient to plead an injury in fact. Id. at 1155.

The Ninth Circuit addressed standing in McGee v. S-L Snacks National, 982 F.3d 700 (9th Cir. 2020), a putative consumer class action. The plaintiff alleged that she had purchased and consumed defendant’s popcorn containing trans fats, despite the FDA’s determination that trans fats are no longer “generally recognized as safe,” and she brought claims under both California’s Unfair Competition Law and for present and future physical injury from the ingestion of trans fats. Id. at 703. In support of her claim for physical injury, the plaintiff estimated that she had consumed 0.2 grams of trans fats per day, and cited studies showing a link between consuming trans fats and organ damage. Id. at 709.

The Ninth Circuit held that the plaintiff did not have standing to bring claims for her alleged physical injury. Id. at 710. Even though the plaintiff’s cited studies showed a connection between trans fats and organ damage, they did not show that the consumption of trans fats invariably lead to such damage, which is required to establish concrete injury without any individual medical evidence of harm. Id. at 708. As for future injury, the court noted that the plaintiff cited studies involving far greater levels of trans fats consumption, such that the plaintiff had alleged no substantial risk of future health consequences to her. Id. at 710.


The following Gibson Dunn lawyers contributed to this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Lauren Blas, Jillian London, Wesley Sze, Jessica Pearigen, and Jonathan Haderlein.

Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers:

Theodore J. Boutrous, Jr. – Co-Chair, Litigation Practice Group – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba – Co-Chair, Class Actions Practice Group – Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis – Co-Chair, Class Actions Practice Group – Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick – Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger – Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com) Lauren M. Blas – Los Angeles (+1 213-229-7503, lblas@gibsondunn.com)

© 2021 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 10, 2020 |
Third Quarter 2020 Update on Class Actions

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This update provides an overview and summary of key class action developments during the third quarter of 2020 (July through September).

Part I discusses an important Second Circuit decision regarding claims for injunctive relief in false advertising class actions.

Part II describes an Eleventh Circuit opinion in which a divided panel held that 19th-century Supreme Court decisions prohibit the very common practice of providing incentive awards to class representatives.

Part III covers two decisions from the Ninth Circuit relating to the Class Action Fairness Act’s amount-in-controversy requirement.

I.   The Second Circuit Holds That It Is Improper to Certify an Injunctive-Relief Class of Past Purchasers of an Allegedly Falsely Advertised Product

In a very significant decision impacting false advertising class actions, the Second Circuit in Berni v. Barilla S.p.A., 964 F.3d 141 (2d Cir. 2020), held that district courts cannot certify a Rule 23(b)(2) injunctive-relief class of past purchasers of products that were allegedly falsely advertised.

Berni involved the allegation that boxes of pasta they had purchased were underfilled in violation of New York’s General Business Law § 349(a), which prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce.” Id. at 144. The parties reached a settlement in which the defendant agreed, among other things, to include disclosures on its boxes regarding the amount of pasta contained in them. Id. The district court certified an injunctive-relief class for settlement purposes under Rule 23(b)(2) and entered final approval of the settlement. An objector appealed.

The Second Circuit held that the objector had standing to appeal even though he was not personally deceived by the packaging, id. at 145–46, and it then reversed the grant of class certification, holding that a Rule 23(b)(2) class may be certified only where the injunctive relief sought would be “proper for each and every member of the group of past purchasers.” Id. at 146. In this case, such relief would not be proper, according to the court, because past purchasers were under no obligation to buy the product again, and, even if they did, would already have the information they claimed to lack at the time of their initial purchase. As such, they were “not likely to encounter future harm of the kind that makes injunctive relief appropriate.” Id. at 147–48.

The Berni decision is a critical ruling in favor of class-action defendants, as it will prevent the certification of Rule 23(b)(2) classes in many, if not most, false advertising class actions within the Second Circuit. Coupled with the Ninth Circuit’s decision in Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020), which upheld the dismissal of equitable claims when an adequate legal remedy exists, plaintiffs should face more challenges asserting Rule 23(b)(2) class actions in two of the busiest jurisdictions for these lawsuits.

II.   Relying on Longstanding Supreme Court Decisions, the Eleventh Circuit Rejects Incentive Awards for Class Representatives

The Eleventh Circuit caught the attention of practitioners this quarter on the permissibility of incentive payments for class representatives, which are almost customary in class settlements.

In Johnson v. NPAS Solutions, LLC, 975 F.3d 1244 (11th Cir. 2020), a putative class of consumers alleged that the defendant had violated the Telephone Consumer Protection Act, 47 U.S.C. § 227. The parties settled, and the district court eventually approved the settlement, overruling one class member’s objection that the class representative’s incentive award “contravened” the United States Supreme Court’s decisions in Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), which are known for “establishing the rule . . . that attorneys’ fees can be paid from a common fund.” Johnson, 975 F.3d at 1250, 1255–56.

The frequency of class action “service awards” in modern practice did not persuade the majority of the Eleventh Circuit panel:

The class-action settlement that underlies this appeal is just like so many others that have come before it. And in a way, that’s exactly the problem. We find that, in approving the settlement here, the district court repeated several errors that, while clear to us, have become commonplace in everyday class-action practice . . . . We don’t necessarily fault the district court—it handled the class-action settlement here in pretty much exactly the same way that hundreds of courts before it have handled similar settlements. But familiarity breeds inattention, and it falls to us to correct the errors in the case before us.

Id. at 1248–49. The majority ruled that while Greenough and Pettus had permitted an award of class counsel’s fees, they had denied class representatives’ claims for a “salary” or “personal services” and for “private expenses” as “unsupported by reason or authority.” Id. at 1256–57. The majority held that incentive awards are “roughly analogous to a salary” and, “[i]f anything, . . . present even more pronounced risks than . . . salary and expense reimbursements” because they “promote litigation by providing a prize to be won.” Id. at 1257–58.

Judge Martin dissented and warned that the majority’s holding was unprecedented and would cause plaintiffs to “be less willing to take on the role of class representative in the future.” Id. at 1264.

III.   The Ninth Circuit Reverses Remand Orders in Two Class Action Fairness Act Cases

The Ninth Circuit issued two significant decisions in appeals involving remand orders under the Class Actions Fairness Act (“CAFA”) that will make it easier for defendants to establish the $5 million amount in controversy needed for removal under CAFA.

In Salter v. Quality Carriers, Inc., 974 F.3d 959 (9th Cir. 2020), the court held that plausible allegations of CAFA’s amount-in-controversy requirement are sufficient unless the plaintiff challenges the truth of those allegations. In Salter, the defendant removed an action brought by a putative class of truck drivers alleging that they were misclassified as independent contractors. To establish that the amount in controversy exceeded $5 million, the defendant relied on a declaration from its Chief Information Officer that stated he was familiar with the company’s record-keeping practices and that the company had deducted expenses totaling over $14 million from putative class members’ paychecks. Id. at 961–62. The district court determined that the declaration was conclusory and faulted the defendant for failing to attach the underlying business records, and remanded the action to state court. Id. at 962. Citing Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, 88–89 (2014), the Ninth Circuit vacated the remand order because the district court erred in refusing to accept the truth of the declaration. Salter, 974 F.3d at 964–65. Because the plaintiff did not make a factual attack on the truth of the declaration, and instead argued only that the declaration was insufficiently detailed and did not attach supporting data, the declaration’s conclusions should have been accepted as true. Id. at 965.

In Greene v. Harley-Davidson, Inc., 965 F.3d 767 (9th Cir. 2020), the Ninth Circuit held that punitive damages can be factored into the amount in controversy calculation under CAFA if there is a “reasonable possibility” of such damages. The defendant argued that a jury might award punitive damages on a 1:1 ratio with compensatory damages, as juries had done in other cases brought under California’s Consumers Legal Remedies Act. Id. at 770–71. The district court refused to include punitive damages in the amount-in-controversy calculation because the defendant did not “analogize or explain” how the cited cases “[we]re similar to the instant action.” Id. at 771. The Ninth Circuit reversed. It reasoned that the amount in controversy for purposes of CAFA is the “amount at stake in the underlying litigation,” which “refers to possible liability.” Id. at 772 (first emphasis in original, second emphasis added). A defendant could meet its burden to show possible liability by “cit[ing] a case based on the same or a similar statute in which the jury or court awarded punitive damages based on the punitive-compensatory damages ratio relied upon by the defendant in its removal notice.” Id. Because the defendant had cited four such cases, it met its burden. Id.


The following Gibson Dunn lawyers contributed to this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Lauren Blas, Nathan Strauss, Vincent Eisinger, and Andrew Kasabian.

Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm's Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers:

Theodore J. Boutrous, Jr. - Co-Chair, Litigation Practice Group - Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick - Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger - Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com)

© 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

November 5, 2020 |
Daily Journal Names Theane Evangelis and Carrie LeRoy Among 2020 Top Women Lawyers in California

The Daily Journal named Los Angeles partner Theane Evangelis and Palo Alto partner Carrie LeRoy to its 2020 list of Top Women Lawyers.  The profiles were published on November 4, 2020. Theane Evangelis is Co-Chair of the firm’s Class Actions Practice Group.  She advises on appellate, constitutional, media and entertainment, and crisis management matters, as well as a variety of employment, consumer and other class actions, in trial and appellate courts across the country. Carrie LeRoy is Co-Chair of the firm’s Technology Transactions Practice Group.  Her practice covers a wide range of intellectual property, technology and sourcing transactions, including development and license agreements, patent and other technology license agreements, outsourcing, joint ventures and strategic collaborations.

July 24, 2020 |
Second Quarter 2020 Update on Class Actions

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This update provides an overview and summary of key class action developments during the second quarter of 2020 (April through June). 

Part I discusses two significant decisions addressing Rule 23’s commonality and predominance requirements. 

Part II analyzes a decision from this past quarter relating to equitable restitution, an oft-discussed issue in consumer class actions.

Part III covers recent decisions on the injury-in-fact requirement for Article III standing in class actions after Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016)—a subject of ongoing coverage in these class action alerts.

I.  Federal Circuit Courts Continue to Emphasize the Rigorous Analysis Required at the Class Certification Stage

This past quarter, the Ninth and Third Circuits issued two decisions that emphasized the need for district courts to conduct a rigorous analysis in assessing whether Rule 23’s commonality and predominance requirements are satisfied.

The Ninth Circuit in Grodzitsky v. American Honda Motor Co., 957 F.3d 979 (9th Cir. 2020), issued a significant ruling that makes clear that district courts must assess expert testimony submitted in support of class certification under Daubert. Id. at 984. The district court in Grodzitsky had denied class certification on commonality grounds because the plaintiffs could not establish that an alleged defect in defendant’s vehicles was common to all putative class members. Id. Although plaintiffs offered expert testimony to support the existence of a common defect, the district court excluded that testimony under Daubert, finding deficiencies in the expert’s methodology and a lack of supporting studies or testing to corroborate the expert’s conclusions. Id. In affirming the district court’s denial of class certification, the Ninth Circuit held that the court had properly applied Daubert at the class certification stage, and that the exclusion of the expert’s testimony was fatal to certification given the “rigorous analysis” of commonality that the court was required to undertake. Id. at 986–87.

In another expert-focused class certification ruling, the Third Circuit in In re Lamictal Direct Purchaser Antitrust Litigation, 957 F.3d 184 (3d Cir. 2020), emphasized that Rule 23 requires a rigorous analysis of competing expert evidence. The plaintiffs there alleged that an agreement between two drug manufacturers to settle a patent dispute was an impermissible “reverse payment agreement” that violated antitrust laws. Id. at 189. Notwithstanding the complexity of individual factors relevant to the amount that a particular direct purchaser actually paid for the drugs, the plaintiffs relied on an expert’s model using an “average hypothetical price” to establish that the entire class suffered a competitive injury; the district court then relied on this model to certify a class of all companies that purchased drugs from the defendants. Id. at 193–94. The Third Circuit reversed the order granting class certification, holding that the district court abused its discretion by assuming that “averages are acceptable” to prove that “common issues predominated by a preponderance of the evidence.” Id. at 194. To the contrary, relying on averages without conducting the requisite analysis was not acceptable because that could “mask individualized injury.”  Id.

The Third Circuit specifically rejected plaintiffs’ argument that the Supreme Court had held in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016), that so-called “representative” evidence was sufficient to satisfy Rule 23’s predominance requirement unless “no reasonable juror could believe the common proof at trial.” Lamictal, 957 F.3d at 191–92. The Third Circuit emphasized that Tyson Foods was grounded in a special rule for certain actions under the Fair Labor Standards Act, and thus did not relieve plaintiffs in an antitrust action of their obligation to “prove their claim is capable of common proof by a predominance of the evidence” at the class certification stage. Id. at 192.

II.  The Ninth Circuit Addresses the Availability Equitable Remedies in Consumer Class Actions Litigated in Federal Court

In an important decision addressing California’s consumer protection laws, the Ninth Circuit held in Sonner v. Premier Nutrition Corp., 962 F.3d 1072 (9th Cir. 2020), that federal courts cannot entertain equitable claims when an adequate legal remedy exists, even when state law would permit issuance of equitable relief. This is a potentially significant limitation on consumer class actions brought in, or removed to, federal courts within the Ninth Circuit.

The plaintiff in Sonner brought a putative class action against a dietary supplement manufacturer. The operative complaint alleged false advertising and demanded injunctive relief and restitution under California’s Unfair Competition Law (“UCL”) and Consumers Legal Remedies Act (“CLRA”), as well as damages under the CLRA. After the class was certified and after the plaintiff defeated the defendant’s motion for summary judgment, the plaintiff filed an amended complaint and dropped her CLRA damages claim to avoid a jury trial. The district court dismissed the claim for equitable restitution on the ground that the plaintiff “failed to establish that she lacked an adequate legal remedy for the same past harm for which she sought equitable restitution.” Id. at 1075–76.

The plaintiff argued that “state law alone decides whether she must show a lack of an adequate legal remedy before obtaining restitution . . . [and] the California legislature abrogated the state’s inadequate-remedy-at-law doctrine for claims seeking equitable restitution under the UCL and CLRA.” Id. at 1076. But the Ninth Circuit disagreed, holding that “federal courts must apply equitable principles derived from federal common law to claims for equitable restitution under [the UCL and CLRA].” Id. at 1074.

The Ninth Circuit went on to apply the Supreme Court’s decision in Guaranty Trust Co. of New York v. York, 326 U.S. 99 (1945), which held that because state law cannot expand a federal court’s equitable powers, “even if a state authorizes its courts to provide equitable relief when an adequate legal remedy exists, such relief may be unavailable in federal court because equitable remedies are subject to traditional equitable principles unaffected by state law.” Sonner, 962 F.3d at 1078–79. According to the Ninth Circuit, “the strong federal policy protecting the constitutional right to a trial by jury[,]” which the adequate-remedy-at-law doctrine is meant to vindicate, “outweighs [the] procedural interest” afforded by the CLRA and UCL. Id. at 1079.

