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January 23, 2019 |
Webcast: Class Action Litigation in Europe: Recent Developments and Emerging Trends

Although class action litigation in the United States remains an outlier in the global legal landscape, recent developments in Europe indicate that class or representative actions could soon become more meaningful parts of European legal frameworks. In the last nine months, the European Commission proposed the first EU-wide class action regime, and a new law took effect in Germany that permits representative actions on behalf of consumers. These and other developments could have significant implications for global companies that could be subject to new legal challenges in foreign jurisdictions. A panel of Gibson Dunn partners from the United Kingdom, France, Germany, and the United States provide insights into these emerging trends and offer practical guidance to in-house attorneys for managing associated risks. Topics to be covered: Availability and contours of class actions in Germany, France, and the UK Differences in US versus European class action frameworks Significance of the EU Directive: “New Deal for Consumers” Expectations for the future View Slides (PDF) PANELISTS: Chantale Fiebig Partner in the Washington, D.C. office whose practice focuses on complex civil litigation in federal court. Ms. Fiebig has substantial experience litigating consumer class actions, particularly relating to products that are heavily regulated. She has successfully defended claims involving branded pharmaceuticals, polyurethane foam, automobiles, and food and beverage products, among others. Daniel W. Nelson Partner in the Washington, D.C. office, Co-Chair of the firm’s Environmental Litigation and Mass Tort Practice Group, and a member of the Class Actions and Complex Litigation Practice Group. Mr. Nelson has a national complex litigation practice spanning a wide range of areas, with a particular focus on environmental and mass tort litigation, complex business litigation, antitrust litigation, and class action litigation. He has served as the lead defense counsel for clients in the courts of more than 30 states, and he has defended more than 150 class action lawsuits, including as lead trial counsel in securing a defense verdict in a certified class action jury trial. Eric Bouffard Partner in the Paris office and a member of the firm’s Litigation, International Arbitration and Business Restructuring Practice Groups. Mr. Bouffard is particularly active in cross-border litigation, commercial arbitration, insurance and reinsurance, commercial law (including insolvency and recovery of debt), industrial risk (latent defects, interruption of production, delay and consequential losses) and international trade before both judicial courts and arbitral tribunals. Finn Zeidler Partner in the Frankfurt office and a member of the firm’s Litigation and White Collar Defense and Investigations Practice Groups. Mr. Zeidler focuses his litigation practice on corporate and commercial litigation and arbitration, often with a transatlantic background. Another focus of his practice is on white-collar crime and regulatory investigations as well as on compliance issues, often with cross-border elements. He has significant experience in the automotive, financial and new energy sectors. Among others, Mr. Zeidler has represented German publicly-listed corporations in proceedings under the German legal regulation “KapMuG”, concerning securities mass actions. Osma Hudda Partner in the London office and a member of the firm’s Dispute Resolution Practice Group. Ms. Hudda has broad-based dispute resolution experience including litigation, international arbitration and regulatory investigations. Her litigation experience has involved representing clients in Employment Tribunals, the High Court and Court of Appeal. Ms. Hudda also has defended companies involved in regulatory investigations in the UK and internationally as well as assisting clients in large scale internal investigations and related compliance issues. MCLE CREDIT INFORMATION: This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of  1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit. Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com to request the MCLE form. This program has been approved for credit in accordance with the requirements of the Texas State Bar for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the area of accredited general requirement. Attorneys seeking Texas credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact Jeanine McKeown (National Training Administrator), at 213-229-7140 or jmckeown@gibsondunn.com to request the MCLE form. Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour. California attorneys may claim “self-study” credit for viewing the archived version of this webcast.  No certificate of attendance is required for California “self-study” credit.

January 22, 2019 |
Law360 Names Gibson Dunn Among Its Class Action 2018 Practice Groups of the Year

Law360 named Gibson Dunn one of its five Class Action Practice Groups of the Year [PDF] for 2018. The practice group was recognized “as a leader in ‘gig economy’ lawsuits.” The firm’s Class Action practice was profiled on January 22, 2019. Gibson Dunn’s Class Actions Practice Group has an unrivaled record of success in the defense of high-stakes class action lawsuits across the United States. We have successfully litigated many of the most significant class actions in recent years, amassing an impressive win record in trial and appellate courts, including before the U. S. Supreme Court, that have changed the class action landscape nationwide.

January 18, 2019 |
Fourth Quarter 2018 Update on Class Actions

Click for PDF This update provides an overview and summary of key class action developments during the fourth quarter of 2018 (October through December). Part I summarizes amendments to Rule 23 that went into effect on December 1, 2018. Part II covers an important First Circuit decision in In re Asacol Antitrust Litigation, in which the court reversed a class certification order where a significant number of uninjured individuals were included in the certified class. Part III discusses a Second Circuit decision rejecting an attempt by defendants to moot putative class actions. Part IV addresses a Ninth Circuit decision considering what constitutes a “coupon” settlement subject to increased scrutiny under the Class Action Fairness Act. I.   December 2018 Amendments to Rule 23 First, new amendments to Rule 23 took effect on December 1, 2018.  These amendments focus on procedural issues relating to class settlement and notice to absent class members.  We have briefly summarized the changes below: Electronic Notice to Rule 23(b)(3) Classes:  Rule 23(c)(2)(B), which governs notice requirements for Rule 23(b)(3) classes, now expressly permits notice via electronic or other means, so long as the selected method is “the best notice practicable under the circumstances.” Explicit Standards for Settlement Approval:  To provide courts with a standard set of substantive and procedural concerns to consider when determining whether a settlement is “fair, reasonable, and adequate,” the amended Rule 23(e)(2) directs courts to consider:  (1) the adequacy of representation by class representatives and class counsel; (2) whether “the proposal was negotiated at arm’s length”; (3) the adequacy of relief, taking into account various factors; and (4) whether “class members are treated equitably relative to each other.” Many courts had already been relying on these factors, but there was not always uniformity among the federal circuits.  The advisory committee’s comments also specifically note that the amended language was not intended to displace other factors courts have used to determine fairness, reasonableness, and adequacy. Addressing “Bad Faith” Objectors:  The amendments to Rule 23(e)(5) attempt to deter “bad faith” objections to class settlements in two ways.  First, Rule 23(e)(5)(A) requires objectors to state specific grounds for any objection and whether the objection applies to the entire class, a subset of the class, or just the objector.  Second, a new provision—Rule 23(e)(5)(B)—prohibits an objector from receiving consideration for withdrawing an objection or for abandoning an appeal from a judgment approving the proposal, unless approved by the court after a hearing.  These changes are designed to curb meritless objections that are asserted by objectors in order to obtain payoffs in return for withdrawing the objections—a disturbing trend that has increased in recent years. Standards for Approving Notice of Proposed Class Settlement:  In an effort to avoid scenarios in which the parties provide notice after preliminary approval of a class settlement, only to have the court deny final approval or order additional notice, the amendment to Rule 23(e)(1) now requires parties to provide the court “with information sufficient to enable [the court] to determine whether to give notice of the proposal to the class.”  Based on the information provided by the parties, Rule 23(e)(1) also now mandates that a court determine, before sending notice to the class, that the proposed class will likely be certified and the proposed settlement is likely to earn final approval.  Before this change, many courts at the preliminary approval stage had merely been asking whether a settlement was within the “range of reasonableness,” so it was not entirely unusual for courts to grant preliminary approval, direct costly notice to be issued to the class, but then deny final approval based on concerns that could have been spotted at the outset.  This amendment thus aims to prevent situations in which a court is asked to order notice based on insufficient information, and thereafter must order a second notice, which is both wasteful and confusing to class members. Clarification of Interlocutory Appeals Permitted under Rule 23(f):  The amendment to Rule 23(f) clarifies that an order to give notice of proposed settlement under Rule 23(e)(1) cannot be appealed under Rule 23(f).  As such, Rule 23(f) permits parties to seek permission to pursue an interlocutory appeal only of an order granting or denying class certification.  Rule 23(f) also extends the 14 day time limit to 45 days for cases where the U.S. government is a party. II.   First Circuit Reverses Class Certification Order Because at Least 10% of Class Members Suffered No Injury  As we have discussed in a past update, the federal courts of appeals have long been divided over whether it is permissible to certify a class that includes uninjured class members who lack standing under Article III.  Although the Supreme Court has never squarely addressed the issue, the Court noted in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016), that “the question whether uninjured class members may recover is one of great importance.”  Id. at 1050.  And Chief Justice Roberts in his Tyson Foods concurring opinion expressed his view that “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.”  Id. at 1053 (Roberts, C.J., concurring). This past quarter, the First Circuit addressed this issue in In re Asacol Antitrust Litigation, 907 F.3d 42 (1st Cir. 2018).  The court reversed an order certifying a class of indirect purchasers of the anti-inflammatory drug Asacol because “there are apparently thousands [of class members] who in fact suffered no injury” and the “need to identify those individuals will predominate and render a[ class] adjudication unmanageable.”  Id. at 53–54. The plaintiffs sought to represent a class of buyers who purportedly bought Allergan medicines at artificially high prices because Allergan’s predecessor allegedly pulled Asacol off the shelves just before its patent expired and replaced it with a newer version of the drug, which had a later patent expiration date.  Id. at 45–47.  According to the plaintiffs, this conduct injured them because it “allegedly precluded generic manufacturers from introducing a generic version of Asacol, which would have provided a lower-cost alternative.”  Id. at 44. It was undisputed that at least 10% of the putative class members—”thousands” of individuals—had not suffered any injury attributable to the allegedly anticompetitive conduct because they were brand loyalists who would not have switched to a generic drug had one been available.  Id. at 53–54.  Nonetheless, the district court certified a class that included those uninjured persons, reasoning that the uninjured class members could be removed in a subsequent proceeding conducted by a claims administrator.  Id. at 47. The First Circuit reversed, holding that the plaintiffs could not satisfy the predominance requirement of Rule 23(b)(3) because individualized issues relating to the uninjured class members would predominate.  As the First Circuit noted, “determining whether any given individual was injured (and therefore has a claim) turns on an assessment of the individual facts concerning that person,” and “the defendant must be offered the opportunity to challenge each class member’s proof that the defendant is liable to that class member.”  Id. at 55. The court rejected the plaintiffs’ argument that class members could submit affidavits to a claims administrator who could distinguish injured class members from uninjured members, explaining that such a process could only work if the declarations would be “unrebutted.”  Id. at 52–53.  But where the “defendants have expressly stated their intention to challenge any affidavits that might be gathered,” the affidavits would not be sufficient, as a “claims administrator’s review of contested forms completed by consumers concerning an element of their claims would fail to be protective of defendants’ Seventh Amendment and due process rights.”  Id. (internal quotation marks omitted).  The First Circuit emphasized that “[t]he fact that plaintiffs seek class certification provides no occasion for jettisoning the rules of evidence and procedure, the Seventh Amendment, or the dictate of the Rules Enabling Act.”  Id. at 53. In reaching its decision, the First Circuit distinguished the Supreme Court’s decision in Tyson Foods, where the underlying substantive law—the Fair Labor Standards Act—supported the admissibility of representative evidence, noting that the plaintiffs in Asacol had “point[ed] to no such substantive law that would make an opinion that ninety percent of class members were injured both admissible and sufficient to prove that any given individual class member was injured.”  Id. at 54. The First Circuit also disagreed with the plaintiffs’ assertion that the district court could proportionately reduce the aggregate damages award by the percentage of uninjured class members, concluding that this approach incorrectly assumed that the amount of damages did not depend on the number of class members harmed.  Id. at 55.  Rather, “proving that the defendant is not liable to a particular individual because that individual suffered no injury reduces the amount of the possible total damages.”  Id.  Moreover, if the plaintiffs’ approach were permissible, “there would be no logical reason to prevent a named plaintiff from bringing suit on behalf of a large class of people, forty-nine percent or even ninety-nine percent of whom were not injured, so long as aggregate damages on behalf of ‘the class’ were reduced proportionately.”  Id. at 56.  The First Circuit concluded that “[s]uch a result would fly in the face of the core principle that class actions are the aggregation of individual claims, and do not create a class entity or re-apportion substantive claims.”  Id. Asacol represents a significant victory for class action defendants, who often are faced with putative classes filled with uninjured persons who could never assert a viable claim on an individual basis.  The plaintiffs have filed a petition for rehearing en banc, which remains pending. III.   The Second Circuit Rejects Attempt to Moot Putative Class Actions As we have discussed previously, including in our 2016 year-end update, the Supreme Court decided in Campbell-Ewald Co. v. Gomez that an unaccepted settlement offer—even an offer of complete relief—does not necessarily moot a plaintiff’s claim.  136 S. Ct. 663, 670–71 (2016).  However, the Court did not decide “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.”  Id. at 672.  Nonetheless, the trend has been to reject a distinction between an unaccepted offer of judgment and an unaccepted offer combined with the delivery of money to the plaintiff, as we reported in May 2017. That trend continued in the Second Circuit this past quarter.  In Geismann v. ZocDoc, Inc., 909 F.3d 534 (2d Cir. 2018), the court held that tendering payment to the named plaintiff does not moot putative class claims.  The plaintiff filed a putative class action alleging violations of the Telephone Consumer Protection Act.  Id. at 536–37.  The defendant made two attempts to moot the plaintiff’s individual claims.  It first made a settlement offer under Rule 68, which the plaintiff rejected.  Id. at 537.  The district court then entered judgment in the amount of the offer, and dismissed the action as moot.  The plaintiff appealed, and the Second Circuit applied Campbell-Ewald to reverse, holding that the offer did not moot the claims.  Id.  On remand, the defendant tried again, this time tendering payment to the court under Rule 67.  Id.  The district court again entered judgment for the defendant, and the plaintiff again appealed.  Id. The Second Circuit followed the reasoning set forth by the Seventh Circuit in Fulton Dental, LLC v. Bisco, Inc., 860 F.3d 541 (7th Cir. 2017), and held that, under Campbell-Ewald, an unaccepted tender of payment under Rule 67 is the same as an unaccepted offer of payment—neither is binding under contract law until accepted, and neither moots a plaintiff’s claims.  Geismann, 909 F.3d at 541.  The court explained that the Rule 67 procedure provides for safekeeping of disputed funds pending resolution of litigation, but it cannot alter the parties’ contractual relationship and legal duties.  Id. at 541–42.  “[A] conclusion otherwise,” the court reasoned, “would risk placing the defendant in control of a putative class action, effectively allowing the use of tactical procedural maneuvers to thwart class litigation at will.”  Id. at 543. While courts continue to be skeptical of attempts to moot putative class actions through efforts to make a named plaintiff whole, it is important to note that the Supreme Court in Campbell-Ewald left open the possibility that actual delivery of money to the named plaintiff—as opposed to a mere settlement offer—might result in mootness.  Given that unanswered question, it is possible the Court may eventually weigh in on these issues again. IV.   The Ninth Circuit Provides Guidance on Identifying a “Coupon” Settlement The Class Action Fairness Act (“CAFA”) imposes certain limitations and requirements in the event a class action settlement includes coupons.  Specifically, under CAFA, district courts must consider “the value to class members of the coupons that are redeemed,” and not the aggregate value of all coupons that are simply offered, when assessing the amount of relief awarded to the class for purposes of awarding attorney’s fees for class counsel.  28 U.S.C. § 1712(a) (emphasis added).  However, CAFA does not define what is a “coupon,” leaving that term for the courts to interpret. The Ninth Circuit took up that issue in In re Easysaver Rewards Litigation, 906 F.3d 747 (9th Cir. 2018).  The plaintiffs in that case alleged that after they had purchased defendants’ products online, the defendants had, without plaintiffs’ knowledge or consent, enrolled the plaintiffs in a “rewards” program that charged them ongoing fees for no actual benefits.  The parties ultimately reached a proposed settlement that included a $20 credit that class members could use to purchase additional products from the defendants online.  The district court approved the settlement and awarded attorney’s fees to class counsel based on the total value of the credits offered (not just those redeemed), reasoning that the credits did not count as “coupons” because “of how closely the relief matched class members’ alleged injury.”  Id. at 756. The Ninth Circuit reversed.  The court reiterated its three-factor inquiry for determining what constitutes a coupon under CAFA: “(1) whether class members have ‘to hand over more of their own money before they can take advantage of’ a credit, (2) whether the credit is valid only ‘for select products or services,’ and (3) how much flexibility the credit provides, including whether it expires or is freely transferrable.”  Id. at 755 (quoting In re Online DVD, 779 F.3d 934, 951 (9th Cir. 2015)). Applying these factors to the credits in Easysaver, the Ninth Circuit concluded that the credits were coupons.  First, class members could use the credits to purchase only a very limited universe of online products—such as flowers, chocolates, and similar gifts—without spending any of their own money.  Id. at 757.  In fact, when asked at the fairness hearing whether a class member could purchase anything from the defendants’ websites for the amount of the credits once shipping charges were included, counsel replied:  “If you include shipping, I’m not sure.”  Id.  Second, the Ninth Circuit was troubled by the fact that in order to take advantage of the credit, class members “must hand over their billing information again to the very company that they believe mishandled that information in the first place,” resulting in the same activity that they believe led to their injury.  Id.  Third, the credits also had a series of blackout periods—including Mother’s Day, Valentine’s Day, and other holidays on which consumers most often buy flowers and chocolates.  Id. The district court erred, according to the Ninth Circuit, by improperly relying on a fourth factor—i.e., “how closely the relief matched class members’ alleged injury.”  Id. at 756.  The court explained that while this equivalence “bore on the fairness of the settlement,” it did not impact “whether the vouchers were coupons under CAFA.”  Id.  This holding brings the Ninth Circuit in line with the Seventh Circuit, which has rejected a similar analysis.  See In re Sw. Airlines Voucher Litig., 799 F.3d 701, 706 (7th Cir. 2015). The proposed credits in Easysaver bore several key indicia of a coupon settlement, and the Ninth Circuit plainly was suspicious of the actual value, if any, to class members, particularly given the underlying nature of the defendants’ alleged wrongdoing.  This opinion reinforces the incentives for plaintiffs’ counsel to avoid artificial inflation of a settlement “without a concomitant increase in the actual value of relief for the class.”  Easysaver, 906 F.3d at 755. The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn A. Scolnick, Bradley J. Hamburger, Jeremy Smith, Wesley Sze, Jennafer Tryck, Gatsby Miller and Andrenna Berggren. 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, 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.

January 13, 2019 |
Gibson Dunn Named a 2018 Law Firm of the Year

Gibson, Dunn & Crutcher LLP is pleased to announce its selection by Law360 as a Law Firm of the Year for 2018, featuring the four firms that received the most Practice Group of the Year awards in its profile, “The Firms That Dominated in 2018.” [PDF] Of the four, Gibson Dunn “led the pack with 11 winning practice areas” for “successfully securing wins in bet-the-company matters and closing high-profile, big-ticket deals for clients throughout 2018.” The awards were published on January 13, 2019. Law360 previously noted that Gibson Dunn “dominated the competition this year” for its Practice Groups of the Year, which were selected “with an eye toward landmark matters and general excellence.” Gibson Dunn is proud to have been honored in the following categories: Appellate [PDF]: Gibson Dunn’s Appellate and Constitutional Law Practice Group is one of the leading U.S. appellate practices, with broad experience in complex litigation at all levels of the state and federal court systems and an exceptionally strong and high-profile presence and record of success before the U.S. Supreme Court. Class Action [PDF]: Our Class Actions Practice Group has an unrivaled record of success in the defense of high-stakes class action lawsuits across the United States. We have successfully litigated many of the most significant class actions in recent years, amassing an impressive win record in trial and appellate courts, including before the U. S. Supreme Court, that have changed the class action landscape nationwide. Competition [PDF]: Gibson Dunn’s Antitrust and Competition Practice Group serves clients in a broad array of industries globally in every significant area of antitrust and competition law, including private antitrust litigation between large companies and class action treble damages litigation; government review of mergers and acquisitions; and cartel investigations, internationally across borders and jurisdictions. Cybersecurity & Privacy [PDF]: Our Privacy, Cybersecurity and Consumer Protection Practice Group represents clients across a wide range of industries in matters involving complex and rapidly evolving laws, regulations, and industry best practices relating to privacy, cybersecurity, and consumer protection. Our team includes the largest number of former federal cyber-crimes prosecutors of any law firm. Employment [PDF]: No firm has a more prominent position at the leading edge of labor and employment law than Gibson Dunn. With a Labor and Employment Practice Group that covers a complete range of matters, we are known for our unsurpassed ability to help the world’s preeminent companies tackle their most challenging labor and employment matters. Energy [PDF]: Across the firm’s Energy and Infrastructure, Oil and Gas, and Energy, Regulation and Litigation Practice Groups, our global energy practitioners counsel on a complex range of issues and proceedings in the transactional, regulatory, enforcement, investigatory and litigation arenas, serving clients in all energy industry segments. Environmental [PDF]: Gibson Dunn has represented clients in the environmental and mass tort area for more than 30 years, providing sophisticated counsel on the complete range of litigation matters as well as in connection with transactional concerns such as ongoing regulatory compliance, legislative activities and environmental due diligence. Real Estate [PDF]: The breadth of sophisticated matters handled by our real estate lawyers worldwide includes acquisitions and sales; joint ventures; financing; land use and development; and construction. Gibson Dunn additionally has one of the leading hotel and hospitality practices globally. Securities [PDF]: Our securities practice offers comprehensive client services including in the defense and handling of securities class action litigation, derivative litigation, M&A litigation, internal investigations, and investigations and enforcement actions by the SEC, DOJ and state attorneys general. Sports [PDF]: Gibson Dunn’s global Sports Law 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. Transportation [PDF]: Gibson Dunn’s experience with transportation-related entities is extensive and includes the automotive sector as well as all aspects of the airline and rail industries, freight, shipping, and maritime. We advise in a broad range of areas that include regulatory and compliance, customs and trade regulation, antitrust, litigation, corporate transactions, tax, real estate, environmental and insurance.

