Certification: Latest Litigation Trends Strategies for Plaintiff and - - PowerPoint PPT Presentation

Article III Standing and Rule 23(b)(3) Certification: Latest Litigation Trends

Strategies for Plaintiff and Defense Counsel to Pursue or Challenge Certification Today’s faculty features:

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THURSDAY, APRIL 9, 2015

Presenting a live 90-minute webinar with interactive Q&A Molly M. Donovan, Partner, Winston & Strawn, New York Jordan Elias, Of Counsel, Lieff Cabraser Heimann & Bernstein, San Francisco

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Molly M. Donovan

mmdonovan@winston.com

5

What is Article III Standing?

• Constitutional standing is a threshold requirement to sue

in federal court.

• The requirement is in Article III, Section 2, which limits

the judiciary to act only in “cases” and “controversies”.

• One way to ensure the existence of an actual case or

controversy is standing, i.e., the plaintiff must have some personal stake in the dispute and not be a mere advocate.

6

Elements of Article III Standing

• Plaintiff must have suffered:

– an “injury in fact”; – that is “fairly traceable” to the challenged conduct

• f the defendant;

– and, likely to be redressed by a favorable decision.

• See, e.g., Friends of the Earth, Inc. v. Laidlaw Envtl.

Servs., Inc., 528 U.S. 167, 180-81 (2000).

• This is the “irreducible constitutional minimum” for
• standing. Lujan v. Defenders of Wildlife, 504 U.S.

555, 560-61 (1992).

7

What Is Injury In Fact?

• The injury suffered must be:

–concrete and particularized –actual or imminent, not conjectural or hypothetical

• See, e.g., Friends of the Earth, 528 U.S. at 180.

8

Injury In Fact – Is an Alleged Violation

• f “Public Right” Sufficient?
• In 1970, the Supreme Court said “yes”, so long

as the plaintiff alleges that the challenged action “has caused him injury in fact, economic or otherwise.”

– Assoc. of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150, 152 (1970) (emphasis added).

9

Injury In Fact – Is an Alleged Violation

• f “Public Right” Sufficient Without A

Concrete Injury?

• Warth v. Seldon has been cited for the

proposition that the injury required may exist “solely by virtue of statutes creating legal rights” even if no concrete or actual harm is

• alleged. 422 U.S. 490, 500 (1975).

10

Injury In Fact – What Happened in Warth?

• Persons of low to moderate income?

– No standing, “the fact that these petitioners share attributes common to persons who may have been excluded” is insufficient. Plaintiffs themselves must be injured. Id. at 502.

• Home builders?

– No standing, there are no specific or current plans to build in the affected area. Id. at 516.

• Non-profit association?

– No standing, while it’s true that “Congress may create a statutory right…which can confer standing to sue even where the plaintiff would have suffered no judicially cognizable injury in the absence of statute,” there is no such statute here. Id. at 514.

11

Injury in Fact – How did Lujan Clarify Warth?

• In Lujan v. Defenders of Wildlife, the Court

seems to have taken a stricter approach in this

• area. 504 U.S. 555 (1992).

12

Lujan – The Claims to Injury In Fact

• A particular plaintiff’s desire to return to a

particular place to see the species at issue

– This is a cognizable interest (even if only for aesthetics), but the party seeking review must be “himself among the injured”. Id. at 563. – “Some day” intentions are not good enough without concrete plans. Id. at 564.

13

Lujan – The Claims to Injury In Fact

• Any person who uses any part of a “contiguous ecosystem”

and is adversely affected by the conduct “even if the activity is located a great distance away”?

– No, plaintiff must use the area actually affected by the conduct. Id. at 565-66.

• Any person who has an interest in studying the animals

anywhere on the globe and/or any person with a professional interest in the animals, i.e., “anyone who goes to see Asian elephants at the Bronx Zoo”?

– No, this is “beyond all reason”; “anyone…anywhere in the world” goes too far. Id. at 566-67.

14

Lujan – The Claims to Injury In Fact

• A “citizen-suit” provision allowing anyone to file suit

to enjoin a violation?