Applying these principles, the Ninth Circuit concluded that the plaintiff failed to make a showing of an inadequate legal remedy because she sought “the same sum in equitable restitution [under the UCL] as she requested in damages [under the CLRA] to compensate her for the same past harm.” Id. at 1081.

III.  Courts Wrestle with Article III Standing in Putative Class Actions

Over the past four years, the federal courts of appeals have issued a steady stream of decisions interpreting and applying the Supreme Court’s landmark Article III standing decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), to putative class actions. (For recent coverage of post-Spokeo decisions, please see the following quarterly updates: First Quarter 2020 Update on Class Actions, Year-End and Fourth Quarter 2019 Update on Class Actions, and Third Quarter 2019 Update on Class Actions). This past quarter was no exception, with two decisions finding that plaintiffs had Article III standing under Spokeo.

First, the Ninth Circuit held that even temporary financial loss can create an injury-in-fact for Article III purposes. In Van v. LLR, Inc., 962 F.3d 1160 (9th Cir. 2020), the plaintiff alleged that she was injured when, as a result of a related lawsuit, the defendant refunded certain improperly charged sales taxes (approximately $531) but failed to pay interest on the refunded funds (alleged to equal $3.76). The defendant moved to dismiss for lack of Article III standing, arguing that the plaintiff could not establish injury-in-fact because she had received a full refund of the tax charges and “her claim for interest alone was insufficient to establish standing.” Id. at 1161. The Ninth Circuit rejected this argument, holding that “the loss of a significant amount of money . . . for a substantial amount of time . . . is not too trifling to support standing.” Id. at 1162. The court likewise rejected the defendant’s argument that the lost time value of money, standing alone, was too speculative an injury to support Article III standing. Id. at 1162–63.

Second, the Seventh Circuit in Bryant v. Compass Group USA, Inc., 958 F.3d 617 (7th Cir. 2020), held that the alleged collection of an employee’s fingerprints without first obtaining her written consent, as required by the Illinois Biometric Information Privacy Act, was sufficiently concrete for Article III standing. Applying Spokeo, the Seventh Circuit reversed the district court’s ruling to the contrary, and emphasized that an injury need not be “tangible” in order to satisfy Article III’s concreteness requirement. Id. at 620. According to the Seventh Circuit, the plaintiff had not only alleged a concrete “invasion of her private domain,” but also an informational injury, insofar as information was withheld from her and “impaired her ability to use the information in a way the statute envisioned.” Id. at 624. The Seventh Circuit, however, held that the company’s failure to make its biometric retention schedule available to the public was not an injury-in-fact because the statutory duty to disclose was owed to the public generally, and the plaintiff therefore “did not suffer a concrete and particularized injury.” Id. at 626.


The following Gibson Dunn lawyers contributed to this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Michael Holecek, Lauren Blas, Wesley Sze, Emily Riff, and David Rubin.

Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm's Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers:

Theodore J. Boutrous, Jr. - Co-Chair, Litigation Practice Group - Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick - Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger - Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com)

© 2020 Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071

Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 26, 2020 |
Best Lawyers in Germany 2021 Recognizes 19 Gibson Dunn Attorneys

Best Lawyers in Germany 2021 has recognized 19 Gibson Dunn attorneys as leading lawyers in their respective practice areas. Frankfurt attorneys recognized include: Alexander Klein – Banking and Finance Law; Jens-Olrik Murach – Competition/Antitrust Law, and Litigation; Dirk Oberbracht – Corporate Law, Mergers and Acquisitions Law, and Private Equity Law; Wilhelm Reinhardt – Corporate Law, and Mergers and Acquisitions Law; Sebastian Schoon – Banking and Finance Law; and Finn Zeidler – Arbitration and Mediation, Criminal Defense, and Litigation. Munich attorneys recognized include: Silke Beiter – Corporate Governance and Compliance Practice; Peter Decker – Banking & Finance, Private Equity Law, and Real Estate Law; Lutz Englisch – Corporate Governance and Compliance Practice, Corporate Law, Mergers and Acquisitions Law, and Private Equity Law; Ralf van Ermingen-Marbach – Criminal Tax Practice; Birgit Friedl – Restructuring and Insolvency Law; Ferdinand Fromholzer – Corporate Law, Mergers and Acquisitions Law, and Private Equity Law; Kai Gesing – Litigation; Markus Nauheim – Arbitration and Mediation, Corporate Law, Litigation, and Mergers and Acquisitions Law; Markus Rieder – Arbitration and Mediation, Corporate Governance and Compliance Practice, International Arbitration, and Litigation; Hans Martin Schmid – Real Estate Law; Benno Schwarz – Corporate Governance and Compliance Practice, Corporate Law, Criminal Defense, and Mergers and Acquisitions Law; Michael Walther – Competition/Antitrust Law; and Mark Zimmer – Corporate Governance and Compliance Practice, Criminal Defense, Labor and Employment, and Litigation. The list was published on June 26, 2020.

June 23, 2020 |
9th Circ. Unequal Class Cert. Appeal Treatment Is Problematic

Los Angeles partner Bradley Hamburger, Los Angeles associate Lauren Blas and Washington, D.C. associate Kelley Pettus are the authors of "9th Circ. Unequal Class Cert. Appeal Treatment Is Problematic," [PDF] published by Law360 on June 19, 2020.

June 1, 2020 |
Supreme Court Holds That ERISA Defined-Benefit Pension Plan Participants Do Not Have Article III Standing To Sue For Fiduciary Breach

Click for PDF Decided June 1, 2020 Thole v. U.S. Bank, N.A., No. 17-1712

Today, the Supreme Court held 5-4 that participants in defined-benefit pension plans lack Article III standing to sue under ERISA for alleged breach of fiduciary duties because, whether or not they prevail in the action, they will receive the same payments for the rest of their lives. 

Background: Section 502(a)(2) and (a)(3) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(2) and (a)(3), authorize civil actions for breach of fiduciary duty with respect to  employee pension benefit plans. Petitioners are participants in U.S. Bank’s defined-benefit pension plan, which guarantees lifetime fixed periodic payments. Although petitioners have received all payments to which they are entitled, they sued U.S. Bank for breach of fiduciary duty, alleging that plan fiduciaries did not appropriately manage the plan’s assets, causing the assets to fall below the minimum funding level that ERISA requires, and that investment of plan assets in mutual funds offered by a U.S. Bank subsidiary caused the plan to pay higher investment fees than it would have paid for other, similar mutual funds. U.S. Bank moved to dismiss, arguing that petitioners lacked Article III standing because they did not suffer an injury-in-fact. The district court granted the motion. The Eighth Circuit affirmed, but not on Article III grounds. The Court held that ERISA does not permit defined-benefit plan participants to sue for alleged breach of fiduciary duty when they have received all benefits to which they are entitled under the plan.

Issues: Whether an ERISA defined-benefit plan participant or beneficiary can demonstrate Article III standing to bring claims alleging breach of fiduciary duty under ERISA Section 502(a)(2) or (a)(3) when the participants and beneficiaries have received all benefits to which they are contractually entitled.

Court's Holding: No. A participant or beneficiary in a defined-benefit ERISA plan who has received all vested benefits—and who has not shown a “substantially increased risk that the plan and employer would both fail”—cannot show the requisite injury-in-fact for Article III standing to sue for alleged breach of fiduciary duty.

“If [petitioners] were to win this lawsuit, they would still receive the exact same monthly benefits that they are already slated to receive, not a penny more. The [petitioners] therefore have no concrete stake in this lawsuit.

Justice Kavanaugh, writing for the majority

What It Means:
  • Explaining that “[t]here is no ERISA exception to Article III,” a majority of the Court—the Chief Justice and Justices Thomas, Alito, Gorsuch, and Kavanaugh—held that petitioners lacked Article III standing “for a simple, commonsense reason: They have received all of their vested pension benefits so far, and they are legally entitled to receive the same monthly payments for the rest of their lives.” Petitioners also did not plausibly allege that “plan underfunding” created a “substantially increased risk” that the plan or employer “would both fail,” thereby jeopardizing future pension benefits.
  • The Court rejected petitioners’ argument, based on trust-law principles, that they have an equitable or property interest in the plan’s assets, or the “financial integrity” of the plan. The benefits of trust beneficiaries depend on how well the trust is managed. By contrast, “a defined-benefit plan is more in the nature of a contract,” and “[t]he plan participants’ benefits are fixed and will not change, regardless of how well or poorly the plan is managed.”
  • The Court also held that petitioners lacked standing to sue “as representatives of the plan itself” because they had not been “legally or contractually appointed to represent the plan.” Going forward, fiduciary breach claims concerning defined-benefit plans likely will need to be brought by the Department of Labor or co-fiduciaries.
  • The Court’s ruling means that beneficiaries of ERISA defined-benefit pension plans generally will not be able to sue for breach of fiduciary duty unless the plan has failed to make required benefits payments, or it is likely that the alleged misconduct will render the plan insolvent.
  • Although the Court was careful to distinguish defined-contribution plans, today’s opinion could impact other types of ERISA claims. For example, in cases challenging the administration of health benefits, the Court’s ruling may cast doubt on plaintiffs’ attempts to evade the limits on class certification by claiming class-wide breaches of fiduciary duty without tying those allegations to a class-wide deprivation of benefits.

The Court's opinion is available here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Supreme Court.  Please feel free to contact the following practice leaders:

Appellate and Constitutional Law Practice

Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com

Related Practice: Class Actions and Employee Benefits

Richard J. Doren +1 213.229.7038 rdoren@gibsondunn.com Heather L. Richardson +1 213.229.7409 hrichardson@gibsondunn.com
Geoffrey Sigler +1 202.887.3752 gsigler@gibsondunn.com Daniel J. Thomasch +1 212.351.3800 dthomasch@gibsondunn.com
© 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

May 19, 2020 |
Closed for COVID-19: Class Action Refund Lawsuits, Practical Considerations, & Potential Defenses

Click for PDF The COVID-19 global pandemic has changed the face of the world for businesses and customers as we know it.  Public health mandates and local, state, and national shelter-in-place orders have required events to be canceled, plans to be postponed indefinitely, and facilities closed until further notice.  In the wake of these closures and cancellations, consumer frustration has mounted, and scores of class action lawsuits have followed.  This Article examines the industries facing these lawsuits, describes the theories that plaintiffs are asserting, and provides some practical considerations and potential defenses for these lawsuits. Industries Facing COVID-19 Related Refund Class Actions Plaintiffs’ lawyers have seized on the COVID-19 pandemic to bring class action lawsuits involving the following businesses: Student Tuition and Fees As schools have been forced to close their campuses and shift to online learning, students and parents have filed class actions seeking reimbursement of tuition, room and board, and other expenses.  The student-plaintiffs allege that the value of their degrees, the quality of their education, and their enjoyment of on-campus facilities have been diminished by switching to online classes.  As such, the students allege that they are entitled to refunds on the theory that schools are not fulfilling their alleged contractual obligations to provide an on-campus education.  Scores of these lawsuits have been filed against private and public universities.[1]  Multiple class actions have been brought that seek not only reimbursement of room and board fees, but also tuition. Concerts and Sporting Events Shelter-in-place orders have left no choice but to cancel or postpone concerts and sporting events.  In response, ticketholders to these events have filed refund class actions against event sponsors, as well as the websites that facilitate ticket sales, seeking refunds.  For example, season ticket holders have sued Major League Baseball for “unfairly” financially burdening customers by withholding refunds after MLB postponed the season.[2]  Other class action complaints brought against ticket sellers allege that companies changed their refund policies after consumers had already purchased their tickets. Season Passes and Memberships Companies that offer memberships and season passes for access to physical facilities, such as fitness centers, yoga studios, and ski resorts, also find themselves facing class actions seeking refunds following long-term and seasonal closures resulting from COVID-19.  For example, one plaintiff claims her gym is not refunding her monthly membership fee while the gym is closed.[3] Travel Deposits Consumers have filed a number of class actions against travel companies seeking refunds for canceled flights or cruises.  While many travel companies have offered no-fee cancellations and provided a credit for future travel, plaintiffs allege that they should be entitled to refunds of the funds paid, rather than a credit for future travel.[4] Defenses and Practical Considerations Businesses that are facing class action lawsuits based on mandatory closures have several defenses that warrant consideration as part of any legal strategy. Arbitration Agreements and Class Action Waivers Arbitration agreements are included in many contracts that accompany consumer transactions.  Since the Supreme Court’s landmark decision in AT&T Mobility LLC v. Concepcion,[5] these types of agreements are enforceable subject to any generally applicable contract defenses that do not interfere with the fundamental attributes of arbitration (e.g., fraud, duress, and unconscionability). As a result, one of the first steps a company should take in defending a consumer class action is determining whether the parties have agreed to resolve the dispute outside of court and outside of a class action setting.  This also includes looking at whether there are arbitration provisions in third-party contracts, such as contracts between plaintiffs and ticket resellers. If the case is one in which California law applies, then recent caselaw confirms that a company must also evaluate whether any of plaintiffs’ claims that are the subject of an arbitration agreement seek a public injunction. Other Contract-Based Defenses Once a company has determined whether the case should proceed in court or before an arbitrator, it should consider other contract-based defenses, especially those that may excuse a company’s performance or otherwise limit a company’s liability. A frequently invoked contract defense in the wake of COVID-19 is force majeure.  These clauses vary from contract to contract, but as a general matter, the purpose of these clauses is to set forth when a party may terminate or fail to perform without liability due to an unforeseen event.  We anticipate that these clauses will be a particular focus of COVID-19 related litigation, especially those based on forced closures and cancellations. Another possible defense is that there has been no actual breach of contract.  If a company is complying with its contractual obligations, there is arguably no liability.  For example, a contract may contemplate that an event or season may be cut short due to unforeseen circumstances, and it may assign that risk to the purchaser.  Similarly, a purchaser’s entitlement to a refund may turn on his compliance with the contractual procedures for receiving a refund. Impossibility and frustration of purpose also may excuse performance.  “Impossibility” applies where performance is objectively impossible, and “frustration of purpose” is triggered if circumstances make the required performance worthless to the receiving party.  Companies may be subject to government orders that make it impossible to host an event or open facilities, and courts have held that impossibility during disasters, based on intervening government restrictions, can excuse performance.[6] Causation and Reliance-Based Defenses Depending on a plaintiff’s theory, intervening factors may preclude, or mitigate, a company’s liability.  These factors could include state and local orders limiting large gatherings or evidence of a plaintiff’s unwillingness to attend an event even if it were to proceed as scheduled. A purchaser’s conduct may also defeat his claim.  If a purchaser does not mitigate his or her damages, recovery may be limited.  For example, a purchaser who fails to accept a voucher may be subject to an offset, and a purchaser who fails to accept a refund offer may not have standing to bring a claim, depending on the circumstances.  A purchaser may also waive or negate any claim based on subsequent conduct, such as continuing a membership or using a voucher. Defenses based on COVID-19 may also exist on bad faith and unjust enrichment claims.  Evidence that a company is thoughtfully considering different options for responding to COVID-19 may negate a finding of bad faith.  Similarly, companies are still incurring substantial costs due to government orders and closures, even with events canceled and facilities closed.  Thus, a company may respond to an unjust enrichment claim by arguing that it is not unjustly retaining benefits due to the excessive costs it is incurring as a result of forced closures. Class Certification Defenses As this discussion suggests, putative class members are not going to be similarly situated and/or affected by the pandemic.  For example, entitlement to a refund could turn on individualized issues, such as the specific representations to each consumer, and the steps taken to secure a refund.  Individualized inquiries may also exist based on customer expectations.  A frequent traveler may understand that flights are subject to unforeseen cancellation, but not a less-experienced traveler.  In addition, damages may vary and be incapable of a method that allows them to be determined across the class.  For example, a class member who uses a gym pass 50 times per year is differently situated than a consumer who historically uses it more infrequently.  The presence of arbitration clauses and class action waivers in contracts with at least some of the putative class members can also make a class action lawsuit an inappropriate forum. Conclusion Companies that have canceled or postponed events or closed their facilities face many difficult choices based on COVID-19, and the specter of class action lawsuits further complicates these decisions.  Regardless of a company’s approach, and even if a company is already subject to a class action lawsuit, there are important considerations that companies should weigh with counsel in order to determine the best path forward. ___________________________    [1]   See, e.g., Rickenbaker v. Drexel Univ., No. 2:20-cv-1358 (D.S.C. Apr. 8, 2020); Dixon v. Univ. of Miami, No. 2:20-cv-1348 (D.S.C. Apr. 8, 2020); Rosenkrantz v. Ariz. Bd. of Regents, No. 2:20-cv-00613 (D. Ariz. Mar. 27, 2020).    [2]   Ajzenman v. Office of the Comm’r of Baseball, No. 2:20-cv-03643 (C.D. Cal. Apr. 20, 2020).    [3]   Labib v. 24 Hour Fitness USA Inc., No. 4:20-cv-02134 (N.D. Cal. Mar. 27, 2020); see also Weiler v. Corepower Yoga LLC, No. 2:20-cv-03496 (C.D. Cal. Apr. 15, 2020); Kramer v. Alterra Mountain Co., No. 1:20-cv-01057 (D. Colo. Apr. 14, 2020).    [4]   See, e.g., Manchur v. Spirit Airlines Inc., No. 1:20-cv-10771 (D. Mass. Apr. 21, 2020); Alvarez v. Hawaiian Airlines Inc., No. 1:20-cv-00175 (D. Haw. Apr. 20, 2020); Roman v. JetBlue Airways Corp., No. 1:20-cv-01829 (E.D.N.Y. Apr. 16, 2020); Herr v. Allegiant Air LLC, No. 2:20-cv-10938 (E.D. Mich. Apr. 15, 2020); Bombin v. Sw. Airlines Co., No. 5:20-cv-01883 (E.D. Pa. Apr. 13, 2020).    [5]   AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).    [6]   See, e.g., Bush v. ProTravel Int’l, 192 Misc. 2d 743, 752–53 (N.Y. Civ. Ct. 2002) (recognizing impossibility of performance due to state of emergency following September 11 terrorist attacks).


Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. For additional information, please contact any member of the firm’s Coronavirus (COVID-19) Response Team or its Class Actions practice group, or the following authors: AUTHORS:  Christopher Chorba, Timothy W. Loose, Daniel Weiss, Jeremy S. Smith, Emily Riff, and Andrew Kasabian. © 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

April 24, 2020 |
First Quarter 2020 Update on Class Actions

Click for PDF We hope that everyone is staying safe and healthy during these unprecedented times. This update provides an overview and summary of key class action developments during the first quarter of 2020 (January through March). Part I covers three appellate interpretations of the U.S. Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), and whether federal courts may exercise personal jurisdiction over the claims of absent class members. Part II reviews several critical appellate decisions relating to whether absent class members must have Article III standing, as well as further developments on the issue of Article III standing in class actions after Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). Part III discusses a Ninth Circuit decision denying discovery to find a new class representative. Part IV analyzes two recent decisions addressing the certification of classes alleging claims under California’s Unfair Competition Law and False Advertising Law. _____________________

I. Appellate Courts Begin to Consider How Bristol-Myers Applies to Class Actions

This quarter, appellate courts wrestled for the first time with the application of Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S. Ct. 1773 (2017), to class actions. In Bristol-Myers, the Supreme Court held that the scope of a state court’s power to exercise personal jurisdiction over a defendant requires a connection between the defendant’s activity in the forum state and the specific claims in the litigation. As we detailed in a prior client alert, a group of plaintiffs (including California and non-California residents) filed a mass tort suit in California alleging that all had been injured by a drug produced by defendant, which was incorporated in Delaware and headquartered in New York. The Supreme Court held that California could not exercise jurisdiction over the claims brought by non-residents because there was no connection between the forum and those claims. As Justice Sotomayor noted in her dissent, the Court did “not confront the question whether its opinion here would also apply to a class action in which a plaintiff injured in the forum State seeks to represent a nationwide class of plaintiffs, not all of whom were injured there.” Id. at 1789 n.4 (Sotomayor, J., dissenting). Three federal circuit courts have now weighed in on this question, and have reached varied conclusions. In Mussat v. IQVIA, Inc., 953 F.3d 441 (7th Cir. 2020), the plaintiff, an Illinois professional medical services corporation, received from the defendant two unsolicited faxes that failed to include the opt-out notice required by the Telephone Consumer Protection Act. Id. at 443. The plaintiff then brought a putative class action in Illinois on behalf of a nationwide class who had received similar unsolicited faxes. Id. The district court struck the class definition, reasoning that, under Bristol-Myers, absent class members each had to show minimum contacts between the defendant and the forum state when the defendant is not subject to general jurisdiction in the forum state. Id. The Seventh Circuit reversed the order granting the motion to strike, holding that because Bristol-Myers was a mass tort action and not a class action, its principles “do not apply to the case of a nationwide class action filed in federal court under a federal statute.” Id. It reasoned that in a mass tort action, all plaintiffs are considered “parties,” because mass tort actions represent a consolidation of all possible individual claims. Id. at 447. In class actions, by contrast, the “proper characterization of the status of absent class members depends on the issue,” id., and absent class members “are not considered parties for assessing whether the requirement of diverse citizenship” has been met or “when a court decides whether it has the proper venue.” Id. The court explained “[w]e see no reason why personal jurisdiction should be treated any differently from subject-matter jurisdiction and venue: the named representatives must be able to demonstrate either general or specific jurisdiction, but the unnamed class members are not required to do so.” Id. The D.C. Circuit took a different approach in Molock v. Whole Foods Market Group, 952 F.3d 293 (D.C. Cir. 2020). There, the court granted an interlocutory appeal after a district court denied a defendant’s motion to dismiss all non-resident putative class members for lack of personal jurisdiction. It held that the motion to dismiss was premature (because the class had not yet been certified) and declined to reach the question of whether a court may assert specific personal jurisdiction over putative class action claims of unnamed non-resident class members. Like the Seventh Circuit, the D.C. Circuit noted the unique status of putative class members, stating that they are “always treated as nonparties.” Id. at 297 (emphasis in original). “Putative class members become parties to an action—and thus subject to dismissal—only after class certification.” Id. at 298. Judge Silberman dissented, explaining that “the party status of absent class members seems to me to be irrelevant,” because “a court’s assertion of jurisdiction over a defendant exposes [the defendant] to that court’s coercive power, so such an assertion must comport with due process of law.” Id. at 307. He went on to say that whenever a court exercises its coercive power, a defendant is “entitled to due process protections—including limits on assertions of personal jurisdiction—with respect to all claims in a class action for which judgment is sought.” Id. While the judges may have disagreed about whether Bristol-Myers bars claims by non-resident putative class members at the pleading stage, the D.C. Circuit, unlike the Seventh Circuit, did not appear to reject outright the possibility that Bristol-Myers could be relevant at the class certification stage and potentially bar non-residents from being part of the class. The Fifth Circuit took a similarly proceduralist approach in Cruson v. Jackson National Life Insurance Company, 954 F.3d 240 (5th Cir. 2020). Like the D.C. Circuit in Molock, the Fifth Circuit ruled that any decision relating to a court’s jurisdiction over the claims of non-resident putative class members must wait until certification. Specifically, the court held that a defendant who did not raise a defense of personal jurisdiction as to non-resident putative class members in its Rule 12 motion had not waived the defense because that defense was not yet “available” against non-resident putative class members who “were not yet before the court” when the Rule 12 motion was filed. Id. at 250. Whether or not the Fifth Circuit will rule that Bristol-Myers bars courts from asserting jurisdiction over claims brought by non-resident individuals in a class action remains an open question. Because most circuits have not definitively resolved whether a Bristol-Myers challenge is appropriate at the pleadings stage, defendants should continue to assert such arguments early in the case to avoid a finding of waiver.

II. Courts Consider the Interplay Between Article III Standing and Class Actions

In the opening months of 2020, federal appellate courts issued decisions addressing whether and when absent class members and named plaintiffs must satisfy the United States Constitution’s standing requirements, as well as what types of concrete injuries are necessary to establish standing in the wake of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). In Flecha v. Medicredit, Inc., 946 F.3d 762 (5th Cir. 2020), the Fifth Circuit considered whether absent class members must establish standing at the class-certification stage—a question that, as we explained in a previous update, continues to divide the federal courts of appeal. Unfortunately, however, the Fifth Circuit ultimately declined to provide a clear answer. In that case, the plaintiff brought a putative class action under the Fair Debt Collection Practices Act on behalf of a putative class of all Texans who had received a purportedly misleading debt-collection letter from defendant. Id. at 765. While the court acknowledged that “there are undoubtedly many unnamed class members here who lack the requisite injury to establish Article III standing,” the court concluded that it did not (and ought not) reach the question because the putative class could not be certified under Rule 23 in any event. Id. at 768–69. But Judge Oldham wrote separately to note his view that “Article III is just as important in class actions as it is in individual ones,” and that a putative class that includes absent members who lack standing should not be certified. Id. at 771 (Oldham, J., concurring) (citations and quotation marks omitted). Consistent with Judge Oldham’s concurrence, the Ninth Circuit held in Ramirez v. Transunion LLC, 951 F.3d 1008 (9th Cir. 2020), that “each member of a class certified under Rule 23 must satisfy the bare minimum of Article III standing at the final judgment stage of a class action in order to recover monetary damages in federal court.” Id. at 1023. Citing Chief Justice Roberts’s observation that “‘Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not,’” id. at 1023 (quoting Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1053 (2016) (Roberts, C.J., concurring)), the court reasoned that a contrary rule would “transform the class action—a mere procedural device—into a vehicle for individuals to obtain money judgments in federal court even though they could not show sufficient injury to recover those judgments individually,” id. at 1023–24. Although Ramirez limited the obligation of absent class members to establish Article III standing to the “final judgment stage” of a class action, it cautioned that “district courts and parties should keep in mind that they will need a mechanism for identifying class members who lack standing at the damages phase” when they consider class certification. Id. at 1023 n.6. This decision provides a strong basis for arguing that a class may not be certified in the first place—or must be decertified—where there is no manageable method for ultimately assessing absent class members’ standing. That reading of Ramirez would align the Ninth Circuit with the Eleventh Circuit’s decision last year in Cordoba v. DIRECTV, LLC, 942 F.3d 1259 (11th Cir. 2019), which vacated a class-certification order where “individualized questions” about which class members had standing “may predominate over common issues susceptible to class-wide proof.” Id. at 1275, 1277. In addition to analyzing when absent class members must prove they have standing, Ramirez also analyzed what kind of injury suffices, and it held that each of the absent class members had suffered a concrete injury under Article III under a “two-part inquiry” that asks “(1) whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights), and if so, (2) whether the specific procedural violations alleged . . . actual harm, or present a material risk of harm to, such interests.” 951 F.3d at 1025 (quotations omitted). In Ramirez, a credit-reporting agency allegedly violated the Fair Credit Reporting Act (“FCRA”) by misidentifying class members as potential terrorists and drug traffickers. Id. at 1022. Although not all class members’ credit reports were actually disclosed to third parties, the Ninth Circuit reasoned that the FCRA was enacted to protect consumers’ concrete interests and “the fact that TransUnion made the reports available to numerous potential creditors,” along with “the highly sensitive and distressing nature of the OFAC alerts,” was “sufficient to show a material risk of harm to the concrete interests of all class members.” Id. at 1027. The Ninth Circuit offered another glimpse into how it will evaluate Article III’s “concrete injury” requirement post-Spokeo in Campbell v. Facebook, Inc., 951 F.3d 1106 (9th Cir. 2020), which involved claims that Facebook violated various privacy statutes by allegedly misusing private messages sent by users on the social-networking platform. (Gibson Dunn represented Facebook in this litigation.) Although the primary issue in the case involved an appeal of a class action settlement, following Spokeo and Frank v. Gaos, the Ninth Circuit ordered supplemental briefing after expressing doubt at oral argument that the named plaintiffs suffered any actual injury in fact, given that the challenged practices had ceased long ago. Id. at 1116. The court noted that where “we deal with an ‘intangible harm’ that is linked to a statutory violation, we are guided in determining concreteness by ‘both history and the judgment’” of the legislature. Id. Tracking its analysis in last year’s decision in Patel v. Facebook, 932 F.3d 1264 (9th Cir. 2019), and relying heavily on its post-Spokeo decision, the court wrote that because “[t]he harms protected by the[] statutes bear a ‘close relationship’ to ones that have ‘traditionally been regarded as providing a basis for a lawsuit,’” including intrusion upon the seclusion of another, the plaintiffs had Article III standing even without a tangible harm. Id. at 1117. This conclusion was confirmed by the fact that, “under the privacy torts that form the backdrop for these modern statutes, ‘[t]he intrusion itself makes the defendant subject to liability.’” Id. Determining that the named plaintiffs had Article III standing, the Ninth Circuit affirmed the District Court’s decision approving the class settlement.

