|
As this challenging year draws to a close, Predominant Issues would like to look back at some of the key class action opinions that we reported on in 2020—and highlight a few emerging issues that will likely garner significant attention in the months ahead.
We thank you for your continued readership and look forward to providing succinct, reader-friendly analysis of class action developments in the coming year.
Most importantly, we wish you a safe and happy holiday season! |
SCOTUS TAKES UP ISSUE OF CLASS MEMBER STANDING |
In our March issue, we reported on the Ninth Circuit’s ruling in Ramirez v. TransUnion LLC, which stemmed from a class action trial that resulted in a $60 million jury award for alleged violations of the Fair Credit Reporting Act. While an important decision at the time, the case became even more significant last week when the U.S. Supreme Court granted TransUnion’s certiorari petition concerning an issue that has divided lower courts for many years: the problem of uninjured class members. Specifically, the Supreme Court granted cert on the following question: “Whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.” The Supreme Court has previously signaled an interest in taking up these issues but has not yet had occasion to resolve them. See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1050 (2016) (recognizing that “the question whether uninjured class members may recover is one of great importance” but holding it was “premature” to resolve the issue because petitioner had abandoned it on appeal).
This case will be closely watched for its potential impact on post-Spokeo caselaw, including the extent to which a class can be certified where a majority of absent class members did not suffer anything more than a bare procedural violation and therefore lack sufficiently concrete injuries to have standing. Depending on how broadly the Court decides the question, its ruling could impact any class action in which a non-trivial proportion of class members may not have been injured at all by the defendant’s alleged misconduct. Below is our summary of the Ninth Circuit’s opinion last February. We will provide full coverage of the Supreme Court’s treatment of this important issue next year. |
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. |
CIRCUITS WEIGH IN ON PERSONAL JURISDICTION IN MULTI-STATE CLASS ACTIONS |
At the end of last year, we noted that four U.S. Courts of Appeals—the Fifth, Seventh, Ninth, and D.C. Circuits—could soon be the first to issue decisions concerning whether the Supreme Court’s landmark personal jurisdiction decision in Bristol-Myers Squibb v. Superior Court of California, 137 S. Ct. 1773 (2017), applies to federal class actions. By March, three of the four circuits had ruled. Rather than adding clarity, however, these decisions in many ways reinforced the need for the Supreme Court to ultimately resolve several key issues, including whether defendants must face putative nationwide class actions in states where they are not subject to general jurisdiction. Indeed, only one circuit—the Seventh Circuit—reached the ultimate personal jurisdiction question and rejected the notion that Bristol-Myers Squibb applies to putative nationwide class actions filed in federal court. In contrast, both the D.C. Circuit and Fifth Circuit determined it was premature to resolve the issue given the procedural posture of the case. Even so, the Fifth Circuit suggested—and the D.C. Circuit expressly held—that a determination of whether Bristol-Myers Squibb applies in the context of multi-state class actions must be deferred unless and until a class is certified, as absent class members are not properly parties before the court prior to Rule 23 certification. Significantly, however, neither the D.C. Circuit nor the Firth Circuit rejected the notion that the citizenship of absent class members may ultimately factor into the court’s personal jurisdiction analysis. Moreover, none of the three circuits called into question the separate issue of whether a named plaintiff’s claims fail for lack of personal jurisdiction when (i) there is no general jurisdiction and (ii) his or her individual claims do not “arise out of or relate to” the defendant’s contacts with the forum state. Courts generally answer that question with a definitive “yes” (and increasingly so).
Below, you can read two articles published earlier this year that summarize these developments. |
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.
|
Fifth Circuit Becomes the Third Appeals Court to Address the Applicability of Bristol-Myers Squibb’s Personal Jurisdiction Ruling to Putative Class Actions |
In the March edition of Predominant Issues, we reported on the first two appellate decisions (from the D.C. and Seventh Circuits) to address whether the Supreme Court’s landmark personal jurisdiction decision in Bristol-Myers Squibb v. Superior Court of California applies to putative class actions. Now, the Fifth Circuit has weighed in, holding that a defendant does not waive the right to challenge personal jurisdiction as to the claims of absent class members by not raising that argument in a motion to dismiss—provided that the defendant properly preserves the argument in its answer and through its subsequent litigation conduct.