– No, injury in fact cannot be satisfied by “congressional conferral upon all persons of an abstract, self-contained, non- instrumental ‘right’”. Id. at 573. – The judiciary may participate in law enforcement entrusted to administrative bodies only to protect “individual rights”, i.e., not “public rights that have been legislatively pronounced to belong to each individual who forms part of the public.” Id. at 578.

15

Lujan – How to Reconcile with Warth?

16

• BUT, it’s true that Article III injury may exist solely by

virtue of statutes creating legal rights.

• This means only that Congress can elevate to the

status of a legally cognizable injury concrete, de facto injuries previously inadequate in law. Congress cannot manufacture an injury wholesale.

– Example: Congress can elevate an individual’s personal interest in living in a racially integrated community to a legally cognizable injury.

Jordan Elias

Lieff Cabraser Heimann & Bernstein LLP jelias@lchb.com

Clapper v. Amnesty International USA 133 S. Ct. 1138 (2013)

• Suit by U.S. citizens who engage in sensitive

international communications with individuals whom they believe may be the targets of American surveillance under the 2008 Amendments to the Foreign Intelligence Surveillance Act (“FISA”).

• Action for declaration that FISA was unconstitutional.
• Claimed to have suffered injury in fact because of a

reasonable likelihood that their communications with foreign contacts would be intercepted, and

• because the risk of surveillance requires them to take

costly and burdensome actions to protect confidentiality of their communications.

18

Clapper v. Amnesty Int’l, cont.

• In a 5-4 decision, Court held that the plaintiffs did

not have standing under Article III.

• To establish standing, injury must be:

– Concrete, particularized, and actual or imminent, – Fairly traceable to the challenged action, and – Redressable by a favorable ruling. – Threatened injury must be “certainly impending” to constitute injury in fact. – Allegations of possible future injury are not sufficient.

19

Clapper v. Amnesty Int’l, cont.

• Speculative whether government will imminently target

communications to which respondents are parties.

• Speculative whether government will seek to use FISA

authorized surveillance methods, will be granted authority to do so, and will be successful.

• Causal chain too attenuated, majority finds.
• Majority says it is declining to abandon the usual reluctance

to endorse standing theories that depend on speculation about decisions of independent actors.

• It was no answer to point to costs presently incurred to avoid

a harm that was neither certainly impending nor fairly traceable to action under the FISA Amendments.

20

Clapper v. Amnesty Int’l, conclusion

• Cases since Clapper have been inconsistent.
• Some find no standing on imminence grounds,

reasoning that the plaintiff has suffered no actual injury.

• Others find standing in cases involving similar

facts and claims.

• Data breach and privacy class actions are

notable.

21

Article III Standing at Class Certification

The standing inquiry at class certification focuses on:

• 1. Whether a plaintiff has standing; and
• 2. The class definition.

There is no standing problem if:

• 1. A plaintiff has a plausible claim to concrete, redressable

harm as a result of the alleged violations; and

• 2. The class is defined to include only similarly situated

persons who may have suffered or who may yet suffer the relevant harm.

22

General Standing Principles

Article III standing has three elements.

• 1. The plaintiff suffered “injury in fact”—a concrete and actual

invasion of a cognizable legal interest.

• 2. The injury is “fairly traceable” to the alleged violations

(i.e., a causal connection).

• 3. It is “likely” that a favorable decision will redress the injury.
• “[E]ach element must be supported in the same way as

any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

23

Stages of Civil Litigation

What does this mean in terms of the various legal standards?

• 1. Plausible standing allegations suffice on a motion to

dismiss.

• 2. At summary judgment, there must at least be triable

facts on standing.

• 3. To secure a judgment, the standing elements must

have been proved more likely than not (preponderance of the evidence). So where does class certification fit in?

24

Before Certification

Jurisdiction over the class does not exist until the point it is certified.

• In Smith v. Bayer Corp., 131 S. Ct. 2368, 2379-80 (2011), the Court

unanimously held that a member of a proposed class is not a “party” to whom preclusion can apply.

