KCC Class Action Digest March 2015

Transcription

1 KCC Class Action Digest March 2015 Class Action Services KCC Class Action Services partners with counsel to deliver high-quality, cost-effective notice and settlement administration services. Recognized as Best Claims Administrator by The Recorder, The National Law Journal, and The New York Law Journal, KCC has earned the trust and confidence of our clients with our track record as a highly responsive partner. As part of our commitment to practitioners, KCC provides this resource on decisions related to class action litigation in state and federal court. In addition to industry resources, KCC offers interactive CLE-accredited courses geared toward class action settlement administration and legal notification, some of which carry Professional Responsibility CLE credit. Go to to learn more about our courses and schedule a CLE for your law firm or industry event. INSIDE THIS ISSUE Class Certification pg. 1 Consumer pg. 1 Electronic Funds Transfer Act pg. 2 Fair Debt Collection Practices Act pg. 3 Settlement Issues pg. 4 This KCC Class Action Digest is provided by Patrick Ivie, Executive Vice President Class Action Services. To request a proposal, or schedule a CLE, contact Patrick at or Subscribe or request to opt-out of the KCC Class Action Digest by sending an to: hschlager@kccllc.com.

2 KCC Class Action Digest Page 1 CLASS CERTIFICATION Alabama Procedure Baldwin Mut. Ins. Co. v. McCain, No , 2015 WL (Ala. Feb. 20, 2015) (Stuart, J.). Insured brought suit for breach of contract and misrepresentation and suppression of material facts against an insurance company, alleging that the insurance company reduced the amount paid on home insurance claims for labor costs associated with removing damaged materials in violation of the actual cash value policy. After the trial court granted Plaintiff s request for certification of a class of all Alabamans insured by the company who faced the same reduction in claim awards, Defendant appealed. The Court reversed and remanded the case. In support of its decision, the Court relied on Alabama procedural requirements for class certification, which required in relevant part that a court must hold a full evidentiary hearing on class certification. Observing that the trial court had allowed Plaintiff to redefine the class in her brief after the evidentiary hearing and then certified that redefined class, which was materially different, procedural requirements were not met. CONSUMER Online Purchases I.B., by and through guardian ad litem Glynnis Bohannon, et al., v. Facebook, Inc., No. 12-cv WL (N.D. Cal. Mar ) (Freeman, J.). Two teenagers brought suit against Facebook for violating the California Family Code. Specifically, Plaintiffs allege that Facebook s policy, representing that any purchases made through its website are final and non-refundable, violates Sections 6701(c) and 6710 of the California Family Code, which allow minors who enter into contracts, using a lack of judgment, to later void or disaffirm those contracts. Plaintiffs sought certification of a nationwide class. This decision primarily concerns whether the court can certify a nationwide class of minors pursuant to the California Family Code. The Court granted Plaintiffs motion for class certification for declaratory and injunctive relief, but denied to certify the same class and subclass for restitution or other monetary relief. In support of its decision, the Court first resolved three preliminary issues prior to deciding whether the class should be certified. First, the Court held California Code Sections 6701(c) and 6710 apply extraterritorially to all minors in the proposed class because Defendant was located in California and Defendant failed to show how applying California law would run contrary to other states policies or interests despite having fewer remedial rules about minors disaffirming contracts. Second, the Court held that Plaintiffs established standing by showing that they would attempt to make future purchases over Facebook if it changed its policy. Last, the Court found that Judge Wilken s dismissal orders did not limit the class to circumstances where minors used parental funds without a parent s consent. In support of its decision to allow Plaintiffs claims for injunctive and declaratory relief under Rule 23(a), the Court held both the class (all Facebook users who were minors according to Facebook s own records for the four years preceding the date when the original complaint was filed) and subclass (minors from whose Facebook accounts Facebook credits were purchased) were readily ascertainable, and thus satisfied this first element, because consent of the minor was irrelevant to defining the class. The Court then held the element of numerosity was not at issue, with sufficient minors making purchases through Facebook. Next, the Court held the element of commonality was satisfied because the class does not include individuals who would