III. The Ninth Circuit Holds That Discovery Cannot Be Used to Find a Named Plaintiff Before a Class Action Is Certified

The Ninth Circuit recently confronted a recurring issue in class action litigation—whether and to what extent the federal discovery process may be used to secure a new named plaintiff before class certification. In a significant win for defendants, In re: Williams-Sonoma, Inc., 947 F.3d 535 (9th Cir. 2020), held that “using discovery to find a client to be the named plaintiff before a class action is certified is not within the scope of Rule 26(b)(1).” Id. at 540. The original plaintiff in the matter, a Kentucky resident, filed a putative class action against Williams-Sonoma in California, alleging that he had been injured by his purchase of deceptively advertised bedding. Id. at 537. Before a class was certified, however, the district court determined that Kentucky law, which prohibits class actions, governed his claims. Id. at 538. Because the named plaintiff could no longer represent the class, the district court ordered Williams-Sonoma to produce a “list of all California customers who purchased bedding products of the type referred to in [plaintiff’s] complaint” since January 2012. Id. Defendants sought a writ of mandamus, and the Ninth Circuit—which rarely grants such requests—reversed, concluding that the order was clearly erroneous because it ran afoul of the Supreme Court’s decision in Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340 (1978), and Federal Rule of Civil Procedure 26(b)(1), which limits discovery to “matter that is relevant to any party’s claim or defense.” Id. at 539 (quotation marks omitted). Because “seeking discovery of the name of a class member” is not “relevant” within the meaning of Rule 26 where a class has not been certified, the discovery was impermissible. Id. Defendants should invoke Williams-Sonoma’s gatekeeping rationale to prevent burdensome fishing expeditions by plaintiffs in search of a more suitable named plaintiff before class certification.

IV. Appellate Courts Wrestle with the Issue of “Exposure” in California Unfair Competition and False Advertising Class Actions

During the first quarter of 2020, the Ninth Circuit and California Court of Appeal took divergent approaches to a recurring issue in class actions under California’s Unfair Competition Law (“UCL”) and False Advertising Law (“FAL”): whether class members have been “exposed” to the allegedly misleading representations at issue. In Downey v. Public Storage, Inc., 44 Cal. App. 5th 1103 (2020), the California Court of Appeal held that plaintiffs in an FAL lawsuit must prove that exposure and deception are “susceptible of common proof.” Id. at 1119–20. The plaintiffs in that case brought a putative class action claiming that “Public Storage’s $1 promotional rate was deceptive.” Id. at 1111. The trial court denied class certification because many class members had not been exposed to the allegedly deceptive advertisements and the advertisements were not uniform. Id. at 1112. The California Court of Appeal affirmed, holding that California’s “community of interest” requirement for class certification demands in a false advertising case that exposure and deception be susceptible of common proof. Id. at 1115. The plaintiffs did not satisfy this requirement chiefly because the evidence showed that customers could have purchased storage without seeing the allegedly misleading advertisements. Id. at 1117. The court also credited the fact that many of the advertisements contained disclosures which, as Public Storage showed, actually impacted consumers’ choices. Id. at 1118–19. Under Federal Rule 23(b)(3), plaintiffs must show “that the questions of law or fact common to class members predominate over any questions affecting only individual members.” Fed. R. Civ. P. 23(b)(3). California applies a similar requirement. Applied in UCL and FAL cases, this requires a showing of classwide exposure to the allegedly misleading statements, such that it is subject to common proof. Here, the court rejected the plaintiffs’ argument that In re Tobacco II Cases, 46 Cal. 4th 298 (2009), a leading California Supreme Court case on the issue of exposure and reliance, “abrogated the requirements of exposure and deception.” Public Storage, 44 Cal. App. 5th at 1120. The court reasoned that Tobacco II chiefly concerned the standing requirements for the named plaintiff, not California’s community of interest requirement and its mandate that exposure and deception be susceptible of common proof. The Ninth Circuit, meanwhile, held that if the defendant in a UCL case raises questions as to whether members of the class have been “exposed” to a particular representation, a district court has discretion to define the class in a way that automatically gives rise to a presumption of reliance on the allegedly misleading statement, and need not necessarily deny class certification. Walker v. Life Ins. Co. of the Sw., 953 F.3d 624, 634 (9th Cir. 2020). There, a proposed class sued an insurance seller, alleging that its illustrations forecasting financial returns were misleading. Id. at 627. Some customers received a “pre-application” illustration of projected returns before or at the same time they applied for a policy, while others received a “batch” illustration of projected returns after approval of a policy application. Id. Sidestepping the practical difficulties of identifying which putative class members were exposed to which illustration, the district court defined the class by limiting it to customers who received the pre-application illustration, thereby embedding the exposure issue into the class definition. Id. at 628. As a matter of first impression, the Ninth Circuit held that a court can define a class in a way that “automatically gives rise to a presumption of reliance.” Id. at 634. The different outcomes in these cases seemed to turn on whether it was possible to identify which putative class members had been exposed to the representations at issue. In Walker, the class could be limited to those people who receive the “pre-application” illustration, which meant classwide exposure was assured. In Downey, by contrast, there was a far broader range of statements alleged to be at issue, and determining who saw which statements and when was not possible without individualized inquiries. Defendants facing putative UCL and FAL class actions should keep this distinction in mind.
The following Gibson Dunn lawyers contributed to this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Michael Holecek, Lauren Blas, Samuel Eckman, Emily Riff, and Warren Loegering. Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm's Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers: Theodore J. Boutrous, Jr. - Co-Chair, Litigation Practice Group - Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick - Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger - Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com) © 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

March 25, 2020 |
Competitor Collaborations During COVID-19 Pandemic: Practical Antitrust Guidelines and an Update from the DOJ and FTC

Click for PDF In response to emergency conditions presented by the COVID-19 pandemic, the need and opportunity to engage in legitimate competitor collaboration to overcome supply chain disruptions, ensure supply continuity, and better serve markets and customers can be expected to increase. While the antitrust laws are not lifted in these circumstances, they are flexible enough to enable competitors to collaborate where the result is improved supply and output, mitigation of market disruptions, enhanced efficiency, and enhanced customer welfare, provided that appropriate precautions are taken.[1] This Client Alert aims to provide practical guidance for companies considering competitor collaborations or discussing such plans with competitors. First, we discuss a statement issued jointly by the Antitrust Division of the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) on March 24, 2020 that details expedited antitrust review of those competitor collaborations related to the COVID-19 pandemic. Second, we provide practical antitrust guidance for companies exploring competitor collaborations during this time.

1. The DOJ/FTC Joint Statement

The DOJ and FTC have announced that each will issue expedited advisory guidance on whether a specific proposed collaborations between firms would face government antitrust scrutiny including investigations or legal challenges. In issuing their statement, the DOJ and FTC identified examples of likely permissible collaborations including partnerships between health care facilities to provide resources to communities lacking sufficient medical equipment (such as personal protective equipment), coordination of production facilities to manufacture COVID-19-related supplies, and coordination of competitor distribution or service networks to improve transportation and dissemination of medical equipment or health care services. An applicant requesting guidance regarding a potential COVID-19 related collaboration must provide the following information:
  • Nature of the proposed collaboration, including the duration and geographic scope;
  • Rationale for the proposal;
  • Products and/or services covered by the collaboration;
  • Description of proposed contractual arrangements;
  • Identity of potential customers;
  • Explanation of the collaboration’s relationship to the COVID-19 pandemic; and
  • Any available information on alternative providers for the product or service at issue.
Once receiving all required information, the agencies will provide a response within seven calendar days that describes whether the agency would take enforcement action regarding the proposed arrangement and the basis for the agency’s conclusion. The agencies’ response and related guidance would be effective for one year from the date of issuance. Potential applicants should not commence the collaboration before receiving a response from the agencies. An affirmative response from the agencies should not be construed as a broad grant of immunity for the contemplated collaboration. Third parties, such as affected competitors or class action plaintiffs, may still attempt to challenge collaborations that harm competition. At the same time, however, it is not necessary for parties engaging in a collaboration to seek or secure government pre-approval for a collaboration, and there is no mandatory waiting period to allow for government review (unlike, for example, an HSR filing before a merger). Parties exploring a cooperative relationship, whether or not government pre-approval is sought, should observe the guidance in the following section to minimize potential antitrust risk from the arrangement. The agencies’ press release can be found here: https://www.ftc.gov/news-events/press-releases/2020/03/ftc-doj-announce-expedited-antitrust-procedure. The joint DOJ/FTC guidance can be found here: https://www.ftc.gov/system/files/documents/public_statements/1569593/statement_on_coronavirus_ftc-doj_3-24-20.pdf.

2. Practical Antitrust Guidance

The joint DOJ/FTC guidance sets out a revised process for reviewing COVID-19-related collaborations, but there are numerous cooperative situations that do not call for advisory guidance from the agencies. The agencies have longstanding guidance—the 2000 Antitrust Guidelines for Collaborations Among Competitors (the “Competitor Collaboration Guidelines”)[2]—that sets out the analytical framework and related antitrust considerations in these situations. Under the Competitor Collaboration Guidelines, proposed collaborations often do not raise substantial antitrust concerns provided that they are reasonably necessary to achieve procompetitive objectives and do not result in harm to competition. A proper evaluation of a proposed cooperative relationship requires the early and active involvement of antitrust counsel to assess the goals and effect of the proposed collaboration. We recommend the following steps when considering a competitor collaboration, whether in response to COVID-19 or in non-public health contexts:
    1. Before proceeding with any joint effort with a competitor, identify a legitimate objective for the collaboration. From an antitrust perspective, a legitimate objective is one that is competitively neutral (i.e., it neither enhances nor reduces competition, but serves some other goal), enhances efficiency or overcomes a market failure, or enhances competition. One example of a legitimate objective is the development of a product that neither participant could develop on its own, using its own assets and resources, but there are many others. On the other hand, if one of the goals of the collaboration is to reduce competition with a competitor, or to hinder other companies in their ability to compete, stop immediately and seek guidance from counsel.
    2. Once you identify a legitimate objective, make sure that all actions undertaken jointly with a competitor are limited to those that are reasonably necessary to achieve the objective. This includes limiting the activities by scope, geography, duration, and any other dimension. In some jurisdictions outside the U.S., there is an additional test which requires that there are no less restrictive means to achieve the same objective - or to put it another way, the parties have sought to achieve their objectives through the least restrictive means possible.
    3. Joint actions are more likely to be acceptable from an antitrust perspective if they are (i) voluntary (i.e., any party may choose to participate in its own independent discretion), (ii) non-exclusive (i.e., any party may participate jointly while retaining the discretion to compete independently), and (iii) short-term and limited in duration to the period necessary to achieve the legitimate objective.
    4. Conversations with competitors regarding any potential collaboration (or otherwise) should follow an agenda that is prepared in advance and reviewed by counsel.
    5. Once the objective of the joint effort is achieved, or once the emergency circumstances necessitating the joint effort have abated, the joint effort should be discontinued. Any long-term joint efforts should be reviewed by counsel in advance. Similarly, if a joint effort that is intended to be a short-term project extends for a longer term, counsel should review the project on an ongoing basis to ensure that antitrust compliance is not compromised by changed circumstances.
    6. Watch out:
      • If any joint effort with a competitor is likely to have the effect of raising customer prices or decreasing supplier prices, reducing output, or reducing the quality of goods or services, stop immediately and seek guidance of counsel.
      • Do not discuss product pricing, pricing strategies, margins, the terms or conditions upon which you will deal with others, allocating suppliers, customers or markets, or the impact any particular action may have on pricing. If a discussion of these subjects is necessary to achieve the legitimate objective of the joint effort, seek guidance of counsel before proceeding.
      • Do not use the collaboration to discuss issues unrelated to the procompetitive objective, such as employee wages, layoffs, or hiring plans. If the collaboration will have its own employees, such as a joint venture, seek guidance of counsel before proceeding.
      • Do not exchange competitively sensitive information, such as current or future prices, costs, or output. If an exchange of competitively sensitive information is necessary to achieve the legitimate objective of the joint effort, seek guidance of counsel before proceeding.
      • It may be necessary and legitimate for participants in a collaboration to adopt a non-compete provision. If so, the non-compete should be limited in time and scope, and should not limit any participant’s ability to compete outside the scope of the collaboration. Any non-compete should correspond to the area where the participants are collaborating, and should end at the time the collaboration ends (or shortly thereafter). Again, seek legal guidance before proceeding.
      • Do not agree not to do business with a third party, and do not agree on the terms on which you will do business with a third party. Likewise, do not agree on any joint effort that will hinder a third party in its ability to compete.
      • If a joint effort may create a situation in which a supplier, customer, or competitor could claim that it is disadvantaged in its business as a result of the joint effort, seek guidance of counsel before proceeding. For example, if a joint effort will create “winners and losers” (e.g., competitors collaborate to jointly select a supplier) beware of the possibility that a “losing” company could pursue an antitrust claim.
      • Beware of spillover effects – i.e., effects on other lines of business as a result of the joint effort. If a joint effort with a competitor could potentially have effects on another line of business or on other geographies or time periods outside the scope of the legitimate objective, stop and seek guidance of counsel before proceeding.
If you have any doubts about the propriety of any discussion or action, stop and seek guidance of counsel before proceeding with the discussion or action. _______________________    [1]   Department of Justice, Federal Trade Commissions, Antitrust Guidelines for Collaborations Among Competitors, April 2000, available at: https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf.    [2]   Id.
Gibson Dunn's lawyers are available to assist with any questions you may have regarding developments related to the COVID-19 outbreak. For additional information, please contact any member of the firm's Coronavirus (COVID-19) Response Team. The following Gibson Dunn lawyers prepared this client update: Adam Di Vincenzo, Kristen Limarzi, Josh Lipton and Chris Wilson. Gibson Dunn lawyers regularly counsel clients on issues raised by this pandemic, and we are working with many of our clients on their response to COVID-19. Please also feel free to contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the Antitrust and Competition Practice Group: Washington, D.C. D. Jarrett Arp (+1 202-955-8678, jarp@gibsondunn.com) Adam Di Vincenzo (+1 202-887-3704, adivincenzo@gibsondunn.com) Scott D. Hammond (+1 202-887-3684, shammond@gibsondunn.com) Kristen C. Limarzi (+1 202-887-3518, klimarzi@gibsondunn.com) Joshua Lipton (+1 202-955-8226, jlipton@gibsondunn.com) Richard G. Parker (+1 202-955-8503, rparker@gibsondunn.com) Cynthia Richman (+1 202-955-8234, crichman@gibsondunn.com) Jeremy Robison (+1 202-955-8518, wrobison@gibsondunn.com) Andrew Cline (+1 202-887-3698, acline@gibsondunn.com) New York Eric J. Stock (+1 212-351-2301, estock@gibsondunn.com) Lawrence J. Zweifach (+1 212-351-2625, lzweifach@gibsondunn.com) Los Angeles Daniel G. Swanson (+1 213-229-7430, dswanson@gibsondunn.com) Christopher D. Dusseault (+1 213-229-7855, cdusseault@gibsondunn.com) Samuel G. Liversidge (+1 213-229-7420, sliversidge@gibsondunn.com) Jay P. Srinivasan (+1 213-229-7296, jsrinivasan@gibsondunn.com) Rod J. Stone (+1 213-229-7256, rstone@gibsondunn.com) San Francisco Rachel S. Brass (+1 415-393-8293, rbrass@gibsondunn.com) Dallas Veronica S. Lewis (+1 214-698-3320, vlewis@gibsondunn.com) Mike Raiff (+1 214-698-3350, mraiff@gibsondunn.com) Brian Robison (+1 214-698-3370, brobison@gibsondunn.com) Robert C. Walters (+1 214-698-3114, rwalters@gibsondunn.com) Brussels Peter Alexiadis (+32 2 554 7200, palexiadis@gibsondunn.com) Attila Borsos (+32 2 554 72 11, aborsos@gibsondunn.com) Jens-Olrik Murach (+32 2 554 7240, jmurach@gibsondunn.com) Christian Riis-Madsen (+32 2 554 72 05, criis@gibsondunn.com) Lena Sandberg (+32 2 554 72 60, lsandberg@gibsondunn.com) David Wood (+32 2 554 7210, dwood@gibsondunn.com) Munich Michael Walther (+49 89 189 33 180, mwalther@gibsondunn.com) Kai Gesing (+49 89 189 33 180, kgesing@gibsondunn.com) London Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com) Charles Falconer (+44 20 7071 4270, cfalconer@gibsondunn.com) Ali Nikpay (+44 20 7071 4273, anikpay@gibsondunn.com) Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com) Deirdre Taylor (+44 20 7071 4274, dtaylor2@gibsondunn.com) Hong Kong Kelly Austin (+852 2214 3788, kaustin@gibsondunn.com) Sébastien Evrard (+852 2214 3798, sevrard@gibsondunn.com) © 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

