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D.C. Circuit and Seventh Circuit Address Applicability of Bristol-Myers Squibb’s Personal Jurisdiction Ruling to Putative Class Actions |
- Predominant Issues has been tracking district court decisions across the country addressing whether the Supreme Court’s decision in Bristol-Myers Squibb v. Superior Court of California—which reiterated that a plaintiff’s claims must “arise out of or relate to” the defendant’s contacts with the forum state to confer specific personal jurisdiction—applies in putative class actions. As we have reported, this issue has divided district courts. Some courts have concluded that it does, and have held that a defendant cannot be compelled to defend nationwide class claims in a state where it is not subject to general jurisdiction. Other courts, however, have reached the opposite conclusion. Now, the D.C. Circuit and the Seventh Circuit have become the first two appellate courts to weigh in on this issue, with more to follow soon.
- In Molock v. Whole Foods Market Group, Inc., a split panel of the D.C. Circuit held that it is premature to assess personal jurisdiction over the claims of putative absent class members before a class is certified, because putative class members are not treated as parties to the lawsuit before a class is certified, and “personal jurisdiction entails a court’s ‘power over the parties before it.’”
- In Molock, the district court denied Whole Foods’s motion to dismiss the claims of the out-of-state absent class members for lack of personal jurisdiction, and certified its order for interlocutory appeal, which the D.C. Circuit accepted.
- The panel majority affirmed the district court’s order but did not reach the ultimate issue of whether Bristol-Myers Squibb applies in the context of multi-state class actions. Instead, the majority held that this issue should be deferred unless and until a class is certified.
- The majority observed that, although class members are considered parties for some purposes if a class is certified, putative class members “are always treated as nonparties”—relying primarily upon the Supreme Court’s decision in Smith v. Bayer Corp., 564 U.S. 299 (2011). Because personal jurisdiction is a question of the court’s jurisdiction over a party, “it is class certification that brings unnamed class members into the action and triggers due process limitations on a court’s exercise of personal jurisdiction over their claims.” Accordingly, “[a]ny decision purporting to dismiss putative class members before that point would be purely advisory.”
- The court did not address how personal jurisdiction over the claims of the absent class members would be decided if a class is eventually certified, leaving the door open for Whole Foods to renew its argument that the nationwide class claims should be dismissed.
- In a robust dissent that may influence the D.C. Circuit to grant en banc review, Judge Silberman rejected the majority’s finding that Whole Foods’s motion was premature and went on to find that the court lacked personal jurisdiction over the claims of the putative nationwide class. Judge Silberman found no material difference between the due process considerations raised by the mass joinder of the claims of individual plaintiffs in Bristol-Myers Squibb and the “virtual joinder” of the claims of absent class members under Rule 23.
- In Mussat v. IQVIA, Inc., by contrast, the Seventh Circuit reached the ultimate personal jurisdiction question and concluded that “the principles announced in Bristol-Myers do not apply to . . . a nationwide class action filed in federal court under a federal statute.”
- In Mussat, the district court granted the defendant’s motion to strike the nationwide class allegations in a case involving alleged violations of the Telephone Consumer Protection Act (“TCPA”), concluding that the court lacked personal jurisdiction over the claims of the out-of-state putative class members.
- After granting the plaintiff’s interlocutory petition, the Seventh Circuit first assessed whether an order striking class allegations was properly appealable under Rule 23(f). Although the order was not “an order granting or denying certification under [Rule 23],” the court reasoned that it was “functionally equivalent” to a class certification order. Relying on Microsoft v. Baker, 137 S. Ct. 1702 (2017), the court concluded that the order was immediately appealable.
- As to the merits of the personal jurisdiction issue, the Seventh Circuit relied heavily on the fact that Bristol-Myers Squibb was expressly based on “settled principles” of personal jurisdiction and, long before that decision was rendered, courts routinely allowed nationwide class actions to proceed in states where the defendant was not subject to general jurisdiction. The court also emphasized that absent class members are treated as nonparties for purposes of diversity jurisdiction, and reasoned that this calculus should not change for purposes of personal jurisdiction.