November 28, 2018 |
Law360 Names Eight Gibson Dunn Partners as MVPs

Law360 named eight Gibson Dunn partners among its 2018 MVPs and noted that the firm had the most MVPs of any law firms 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.” Gibson Dunn’s MVPs are: Christopher Chorba, a Class Action MVP [PDF] – Co-Chair of the firm’s Class Actions Group and a partner in our Los Angeles office, he defends class actions and handles a broad range of complex commercial litigation with an emphasis on claims involving California’s Unfair Competition and False Advertising Laws, the Consumers Legal Remedies Act, the Lanham Act, and the Class Action Fairness Act of 2005. His litigation and counseling experience includes work for companies in the automotive, consumer products, entertainment, financial services, food and beverage, social media, technology, telecommunications, insurance, health care, retail, and utility industries. Michael P. Darden, an Energy MVP [PDF] – Partner in charge of the Houston office, Mike focuses his practice on international and U.S. oil & gas ventures and infrastructure projects (including LNG, deep-water and unconventional resource development projects), asset acquisitions and divestitures, and energy-based financings (including project financings, reserve-based loans and production payments). Thomas H. Dupree Jr., an MVP in Transportation [PDF] –  Co-partner in charge of the Washington, DC office, Tom has represented clients in a wide variety of trial and appellate matters, including cases involving punitive damages, class actions, product liability, arbitration, intellectual property, employment, and constitutional challenges to federal and state statutes.  He has argued more than 80 appeals in the federal courts, including in all 13 circuits as well as the United States Supreme Court. Joanne Franzel, a Real Estate MVP [PDF] – Joanne is a partner in the New York office, and her practice has included all forms of real estate transactions, including acquisitions and dispositions and financing, as well as office and retail leasing with anchor, as well as shopping center tenants. She also has represented a number of clients in New York City real estate development, representing developers as well as users in various mixed-use projects, often with a significant public/private component. Matthew McGill, an MVP in the Sports category [PDF] – A partner in the Washington, D.C. office, Matt practices appellate and constitutional law. 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. Mark A. Perry, an MVP in the Securities category [PDF] – Mark is a partner in the Washington, D.C. office and is Co-chair of the firm’s Appellate and Constitutional Law Group.  His practice focuses on complex commercial litigation at both the trial and appellate levels. He is an accomplished appellate lawyer who has briefed and argued many cases in the Supreme Court of the United States. He has served as chief appellate counsel to Fortune 100 companies in significant securities, intellectual property, and employment cases.  He also appears frequently in federal district courts, serving both as lead counsel and as legal strategist in complex commercial cases. Eugene Scalia, an Appellate MVP [PDF] – A partner in the Washington, D.C. office and Co-Chair of the Administrative Law and Regulatory Practice Group, Gene has a national practice handling a broad range of labor, employment, appellate, and regulatory matters. His success bringing legal challenges to federal agency actions has been widely reported in the legal and business press. Michael Li-Ming Wong, an MVP in Cybersecurity and Privacy [PDF] – Michael is a partner in the San Francisco and Palo Alto offices. He focuses on white-collar criminal matters, complex civil litigation, data-privacy investigations and litigation, and internal investigations. Michael has tried more than 20 civil and criminal jury trials in federal and state courts, including five multi-week jury trials over the past five years.

October 24, 2018 |
Third Quarter 2018 Update on Class Actions

Click for PDF This update provides an overview and summary of significant class action developments during the third quarter of 2018 (July through September), as well as a brief look ahead to some of the key class action issues anticipated for the end of 2018 and into 2019. Part I covers the class action cases on the U.S. Supreme Court’s docket this Term. Part II reviews several decisions from the federal courts of appeals relating to the interplay between class actions and arbitration agreements, including Gibson Dunn’s recent win before the Ninth Circuit in O’Connor v. Uber Technologies. Part III highlights two decisions that have created circuit splits on important issues of class action procedure. Part IV wraps up with a discussion of a new Ninth Circuit decision on the amount-in-controversy requirement in the Class Action Fairness Act (CAFA). I.   The U.S. Supreme Court Is Hearing Argument on Arbitration Issues and Will Consider Several Other Class Action Cases As previewed in our first and second quarter 2018 updates, an eight-member U.S. Supreme Court heard argument on October 3, 2018 in New Prime Inc. v. Oliveira (No. 17‑340).  (Gibson Dunn represents the petitioner, New Prime Inc.) The Court—now with all nine members—will also hear argument in three other cases involving arbitration or class action issues in late October, as previewed in our first and second quarter 2018 updates and 2018 Supreme Court Roundup.  On October 29, the Court will hear argument in Lamps Plus, Inc. v. Varela (No. 17‑988), to decide whether the Federal Arbitration Act forecloses a state-law interpretation of an arbitration agreement that authorizes class arbitration based on general language commonly used in such agreements.  The same day, argument will be held in Henry Schein, Inc. v. Archer & White Sales, Inc. (No. 17-1272), which concerns whether a court can decline to enforce an agreement delegating questions of arbitrability to an arbitrator if the court concludes that the claim of arbitrability is “wholly groundless.”  And on October 31, in Frank v. Gaos (No. 17-961), the Court will consider the validity of cy pres-only settlements that provide no direct compensation to class members. The Court also added another class action case to its docket in September, Home Depot U.S.A., Inc. v. Jackson (No. 17-1471), which presents two questions regarding the permissibility of removal to federal court under CAFA:  (a) whether CAFA’s statement that “any defendant” may remove an action permits removal by a party that was brought into the suit when an original named defendant filed a counterclaim, and (b) whether the Supreme Court’s holding in Shamrock Oil & Gas Co. v. Sheets, 313 U.S. 100 (1941)—that an original plaintiff may not remove a counterclaim against it—extends to third-party counterclaim defendants.  In Home Depot, Citibank filed a state-court collection action against Jackson, and Jackson filed a counterclaim against Citibank, Home Depot, and another company, alleging class-action consumer-protection claims.  The Fourth Circuit held that Home Depot could not remove the case to federal court under CAFA because Home Depot was a counterclaim defendant, not an original defendant.  The three other circuits to have addressed this issue have also held that CAFA does not permit removal in these circumstances.  Home Depot argues that this interpretation creates an “unfortunate loophole” in CAFA’s grant of federal jurisdiction over certain class actions, allowing plaintiffs’ attorneys to keep consumer class actions out of federal court simply by bringing them as counterclaims in minor debt-collection and other state court suits.  Home Depot presents the Court with the opportunity to determine whether its precedent and CAFA’s text requires this result. II.   Several Federal Courts of Appeals Issue Significant Rulings Regarding the Interplay Between Class Actions and Arbitration Arbitration—and class arbitration in particular—continues to be actively litigated in the circuit courts. In an important decision that will have significant implications for attempts to pursue class actions notwithstanding individual arbitration agreements, the Ninth Circuit in O’Connor v. Uber Technologies, Inc., 904 F.3d 1087, 2018 WL 4568553 (9th Cir. 2018), reversed an order certifying a class of hundreds of thousands of current and former drivers alleging they were misclassified as independent contractors.  Relying on its earlier decision in Mohamed v. Uber Technologies, Inc., 848 F.3d 1201 (9th Cir. 2016), which upheld the enforceability of Uber’s arbitration agreements with drivers, the Ninth Circuit reversed the district court’s class certification orders, orders denying Uber’s motions to compel arbitration, and orders regulating Uber’s communications with drivers under Rule 23(d).  (Gibson Dunn represented Uber in O’Connor and Mohamed.) In O’Connor, the plaintiffs argued that the arbitration agreements were unenforceable because the named plaintiffs had supposedly “opted out of arbitration on behalf of the entire class,” and the agreements contained class-action waivers that violated the National Labor Relations Act.  2018 WL 4568553, at *4.  The Ninth Circuit rejected both arguments, holding that the plaintiffs’ opt-out argument—which was premised on the Georgia Supreme Court’s decision in Bickerstaff v. Suntrust Bank, 788 S.E.2d 787 (Ga. 2016)—was not supported by federal law and, in fact, “would be preempted by the FAA.”  O’Connor, 2018 WL 4568553, at *4–5.  The court also held that the plaintiffs’ NLRA argument was “extinguished” by Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).  O’Connor, 2018 WL 4568553, at *5. Because the district court’s class-certification orders were premised on its erroneous finding that the arbitration agreements were unenforceable, the Ninth Circuit reversed the district court’s decisions on those issues as well, emphasizing that a class cannot be certified where drivers “entered into agreements to arbitrate their claims and . . . waive[d] their right to participate in a class action with regard to those claims.”  O’Connor, 2018 WL 4568553, at *5.  The Ninth Circuit’s decision in O’Connor makes clear that a class cannot be certified where putative class members are subject to binding arbitration agreements that include class waivers. In several other decisions this past quarter, the Tenth and Eleventh Circuits sided with the Second and Fifth Circuits in a widening split with the Third, Fourth, Sixth, and Eighth Circuits over whether the availability of class arbitration is a “question of arbitrability” that presumptively must be decided by courts in the first instance, absent clear evidence of contrary intent in the parties’ arbitration agreement. In Spirit Airlines, Inc. v. Maizes, 899 F.3d 1230 (11th Cir. 2018), the Eleventh Circuit affirmed a district court’s ruling that the availability of class arbitration was presumptively one for the court to decide, but that the parties’ arbitration agreement evidenced a clear intent to overcome that default presumption.  Id. at 1233–34.  In particular, the parties’ agreement adopted American Arbitration Association (AAA) arbitration rules, including Rule 3 of the AAA’s Supplementary Rules for Class Arbitrations, which explicitly provides that an arbitrator shall decide whether an arbitration clause permits class arbitration.  Id.  Siding with the Fifth Circuit, the Eleventh Circuit rejected the “higher burden for showing ‘clear and unmistakable’ evidence for questions of class arbitrability [relative to] . . . ordinary questions of arbitrability” adopted by the Third, Fourth, Sixth, and Eighth Circuits following Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010).  See Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966, 972-73 (8th Cir. 2017) (“The risks incurred by defendants in class arbitration . . . and the difficulties presented by class arbitration . . . all demand a more particular delegation of the issue than we may otherwise deem sufficient in bilateral disputes.”); accord Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746, 762–63 (3d Cir. 2016); Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867, 876–77 (4th Cir. 2015); Reed Elsevier, Inc. ex rel. LexisNexis Div. v. Crockett, 734 F.3d 594, 599–600 (6th Cir. 2013).  But see Wells Fargo Advisors, L.L.C. v. Sappington, 884 F.3d 392, 395 (2d Cir. 2018); Robinson v. J & K Admin. Mgmt. Servs., Inc., 817 F.3d 193, 196 (5th Cir. 2016). The Eleventh Circuit reached the same conclusion one month later in JPay, Inc. v. Kobel, 904 F.3d 923 (11th Cir. 2018), affirming a district court’s summary judgment ruling that the availability of class arbitration was presumptively one for the court to decide, but that, like Spirit Airlines, the parties’ arbitration agreement evidenced a clear intent to overcome that default presumption by adopting the AAA’s arbitration rules.  Id. at 937–40.  The court acknowledged that a plurality of the U.S. Supreme Court in Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), held that whether an agreement provides for class arbitration is not a question of arbitrability, but observed that the Supreme Court has since repeatedly emphasized—in Stolt-Nielsen and Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013)—that Bazzle was a plurality opinion and that the question remains open.  JPay, 904 F.3d at 931. Similarly, in Dish Network, L.L.C. v. Ray, 900 F.3d 1240 (10th Cir. 2018), the Tenth Circuit held that the issue of classwide arbitrability presumptively is for a court to decide, but rejected the argument that the arbitrator exceeded his authority in considering that issue and ordering class arbitration because the parties’ agreement demonstrated a clear intent to delegate the issue to the arbitrator.  As in Spirit Airlines and JPay, the parties agreed that “any claim, controversy and/or dispute between them” would be resolved through arbitration under AAA rules, which give the arbitrator authority to decide his own jurisdiction.  Id. at 1245–46. These cases serve as an important reminder to pay close attention to the terms incorporated by reference into an arbitration agreement in order to avoid inadvertently delegating key issues like classwide arbitrability to an arbitrator, whose decision may be unreviewable by a court or reviewable only under a highly deferential standard.  Also, as noted above and in our second quarter 2018 update, the Supreme Court in Lamps Plus, Inc. v. Varela (No. 17‑988), will decide whether the FAA forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in such agreements.  While not explicitly teed up for resolution in Lamps Plus, the Court could weigh in on the widening split over whether the availability of classwide arbitration presumptively should be decided by a court or an arbitrator. III.   Circuit Splits Regarding Appealability of Class Action Orders After Settlement and on the Propriety of “Issue” Certification Class action procedure was another active topic this past quarter, with a Tenth Circuit decision breaking with the Ninth Circuit on the question whether class certification rulings may be appealed following settlement and voluntary dismissal of individual claims, and a Sixth Circuit decision that deepens an existing circuit split as to whether predominance is a prerequisite to “issue” certification under Rule 23(c)(4).  Ultimately, one or both of these questions may end up before the Supreme Court. In Anderson Living Trust v. WPX Energy Production, LLC, 904 F.3d 1135 (10th Cir. 2018), the Tenth Circuit held—contrary to the Ninth Circuit’s decision in Brown v. Cinemark USA, Inc., 876 F.3d 1199 (9th Cir. 2017)—that voluntary dismissal of individual claims following settlement does not convert a previous denial of class certification into a final appealable order.  In Anderson, the parties settled the plaintiffs’ individual claims two years after the district court had denied class certification.  The district court then entered a stipulated judgment dismissing the individual claims with prejudice, but reserving the plaintiffs’ right, if any, to appeal the class-certification denial.  But the Tenth Circuit dismissed the appeal, relying on the U.S. Supreme Court’s decision in Microsoft v. Baker, 137 S. Ct. 1702 (2017), which held that the federal courts of appeals lack jurisdiction “to review an order denying class certification . . . after the named plaintiffs have voluntarily dismissed their claims with prejudice.”  Id. at 1712.  The Ninth Circuit in Brown had come to the opposite conclusion, and distinguished Baker on the ground that there was a difference between dismissing claims following a settlement for consideration and dismissing claims voluntarily as a mechanism to trigger appellate review.  The Tenth Circuit, by contrast, held that distinction was illusory, and that the policy concerns articulated in Baker—the danger of protracted litigation and piecemeal appeals, preventing parties from usurping Rule 23(f), and wanting to avoid giving plaintiffs an asymmetrical advantage in seeking interlocutory review of class certification decisions—applied in both scenarios. The Sixth Circuit in Martin v. Behr Dayton Thermal Products, 896 F.3d 405 (6th Cir. 2018), added to the division among the federal courts of appeals as to whether plaintiffs must satisfy Rule 23(b)(3)’s predominance requirement for a claim as a whole when seeking “issue” certification under Rule 23(c)(4).  In Martin, a group of Ohio residents alleged that four companies had contaminated the local drinking water.  Plaintiffs sought class certification under Rule 23(b)(3), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy,” as well as Rule 23(c)(4), which provides that “[w]hen appropriate, an action may be brought or maintained as a class action with respect to particular issues.”  The district court denied certification under Rule 23(b)(3), holding that the plaintiffs could not meet that rule’s predominance requirement as to “injury-in-fact and causation,” but granted certification under Rule 23(c)(4) on seven discrete issues, including the extent of “[e]ach [d]efendant’s role in creating the contamination” at issue and “[w]hether [the d]efendants negligently failed to investigate and remediate the contamination at and flowing from their respective [f]acilities.”  Martin, 896 F.3d at 409–10. The Sixth Circuit affirmed the class certification order.  It noted the existing circuit split between the “broad” view of Rule 23(c)(4) taken by the Second, Fourth, Seventh, and Ninth Circuits, and the “narrow” view held by the Fifth and Eleventh Circuits.  According to the Sixth Circuit, under the “broad” view of Rule 23(c)(4), a district court may certify a class on specific common issues “even where predominance has not been satisfied for the cause of action as a whole,” so long as predominance and superiority are satisfied for the issues identified for class treatment.  Martin, 896 F.3d at 411–12.  The “narrow” view of Rule 23(c)(4), by contrast, “prohibits certification if predominance has not been satisfied as to the cause of action as a whole.”  Id.  The Sixth Circuit adopted the broad view, reasoning that it “respects each provision’s contribution to class determinations by maintaining Rule 23(b)(3)’s rigor without rendering Rule 23(c)(4) superfluous.”  Id. at 413.  The court also explained that the superiority requirement of Rule 23 “functions as a backstop against inefficient use of Rule 23(c)(4).”  Id. IV.   Ninth Circuit Clarifies CAFA’s Amount-In-Controversy Requirement Finally, the Ninth Circuit’s opinion in Fritsch v. Swift Transportation Co. of Arizona, LLC, 899 F.3d 785 (9th Cir. 2018), slightly relaxed the amount-in-controversy requirement for defendants seeking to remove an action to federal court under CAFA.  This holding will likely be of particular import in cases brought under Title VII and other statutes that include a fee-shifting provision for prevailing plaintiffs. Fritsch was a putative wage-and-hour class action asserting various violations of the California Labor Code.  899 F.3d at 789.  The defendant removed the case to federal court, relying on a combination of claimed damages and attorneys’ fees to meet the $5 million removal threshold under CAFA.  Id.  The district court concluded that the defendant could not include any fees beyond those that had “been incurred prior to removal,” which caused the total amount in controversy to fall below the removal threshold.  Id.  The Ninth Circuit reversed, explaining that under existing circuit precedent, while the threshold is measured “at the time of removal,” it includes “all relief claimed at the time of removal to which the plaintiff would be entitled if she prevails.”  Id. at 793 (quotation omitted).  For attorneys’ fees, this meant that district courts “must include future attorneys’ fees recoverable by statute or contract when assessing whether the amount-in-controversy requirement is met,” rather than just fees actually incurred at the time of removal.  Id. at 794.  In so ruling, the Ninth Circuit parted ways with the Seventh Circuit’s decision in Gardynski-Leschuck v. Ford Motor Co., 142 F.3d 955, 958 (7th Cir. 1998), which had held that future attorneys’ fees are too speculative to count toward the amount-in-controversy requirement for federal jurisdiction under the Magnuson-Moss Warranty Act.  Fritsch, 899 F.3d at 795.  To address the concern that future fees may be too speculative, the Ninth Circuit held that a district court must count only those future fees that the removing defendant can substantiate under a preponderance-of-the-evidence standard.  Id. at 795–96. The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn A. Scolnick, Bradley J. Hamburger, Brandon J. Stoker, Lauren M. Blas, David Schnitzer, Jessica Culpepper, Gatsby Miller, 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) © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 18, 2018 |
Second Quarter 2018 Update on Class Actions