February 4, 2020 |
Law360 Names Gibson Dunn Among Its 2019 Class Action Practice Groups of the Year

Law360 named Gibson Dunn one of its six Class Action Groups of the Year for 2019.  The firm’s Class Action practice was profiled on February 4, 2020. The Class Actions Practice Group has unrivaled experience in defeating enterprise-threatening class action lawsuits throughout the United States.  The group has an unparalleled record in securing early dismissal in cases where other defendants facing similar lawsuits have been forced to litigate through costly, burdensome discovery and other pretrial proceedings.

January 31, 2020 |
Year-End and Fourth Quarter 2019 Update on Class Actions

Click for PDF This update provides an overview and summary of key class action developments during the fourth quarter of 2019 (October through December). Part I discusses the Second Circuit’s decision in Jock v. Sterling Jewelers Inc., 942 F.3d 617 (2d Cir. 2019), affirming the power of an arbitrator to bind absent class members. Part II addresses several important appellate decisions reversing class certification orders or affirming the denial of certification that could help defendants opposing class certification in other cases. Part III reviews further developments on the issue of Article III standing in class actions after Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). _____________________

Part I: The Second Circuit Rejects Challenge to Class Arbitration, and Holds That an Arbitrator Has the Power to Bind Absent Class Members

The Supreme Court made clear in Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), and Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010), that class arbitration so fundamentally changes the nature of dispute resolution that the parties must expressly agree to it. (Gibson Dunn’s analyses of those cases can be found here and here.) Against that backdrop, the Second Circuit recently issued an important ruling about the terms that indicate an express agreement to class arbitration. In Jock v. Sterling Jewelers Inc., 942 F.3d 617 (2d Cir. 2019), current and former female employees of a jewelry maker filed a demand for class arbitration, asserting various claims on the theory that they were paid less than their male counterparts. The arbitrator certified a mandatory, non-opt-out class of approximately 44,000 women, despite the fact only 254 plaintiffs had chosen affirmatively to participate in the arbitration proceedings. Id. at 621. At the defendant’s urging, the district court vacated the arbitrator’s class certification order because the arbitration agreement did not expressly authorize the arbitrator to certify a class that included members who had not opted in to arbitration. Id. at 622. The agreement provided that “questions of arbitrability” and “procedural questions” “shall be decided by the arbitrator,” and that claims arising under the agreement would be arbitrated “in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association [(‘AAA’)].” Id. at 620, 624. The Second Circuit reversed for two reasons. Id. at 623–24. First, the agreement incorporated the AAA Rules, which provide that “the arbitrator shall determine as a threshold matter . . . whether the applicable arbitration clause permits the arbitration to proceed on behalf of . . . a class.” Id. at 623 (alterations in original). Second, in a holding with potentially broader application, the court ruled that the arbitrator had authority to decide “the availability of class procedures” in light of her express authority under the agreement to decide “questions of arbitrability” and “procedural questions.” Id. at 624. The court left open on remand the question of whether the arbitrator had exceeded her authority by certifying a mandatory class, as opposed to an opt-out class. Id. at 626. Jock is particularly significant in light of the Supreme Court’s repeated emphasis that class arbitration is unusual. Few other appellate cases have addressed, much less endorsed, the use of class arbitration. The Second Circuit’s word may not be final, though, as Sterling Jewelers plans to seek review from the Supreme Court.

Part II: Appellate Courts Issue Several Important Decisions Rejecting Class Certification

During the last quarter of 2019, the Eleventh, Eighth, and Third Circuits issued several rulings reversing or vacating class certification. In one case, individualized questions regarding whether absent class members had standing led to a remand for a district court to reassess whether those issues predominated over any common issues. In another, a state consumer protection law was rejected as the basis for a nationwide class alleging injury arising from out-of-state transactions. And in the third, individual issues were found to predominate in an employment dispute where class members would have to prove if and when they had performed unpaid work. Defendants may be able to leverage these important decisions in opposing class certification in similar cases. In Cordoba v. DIRECTV, LLC, 942 F.3d 1259 (11th Cir. 2019), the Eleventh Circuit vacated the certification of a class where “a large portion” of it “d[id] not have standing” and “individualized questions” about which members had standing “may predominate over common issues susceptible to class-wide proof.” Id. at 1275, 1277. The named plaintiff had alleged that DIRECTV and a telemarketing contractor, Telecel, violated Federal Communications Commission regulations promulgated under the Telephone Consumer Protection Act by failing to maintain an internal do-not-call list. Id. at 1266. The named plaintiff alleged that he had received eighteen calls even though his phone number appeared on the National Do Not Call Registry and he had specifically requested that Telecel stop calling him. Id. The district court certified a Rule 23(b)(3) class defined as “all individuals who received more than one telemarketing call from Telecel” during the period that Telecel failed to maintain an internal do-not-call-list. Id. On appeal, the defendants argued that absent class members who never requested that Telecel stop calling them necessarily lacked Article III standing because they had not suffered an injury-in-fact that was fairly traceable to the defendants’ conduct. Id. at 1268. The Eleventh Circuit concluded that “the receipt of more than one unwanted phone call is enough to establish injury in fact” because “a phone call intrudes upon the seclusion of the home, fully occupies the recipient’s device for a period of time, and demands the recipient’s immediate attention.” Id. at 1269–70. As to traceability, however, the court agreed that absent class members who did not request that Telecel stop calling them could not trace their injury to Telecel’s alleged misconduct, because they would have received unsolicited calls even if Telecel had maintained an internal do-not-call list. Id. at 1271–72. The Eleventh Circuit then vacated the certification order and remanded so that the district court could determine in the first instance whether individualized standing questions would predominate, precluding certification under Rule 23(b)(3). Id. at 1277. Although the Eleventh Circuit agreed that the class’s claims were justiciable—because the named plaintiff had standing—the court held that district courts must consider whether and how to certify a class “[i]f many or most of the putative class members could not show that they suffered an injury fairly traceable to the defendant’s misconduct.” Id. at 1273 (emphasis omitted). In Hale v. Emerson Electric Co., 942 F.3d 401 (8th Cir. 2019), the Eighth Circuit reversed a district court’s order certifying a nationwide class of vacuum purchasers and applying Missouri’s consumer-protection laws to all of their claims. The Eighth Circuit explained that because “every part of the challenged transaction”—including the purchase and alleged failure of the product to perform as advertised—“took place in a class member’s home state,” the consumer-protection laws of their home states would apply. Id. at 403–04. The Eighth Circuit also remanded so that the district court could apply Missouri’s choice-of-law rules to the class members’ non-consumer-protection claims in the first instance. Id. at 404. The Third Circuit also reversed a class certification order in Ferreras v. American Airlines, Inc., 946 F.3d 178 (3d Cir. 2019). There, the district court had certified multiple subclasses of employees who sued their employer under New Jersey’s employment laws. In reversing, the Third Circuit noted, among other things, that the purported “common questions” that the district court had identified—“whether hourly-paid American employees at Newark airport are not being compensated for all hours worked, and . . . whether American has a policy that discourages employees from seeking exceptions for work done outside of their shifts”—could not “generate common answers” amenable to class-wide treatment, since each plaintiff would still have to prove when they were working. Id. at 185–86. Significantly, the Third Circuit distinguished the Supreme Court’s decision in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016), which held that “representative evidence” could in some circumstances be a “permissible means of establishing the employees’ hours worked in a class action.” Id. at 1046–47. The Third Circuit held that such evidence could not be used because, unlike the employees in Tyson Foods, American’s employees did not all perform the same unpaid activity, and thus representative evidence would not be used solely to determine the amount of time they spent performing the activity. Ferreras, 946 F.3d at 186–87.

Part III: Appellate Courts Issue a Range of Rulings Dealing with Non-Traditional “Injuries”

The federal courts of appeals continue to grapple with Article III standing after the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), as we have discussed in prior updates. This past quarter, courts attempted to apply Spokeo in situations involving non-traditional purported injuries. The decisions suggest that whether courts will find standing in a given case is likely to be highly dependent on the particular claims and factual allegations at issue. In Nayab v. Capital One Bank (USA), N.A., 942 F.3d 480 (9th Cir. 2019), the Ninth Circuit held that a plaintiff has Article III standing when a third party obtains his or her credit report for a purpose not authorized by the Fair Credit Reporting Act (FCRA). Id. at 487. Citing existing precedent as well as historical practice, the court concluded that because the FCRA “protect[s] the consumer’s privacy interest” in his or her credit report, obtaining a credit report for an unauthorized purpose “violates a substantive provision of the FCRA.” Id. at 490. The court therefore held that a plaintiff “has standing to vindicate her right to privacy under the FCRA when a third-party obtains her credit report without a purpose authorized by statute, regardless of whether the credit report is published or otherwise used by that third-party.” Id. at 493. The Eleventh Circuit likewise found standing under the Food, Drug, and Cosmetic Act (FDCA) and the Dietary Supplement Health and Education Act (DSHEA) in Debernardis v. IQ Formulations, LLC, 942 F.3d 1076 (11th Cir. 2019). The plaintiffs alleged they suffered economic loss when they purchased dietary supplements that the FDCA and DSHEA banned from sale. Id. at 1080. The district court dismissed their claims, stating that “even if the supplements could not legally be sold, the plaintiffs received the benefit of their bargain because there was no allegation that the supplements failed to perform as advertised, that the supplements caused any adverse health effects, or that the plaintiffs paid a premium for the supplements.” Id. at 1083. The Eleventh Circuit reversed. Id. at 1089. It concluded that because the supplements had been deemed unsafe under the FDCA and DSHEA, the plaintiffs plausibly alleged that they received a product that had no value. Id. at 1085. The plaintiffs thus had standing under “the well-established benefit-of-the-bargain theory of contract damages, which recognizes that some defects so fundamentally affect the intended use of a product as to render it valueless.” Id. The court cautioned, however, that its decision was “limited to the specific facts alleged in this case.” Id. at 1088. And in a concurring opinion, Judge Sutton (sitting by designation) suggested that the plaintiffs’ injuries were on “the razor’s edge of Article III jurisdiction.” Id. at 1089. By contrast, the Seventh Circuit declined to find Article III standing in a different “benefit-of-the-bargain” case brought under the FDCA. The plaintiffs in Benson v. Fannie May Confections Brands, Inc., 944 F.3d 639 (7th Cir. 2019) alleged that they were deceived by boxes of chocolate that contained roughly 33%-40% “slack-fill” or empty space, which supposedly caused consumers to believe that the boxes contained more chocolate than they actually did. Id. at 644. The Seventh Circuit affirmed dismissal of the complaint, holding that plaintiffs “failed to raise a plausible theory of actual damage” because they “never said that the chocolates they received were worth less than the $9.99 they paid for them, or that they could have obtained a better price elsewhere.” Id. at 648. In addition to that “fatal” defect, the court noted that “their request for damages based on the percentage of nonfunctional slack-fill is quite vague” insofar as they failed to “explain how a percentage refund of the purchase price based on the percentage of nonfunctional slack-fill corresponds to their alleged harm.” Id.
The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Lauren Blas, Vince Eisinger, and Madeleine McKenna. Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm's Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers: Theodore J. Boutrous, Jr. - Co-Chair, Litigation Practice Group - Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick - Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger - Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com) © 2020 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

January 13, 2020 |
Gibson Dunn Named a 2019 Law Firm of the Year

Law360 named Gibson Dunn a Firm of the Year for 2019 in its article, “The Firms That Dominated in 2019,” featuring seven firms that received the most Practice Group of the Year awards.  Of the seven, Gibson Dunn is one of two firms with the most winning Practice Groups of the Year, noting that the firm “scored big wins across several practice groups for major technology companies such as Facebook and Uber in lawsuits that tackled hot-button issues like internet privacy and the gig economy.” Law360 also noted Gibson Dunn “dominated the competition again this year” in announcing its Practice Groups of the Year, which “honor the law firms behind the litigation wins and major deals that resonated throughout the legal industry in the past year.” The firm was named a Practice Group of the Year in the following categories:

  • Appellate [PDF] – Gibson Dunn’s Appellate and Constitutional Law Practice Group’s lawyers participate in appeals in all 13 federal courts of appeals and state appellate courts throughout the United States and have presented arguments in front of the Supreme Court of the United States more than 100 times.
  • Class Action [PDF] – The Class Actions Practice Group has unrivaled experience in defeating enterprise-threatening class action lawsuits throughout the United States.  The group has an unparalleled record in securing early dismissal in cases where other defendants facing similar lawsuits have been forced to litigate through costly, burdensome discovery and other pretrial proceedings.
  • Cybersecurity & Privacy [PDF] – The firm’s Privacy, Cybersecurity and Consumer Protection Practice Group has a demonstrated history of helping companies successfully navigate the complex and rapidly evolving laws, regulations, and industry best practices relating to privacy, cybersecurity and consumer protection.  Our global and interdisciplinary team advises clients across a broad range of industries in high-stakes matters on the full spectrum of issues in these areas.
  • International Arbitration [PDF] – The International Arbitration Practice Group advises leading multinational corporations in arbitration proceedings around the world.  The International Arbitration group’s lawyers have appeared before many of the world’s leading arbitrators and work with all major arbitral institutions and rules.
  • Real Estate [PDF] – The Real Estate Practice Group handles the most sophisticated real estate transactions worldwide.  Our team of lawyers handles complex and challenging matters for a wide array of clients, such as the owners, developers and financiers of the largest real estate projects in the United States and Europe, both in the private and public sectors.
  • Sports & Betting [PDF] – The Sports Law Practice Group advises clients on the most complex sports industry matters, from the purchase and sale of U.S. and non-U.S. professional teams to precedent-setting litigation.  Gibson Dunn’s global sports practice represents a wide range of clients in matters relating to professional and amateur sports, including individual teams, sports facilities, athletic associations, athletes, financial institutions, television networks, sponsors and municipalities.  The Betting and Gaming Practice Group is one of the most preeminent betting and gaming legal practices worldwide, representing the most prestigious and influential clients in the industry across Europe, Asia and the Americas.
  • Technology [PDF] – The Media, Entertainment and Technology Group represent both established and emerging media, entertainment and technology companies and handle our clients’ most important and complex corporate and intellectual property transactions, litigation, antitrust, internal investigations and other legal challenges.
  • Trials [PDF] – Acclaimed as a litigation powerhouse, Gibson Dunn has a long record of outstanding successes.  The members of our litigation practice group are not just litigators, they are first-rate trial lawyers who have tried cases and argued appeals before the U.S. Supreme Court and state supreme courts in addition to federal and state courts across the United States involving almost every foreseeable area of controversy.