- Cases presenting this question remain pending before the Fifth Circuit and the Ninth Circuit. And, notably, neither the Seventh Circuit nor the D.C. Circuit called into question the generally prevailing view after Bristol-Myers Squibb that non-resident named plaintiffs may not pursue claims in jurisdictions where the defendant is not subject to general jurisdiction.
- Ultimately, until the Supreme Court provides clarity, this issue will continue to present itself whenever defendants face putative nationwide class actions in states where they are not subject to general jurisdiction.
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Ninth Circuit Affirms Judgment Against TransUnion After Rare Class Action Trial and Offers Illuminating Discussion of Class Member Standing at the Final Judgment Stage |
On February 27, the Ninth Circuit affirmed a jury verdict against TransUnion in a class action involving alerts that TransUnion included in certain consumers’ credit files that falsely indicated they might be on a national security watch list. Perhaps most notably, however, the court clarified—in an issue of first impression—that all class members in a certified class action must satisfy Article III standing requirements at the final judgment stage in order to obtain damages.
- Plaintiff brought a putative class action against TransUnion for including in certain consumers’ credit files an alert indicating that they might be on the U.S. Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) list of Specially Designated Nationals (“SDNs”) prohibited from doing business in the United States.
- Plaintiff brought claims under the Fair Credit Reporting Act (“FCRA”), alleging that TransUnion failed to maintain reasonable procedures for assuring maximum possible accuracy when preparing consumer reports and that it failed to disclose credit information and summaries of rights to consumers who inquired about the OFAC alerts in their files.
- TransUnion provided OFAC information to creditors to assist them in avoiding the fines resulting from transacting with an SDN. TransUnion received information about potential OFAC matches from a third-party vendor—which conducted basic first-and-last-name searches that led to thousands of false positives—“despite having the capability to conduct more accurate searches and despite having been put on notice by another circuit court in 2010 that this practice violated the FCRA.” At trial, a jury assessed $60 million in damages after finding three willful violations of the FCRA.
- On appeal, TransUnion argued, among other things, that absent class members lacked Article III standing because they claimed only procedural violations of the FCRA.
- The Ninth Circuit first agreed with TransUnion that “every member of a class certified under Rule 23 must satisfy the basic requirements of Article III standing at the final stage of a money damages suit when class members are to be awarded individual monetary damages.”
- The court stated that a contrary holding that only the class representative needs to show standing at the final judgment stage “would directly contravene the Rules Enabling Act, because it would transform the class action—a mere procedural device—into a vehicle for individuals to obtain money judgments in federal court even though they could not show sufficient injury to recover those judgments individually.”
- The court found, however, that all class members—including those who did not have creditor inquiries on their credit files during the class period—had suffered “a real risk of harm” as a result of including the OFAC alerts in their credit files, as the alerts were “made available” to creditors and employers.
- Dissenting in part, Judge McKeown stated that only class members whose information was actually disclosed to a third party had standing to assert a “reasonable procedures” claim under the FCRA. According to Judge McKeown, the egregious facts supporting the named plaintiff’s claims could not be imputed to the class as a whole. Because the trial was largely devoid of evidence concerning the absent class members, jurors were left to speculate that absent class members suffered the same injury as the named plaintiff, which should have been insufficient to confer Article III standing.
- While the Ninth Circuit upheld the statutory damages award of $984.22 per class member (which was within the statutory range of $100-$1,000), the court reduced the jury’s punitive damages award, concluding that a punitive-to-compensatory ratio of 4:1 constituted the constitutional maximum. The court reasoned that TransUnion’s conduct “was not so egregious as to justify a punitive award of more than six times an already substantial compensatory award.”