- In Cruson v. Jackson National Life Insurance Company, Texas plaintiffs brought a putative class action against Jackson National Life Insurance Company in the Eastern District of Texas, alleging that Jackson overcharged them by miscalculating fees for early withdrawals from the annuities they had purchased from Jackson.
- Jackson filed a motion to dismiss the initial complaint and an amended complaint for lack of subject-matter jurisdiction and failure to state a claim. Jackson did not assert a personal jurisdiction defense in either of its motions to dismiss. But its answer expressly denied that the court had personal jurisdiction with respect to the claims of putative class members residing outside Texas.
- In its opposition to the plaintiffs’ motion to certify a nationwide class, Jackson argued that the court lacked personal jurisdiction over the non-Texas class members’ claims. The district court held that Jackson waived this defense by not raising it in its initial Rule 12(b) motions and by litigating the merits of the plaintiffs’ claims. The court granted the motion for class certification.
- Jackson filed a Rule 23(f) petition, which the Fifth Circuit granted. On appeal, the Fifth Circuit concluded that Jackson had not waived its personal jurisdiction defense as to the claims of the non-Texas class members.
- The court explained that a defense which is omitted from a Rule 12 motion is waived only if the defense was “available” to the defendant at the time the motion was filed. Jackson’s personal jurisdiction defense as to the absent class members, however, was not “available” at the time of Jackson’s motion to dismiss, because the absent class members “were not yet before the court when Jackson filed its Rule 12 motion.”
- In other words, the absent class members’ claims only became relevant, and the personal jurisdiction defense only became “available” to Jackson, when the district court certified the class. Because Jackson asserted its personal jurisdiction defense at that juncture, Jackson did not waive the defense.
- The Fifth Circuit declined to address the merits of Jackson’s personal jurisdiction defense, leaving that issue for the district court to determine in the first instance. The panel observed that although “Bristol-Myers provided new legal support for Jackson’s objection, the Supreme Court’s decision did not make the objection ‘available.’ Certification did.”
- Although the Fifth Circuit’s ruling constituted a “win” for the defendant on the waiver issue, it may make matters more difficult for class action defendants in the Fifth Circuit, as the court’s reasoning suggests that district courts will no longer dismiss the claims of out-of-state absent class members for lack of personal jurisdiction at the pleading stage. Like the Seventh Circuit and D.C. Circuit opinions before it, however, the Fifth Circuit’s ruling did not call 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.
Read the Fifth Circuit’s opinion here. |
AN ACTIVE YEAR FOR TCPA LITIGATION |
In 2020, courts returned again and again to the many complex issues raised by putative class actions alleging violations of the Telephone Consumer Protection Act (“TCPA”). Virtually every edition of Predominant Issues this year featured at least one article concerning an important development in TCPA law. In February, for instance, we reported on a widening circuit split concerning the TCPA’s definition of “auto-dialers”—a circuit split that the Supreme Court may soon resolve, with arguments held earlier this month. In August, we analyzed the Supreme Court’s opinion in Barr v. American Association of Political Consultants, which held that the government-backed debt exception to the TCPA violated the First Amendment. As we noted last month, some district courts have subsequently held that the TCPA’s autodialer provision should be deemed wholly unconstitutional during the five-year period in which the government-debt exception was operative, and that the Supreme Court’s severance of the exception cannot be applied retroactively. Should they gain traction, these rulings may jeopardize the bulk of currently pending TCPA claims (though not future TCPA claims).