November 20, 2019 |
Gibson Dunn Promotes 13 Lawyers to Partnership

Gibson, Dunn & Crutcher LLP is pleased to announce that the firm has elected 13 new partners, effective January 1, 2020. “We congratulate our new partners on this important and well-deserved professional achievement,” said Ken Doran, Chairman and Managing Partner of Gibson Dunn.  “Each of them exemplifies the core values of the firm – excellence, professionalism and collegiality – and I know that they will continue to uphold these principles as our partners.” The new partners are: Amer S. Ahmed (Litigation / New York) – Ahmed’s practice focuses on representing both institutional and individual clients in high-stakes, complex investigation and litigation matters at all stages of disputes.  He has significant experience with ERISA, defamation and other First Amendment claims, product liability actions, and white-collar criminal defense.  In addition to his frontline trial experience, Ahmed has successfully handled several appeals in state and federal courts.  Ahmed graduated in 2005 from Columbia Law School, where he was an articles editor for the Columbia Law Review, a Harlan Fiske Stone Scholar, and a Tony Patino Fellow. Brian C. Ascher (Litigation, Media, Entertainment and Technology / New York) – Ascher has represented corporate and individual clients in a wide range of commercial litigation in both federal and state court and administrative proceedings.  Ascher graduated in 2009 from New York University School of Law, where he served as an articles editor for the New York University Environmental Law Journal.  He clerked for Judge Faith S. Hochberg in the U.S. District Court for the District of New Jersey. Attila Borsos (Litigation, Competition and Antitrust / Brussels) – Borsos is an experienced competition lawyer who advises on a broad range of complex competition and antitrust issues, including global merger control and cartel enforcement.  Borsos represents clients before the European Commission, national competition authorities in Europe as well as regulatory authorities worldwide.  His experience spans many industry sectors, with recent experience particularly in the consumer goods, chemicals, energy, airline, media and entertainment, insurance, and financial services industries.  In addition, he advises clients on EU State aid, anti-dumping and anti-subsidy investigations and on EU sanctions. Borsos graduated summa cum laude from Eötvös Loránd University in 2004. Elaine Chao (Corporate, Power and Renewables / Singapore) – Chao’s areas of practice include renewable energy and infrastructure projects, cross-border mergers and acquisitions, and general corporate/commercial transactions.  She has advised developers, investors and government agencies in connection with the development, financing, construction and operation of infrastructure and energy-related projects.  Chao received her LL.M. from King’s College London in 2000. Evan M. D’Amico (Corporate, Mergers and Acquisitions / Washington, D.C.) – D’Amico advises companies, private equity firms, boards of directors and special committees in connection with a wide variety of complex corporate matters, including mergers and acquisitions, asset sales, leveraged buyouts, spin-offs and joint ventures.  He also advises public companies on federal securities laws and corporate governance matters.  D’Amico graduated cum laude in 2008 from Harvard Law School, where he served as an executive technical editor for the Harvard Civil Rights-Civil Liberties Law Review. Joshua D. Dick (Litigation / San Francisco) – Dick has significant experience litigating a broad range of matters in both state and federal courts, at the trial and appellate levels.  He has successfully represented clients throughout the United States and abroad in multiple areas of the law including, antitrust, unfair competition law, false advertising, products liability, constitutional challenges, the securities and commodities acts, regulatory enforcement and compliance, the Stored Communications Act, the Communications Decency Act, trade secrets misappropriation, tort claims, legal malpractice, and general business disputes.  He graduated cum laude in 2004 from University of Michigan Law School, where he served as an associate and articles editor for the Journal of Law Reform. Russell H. Falconer (Litigation, Appellate / Dallas) – Falconer has extensive experience representing clients who operate in heavily regulated industries, including broker-dealers, airlines, electric utilities, investment firms, and pharmaceutical companies.  He has played a substantial role in a wide range of high-stakes appeals, trials, and litigation.  Falconer graduated in 2009 with highest honors from The University of Texas at Austin School of Law, where he was the Grand Chancellor of his class and served as a member of the Texas Law Review. Nancy Hart (Litigation / New York) – Hart is a complex commercial litigator principally focused on law firm defense matters, and has successfully defended high-stakes legal malpractice cases and disqualification motions for law firms across the United States.  She also has significant experience representing clients in a wide range of matters including complex contract disputes, corporate control contests, securities litigation, and shareholder actions alleging breaches of fiduciary duties, in state and federal courts, at both the trial and appellate levels, as well as in domestic and international arbitrations.  She graduated magna cum laude in 2003 from Boston College Law School, where she was elected to the Order of the Coif. Michael Holecek (Litigation, Class Actions / Los Angeles) – Holecek’s practice focuses on complex commercial litigation both in the trial court and on appeal.  He has first-chair trial experience and has successfully tried to verdict both jury and bench trials, and he has successfully argued numerous appeals.  Holecek graduated with high honors in 2011 from the University of Chicago Law School, where he was a member of the University of Chicago Law Review and elected to the Order of the Coif. Dhananjay S. Manthripragada (Litigation / Los Angeles) – Manthripragada has extensive experience defending companies in complex litigation in state and federal courts throughout the country, from pre-trial demands through trial, arbitration, or settlement, and on appeal.  Manthripragada graduated in 2007 from the UCLA School of Law, where he served as chief comments editor and an articles editor for the UCLA Journal of Environmental Law and Policy. Ilissa Samplin (Litigation, Media, Entertainment and Technology / Los Angeles) – Samplin is a complex commercial litigator who focuses on high-stakes entertainment and technology disputes.  She has extensive experience representing entertainment and technology companies in breach of contract, copyright, trademark, and trade secret matters, and also maintains a robust intellectual property counseling practice.  Samplin graduated in 2011 from Stanford Law School, where she served as a managing editor for the Stanford Journal of Law, Business & Finance.  She clerked for Judge Joseph F. Bianco, then of the U.S. District Court for the Eastern District of New York. Michael A. Titera (Corporate, Securities Regulation / Orange County) – Titera’s practice focuses on advising public companies regarding securities disclosure and compliance matters, financial reporting, and corporate governance.  Titera often advises clients on accounting and auditing matters and the use of non-GAAP financial measures.  He graduated in 2009 from the UCLA School of Law, where he was elected to the Order of the Coif. Lorna Wilson (Tax / Los Angeles) – Wilson’s practice focuses on federal income tax matters, including corporate and partnership tax matters in both the United States and international contexts.  She has extensive experience in tax planning for real estate transactions, including advising on investments in real estate by U.S. and non-U.S. investors.  She graduated in 2007 from the UCLA School of Law, where she was elected to the Order of the Coif.

November 12, 2019 |
Law360 Names Nine Gibson Dunn Partners as 2019 MVPs

Law360 named nine Gibson Dunn partners among its 2019 MVPs and noted that Gibson Dunn was one of two law firms with the most MVPs this year.  Law360 MVPs feature lawyers who have “distinguished themselves from their peers by securing hard-earned successes in high-stakes litigation, complex global matters and record-breaking deals.” The list was published on November 12, 2019. Gibson Dunn’s MVPs are:

  • Richard J. Birns, a Private Equity MVP [PDF] – Rich is a partner in the New York office and Co-Chair of the Sports Law Practice Group. He focuses his practice on U.S. and cross-border mergers, acquisitions, divestitures, joint ventures and financings for both corporations and leading private equity firms.  He also advises private investment funds on a variety of corporate issues, including securities law and shareholder activism matters.  He has extensive experience advising clients on significant transactional matters in media, sports and entertainment.
  • Michael P. Darden, an Energy MVP [PDF] – Mike is Partner-in-Charge of the Houston office and Chair of the Oil & Gas practice group. His practice focuses on International and U.S. oil and gas ventures (including LNG, deep-water and unconventional resource development projects), international and U.S. infrastructure projects, asset acquisitions and divestitures, and energy-based financings (including project financings, reserve-based loans and production payments).
  • Scott A. Edelman, a Trials MVP [PDF] – Scott is a partner in the Century City office and Co-Chair of the Media, Entertainment and Technology Practice Group. He has first-chaired numerous jury trials, bench trials and arbitrations, including class actions, taking well over 25 to final verdict or decision. He has a broad background in commercial litigation, including antitrust, class actions, employment, entertainment and intellectual property, real estate and product liability.
  • Theane Evangelis, a Class Action MVP [PDF] – Theane is a partner in the Los Angeles office, Co-Chair of the firm’s Class Actions Practice Group and Vice Chair of the California Appellate Practice Group. She has played a lead role in a wide range of appellate, constitutional, media and entertainment, and crisis management matters, as well as a variety of employment, consumer and other class actions.
  • Mark A. Kirsch, a Securities MVP [PDF] – Mark is Co-Partner-in-Charge of the New York office. His practice focuses on complex securities, white collar, commercial and antitrust litigation. He is routinely named one of the leading litigators in the United States.
  • Joshua S. Lipshutz, a Cybersecurity MVP [PDF] – Josh is a partner in the Washington, D.C. and San Francisco offices. His practice focuses primarily on constitutional, class action, data privacy, and securities-related matters.  He represents clients before the Supreme Court of the United States, the Ninth Circuit Court of Appeals, the California Supreme Court, the Delaware Supreme Court, the D.C. Court of Appeals, and many other state and federal courts.
  • Jane M. Love, a Life Sciences MVP [PDF] – Jane is a partner in the New York office. Her practice spans four areas: patent litigation, Patent Office trial proceedings including inter partes reviews (IPRs), strategic patent prosecution advice and patent diligence in transactions. She is experienced in a wide array of life sciences areas such as pharmaceuticals, biologics, biosimilars, antibodies, immunotherapies, genetics, vaccines, protein therapies, blood factors, medical devices, diagnostics, gene therapies, RNA therapies, bioinformatics and nanotechnology.
  • Matthew D. McGill, a Sports & Betting MVP [PDF] – Matthew is a partner in the Washington, D.C. office. He has participated in 21 cases before the Supreme Court of the United States, prevailing in 16.  Spanning a wide range of substantive areas, those representations have included several high-profile triumphs over foreign and domestic sovereigns. Outside the Supreme Court, his practice focuses on cases involving novel and complex questions of federal law, often in high-profile litigation against governmental entities.
  • Jason C. Schwartz, an Employment MVP [PDF] – Jason is a partner in the Washington, D.C. office and Co-Chair of the Labor & Employment Practice Group. His practice includes sensitive workplace investigations, high-profile trade secret and non-compete matters, wage-hour and discrimination class actions, Sarbanes-Oxley and other whistleblower protection claims, executive and other significant employment disputes, labor union controversies, and workplace safety litigation.

November 6, 2019 |
Third Quarter 2019 Update on Class Actions

Click for PDF This update provides an overview and summary of key class action developments during the third quarter of 2019 (July through September).

  • Part I discusses varying approaches to assessing damages at the class certification stage.
  • Part II addresses developments in class settlements law, including pre-certification negotiations and cy pres-only settlements.
  • Part III reviews further developments in the federal courts of appeals’ analysis of Article III standing under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).
  • Part IV describes a recent California Supreme Court decision that rejected a strict interpretation of the state-law ascertainability requirement.

Part I: Federal Courts of Appeals Apply a Range of Approaches to Damages Proposals at the Class Certification Stage