Click for PDF This update provides an overview and summary of significant class action developments during the second quarter of 2018 (April through June), as well as a brief look ahead to some of the key class action issues anticipated later this year. Part I discusses the U.S. Supreme Court’s decisions in two key cases, Epic Systems Corp. v. Lewis, and China Agritech, Inc. v. Resh. Part II looks forward to the Supreme Court’s October 2018 Term and previews a new class action case on the Court’s docket, Nutraceutical Corp. v. Lambert. Part III discusses two recent circuit-level cases involving class action settlements. I.     The U.S. Supreme Court Affirms Validity of Arbitration Clauses in Employment Agreements, and Limits American Pipe Tolling to Individual Suits The Supreme Court issued two important opinions in the past quarter of significant relevance to class action defendants. First, in the consolidated cases of Epic Systems Corp. v. Lewis, Ernst & Young LLP v. Morris, and National Labor Relations Board v. Murphy Oil USA, Inc., 138 S. Ct. 1612 (2018), the Supreme Court held that arbitration agreements in which an employee waives his right to bring a claim against an employer on a class or collective basis are enforceable under the Federal Arbitration Act (“FAA”) and do not violate the National Labor Relations Act (“NLRA”).  The Court’s ruling resolved a longstanding circuit split on this issue. In a 5-4 decision written by Justice Gorsuch, the Court held that “Congress has instructed in the Arbitration Act that arbitration agreements providing for individualized proceedings must be enforced, and neither the Arbitration Act’s saving clause nor the NLRA suggests otherwise.”  138 S. Ct. at 1616, 1624–27.  The Court rejected the employees’ argument that the FAA’s savings clause—which allows courts to refuse to enforce arbitration agreements “upon such grounds as exist at law or in equity for the revocation of any contract”—precludes enforcement of their arbitration agreements.  Because the employees’ argument was not applicable to “any” contract, and instead singled out “individualized arbitration proceedings” as invalid, the Court explained that the savings clause was not implicated, and there was no “generally applicable contract defense[]” to overcome the FAA’s presumption of enforceability.  Id. at 1622–23. The Court also rejected the argument that enforcing an arbitration agreement’s class action waiver would violate employees’ right to engage in collective action under the NLRA.  It disagreed with the suggestion that the later-passed NLRA had impliedly repealed portions of the FAA, emphasizing that “repeals by implication are ‘disfavored,’” and “Congress ‘does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions.’”  Id. at 1624, 1626–27.  Section 7 of the NLRA, moreover, “focuses on the right to organize unions and bargain collectively,” “does not express approval or disapproval of arbitration,” and “does not even hint at a wish to displace the Arbitration Act—let alone accomplish that much clearly and manifestly.”  Id. at 1624. Finally, the Court declined to apply Chevron deference to the NLRB’s contrary conclusions, noting that Congress had not given the NLRB any authority to interpret the FAA, a statute that the agency does not administer.  The Court also observed that although Chevron deference is premised on the notion that “‘policy choices’ should be left to the Executive Branch,” “here the Executive seems to be of two minds, for [the Court] received competing briefs from the [NLRB] and the United States (through the Solicitor General),” the latter of which had supported the employers.  Id. at 1630. Justice Ginsburg, joined by Justices Breyer, Sotomayor, and Kagan, dissented.  They expressed concern that “underenforcement of federal and state” employment statutes will result from the majority’s decision, because employees will be deterred by the relative expense and “slim relief obtainable” in individual suits.  Id. at 1637, 1646–48 (Ginsburg, J., dissenting).  In response, the majority observed that “the dissent retreats to policy arguments,” and underscored that “[t]he respective merits of class actions and private arbitration as means of enforcing the law are questions constitutionally entrusted not to the courts to decide but to the policymakers in the political branches where those questions remain hotly contested.”  Id. at 1632. Epic Systems confirms that courts will continue to enforce agreements between employers and employees to arbitrate their disputes on an individual—rather than class or collective—basis, and continues the Supreme Court’s trend of enforcing the FAA’s strong policy favoring arbitration. In the second important class action case of the Term, China Agritech, Inc. v. Resh, 138 S. Ct. 1800, the Court declined to extend the rule of equitable tolling announced in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), to the filing of successive class actions. Under American Pipe, the timely filing of a class action tolls the applicable statute of limitations for “all persons encompassed by the class complaint” to intervene in the action or to file individual suits after the denial of class certification.  China Agritech, 138 S. Ct. at 1804–05.  The Ninth Circuit had extended that ruling to the successive filing of class actions, but the Supreme Court reversed, explaining that the concerns underlying American Pipe simply do not apply in the class action context.  The rule announced in American Pipe serves to promote “the efficiency and economy of litigation” embodied in Rule 23, on the theory that plaintiffs “reasonably rel[y] on the class representative . . . to protect their interests in their individual claims,” and without equitable tolling, potential class members “would be induced to file protective motions to intervene” (id. at 1806), or “a needless multiplicity of [separate] actions” to protect their interests in the event certification is denied (id. at 1810). Extending American Pipe tolling to successive class actions, however, “would allow the statute of limitations to be extended time and again” and allow plaintiffs “limitless bites at the apple.”  Id. at 1808–09.  The Court noted that in those circuits that had already declined to extend American Pipe to successive class actions, there had not been “a disproportionate number of duplicative, protective class action filings.”  Id. at 1810.  The Court also reasoned that “efficiency favors early assertion of competing class representative claims” (id. at 1807), and early filing “may aid a district court in determining, early on, whether class treatment is warranted” (id. at 1811). All of the justices joined the Court’s opinion in China Agritech except for Justice Sotomayor, who wrote an opinion concurring in the judgment but expressing the view that the Court’s holding should be limited to cases governed by the Private Securities Litigation Reform Act.  Id. at 1811–15 (Sotomayor, J., concurring in the judgment). China Agritech emphasizes the importance of timely filing putative class actions and reaffirms the class action defendant’s reasonable expectation that class claims will not continue to emerge after the statute of limitations period has expired. II.     The U.S. Supreme Court Is Poised to Weigh In on the Timing of Rule 23(f) Petitions, Arbitration Issues, and the Validity of Cy Pres-Only Settlements The Supreme Court’s October 2018 Term promises to be another active one in the class action space, particularly on a number of bread-and-butter issues relating to class action procedure, settlement, and arbitration. On June 25, 2018, the Supreme Court granted certiorari in Nutraceutical Corp. v. Lambert (No. 17‑1094) to resolve whether equitable exceptions apply to non-jurisdictional claims-processing rules, and specifically, to decide if and when an appellate court may equitably toll the time to file a petition for permission to appeal the grant or denial of class certification under Federal Rule of Civil Procedure 23(f).  Ordinarily, a Rule 23(f) petition must be filed within 14 days following the grant or denial of class certification or decertification, but the Ninth Circuit held that, under the particular circumstances of the case, the filing of a motion for reconsideration 20 days after the decertification order equitably tolled the 14-day deadline.  The Ninth Circuit acknowledged, however, that its ruling conflicted with the other circuit courts that have considered the issue.  (We covered the Ninth Circuit’s decision in Lambert in our third quarter 2017 update.) As noted in our first quarter 2018 update, the Supreme Court is also expected to resolve a series of other issues of interest to class action practitioners in the coming Term.  In New Prime Inc. v. Oliveira (No. 17‑340), the Court will decide whether (a) a dispute regarding the applicability of the FAA must be resolved by an arbitrator under a valid delegation clause, and (b) an exemption for contracts of employment for transportation workers in Section 1 of the FAA applies to independent contractors.  Briefing is currently underway.  (Gibson Dunn represents the petitioner, New Prime, Inc.)  In Lamps Plus, Inc. v. Varela (No. 17‑988), the Court will decide whether the FAA forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in such agreements.  And in Frank v. Gaos (No. 17-961), the Court will consider the validity of cy pres-only settlements that provide no direct compensation to class members.  Opening briefs were filed in both cases on July 9, 2018. III.     The Seventh and Eighth Circuits Issue Notable Class Action Settlement Decisions The federal courts of appeals continue to closely scrutinize class action settlements, and this past quarter saw the issuance of two significant decisions (which both coincidentally involved Target Corp.). In Pearson v. Target Corp., No. 17‑2275,  — F.3d —, 2018 WL 3117848 (7th Cir. June 26, 2018), the Seventh Circuit examined a common tactic employed by professional objectors—filing baseless appeals from a settlement approval as a form of “blackmail,” hoping that the parties will pay them to dismiss the appeals so that the settlement can become effective. In 2014, the parties in Pearson had agreed to a classwide settlement in response to allegations that the defendants had “violated consumer protection laws by making false claims about the efficacy of [a dietary] supplement.”  Id. at *1.  Ted Frank, a frequent objector to class action settlements, objected to the awards to class counsel in the district court, and appealed the settlement approval order to the Seventh Circuit.  The Seventh Circuit agreed with Frank’s objections and reversed the district court, holding that “the settlement provided outsized benefits to class counsel.”  Id. On remand, the parties reached a new settlement, which the district court approved.  It then dismissed the case “‘without prejudice’ so as to allow the Court to supervise the implementation and administration of the Settlement.”  Id.  Three different class members then objected and filed appeals.  Id. at *2.  All three subsequently dismissed their appeals, and the district court entered a new order dismissing the case with prejudice.  Id.  Frank then moved to intervene and disgorge any side settlements made with the other three objectors.  His concern was “‘objector blackmail’” in which an “absent class member objects to a settlement with no intention of improving the settlement for the class,” “appeals, and pockets a side payment in exchange for voluntarily dismissing the appeal.”  Id. at *1.  The district court refused to hear the motion, reasoning that the dismissal with prejudice had divested the court of jurisdiction.  Frank then moved under Federal Rule of Civil Procedure 60(b) to vacate the dismissal with prejudice and restore the court’s jurisdiction over the settlement.  Id. at *2.  The district court denied that motion as well, which led to Frank’s second appeal and the subject of this decision.  Id. The Seventh Circuit again ruled in Frank’s favor.  Writing for a three-judge panel, Judge Wood explained that Frank could bring a Rule 60(b) motion because he had objected the settlement and thus qualified as a “party.”  Id.  On the merits, the court held that the district court should have granted the Rule 60(b) motion because (1) the objectors voluntarily dismissed their appeals before briefing raised concerns that they had done so at the expense of the class; (2) the class was comprised of ordinary consumers rather than sophisticated financial institutions (and thus needed greater protection from the court); (3) Frank sought only to effectuate the limited ancillary jurisdiction contemplated by the settlement itself, so the interest in finality was less compelling that it would be had Frank sought to unwind the settlement and re-litigate merits issues; and (4) Rule 60(b)(6) exists as an “‘equitable’” “safety valve” for precisely these types of situations.  Id. at *3-4. This decision continues the trend among the federal courts of appeals to carefully scrutinize class settlements, particularly when they involve “ordinary consumers.”  And, as the Seventh Circuit recognized, it also highlights the importance of “an amendment of Rule 23”—Rule 23(e)(5)(B)—which is “designed to prevent this problem from recurring.”  Id. at *5.  That proposed rule would require district court approval, after a hearing, of any “‘payment or other consideration’ provided for ‘forgoing or withdrawing an objection’ or ‘forgoing, dismissing, or abandoning an appeal.’”  Id.  If Congress allows this new rule to go into effect, observers will be keen to see whether it “solve[s] the problem” of “objector blackmail,” or whether objectors will find new, creative ways to “leverage[]” the process “for a purely personal gain.”  Id. at *1, *5. The second case, In re Target Corporation Customer Data Security Breach Litigation, 892 F.3d 968 (8th Cir. 2018), also involved the re-examination of a class action settlement, at the urging of an objector, after the Eighth Circuit had rejected an earlier settlement. With the earlier settlement, the Eighth Circuit concluded the district court had “failed to conduct the appropriate pre-certification analysis.”  Id. at 972.  On the second go-around, however, the Eighth Circuit affirmed the judgment of the district court, reasoning that the court had not “fundamentally misunderstood the structure of the settlement agreement” (id. at 973), nor was separate legal counsel required to protect the interests of the subclass of plaintiffs who had yet to suffer any material loss from the data breach that formed the basis for the suit (id. at 976).  On the latter point, the Eighth Circuit maintained that the interests of those class members with “documented losses” and those without losses were “more congruent than disparate” because it was “hypothetically possible that a member” of either subclass could “suffer some future injury.”  Id. at 975-76. The Eighth Circuit also affirmed the district court’s approval of the settlement.  Even though it noted the district court’s analysis of the $6.75 million fee award may have been “perfunctory,” it held the court’s reasoning was sufficient and that the lodestar multiplier applied was “well within amounts [the court had] deemed reasonable in the past.”  Id. at 977.  The court also held that the district court was within its discretion to approve the settlement despite the objectors’ concerns about what arguably constituted a “clear-sailing” provision requiring defendants not to oppose the attorney’s fees request, and a “kicker” provision that permitted unused settlement funds to be returned to defendants rather than distributed to the class.  Id. at 979. The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn A. Scolnick, Bradley J. Hamburger, Brandon J. Stoker, Jeremy S. Smith, Lauren M. Blas, Michael Eggenberger, and Gatsby Miller. 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) © 2018 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 11, 2018 |
Supreme Court Rejects Tolling Of Statute Of Limitations For Successive Class Actions

Click for PDF China Agritech Inc. v. Resh, No. 17-432 Decided June 11, 2018 Today, the Supreme Court held that the filing of a class action does not toll the statute of limitations for putative class members to file their own class actions. That means that if class certification is denied, putative class members cannot file successive class actions after the statute of limitations has expired. Background: Stockholders filed two timely class actions against China Agritech, Inc. alleging that the company violated the Securities Exchange Act of 1934.  After class certification was denied in both actions, stockholders filed a third class action, well outside the two-year limitations period.  They argued that their claims were timely because the limitations period was tolled while the earlier class actions were pending. Issue: Whether previously absent class members may bring a class action outside the applicable limitations period on the theory that the pendency of a previous class action (in which the court ultimately denied class certification) tolled the statute of limitations during the pendency of earlier class actions. Court’s Holding: No. Previously absent class members may not bring successive (also called “stacked”) class actions outside the limitations period. “The ‘efficiency and economy of litigation’ that support tolling individual claims, . . . do not support maintenance of untimely successive class actions; any additional class filings should be made early on, soon after the commencement of the first action seeking class certification.” Justice Ginsburg, writing for the Court Gibson Dunn filed amicus briefs arguing against tolling for successive class actions for the Chamber of Commerce, Retail Litigation Center, and the American Tort Reform Association What It Means: The Court declined to extend the equitable tolling rule established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), which permits putative class members to wait for a decision on class certification before filing an individual claim or intervening in the original lawsuit.  The Court held that the American Pipe rule does not toll the statute of limitations for putative class members to file class actions, so all class claims must be filed within the limitations period. The ruling ensures that when class certification is denied, a new plaintiff cannot revive otherwise expired claims by filing the case as a class action.  The Court explained that the decision about whether to certify a class should be made at the outset of the case for all would-be class representatives, and class members should not be able to extend the statute of limitations indefinitely by filing successive class actions each time class certification is denied. The Court made clear that its ruling applies regardless of the reason the court denied class certification in the first case. The Court stated that its ruling is not likely to lead to a dramatic increase in the number of protective class actions filed during the limitations period.  The majority of courts of appeals had already adopted the same rule, and those courts did not experience an increase in protective class action filings. 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 Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Nicole A. Saharsky +1 202.887.3669 nsaharsky@gibsondunn.com Related Practice: Class Actions Theodore J. Boutrous, Jr. +1 213.229.7804 tboutrous@gibsondunn.com Christopher Chorba +1 213.229.7396 cchorba@gibsondunn.com Theane Evangelis +1 213.229.7726 tevangelis@gibsondunn.com   © 2018 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

June 5, 2018 |
A Better Method For Achieving Broader Class Action Reform

Los Angeles partners Kahn Scolnick and Bradley Hamburger are the authors of “A Better Method For Achieving Broader Class Action Reform,” [PDF] published in Law360 on June 5, 2018.

May 21, 2018 |
Supreme Court Upholds Agreements To Individually Arbitrate Employment-Related Disputes

Click for PDF Epic Systems Corp. v. Lewis, No. 16-285; Ernst & Young LLP v. Morris, No. 16-300; National Labor Relations Board v. Murphy Oil USA, No. 16-307 Decided May 21, 2018 Today, the Supreme Court held 5-4 that an employee’s agreement to arbitrate employment-related disputes with his employer through individual arbitration is enforceable under the Federal Arbitration Act. The Court rejected the argument that enforcing the arbitration agreement’s class action waiver would violate employees’ right to engage in collective action under the National Labor Relations Act. Background: The Federal Arbitration Act (FAA) provides that agreements to arbitrate transactions involving interstate commerce “shall be valid, irrevocable, and enforceable,” except “upon such grounds as exist at law or in equity for the revocation of any contract.”  9 U.S.C. § 2.  In these consolidated cases, the employees agreed to arbitrate work-related disputes through individual arbitration, but later sued their employers in federal courts, arguing that the arbitration agreements were invalid because they violated employees’ right to engage in “concerted activities” under the National Labor Relations Act (NLRA).  29 U.S.C. § 157. Issue: Whether an agreement that requires an employer and an employee to resolve work-related disputes through individual arbitration, and waive class proceedings, is enforceable under the FAA, notwithstanding the employee’s NLRA right to engage in concerted activities.Court’s Holding: Yes.  Arbitration agreements requiring individual arbitration of employment disputes are enforceable notwithstanding the NLRA collective-action right. What It Means: The Supreme Court ruling confirms that courts will continue to enforce agreements between employers and employees to arbitrate their disputes on an individual basis, rather than in class action litigation. This case continues the Supreme Court’s trend of enforcing the FAA’s strong policy favoring arbitration. The Court held that under the FAA’s saving clause, litigants only can challenge an arbitration agreement on grounds that would apply to “any” contract—not on grounds specific to arbitration. The Court’s reasoning suggests that state laws restricting arbitration are not likely to withstand challenge under the FAA. Clients should consult a Gibson Dunn attorney regarding the nuances created by different jurisdictions. The Court determined that the NLRA’s “concerted activities” provision was intended to protect organizing and collective bargaining in the workplace, not the treatment of class actions or class arbitration. Interestingly, the Solicitor General said the arbitration agreements are enforceable, but the National Labor Relations Board (NLRB) said they are not enforceable – and both argued their positions before the Supreme Court. For this reason (and others), the Court declined to afford Chevron deference to the NLRB’s view. “It is this Court’s duty to interpret Congress’s statutes as a harmonious whole rather than at war with one another. And abiding that duty here leads to an unmistakable conclusion.” Justice Gorsuch, writing for the Court 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 Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Nicole A. Saharsky +1 202.887.3669 nsaharsky@gibsondunn.com   Gibson Dunn’s Labor and Employment lawyers are available to assist in addressing any questions you may have regarding arbitration programs. Please feel free to contact the following practice leaders or the attorneys with whom you work: Labor and Employment Practice Catherine A. Conway +1 213.229.7822 cconway@gibsondunn.com) Eugene Scalia +1 202.955.8206 escalia@gibsondunn.com Jason C. Schwartz +1 202.955.8242 jschwartz@gibsondunn.com   Related Practice: Class Actions Theodore J. Boutrous, Jr. +1 213.229.7804 tboutrous@gibsondunn.comm Christopher Chorba +1 213.229.7396 cchorba@gibsondunn.com Theane Evangelis +1 213.229.7726 tevangelis@gibsondunn.com   © 2018 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 4, 2018 |
First Quarter 2018 Update on Class Actions

Click for PDF This update provides an overview and summary of significant class action developments during the first quarter of 2018 (January through March), as well as a brief look ahead to some of the key class action issues anticipated later this year. Part I addresses developments at the United States Supreme Court, including the oral arguments in China Agritech, Inc. v. Resh, the decision in Jennings v. Rodriguez and its implications for Rule 23(b)(2) class actions, and three grants of certiorari in cases relating to class actions (including in two important arbitration cases, and in another that will address the use of cy pres in class action settlements). Part II covers the Ninth Circuit’s decision in In re Hyundai & Kia Fuel Economy Litigation, which may have significant consequences for plaintiffs attempting to certify nationwide class actions, as well as parties attempting to settle such actions. Part III describes several rulings addressing important issues regarding class settlements, including recent activity by the U.S. Department of Justice in scrutinizing these settlements. Part IV discusses a series of decisions from the federal courts of appeals, involving (among other things) what it takes to establish standing under Article III in data breach class actions. Part V addresses a new California Court of Appeal decision regarding the standards applicable to the use of experts at class certification. I.   The U.S. Supreme Court Hears Argument on the Tolling Effect of Putative Class Actions, Issues Guidance on Rule 23(b)(2) Class Actions, and Grants Certiorari in Three Important Cases As previewed in our fourth quarter 2017 update, the U.S. Supreme Court heard oral argument on March 26, 2018, in China Agritech, Inc. v. Resh (No. 17-432).  The case concerns the scope of the equitable tolling rule of American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974), which held that the filing of a class action tolls the statute of limitations for absent class members and permits them to bring subsequent individual suits after the original class action has been dismissed.  China Agritech asks whether the American Pipe rule should be extended to permit absent class members to bring successive class action lawsuits—a question that has divided the courts of appeals. The oral argument did not suggest a clear answer.  While some justices seemed skeptical of barring individuals who relied on their membership in a class action (as a reason not to sue within the limitations period) from then using Rule 23 in a subsequent suit, others expressed concern that applying the American Pipe rule to subsequent class actions would encourage “stacked” successive class actions that would undermine the efficiency rationales underlying the class action device.  (Gibson Dunn filed an amicus brief in this case on behalf of the Chamber of Commerce of the United States, the Retail Litigation Center, Inc., and the American Tort Reform Association in support of the petitioner.) The Court also provided guidance regarding Rule 23(b)(2) classes in Jennings v. Rodriguez, 138 S. Ct. 830 (2018), a case involving the government’s detention of aliens without bond hearings.  The Court instructed the Ninth Circuit to “consider whether a Rule 23(b)(2) class action continues to be the appropriate vehicle for respondents’ [due process] claims in light of” its holding in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), that “‘Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class.'”  Id. at 851–52 (quoting Dukes, 564 U.S. at 360).  Writing for the majority, Justice Alito explained that Rule 23(b)(2) may no longer permit class treatment because some class members may not be entitled to bond hearings as a matter of constitutional due process.  Id. at 852.  The Court also instructed the Ninth Circuit to consider whether the “flexible” due process inquiry, which “calls for such procedural protections as the particular situation demands,” can be adjudicated in a class action.  Id. (quotations omitted). Looking ahead, there are several significant class action issues on the Court’s docket.  As noted in our fourth quarter 2017 update, by June 2018, the Court is expected to decide whether the National Labor Relations Act precludes enforcement of class action waivers in mandatory employment arbitration agreements, which is the question presented in a consolidated trio of cases, Epic Systems Corp. v. Lewis (No. 16-285), National Labor Relations Board v. Murphy Oil USA, Inc. (No. 16-307), and Ernst & Young LLP v. Morris (No. 16-300). In the past three months, the Court granted certiorari in three more cases that will address issues relevant to class actions. First, on February 26, 2018, the Court granted certiorari in New Prime Inc. v. Oliveira (No. 17‑340) to resolve two important issues concerning the interpretation and scope of the Federal Arbitration Act (“FAA”):  (a) whether a dispute regarding the applicability of the FAA must be resolved by an arbitrator under a valid delegation clause, and (b) whether an exemption for contracts of employment for transportation workers in Section 1 of the FAA applies to independent contractors.  Both questions have divided the federal courts of appeals.  The case presents an opportunity for the Court to establish uniform, national rules concerning the interpretation of the FAA, including the ability of parties to incorporate enforceable arbitration provisions in agreements governing independent contractors.  (Gibson Dunn represents the petitioner, New Prime Inc.) Second, on April 30, 2018, the Court granted certiorari in Lamps Plus, Inc. v. Varela (No. 17‑988), which presents the question whether the FAA forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements.  Lamps Plus presents the Court with an opportunity to again wrestle with the propriety of class arbitration, an issue that the Court previously addressed in Stolt-Nielsen, S.A. v. AnimalFeeds International Corp., 559 U.S. 662 (2010). Finally, on April 30, 2018, the Court granted certiorari in Frank v. Gaos (No. 17-961), which we discussed in our third quarter 2017 update and our fourth quarter 2017 update.  Frank, which involved a class action settlement of claims against Google, concerns the validity of cy pres-only settlements that provide no direct compensation to class members.  Frank presents an opportunity to address the “fundamental concerns” with cy pres-only settlements that Chief Justice Roberts previously identified, “including when, if ever, such relief should be considered; how to assess its fairness as a general matter; whether new entities may be established as part of such relief; if not, how existing entities should be selected; what the respective roles of the judge and parties are in shaping a cy pres remedy,” among other issues.  Marek v. Lane, 134 S. Ct. 8, 9 (2013) (Roberts, C.J., respecting denial of certiorari). II.   Ninth Circuit Vacates Certification of Nationwide Settlement Class This past quarter, the Ninth Circuit likely increased the scrutiny that district courts must now apply to the certification of nationwide class actions asserting state-law claims.  In In re Hyundai & Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018), a divided panel vacated a nationwide class action settlement because the district court failed to properly analyze whether California law could be applied to all class members. This action arose out of alleged misstatements concerning the fuel efficiency of certain Hyundai and Kia vehicles.  In re Hyundai, 881 F.3d at 694-95.  The district court certified a nationwide Rule 23(b)(3) class for settlement purposes and granted preliminary approval of a proposed class settlement.  Id. at 700-01.  The district court ruled that it was not required to analyze whether there were significant differences between California law and the laws of the other states at issue because differences in state law could be addressed during a hearing on the fairness of the settlement.  Id. at 700.  The district court approved the settlement without conducting a choice-of-law analysis.  See id. at 701. The Ninth Circuit vacated the class certification order.  It emphasized that, under Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), “the district court was required to apply California’s choice of law rules to determine whether California law could apply to all plaintiffs in the nationwide class, or whether the court had to apply the law of each state, and if so, whether variations in state law defeated predominance.”  In re Hyundai, 881 F.3d at 702.  The Ninth Circuit agreed that district courts need not consider “litigation management issues” in deciding whether to certify a settlement class, but they were still obligated to ensure that the class “meets all of the prerequisites of Rule 23,” including its predominance requirement.  Id.  Punting the decision about choice-of-law issues to a “fairness hearing” was not a viable option, as a “fairness hearing under Rule 23(e) is no substitute for rigorous adherence to those provisions of the Rule designed to protect absentees[.]”  Id. at 703 (alteration in original) (quoting Ortiz v. Fibreboard Corp., 527 U.S. 815, 849 (1999)). The Ninth Circuit also took steps to limit the perception that nationwide or mass advertising campaigns can produce a “common” question of whether the class relied on certain misrepresentations by the defendants.  The court reasoned that even though there was some evidence of nationwide advertising, there was no evidence of uniform representations to used car purchasers, and no evidence of the sort of “massive advertising campaign” that could give rise to a presumption of reliance as to such purchasers.  In re Hyundai, 881 F.3d at 704.  It also rejected the argument that individualized questions regarding exposure to the advertising could simply be ignored in the settlement context. Judge Nguyen’s dissent claimed, among other things, that the majority improperly shifted the burden from the objectors to the district court or class counsel to decide whether other states’ laws apply and argued that the majority’s decision had created a circuit split and ran afoul of Erie Railroad v. Tompkins, 304 U.S. 64 (1938). The settling parties filed petitions for rehearing and rehearing en banc in March.  The objectors were ordered to file their response and did so on March 28.  The petitions are currently pending. III.   Notable Decisions Involving Objections to Class Action Settlements There were two other notable decisions regarding class action settlements this quarter. First, the United States Department of Justice signaled a renewed interest in policing class action settlements.  According to reports, the DOJ receives more than 700 notices of class action settlements each year as required by the Class Actions Fairness Act (“CAFA”), but it had only participated in two cases.  Dep’t of Justice, Associate Attorney General Brand Delivers Remarks to the Washington, D.C. Lawyers Chapter of the Federalist Society (Feb. 15, 2018), https://www.justice.gov/opa/speech/associate-attorney-general-brand-delivers-remarks-washington-dc-lawyers-chapter.  At a conference on February 15, however, Associate Attorney General Rachel L. Brand warned that “If a settlement isn’t fair or reasonable under CAFA, DOJ may file a statement of interest saying so.  Be on the lookout in the coming days for the first example.”  Id. The DOJ followed through on this promise in Cannon v. Ashburn Corp., No. 16-cv-1452, 2018 WL 1806046 (D.N.J. Apr. 17, 2018), where the district court denied a motion for final settlement approval based in part on the concerns raised by the DOJ.  The DOJ had filed a “statement of interest” objecting to the class settlement of claims involving alleged false advertising in connection with the sale of wines.  Id. at *12.  The proposed settlement offered class members coupons worth between $0.20 to $2.25 per bottle of wine purchased, with a total settlement value estimated at $10.8 million.  Id. at *3.  Class counsel were to receive $1.7 million in fees.  Id.  In its “statement of interest,” the DOJ argued that class counsel should not receive a “windfall” of $1.7 million, given the minimal benefit to class members and the apparent lack of merit of the claims.  Statement of Interest of the United States at 1, Cannon v. Ashburn Corp., No. 16‑cv‑1452 (Feb. 16, 2018), ECF No. 58.  Arguing that the settlement was “a textbook coupon settlement” that would force class members to engage in future business with the defendant if they wanted to receive any benefit, the DOJ urged the court, should it grant approval, to defer payment of fees to class counsel until the total value of redeemed coupons is known.  Id. at 9–11, 16.  The Arizona Attorney General also weighed in on behalf of 19 states’ Attorneys General, as did ten objectors.  2018 WL 1806046, at *4.  This case may be the first example of what appears to be a new trend of heightened scrutiny of class action settlements by both state and federal law enforcement officials. Second, in Low v. Trump University, LLC, 881 F.3d 1111 (9th Cir. 2018), the Ninth Circuit affirmed the district court’s order approving a class settlement between Trump University and its former students.  Id. at 1113.  A lone objector sought to opt out of the class after receiving a court-approved settlement notice and submitting her claim.  Id. at 1115-16.  The district court approved the settlement and the objector appealed.  Id. at 1116.  The objector argued that a single sentence in the long-form notice stating that class members would “be notified about how to obtain a share (or how to ask to be excluded from any settlement)” led her to believe that there would be a second opportunity to opt out.  Id. at 1117.  The Ninth Circuit found that, “reading the notice as a whole and in context,” it “promised only one opportunity to opt out,” and observed that there is “‘no authority of any kind suggesting that due process requires that members of a Rule 23(b)(3) class be given a second chance to opt out.'”  Id. at 1121 (quoting Officers for Justice v. Civil Serv. Comm’n of S.F., 688 F.2d 615, 635 (9th Cir. 1982)). IV.   In re Zappos.com and Other Notable Opinions from the Federal Courts of Appeals Addressing Article III Standing The issue of Article III standing in putative class actions, and in data privacy class actions in particular, continues to be a hotly litigated issue. The most significant decision this quarter came from the Ninth Circuit, which reversed the dismissal of a putative class action relating to the breach of Zappos.com’s data systems that had allegedly exposed the “names, account numbers, passwords, email addresses, billing and shipping addresses, telephone numbers, and credit and debit card information” of 24 million customers.  In re Zappos.com, Inc., — F.3d —, No. 16-16860, 2018 WL 1883212, at *2 (9th Cir. Apr. 20, 2018).  The district court ruled that those plaintiffs who alleged “actual fraud occurred as a direct result of the breach” had Article III standing, but that those plaintiffs who “failed to allege . . . actual identity theft or fraud” based on the breach did not.  Id. at *3. The Ninth Circuit reversed, concluding that the dismissed plaintiffs had “sufficiently alleged standing based on the risk of identity theft.”  Zappos, 2018 WL 1883212, at *2.  The Ninth Circuit relied heavily on its previous decision in Krottner v. Starbucks Corp., 628 F.3d 1139 (9th Cir. 2010), which had addressed “the Article III standing of victims of data theft.”  Zappos, 2018 WL 1883212, at *3.  The court considered whether Krottner was still good law following the Supreme Court’s decision in Clapper v. Amnesty International, USA, 568 U.S. 398 (2013), but ultimately concluded that “Krottner is not clearly irreconcilable with Clapper” and thus “control[led] the results here.”  Zappos, 2018 WL 1883212, at *5–*6. Applying Krottner, the Ninth Circuit reasoned that “the sensitivity of the personal information, combined with its theft,” meant that “the plaintiffs had adequately alleged an injury in fact” for standing purposes.  Zappos, 2018 WL 1883212, at *6.  Because the hackers had allegedly accessed full credit card numbers, the stolen information “gave hackers the means to commit fraud or identity theft,” as underscored by those “plaintiffs who alleged that the hackers had already commandeered their accounts or identities using information taken from Zappos.”  Id.  Finding the other elements of Article III standing satisfied, the Ninth Circuit remanded the case to the district court for further proceedings. While In re Zappos.com held that Article III was satisfied based on the facts alleged there, three other decisions issued this past quarter came to the opposite conclusion and thus affirmed the dismissal of putative class actions: In Owner-Operator Independent Drivers Association v. U.S. Department of Transportation, 879 F.3d 339 (D.C. Cir. 2018), the D.C. Circuit held that commercial truck drivers lacked Article III standing to sue the Department of Transportation for inaccuracies in its database of driver-safety information.  Five commercial truck drivers sued the Department because their records contained inaccuracies, but only two of the drivers ever had the inaccurate information shared with future employers.  Id. at 340.  On these facts, the court determined that “the mere existence of inaccurate database information is not sufficient to confer Article III standing” because there was no concrete or de facto harm.  Id. at 345.  Nevertheless, the court found the actual dissemination of inaccurate information was sufficient to confer standing for the two truck drivers whose information had in fact been shared.  Id. In Bassett v. ABM Parking Services, Inc., 883 F.3d 776 (9th Cir. 2018), the Ninth Circuit agreed with the Second and Seventh Circuits that alleging “a statutory violation,” without more, was “too speculative” a “theory of exposure to identity theft” to confer Article III standing on a plaintiff to litigate claims under the Fair and Accurate Credit Transactions Act and the Fair Credit Reporting Act.  Id. at 777, 783; see also Crupar–Weinmann v. Paris Baguette Am., Inc., 861 F.3d 76 (2d Cir. 2017); Meyers v. Nicolet Rest. of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016).  The court determined that this bare procedural violation failed to establish a concrete harm and that plaintiff’s “theory of ‘exposure’ to identity theft”—premised on the printing of a few digits of his credit card on a parking receipt—”[was] . . . ‘too speculative for Article III purposes.'”  Bassett, 883 F.3d at 783 (quoting Missouri ex rel. Koster v. Harris, 847 F.3d 646, 654 (9th Cir. 2017)). In Hagy v. Demers & Adams, 882 F.3d 616 (6th Cir. 2018), the Sixth Circuit ruled that alleging a violation of the Fair Debt Collection Practices Act (“FDCPA”) is not enough to confer Article III standing.  The defendant’s attorney sent plaintiffs a debt-collection letter stating there would be no more “attempt[s] to collect any deficiency balance.”  Id. at 619.  This letter failed to disclose that it was a “communication . . . from a debt collector” in violation of the FDCPA.  Id. (quoting 15 U.S.C. § 1692e(11)).  The court determined that “[f]ar from causing . . . any injury, tangible or intangible, the . . . letter gave [plaintiffs] peace of mind.” Id. at 621.  It accordingly declined to elevate a “bare violation” of the statute to an injury sufficient for Article III standing, as “there must be some limits on Congress’s power to create injuries in fact suitable for judicial resolution.” Id. at 622-23. V.   California Court of Appeal Adopts Majority Position of Federal Courts of Appeals in Holding that the State’s Daubert Equivalent Applies at Class Certification In an important new decision, Apple Inc. v. Superior Court of San Diego County, 19 Cal. App. 5th 1101 (2018), the Court of Appeal held that Sargon Enterprises, Inc. v. University of Southern California, 55 Cal. 4th 747 (2012), which adopts a standard comparable to that by which federal courts evaluate the admissibility of expert testimony under Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), “applies to expert opinion evidence submitted in connection with a motion for class certification.”  Apple, 19 Cal. App. 5th at 1106.  The ruling aligns California law with the majority of federal courts of appeals. A proposed class of consumers sought certification of their putative class claims that a purportedly defective power button on older iPhone models decreased the phones’ value.  The plaintiffs relied on expert declarations to support their certification motion, and the trial court held that it did not need to apply the Sargon standard until evidentiary hearings later in the proceedings.  The Court of Appeal reversed, reasoning that certifying the class based on inadmissible evidence “would merely lead to its exclusion at trial, imperiling continued certification of the class and wasting the time and resources of the parties and the court.”  Apple, 19 Cal. App. 5th at 1117.  The court was careful to clarify, however, that the scope of Sargon‘s applicability at class certification was “limited . . . compared with the inquiry at trial” because the court “need not rule on the admissibility of certain expert opinion evidence” that is “irrelevant or unnecessary for [the class certification] decision.”  Id. at 1120. The ruling rested in part on the recognition that “[a]lthough some federal courts appear to have a largely semantic disagreement over whether to apply a ‘full’ or ‘focused’ Daubert analysis, the substantive result appears the same,” and these decisions show that applying the standard is both feasible and desirable.  Apple, 19 Cal. App. 5th at 1119-20.  Four circuits endorse a “full” Daubert analysis at class certification, see In re Blood Reagents Antitrust Litig., 783 F.3d 183 (3d Cir. 2015); In re Carpenter Co., No. 14-0302, 2014 WL 12809636 (6th Cir. Sept. 29, 2014); Sher v. Raytheon Co., 419 F. App’x 887 (11th Cir. 2011); American Honda Motor Co. v. Allen, 600 F.3d 813 (7th Cir. 2010), while the Eighth Circuit, and more recently, the Ninth Circuit, have adopted a more “focused” approach, see In re Zurn Pex Plumbing Prod. Liab. Litig., 644 F.3d 604 (8th Cir. 2011); Sali v. Corona Regional Medical Ctr., No. 15-56460 (9th Cir. May 3, 2018).  Although the Supreme Court has suggested that Daubert should apply to expert evidence at class certification, it has yet to squarely resolve the issue.  See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 354 (2011) (“The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. . . . We doubt that is so. . . .”) (internal citation omitted). Apple v. Superior Court joins a growing body of case law recognizing that the “corrosive effects of improper expert opinion testimony may be felt with substantial force at class certification,” so courts must scrutinize such testimony at that stage.  19 Cal. App. 5th at 1119. The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley J. Hamburger, Lauren M. Blas, Gregory Bok, Jessica Culpepper, Wesley Sze, and Josh Burk. Gibson Dunn 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) © 2018 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 20, 2018 |
Supreme Court Holds States May Hear Securities Fraud Class Actions Under The 1933 Act