- In addition to grappling with pervasive issues concerning when pure statutory violations constitute Article III harm in the wake of Spokeo, the case is significant because it clarified that absent class members’ claims at trial cannot simply rise or fall with those of the class representative(s). Rather, there must be evidence that all class members have individual standing to sue. Although the dissent disagreed with the majority’s conclusion that the plaintiff’s evidence at trial adequately made this showing, even the majority opinion recognized that “district courts and parties should keep in mind that they will need a mechanism for identifying class members who lack standing at the damages phase.” These aspects of the Ninth Circuit’s ruling should prove helpful to class action defendants in future cases—particularly the rare cases that proceed to trial.
The case is Ramirez v. TransUnion LLC, No. 17-17244 (9th Cir. 2020). Read the Ninth Circuit’s opinion here. |
Third Circuit Affirms Judgment in Favor of Serial TCPA Litigant Due to Defendant’s Failure to Respond to Request for Admission |
On March 3, the Third Circuit upheld the Eastern District of Pennsylvania’s judgment in favor of a repeat player in TCPA litigation, concluding that the plaintiff had standing to sue because the calls in question went to his personal cellphone. The case is unusual because the same plaintiff admitted in prior litigation that he also used his cellphone for business purposes, which defeated his standing to sue in that case. The Third Circuit determined, however, that the defendant’s untimely discovery responses barred it from introducing evidence of plaintiff’s otherwise fatal admission in the earlier case.
- Plaintiff James Everett Shelton—a serial litigant who has filed dozens of TCPA actions—brought suit against Fast Advance Funding (“FAF”) in May 2018, claiming the loan company violated the TCPA by making 22 telemarketing calls to his cell phone, despite his number being listed on the National Do Not Call Registry.
- In an earlier case, the plaintiff admitted he used his cell phone for both personal and business purposes. The court in that case thus held that the plaintiff did not have standing, because business numbers may not be registered on the National Do Not Call Registry. FAF was aware of the earlier court’s finding and submitted a proposed jury instruction in the current case stating that the plaintiff lacked standing under the TCPA because he used his cell phone for both personal and business purposes.
- The court refused to adopt the proposed instruction, however, because FAF failed to timely respond to plaintiff’s request for admission that the cell phone was a personal telephone; thus, that fact was deemed admitted under FRCP 36. The court rejected FAF’s argument that it had no obligation to respond because its response was due after the close of discovery. The court then granted plaintiff partial summary judgment.
- The Third Circuit affirmed the district court’s rulings, holding that the plaintiff had standing to advance his TCPA claims. The Third Circuit explained that nothing in Rule 36 provides that a party may ignore requests for admission if the responses are due after the discovery cutoff. Thus, the undisputed fact that FAF’s calls went to plaintiff’s cellphone was enough to establish his standing under the TCPA, despite his admission in the separate TCPA case.
- The case serves as a cautionary reminder that—barring a local rule or scheduling order providing otherwise—parties must respond to all requests for admission served within the discovery period, even if the response deadline falls outside the discovery cutoff.
The case is Shelton v. Fast Advance Funding, Inc., No. 19-2265 (3d Cir. 2020). Read more here. |
Maryland Federal Court Holds that Plaintiffs in Marriott Data Breach MDL Have Standing to Sue |
On February 21, the District of Maryland held that consumers had standing to assert claims arising from the historic data breach that hit Marriott in 2018, but the court dismissed the plaintiffs’ claim for negligence under Illinois law. The court declined to dismiss the remaining tort, contract, and statutory claims.
- In November 2018, Marriott announced that it had been the target of one of the largest-ever data breaches, in which hackers gained access to Starwood’s guest information database. Over four years, hackers allegedly stole contact information and even passport numbers from guests in the database.
- Shortly after the breach was announced, consumers who had provided their personal information to Marriott filed a putative class action against the hotel chain under theories of tort, contract, and breach of statutory duties. The plaintiffs claimed Marriott failed to take reasonable steps to protect their personal information against the foreseeable risk of a cyber-attack.
- Marriott moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6), arguing, among other things, that most of the plaintiffs lacked standing because they did not allege that their information had been misused. The court disagreed.