Up until certification, therefore, any standing arguments will be resolved by reference to the named plaintiff alone.

“That a suit may be a class action, however, adds nothing to the question of standing, for even named plaintiffs who represent a class ‘must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.’” Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 (1976).

25

Certification Stage

A plaintiff need not prove injury to obtain class certification—this would “put the cart before the horse” and “vitiate the economies of class action procedure; in effect the trial would precede the certification. It is true that injury is a prerequisite to standing. But as long as one member

• f a certified class has a plausible claim to have suffered damages, the

requirement of standing is satisfied.” Kohen v. PIMCO, 571 F.3d 672, 676 (7th Cir. 2009), cert. denied, 559 U.S. 962 (2010).

• Judge Posner’s holding in Kohen contemplates that a new class

representative can be substituted to cure a standing problem.

• The reference to “plausibility” tracks the motion-to-dismiss standard.

The Fifth Circuit concurred in BP: “Allegations of causation are sufficient to satisfy Article III in a class action complaint and in a class definition. . . . [D]uring Rule 23 proceedings it is ‘sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered,’ because ‘a federal court must assume arguendo the merits of [each claimant’s] legal claim’” in evaluating standing. 753 F.3d 509, 513 & n.1 (5th Cir. 2014).

26

What About the Absent Class Members?

Current law is less clear, however, regarding the status of absent class members in relation to Article III standing at class certification. One school of thought focuses solely on the representative plaintiffs.

• Three Justices (Souter, Ginsburg, and Breyer) wrote that

“[u]nnamed plaintiffs need not make any individual showing of standing in order to obtain relief, because the standing issue focuses on whether the plaintiff is properly before the court, not whether represented parties or absent class members are properly before the court.” Lewis v. Casey, 518 U.S. 343, 395-96 (1996) (concurring

• pinion) (citation omitted).
• What do the treatises say? (New Newberg; Wright & Miller)

27

Focus on the Class Representatives

Justice Souter’s approach generally prevails in the Third, Seventh, Ninth, and Tenth Circuits.

• Prudential, 148 F.3d 283, 306-07 (3d Cir. 1998) (“[T]he named plaintiffs satisfy

Article III. The absentee class members are not required to make a similar showing”), cert. denied, 525 U.S. 1114 (1999).

• Kohen, supra, 571 F.3d at 676-78 (no standing problem “as long as one

member of a certified class has a plausible claim to . . . damages”).

• Stearns, 655 F.3d 1013, 1020-21 (9th Cir. 2011) (“[O]ur law keys on the

representative party, not all of the class members . . . . In a class action, standing is satisfied if at least one named plaintiff meets the requirements”),

• cert. denied, 132 S. Ct. 1970 (2012).
• Devaughn, 594 F.3d 1188, 1197-98 (10th Cir. 2010) (“[O]nly named plaintiffs in

a class action seeking prospective injunctive relief must demonstrate standing”); Urethane, 768 F.3d 1245, 1254 (10th Cir. 2014) (affirming class antitrust verdict where “[i]t is true that some of the plaintiffs may have successfully avoided damages.”), cert. petition pending, S. Ct. No. 14-1091.

28

The Importance of the Class Definition and of Not Construing Standing Too Restrictively

But, what if the class is defined in such a way that it is clear many class members were or will not be injured even if liability is established?

• “We do not require that each member of a class submit evidence of

personal standing. At the same time, no class may be certified that contains members lacking Article III standing. The class must therefore be defined in such a way that anyone within it would have standing.” Denney, 443 F.3d 253, 263-64 (2d Cir. 2006).

While this appears strict, Denney rejected a standing challenge, holding that class members who had not been audited remained subject to tax penalties on account of the allegedly illegal tax advice they had received.

• “[A]n injury-in-fact need not be capable of sustaining a valid cause of

action,” the Second Circuit held, and “[i]f plaintiff can show that there is a possibility that defendant’s conduct may have a future effect, even if injury has not yet occurred, the court may hold that standing has been satisfied.” Id. at 265 (quoting Wright & Miller§1785.1).