Questions of how to measure a class’s damages—and what measures of damages lend themselves to classwide treatment—were addressed in several decisions during the last quarter. In each case, the courts evinced sensitivity toward the issue of individualized damages, but responded to those arguments quite differently. In Nguyen v. Nissan North America, Inc., 932 F.3d 811 (9th Cir. 2019), a consumer brought a class action against an automobile manufacturer under state and federal law, alleging defects with the vehicle’s clutch. Id. at 813–14. The plaintiff sought class certification, arguing that his damages model—which proposed that every class member receive damages equal to the cost of a replacement clutch—was “based on the economic principle of benefit-of-the-bargain and is consistent with [his] theory of liability.” Id. at 815. The district court rejected that model because “the difference between value represented and value received only equals the cost to replace the defective [system] if consumers would have deemed the defective part valueless.” Id. at 816 (citation omitted). Because putative class members drove their vehicles for varying amounts of miles before experiencing the defect, the district court found that the plaintiff had not satisfied the predominance requirement. Id. The Ninth Circuit reversed. The plaintiff’s theory was not that the clutch performed below his expectations—rather, the theory was that the clutch was per se defective. Accordingly, the court held that a benefit-of-the-bargain model satisfied Rule 23(b)(3)’s predominance requirement. 932 F.3d at 821–22. The Ninth Circuit explained that the “district court mischaracterized Plaintiff’s theory as being centered on performance issues, rather than the defective system itself.” Id. at 819. The court clarified that the “liability-triggering event” would be “the sale of the vehicle with the known defect,” not “when the [alleged defect] manifests.” Id. at 820. The court believed that “[t]his distinction is key”—under past precedent, individualized issues would predominate if plaintiffs sought “damages for the faulty performance of the clutch system.” Id. at 822. “Instead, Plaintiff’s theory is that the allegedly defective clutch is itself the injury, regardless of whether the faulty clutch caused performance issues.” Id. In re Rail Freight Fuel Surcharge Antitrust Litigation, 934 F.3d 619 (D.C. Cir. 2019), wrestled with a different issue—namely, whether a class can be certified where a damages model shows not only variable damages, but also that some class members suffered no harm or damage at all. Id. at 620. The plaintiffs sought class certification under Rule 23(b)(3), and submitted an expert report that contained a regression model to establish causation, injury, and damages on a classwide basis. Id. at 621–22. The damages model indicated that approximately 2,000 putative class members (about 12.7% of the class) suffered no harm. Id. at 623–24. The district court determined that this model did not satisfy Rule 23(b)(3)’s predominance requirement, reasoning that “even assuming the model can reliably show injury and causation for 87.3 percent,” there was “no common proof of those essential elements of liability for the remaining 12.7 percent.” Id. at 623–24. The D.C. Circuit affirmed the denial of class certification. Pursuant to Comcast Corp. v. Behrend, 569 U.S. 27 (2013), courts must take a “hard look at the soundness of statistical models that purport to show predominance.” Rail Freight, 934 F.3d at 621. Because the plaintiffs must prove through common evidence “that all class members were in fact injured” by the alleged violation, the court took a “hard look” and reasoned that the regression damages model did not satisfy the predominance requirement. Id. at 623–26. This insufficiency was confirmed by plaintiffs’ failure to propose any “winnowing mechanism” to prevent uninjured class members from recovering. Id. at 625. (Gibson Dunn represented BNSF Railway Company in this matter.) In AA Suncoast Chiropractic Clinic, P.A. v. Progressive America Insurance Co., 938 F.3d 1170 (11th Cir. 2019), the Eleventh Circuit considered another recurring issue: whether and when a court can certify a Rule 23(b)(2) class in a case where the plaintiffs are also seeking damages. In AA Suncoast, healthcare providers brought a putative class action against an insurance company, alleging that the insurer was improperly reducing its policy limits based on the opinions of non-treating physicians. 938 F.3d at 1172. The plaintiffs sought damages for past coverage reductions, as well as an injunction that would have restored the higher coverage limit for previously affected policies. Id. at 1173. The district court certified an “injunction class” under Rule 23(b)(2), but denied certification of a “damages subclass” under Rule 23(b)(3), which would have required “each and every member of the damages subclass” to “establish an individualized entitlement to damages . . . .” Id. at 1175. The Eleventh Circuit reversed, holding that the “injunction class” was actually a “damages subclass” seeking to evade Rule 23(b)(3)’s predominance and superiority requirements. 938 F.3d at 1175. The injunction class sought only to rectify past injuries, not enjoin future harm. Id. In fact, the injunction was “not an injunction at all” because it was “not designed to address the treatment of future claims”; it aimed to require the defendant to reimburse the plaintiffs for prior harms. Id. Certifying this class under Rule 23(b)(2) was improper because it “sidestep[ped] the Rule 23(b)(3) problems by shaving away all the issues that would require individualized determinations.” Id. Nguyen, Rail Freight, and AA Suncoast each illustrate the general theme that courts can and should look beyond the parties’ arguments to determine the true nature of the damages alleged, and whether they might be amenable to classwide treatment.

Part II: Courts Show Flexibility in Assessing Class Action Settlements

The courts of appeals continue to actively police the process and remedies arising out of class action settlements. In the past quarter, the Ninth Circuit declined to overrule a standing order from a Northern District of California judge that bars pre-certification class settlement negotiations, and the Third Circuit declined to adopt a rule that would categorically bar cy pres remedies in Rule 23(b)(2) class actions. Many courts have warned of the need to be “particularly vigilant of pre-certification class action settlements.” Dennis v. Kellogg Co., 697 F.3d 858, 868 (9th Cir. 2012) (citation omitted). But in the Northern District of California, Judge William Alsup has gone so far as to ban them altogether via a standing order. In a decision issued this past quarter, the Ninth Circuit denied a mandamus petition challenging this standing order on various grounds. In re Logitech, Inc., No. 19-70248, 2019 WL 4319012 (9th Cir. Sept. 12, 2019). The panel determined that the standing order was not clearly erroneous, in part because Rule 23 “explicitly contemplates the simultaneous certification of a class and settlement, albeit with permissive and not mandatory language.” 2019 WL 4319012 at *1. The court further acknowledged that “sections of Rule 23 provide district courts with wide discretion, including the factors to be considered in the appointment of class counsel, which is required before a class can be certified and settled.” Id. (citing Fed. R. Civ. P. 23(g)(1)(A)–(B)). Given this wide discretion and Rule 23’s “lack of mandatory class settlement language,” the Ninth Circuit could not “say the [o]rder’s prohibition on class negotiations before certification is clear error.” Id. The Ninth Circuit next determined that Judge Alsup’s standing order did not violate the principles enunciated in Gulf Oil Co. v. Bernard, 452 U.S. 89 (1981), which stated that “any restriction on communications [with putative class members] that would frustrate the policies of Rule 23 must follow ‘a specific record showing . . . the particular abuses . . . threatened’ and the district court must ‘give explicit consideration to the narrowest possible relief which would protect the respective parties.’” Logitech, 2019 WL 4319012, at *1 (quoting Gulf Oil, 452 U.S. at 102). The Ninth Circuit acknowledged that the district court had made no “specific findings of the abuses [n]or explicitly consider[ed] narrower means of protecting the parties from any abuses threatened by pre-certification class negotiations,” but nevertheless determined that the order did not “amount to clear error.” Id. Finally, the Ninth Circuit determined that there was no violation of the defendant’s First Amendment rights, reasoning that “[e]ven if the [o]rder ‘involved serious restraints on expression,’ it is unclear whether the expression is protected by the First Amendment.” 2019 WL 4319012 at *1. (quoting Gulf Oil, 452 U.S. at 103–04). Settlement discussions “may not be protected speech because [a defendant] does not have a right to negotiate with absent, unrepresented, potential class members before there is a class or interim class counsel.” Id. (citation omitted). In another class settlement decision, the Third Circuit confronted cy pres issues. In re: Google Inc. Cookie Placement Consumer Privacy Litigation, 934 F.3d 316 (3d Cir. 2019), involved a putative class action alleging that Google violated the California Constitution and common law by using cookies that bypassed internet browser privacy settings. The parties reached a proposed settlement under which Google would “assure it had implemented systems configured to abate or delete all third-party Google cookies” and “pay $5.5 million, to be divided among the settlement administrator, class counsel, the named class representatives, and cy pres recipients.” Id. at 321 (citation omitted). In exchange, the plaintiffs would “release all class member claims, including for damages, that did or could stem from, or relate to, the subject matter of the litigation” on behalf of a settlement class comprising “all persons in America who used Safari or Internet Explorer web browsers and who visited a website from which . . . cookies were placed by the means alleged in the Complaint.” Id. (citation omitted). The district court preliminarily certified the settlement class under Rule 23(b)(2). 934 F.3d at 323. Following a notice period, a lone objector—Ted Frank, who was both a party and counsel in Frank v. Gaos, 139 S. Ct. 1041 (2019), covered in the First Quarter 2019 Update—challenged the settlement because it prioritized cy pres over direct compensation to class members and because there was an alleged conflict of interest among Google, class counsel, and the cy pres recipients. In re: Google, 934 F.3d at 320. The district court approved the settlement, but the Third Circuit vacated that ruling and remanded. Id. at 329, 332. The court first determined that the plaintiffs had Article III standing under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), because “[h]istory and tradition reinforce that a concrete injury for Article III standing purposes occurs when Google, or any other third party, tracks a person’s internet browser activity without authorization,” and “[p]rivacy torts have become well-ensconced in the fabric of American law.” In re: Google, 934 F.3d at 325 (citation omitted). The court then declined to adopt the objector’s proposed rule that cy pres-only settlements of Rule 23(b)(2) class actions are per se invalid. Although the objector’s “central argument on appeal is that cy pres awards should never be preferred over direct distributions to class members because the settlement fund properly ‘belongs’ to individual class members as monetary compensation for their injuries,” the court explained there is no rule “that requires district courts to approve only settlements that provide for direct class distributions” where doing so would be “economically infeasible.” Id. at 327–28. This is especially so with respect to a Rule 23(b)(2) class, which “assumes a single, ‘indivisible’ injunctive or declaratory remedy against the defendant,” such that there is “no reason why a cy pres-only (b)(2) settlement . . . could not ‘belong’ to the class as a whole, and not to individual class members as monetary compensation.” Id. at 328 (emphasis omitted).

Part III: Spokeo Issues Continue to Percolate Throughout the Federal Courts

The last quarter also saw further efforts by the federal courts of appeals to interpret the “concreteness” requirement in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). As we have discussed in two prior updates, the appellate courts continue to grapple with the application of Spokeo under a wide range of consumer protection statutes, with unpredictable and often irreconcilable results from circuit to circuit. A pair of decisions from the Eighth and Eleventh Circuits addressing the Telephone Consumer Protection Act (“TCPA”) is illustrative. In Salcedo v. Hanna, 936 F.3d 1162 (11th Cir. 2019), the Eleventh Circuit concluded that “a single unsolicited text message, sent in violation of” the TCPA, was not a “concrete injury in fact” sufficient to confer standing on a named plaintiff. Id. at 1165. The court distinguished a prior Eleventh Circuit decision that held that a single unsolicited fax was sufficient, reasoning that a text message “uses no paper, ink, or toner,” does not make the phone unavailable for other uses, and that there was no allegation of a charge by the wireless service provider. Id. at 1168. It further reasoned that Congress had “less . . . concern about calls to cell phones” than about residential land lines, and rejected arguments that such messages were akin to the historic torts of intrusion upon seclusion, nuisance, conversion, or trespass to chattel. Id. at 1169–72. This decision deepens a circuit split on text messages: As we discussed in the last update, the Second Circuit also recently considered alleged injuries from unsolicited text messages and came to the opposite conclusion in Melito v. Experian Marketing Solutions, Inc., 923 F.3d 85 (2d Cir. 2019). This past quarter, the Eighth Circuit likewise found standing for a named plaintiff in a TCPA case based on “two telemarketing messages” left on an answering machine in Golan v. FreeEats.com, Inc., 930 F.3d 950, 959 (8th Cir. 2019). The court held that such calls “b[ore] a close relationship to the types of harms traditionally remedied by tort law, particularly the law of nuisance,” and further relied on the type of harm Congress sought to remedy with the statute. Id. (citations omitted). Although the injury was “intangible” and “minimal,” under that analysis, the plaintiff had standing. Id. at 958–59. The Ninth Circuit has been more likely to uphold standing in these scenarios. In addition to concluding that standing existed under the TCPA in Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037 (9th Cir. 2017), in the past quarter, the court also found standing for named plaintiffs alleging a violation of Illinois’s Biometric Information Privacy Act. Patel v. Facebook, Inc., 932 F.3d 1264 (9th Cir. 2019). The suit dealt with Facebook’s “Tag Suggestions” feature, which compares the faces in newly uploaded pictures to “faces in Facebook’s database of user face templates,” and prompts the user to “tag” the photo with the names of any matches. Id. at 1268. The plaintiffs alleged that this violated the Illinois statute because it “collect[ed], us[ed], and stor[ed] biometric identifiers . . . without obtaining a written release and without establishing a compliant retention schedule.” Id. (footnote omitted). The Ninth Circuit concluded that there was a concrete injury rooted in a broad right to privacy, pointing to “common law roots” for suits protecting such rights and Supreme Court decisions recognizing privacy rights in various contexts. Id. at 1271–74. Facebook has indicated that it intends to petition for certiorari. As shown by these decisions, litigants (and courts) will continue to confront evolving and contradictory case law applying Spokeo, deepening circuit splits, and laying the foundation for future Supreme Court review.

Part IV: The California Supreme Court Softens Ascertainability Requirement

Finally, in July 2019, the California Supreme Court held that plaintiffs need not satisfy a strict “ascertainability” requirement to obtain class certification in California state courts. In Noel v. Thrifty Payless, Inc., 7 Cal. 5th 955 (2019), plaintiff asserted violations of California’s broad consumer protection and false advertising laws, alleging that he had been misled about the true size of an inflatable plastic pool he had purchased. He sought certification of a class of “all persons who purchased the [pool] at a Rite Aid store located in California within the four years preceding the date of the filing of this action.” Id. at 962–63. The trial court denied the named plaintiff’s motion for class certification on the grounds that he failed to adequately demonstrate how class members would be identified. 7 Cal. 5th at 963–65. The California Court of Appeal affirmed, emphasizing that the named plaintiff had “submitted nothing offering a glimmer of insight into who purchased the pools or how one might find out” and failed to describe what, if any, retail transaction records existed that could facilitate identification of members of the proposed class. 7 Cal. 5th at 965 (citation omitted). Although the Court of Appeal acknowledged that the named plaintiff “was not required to actually identify the 20,000-plus individuals who bought pools,” it faulted him for failing “to come up with any means of identifying them . . . .” Id. (citations omitted). But the California Supreme Court unanimously reversed and remanded, holding that the proposed class was sufficiently ascertainable because it was “defined ‘in terms of objective characteristics and common transactional facts’ that ma[de] ‘the ultimate identification of class members possible when that identification becomes necessary.’” 7 Cal. 5th at 974 (quoting Hicks v. Kaufman & Broad Home Corp., 89 Cal. App. 4th 908, 915 (2001)). The court concluded that this standard does not “import[] an additional evidentiary burden into the ascertainability requirement.” Id. at 967. The court explained that this ascertainability standard was constitutional because “due process does not invariably require that personal notice be directed to all members of a class [or] that an individual member of a certified class must receive notice to be bound by a judgment.” 7 Cal. 5th at 984 (citation omitted). As a result, a class is ascertainable so long as it (1) “puts members of the class on notice that their rights may be adjudicated in the proceeding” and (2) “suppl[ies] a concrete basis for determining who will and will not be bound by (or benefit from) any judgment.” Id. at 980. In applying this standard to the facts, the California Supreme Court determined that the proposed class definition was (1) “neither vague nor subjective,” (2) provided class members with adequate notice of their membership in the class, and (3) made “the res judicata consequences of a judgment clear, creating no ambiguity as to who will and will not be bound by the outcome.” 7 Cal. 5th at 987 (citation omitted). Consequently, the court ruled that the class was sufficiently ascertainable. Importantly, however, the court emphasized the low cost of the products at issue ($59.99 each), which led it to surmise that “the odds that any class member will bring a duplicative individual action in the future are effectively zero.” 7 Cal. 5th at 985. As such, the court held that the choice presented was “between a class action and no lawsuits being brought at all. Under the circumstances, due process may not demand personal notice to individual class members, and to build a contrary assumption into the ascertainability requirement would be a mistake.” Id. (footnote omitted). It remains to be seen whether other courts will attempt to distinguish Noel on this basis when individual claims have potentially greater value.
The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Lauren Blas, David Schnitzer, Andrew Kasabian, Kory Hines, and Timothy Kolesk. Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm's Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers: Theodore J. Boutrous, Jr. - Co-Chair, Litigation Practice Group - Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick - Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger - Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

August 15, 2019 |
Gibson Dunn Lawyers Recognized in the Best Lawyers in America® 2020

The Best Lawyers in America® 2020 has recognized 158 Gibson Dunn attorneys in 54 practice areas. Additionally, 48 lawyers were recognized in Best Lawyers International in Belgium, Brazil, France, Germany, Singapore, United Arab Emirates and United Kingdom.