Click for PDF Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439 Decided March 20, 2018 Today, the Supreme Court held 9-0 that class actions alleging only federal claims under the Securities Act of 1933 may be heard in state court and, if brought in state court, cannot be removed to federal court. Background: Federal and state courts have traditionally shared jurisdiction over claims under the Securities Act of 1933. After the Private Securities Litigation Reform Act of 1995 (PSLRA) tightened standards for pleading and proving federal securities fraud class actions, plaintiffs began filing those claims in state court. In response, Congress enacted the Securities Litigation Uniform Standards Act of 1998 (SLUSA), which requires certain “covered class actions” alleging state law securities claims to be heard and dismissed in federal court. 15 U.S.C. § 77p(c). But courts were split over whether covered class actions filed in state court that allege only claims under the 1933 Act also must be heard in federal court. In this case, investors in Cyan, Inc. filed a class action in California state court alleging only claims under the 1933 Act. The California courts refused to dismiss the case for lack of subject-matter jurisdiction. Issues: (1) Whether state courts lack subject-matter jurisdiction over class actions that allege only Securities Act of 1933 claims, and (2) Whether defendants in class actions filed in state court that allege only 1933 Act claims may remove the cases to federal court. “[W]e will not revise [Congress’s] legislative choice, by reading a conforming amendment and a definition in a most improbable way, in an effort to make the world of securities litigation more consistent or pure.” Justice Kagan,writing for the Court Court’s Holding: SLUSA does not deprive state courts of subject-matter jurisdiction over class actions raising only claims under the 1933 Act and does not authorize defendants to remove such actions to federal court. What It Means: SLUSA has often been the subject of statutory-interpretation disputes. But here, the unanimous Court held that SLUSA’s “clear statutory language” does not preclude state courts from adjudicating class actions involving 1933 Act claims. SLUSA’s class-action bar and federal-court-channeling provision apply only to state law claims. Under SLUSA, covered securities class actions based on the 1934 Act must proceed in federal court. 15 U.S.C. § 78aa. But as a result of the Court’s decision today, covered class actions based only on the 1933 Act may proceed in state court. Either way, the Court emphasized, the substantive protections of the PSLRA (such as the safe harbor for forward-looking statements) apply to all claims under both the 1933 and 1934 Acts. The United States argued that SLUSA permits defendants in class actions filed in state court that raise 1933 Act claims to remove those actions to federal court. The Court disagreed. In the wake of this ruling, businesses should expect to see more securities class actions alleging violations of the 1933 Act in state court, because plaintiffs will seek to take advantage of state courts that are perceived to be friendlier to their interests. This significant loophole may prompt Congress to enact new legislation, similar to SLUSA, to ensure that plaintiffs are required to bring securities class actions in federal court. 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 Caitlin J. Halligan +1 212.351.3909 challigan@gibsondunn.com Mark A. Perry +1 202.887.3667 mperry@gibsondunn.com Nicole A. Saharsky +1 202.887.3669 nsaharsky@gibsondunn.com Related Practice: Securities Litigation Brian M. Lutz +1 415.393.8379 blutz@gibsondunn.com Robert F. Serio +1 212.351.3917 rserio@gibsondunn.com Meryl L. Young +1 949.451.4229 myoung@gibsondunn.com Related Practice: Class Actions Theodore J. Boutrous, Jr. +1 213.229.7804 tboutrous@gibsondunn.com Christopher Chorba +1 213.229.7396 cchorba@gibsondunn.com Theane Evangelis +1 213.229.7726 tevangelis@gibsondunn.com © 2018 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 15, 2018 |
Michele Maryott and Theane Evangelis Named Litigators of the Week

The Am Law Litigation Daily named partners Michele Maryott and Theane Evangelis as its Litigators of the Week [PDF] for their trial victory on behalf of Grubhub “in a bellwether case that could have a lasting impact on how gig-economy workers are classified.”  The profile was published on February 15, 2018.  

January 30, 2018 |
Fourth Quarter 2017 Update on Class Actions

Click for PDF This update provides an overview and summary of key class action developments during the fourth quarter of 2017 (October through December), and a brief look ahead to some of the key class action issues anticipated in 2018. Part I addresses class action developments at the United States Supreme Court, including the December grant of certiorari in an important case regarding the tolling effect of putative class actions under the American Pipe rule, and a pending certiorari petition that could provide clarification of the propriety of cy pres awards in class action settlements. Part II covers rulings from the Third and Ninth Circuits that explore the limits that Article III standing imposes on consumer protection suits in the absence of a clear injury to the plaintiff, and the circuit split that now exists on this issue. Part III describes several rulings from the federal appellate courts on the issue of removal under the Class Action Fairness Act (“CAFA”). Part IV discusses noteworthy rulings from the California Court of Appeal that reaffirm the differences in class certification standards between California and federal courts, including California’s emphasis on the ascertainability of a proposed class. In 2017, our first quarter update covered notable decisions by the federal courts of appeals interpreting the Supreme Court’s rulings in Spokeo, Inc. v. Robins (standing to sue for statutory violations) and Campbell-Ewald Co. v. Gomez (whether an unaccepted offer of judgment may moot a class action), and other key decisions in the areas of class certification and class settlement.  Our second quarter update addressed the Supreme Court’s opinion in Microsoft v. Baker (rejecting plaintiffs’ attempts to manufacture appellate jurisdiction by a “voluntary dismissal” following orders denying class certification), and several other topics of interest to class action litigators, including CAFA issues.  And our third quarter update focused on arbitration-related developments, interlocutory appeals under Rule 23(f), and other noteworthy appellate rulings issued during that quarter. We will continue to issue quarterly updates on developments in the law of class actions throughout 2018. I.     Supreme Court Agrees to Decide Tolling Effect of Putative Class Actions and Weighs Certiorari on Cy Pres Relief As our second quarter 2017 update explained, the Ninth Circuit in Resh v. China Agritech, Inc., 857 F.3d 994 (9th Cir. 2017), in conflict with several other circuits, held that the tolling of a statute of limitations under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974)—which held that the timely filing of a putative class action tolls the limitations period as to the individual claims of the putative class members—applies not only to the filing of subsequent individual lawsuits but also to subsequent class action lawsuits.  On December 8, 2017, the Supreme Court granted China Agritech’s cert petition (No. 17-432) to decide whether the American Pipe rule permits a previously absent putative class member to bring a subsequent class action outside the applicable limitations period.  Whether the American Pipe rule extends to successive (or “stacked”) class actions—and thus whether the rule can be used to revive the claims of absent persons who did not themselves sue after class certification was denied in an earlier case—is of considerable practical importance to class action defendants, who face the prospect of a series of duplicative putative class actions over a potentially lengthy period of time.  The Court has set the case for oral argument on March 26, 2018.  (At the petition stage, Gibson Dunn represented the Chamber of Commerce of the United States of America and the Retail Litigation Center as amici supporting petitioner China Agritech.  At the merits stage, Gibson Dunn represented those organizations, and the American Tort Reform Association, in an amicus brief supporting the petitioner.) Additionally, the Supreme Court is also expected to decide by June 2018 whether the National Labor Relations Act precludes enforcement of class action waivers in mandatory employment arbitration agreements, which is the question presented in Epic Systems Corp. v. Lewis (No. 16-285), National Labor Relations Board v. Murphy Oil USA, Inc. (No. 16-307), and Ernst & Young LLP v. Morris (No. 16-300).  We discussed the underlying circuit split in our third quarter 2016 update, and described the October 2, 2017 oral argument in our third quarter 2017 update. In 2018, the Court could also address a significant class action question raised by the certiorari petition in Frank v. Gaos (No. 17-961) (pet. for cert., filed Jan. 3, 2018).  Specifically, the petition in Frank gives the Court the opportunity to address some of the “fundamental concerns” Chief Justice Roberts previously identified “surrounding the use of” cy pres remedies—under which courts redirect unclaimed funds to their next best use, often benefitting persons who are not identical to the aggrieved class of plaintiffs—which are “a growing feature of class action settlements.”  Marek v. Lane, 134 S. Ct. 8, 9 (2013) (Roberts, C.J., respecting denial of certiorari).  The petitioners in Frank objected to the fairness of the “cy pres-only,” no-money-for-the-class settlement approved by a divided vote in In re Google Referrer Header Privacy Litig., 869 F.3d 737 (9th Cir. 2017).  We described the Ninth Circuit’s decision sustaining that settlement in our third quarter 2017 update. Petitioners challenge the allowance of purely cy pres settlements, in which money flows to non-parties (typically, charitable institutions selected by class counsel and the defendants), whenever direct monetary payments to class members is deemed “infeasible” (in that the monetary amount would be small when divided among class members).  They contend the Ninth Circuit’s forgiving standard for such settlements conflicts with the more stringent standards of the Third, Fifth, Seventh, and Eighth Circuits disfavoring purely cy pres relief, inviting class action plaintiffs’ counsel to favor the Ninth Circuit.  Petitioners urge the Court to reject the Ninth Circuit’s approach as “a serious abuse of the class action mechanism that puts the interests of those it is intended to protect, class members, dead last.”  Respondents’ brief in opposition is currently due on March 9, 2018. II.     The Courts of Appeals Issue Significant Rulings on Article III Standing In two notable decisions this quarter, the Third and Ninth Circuits issued rulings making it more difficult for defendants to obtain the dismissal of class complaints on Article III standing grounds. Cottrell v. Alcon Labs., 874 F.3d 154 (3d Cir. 2017) In Cottrell, a split panel reversed a district court’s dismissal of a putative consumer class action lawsuit on standing grounds.  The plaintiffs were consumers of prescription eye medication who alleged that manufacturers and distributors of the medication packaged it with a dispenser that discharged the medicine in doses that were too large, forcing consumers to waste it, and thereby violating the consumer protection statutes of their home states.  Id. at 159.  The district court granted the defendants’ motion to dismiss on the grounds that the named plaintiffs lacked Article III standing, finding that the plaintiffs had not pleaded an injury in fact.  Id. at 161. Breaking with a decision of the Seventh Circuit, the Third Circuit held that, under Spokeo, Inc. v. Robbins, 136 S. Ct. 1540 (2016), the plaintiffs had sufficiently alleged an injury to confer standing to sue for unfair trade practices based on their theory that a manufacturer is obliged to optimize the number of eye drop doses in a container of fixed volume, even if there was no misrepresentation as to the number of doses in the product.  Id. at 163-65.  The court acknowledged that the Seventh Circuit had recently reached the opposite conclusion when faced with similar allegations in Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017), but concluded that the Seventh Circuit improperly “blended standing and merits together in a manner that the Supreme Court has exhaustively cautioned courts against,” and in so doing, the Seventh Circuit’s analysis “flips the standing inquiry inside out, morphing it into a test of the legal validity of the plaintiffs’ claims of unlawful conduct.”  Id. at 165-66. In a strongly-worded dissent, Judge Jane R. Roth cautioned that the Third Circuit’s opinion “erodes [constitutional] strictures by allowing the plaintiffs here to manufacture a purely speculative injury in order to invoke our jurisdiction.”  Id. at 171.  Judge Roth further warned that “the Majority … invites judges—rather than industry experts, market forces, or agency heads—to second-guess the efficacy of product design even in the most opaque of industries.”  Id. at 175-76. The Third Circuit’s decision also appears to be in tension with the Ninth Circuit’s decision in Ebner v. Fresh, Inc., 838 F.3d 958 (9th Cir. 2016), which concluded that a plaintiff could not state a valid claim for false advertising based on the quantity of lip balm in a dispenser tube, some of which may not be reasonably accessible once the consumer reaches the bottom of the tube using a screw mechanism.  The Ninth Circuit concluded that the product’s label accurately stated the amount of lip balm in the tube, and was “not false and deceptive merely because the remaining product quantity may be ‘unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons’ that may purchase the product.”  Id. at 996. Davidson v. Kimberly-Clark Corp., 873 F.3d 1103 (9th Cir. 2017) In Davidson, the Ninth Circuit revived a putative class action filed by a consumer who alleged that Kimberly-Clark’s flushable wipes are not actually flushable.  The plaintiff in Davidson asserted claims under California’s Consumers Legal Remedies Act, Unfair Competition Law, and False Advertising Law, and sought damages and injunctive relief, among other remedies.  The district court found that the plaintiff lacked standing to seek injunctive relief because she was unlikely to purchase Kimberly-Clark’s flushable wipes in the future.  Id. at 1108-09.  On the merits, the district court concluded that the plaintiff had failed to adequately allege why the representation “flushable” was false, and dismissed the complaint.  Id. at 1109.  Finally, the district court found that the plaintiff failed to allege any harm due to her use of the product.  Id. The Ninth Circuit reversed, holding that the complaint adequately alleged that the term “flushable” deviated from the dictionary definition of the term.  Id. at 1110-11.  The court further held that the plaintiff sufficiently alleged harm because she claimed she was exposed to false information about the product purchased, which caused the product to be sold at a higher price.  Id. at 1112. In reaching its decision, the Ninth Circuit noted that several district courts had reasoned that plaintiffs who are already aware of the deceptive nature of an advertisement are not likely to be misled into buying the relevant product in the future and, therefore, are not capable of being harmed again in the same way.  Id. at 1113-14.  The Ninth Circuit, however, rejected that reasoning, and instead held that “a previously deceived consumer may have standing to seek an injunction against false advertising or labeling, even though the consumer now knows or suspects that the advertising was false at the time of the original purchase, because the consumer may suffer an ‘actual and imminent, not conjectural or hypothetical’ threat of future harm.”  Id. at 1115. III.    Disputes Regarding the Removal of Class Actions Under CAFA Continue to Be Resolved y the Courts of Appeals The federal courts of appeals continue to grapple with the terms of the CAFA statute and its application to various factual scenarios, and this quarter they issued an unusually high number of decisions on these issues. Corporate Citizenship.  In Roberts v. Mars Petcare US, Inc., 874 F.3d 953 (6th Cir. 2017), the Sixth Circuit reversed the district court’s denial of a motion to remand to Tennessee state court a lawsuit by a putative class of Tennessee citizens against a Delaware corporation headquartered in Tennessee.  The court held that the phrase “a citizen of a State different from any defendant” in CAFA, 28 U.S.C. § 1332(d)(2)(A), refers to “all of a defendant’s citizenships, not the alternative that suits it.”  Roberts, 874 F.3d at 955.  The court reasoned that CAFA did not alter the general rule under the diversity jurisdiction statute that a corporation is considered a citizen of both its state of incorporation and the state of its principal place of business for diversity purposes, and that Mars Petcare was therefore not diverse from the members of the putative class.  Id. at 955-56. Discretionary Exception.  In Speed v. JMA Energy Co., 872 F.3d 1122 (10th Cir. 2017), the district court remanded a lawsuit filed by a putative class of oil well owners to Oklahoma state court.  Although the class met the elements for removal under CAFA, the district court concluded that the factors in the discretionary exception to CAFA, 28 U.S.C. § 1332(d)(3), weighed in favor of remand, because the plaintiff had sued an Oklahoma energy company under an Oklahoma statute, and more class members were from Oklahoma (48%) than from any other state.  The Tenth Circuit affirmed, rejecting the defendant’s argument that a factor in the discretionary exception analysis found to be “neutral” should count against remand.  Speed, 872 F.3d at 1128-29. “Home State” Exception.  In Brinkley v. Monterey Financial Services, Inc., 873 F.3d 1118 (9th Cir. 2017), the plaintiff filed a lawsuit in California state court alleging violations of California and Washington laws that prohibit recording of telephone conversations without notice, on behalf of a putative class of individuals who had made or received a recorded phone call with the defendant “while physically located or residing in California and Washington.”  The defendant removed, and during jurisdictional discovery produced a list of more than 152,000 persons whose calls had been recorded and who had a California or Washington address, and the plaintiff filed an expert report analyzing a random sample of the list.  Id. at 1120.  The district court granted the plaintiff’s motion to remand under the “home state” exception to CAFA, 28 U.S.C. § 1332(d)(4)(B), finding that at least two-thirds of the members of the putative class were California citizens based on the expert’s statistical evidence.  Id.  The plaintiff, however, had produced evidence only regarding individuals “residing in” California, and had failed to present evidence regarding either the size of the entire class or the composition of the “located in” California subgroup of the class.  Id. at 1122.  The Ninth Circuit therefore vacated the district court’s decision, holding that the plaintiff’s attempt to remand the case “based on evidence of only some class members’ citizenship” was improper.  Id. CAFA and Mass Actions.  In Liberty Mutual Fire Insurance Co. v. EZ-FLO International, Inc., 877 F.3d 1081 (9th Cir. 2017), the Ninth Circuit affirmed remand of lawsuit that the defendant had removed as a “mass action” under 28 U.S.C. § 1332(d)(11)(B)(i).  The case was brought by 26 insurance companies in their capacity as subrogees of 145 insured homeowners with leaking pipes.  Id.  at 1083.  The court applied the Supreme Court’s holding in Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014), that the “persons” in the phrase “100 or more persons” in the CAFA definition of “mass action” refers to named plaintiffs, and therefore concluded that the 145 insureds, although real parties in interest in the case, did not count toward the CAFA numerosity requirement because they were not the parties who had actually brought the lawsuit, filed or served papers, or had any right to control the lawsuit, and thus could not be counted as “plaintiffs.”  EZ-FLO, 877 F.3d at 1084-85. Notice of Class Settlements to State Officials.  In In re Flonase Antitrust Litigation, 879 F.3d 61 (3d Cir. 2017), the Third Circuit affirmed the district court’s denial of a motion by GlaxoSmithKline to enforce a class settlement against the State of Louisiana through an injunction to prevent the state from pursuing its claims against the manufacturer in a separate lawsuit.  Louisiana, an indirect purchaser of Flonase and a potential member of the class, had not received class notice, but had received notice of the litigation pursuant to the CAFA provision that requires the complaint be sent to each state in which a class member resides, 28 U.S.C. § 1715(b).  Id. at 63-64.  The court held that the class settlement could not be enforced against Louisiana through an injunction because the state had not waived its sovereign immunity and its receipt of the statutory notice under CAFA did not constitute a clear declaration of its consent to be sued.  Id. at 68-69. As these cases indicate, parties removing cases under CAFA should pay close attention to the text of the statute when determining whether the removal requirements apply, and should stay advised of the latest developments in the courts of appeals as they continue to interpret various provisions of the statute. IV.    Notable California Appellate Decisions on Class Certification Standards The California Court of Appeal issued two notable class actions decisions last quarter that reaffirmed the differences between California and federal class certification standards, and emphasized the state’s heightened rule for establishing ascertainability. Hefczyc v. Rady Children’s Hospital-San Diego, 17 Cal. App. 5th 518 (2017) (pet. for review filed Dec. 27, 2017) In Hefczyc, the plaintiff filed a putative class action against a hospital seeking only declaratory relief regarding certain contractual terms between a class of the hospital’s patients (or their guarantors) and the hospital.  Id. at 522.  The plaintiff moved for class certification under California Code of Civil Procedure section 382 and asserted that this provision of law was the state law equivalent of Federal Rule of Civil Procedure 23(b)(1) and (b)(2), the elements of which are less onerous for declaratory or injunctive relief actions than for damages actions.  Id. at 525-26.  The trial court rejected the plaintiff’s argument and denied class certification, finding that the plaintiff’s motion was insufficient because he failed to establish ascertainability, predominance, and superiority as required by section 382.  Id. at 526. The California Court of Appeal affirmed, holding that section 382 does not have an equivalent to Federal Rule of Civil Procedure 23(b)(1) or (b)(2), and as a result, California’s procedural requirements apply to declaratory relief, injunctive relief, and damages actions alike.  The court explained: [T]here is no gap in California precedent to be filled by reference to Federal Rules of Civil Procedure, rule 23(b)(1)(A) or (b)(2) (28 U.S.C.) on the issue of what class certification standards must be met when a plaintiff seeks only declaratory or injunctive relief on behalf of a class.  Even when the plaintiff seeks solely declaratory or injunctive relief, California case law follows the well-established requirements that our Supreme Court has consistently stated, namely, (as relevant here) that the plaintiff must establish that (1) the class is ascertainable; (2) common questions predominate; and (3) a class action would provide substantial benefits, making it superior to other procedures for resolving the controversy. Id. at 535-36. Noel v. Thrifty Payless, Inc., 17 Cal. App. 5th 1315 (2017) (pet. for review filed Jan. 24, 2018) In Noel, the plaintiff filed suit under the California Consumers Legal Remedies Act, Unfair Competition Law, and False Advertising Law after purchasing an inflatable swimming pool that was smaller than it appeared in a photo on the box.  Id. at 1320-21.  The trial court denied the plaintiff’s motion to certify a proposed class of more than 20,000 customers, concluding that the proposed class was not ascertainable, and further found that the plaintiff had not presented any evidence to establish a method for identifying class members, including what records were available or what those records would show.  Id. at 1323. The Court of Appeal affirmed the denial of class certification, criticizing “class counsel’s premature filing of the motion without first conducting sufficient discovery to meet its burden of demonstrating there are means of identifying members of the putative class so that they might be notified of the pendency of the litigation.”  Id. at 1321.  Doing so, the court reasoned, “jeopardizes the due process rights of absent class members.”  Id. The court also concluded that the trial court did not abuse its discretion by denying the plaintiff a continuance to conduct additional discovery, noting that “no one forced [plaintiff’s counsel] to file a premature class certification motion.”  Id. at 1337.  Although the plaintiff had obtained new counsel between the filing of the motion and the hearing, the court noted that new counsel could have withdrawn the motion and conducted additional discovery or requested a continuance if he had concluded the motion was premature.  Id. at 1338. The Noel decision’s strict enforcement of California Code of Civil Procedure section 382’s ascertainability requirement is a positive development for defendants in class action suits, but conflicts with another California Court of Appeal decision, Aguirre v. Amscan Holdings, Inc., 234 Cal. App. 4th 1290 (2015), which held that a plaintiff could wait until the remedial stage to offer a member identification plan. The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn Scolnick, Bradley J. Hamburger, Indraneel Sur, Jennafer M. Tryck, Samuel D. Eisenberg and Laura A. Sucheski. Gibson Dunn 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 (213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba – Co-Chair, Class Actions Practice Group – Los Angeles (213-229-7396, cchorba@gibsondunn.com) Theane Evangelis – Co-Chair, Class Actions Practice Group – Los Angeles (213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick – Los Angeles (213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger – Los Angeles (213-229-7658, bhamburger@gibsondunn.com) © 2018 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 7, 2017 |
Third Quarter 2017 Update on Class Actions