- The court held that the plaintiffs adequately alleged an injury-in-fact for purposes of standing. The court explained that the fact that the plaintiffs’ personal information was targeted for misuse created a non-speculative, imminent threat of identity theft. For that reason, the plaintiffs’ allegations that they were forced to incur time and money to mitigate that harm also established a concrete injury-in-fact.
- The court further held that a loss in the value of the plaintiffs’ personal information could satisfy the injury-in-fact requirement for Article III standing, as could allegations that the plaintiffs did not receive the benefit of their bargain—which included data security.
- The court also rejected Marriott’s traceability arguments, concluding it was premature to dismiss the plaintiffs’ claims on this basis.
- The court did, however, dismiss the plaintiffs’ negligence claim under Illinois law, concluding that Illinois law did not impose on Marriott a legal duty to plaintiffs to protect their personal information.
- The court denied Marriott’s motion to dismiss the remaining claims, including negligence claims under Florida and Georgia law, breach of contract claims, and statutory claims.
The case is In re: Marriott Int’l, Inc., Customer Data Security Breach Litig., MDL No. 19-md-2879. Read more here. |
California Federal District Court Rejects Class Certification in Toyota HVAC Case |
On March 3, the Central District of California denied class certification in a putative automotive class action against Toyota. The court found that the plaintiffs failed to establish commonality under Rule 23(a)(2), as well as predominance or superiority under Rule 23(b)(3), and could not seek certification under Rule 23(b)(2).
- The plaintiffs alleged that their Toyota vehicles’ heating, ventilation, and air conditioning (“HVAC”) systems emitted foul odors and blew mold into the vehicles, and that Toyota knowingly concealed this purported design defect. The putative class vehicles spanned 13 different car models (each produced over several years), resulting in 84 total model years. The plaintiffs alleged that Toyota committed fraud, negligent misrepresentation, breach of implied warranty under multiple state laws, and violated various state consumer protection statutes. The plaintiffs sought to certify two nationwide classes and eight state sub-classes.
- Toyota opposed class certification, contending that the plaintiffs could not establish commonality, predominance, or superiority, and that the class could not be certified under Rule 23(b)(2).
- Before deciding those issues, the court considered Toyota’s Daubert challenge to the plaintiffs’ expert’s opinion that the HVAC systems contained a common defect across all vehicle models that could theoretically allow mold to grow. While the court denied the motion to exclude, it gave little weight to the expert’s opinion, finding that his failure to test any of the putative class vehicles meant that his hypothetical analysis did “little to answer” whether the HVAC systems in fact developed mold.
- The court then denied class certification on several grounds:
- As for commonality and predominance, it found that design differences in the HVAC systems of the various vehicle models precluded the plaintiffs from showing that the systems were sufficiently similar. Moreover, the court held that “[b]ecause the inference of exposure and reliance is not available in sales outside an authorized dealership, individual inquiries would be required … to determine whether putative class members purchased their Class Vehicles from Toyota or a third party.” Privity requirements also varied across the relevant state laws for the implied warranty claims.
- The court similarly rejected the plaintiffs’ superiority arguments. It agreed with Toyota that the number of individualized issues (including differences in statutes of limitations and other material variations in state law) would require mini-trials, rendering class adjudication impractical.
- Finally, the court rejected the plaintiffs’ last-ditch attempt to certify “injunctive relief” classes under Rule 23(b)(2), finding that the plaintiffs’ request for extended warranty coverage and certain repairs was “almost indistinguishable from Plaintiffs’ request for benefit-of-the-bargain damages.”
- By concluding that the plaintiffs failed to identify a single common question—let alone prove that common issues predominated—the court took issue with the sprawling nature of the putative classes. It noted that commonality is generally only found “where the proposed classes are far less varied, often consisting of only a few car models or years, and [where] there is no evidence that the allegedly defective component was redesigned during the class period or varied by car model.” This opinion will prove helpful to automotive defendants facing putative class actions in which plaintiffs’ counsel has attempted to inflate potential damages by encompassing numerous different vehicle models in the class.
The case is Stockinger v. Toyota Motor Sales, U.S.A., Inc., and you can read more here. |
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