Posts Authored by Drew H. Campbell

Debt buyers beware: SCOTUS will decide if the FDCPA applies to you

On Friday, January 13, 2017, the U.S. Supreme Court granted certiorari in Henson v. Santander Consumer USA, Inc. This case raises the question whether a debt buyer is a “creditor” or a “debt collector” under the Fair Debt Collection Practices Act (FDCPA). The answer to this question, it turns out, is far from clear since debt buyers fit plausibly into either category. Read more >>

Banking Industry, Fair Debt Collection Practices Act, Federal Class Action Law

When at first you don’t succeed, seek post-verdict decertification: Lessons learned from Mazzei v. The Money Store

What do you do when a court certifies a class over your objection and denies your motion for directed verdict on the critical class certification issue at trial, and a jury awards $32 million ($54 million if you count pre-judgment interest) on an individual claim worth $133.80? This was the situation the defendants faced in Mazzei v. The Money Store. What happened defied all odds. Read more >> 

Banking Industry, Mortgage Lending Industry, Pre-Certification Motions, U.S. Supreme Court

New life for the death knell? SCOTUS accepts Microsoft Corp. v. Baker

On January 15, 2016, the U.S. Supreme Court granted certiorari to review the decision of the Ninth Circuit in Baker v. Microsoft Corporation. The question presented is: “Whether a federal court of appeals has jurisdiction under both Article III and 28 U.S.C. § 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice.” Read more >>

Class Definitions, Federal Class Action Law, U.S. Supreme Court

No good deed goes unpunished: Did P.F. Chang’s prompt notice of data breach create standing to sue?

On April 14, the court released its opinion in Lewert v. P.F. Chang’s China Bistro, Inc., holding that class plaintiffs may satisfy Article III standing by alleging both an increased risk of fraudulent charges and identity theft, as well as costs incurred in mitigating a future risk of harm. Although this is the second time the Seventh Circuit has addressed standing in this context, the case expands the court’s already generous standard. It also illustrates the difficult choices faced by companies whose systems are hacked. Read more >>

Class Definitions, Data Privacy and Cyber Security, U.S. Supreme Court

Third Circuit "clarifies" ascertainability: Is the circuit split?

The Third Circuit has published extensively in recent years on the issue of ascertainability. The court teaches that ascertainability is an implied prerequisite for class certification under Rule 23, and should be separately considered by the trial court. The gist of the doctrine is that a class must be defined by reference to objective criteria, and there must be a reliable and administratively feasible mechanism for determining who falls within that definition.

On April 16, 2015, the Third Circuit issued its fifth ruling in three years on this subject: Byrd v. Aaron’s, Inc., No. 14-3050, 2015 U.S. App. LEXIS 6190 (3d Cir. April 16, 2015). Why? It said that it was “necessary to address the scope and source of the ascertainability requirement” because of “apparent confusion in the invocation and application” of the doctrine in the Third Circuit. Id. at *9.

The Byrd court reversed certification of a class of consumers who had leased or purchased laptop computers that contained unauthorized spyware. The decision tracks and clarifies much of the case law established by the Third Circuit’s prior decisions, with two important exceptions.

First, although the court acknowledged that there would be ambiguity in determining exactly who was—or wasn’t—a “household member” of a purchaser or lessee, it said that the inquiry would “not require a ‘mini-trial,’ nor does it amount to ‘individualized fact-finding’” because “anyone charged with administering the fund resulting from a successful class action [will] ensure that person is actually among the 895 customers identified by the Byrds.” Id. at *34–35.

In other words, the term “household members” was ascertainable not because it is administratively feasible for the trial court to figure it out at the class certification stage, but because a claims administrator could sort it out after class certification and judgment on the merits.

As an implied prerequisite to Rule 23 certification, however, the ascertainability analysis has to be performed before certification, not after. And it needs to be performed by the court, not the claims administrator. That’s because the court needs to be able to ascertain class membership to ensure that class members receive notice before trial to so that they can either opt out or be bound by the judgment. Any rule that permits notice after trial re-introduces the now-discredited practice of one-way intervention, which Rule 23 was amended to preclude.