July 25, 2019 |
Second Quarter 2019 Update on Class Actions

Click for PDF This update provides an overview and summary of key class action developments during the second quarter of 2019 (March through June).

  • Part I discusses developments in the law governing class settlements, including loosened requirements for certifying settlement-only classes, the continued viability of multistate classes, and acceptance of third-party litigation funders.
  • Part II discusses the continued divergent approaches that the federal appellate courts have adopted in order to assess whether putative class plaintiffs have standing under Article III after the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).

I.  Courts Continue to Address Important Questions Regarding Class Settlements

During this past quarter, the federal courts of appeals touched upon three important issues relating to class settlements.

A.  The En Banc Ninth Circuit Reaffirms Viability of Nationwide Settlement Classes

In June 2019, an en banc panel of the Ninth Circuit endorsed the viability of multistate settlement classes in In re Hyundai & Kia Fuel Economy Litigation, reversing the prior three-judge panel decision. As reported in our first quarter 2018 update, in a 2-1 decision, a three-judge Ninth Circuit panel originally vacated the district court’s certification of a nationwide settlement class because the district court had failed to analyze whether California law could be applied to the claims of a nationwide class, given potential differences in states’ consumer protection laws. In re Hyundai, 881 F.3d 679, 702 (9th Cir. 2018). Judge Nguyen dissented, warning that the panel decision would “deal[] a major blow to multistate class actions” and “significantly burden[] . . . overloaded district courts” because it would “import[] . . . additional hurdle[s]” into the class certification process that are “found nowhere in [Rule 23].” Id. at 708, 712 (Nguyen, J., dissenting) (internal quotation marks omitted). The Ninth Circuit reheard the case en banc and, in an 8-3 decision (authored by Judge Nguyen), overruled the three-judge panel and affirmed the district court’s certification of a nationwide settlement class. 926 F.3d 539 (9th Cir. 2019) (en banc). The en banc court first observed that because the case involved certification of a settlement-only class, the question of “manageability [wa]s not a concern . . . [since] by definition, there will be no trial.” Id. at 556-57. On the choice-of-law issue, the court held that “[s]ubject to constitutional limitations and the forum state’s choice-of-law rules, a court adjudicating a multistate class action is free to apply the substantive law of a single state to the entire class.” Id. at 561. In particular, under California’s choice-of-law rules, because no party or objector timely argued that the law of another state should apply, the district court was not obligated to address choice-of-law issues at all, and the Ninth Circuit would not disturb the class certification decision “for lack of such analysis.” Id. at 562. Importantly, the en banc Ninth Circuit left undisturbed its prior decision in Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012)—which held that a multi-state class could not be certified due to substantive differences in the law across dozens of jurisdictions—because it found the decision distinguishable. Specifically, the class in Mazza had been certified for litigation, rather than settlement purposes, and therefore the distinct laws of multiple jurisdictions would have presented significant trial manageability problems. In re Hyundai, 926 F.3d at 563. In the settlement context, however, the trial manageability concerns identified in Mazza had no relevance, according to the en banc Ninth Circuit. Id. By reinstating the nationwide settlement class, the Ninth Circuit’s en banc opinion in In re Hyundai offers a roadmap for parties wishing to settle class actions on a nationwide basis. Yet at the same time, the Ninth Circuit reaffirmed that choice of law issues are still a legitimate reason to deny certification of a class action in which certification is sought for litigation, rather than settlement, purposes.

B.  The Third Circuit Holds That District Court Overstepped by Voiding Agreements Assigning Class Claims to Third-Party Litigation Funders

Third-party litigation funders scored a victory in the Third Circuit in the second quarter of 2019. In In re NFL Players’ Concussion Injury Litigation, 923 F.3d 96 (3d Cir. 2019), the district court approved a $1.5 billion class settlement between former NFL players and the NFL arising from concussion-related injuries. Some class members assigned their claims to third-party litigation funders in exchange for receipt of an immediate cash payment, even though the settlement contained an anti-assignment clause. Id. at 100. The district court subsequently entered an order “purporting to void all such agreements,” reasoning that its order was “necessary to protect vulnerable class members from predatory funding companies.” Id. at 100, 103. The litigation funders appealed, and the Third Circuit reversed. While recognizing that the district court had the power to administer the settlement, and that true assignments of settlement proceeds were void ab initio under the class settlement’s anti-assignment clause, the court held that the district court “went beyond its authority when it purported to void the cash advance agreements in their entirety.” Id. at 111. Because there were other “portions of the cash advance agreements that may be enforceable even after any true assignments are voided,” the district court “had the option of invalidating only the assignment portions of the agreements containing true assignments . . . without voiding the agreements in their entirety.” Id. The court also seemed troubled that the district court voided the cash advance agreements “without affording the [third-party funders] notice and a hearing.” Id. at 112. The Third Circuit added, however, that “once the funds are disbursed to the players, the District Court’s power over the funds—and any contracts affecting the funds—is at an end.” Id. at 111. In light of the increasing prevalence of third-party litigation funding, the Third Circuit’s ruling provides important guidance regarding the contours of the role that funders may play in class action litigation.

C.  The Ninth Circuit Addresses the Preclusive Effect of Class Settlement on Subsequent Class Actions

The Ninth Circuit also addressed the scope of class settlement releases in Wojciechowski v. Kohlberg Ventures, LLC, 923 F.3d 685 (9th Cir. 2019). The case involved a plaintiff who had settled a class action against his former employer, in which he had alleged that the employer had terminated employees without the advance notice required under the Worker Adjustment and Retraining Notification Act (“WARN Act”). Id. at 688. As part of the class settlement, the class (including the plaintiff) released all claims against the employer. Id. But the release expressly preserved claims against third parties affiliated with the employer, including an affiliated venture capital firm, Kohlberg Ventures LLC (“Kohlberg”). Id. After entering the settlement, the plaintiff filed a new putative action against Kohlberg, alleging that Kohlberg was also liable as a “single employer” under the WARN Act. Id. at 688–89. The district court dismissed the plaintiff’s claims, holding that the earlier class action barred the new suit, and reasoning that because Kohlberg was not a party to that first lawsuit, it could not be bound by the prior settlement agreement (including the provision preserving the class’s claims against Kohlberg). Id. at 689. The Ninth Circuit reversed and allowed the plaintiff to proceed with his claims against Kohlberg. When a court dismisses an action because of a settlement, the Ninth Circuit held, “the settlement agreement—and in particular, the intent of the settling parties—determines the preclusive effect of the previous action.” Id. at 688. The court explained that because “‘the settlement and release of claims . . . is stamped with the imprimatur of [a] court with jurisdiction,’” “[t]he settlement and release become a ‘final judgment’ and ‘not simply a contract entered into by . . . private parties.’” Id. at 690-91. Accordingly, to determine the preclusive effect of the prior settlement, the district court had to consider “whether the settling parties intended to preclude [plaintiff’s] current claim.” Id. at 691. Because it was undisputed that the parties from the first settlement agreement did not intend to release claims against Kohlberg, the Ninth Circuit reversed and remanded for further proceedings. Id. Wojciechowski underscores the importance of clearly spelling out the intended scope of a class settlement release, as that intent should determine the preclusive effect of the settlement. This issue remains far from settled, however, as litigants and district courts must now attempt to square the holding and reasoning of Wojciechowski with the Ninth Circuit’s prior decision in Hesse v. Sprint Corp., 598 F.3d 581 (9th Cir. 2010). In Hesse, the court retroactively limited the effect of a prior class settlement release, reasoning that regardless of the language or intent of the release, the preclusive effect of that release can go no further than claims that share an “identical factual predicate” with the claims in the first settled class action. Id. at 592. In future cases, class plaintiffs seeking to avoid prior class settlement releases will continue to rely on Hesse, and defendants invoking prior class settlement releases will cite Wojciechowski and argue that Hesse can be limited to its unique facts. In short, the issue will likely be back in front of the Ninth Circuit before too long.

II.  The Federal Courts of Appeals Continue To Apply a Divergent Range of Approaches to Assessing Article III Standing After Spokeo

As we have discussed in prior updates, the federal courts of appeals continue to grapple with the Supreme Court’s 2016 decision on Article III standing in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), with circuit splits continuing to emerge or deepen regarding Spokeo’s meaning and application to various statutes. On one end of the spectrum, the Sixth and Seventh Circuits applied a more demanding standard in this quarter, finding that violations of consumer protection statutes did not constitute injuries under Article III. In Huff v. Telecheck Services, Inc., the plaintiff filed a putative class action under the Fair Credit Reporting Act, alleging that Telecheck provided him an incomplete report of its records about his check-writing history and accounts. 923 F.3d 458, 461-62 (6th Cir. 2019). While acknowledging that the “border between what Congress may do in creating cognizable intangible injuries and what it may not do remains elusive,” the Sixth Circuit, citing Spokeo, agreed with the district court that he lacked standing, notwithstanding the statutory violation, and declared that under Spokeo, “Congress cannot conjure standing by declaring something harmful that is not, by saying anything causes injury because the legislature says it causes injury.” Id. at 465. Because Telecheck’s disclosure “never harmed” plaintiff Huff and “did not create a material risk that Huff would suffer a check decline, Huff has not suffered an injury in fact.” Id. at 468. The Seventh Circuit came to a similar conclusion in a case arising under the Fair Debt Collection Practices Act. In Casillas v. Madison Avenue Associates, Inc., the defendant sent the plaintiff a debt-collection letter which omitted required language explaining “that she had to communicate in writing to trigger the statutory protections” of the statute. 926 F.3d 329, 331 (7th Cir. 2019). Like the court in Huff, the Seventh Circuit held “no harm, no foul.” Id. Because the plaintiff “complained only that her notice was missing some information that she did not suggest that she would ever have used,” id. at 334, she lacked an injury in fact sufficient to create Article III standing. Reflecting the unsettled state of the law in this area, both Huff and Casillas garnered dissents: one member of the Sixth Circuit panel would have held that Telecheck’s omission “present[ed] a material risk of real harm to [a] concrete interest,” and thus was sufficient to confer standing on the plaintiff. 923 F.3d at 469 (White, J., dissenting) (quotation omitted). And in Casillas, three judges dissented from the denial of rehearing en banc, concluding there was a “fair inference” in the pleading of “imminent risk of losing the many protections” provided by the statute, and warning against imposing “unnecessarily heightened requirements” for pleading. 926 F.3d at 340-41 (Wood, J., dissenting from the denial of rehearing en banc). On the other side of the Spokeo divide, the Second and Fourth Circuits found standing in Telephone Consumer Protection Act cases, and the D.C. and Eleventh Circuits found that a heightened risk of identity theft was a sufficient injury to create Article III standing. In Melito v. Experian Marketing Solutions, Inc., the Second Circuit considered a putative class action alleging unsolicited spam text messages. It concluded that “receipt of the unsolicited text messages, sans any other injury” was sufficiently concrete to establish standing. 923 F.3d 85, 88 (2d Cir. 2019). This conclusion was based on the court’s view that “nuisance and privacy invasion . . . are the very harms with which Congress was concerned when enacting” the statute, and that “such injuries were traditionally regarded as providing bases for lawsuits in English and American courts.” Id. In Krakauer v. Dish Network, L.L.C.—which involved calls to numbers on the Do-Not-Call registry—the Fourth Circuit found standing for similar reasons. 925 F.3d 643 (4th Cir. 2019). “Looking both to Congress’s judgment and historical practice, as Spokeo instructs,” the Fourth Circuit held that “the private right of action [at issue] plainly satisfies the demands of Article III.” Id. at 653. The court noted that Congress had created a right of action for an individual who “receive[s] a call on his own residential number, a call that he previously took steps to avoid,” and that “[o]ur legal traditions, moreover, have long protected privacy interests in the home.” Id. In reaching this conclusion, the court rejected a standing inquiry that would require courts to conduct an element-by-element analysis of whether a violation would have supported a common-law tort, holding instead that the standing analysis considers only the “types of harms protected at common law, not the precise point at which those harms become actionable.” Id. at 654. Also taking a broad view of Article III standing, the Eleventh and D.C. Circuits found standing based on the mere potential for identity theft. In Muransky v. Godiva Chocolatier, Inc., 922 F.3d 1175 (11th Cir. 2019), the Eleventh Circuit considered claims under the Fair and Accurate Credit Transactions Act (FACTA), alleging that the defendant violated the statute by printing the first six and last four digits of credit card numbers on cash register receipts. Id. at 1181. The court found Spokeo’s requirements satisfied for two separate reasons. First, Congress had deemed “the risk of identity theft . . . to be sufficiently concrete” to create a cause of action when it enacted the FACTA, and—in this particular case—the pleadings were sufficient to establish a heighted risk of identity theft. Id. at 1188-89. Departing from the Third Circuit, the Eleventh Circuit separately held that standing existed because “the risk of identity theft bears a close enough relationship to the common law tort of breach of confidence.” Id. at 1187, 1191. The D.C. Circuit addressed a similar issue in In re U.S. Office of Personnel Management Data Security Breach Litigation, __ F.3d __, 2019 WL 2552955 (D.C. Cir. June 21, 2019). The case involved related suits by individuals whose personal information was stolen in cyberattacks on a database of federal background investigations for government employees and contractors. The D.C. Circuit explained that it had held previously that identity theft can qualify as a “concrete and particularized injury,” and then proceeded to reverse the district court’s holding that the risk of identity theft to the plaintiffs was insufficient in this case to confer standing. Id. at *5. Based on the allegations of identity theft incidents that had already occurred, the D.C. Circuit concluded there was a “substantial—as opposed to a merely speculative or theoretical—risk of future identity theft.” Id. at *6. These decisions illustrate how Article III standing continues to be a moving target, with diverging authority regarding Spokeo’s application under particular statutes and factual circumstances.
The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley Hamburger, Lauren Blas, Martie Kutscher Clark, David Schnitzer, and Wesley Sze. Gibson Dunn attorneys are available to assist in addressing any questions you may have regarding these developments.  Please contact the Gibson Dunn lawyer with whom you usually work in the firm's Class Actions or Appellate and Constitutional Law practice groups, or any of the following lawyers: Theodore J. Boutrous, Jr. - Co-Chair, Litigation Practice Group - Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis - Co-Chair, Class Actions Practice Group - Los Angeles (+1 213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick - Los Angeles (+1 213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger - Los Angeles (+1 213-229-7658, bhamburger@gibsondunn.com) © 2019 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.