29

Avritt and the Ability to Redefine the Class

The Eighth Circuit issued the most defendant-friendly decision in this area. First, the court stated that “a named plaintiff cannot represent a class of persons who lack the ability to bring a suit themselves.” Second, the court perceived “reason to doubt that” state law could “eliminate[e] any need to show that unnamed class members relied on any misrepresentations or were actually injured.” Avritt, 615 F.3d 1023, 1034 (8th Cir. 2010).

• It is not clear whether Avritt’s second comment referred to the post-judgment

stage, but if the court meant for this suggestion to apply to the class certification stage, it was mistaken. As Chief Judge Diane Wood observed last year, in reversing the denial of class certification in a consumer products case, “If the court thought that no class can be certified until proof exists that every member has been harmed, it was wrong.” Suchanek, 764 F.3d 750, 757 (7th Cir. 2014).

• In any event, both statements in Avritt were dicta with respect to standing because

the court affirmed under Rule 23 itself. Even under Avritt, moreover, a district court may be able fix a standing problem by narrowing the class definition sua sponte or by accepting a proposed modification.

• Rule 23(c)(1)(C) expressly authorizes the court to alter or amend the definition at

any time before judgment. See, e.g., In re Whirlpool, 302 F.R.D. 448 (N.D. Ohio 2014) (narrowing the class on the eve of trial to match the evidence of defect).

30

How to Reconcile These Lines of Authority?

Although defendants have argued to the Supreme Court on multiple

• ccasions that these decisions reflect a circuit split—e.g., Cert. Petition in

Whirlpool Corp. v. Glazer, 2012 U.S. Briefs 96255 (Sept. 14, 2012), cert. denied, 134 S. Ct. 1277 (2014)—they can also be seen as complementary. Analyzing the developing law, a recent article concluded:

“Standing doctrine does not prevent a court from certifying a class that contains members who will ultimately turn out not to have meritorious claims. As long as the court cannot determine in advance that the class members could not be entitled to recover, a class may include them. To put the same point more simply—without the double negative—a court may certify a class provided that each absent member may have suffered the relevant form of harm.”

Josh Davis, Eric Cramer & Caitlin May, The Puzzle of Class Actions with Uninjured Members, 82 Geo. Wash. L. Rev. 858, 867 (2014).

31

The Real Quandary

Regardless of the substantive legal area, a plaintiff often faces difficulty in defining a class such that (if the claims are proved up) every single member suffered or is subject to concrete, traceable, redressable harm.

• This is particularly true because a class cannot be defined by

reference to liability or illegal conduct (“fail-safe” definitions).

Thus, as Judge Posner recognized, “a class will often include persons who have not been injured by the defendant’s conduct; indeed this is almost inevitable because at the outset of the case many of the members of the class may be unknown, or if they are known still the facts bearing on their claims may be

• unknown. Such a possibility or indeed inevitability does not

preclude class certification[.]” Kohen, 571 F.3d at 677.

32

Examples

Employment: A woman was promoted to management even though the company had a pattern or practice of sex discrimination. Antitrust: Large retailers and distributors received volume discounts from a price-fixing cartel such that they did not pay unlawful overcharges for the goods. Consumer: Some individuals would have bought the product or service even absent the misrepresentations. Securities: Despite belonging to the class because he purchased shares, an investor profited from the fraud because he hedged his position in the market.

33

Resolving the Quandary

At class certification, either the proposed class must be redefined or certification denied if more than a “de minimis” number of class members (alternatively: if a “great many” class members) did not or could not suffer the alleged harm.

• Nexium affirmed certification this year because: “‘Rigorous analysis’ of the

evidence does not show that the number of uninjured class members is more than de minimis.” 777 F.3d 9, 31 (1st Cir. 2015).

• Kohen held: “a class should not be certified if it is apparent that it contains

a great many persons who have suffered no injury[.]” 571 F.3d at 677.

After a classwide award from a verdict or settlement, the claims administrator may be able to resolve individual allocation issues relating to any class members who are not entitled to recover certain damages.