This update provides an overview of key class action developments during the third quarter of 2017 (July through September): Part I reports on important decisions from the Seventh Circuit and Ninth Circuit regarding class action settlements of weak claims. Part II addresses significant rulings assessing whether putative class plaintiffs have Article III standing under the Supreme Court’s decision in Spokeo, Inc. v. Robins, including the Ninth Circuit’s decision on remand in that case. Part III reports on recent arbitration-related developments, including a major decision in favor of Uber from the Second Circuit. Finally, Part IV discusses two decisions, one from the D.C. Circuit and the other from the Ninth Circuit, addressing interlocutory appeals of class certification orders under Federal Rule of Civil Procedure 23(f). I.   Appellate Courts Are Spotting Weak Lawsuits at the Class Settlement Stage Several of our prior updates (including our 2013 and 2014 year-end updates) have focused on the heightened scrutiny that courts have applied to class settlements in recent years.  Sometimes, that scrutiny goes beyond finding an element of unfairness in the settlement—it can also reveal that the underlying lawsuit never should have made it out of the starting gate. For instance, our third quarter 2016 update covered the Seventh Circuit’s decision in In re Walgreen Co. Stockholder Litigation, 832 F.3d 718 (7th Cir. 2016), in which the court vacated the approval of a disclosure-only settlement of a class action challenging a merger.  Judge Posner’s opinion concluded with a strong warning to the class plaintiffs’ bar:  “the class action that yields fees for class counsel and nothing for the class . . . is no better than a racket.  It must end.  No class action settlement that yields zero benefits for the class should be approved, and a class action that seeks only worthless benefits for the class should be dismissed out of hand.”  Id. at 721, 723–24. This past quarter, the Seventh Circuit and Ninth Circuit addressed the propriety of class settlements in cases of questionable merit.  Although the outcomes differed (the Seventh Circuit vacated a settlement while the Ninth Circuit affirmed settlement approval), the dubiousness of the underlying claims factored heavily in the analyses in both cases. A.   The Seventh Circuit Rejects Settlement of Subway “Footlong” Class Action The plaintiff in In re Subway Footlong Sandwich Marketing & Sales Practices Litigation, 869 F.3d 551 (7th Cir. 2017), “purchased a Subway Footlong sandwich and, for reasons unknown, decided to measure it.”  Id. at 553.  When the sandwich came in at only 11 inches, he took a photo and posted it on Facebook, and “a minor social-media sensation was born.”  Id.  Within days, “the American class-action bar rushed to court,” but “[i]n their haste to file suit,” these “lawyers neglected to consider whether the claims had any merit.”  Id.  According to the Seventh Circuit, “They did not.”  Id. As the court described it, even if a few sandwiches fall short due to “natural—and unpreventable—vagaries in the baking process,” no class member is actually getting any less bread, because “all of Subway’s raw dough sticks weigh exactly the same, so the rare sandwich roll that fails to bake to a full 12 inches actually contains no less bread than any other.”  Id. at 554.  Under the circumstances, there was no hope of certifying a damages class under Rule 23(b)(3), because individual hearings would be needed to determine whether a class member’s sandwich actually was under 12 inches, and “most people consumed their sandwiches without first measuring them.”  Id.  Moreover, the Seventh Circuit noted that “[p]roof of injury was nigh impossible because no customer whose sandwich roll actually failed to measure up received any less food because of the shortfall.”  Id. Nonetheless, “[r]ather than drop the suit as meritless,” class counsel focused on certifying an injunction class under Rule 23(b)(2).  Id.  The district court eventually approved a class settlement in which Subway agreed to injunctive relief designed to ensure, to the extent practicable, that sandwiches would be at least 12 inches long.  Class plaintiffs would get $500 incentive awards, and class counsel would receive $525,000 in fees.  Id. at 554–55. Relying heavily on its decision in Walgreens, the Seventh Circuit found the Subway settlement to be “utterly worthless,” and vacated it.  Id. at 557.  As the court explained, “before the settlement there was a small chance that Subway would sell the class member a sandwich that was slightly shorter than advertised, but that sandwich would provide no less food than any other,” and even “[a]fter the settlement—despite the new measuring tools, protocols, and inspections—there’s still the same small chance.”  Id. at 556–57.  The parties pointed out that a class member could seek contempt to enforce the injunction, but the Seventh Circuit was unmoved:  “Contempt as a remedy to enforce a worthless settlement is itself worthless.  Zero plus zero equals zero.”  Id. at 557. Therefore, as in Walgreens, the Seventh Circuit emphasized that the lawsuit itself—not just the settlement—was baseless, and should have been “‘dismissed out of hand.'”  Id. (quoting Walgreens, 832 F.3d at 724). B.   The Ninth Circuit Approves Cy Pres-Only Settlement of “Shaky” Claims Against Google This past quarter, the Ninth Circuit also addressed the settlement of a class action that rested on flimsy merits grounds, but instead of rejecting the settlement and ordering the case dismissed—as the Seventh Circuit did in Subway—the Ninth Circuit took a different course.  It approved the settlement, even though it provided no direct benefit to any of the 129-million class members, in part because of the “shakiness of the plaintiffs’ claims.”  In re Google Referrer Header Privacy Litig., 869 F.3d 737, 742 (9th Cir. 2017). The plaintiffs in this case claimed that Google violated users’ privacy when it disclosed their search terms to third-party websites.  This occurs as a “consequence of the browser architecture”:  a user’s search terms generate a unique URL, which by default is then reported to third parties as the last webpage viewed before clicking through to a third-party website.  Id. at 740. The parties reached a classwide settlement, which provided for additional disclosures on how search terms are shared with third parties—and an $8.5 million settlement fund, of which $3.2 million was set aside for attorneys’ fees and costs, with the remainder going to six cy pres recipients, and no direct compensation to the class.  Id. The Ninth Circuit affirmed the “cy pres-only settlement,” even though such settlements are the “exception, not the rule,” in part because of the “shakiness of the plaintiffs’ claims.”  Id. at 741–42.  Cy pres-only settlements may be appropriate, the court explained, where each class members’ individual recovery would have been de minimis, making direct monetary payments “infeasible.”  Id. at 743.  The court rejected the suggestion that class members could have been compensated through a “random lottery distribution,” or by offering “$5 to $10 per claimant on the assumption that few class members will make claims.”  Id. at 742 (quotation marks omitted).  The court also explained that its review of orders approving class action settlements is not focused on whether “there may be ‘possible’ alternatives” but instead on “whether the district court discharged its obligation to assure that the settlement is ‘fair, adequate, and free from collusion.'”  Id. (quotation marks and citation omitted). The Ninth Circuit also rejected objections based on the preexisting relationships between counsel for Google, on the one hand, and the cy pres recipients, on the other.  “Given that, over time, major players such as Google may be involved in more than one cy pres settlement, it is not an abuse of discretion for a court to bless a strong nexus between the cy pres recipient and the interests of the class over a desire to diversify the pick via novel beneficiaries that are less relevant or less qualified.”  Id. at 746.  Judge Wallace, however, in his dissenting opinion criticized that conclusion, stating that “the fact alone that 47% of the settlement fund is being donated to the alma maters of class counsel raises an issue which, in fairness, the district court should have pursued further.”  Id. at 748 (Wallace, J., dissenting). II.   The Spokeo Fallout Continues:  The Ninth Circuit’s Decision on Remand and Other Notable Article III Standing Opinions from the Courts of Appeals As we observed in the first and second quarters of this year, the federal courts of appeals have struggled to consistently apply the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), which clarified that Article III requires plaintiffs to establish a “concrete injury even in the context of a statutory violation.”  Id. at 1549.  That trend continued into the third quarter, with courts reaching divergent conclusions on this important issue. Most significantly, the Ninth Circuit in August 2017 decided Spokeo on remand and applied the Supreme Court’s guidance.  The court held that the plaintiff had standing to pursue his putative class claim based on a procedural violation of the federal Fair Credit Reporting Act (“FCRA”), despite the fact that the alleged harm to him was based on disclosure of information that was better than the true facts and was arguably not harmful.  Robins v. Spokeo, Inc., 867 F.3d 1108, 1118 (9th Cir. 2017).  Before the Supreme Court took the case, the Ninth Circuit had held that the plaintiff’s allegation of a violation of FCRA was sufficient to satisfy Article III, but the Supreme Court vacated that decision because the Ninth Circuit did not consider whether the harm resulting from the particular procedural violations alleged was sufficiently concrete.  Spokeo, 136 S. Ct. at 1550.  The Supreme Court acknowledged that “intangible” injuries—like the procedural violations of the FCRA at issue in Spokeo—may be sufficiently concrete when the violation has caused “real,” as opposed to “abstract” or purely legal harm to the plaintiff.  Id. at 1548–49.  The Supreme Court thus remanded to the Ninth Circuit for it to assess whether this test was met in Spokeo.  Id. at 1550. On remand, the Ninth Circuit again concluded that the plaintiff had alleged an injury in fact sufficient to satisfy Article III.  The court emphasized that Congress enacted the FCRA provisions at issue to protect concrete interests in avoiding the harm associated with the transmission of inaccurate information in consumer reports.  Spokeo, 867 F.3d at 1114.  The court also noted that the “interests that [the] FCRA protects also resemble other reputational and privacy interests that have long been protected in the law.”  Id.  And the court ultimately concluded that the alleged procedural violation asserted by the plaintiff “raise[d] a real risk of harm to the concrete interests that [the] FCRA protects,” because the specific inaccuracies complained of—among other things, regarding plaintiff’s “age, marital status, educational background, and employment history”—were of the “type that may be important to employers or others making use of a consumer report.”  Id. at 1116–17.  The Ninth Circuit, however, clarified that not just “any FCRA violation premised on some inaccurate disclosure of . . . information is sufficient” to show concrete injury, and noted that “in many instances, a plaintiff will not be able to show a concrete injury simply by alleging that a consumer-reporting agency failed to comply with one of [the] FCRA’s procedures.”  Id. at 1115–16. While it is too early to gauge the impact of the Ninth Circuit’s decision on remand in Spokeo, the court adopted an expansive approach to assessing whether allegations of harm are sufficient to transform a statutory violation into a concrete injury. In addition to the Ninth Circuit, several other courts of appeals this past quarter adopted a similarly permissive approach to assessing injury under Spokeo: In Susinno v. Work Out World Inc., 862 F.3d 346 (3d Cir. 2017), the Third Circuit concluded that a plaintiff demonstrated a concrete injury when she received a prerecorded voicemail that lasted one minute, allegedly in violation of the Telephone Consumer Protection Act.  Id. at 352.  And in Taha v. County of Bucks, 862 F.3d 292 (3d Cir. 2017), the Third Circuit held that a plaintiff had standing to pursue recovery for intangible injury to his emotional well-being when a corrections facility improperly published his name, photo, and crime on a public database—even though he did not establish any entitlement to compensatory damages.  Id. at 302. In Pedro v. Equifax, Inc., 868 F.3d 1275 (11th Cir. 2017), the Eleventh Circuit held that a plaintiff suffered a concrete injury under the FCRA where a credit reporting agency failed to promptly remove her parents’ defaulted bank account from her credit report, causing her credit score to drop more than 100 points temporarily.  Id. at 1280.  The court reasoned that this injury was concrete because “the harm caused by the alleged violation of the Act—the reporting of inaccurate information about [plaintiff]’s credit to a credit monitoring service—has a close relationship to the harm caused by the publication of defamatory information,” as the plaintiff “‘lost time'” attempting to resolve the inaccuracy, and because the plaintiff’s score dropped 100 points.  Id. at 1279–80. In Attias v. CareFirst, Inc., 865 F.3d 620 (D.C. Cir. 2017), the D.C. Circuit concluded that the plaintiffs had satisfied Spokeo by plausibly alleging a “substantial risk” of future injury as a result of the identify theft, which “cleared the low bar” to establish “standing at the pleading stage.”  Id. at 622, 629. At the same time, other courts of appeals this past quarter held plaintiffs to a higher standard in light of the Supreme Court’s decision in Spokeo: In Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017), the Seventh Circuit affirmed dismissal of a complaint asserting violations of the FCRA based on allegations that prospective employers improperly included extraneous information in disclosures required when procuring a consumer credit report for employment purposes.  Id. at 889.  The court reasoned that the asserted statutory violation was “completely removed from any concrete harm or appreciable risk of harm” because the plaintiff did not plausibly allege that the extraneous disclosure confused him, induced him to sign a document he would not have otherwise signed, or caused him any other harm.  Id. at 887. In Katz v. Donna Karan Co., 872 F.3d 114 (2d Cir. 2017), the Second Circuit affirmed dismissal on standing grounds of an action based on the defendant’s inclusion of the first six digits of consumers’ credit card numbers on receipts, which was only a bare procedural violation of the Fair and Accurate Credit Transactions Act, and was insufficient, without more, to satisfy Article III.  Id. at 116. In light of these conflicting interpretations of Spokeo, we will continue to closely monitor this important issue in future quarters. III.   Arbitration Agreements Continue to Play an Important Role in Class Action Litigation  Two notable arbitration-related decisions were issued by the federal courts of appeals this past quarter, with the Second Circuit addressing the acceptance of arbitration agreements via a smartphone app, and the Eight Circuit holding that courts must decide whether an arbitration agreement permits class arbitration.  In addition, the Supreme Court is anticipated to rule in the coming months on the enforceability of class action waivers in employment arbitration agreements, and its ruling may have profound implications for employment class actions throughout the country. A.   The Second Circuit Approves Enforceability of an Arbitration Agreement Entered into Via a Smartphone App This quarter, Gibson Dunn secured an important victory for Uber before the Second Circuit on the enforceability of arbitration agreements entered into via smartphone apps. In Meyer v. Uber Technologies, Inc., 868 F.3d 66 (2d Cir. 2017), the Second Circuit held that a user’s registration through a smartphone app constituted valid assent to an arbitration provision contained in the company’s terms of service.  Id. at 80.  Applying California state contract law, the court explained that the arbitration agreement was enforceable as long as “a reasonably prudent user would be on inquiry notice” of the terms, which, in turn, would depend on the “clarity and conspicuousness” of the hyperlink to the arbitration terms.  Id. at 75 (quotation marks omitted).  The court then analyzed the specific interface of the app at issue (helpfully included as an attachment to the court’s opinion, see id. at 82), and held that the notice was reasonable based on the spatial and temporal proximity of the hyperlink to the registration button was sufficient to put the user on inquiry notice.  Id. at 79–80.  The court therefore concluded that “[a] reasonable user would know that by clicking the registration button, he was agreeing to the terms and conditions accessible via the hyperlink, whether he clicked on the hyperlink or not.”  Id. The Second Circuit’s commonsense decision in Meyer represents an important win for technology companies and other defendants that regularly rely on arbitration agreements accepted by consumers via websites or smartphone applications.  Although courts have at times disfavored these so-called “clickwrap” or “browsewrap” agreements, the Second Circuit’s decision in Meyer suggests that there is growing judicial recognition of the realities of modern commerce.  Meyer thus provides helpful guidance for companies seeking to develop best practices for implementing valid and enforceable arbitration agreements into their consumer-facing products and software. B.   Eighth Circuit Holds That Courts Must Decide the Threshold Question of Class Arbitrability In Catamaran Corp. v. Towncrest Pharmacy, 864 F.3d 966 (8th Cir. 2017), the Eighth Circuit joined a majority of courts of appeals to hold that in the absence of express language to the contrary, courts—and not arbitrators—must decide whether an arbitration agreement authorizes class arbitration.  Id. at 969.  The court began by noting the fundamental differences in the benefits, efficiencies, and constitutional considerations between bilateral and class arbitration, and held that “the question of class arbitration is substantive in nature, and hence one for the court to decide absent clear and unmistakable language to the contrary.”  Id. at 971.  Next, turning to the specific arbitration agreements at issue, the court reasoned that the agreements were completely silent on the issue of class arbitration, and that the agreements’ reference to the Arbitration Association of America rules (which delegate the threshold question of class arbitrability to the arbitrator) did not constitute “clear and unmistakable evidence of an agreement to arbitrate the particular question of class arbitration.”  Id. at 973.  Thus, the court remanded the case to the district court to determine whether there was a contractual basis for class arbitration between the parties.  Id. at 973–74. Importantly, Catamaran does not altogether foreclose the possibility that parties may delegate the issue of class arbitrability to an arbitrator.  The decision, however, creates a strong presumption that in light of the substantive nature of class arbitration, the question will normally be reserved for the courts unless an arbitration agreement evinces a “clear” and “unmistakable” intent to the contrary.  Companies are well advised to keep this standard in mind when drafting arbitration agreements that are intended to include a waiver of class arbitration. C.   The Supreme Court Is Set to Rule on the Enforceability of Class Action Waivers in Employment Arbitration Agreements Looking ahead to the coming months, the Supreme Court is expected to issue an opinion in a trio of closely watched cases concerning the enforceability of class arbitration waivers in Epic Systems Corp. v. Lewis (No. 16-285), National Labor Relations Board v. Murphy Oil USA, Inc. (No. 16-307), and Ernst & Young LLP v. Morris (No. 16-300).  As we discussed in our 2016 Year-End Update on Class Actions, these cases pose the issue of whether the National Labor Relations Act precludes enforcement of class action waivers in mandatory employment arbitration agreements. The Supreme Court held oral argument in these cases on October 2, 2017.  During oral argument, the Court appeared to be divided, with Justices Breyer, Ginsburg, Kagan, and Sotomayor expressing support for collective actions in the workplace, and Chief Justice Roberts and Justices Alito and Kennedy suggesting they would be inclined to rule in favor of the employers.  The Court’s forthcoming decision is set to be its most important ruling on arbitration in years. IV.   The D.C. Circuit and the Ninth Circuit Provide Guidance for Litigants Seeking to Pursue Immediate Appeals of Class Certification Orders Under Rule 23(f) Earlier this year in Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), the Supreme Court emphasized the importance of “Rule 23(f)’s discretionary regime” for permitting interlocutory appeals of class certification orders.  (See our coverage of Baker in last quarter’s update.)  In this past quarter, the federal courts of appeals issued two published decisions interpreting Rule 23(f), with the D.C. Circuit reaffirming the limited circumstance in which it will authorize an interlocutory appeal of a class certification ruling, and the Ninth Circuit adopting a liberal rule for assessing the timeliness of Rule 23(f) petitions.  These decisions represent important additions to the relatively small body of precedent construing Rule 23(f). A.   The D.C. Circuit Addresses When Rule 23(f) Appeals Are Warranted In re Brewer, 863 F.3d 861 (D.C. Cir. 2017), denied a petition for permission to appeal an order denying class certification after concluding that none of the “limited circumstances” required for Rule 23(f) review was present.  Id. at 874.  The plaintiff, a former deputy U.S. Marshall alleging racial discrimination, moved to certify a class predominantly seeking injunctive relief, but the district court denied the motion on the ground that the plaintiff, who recently retired, could not adequately represent the class given the nature of the relief sought.  Id. at 866.  The plaintiff then filed a Rule 23(f) petition seeking review of the district court’s order. In denying the petition, the D.C. Circuit reiterated that interlocutory review under Rule 23(f) is “an exception” that “ordinarily is appropriate only in [three] limited circumstances: (1) when there is a death-knell situation for either the plaintiff or defendant that is independent of the merits of the underlying claims, coupled with a class certification decision by the district court that is questionable, taking into account the district court’s discretion over class certification; (2) when the certification decision presents an unsettled and fundamental issue of law relating to class actions, important both to the specific litigation and generally, that is likely to evade end-of-the-case review; and (3) when the district court’s class certification decision is manifestly erroneous.”  Id. at 874. The court concluded that none of the three circumstances was present in Brewer.  No death-knell situation existed because intervenors had since joined the case to further pursue the litigation.  Id.  The court also did not believe that the Rule 23(f) petition presented an unsettled and fundamental issue of class action law given the fact-specific nature of the district court’s ruling.  Id. at 874–75.  And, after noting that the D.C. Circuit “has never held a district court’s class certification decision manifestly erroneous” and that the “manifest error standard is extremely difficult to meet,” the court concluded that nothing about the ruling was manifestly erroneous.  Id. at 875–76. B.   The Ninth Circuit Addresses Tolling of Deadline for Filing a Rule 23(f) Petition In Lambert v. Nutraceutical Corp., 870 F.3d 1170 (9th Cir. 2017), the Ninth Circuit granted a Rule 23(f) petition and held—in a case of first impression for the court—that the 14-day deadline for filing Rule 23(f) petitions is non-jurisdictional and therefore eligible for equitable tolling.  Id. at 1176–77. Lambert involved a putative class of consumers who purchased a supplement product that allegedly was marketed in violation of FDA rules and was improperly labeled.  Id. at 1174.  Ten days after the district court granted a motion to decertify the class, the plaintiff informed the court of his intention to move for reconsideration of that order.  The district court ordered briefing on that motion to be filed 10 days later (and thus 20 days from the order decertifying the class).  Id. at 1175.  The district court then took three months to resolve the motion, ultimately denying it.  Id.  The plaintiff then filed a Rule 23(f) petition 14 days after the denial of the motion for reconsideration.  Id. The Ninth Circuit, agreeing with the decisions of other courts of appeals, held that Rule 23(f)’s 14-day deadline is not jurisdictional and could be equitably tolled.  Id. at 1177.  The Ninth Circuit further held that the plaintiff’s filing of the motion for reconsideration after the 14-day period established under Rule 23(f) had lapsed and did not render his subsequent petition untimely because, according to the court, all that was necessary was for the petitioner to notify the district court within 14 days of a well-founded intention to seek reconsideration (which is what the plaintiff here did).  Id. at 1179.  The Ninth Circuit thus concluded that the plaintiff’s filing of the motion for reconsideration tolled the deadline for seeking review under Rule 23(f).  Id. The Ninth Circuit’s decision in Lambert represents a very forgiving interpretation of the deadline for filing a Rule 23(f) petition.  But as the Ninth Circuit itself acknowledged, “other circuits would likely not toll the Rule 23(f) deadline” under similar circumstances, and specifically noted arguably conflicting decisions from the Third, Tenth, and Eleventh Circuits.  Id. at 1179–80.  Thus, outside of the Ninth Circuit, reliance on the tolling rule established in Lambert may be risky.  The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn A. Scolnick, Bradley J. Hamburger, Joseph P. Vardner, Laura A. Sucheski, and Wesley Sze. Gibson Dunn 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 (213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba – Co-Chair, Class Actions Practice Group – Los Angeles (213-229-7396, cchorba@gibsondunn.com) Theane Evangelis – Co-Chair, Class Actions Practice Group – Los Angeles (213-229-7726, tevangelis@gibsondunn.com) Kahn A. Scolnick – Los Angeles (213-229-7656, kscolnick@gibsondunn.com) Bradley J. Hamburger – Los Angeles (213-229-7658, bhamburger@gibsondunn.com) © 2017 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 1, 2017 |
Second Quarter 2017 Update on Class Actions