While we could have devoted an entire “Year in Review” issue on TCPA litigation alone, below we have reprinted one of the more noteworthy features we published in 2020 on this quickly evolving area of class action litigation. |
Supreme Court Strikes Down TCPA Exception—While Keeping the Remainder of the Act Intact—and Will Soon Address “Autodialer” Definition in Highly Anticipated Decision |
On July 6, the Supreme Court issued a long-awaited decision in Barr v. American Association of Political Consultants addressing whether a provision of the Telephone Consumer Protection Act (“TCPA”)—which generally prohibits robocalls to cell phones—violates the First Amendment by exempting calls made to collect a debt owed to or guaranteed by the United States. In a fractured set of opinions, the Court invalidated the government-debt exception, but it left the TCPA’s restrictions on automated calls intact. The opinion dashed the hopes of those who saw the appeal as a potential avenue for a broader invalidation of the 1991 Act that has engendered significant class action litigation, particularly in recent years. Three days later, however, the Court granted a petition for certiorari in Facebook, Inc. v. Duguid to address a growing circuit split regarding what devices constitute autodialers under the statute.
- The plaintiffs in Barr were political and nonprofit organizations that want to make political robocalls to cell phones. They argued that the TCPA’s government-debt exception violates the First Amendment by favoring debt-collection speech over political and other speech. Accordingly, plaintiffs sought to invalidate the TCPA’s restrictions on automated calls in their entirety, rather than simply invalidating the government-debt exception.
- Justice Kavanaugh authored a plurality opinion, joined in full by Chief Justice Roberts and Justice Alito and in part by Justice Thomas. After concluding that the government-debt exception is, in fact, a content-based speech restriction, the plurality applied strict scrutiny—a standard that the government conceded it could not satisfy.
- Justice Kavanaugh then turned to the remedy for the constitutional violation. Rather than striking down the restrictions in their entirety, as plaintiffs requested, the plurality severed the exception from the TCPA, citing both the “strong presumption” that “an unconstitutional provision in a law is severable” and an explicit severability clause in the Communications Act, which the TCPA amended.
- Three other justices wrote separate opinions.
- Justice Sotomayor authored a two-paragraph opinion concurring in the judgment. Justice Breyer submitted an opinion concurring in the judgment with respect to severability and dissenting with respect to constitutionality, which was joined by Justices Ginsburg and Kagan. Justice Gorsuch submitted an opinion concurring in part and dissenting in part, agreeing that the exception was unconstitutional, albeit for different reasons, but dissenting with respect to severability. Justice Thomas joined in Gorsuch’s dissent regarding severability.
- Notably, Gorsuch stated that he would hold that the plaintiffs are entitled to an injunction preventing enforcement of the robocall ban against them. Gorsuch explained that severing the government-debt exception gave plaintiffs no meaningful relief because they did not challenge the exception—they challenged the entire robocall ban. He queried: “What is the point of fighting this long battle, through many years and all the way to the Supreme Court, if the prize for winning is no relief at all?”
- The same week, the Supreme Court granted Facebook’s petition for certiorari asking the Court to resolve the circuit split regarding the TCPA’s definition of “autodialers.” The Court limited its review to the second question presented: whether the definition “encompasses any device that can ‘store’ and ‘automatically dial’ telephone numbers, even if the device does not ‘us[e] a random or sequential number generator.’”
- As we reported in the February edition of Predominant Issues, the Eleventh and Seventh Circuits have narrowly interpreted “autodialer,” limiting the term to devices that send messages or make calls to randomly or sequentially generated phone numbers. The Ninth and Second Circuits’ interpretation is much broader, encompassing all devices with the capacity to store and automatically dial numbers.
- The Supreme Court’s ruling in Facebook will have a significant impact on the ever-growing number of class actions under the TCPA. Briefing will commence soon, and argument will be heard after the Court’s next term begins in October.