• Nexium found that prescription drug consumers could ultimately

“establish injury through testimony [i.e., affidavits] . . . that, given the choice, he or she would have purchased the generic.” 777 F.3d at 20.

34

Uninjured Class Members: Standing vs. Certification Inquiries

The “de minimis” (First Circuit) and “great many” (Seventh Circuit) holdings did not come under the rubric of standing. Instead, they are “cousins” to Article III standing doctrine. When it comes to uninjured class members, the standing inquiry is both stricter and more relaxed than the certification inquiry—and vice versa.

• The standing inquiry is (a) stricter than the certification inquiry in that

no uninjured persons may be included within the class as defined (Denney/Avritt); but (b) more relaxed in that the court must credit the allegations and assess the mere possibility of past or future harm to proposed class members.

• The certification inquiry is (a) stricter than the standing inquiry in that

it entails rigorous analysis of the available evidence against the Rule 23 provisions; but (b) more relaxed in that de minimis (fewer than a “great many”) uninjured persons may be included.

35

Robins v. Spokeo, Inc.

• Spokeo operates a “people search engine” by collecting

public information in phone books, social media and

• ther sources.
• Robins claims that Spokeo is a consumer reporting

agency that provided false information about his education, financial worth, and marital status, among

• ther things.
• Robins alleged that the misinformation harmed his

employment prospects and caused anxiety and stress.

36

Robins v. Spokeo, Inc.

• Robins brought a putative class action alleging

violations of the Fair Credit Reporting Act (“FCRA”), which creates a private right of action for violations

• f the FCRA’s requirements, e.g., to follow

reasonable procedures to assure maximum possible accuracy of consumer reports. – Negligent violation = actual damages – Willful violation = actual damages or statutory damages of not less than $100 or not more than $1,000

37

Robins v. Spokeo, Inc. - The District Court

• The district court granted a motion to dismiss

Robins’s first complaint holding that Robins did not allege injury in fact, i.e., there was no actual or imminent harm.

• After an amended complaint, the district court

denied the motion to dismiss, holding that injury in fact was sufficiently alleged.

• Upon a motion for interlocutory appeal, the district

court reversed itself, dismissing the case with prejudice.

– 2011 WL 11562151 (C.D. Cal. Sept. 19, 2011).

38

Robins v. Spokeo, Inc. - The Ninth Circuit Reverses

• Relying on Ninth Circuit precedent, the court stated two

propositions:

– Congress’s creation of a private cause of action in a statute implies that it intended to create a statutory right. – The violation of a statutory right is usually a sufficient injury in fact to confer standing. 742 F.3d 409, 412-13 (9th Cir. 2014)

• “When, as here, the statutory cause of action does not

require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages.” 742 F.3d at 412-13.

• Recognition that Congress’s power is not plenary.

– Must be among the injured. – Statutory right must protect against individual (not collective harm).

39

Robins v. Spokeo, Inc. - The Cert Petition

• Framing the issue: Can a technical violation of a federal statute satisfy the

injury in fact requirement without concrete and particularized injury?

• On this issue, there are confusing statements by the Supreme Court:

– “The actual or threatened injury required by Art. III may exist solely by virtue of statutes creating legal rights, the invasion of which creates standing.” Warth v. Seldin, 422 U.S. 490, 500 (1975). – “Congress cannot erase Article III’s standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing.” Raines v. Byrd, 521 U.S. 811, 820 n.3 (1997) – post Lujan.

• Why is the issue important?

– In this case alone, Robins seeks to represent a class of millions on whose behalf he hopes to recover $1000 per violation. Faced with even a small chance of such a “devastating” loss, the defendant faces unreasonable settlement pressure over questionable “no injury” claims. – Beyond this case, expensive FCRA class actions are being filed with increased frequency even against non-traditional consumer reporting entities that cannot escape the litigation at the pleading stage under a “no injury” scheme.

40

Robins v. Spokeo, Inc. - The Opposition to Cert

• Framing the issue: Robins has alleged concrete and particularized injuries, so

it is not necessary to decide whether a “bare violation” of a statute without such injuries is sufficient.