This update provides an overview of key class action developments during the second quarter of 2017 (April through June): Part I explores a significant decision from the Supreme Court concerning defeating novel attempts by plaintiffs to obtain appellate review of denials of class certification.  Part II addresses rulings from the Supreme Court and Ninth Circuit regarding the breadth of the American Pipe tolling doctrine for statutes of limitations in class actions.  Part III analyzes recent decisions interpreting and applying the Supreme Court’s Article III standing decision in Spokeo, Inc. v. Robins.  Part IV discusses noteworthy rulings interpreting the Class Action Fairness Act of 2005 (CAFA).  Finally, Part V reviews decisions from the Supreme Court, the Sixth Circuit, and the California Supreme Court concerning the enforceability of arbitration agreements. I.   The Supreme Court Rejects Attempt to Manufacture Appellate Jurisdiction Through a Plaintiff’s "Voluntarily Dismissal" After the Denial of Class Certification In Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), the Supreme Court held that the federal courts of appeals lack jurisdiction under 28 U.S.C. § 1291 to review orders denying class certification (and orders striking class action allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice.  This is an important victory for class-action defendants, and the Supreme Court’s guidance in Baker will have a continuing impact on petitions for permission to appeal class certification decisions under Rule 23(f). The plaintiffs in Baker alleged that Microsoft’s Xbox 360 videogame console was "defective" because it caused scratches to game discs.  The district court struck the plaintiffs’ class allegations from the complaint, and the Ninth Circuit denied their petition for permission to appeal that ruling under Rule 23(f).  Then, rather than pursue their individual claims to final judgment, the plaintiffs stipulated to a voluntary dismissal with prejudice in an attempt to create a "final decision" that they could appeal.  But at the same time, the plaintiffs purported to reserve the right to revive their claims should the Ninth Circuit reinstate their class allegations.  The plaintiffs then appealed, challenging only the interlocutory order striking their class allegations.  Although the Ninth Circuit had denied the Rule 23(f) petition, the court held that it had jurisdiction to entertain the appeal under Section 1291, and it reversed the district court’s class-certification ruling based on a prior Ninth Circuit ruling involving a different defendant but similar Rule 23 predominance issues. After accepting the petition for a writ of certiorari, the Supreme Court reversed.  Writing for the majority, Justice Ginsburg explained that, under Section 1291, federal courts of appeals are empowered to review only "final decisions of the district courts."  The Court offered three primary reasons why Plaintiffs’ voluntary dismissal was not a "final decision" for purposes of Section 1291: First, "finality is to be given a practical rather than a technical construction," and treating plaintiffs’ voluntary dismissal as a final decision would "invite[] protracted litigation and piecemeal appeals."  137 S. Ct. at 1713 (quotation marks omitted).  The plaintiffs’ tactic would permit them to take an appeal each and every time a district court denied a class certification motion on a new ground or decertified the class, "stopping and starting the district court proceedings with repeated interlocutory appeals."  Id.  Such a scenario would undermine the "proper balance between trial and appellate courts," lead to "harassment and delay," and frustrate "the efficient administration of justice."  Id. at 1712. Second, the voluntary-dismissal "tactic undercuts Rule 23(f)’s discretionary regime."  Id. at 1714.  The Court explained that "[t]his consideration is of prime significance to the jurisdictional issue in this case" because Congress has established rulemaking as the means for determining when a decision is final for purposes of Section 1291, as well as for providing for appellate review of interlocutory orders.  Id. (quotation marks omitted).  The Court emphasized the "unfettered discretion" that the courts of appeals already wield in considering Rule 23(f) petitions for review, which permits review to be granted or denied "on the basis of any consideration."  Id. at 1709–10. Third, the Court noted the one-sidedness of the voluntary-dismissal tactic—it permitted only plaintiffs, never defendants, to force an immediate appeal.  Yet the "class issue" may be just as important to defendants because "[a]n order granting certification . . . may force a defendant to settle rather than . . . run the risk of potentially ruinous liability."  Id. at 1715 (quotation marks omitted).  Justice Thomas, joined by Chief Justice Roberts and Justice Alito (Justice Gorsuch took no part in the decision), concurred in the judgment but not the Court’s reasoning.  Unlike the majority, the concurring Justices believed that the plaintiffs’ voluntary dismissal was a "final decision" under Section 1291 because it "’end[ed] the litigation on the merits and le[ft] nothing for the court to do but execute the judgment.’"  Id. at 1716 (Thomas, J., concurring).  Nevertheless, the concurring Justices would have found no appellate jurisdiction under Article III.  Justice Thomas explained that Article III "limits the jurisdiction of the federal courts to issues presented in an adversary context," and "in which the parties maintain an actual and concrete interest."  Id. at 1717 (internal quotation marks omitted).  The plaintiffs "did not satisfy this jurisdictional requirement," according to the concurrence, because "they consented to the judgment against them and disavowed any right to relief from Microsoft."  Id.  "The parties thus were no longer adverse to each other on any claims," and therefore the Ninth Circuit lacked Article III jurisdiction to hear the appeal.  Id.  Baker eliminates this one-way avenue that would have allowed plaintiffs (but not defendants) to appeal adverse class certification rulings. II.   The Supreme Court and the Ninth Circuit Issue Important Decisions Concerning the Breadth of American Pipe Tolling The second quarter of 2017 saw two important decisions regarding the application of the statute of limitations to putative class actions under American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974).  In CalPERS v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017), the Supreme Court resolved a longstanding circuit split and held that the filing of a putative class action does not toll the statute of repose in the Securities Act of 1933.  Section 11 of the 1933 Act provides a private right of action for misstatements and omissions in registration statements and certain other filings.  Section 13 of the Act includes a two-part provision governing the deadline for bringing such suits: they must be filed "within one year after the discovery of the untrue statement or omission," but "[i]n no event . . . more than three years after the security was bona fide offered to the public." In CalPERS, a putative class action was filed within both the one-year and three-year limits, but the individual plaintiff opted out and filed suit more than three years after the securities were issued.  The plaintiff argued that its claim was timely under American Pipe, which held that the filing of a putative class action generally tolls the statute of limitations applicable to the claims of would-be class members until class certification is decided.  The district court, however, dismissed the complaint as untimely and the Second Circuit affirmed, holding that because Section 13’s outside limit is a statute of repose—and not a statute of limitations—it is not subject to equitable tolling under American Pipe. The Supreme Court affirmed, confirming that the three-year deadline in Section 13 of the Securities Act is a statute of repose and not subject to equitable tolling.  137 S. Ct. at 2052.  Writing for a 5-4 majority, Justice Kennedy explained the difference between statutes of limitations and statutes of repose:  The former run from accrual, or "when the plaintiff can file suit and obtain relief," while the latter run from "the date of the last culpable act or omission."  Id. at 2049 (quotations omitted).  Notably, "statutes of repose are not subject to equitable tolling" because they implement an "unqualified" legislative decision to set a "specific time beyond which a defendant should no longer be subjected to protracted liability."  Id. at 2051 (quotation omitted).  Statutes of limitation, in contrast, can be equitably tolled. After examining the history and structure of the Securities Act’s timely filing provision, the Court determined that the one-year limit is a statute of limitations, while the three-year limit is a statute of repose.  Id. at 2049–50.  Congress commonly employs both approaches in a statute, "giv[ing] leeway to a plaintiff who has not yet learned of a violation," while "protect[ing] the defendant from an interminable threat of liability."  Id.  The three-year limit in the Securities Act, the Court explained, is the outer bound of private liability. The Court then explained that American Pipe tolling is "rooted in" courts’ "equitable powers," and therefore cannot override a Congressional determination to impose an absolute outer limit on liability.  Id. at 2052.  To the contrary, "the object of a statute of repose, to grant complete peace to defendants, supersedes the application of a tolling rule based in equity."  Id. Justice Ginsburg’s dissent expressed concern that the Court’s ruling will "gum up the works of class litigation" and give defendants "an incentive to slow walk discovery and other precertification proceedings so the clock will run on potential opt outs."  Id. at 2058 (Ginsburg, J., dissenting).  Further, unnamed class members "will have strong cause to file a protective claim, in a separate complaint or in a motion to intervene, before the three-year period expires," thereby "increasing the costs and complexity of the litigation," and burdening the courts.  Id.  The majority, however, dismissed such concerns as "overstated" because of the lack of "evidence of any recent influx of protective filings in the Second Circuit, where the rule affirmed here has been the law since 2013."  Id. at 2054. By clarifying the nature of American Pipe tolling and declining to expand that doctrine beyond its existing boundaries, CalPERS should bring helpful stability, predictability, and finality to securities litigation.  (For additional discussion of CalPERS, please see our prior client alert on the Supreme Court’s decision.)  The Ninth Circuit also weighed in on American Pipe tolling during the second quarter, and held that the doctrine permits the filing of successive putative class actions, not just individual actions.  In Resh v. China Agritech, Inc., 857 F.3d 994 (9th Cir. 2017), the court held that American Pipe tolling applies not only to the filing of subsequent individual lawsuits but also to subsequent class action lawsuits.  The plaintiff was a putative absent class member in two prior lawsuits that were dismissed with prejudice after unsuccessful motions for class certification.  The plaintiff then filed a new class action that would have been untimely absent tolling.  The district court held that, although American Pipe would apply to an individual lawsuit filed by the plaintiff, the tolling doctrine did not apply to his putative class action.  Id. at 999. The Ninth Circuit reversed and held that American Pipe applies to both individual and class actions.  Id. at 1002–03.  The court brushed aside the concern that its ruling may lead "to abusive filing of repetitive class actions," believing "the current legal system is adequate to respond to such a concern."  Id. at 1004–05.  According to the court, doctrines such as issue preclusion, comity, and stare decisis would check any abusive practices, and in any event, "if it is clear that a proposed class is not viable under Rule 23, as evidenced by an earlier federal court decision, potential future plaintiffs (or, more precisely, their attorneys) will have little to gain from repeatedly filing new suits."  Id. The decision appears to conflict with (at least) the decisions of the Third, Eleventh, and Fifth Circuits.  See Yang v. Odom, 392 F.3d 97 (3d Cir. 2004) (pendency of earlier class action tolls limitations period for class claims where denial of certification in the first case was based on lead plaintiffs’ deficiencies; but no tolling where the denial of certification was based on Rule 23(b)(3) defect in the class itself); Ewing Industries Corp. v. Bob Wines Nursey, Inc., 795 F.3d 1324 (11th Cir. 2015) (pendency of prior putative class action does not toll statute of limitations for subsequent class action); Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d 1334, 1351 (5th Cir. 1985) (plaintiffs may not "piggyback one class action onto another and thus toll the statute of limitations indefinitely").  Given this conflict, this issue may need to be resolved by the Supreme Court. III.   The Courts of Appeal Continue to Adopt Conflicting Views of Spokeo In Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court held that a plaintiff seeking to redress a statutory violation must demonstrate that he suffered a sufficiently concrete injury in order to have standing under Article III.  As we noted in our First Quarter 2017 Update on Class Actions and our 2016 Year-End Update on Class Actions, the federal courts of appeals continue to apply Spokeo in a variety of contexts, often reaching conflicting interpretations of the Supreme Court’s decision. This quarter, the Fourth Circuit clarified that mere "nebulous frustration resulting from a statutory violation" is not an "informational injury" giving rise to Article III standing.  Dreher v. Experian Info. Sols., Inc., 856 F.3d 337, 346 (4th Cir. 2017).  The plaintiff in that case received a number of credit reports listing delinquent accounts under a defunct bank.  Unbeknownst to him, however, a new company was servicing his accounts.  Id. at 341.  The plaintiff brought a putative class action, which the district court ultimately certified, alleging that the credit reporting company had willfully violated the Federal Credit Reporting Act by failing to include in the credit reports the correct name of the company servicing his accounts.  Id. at 341-42.  The district court held that the plaintiff had Article III standing because the defendant had allegedly violated his "statutory right to receive the ‘sources of information’ for one’s credit report."  Id. at 342.  Following Spokeo, the Fourth Circuit reversed, holding that the plaintiff had not demonstrated a concrete injury.  The court reasoned that "receiving a creditor’s name rather than a servicer’s name—without hindering the accuracy of the report or efficiency of the credit report resolution process—worked no real world harm on" the plaintiff, who was still able to resolve the issues on his credit report.  Id. at 346. The Sixth Circuit, in Lyshe v. Levy, 854 F.3d 855 (11th Cir. 2017), likewise held that a plaintiff suing under the Fair Debt Collection Practices Act (FDCPA) lacked Article III standing to redress bare violations of the Ohio Rules of Civil Procedure committed in a collection action.  The court held that the FDCPA was not enacted to prevent these types of procedural violations, and thus the bare violations did not amount to a concrete harm contemplated by Spokeo.  Id. at 858-59. In contrast to Dreher and Lyshe, the Eleventh Circuit in Perry v. Cable News Network, Inc., 854 F.3d 1336 (11th Cir. 2017), held that a plaintiff suing under the Video Privacy Protection Act (VPPA) had Article III standing to pursue his claim against a media company for sharing records of his viewing activity with a third party without his consent.  Perry suggests that courts may be more likely to hold that a statutory violation gives rise to standing if the alleged harm suffered by the plaintiff "has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit"—here, invasion of privacy.  Id. at 1340 (quoting Spokeo, 136 S. Ct. at 1549).  After holding that the plaintiff had standing, the court went on to hold that the plaintiff failed to state a claim under the VPPA.  Id. at 1341-44. Spokeo itself, on remand from the Supreme Court, was argued in the Ninth Circuit on December 13, 2016, and remains pending. IV.   The Courts of Appeals Provide Additional Clarity Regarding Removal of Class Actions Under CAFA The federal courts of appeals resolved a number of important questions regarding removal under the CAFA statute this past quarter, as courts continue to struggle with undefined terms in that statute.  Most notably, the Ninth Circuit in Broadway Grill, Inc. v. Visa Inc., 856 F.3d 1274, 1275 (9th Cir. 2017), held that a plaintiff may not amend a complaint after the case has been removed to change the class definition in order to divest the federal court of jurisdiction by eliminating minimal diversity.  The plaintiff, a California restaurant, brought a putative class action against Visa, alleging it violated the antitrust laws by preventing merchants from applying a surcharge for the use of credit cards.  Id. at 1275-76.  The complaint defined the class to include many merchants who were not citizens of California, satisfying CAFA’s minimum diversity requirement.  Following removal, however, the plaintiff sought leave to amend the complaint to change the class definition to include only "California citizens," in order to eliminate minimal diversity.  The district court granted leave to amend and ordered the case remanded, relying on Benko v. Quality Loan Service Corp., 789 F.3d 1111, 1117 (9th Cir. 2015), where the Ninth Circuit had held that, in some circumstances, "plaintiffs should be permitted to amend a complaint to clarify issues pertaining to federal jurisdiction under CAFA."  The Ninth Circuit reversed.  Recognizing that "Benko has created some uncertainty in the district courts," the court clarified that "the range of amendments permitted under [Benko] is very narrow."  Broadway Grill, 856 F.3d at 1275.  "Benko did not," the court emphasized, "strike a new path to permit plaintiffs to amend their class definition, add or remove defendants, or add or remove claims in such a way that would alter the essential jurisdictional analysis."  Id. at 1279.  And because "citizenship of the class for purposes of minimal diversity must be determined as of the operative complaint at the date of removal," and the original class definition included non-California citizens, the court held that the amended complaint did not divest the district court of jurisdiction.  Id.  Broadway Grill is a positive development for defendants, as it makes it much more difficult for plaintiffs to avoid removal through post-removal amendments. Although less significant than Broadway Grill, decisions from the Sixth Circuit and Eleventh Circuit this quarter underscore that many basic issues regarding the meaning of CAFA remain unresolved more than a decade after the statute was enacted. For example, in Davenport v. Lockwood, Andrews & Newnam, Inc., 854 F.3d 905 (6th Cir. 2017), the Sixth Circuit clarified the scope of CAFA’s "local controversy" exception, confirming that it does not apply where similar class actions have been filed in the previous three years—regardless of how "local" a controversy may be.  The plaintiffs in Davenport sued various companies hired by Flint, Michigan for claims arising out of the water crisis in that city.  One of the defendants timely removed to federal court, arguing that CAFA’s local controversy exception did not apply because other class actions concerning the crisis had been filed in the previous three years.  The district court granted the plaintiffs’ motion to remand under the exception.  It acknowledged the other similar class actions, but found that the case was "truly local" because, among other reasons, all of the state class actions were in Michigan. The Sixth Circuit reversed, holding that the district court’s reliance on the "’local’ nature of the controversy" "contradict[ed] CAFA’s plain language."  Id. at 909-10.  While the controversy was "local" in a "colloquial sense," it was not "local in the way Congress contemplated in CAFA."  Id.  "The language of CAFA defines by its own terms what qualifies as a local controversy, and those requirements [we]re not met in this case."  Id. at 910.  Because multiple class actions had already been filed, the local controversy exception simply did not apply.  In Hunter v. City of Montgomery, 859 F.3d 1329 (11th Cir. 2017), the Eleventh Circuit construed the term "primary defendants" as used in CAFA’s "home state" exception.  The exception bars federal courts from exercising jurisdiction over a removed class action if "two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed."  28 U.S.C. § 1332(d)(4)(B).  The plaintiff in Hunter filed a putative class action against the City of Montgomery, Alabama and Traffic Solutions, a company that managed the city’s red-light camera program.  The defendants removed the case to federal court under CAFA.  The district court remanded sua sponte after deciding that the local controversy and home state exceptions applied.  Hunter, 859 F.3d at 1331-32.  The Eleventh Circuit affirmed.  After concluding that Section 1447(d) did not bar appellate review of the sua sponte remand order, see id. at 1333-34, the court found that the home state exception to CAFA applied.  The dispositive question was whether Traffic Solutions, which was not a citizen of Alabama, was a "primary defendant" within the meaning of Section 1332(d)(4)(B); if Traffic Solutions was not a "primary defendant," the home state exception would apply, as the City, the only other defendant, was a citizen of the state where the action was filed.  See Hunter, 859 F.3d at 1335.  In construing the "ambiguous" term "primary defendant," the Eleventh Circuit endorsed the Third Circuit’s gloss in Vodenichar v. Halcon Energy Properties, Inc., 733 F.3d 497 (3d Cir. 2013).  Id. at 1336.  There, the Third Circuit held that the primary defendants include those "who are directly liable to the proposed class, as opposed to being vicariously or secondarily liable based on theories of contribution or indemnification," and those who have "potential exposure to a significant portion of the class and would sustain a substantial loss as compared to other defendant if found liable."  Id. (quoting Vodenichar, 733 F.3d at 504-05).  Traffic Solutions was not a primary defendant, the court held, because the plaintiffs did not seek monetary relief against it, and thus the home state exception applied and required remand. V.   Courts Continue to Apply Concepcion and Grapple with the Enforceability of Arbitration Agreements Prohibiting Class Actions Federal and state courts continued to apply and interpret the U.S. Supreme Court’s holding in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), that facially neutral laws violate the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., if they interfere with the fundamental attributes of arbitration.  This past quarter, the U.S. Supreme Court invalidated a Kentucky rule requiring that a power of attorney contain a clear statement authorizing the agent to enter into an arbitration agreement on the principal’s behalf, while the California Supreme Court and the Sixth Circuit each upheld statutes limiting the scope of arbitration agreements on the ground that those statutes fell within the scope of the FAA’s savings clause, notwithstanding Concepcion. A.   The Supreme Court Again Reaffirms That the FAA Preempts State Laws Discriminating Against Arbitration In Kindred Nursing Centers Limited Partnership v. Clark, 137 S. Ct. 1421 (2017), the Supreme Court overwhelmingly reaffirmed once again the principle that state law rules that disfavor arbitration violate the FAA.  The plaintiffs in Kindred entered into an arbitration agreement with the defendant nursing home on behalf of decedents, pursuant to powers of attorney granted by the decedents.  The plaintiffs subsequently sued, alleging that the defendant’s substandard care caused the decedents’ death.  The Kentucky Supreme Court held that the arbitration agreements were unenforceable "because a power of attorney could not entitle a representative to enter into an arbitration agreement without specifically saying so."  Id. at 1426.  The U.S. Supreme Court reversed with all but Justice Thomas Joining the Court’s opinion.  Justice Kagan’s majority opinion explained that "[t]he Kentucky Supreme Court’s clear-statement rule . . . serves to safeguard a person’s ‘right to access the courts and to trial by jury,’" and by doing so, it "did exactly what Concepcion barred:  adopt a legal rule hinging on the primary characteristic of an arbitration agreement—namely, a waiver of the right to go to court and receive a jury trial."  Id. at 1426–27.  The Court rejected the Kentucky Supreme Court’s attempt to cast its rule as applying to any fundamental constitutional right:  "No Kentucky court, so far as we know, has ever before demanded that a power of attorney explicitly confer authority to enter into contracts implicating constitutional guarantees," and the "slim set of both patently objectionable and utterly fanciful contracts that would be subject to its rule"—contracts waiving a principal’s right to worship freely, committing a principal to an arranged marriage, or binding a principle to personal servitude—"only makes clear the arbitration-specific character of the rule, much as if it were made applicable to arbitration agreements and black swans."  Id. at 1427–28.  Justice Thomas dissented, reiterating his view that the FAA does not apply to state court actions. B.   State and Federal Appellate Courts Continue to Carve Out Exceptions to Concepcion and the FAA Although the U.S. Supreme Court continues to reaffirm the FAA’s preemptive power, other courts continue to carve out exceptions to arbitration clauses. In McGill v. Citibank, N.A., 2 Cal. 5th 945 (2017), the California Supreme Court held that an arbitration agreement waiving the right to seek public injunctive relief violates California public policy and is therefore unenforceable.  The plaintiff in McGill opened a credit card with Citibank, in the process accepting an individual arbitration agreement providing that "'[a]n award in arbitration shall determine the rights and obligations between the named parties only, . . . and shall not have any bearing on the rights and obligations of any other person,’" and that "'[t]he arbitrator will not award relief for or against anyone who is not a party.’"  Id. at 956.  The plaintiff subsequently sued under California’s Consumers Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL), seeking, among other things, "an injunction prohibiting Citibank from continuing to engage in its allegedly illegal and deceptive practices."  Id. at 953.  The California Supreme Court explained that California law recognizes a distinction between public injunctive relief, which "has ‘the primary purpose and effect of’ prohibiting unlawful acts that threaten future injury to the general public" and "benefits the plaintiff, ‘if at all,’ only ‘incidental[ly],’" and private injunctive relief, which "has the primary purpose or effect of redressing or preventing injury to an individual plaintiff."  Id. at 955.  Because "’a law established for a public reason cannot be contravened by a private agreement,’" and because "the public injunctive relief available under the UCL, the CLRA, and the [FAL] . . . is primarily ‘for the benefit of the general public,’" the arbitration agreement at issue was "invalid and unenforceable under California law."  Id. at 961.  This rule did not violate the FAA as interpreted in Concepcion, the Court reasoned, because "a provision in any contract—even a contract that has no arbitration provision—that purports to waive, in all fora, the statutory right to seek public injunctive relief under the UCL, the CLRA, or the [FAL] is invalid and unenforceable under California law."  Id. at 962. McGill is perhaps most notable not for its FAA holding, but rather for its determination under state law that a private plaintiff pursuing only individual claims can even seek public injunctive relief under California’s UCL and FAL even after the passage of Proposition 64.  That initiative, passed in 2004, "identified the ‘[f]il[ing] [of] lawsuits’ by private attorneys ‘on behalf of the general public’ as a misuse of the unfair competition laws, and stated the voters’ ‘intent . . . that only the California Attorney General and local public officials be authorized to file and prosecute actions on behalf of the general public.’"  2 Cal. 5th at 959.  To remedy that abuse, Proposition 64 required plaintiffs pursuing claims under the UCL and FAL to seek class certification in order to litigate on a representative basis.  See Cal. Bus. & Prof. Code § 17203 (requiring persons seeking to "pursue representative claims or relief on behalf of others" to obtain class certification).  McGill nevertheless "conclude[d] that these provisions do not preclude a private individual who has ‘suffered injury in fact and has lost money or property as a result of’ a violation of the UCL or [FAL]—and who therefore has standing to file a private action—from requesting public injunctive relief in connection with that action" because "[a] person who meets these requirements is ‘fil[ing]’ the ‘lawsuit[ ]’ or ‘action[]’ on his or her own behalf, not ‘on behalf of the general public.’"  McGill, 2 Cal. 5th at 959.  The court ruled that "[t]his remains true even if the person seeks, as one of the requested remedies, injunctive relief ‘the primary purpose and effect of’ which is ‘to prohibit and enjoin conduct that is injurious to the general public.’"  Id.  McGill thus allows plaintiffs to subvert the explicit class certification requirements created by Proposition 64, at least with respect to requests for public injunctive relief. Finally, the Sixth Circuit deepened a circuit split regarding the enforceability of class waivers in employment contracts in NLRB v. Alternative Entertainment, Inc., 858 F.3d 393 (6th Cir. 2017), by holding that "[m]andatory arbitration provisions that permit only individual arbitration of employment-related claims are illegal pursuant to the [National Labor Relations Act (NLRA)] and unenforceable pursuant to the FAA’s saving clause."  Id. at 405.  The majority opinion closely tracks the reasoning adopted by the two courts of appeals it joined—Lewis v. Epic Sys. Corp., 823 F.3d 1147 (7th Cir. 2016); Morris v. Ernst & Young, LLP, 834 F.3d 975 (9th Cir. 2016)—which were discussed in our Third Quarter 2016 Update on Class Actions.  In his dissent, Judge Sutton explained that "[a] bevy of Supreme Court decisions confirms that [the FAA] applies in this setting," and "[t]he NLRA does not make a general exception to the FAA for arbitration agreements or class-action waivers."  Id. at 412.  The Sixth Circuit’s decision in Alternative Entertainment will not be the last word on this important issue, as the Supreme Court will hear argument on October 2, 2017 (the first argument of the Term), in three consolidated cases that all raise the issue of whether the NLRA prohibits mandatory arbitration agreements with class action waivers.  Significantly, the Department of Justice has broken with the National Labor Relations Board and filed an amicus brief in support of the position that the NLRA does not preclude class waivers.  See Brief for the United States as Amicus Curiae, Nos. 16-285, 16-300, 16-307 (U.S. filed June 16, 2017).   The following Gibson Dunn lawyers prepared this client update: The following Gibson Dunn lawyers prepared this client update: Christopher Chorba, Theane Evangelis, Kahn A. Scolnick, Bradley J. Hamburger, Michael Holecek, Gregory S. Bok, and Samuel Eckman. Gibson Dunn 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 – Los Angeles (213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba – Co-Chair, Class Actions Practice – Los Angeles (213-229-7396, cchorba@gibsondunn.com)Theane Evangelis – Co-Chair, Class Actions Practice – Los Angeles (213-229-7726, tevangelis@gibsondunn.com)Kahn A. Scolnick – Los Angeles (213-229-7656, kscolnick@gibsondunn.com)Bradley J. Hamburger – Los Angeles (213-229-7658, bhamburger@gibsondunn.com)      © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.