- Read the Supreme Court’s opinion in Barr here. The Facebook docket is here.
|
NEW ROADBLOCKS TO CLASS SETTLEMENT IN ELEVENTH CIRCUIT |
In our October and November issues, we reported on a pair of Eleventh Circuit decisions rejecting class action settlements that the district court in each case had approved. In Johnson v. NPAS Solutions, LLC, the court held that “incentive awards”—payments routinely provided to named plaintiffs in class actions for their service as class representatives—are categorically unlawful. In so doing, the court relied largely on two century-old Supreme Court cases decided long before the advent of the modern class action device. Notably, the Eleventh Circuit is considering whether to rehear the case en banc. Several amici have filed briefs supporting rehearing. We will continue to report on any developments in Johnson in the coming year, as well as the open question of whether courts in other circuits will follow suit by similarly rejecting incentive awards.
Additionally, in Muransky v. Godiva Chocolatier, Inc., the en banc Eleventh Circuit reversed the district court’s approval of a class settlement on the ground that the named plaintiff did not have standing to sue for the alleged statutory violation in question. This decision provides an important reminder that the predicates for Article III jurisdiction—including standing to sue—must be satisfied at all stages of a class action, including the settlement stage. As the court put it, parties to a class action settlement cannot “bargain around Spokeo.”
Below are our summaries of Johnson and Muransky from our October and November issues. |
Eleventh Circuit Bans Class Representative Incentive Awards Based on Supreme Court Precedents Long Predating Rule 23 |
On September 17, 2020, in a first-of-its-kind opinion, the Eleventh Circuit reversed in part a district court’s approval of a class action settlement, holding that “incentive awards”—payments routinely provided to named plaintiffs in class actions for their service as class representatives—are per se invalid.
- The Eleventh Circuit considered an objection to a class-wide settlement of claims under the Telephone Consumer Protection Act (“TCPA”). The $1.4 million settlement provided the class representative with a $6,000 incentive award.
- The objector relied on a pair of century-old Supreme Court cases, Trustees v. Greenough, 105 U.S. 527 (1882), and Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885), in arguing that the incentive award was impermissible, and the Eleventh Circuit agreed.
- Greenough and Pettus established that attorneys’ fees can be paid from a “common fund”—a rule now commonly applied in class actions. According to the court, those cases also established important limits on the types of awards attorneys and litigations may recover from a common fund, resulting in a “fairly clear” rule: “A plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.”
- Though the two Supreme Court cases were decided long before the advent of the modern class action, the Eleventh Circuit found the incentive award analogous to the payment of “personal expenses” Greenough and Pettus rejected, a practice which the Supreme Court called “decidedly objectionable.” The Eleventh Circuit further characterized the incentive award as a “bounty,” and determined that the practice of paying them to class representatives promoted litigation by “providing a prize to be won.”
- As to upending the longstanding practice of providing incentive awards, the Eleventh Circuit explained that the practice was “a product of inertia and inattention, not adherence to law.” While Greenough and Pettus long predate the adoption of Rule 23, the court observed that the Rule has never mentioned incentive awards; thus, the “uncomfortable fact is that the judiciary has created these awards out of whole cloth.”
- Notably, the court did not limit its holding to incentive awards that are drawn from the class’s recovery or that otherwise create conflicts among class—the typical contexts in which incentive awards have been overturned. Rather, the court categorically banned them. In so doing, the court called into question the validity of any class settlement contemplating incentive payments still under review within the courts of the Eleventh Circuit. Indeed, several district courts within the Eleventh Circuit have already cited this opinion and rejected class settlements that include incentive payments. It remains to be seen whether any courts outside of the Eleventh Circuit will follow suit, but we expect certain objectors to begin raising the argument in courts around the country.