• On this issue, there is no conflict:

– Spokeo offers no case holding that a plaintiff who brings suit under the FCRA alleging a particularized injury does not have Article III standing.

• But “[e]ven if Robins had alleged that the only harm he suffered was the

violation of his statutory rights . . . there would be nothing unusual about such an injury conferring standing as well.”

– Respondent’s Brief in Opp’n at 12, Spokeo, Inc. v. Robins, 135 S. Ct. 323 (2014) (No. 13-1339), 2014 WL 3884160.

• Is Spokeo exaggerating the importance of the issue?

– The class has not been certified. The fact that the class may be certified “adds nothing” to the question of standing. – In any event, current congressional policy is to shift class actions of national importance to federal courts.

41

Robins v. Spokeo, Inc. – The Ten Amicus Briefs

• The practical implications of Spokeo are

sweeping.

• Numerous statutes (up to 15) provide for a

private right of action and for the plaintiff to recover actual or statutory damages. Examples:

– Truth In Lending Act – Fair Debt Collection Practices Act – Telephone Consumer Protection Act – Real Estate Settlement Procedures Act – Homeowners Protection Law – Fair and Accurate Credit Transactions Act

42

Statutory Cases and the Spokeo Proceedings

Signaling its potential interest, the Supreme Court requested that the Solicitor General weigh in on a recent cert petition in a statutory case concerning standing. Spokeo, Inc. v. Robins, No. 13-1339, 135 S. Ct. 323 (2014).

• The plaintiff claimed the defendant website had intentionally published inaccurate

personal information about him, in violation of the Fair Credit Reporting Act (FCRA), and that this had impaired his ability to find a job. The district court dismissed on the grounds that the plaintiff failed to allege concrete harm and thus lacked standing. Reversing, the Ninth Circuit explained that FCRA provides for statutory damages and requires no proof of actual injury or damages. Where Congress created a private right of action, it was sufficient for Article III purposes that the plaintiff plausibly alleged a violation of his rights under the statute.

• “When the injury in fact is the violation of a statutory right that we inferred from

the existence of a private cause of action, causation and redressability will usually be

• satisfied. First, there is little doubt that a defendant’s alleged violation of a statutory

provision ‘caused’ the violation of a right created by that provision. Second, statutes like the FCRA frequently provide for monetary damages, which redress the violation

• f statutory rights.” Robins v. Spokeo, Inc., 742 F.3d 409, 413 (9th Cir. 2014).

43

Spokeo in the Supreme Court

This holding led the U.S. Chamber of Commerce to sound alarm bells: “If the only issue that must be proved is an abstract violation of a legal duty, regardless of its widely varying

• r entirely absent effects on individual class members,” then commonality and

predominance would “collapse into a single-issue inquiry.”

• “As a result, businesses would be significantly more likely to face class actions seeking

damages (sometimes annihilating damages) for conduct that caused concrete and particularized harm to only a handful of people or to no one at all—the kind of ‘frivolous lawsuits’ that ‘essentially force corporate defendants to pay ransom to class attorneys by settling.’ . . . [R]eview is necessary to stop these litigious opportunists who have suffered no injury . . . from playing fast and loose with Article III.” 2013 U.S. Briefs 1339 (June 6, 2014).

The plaintiff responded that he “has alleged concrete and particularized injuries— economic, reputational, and emotional injuries caused by the publication of false information about him, and no one else. Under the law of defamation, these kinds of allegations have been enough for suits in common-law courts since the 17th century.”

• And “[e]specially in this case, in which the putative class has not even been certified, it

would be inappropriate to grant certiorari based on the downstream implications of what might happen if a class ever were to come into existence. . . . The likely result of a victory for Spokeo would be a shift of class actions from federal courts, which have limited jurisdiction, to state courts of general jurisdiction. . . . in such tension with Congressional policy.” 2013 U.S. Briefs 1339 (Aug. 6, 2014).

44

Further Discussion

• Practice Pointers
• Q & A

45