3 KCC Class Action Digest Page 2 undoubtedly receive no benefits individuals who are now minors, and individuals who were minors and have now reached majority can both seek disaffirmance under the law. The Court then held typicality satisfied because the desired outcome would be for Facebook to change its practices rather than cease engaging in transactions with minors, which cannot be thwarted merely by some minors desire to continue making purchases through credit cards they do not have permission to use. Last, the Court held adequacy satisfied because the minors showed they have been kept abreast, and understand the gravamen, of the litigation, as a result of their parents and guardians ad litem, who have demonstrated their knowledge of the case. Thus, the Court concluded that Plaintiffs made the necessary showing to satisfy all elements of Rule 23(a). Turning next to Rule 23(b), the Court holds Plaintiffs injunctive and declaratory relief claims readily meet the requirements of Rule 23(b)(2) because Facebook acted on grounds that apply to the class as a whole through a policy that issues refunds on a case-by-case basis thereby not permitting minors to void or disaffirm certain contracts pursuant to laws of California; it is irrelevant that minors may not have been confused by the language in Facebook s policy. Moreover, the Court found the injunctive and declaratory relief claims are permissible because: (1) Plaintiffs have not requested that minors receive refunds for all transactions and circumstances; (2) a policy that permits refunds of unauthorized purchases does not address or resolve their disaffirmance claims in 6710; and (3) the mere fact that injunctive relief could require Facebook to create a policy that allows for the issuance of refunds does not defeat certification of injunctive or declaratory judgment, per case precedent. Turning then to Plaintiffs restitution claims, the Court held that they could not be certified under Rule 23(b) (2), reasoning that first, even if the monetary amounts were relatively small, those claims would overwhelm the claims for injunctive or declaratory relief. Second, the amount of monetary damages would be dependent on the individual circumstances of each class member and cannot be determined formulaically. Last, denying restitution aligned with relevant precedent. Accordingly, the Court denied certification for Plaintiffs restitution claims. ELECTRONIC FUNDS TRANSFER ACT Fee Notice Frey v. First Nat l Bank Southwest, No , 2015 WL (5th Cir. Feb. 20, 2015) (Per Curiam). Consumer brought suit alleging violations of the Electronic Funds Transfer Act ( EFTA ) by a bank, on grounds that one of Defendant s ATMs lacked a required fee notice on its exterior. The United States District Court for the Northern District of Texas certified a class of consumers, and Defendant appealed. The Fifth Circuit affirmed the grant of class certification, reasoning in support of its decision that contrary to Defendant s contention that a recent EFTA amendment retroactively removed the requirement to provide exterior notice on ATMs, Fifth Circuit precedent on the same issue found that the amendment was not retroactive, as pursuant to the applicable test, Congress did not unambiguously express that the statute should be retroactive, and retroactivity would destroy a cause of action that already occurred. Turning next to Defendant s contention that the lower court erred on ascertainability and predominance, the Court found that the class is ascertainable, rejecting Defendant s contention that complex individual inquiries must be made to determine whether each consumer used the ATM for personal banking or a business transaction on each specific occasion, finding that the district court did not abuse its discretion in determining that the only inquiry needed concerns the broad purpose of the account because that is what the EFTA requires, and that question can be determined easily. The Court also cited the relatively small class size (1,500 members) as contributing to the ease of any ascertainability tasks.

4 KCC Class Action Digest Page 3 With respect to predominance, the Court found the lower court did not abuse its discretion, rejecting Defendant s argument that each class member would have to prove that there was no exterior notice when they used the ATM. The Court agreed with the lower court s reasoning that the class suit would attempt to provide an answer to that issue that applied to each class member. The proof regarding the exterior notice, while possibly not entitling all class members to relief, is still an issue common to the class. The Court then noted that given the fact that there is a common course of conduct capable of providing a class-wide basis for deciding significant common issues of fact and law (including whether and when the required notice was absent and whether the bank has proven any defense), the district court correctly concluded that common issues predominate. FAIR DEBT COLLECTION PRACTICES ACT Law Firm Defendant Roundtree v. Bush Ross, P.A., No. 14-cv-357, 2015 WL (M.D. Fla. Feb. 18, 2015) (Whittemore, J.). Condominium owner brought suit alleging violations of the Fair Debt Collection Practices Act ( FDCPA ) by a law firm. Specifically, Plaintiff claims that the firm, in their representation of her condominium association, sent a debt collection letter that causes less sophisticated people to waive FDCPA rights, overshadowed the required FDPCA notice, and inflated debt by including the firm s fees. Plaintiff also claimed that the firm sent a notice of lawsuit that was false and misleading as to her FDCPA rights and the lawsuit process. After a magistrate judge issued a report and recommendation to certify an overshadowing class, a fees class, and a lawsuit class, the district court took it under consideration along with five specific objections Defendant made thereto. The Court adopted the magistrate judge s report and recommendation with minor changes. The Court first analyzed the objection that whether each class member s debt is subject to the FDCPA is not a question subject to common proof, as the FDCPA protects personal households rather than lessors, which were included in the class recommended for certification, making it therefore overbroad. The Court revised the class definitions to exclude those not protected by the FDCPA, and noted that in light of that revision, individual inquiries about the nature of the debt will not predominate over common questions, as claims concerning non-consumer debts will be excluded from the class. The Court next considered the objection that the letters sent to the purported class members are not uniform and the letter sent to the Plaintiff in particular is defective, holding simply that class membership will be limited only to those who received letters with shall rather than should language. The Court next analyzed the objection that common issues do not predominate over individualized issues related to Defendant s asserted affirmative defenses, finding that the common issues of FDCPA violations predominate over individual defenses like class members having released the firm from liability or having filed bankruptcy, and found predominance therefore satisfied. Similarly, the Court rejected Defendant s objection that individualized inquiries are needed to determine actual damages, reasoning that courts often find that common issues of liability predominate over individual issues of damages. The Court also considered Defendant s ascertainability objection, finding that Defendant holds records of its collection letters and their recipients, which should provide sufficient information to ascertain the individuals. The Court also found that there should be ample evidence elsewhere that can show whether the individuals were lessors or used their property for personal housing.