Second, in Carrera v. Bayer Corp., 727 F.3d 300, 307 (3d Cir. 2013), the court previously held that a truly “manageable process [is one] that does not require much, if any individualized factual inquiry.” Although most courts say that “mini-trials” and individualized determinations cut against ascertainability, few have quantified just how much individualized evidence will render a class un-ascertainable. In the Third Circuit, the answer was clear: “Not much, if any.”

But the Byrd court apparently took a very different view. It said:

Carrera does not suggest that no level of inquiry as to the identity of class members can ever be undertaken. If that were the case, no Rule 23(b)(3) class could ever be undertaken. We are not alone in concluding that “the size of a potential class and the need to review individual files to identify its members are not reasons to deny class certification.” See Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 539–40 (6th Cir. 2012).

Byrd, 2015 U.S. App. LEXIS at *35 (emphasis in original).

True, Carrera didn’t say that “no” inquiry can ever be undertaken. But the Young case approved the review of hundreds of thousands of individual local government premium tax assignments as administratively feasible. Invoking Young stands in sharp contrast to the “not-much-if-any” standard approved in Carrera. Whether the reference to Young was inadvertent, or whether the Byrd panel really meant to depart from the “not-much-if-any” standard set by Carrera, remains to be seen. It will be interesting to see how the courts within the Third Circuit sort out this apparent contradiction.

Class Definitions

U.S. Supreme Court to decide whether “no-injury” classes have Article III standing

On April 27, 2015, the U.S. Supreme Court accepted jurisdiction over Spokeo, Inc. v. Robins, 742 F.3d 409 (9th Cir. 2014), to answer this question: May Congress confer Article III standing upon a plaintiff who suffers no concrete harm and who could, therefore, not otherwise invoke the jurisdiction of a federal court by authorizing a private right of action based on a bare violation of a federal statute?

Court watchers will recall that two years ago, SCOTUS accepted jurisdiction over the same issue in another case from the Ninth Circuit, First American Corp v. Edwards, 132 S. Ct. 2536 (2012). There, the Court was to determine whether a class action could be maintained for an alleged violation of the Real Estate Settlement Procedures Act (RESPA), despite the fact that none of the class members had suffered any actual injury. The case was of enormous consequence since Congress has passed dozens of statutes that grant private rights of action for their mere violation, whether or not there has been an actual harm of any sort.

But the Edwards case was dismissed before decision, and it left many wondering why. The dismissal also left unanswered whether “no-injury” classes can be maintained consistent with Article III.

Spokeo raises the same issues. The plaintiff brought suit against the people-search website for an alleged violation of the Fair Credit Reporting Act (FCRA). The plaintiff, who was unemployed, claimed that erroneous information posted by Spokeo hurt his employment opportunities. He sued for economic loss and emotional distress. The district court found the plaintiff’s injury to be speculative and dismissed his claims. But the Ninth Circuit reversed, despite Spokeo’s argument that the plaintiff lacked standing since he suffered no specific, concrete injury.

Spokeo, like Edwards, is of enormous practical importance far beyond the world of websites. From banks to credit collection companies to telecom providers, Congress has used the concept of statutory standing — and punitive fines — to empower class action lawyers to bring claims worth billions of dollars against companies on behalf of clients who suffered literally no injury at all.

Yet “[f]rom Article III’s limitation of the judicial power to resolving ‘Cases’ and ‘Controversies,’ and the separation-of-powers principles underlying that limitation,” the Supreme Court has deduced a set of requirements that together make up the irreducible constitutional minimum of standing.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1386 (2014) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). “Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution.” Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208, 220-21 (1974).

Can Congress create standing for the mere violation of a statute without any corresponding harm, consistent with the requirement of constitutional standing contained in Article III? Will the Congressional enforcement power be curtailed? Or will the Court rule that a technical violation of a statute is concrete enough to meet the test for standing under Article III?

We will be watching.

Standing, U.S. Supreme Court