July 25, 2017 |
Viewing Class Settlements Through a New Lens: Part 1 and Part 2

​Los Angeles partner Kahn Scolnick and associate Sheldon Evans are the authors of "Viewing Class Settlements Through a New Lens: Part 1 and Part 2," [PDF] published by Law360 on July 25, 2017 and July 26, 2017, respectively.

June 26, 2017 |
United States Supreme Court Limits Class-Action Tolling

On June 26, 2017, the Supreme Court of the United States held in CalPERS v. ANZ Securities, Inc., that the filing of a putative class action does not toll the statute of repose in the Securities Act of 1933.  Gibson Dunn filed an amicus curiae brief in the case on behalf of the Securities Industry and Financial Markets Association and The Clearing House Association, L.L.C., urging the outcome reached by the Court. Section 11 of the Securities Act of 1933 provides a private right of action for misstatements and omissions in registration statements and certain other filings.  Section 13 of the Act includes a two-part provision governing the deadline for bringing such suits: they must be filed "within one year after the discovery of the untrue statement or omission," but "[i]n no event … more than three years after the security was bona fide offered to the public."  The Securities Exchange Act of 1934 has a similar structure for private suits, requiring that they be filed within two years of "the discovery of the facts constituting the violation," subject to an outer limit of five years.  See 28 U.S.C. § 1658. Under American Pipe & Construction Company v. Utah, 414 U.S. 538 (1974), the filing of a putative class action generally tolls the statute of limitations applicable to the claims of would-be class members until class certification is decided.  If certification is denied, former members of the proposed class have the remaining limitations period within which to file individual suits or motions to intervene in a pending suit.  Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983).  In CalPERS, a putative class action was filed within both the one-year and three-year limits, but the individual plaintiff opted out and filed suit more than three years after the securities were issued.  The district court dismissed the complaint as untimely and the Second Circuit affirmed, following a previous ruling that because the outside limit in Section 13 is a statute of repose, not a statute of limitations, it is not subject to equitable tolling under American Pipe.  See Police & Fire Ret. Sys. of the City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95 (2d Cir. 2013), cert. dismissed, 135 S. Ct. 42 (2014). Gibson Dunn represented the defendants in IndyMac. In an opinion by Justice Kennedy, joined by Chief Justice Roberts and Justices Thomas, Alito, and Gorsuch, the Supreme Court affirmed the dismissal of the CalPERS complaint as untimely.  The Court confirmed that the three-year deadline in Section 13 of the Securities Act is a statute of repose (thus not subject to equitable tolling) and that American Pipe tolling is equitable.  Hence, the Court concluded, the Securities Act statute of repose cannot be tolled under American Pipe. At the outset, the Court explained that statutes of limitations and statutes of repose are different.  The former run from accrual, or "when the plaintiff can file suit and obtain relief," while the latter run from "the date of the last culpable act or omission."  Slip op. at 5 (quotations omitted).  Crucially, "statutes of repose are not subject to equitable tolling" by the courts because they implement an "unqualified" legislative decision to set a "specific time beyond which a defendant should no longer be subjected to protracted liability."  Id. at 8 (quotation omitted).  Statutes of limitation, in contrast, can be equitably tolled.  Next, the Court examined the history and structure of the Securities Act’s timely filing provision to determine that the one-year limit is a statute of limitations while the three-year limit is a statute of repose.  Slip op. at 4-7.  Congress commonly employs both approaches in a statute, "giving leeway to a plaintiff who has not yet learned of a violation," while "protect[ing] the defendant from an interminable threat of liability."  Id. at 6.  The three-year limit in the Securities Act, the Court explained, is the outer bound of private liability. The Court then reiterated that American Pipe tolling is "rooted in" courts’ "equitable powers," rather than stemming from "the text of a statute or a federal rule," such as Federal Rule of Civil Procedure 23.  Slip op. at 10, 17.  Accordingly, American Pipe tolling cannot override a Congressional determination to impose an absolute outer limit on liability.  To the contrary, "the object of a statute of repose, to grant complete peace to defendants, supersedes the application of a tolling rule based in equity."  Id. at 11. Justice Ginsburg dissented, joined by Justices Breyer, Sotomayor, and Kagan.  She argued that the purpose of a statute of repose was compatible with American Pipe tolling because a timely class action filing provides adequate notice to defendants "within the repose period, of their potential liability to all putative class members."  Dissent at 2.  She also warned that the decision would penalize unsophisticated individual class members, in addition to burdening the courts with protective filings by "[a]ny class member with a material stake" in the case.  Id. at 4. *          *          * The Supreme Court’s decision in CalPERS is significant on a number of points.  First, it confirms the primacy of legislative, rather than judicial, determinations regarding the timeliness of suit.  Second, it balances plaintiffs’ interests in pursuing claims with defendants’ interests in certainty and repose.  Third, it clarifies the nature of American Pipe tolling and declines to expand that doctrine beyond its existing boundaries.  CalPERS thus should bring helpful stability, predictability, and finality to litigation in the securities arena and beyond, to the benefit of courts and litigants alike. Gibson Dunn’s lawyers 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, or the authors of this alert: Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com)David A. Schnitzer – Washington, D.C. (+1 202-887-3775, dschnitzer@gibsondunn.com) Please also feel free to contact any of the following practice group leaders: Appellate and Constitutional Law Group:Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com)James C. Ho – Dallas (+1 214-698-3264, jho@gibsondunn.com) Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Class Actions Group:Christopher Chorba – Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com)Theane Evangelis – Los Angeles (+1 213-229-7726, tevengelis@gibsondunn.com) Securities Litigation Group:Meryl L. Young – Orange County (+1 949-451-4229, myoung@gibsondunn.com)Robert F. Serio – New York (+1 212-351-3917, rserio@gibsondunn.com) © 2017 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, 2017 |
First Quarter 2017 Update on Class Actions