5 KCC Class Action Digest Page 4 SETTLEMENT ISSUES Objections In re Groupon Marketing & Sales Prac. Litig., Nos , , 2015 WL (9th Cir. Feb. 19, 2015) (Per Curiam). Customers brought suit alleging violations of federal and California consumer protection laws by Groupon and merchants with which Groupon partnered. Specifically, the suit alleged that Groupon offered daily expiring deals that coerced customers to purchase the deals without fully realizing that the deals expired after a certain amount of time. After initially declining to approve a proposed settlement, the United States District Court for the Southern District of California approved a subsequent proposed settlement between Defendants and a nationwide class of customers. Objectors appealed, contending that notice was inadequate and the district court made errors in approving the settlement and awarding attorney s fees. The Court vacated the settlement and remanded the case to the district court, reasoning that the de minimis changes made in response to the district court s disapproval of the initial settlement did not require additional notice of the settlement. The Court reasoned that there were no objections to the notice that corresponded to the initial settlement and the changes, which merely removed a provision concerning a potential cy pres award of $75,000 (out of an $8.5 million settlement), did not rise to a level that would require new notice. The Court also considered objections to the terms of the settlement and attorneys fees, noting that district courts are required to perform a searching inquiry concerning settlements reached prior to a decision on class certification. In this regard, the Court found that the district court did not make findings about matters contested by the objectors (whether the settlement fund is duplicative of a current Groupon customer service program and the size, scope, and impact of the settlement fund) and therefore could not properly evaluate whether the inquiry conducted was adequate. The Court also noted its need for a record upon which it could calculate the settlement value to the class and compare the relationship of that to attorneys fees. Essentially, the Court remanded the case with instructions to the district court to explain its reasoning for approving the settlement. Injunction in Settlement Agreement Adkins v. Nestle Purina PetCare Co., No , 2015 WL (7th Cir. Mar ) (Easterbrook, J.). Dog owners brought a products liability suit alleging that Defendants manufactured and sold dog treats that injured their dogs. After the case was certified as a statewide class action in Missouri, it was subsequently certified as a nationwide class action in a parallel suit in the United States District Court for the Northern District of Illinois. The district court tentatively approved a settlement which enjoined all class members from prosecuting litigation in any other forum. A class representative from the state action intervened to protest the resulting federal injunction that stopped the Missouri state case. At issue is whether the district court s issuance of the federal injunction, by tentatively approving the settlement, was permissible. The Seventh Circuit reversed the district court and stayed the injunction. In support of its decision, the Court relied on Rule 65(d)(1)(A) of the Federal Rules of Civil Procedure, under which every order issuing an injunction must identify the appropriate legal standard and make the appropriate findings of law and fact to satisfy the standard. Here, the Court reasoned, the district court judge was silent on all of these essentials, and the injunction should therefore be stayed. In support of its decision to reverse the district court s decision outright, as opposed to just vacating the injunction and remanding for further proceedings, the Court supplied two justifications. First, remanding would be impractical because it would effectively serve as an injunction, given the final hearing dates of this case,

6 KCC Class Action Digest Page 5 leaving the state court in limbo until any proceedings and appeals in the district court concluded. Second, the injunction does not satisfy the Anti-Injunction Act, 28 U.S.C. 2283, which requires, in this instance, that the injunction is necessary in aid of the court s jurisdiction. According to the United States Supreme Court s 2011 decision in Smith v. Bayer, for jurisdiction to be affected by the Missouri litigation, it must imperil the federal district court s ability and authority to adjudicate its case. Contrary to the parties contention, even if the Missouri case is decided first thereby requiring a re-negotiation of the settlement agreement, such a disruption does not qualify as a jurisdictional affect necessitating protection from an injunction. Thus, the Court held a decision to vacate the injunction and remand would not be appropriate, and accordingly, reversed the district court s decision. With experience administering over 1,500 settlements, KCC s team knows first-hand the intricacies of class action settlement administration. At the onset of each engagement, we develop a plan to efficiently and cost-effectively implement the terms of the settlement. Our domestic infrastructure, the largest in the industry, includes a 900-seat call center and document production capabilities that handle hundreds of millions of documents annually. In addition, last year, our disbursement services team distributed $500 billion to payees. Lead Editor of KCC Class Action Digest: Robert DeWitte, Director Class Action Services