Source: http://www.impactlitigation.com/2012/06/
Timestamp: 2019-04-19 16:49:46+00:00

Document:
On a day of surprises at the U.S. Supreme Court, it was a terse ruling on Article III standing — the gateway that determines which plaintiffs may and may not be in federal court — that could have greater consequences than the widely-covered healthcare ruling. Because many class actions that were formerly resolved in state courts are now channeled into federal courts by the Class Action Fairness Act, advocates for consumers and workers feared that the Court took up Edwards v. First American Corp. in order to craft an onerous Article III “actual injury” standard that would lead to a rash of dismissals in these cases, without further recourse for the plaintiffs. A 5-4 majority opinion imposing such a rule would be consistent with recent decisions increasing the burden on plaintiffs in federal court.
The at-issue statute in Edwards was the Real Estate Settlement Procedures Act (RESPA), which prohibits “kickbacks” and other quid pro quo arrangements between title companies and other entities in connection with real estate closings. See Edwards v. First Am. Corp., 610 F.3d 514 (9th Cir. 2010) (available here). Under RESPA, a party to a real estate transaction is entitled to relief when such an arrangement occurs, even if the party suffers no financial loss or diminution of services as a result of the RESPA violation. Denise Edwards did not allege financial or other loss from the kickback arrangement that First American, her title company, engaged in, but she nonetheless sued First American under RESPA, on behalf of herself and all others similarly situated. See id. at 516-17. The defendant argued that Edwards lacked standing to pursue a claim because she did not suffer any injury. Id. The Ninth Circuit rejected this argument, holding that Edwards had standing to sue First American because RESPA provided her a statutory right to do so. Id. at 518.
What followed was a two-year legal odyssey: the granting of defendant’s writ of certiorari, months of anticipation, oral arguments, copious briefing as to a Ninth Circuit decision that many believed would be reversed, all culminating in the Supreme Court’s issuance of a two-sentence opinion, “The writ of certiorari is dismissed as improvidently granted. It is so ordered.” First Amer. v. Edwards, 567 U. S. ____ (2012) (available here). With that, the appeal in Edwards was over, with a swiftness and simplicity that belied the concern the case had engendered.
Judge Claudia Wilken, of California’s Northern District, has certified a class of consumers alleging that Experian, one of the leading credit-reporting agencies, improperly disclosed their credit reports to third parties. See Holman v. Experian, Inc., No. 11-cv-00180 (N.D. Cal. Apr. 27, 2012) (Order Granting Plaintiffs Motion for Class Certification) (available here). The plaintiffs contend that Experian disclosed class members’ credit reports to Finex Group, LLC (“Finex”), in violation of the Fair Credit Reporting Act (FCRA). See Order at 1. Plaintiffs’ claims arose from disparate experiences in which their cars were towed. Finex, a company specializing in the collection of towing-related obligations, was then contracted to collect the resulting debts, and Experian provided Finex with the plaintiffs’ credit reports, allegedly without ascertaining whether Finex had a permissible purpose. See id. at 2-3.
Experian attacked plaintiffs’ certification motion on several fronts, first arguing that the class definition, encompassing all consumers whose reports were provided to Finex, was overly broad, since some of those records would necessarily have been furnished in compliance with FCRA. Id. at 15-16. Although Judge Wilken agreed that the proposed class definition was overbroad, rather than denying certification on that ground, she followed the abundant precedent holding that modifications to class definitions are within a district court’s permissible discretion in ruling on a class certification motion, and modified the class definition accordingly. See id. at 17-18.
Experian also argued that plaintiffs’ counsel should not be appointed counsel for the class, since they invaded class members’ privacy by not seeking the court’s intervention and authority before obtaining the class list from Finex (the records custodian). The court rejected this argument, with reference to Pioneer Electronics, Inc. v. Super. Ct., 40 Cal. 4th 360 (2007), a leading California case concerning prospective class member contact information. Order at 34-35. Judge Wilken made it clear that Pioneer Electronics does not require plaintiffs’ counsel to affirmatively ask the court’s permission to receive the class records, since Finex provided the information voluntarily and without objection. She went on to note, “Experian provides no case law that supports the proposition that a recipient of confidential information can be held liable for the supplier’s improper disclosure.” Order at 35.
The numerosity, typicality, adequacy and superiority requirements were fairly easily satisfied by plaintiffs. Id. at 24-32. As to commonality, Experian offered the relatively weak argument that, having issued a sequence of several different directives during the class period, the inquiry into the reasonableness of its FCRA compliance procedures would be fragmented according to those different directives. Id. at 19. Thus, no determination could be made as to the class period as a whole. Id. However, during oral argument, Experian’s counsel conceded that this impediment could be overcome by dividing the class into subclasses according to time period. Id. As such, Judge Wilken found that the plaintiffs satisfied the commonality element, and the class was certified. Id. at 24, 35. The action now moves to the merits phase.
An Alabama federal court has certified a class of investors who allege that they were defrauded by the defendant’s misleading statements regarding the performance of a real estate portfolio. See Local 703 v. Regions Fin. Corp., No. 10-cv-02847 (N.D. Ala. June 14, 2012) (Memorandum Opinion re certification) (available here). The plaintiffs claim that the defendant artificially inflated the value of its real estate holdings by misrepresenting tens of millions of dollars in non-accrual loans. Memorandum Opinion at 21. The at-issue stock was trading at $23.22 at the beginning of the class period, but plummeted to $4.60 per share by the end of the class period. Id. at 2.
Defendant Regions mounted a strong challenge to Rule 23’s “typicality” requirement, arguing that the named plaintiffs did not have claims typical of the rest of the class, since they actually benefited from the alleged fraud by holding some shares for only a short period and then selling them at a profit. Id. at 8-9. However, the court found that, since the named plaintiffs did not divest themselves of all holdings during the class period, the typicality requirement was met, notwithstanding plaintiffs’ profits. Id. at 9.
As to the predominance requirement, Regions argued (1) that plaintiffs failed to establish a presumption of class-wide reliance based on a “fraud-on-the-market” theory, and (2) even if plaintiffs had established such a presumption, Regions rebutted it. Id. at 19-20. The defendant reasoned that, since plaintiffs had not proven a link between defendant’s alleged misrepresentations and the drop in stock price, there could be no presumption of reliance. In a sprawling analysis, Judge Inge Prytz Johnson found loss causation to be a trial issue, agreeing with the plaintiffs and numerous other courts that it was “not a relevant consideration for a court at this juncture.” Id. at 34. In so ruling, the court relied considerably on Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179, 2185 (2011). Judge Johnson concluded that plaintiffs had, in fact, established the presumption of reliance, and that defendants failed to rebut it. Memorandum Opinion at 31-33, 38-39. She consequently granted plaintiffs’ certification motion, finding all of the class action prerequisites to be satisfied. The certified action now proceeds to the merits phase.

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