This update provides an overview and summary of key class action developments during the first quarter of 2017 (January through March).  Part I explores significant class-certification decisions from the Seventh, Eighth, and Ninth Circuits.  Part II addresses decisions from the Third, Seventh, and Ninth Circuits adopting conflicting approaches to determining whether putative class representatives have standing to sue for statutory violations under the Supreme Court’s decision in Spokeo, Inc. v. Robins.  Part III analyzes decisions from the Second, Sixth, and Seventh Circuits addressing mootness of putative class actions under the Supreme Court’s decision in Campbell-Ewald Co. v. Gomez.  Finally, Part IV discusses noteworthy decisions reversing approvals of class settlements from the Eighth and Ninth Circuits.  I.    Notable Decisions Addressing the Propriety of Class Certification The federal courts of appeals continued in the first quarter of 2017 to decide a steady stream of class-certification appeals.  Four such decisions are worth highlighting because they provide important guidance to district courts and class-action litigants.  The Seventh Circuit in McCaster v. Darden Restaurants, Inc., 845 F.3d 794 (7th Cir. 2017), adopted a strict view of the requirement that a certified class "identif[ies] a common question, the answer to which ‘will resolve an issue that is central to the validity of each one of the claims in one stroke.’"  Id. at 801 (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011)).  The plaintiffs alleged that former employees of a restaurant chain were improperly denied pay-outs for unused vacation time, purportedly in violation of state law.  Id. at 796–97.  The Seventh Circuit affirmed the denial of class certification after concluding that the plaintiffs failed to satisfy the "bedrock requirement" of a "common contention that is ‘capable of classwide resolution,’" id. at 800 (quoting Dukes, 564 U.S. at 350), and consequently Rule 23(a)’s typicality requirement and Rule 23(b)(3)’s "more strenuous predominance requirement" were also not met.  Id. at 801.  The court emphasized that there was no allegation of any policy that facially violated the law, or of a "statewide practice" of withholding earned pay.  Id. at 801.  The class thus presented "only an amalgam of individual" claims, the resolution of which "depend[ed] entirely on each employee’s individual work history … and the specific payroll practices of the managers of the restaurants where they worked."  Id. at 801.  McCaster also reaffirmed the prohibition on "fail-safe" classes—that is, classes defined to include only those persons who have a valid claim.  Id. at 799.  The Seventh Circuit explained that such classes are "impermissible because a class member either wins or, by virtue of losing, is defined out of the class and is therefore not bound by the judgment."  Id. at 799 (quotation marks and citation omitted).  Next, the Seventh Circuit held in Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017), that a class was improperly certified because the plaintiffs lacked standing to sue.  There, the plaintiffs alleged that glaucoma eye drops manufactured by several pharmaceutical companies were "unnecessarily large," purportedly in violation of state consumer protection statutes.  Id. at 316.  The court noted that the plaintiffs were seeking only what they "contend[] to be an unnecessarily high price for the defendants’ eye drops because of the size of those drops," and emphasized that there were no allegations that class members had suffered side effects from the drops, were harmed "because they ran out of them early," had paid inflated prices due to collusion or misrepresentation, or that the drops were "unsafe or ineffective."  Id. at 317–18.  Rather, the claims on behalf of the class boiled down to "[t]he fact that a seller does not sell the product that you want, or at the price you’d like to pay," which the court held was "not an actionable injury; it is just a regret or disappointment."  Id. at 318.  The Seventh Circuit thus concluded that the "suit fails at the threshold, because there is no standing to sue," and for that reason both vacated the grant of class certification and ordered the district court to dismiss the suit with prejudice.  Id. In contrast to these Seventh Circuit decisions, the Ninth Circuit in Just Film, Inc. v. Buono, 847 F.3d 1108 (9th Cir. 2017), rebuffed multiple challenges to class certification of two nationwide classes.  In Just Film, small businesses (and their owners) who leased credit and debit card processing equipment alleged, among other things, that entities involved in the leasing and financing of that equipment had violated RICO in calculating and collecting taxes that were not actually due or paid to any taxing authority.  Id. at 1113.  The district court certified two nationwide classes, one under RICO and the other under a breach of contract theory, and the Ninth Circuit affirmed.  Id. at 1114–15.  The Ninth Circuit held that the potential for "some individualized issues" in calculating damages did not render class certification inappropriate; it was sufficient that damages could be "determined without excessive difficulty" and would be "attributed to" the plaintiffs’ "theory of liability."  Id. at 1121.  Further, notwithstanding the "highly individualized" element of reliance under RICO, the district court did not abuse its discretion in concluding that other common questions predominated over any individualized issues.  Id. at 1121–22.  The Ninth Circuit also explained that the "requirement of typicality is not primarily concerned with whether each person in a proposed class suffers the same type of damages," but instead whether "the plaintiff endured a course of conduct directed against the class."  Id.  at 1118.  The court thus concluded that the fact that one of the named plaintiffs "was able to fend off the attempted fraud before it reached into and diminished her bank account" did not make her claims atypical.  Id.  The Eighth Circuit took a similarly skeptical view of individualized defenses and damages issues in affirming class certification in Barfield v. Show-Me Power Electric Cooperative, 852 F.3d 795 (8th Cir. 2017).  The district court certified a class of landowners who alleged the improper use of easements over their properties.  Id. at 798–99.  On appeal following a summary judgment ruling and damages award in the class’s favor, the defendants challenged the propriety of class certification, arguing that the affirmative defense of landowner consent had to be "individually investigated and adjudicated" and there was a need for "individualized damages calculations."  Id. at 806.  The Eighth Circuit rejected both of those challenges.  As for the defense of consent, the defendants provided "no evidence that even one class member consented to" the disputed use, so this defense was merely an "unsupported allegation" that did not "undercut" the finding of predominance.  Id.  On the issue of individualized damages, the court confusingly reasoned that because it had separately vacated the award of damages, it would not reverse certification on the basis of "the nature of a hypothetical future damages award."  Id.  The Eighth Circuit appears to have overlooked, however, that district courts at the class-certification stage will always be assessing how a case will be tried in the future.  To reject challenges to class certification as "hypothetical" merely because they concern future events would greatly circumscribe the class certification inquiry. II.    The Federal Courts of Appeals Adopt Divergent Interpretations of Spokeo As discussed in our May 2016 and February 2017 updates, the Supreme Court held in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), that Article III requires plaintiffs to establish "a concrete injury even in the context of a statutory violation."  Id. at 1549.  With this holding, Spokeo disapproved many lower-court decisions that had deemed any alleged statutory violation sufficient on its own to satisfy the standing requirements of Article III, thus opening the door to the certification of "no-injury" class actions in which plaintiffs seek to recover statutory damages on a classwide basis without any proof that individual class members suffered any actual, concrete injury.  Spokeo‘s ultimate impact, however, will depend on how lower courts implement its requirement that plaintiffs establish they suffered a "concrete" injury.  Diverging opinions issued during the first quarter of 2017 by the Third, Seventh, and Ninth Circuits shed some light on Spokeo‘s potential impact in the lower courts. Although it has not yet issued its follow-up decision in Spokeo, the Ninth Circuit held in two separate cases that, notwithstanding the Supreme Court’s decision, plaintiffs had standing under Article III to pursue claims under the Telephone Consumer Protection Act ("TCPA") and the Fair Credit Reporting Act ("FCRA") based on alleged statutory violations alone. In Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1037 (9th Cir. 2017), the Ninth Circuit affirmed summary judgment in favor of defendant Vertical Fitness in a putative class action alleging the defendant sent unsolicited text messages regarding gym memberships in violation of the TCPA.  On appeal, the Ninth Circuit considered whether the plaintiff had alleged a "concrete injury-in-fact" that was sufficient to establish Article III standing.  Id. at 1042–43.  Noting that Spokeo "observed that intangible harms a plaintiff alleges can … ‘nevertheless be concrete,’" the Ninth Circuit concluded that the plaintiff had alleged such an injury because Congress found "unsolicited contact" under the TCPA to be a "concrete harm," and an alleged violation is necessarily a "concrete, de facto injury."  Id. at 1042–43 (citations omitted).  The Ninth Circuit nonetheless affirmed summary judgment in favor of the defendant because the plaintiff did not revoke his prior consent to receive the text messages.  Id. at 1043–48. Similarly, in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), the Ninth Circuit reversed an order dismissing a putative class action filed against a prospective employer that allegedly violated the FCRA’s disclosure requirements by including a liability waiver in its disclosure notice.  The FCRA requires that "the disclosure document consist ‘solely’ of the disclosure."  Id. at 498, 500–01.  Applying Spokeo, the Ninth Circuit found a concrete alleged injury because the court "can fairly infer that Syed was confused by the inclusion of the liability waiver with the disclosure and would not have signed it had it contained a sufficiently clear disclosure, as required in the statute," which is more than a "bare procedural violation."  Id. at 499–500.  The court reached this conclusion even though the plaintiff never alleged that he was actually confused by the disclosure; indeed, the plaintiff alleged that the employer’s disclosure "contained too much [information]" rather than "too little."  Id. at 498 (emphasis added).  Consistent with these Ninth Circuit decisions, the Third Circuit held that plaintiffs had standing to bring claims under the FCRA following an alleged data breach related to the theft of laptops from a health insurer.  In re: Horizon Healthcare Servs. Inc. Data Breach Litig., 846 F.3d 625 (3d Cir. 2017).  Although the court acknowledged that Spokeo could be read "as creating a requirement that a plaintiff show a statutory violation has caused a ‘material risk of harm’ before he can bring suit," the Third Circuit interpreted Spokeo more narrowly, as merely "reiterat[ing] traditional notions of standing, rather than erect[ing] any new barriers that might prevent Congress from identifying new causes of action though they may be based on intangible harms."  Id. at 637–38.  Applying this rationale, the court held that "the ‘intangible harm’ that FCRA seeks to remedy ‘has a close relationship to a harm [i.e. invasion of privacy] that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.’"  Id. at 639–40.  Thus, the plaintiffs did not "allege a mere technical or procedural violation of FCRA.  They allege instead the unauthorized dissemination of their own private information—the very injury that FCRA is intended to prevent."  Id. at 640. By contrast, the Seventh Circuit applied Spokeo in Gubala v. Time Warner Cable, Inc., 846 F.3d 909 (7th Cir. 2017), to affirm the dismissal of a putative class action alleging that Time Warner Cable violated the Cable Communications Policy Act ("CCPA") by failing to destroy customers’ personal information after they cancelled their subscriptions.  The Seventh Circuit held that the plaintiff lacked Article III standing under Spokeo because, "while he might well be able to prove a violation of [the CCPA], he has not alleged any plausible (even if attenuated) risk of harm to himself from such a violation—any risk substantial enough to be deemed ‘concrete.’"  Id. at 911 (citation omitted).  Indeed, the plaintiff never alleged a credible threat that his "personal information might have been stolen from Time Warner or sold or given away" to third parties who could harm him; Time Warner’s technical "violation of [the CCPA simply] … made him feel aggrieved."  Id. at 910–11. These decisions confirm that, now a year after its issuance, the full impact of Spokeo remains up for debate, with the courts of appeals reaching seemingly conflicting conclusions.  Given the importance of Spokeo to the viability of "no-injury" class actions, we will continue to monitor how the lower courts are interpreting Spokeo in future updates. III.    The Lower Courts Continue to Reject Attempts to Moot Putative Class Actions After Campbell-Ewald In prior updates, we noted that while the Supreme Court in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), held that an unaccepted offer of judgment does not render a putative class action moot, the Court at the same time appeared to provide a lifeline to class-action defendants by expressly declining to resolve "whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount."  Id. at 672.  In the ensuing year, class-action defendants put that unresolved question to the test, and engaged in various attempts to moot putative class actions in ways not addressed in Campbell-Ewald, such as by making an offer of judgment to the named plaintiff, depositing the offered amount in the court’s registry, and moving for entry of judgment in the named plaintiff’s favor.  Unfortunately, the federal courts of appeals thus far have largely expressed skepticism about the Supreme Court’s suggested distinction between an unaccepted offer of judgment and an unaccepted offer combined with the delivery of money to the plaintiff and obtaining a judgment in plaintiff’s favor.  This trend continued in the first quarter of 2017. It is clear after Campbell-Ewald that an accepted offer of judgment can result in mootness.  An example of this is Wright v. Calumet City, Illinois, 848 F.3d 814 (7th Cir. 2017), in which the Seventh Circuit dismissed  an action as moot where the plaintiff accepted the defendant’s offer of judgment in full satisfaction of the plaintiff’s individual claims.  Id. at 821.  The plaintiff in that case brought a class action against the defendant for allegedly violating the Fourth and Fourteenth Amendment rights of arrestees.  Id. at 815.  After the Seventh Circuit denied his petition for permission to appeal the denial of class certification, the plaintiff accepted an offer of judgment "for all claims brought under this lawsuit," including attorneys’ fees and costs incurred in pursuing plaintiff’s individual (but not class) claims.  Id. at 816.  The plaintiff then appealed the class certification decision, asserting a continuing interest in obtaining attorneys’ fees for the class claims to shift the costs of litigation to the class, which the Supreme Court suggested in Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 336–37 (1980), might be sufficient to satisfy standing even if a judgment is issued in the plaintiff’s favor.  Wright, 848 F.3d at 820–21.  The Seventh Circuit, however, held that the plaintiff had actually accepted the defendant’s Rule 68 offer as complete relief for the plaintiff’s claims, citing Campbell-Ewald for the rule that a case becomes moot when a plaintiff accepts an offer of judgment that fully redresses the plaintiff’s injuries.  Id.    But the lower courts have often reached the opposite conclusion when confronting the scenarios falling short of actual acceptance of an offer of judgment that the Supreme Court left open in Campbell-Ewald.  For example, the Second Circuit held in Geismann v. ZocDoc, Inc., 850 F.3d 507 (2d Cir. 2017), that a district court’s entry of judgment in the plaintiff’s favor on an unaccepted offer of judgment does not moot a putative class action.  Id. at 513.  After receiving unauthorized faxes, the plaintiff sued the defendant under the TCPA.  Id. at 509.  While the plaintiff’s class-certification motion was pending, the defendant made an offer of judgment, which the plaintiff rejected.  Id. at 510.  But finding that the defendant’s offer would have afforded complete relief on the plaintiff’s individual claims and rendered the action moot, the district court entered a judgment in the plaintiff’s favor and later, while the appeal was pending, granted the defendant leave to deposit a check with the clerk of court in satisfaction of that judgment.  Id. at 511.  The Second Circuit reversed, citing Campbell-Ewald for the proposition that an unaccepted offer of judgment is considered "withdrawn" and is a legal nullity.  Id. at 512.  The court further rejected the argument that the district court’s entry of judgment made the case meaningfully different from Campbell-Ewald because, in its view, "the judgment should not have been entered in the first place."  Id. at 513.  A divided panel of the Sixth Circuit adopted an even broader rule in Unan v. Lyon, 853 F.3d 279, 287–88 (6th Cir. 2017), holding that a defendant’s conduct in affording the named plaintiffs complete relief does not moot a putative class action, even if judgment has been entered in the named plaintiffs’ favor, where the defendant has not provided that same relief to all members of the putative class.  Two days after the named plaintiffs filed their putative class action complaint alleging that the defendant had denied them comprehensive Medicaid coverage, the defendant restored those individuals’ coverage and later began approving individual applicants who were members of the putative class.  Id. at 284.  The district court deemed the case moot and entered summary judgment in the defendant’s favor.  Id.  But the Sixth Circuit reversed, holding that case was not moot under both the "picking off" exception to mootness, which prevents defendants from strategically avoiding class litigation by settling the claims of individual named plaintiffs in a way that "would be contrary to sound judicial administration," id. at 285 (quotation marks and citation), and the "inherently transitory" exception, which applies when the alleged injury is "so transitory that it would likely evade review by becoming moot before the district court can rule on class certification" and it is clear that "other class members are suffering the injury," id. at 287 (quotation marks and citation omitted).  In dissent, Judge Sutton disagreed with the majority’s conclusion that the record supported a finding of an inherently transitory injury, id. at 296, and he noted that the Supreme Court has applied the picking off exception only "after the district court has ruled on class certification, not before" and only where review of the class-certification order would otherwise be prevented.  Id. at 295. IV.    Close Appellate Scrutiny of Class Settlements Continues We have noted in several of our prior year-end and quarterly updates (including our October 2016 update) that federal courts of appeals have been closely scrutinizing the fairness of class action settlements in recent years.  This trend continued in the first quarter of 2017.  For example, the Eighth Circuit vacated a class settlement in a class action covering up to 110 million Target customers affected by the company’s data security breach in 2013.  In re Target Corp. Consumer Data Security Breach Litig., 847 F.3d 608 (8th Cir. 2017).  The court concluded that the district court failed to conduct the requisite "adequacy" analysis under Rule 23(a)(4).  Id. at 612–13.  The settlement provided a $10 million fund to be distributed to class members with losses from the breach; by contrast, class members who suffered no loss would get no pecuniary relief, even though they would "release Target from liability for any claims [they] may someday have should the breach injure [them] in the future."  Id. at 611.  The objectors argued there was an inter-class conflict between those with extant losses who could recover money from the settlement fund, and those without extant losses, who could not.  The district court did not offer any reasoned explanation for overruling this objection, which "suggests that class certification was the product of summary conclusion rather than rigor."  Id. at 613.  The Eighth Circuit thus remanded to allow the district court to conduct a "meaningful analysis of class certification."  Id. at 614. The Ninth Circuit also weighed in on a novel settlement-related jurisdictional issue in Koby v. ARS Nat’l Servs., Inc., 846 F.3d 1071 (9th Cir. 2017).  There, the parties settled a Fair Debt Collection Practices Act lawsuit on a classwide basis, with a magistrate judge approving the settlement and entering a final judgment.  On appeal, the Ninth Circuit joined three other circuits in concluding that only the named plaintiffs’ "consent" was needed under 28 U.S.C. § 636 to waive the right to an Article III judge, and that the absent class members did not also need to "consent" to the magistrate’s jurisdiction.  846 F.3d at 1075–79.  The court focused on the representative nature of class actions and the ability of named plaintiffs to bind class members to a variety of litigation strategy decisions (e.g., which claims to assert, what discovery to seek, and what motions to file).  Id. at 1075–77.  Whether to consent to a magistrate judge’s jurisdiction "is probably less consequential to the outcome than the other decisions the named plaintiffs are ordinarily called upon to make."  Id. at 1077. The Ninth Circuit then reversed the magistrate’s approval of the settlement itself.  Id. at 1079.  The settlement provided injunctive relief requiring the defendant to use a new voicemail message in future debt collection calls.  Id.  But there was no evidence that class members "continued to receive calls from [defendant] as part of ongoing efforts to collect debts that were by then two to five years old, a proposition doubtful enough that empirical data of some sort would be necessary to sustain it."  Id. at 1079–80.  In exchange, the class members waived the right to pursue damages claims as part of a class action (although they could still do so individually).  Id. at 1080–81.  The Ninth Circuit concluded the right to participate in class actions was necessarily worth something, even if not much.  And requiring class members "to give up anything at all in exchange for worthless injunctive relief precludes approval of the settlement as fair, reasonable, and adequate."  Id. at 1081.   The following Gibson Dunn lawyers prepared this client update: Kahn A. Scolnick, Bradley J. Hamburger, Christopher Chorba, Theane Evangelis, Andrew LeGrand, Brandon J. Stoker, and David A. Schnitzer. Gibson Dunn 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 – Los Angeles (213-229-7000, tboutrous@gibsondunn.com) Christopher Chorba – Co-Chair, Class Actions Practice – Los Angeles (213-229-7396, cchorba@gibsondunn.com)Theane Evangelis – Co-Chair, Class Actions Practice – Los Angeles (213-229-7726, tevengelis@gibsondunn.com)Kahn A. Scolnick – Los Angeles (213-229-7656, kscolnick@gibsondunn.com)Bradley J. Hamburger – Los Angeles (213-229-7658, bhamburger@gibsondunn.com)     © 2017 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 13, 2017 |
Judge Neil Gorsuch’s Potential Impact on the Development of Class Action Law

As Judge Neil Gorsuch proceeds through the Senate confirmation process, we are continuing to review his jurisprudence and to assess how he might affect the Supreme Court should the Senate approve his nomination.  We are publishing these analyses in a series of client alerts focusing on individual subject matters.  This alert focuses on class actions. Judge Gorsuch’s body of published Tenth Circuit opinions includes only a handful of cases involving class actions and other aggregated litigation, providing limited insights into his views on current controversies in class action practice.  Nonetheless, if confirmed to fill Justice Scalia’s seat on the Court, Judge Gorsuch will likely have an opportunity to help resolve many open questions in this area of law, including clarifying the proper role of statistical evidence in establishing class-wide liability, and resolving whether Federal Rule of Civil Procedure 23 has a distinct "ascertainability" requirement.  We examine below three of Judge Gorsuch’s Tenth Circuit opinions, which provide some indication that he gives the same serious attention to the text of the federal rules as he gives to statutes, including those that define the limits of federal jurisdiction.  His opinions also indicate that he respects the traditional meaning assigned to terms of art, and that he is willing to consider practical consequences in ruling on class action remedies. Judge Gorsuch’s Class Action Jurisprudence Judge Gorsuch has authored three published opinions for unanimous panels that provide some indications about his approach to areas of law important to class action practice.  One of those opinions involved a class claim for injunctive relief, and two involved jurisdiction under the Class Action Fairness Act ("CAFA"). Rule 23(b)(2) Injunctive Relief Classes.  In the case involving a class claim for injunctive relief, Shook v. Board of County of El Paso, 543 F.3d 597 (10th Cir. 2008), Judge Gorsuch showed careful attention to the practical consequences of class action remedies, and recognized that district courts have "considerable discretion" over certification.  Id. at 603.  County jail inmates brought a putative class action alleging that jail conditions for prisoners with mental health conditions violated the Eighth Amendment’s prohibition against cruel and unusual punishment.  Writing for the panel, Judge Gorsuch declined to disturb the district court’s denial of class certification–a relatively rare appellate outcome in the context of putative classes that seek only injunctive relief.  Id. at 604-05.  Because it is easier to obtain certification for a class seeking exclusively injunctive relief than it is for a class seeking monetary damages, appellate affirmances of denials of class certification for injunctive relief are somewhat more infrequent, making Judge Gorsuch’s opinion even more worthy of careful study. The Shook opinion focused on the injunctive relief requested, concluding that the plaintiffs had not satisfied Rule 23(b)(2)’s requirement that "injuries must be sufficiently similar that they can be addressed in" one injunction.  Id. at 604.  The plaintiffs sought an injunction compelling defendants to "cease using restraints, pepper spray, and electroshock weapons (‘tasers’) against prisoners exhibiting signs of mental illness."  Id. at 605.  That prayer for relief, Judge Gorsuch explained, failed Rule 23(b)(2)’s requirement that classes must be cohesive because the relief would require an injunction that "distinguishes . . . between how prison officials may treat class members, rather than prescribing a standard of conduct applicable to all class members."  Id. Also important to Judge Gorsuch’s opinion was Rule 65(d), which requires that a requested injunction "describe in reasonable detail . . . the act or acts restrained or required."  The plaintiffs’ request failed that requirement because it vaguely sought an "’adequate’ system to provide ‘appropriate’ medication to inmates."  Id. at 605-06.  Moreover, because the class was so fluid (it was defined to include future inmates), "enforcing the injunction would require monitoring changes to [class] characteristics over time."  Id. at 606.  The plaintiffs could have avoided these problems, Judge Gorsuch observed, by using subclasses under Rule 23(c)(5).  Id. at 607.  While noting that the district court could have sua sponte suggested subclasses as a possible resolution, he placed the burden of proposing and constructing subclasses squarely on the plaintiffs.  Id. CAFA.  In the more recent of his two CAFA decisions, Judge Gorsuch stressed the need to construe the statute’s terms consistently with historical usage in related jurisdictional statutes, and reached a result upholding congressional intent to expand federal jurisdiction over large class actions.  In Hammond v. Stamps.com, 844 F.3d 909 (10th Cir. 2016), a customer who purchased postage stamps from defendant Stamps.com filed a putative class action in state court alleging unlawful trade practices.  After Stamps.com removed to federal court, the district court granted the customer’s motion to remand to state court.  Id. at 911.  Judge Gorsuch vacated the judgment and remanded, holding that the amount in controversy was sufficient to meet CAFA’s minimum for removal to a federal district court.  Id. at 914. His reasoning in Hammond hinged on CAFA’s use of the jurisdictional term "in controversy."  28 U.S.C. § 1332(d)(2).  The district court declined jurisdiction based on its belief that the defendant had not established that the value of the case was likely to exceed the minimum threshold.  But Judge Gorsuch reasoned that the phrase "in controversy" was one "heavily encrusted with meaning" before Congress enacted CAFA, and that the term had never been understood to require a "probabilistic judgment" concerning "what damages the plaintiff will likely prove."  Id. at 912.  CAFA jurisdiction, and thus removal, depends on "what a factfinder might conceivably lawfully award."  Id. In the other CAFA case, BP America, Inc. v. Oklahoma ex rel. Edmondson, 613 F.3d 1029 (10th Cir. 2010), Judge Gorsuch clarified the standard for discretionary appeals from remands to state court.  Oklahoma sued a propane gas distributor in state court alleging manipulation of gas prices in violation of the Oklahoma Consumer Protection Act.  The distributor removed the action, arguing that it qualified as a mass action under CAFA.  The district court remanded to state court, and the distributor moved for leave to appeal.  Writing for a unanimous panel, Judge Gorsuch granted leave to appeal even though, "[g]enerally speaking, federal courts of appeals may not review district court remand orders."  Id. at 1032 (citing 28 U.S.C. § 1447(d)).  Under Section 1453(c)(1), "a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not [more] than 7 days after entry of the order."  Judge Gorsuch rejected Oklahoma’s argument that the district court’s remand order divested all federal jurisdiction in favor of the state courts.  The plain terms of Section 1453(c)(1), he stressed, did not impose any conditions on the discretion of courts of appeals to allow an appeal if filed within the specified time.  Id. at 1033-34. Implications for the Court Because Judge Gorsuch has not authored a large number of opinions on class actions, we have been unable to paint with a broad brush in detailing how his views might impact this area of law.  Still, his handful of relevant opinions suggest that he will adhere to the plain language of the federal rules and CAFA, and preserve the historically familiar meanings assigned to jurisdictional terms of art.  Judge Gorsuch’s confirmation also could have significant ramifications for class action law because he would fill the seat of Justice Scalia, who authored many 5-4 opinions of great consequence in this area.  For example, Justice Scalia wrote for the majority in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), both of which involved interpreting Rule 23.  The proper construction of these opinions, and the issues they address, could make their way back to the Court in the coming years, resulting in potentially significant developments in class action law.  See, e.g., Julian W. Poon, Blaine H. Evanson, & Bradley J. Hamburger, "Emerging Issues in the Law of Class Certification," Bloomberg/BNA Class Action Litigation Report (Oct. 24, 2014), http://www.gibsondunn.com/wp-content/uploads/documents/publications/Poon-Emerging-Issues-in-the-Law-of-Class-Certification-10.24.2014.pdf. The Court also might soon clarify the role of statistical evidence in establishing class-wide liability–a question touched on but not resolved definitively last Term in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016), and that continues to spark confusion in the lower courts.  Further, the Court may finally decide to address the persistent circuit split on whether Rule 23 has a distinct "ascertainability" requirement.  See, e.g., Gibson Dunn 2016 Year-End Update on Class Actions (Feb. 1, 2017), http://www.gibsondunn.com/wp-content/uploads/documents/publications/2016-Year-End-Update-on-Class-Actions.pdf.  Given that these issues have divided the lower courts, and that class action disputes often closely divide the Court, Judge Gorsuch’s vote on these issues could be critical to future developments in this area. Finally, the Court recently granted certiorari in Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, No. 16-466, which raises questions concerning the distinction between general and specific personal jurisdiction in mass tort cases.  Judge Gorsuch’s Senate confirmation hearings begin on March 20, 2017, and if confirmed soon thereafter, he would be available to cast the ninth vote in Bristol-Myers–providing perhaps our first glimpse into his views on these issues as a sitting Justice.  Gibson Dunn’s lawyers 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 Appellate and Constitutional Law or Class Actions practice groups, or any of the following: Appellate and Constitutional Law Group:Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, tboutrous@gibsondunn.com)Mark A. Perry – Washington, D.C. (+1 202-887-3667, mperry@gibsondunn.com)James C. Ho – Dallas (+1 214-698-3264, jho@gibsondunn.com) Caitlin J. Halligan – New York (+1 212-351-4000, challigan@gibsondunn.com) Class Actions Group: Christopher Chorba – Los Angeles (+1 213-229-7396, cchorba@gibsondunn.com) Theane Evangelis – Los Angeles (+1 213-229-7726, tevengelis@gibsondunn.com) © 2017 Gibson, Dunn & Crutcher LLP Attorney Advertising:  The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.