Source: https://classactionblawg.com/tag/superiority/
Timestamp: 2019-04-21 11:06:12+00:00

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Phoenix Attorney Shawn Aiken sent me an advance copy of a draft class action bill set to be introduced in the Arizona legislature this week. The bill sets forth some specific requirements for class certification that are much more exacting than those required under federal Rule 23 and most state class action rules. Some of the highlights are summarized below. Click this link for a complete copy of the bill.
Professor Eric Voigt of the Jones School of Law at Faulkner University in Alabama has authored an intriguing article entitled A Company’s Voluntary Refund Program for Consumers Can Be a Fair and Efficient Alternative to a Class Action, 31 Review of Litigation 617 (University of Texas 2012). Voigt proposes that a company’s voluntary efforts in providing refunds to customers in consumer litigation can, in an appropriate case, be a more efficient means of providing collective redress than a class action settlement, which a court should take into account in conducting the superiority analysis required under Rule 23. Voigt argues that in evaluating superiority of a class action, non-judicial alternatives must be considered in addition to individual lawsuits. Therefore, he argues, a court must consider whether a company’s voluntary refund program is a more fair and efficient alternative to class action litigation. He also proposes various procedural and substantive features that should be included in any voluntary refund program to satisfy the requirement that it be a fair and efficient alternative to a class action. Voigt’s article is one of the first I have seen addressing this issue in detail, and I highly recommend it to practitioners, academics, judges, and policymakers alike.
As Voigt’s analysis suggests, even though it lacks the same preclusive effect as a class action settlement judgment, a voluntary refund program is something that a defendant may consider in attempting to avoid or defeat a class action in an appropriate case. Candidates for this strategy could include any case where the cost of providing direct relief to customers for 100% of damages that could be claimed in a lawsuit is outweighed by the cost of defending a potential class action combined with the likely cost of having to ultimately settle the case for some smaller amount. The strategy is far from failsafe because a voluntary refund program lacks the same preclusive effect as a class action settlement, and because a court’s evaluation of the superiority requirement is a matter of discretion. However, having done a voluntary refund program with the protections proposed in Voigt’s article can provide a strong basis to seek an early ruling not to certify any subsequent class action. Similarly, even when a class action lawsuit has already been filed, the prospect of doing a voluntary refund program can be used as leverage in bringing down an unreasonable settlement demand from plaintiff’s counsel. This is especially true in jurisdictions that do not recognize the “catalyst” theory (click link to read 2005 article on the topic by Professor Roy Simon) as a basis for the recovery of attorney’s fees.
One of the hottest substantive areas in consumer class actions these days is litigation under the Telephone Consumer Protection Act (TCPA), 47 U.S .C. § 227, sometimes called the “fax blast” statute, which prohibits unsolicited faxes and automated calls for the purpose of commercial solicitation. The TCPA has a statutory penalty provision that allows consumers to recover $500 for each violation. The ability to collect far more in statutory penalties than the actual damages caused by a given violation makes TCPA violations an appealing target for enterprising plaintiffs’ class action lawyers. The aggregation of thousands of claims together can create huge monetary exposure for defendants and the potential for easy settlements and the large contingent fees that comes with it. In this way, the TCPA is similar to other laws with statutory penalties, such as the Fair and Accurate Credit Transactions Act of 2003 (FACTA), which provides for statutory penalties against a company that produces credit card receipts with too much information on them.
Although it is a federal statute, the TCPA does not provide for federal court jurisdiction in private actions to enforce it. TCPA class actions may only be filed in or removed to the federal courts if there is diversity jurisdiction under CAFA.
This has naturally given rise to the question of whether state laws limiting class actions, such as § 901(b) of New York’s Civil Practice Law and Rules, which prohibits class actions for claims seeking statutory penalties, are applicable in federal court exercising diversity jurisdiction over TCPA claims. Before the Supreme Court’s decision in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., the Second Circuit Court of Appeals said yes. After the Supreme Court remanded for reconsideration in light of Shady Grove, the Second Circuit said yes again, reasoning that the TCPA’s language allowing private enforcement “if otherwise permitted by the laws or rules of court of a State” gave the states broad power to determine how TCPA actions may be prosecuted within their borders. The Third Circuit has disagreed with this conclusion, holding that State limitations on class actions do not apply in TCPA class actions filed in the federal courts. Given the Third Circuit’s view, defendants in at least some jurisdictions may have a strong incentive to oppose federal jurisdiction in TCPA cases.