- Read the Eleventh Circuit’s opinion in Johnson v. NPAS Solutions, LLC here. The class representative has already filed a petition for rehearing en banc, which you can read here.
|
En Banc Eleventh Circuit Vacates Order Approving Class Settlement, Holding that Plaintiff Lacked Article III Standing Where Bare Statutory Violation Did Not Cause Concrete Harm |
On October 28, 2020, the en banc Eleventh Circuit reversed the Northern District of Georgia’s approval of a class settlement, holding that the settlement was invalid because the named plaintiff did not have standing to sue for a violation of the Fair and Accurate Credit Transactions Act (“FACTA”). The case represents the latest example—and perhaps the most sweeping decision to date—in which the Eleventh Circuit has construed the Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), and held that a plaintiff alleging a statutory violation failed to show concrete harm sufficient to establish Article III standing. (You can read coverage of previous such cases here, here, and here.) That said, it is clear that these thorny Spokeo-based standing issues still engender significant disagreement in the Circuit, as Judge Britt Grant’s majority opinion gave rise to three separate dissents totaling 111 pages.
- The plaintiff alleged that Godiva Chocolatier, Inc. (“Godiva”) violated FACTA by including the first six and the last four digits of his credit card number on his receipt (the Act forbids merchants from printing more than the last five digits of the card number). At the time he originally filed the complaint, the plaintiff pleaded the case as a pure statutory violation and disclaimed any recovery for actual damages.
- Given the staggering potential for statutory damages under FACTA—between $100 and $1,000 per class member—the parties quickly reached an agreement to settle the case. A driving factor in their settlement discussions was the Supreme Court’s impending decision in Spokeo. Shortly after the parties reached an agreement to settle for $6.3 million—an amount significantly smaller than the $342 million potential liability for Godiva—the district court certified the class and granted preliminary approval of the settlement.
- By the time the district court held a fairness hearing on the proposed class settlement, the Supreme Court had issued its opinion in Spokeo. In light of the Spokeo decision, one objector to the settlement argued that the named plaintiff did not have standing to pursue the FACTA claim. The district court, however, approved the class settlement without addressing the Article III or Spokeo concerns.
- On appeal, a panel of the Eleventh Circuit affirmed, holding that the plaintiff had standing under Spokeo. Under the panel’s reasoning, any statutory violation that increases the risk—no matter how small—of the type of harm Congress sought to prevent (here, an increased risk of identity theft) is sufficient to confer Article III standing.
- Sitting en banc, however, the Eleventh Circuit reversed. The Eleventh Circuit emphasized that “[b]are procedural violations,” even in the context of an alleged “statutory violation,” are not enough to confer standing under Spokeo, because there is no injury in fact. Instead, the court reiterated that plaintiffs must identify real harm to support standing.
- To determine whether real harm flows from an alleged statutory violation, the Eleventh Circuit instructed courts to ask: (1) “if the violation itself caused harm, whether tangible or intangible,” and, if not, (2) “whether the violation posed a material risk of harm to the plaintiff,” i.e., “more than a minor or theoretical risk—a ‘substantial risk’ that the harm will occur.” And, “[i]f the answer to both questions is no, the plaintiff has failed to meet his burden of establishing standing.” Importantly, in assessing standing, courts “need to come to [their] own conclusion[s] that the alleged harm is concrete” and cannot simply rely on the text of a statute or a congressional finding to identify harm sufficient to establish standing.
- Applying this framework, the court rejected the plaintiff’s argument that his FACTA-noncompliant receipt, standing alone, caused him any direct injury or posed a material (as opposed to hypothetical) risk of harm. The court noted that there was no intrinsic worth in a compliant receipt, so a noncompliant receipt itself was not a concrete injury. The court also held that the plaintiff had not provided any evidence (or even sufficiently alleged) that the noncompliant receipt increased his risk of identity theft.
- The decision is just another example in a growing body of caselaw confirming that a lack of Article III standing is a powerful defense against class actions alleging mere statutory violations. Moreover, the decision underscores that Article III standing is a hurdle that plaintiffs must clear, not only to pursue their claims on the merits, but also to settle on behalf of a proposed class—and the evidentiary burden is not relaxed “even if the parties wish to bargain around Spokeo.”
- The case is Muransky v. Godiva Chocolatier, Inc., Nos. 16-16486 & 16-16783 (11th Cir. Oct. 28, 2020), and the decision can be found here.
|
|
|