Another question that arises from the peculiar federalist nature of the TCPA is whether a state or federal statute of limitations applies. Earlier this week, in Giovanniello v. ALM Media LLC, the Second Circuit answered this question and held that a shorter state law limitations period applied rather than the 4-year federal catchall provision.
Several recent decisions have highlighted a split among both the state and federal the courts about whether TCPA claims should be permitted to be brought as class actions at all. Of particular note is the recent decision of the New Jersey Superior Court, Appellate Division in Local Baking Products, Inc. v. Kosher Bagel Munch, Inc., which provides an excellent survey of the various state and federal court decisions on both sides of the issue. The court in Local Baking Products ultimately decided that class certification of TCPA claims was not appropriate. It reasoned that class actions are not a superior procedure for enforcing the TCPA because Congress had made statutory penalties available so that individuals would be incentivized to pursue vindication of their rights in individual actions in small claims or other state courts. In addition to lack of superiority, a common reason offered by other courts for rejecting class certification is that the question of whether faxes or calls were authorized is too individualized for common questions to predominate.
Earlier this month, however, the Supreme Court of Kansas upheld a lower court’s decision granting class certification in a TCPA case. In Critchfield Physical Therapy v. The Taranto Group, Inc., the court rejected both the argument that individual actions in small claims court would be superior to a class action and the argument that the question of consent was too individualized. In addition, the court rejected the argument that class actions would not be superior in light of the threat that aggregating thousands of individual statutory penalties together could create an “annihilating” judgment against the defendant that would be disproportionate to any harm to the class. A similar argument had been successful in a FACTA case in California federal court, but later reversed by the Ninth Circuit in Bateman v. American Multi Cinema, Inc.
Meanwhile, while a bill has been introduced in the U.S. house to “modernize” the TCPA by permitting certain informational robo-calls to be made to mobile phones, among other things, the bill would not modify the private enforcement provisions of the statute.
One quandary facing courts and counsel in TCPA class actions is how to give notice to consumers if a class is certified. Last month, a Madison County, Illinois judge ordered that notice of a class action for unsolicited faxes under the TCPA should be disseminated by. . .
. . . you guessed it . . .
… and commentary from Wage Law on the possible unintended consequences of Brinker.
The Insurance Reinsurance Blog summarizes and provides a link to an Eighth Circuit Court of Appeals decision upholding a lower court’s decision dismissing an insurance class action on the ground that permitting a federal lawsuit to go forward would impair Missouri’s right to regulate insurance and would violate the McCarran-Ferguson Act.
North Carolina Appellate Blog summarizes a North Carolina Court of Appeals decision holding that Rule 23(c) did not require notice to absent class members in the event of a court-ordered dismissal as opposed to a voluntary dismissal.
Several blogs, including the Consumerist, Tech News, and LawMemo commented on the Washington Supreme Court’s decision last week holding a class arbitration waiver unconscionable.
DigitalDay Break comments on what a recent class action lawsuit and settlement regarding online accessibility for the disabled might mean to online marketers.
The D&O Diary discusses reasons why D&O insurance premiums have not skyrocketed despite the recent wave of subprime litigation.
North Carolina Business Litigation Report discusses a North Carolina Court of Appeals decision allowing a plaintiff to proceed in a usury and deceptive trade practices action challenging the practice of litigation funding, or an agreement providing for an advance of litigation costs by a law firm in exchange for a premium return in the event that the case was successful. Coincidently, the decision comes as the practice of litigation funding is becoming more common overseas.
The Race to the Bottom provides a critical, multi-part response to a July report issued by the U.S. Chamber of Commerce Institute for Litigation Reform, which proposed various reforms in securities class actions.
… and more commentary sharing the same general sentiment from the designers.
As an aside, for all of you disenfranchised members of the radical left, In case it helps you feel better, I can tell you from experience that discrimination, employment, and consumer fraud class actions are still going strong and state courts are still seeing their fair share of class actions despite the “thinly veiled ‘special interest extravaganza'” that led to CAFA’s passage–and PLEASE remember that a vote for Ralph Nader (or Dr. John Hagelin or Lyndon LaRouche) is a vote for Bush.
…Nope. Still a vote for Bush.
Hoosier Lottery Class Action: Is it Typical to Spend $40,000 on Lottery Tickets?
The Indianapolis Star reported yesterday on a class certified in a case filed in Marion County, Indiana against the Hoosier Lottery alleging that the lottery defrauded purchasers of its Cash Blast scratch game tickets by misrepresenting the odds of winning the top prizes after most of those prizes had already been awarded.
I haven’t been able to hunt down a copy of Judge Gerald Zore’s opinion, but based on the descriptions of the order in the Star article, there are a couple of potentially troubling aspects to the case. First, the court reportedly based the certification decision in part on 49 affidavits from people saying that they bought tickets “because they thought there were more prizes than existed.” Based on the Star’s description of the allegations in the case, the argument is that tickets continued to be sold with no change in the description of the odds even after most of the larger money prizes had already been claimed. However, it does not appear that this left purchasers without the opportunity to win any prize at all. Consequently, this does not appear to be the type of fraud case where the plaintiffs will be able to prove that no reasonable person would ever have bought a lottery ticket if the true odds had been made known. Common sense and experience suggests that there were probably thousands of people who bought tickets without a thought for the odds. If so, it is curious that the court would find relevant the fact that 49 affiants said that they did rely on the advertised odds in deciding to buy a ticket. Certainly, there would be some purchasers who relied on the published odds, and others who did not. Individualized reliance and causation issues would seem to come in to play in this case just as in most other consumer fraud class actions.
Second, one of the named plaintiffs, Jeff Frazer, reportedly paid $40,000 for 4,000 $10 tickets and considered his purchases an “investment” based on the advertised odds. His co-plaintiff, Jeff Koehlinger, paid another $2,470 for tickets. It’s hard to imagine how the court was able to get around the significant typicality and adequacy problems seemingly inherent in these individuals trying to represent a class of lottery scratch game buyers.
See this MSNBC link for more on Mr. Frazer’s story. The blog WalletPop has a commentary on broader societal implications that this case brings to light about the human cost of state-sponsored gambling.
A trial plan provides the judge with a road map for how the trial is expected to proceed. Trial plans can be an effective pre-certification tool for both plaintiffs and defendants in class action lawsuits. They can be as detailed or as generalized as the court requires and can cover a variety of issues, including bifurcation, the order of proceedings, which issues are to be resolved on a class-wide basis and which must be resolved individually, and what evidence will be presented at each stage of proceedings.
For defense counsel, asking the court to require the plaintiff to provide a trial plan illustrating the expected course of proceedings if the class is certified can help the defendant to persuade the court of practical manageability problems. It may be one thing for the plaintiff to argue as an abstract matter that common issues predominate and that trial on a class-wide basis will be manageable, but having to provide a detailed description of how the case will proceed as a practical matter if the class is certified can expose weaknesses in these arguments.
On the other hand, voluntarily providing a specific trial plan can be also be an effective tool for plaintiffs in seeking class certification. Provide a trial plan illustrating a reasonable and efficient process for resolving both common issues and any individualized issues can give even a skeptical court a level of comfort in certifying a class in the face of more abstract manageability arguments being raised by the defendant.
Trial plans have been used extensively in tobacco class action litigation both in decisions whether to certify a class and in decisions to decertify a class previously certified. For examples, see here and here.
At least one state’s courts have held “that a trial plan is part of the rigorous analysis ‘[c]ourts must perform . . . before ruling on class certification.'” North American Mortgage Co. v. Lee, No. 02-1050 (Tex. Dec. 17, 2004) (quoting Southwestern Refining Co. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000) (emphasis added)). However, many state and federal courts will not by rule or on their own initiative ask for the submission of a trial plan as a matter of course in evaluating class certification. Trial plans are not required under FRCP 23 or the similar rules of many states.
Even if a court does not require a trial plan in connection with class certification proceedings, it cannot hurt to suggest that the plaintiff be required to submit one in order to test manageability and predominance of common issues. Ordering a trial plan is certainly something within a court’s inherent supervisory powers and its discretionary authority in managing class action proceedings under Rule 23(d). Where manageability is suspect, forcing the issue by requiring a trial plan can help to illustrate manageability problems in a way that more generalized arguments in briefs may not make clear.

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