Source: https://www.classactionsinsider.com/
Timestamp: 2019-04-23 12:19:36+00:00

Document:
The Supreme Court ruled yesterday, in Nutraceutical Corp. v. Lambert, that the 14-day deadline under Federal Rule of Civil Procedure 23(f) for petitioning a court of appeals to hear a discretionary appeal from a class certification order cannot be equitably tolled. The district court had decertified the class. The plaintiff’s counsel expressed an intent to file a motion for reconsideration of that decision, and a deadline was set for filing that motion. The motion for reconsideration was filed in accordance with that deadline. The petition for permission to appeal was filed within 14 days after the motion for reconsideration was denied. The Ninth Circuit found the petition timely. But the Supreme Court said no.
Justice Sotomayor’s opinion for a unanimous Court explained that “[w]hether a rule precludes equitable tolling turns not on its jurisdictional character but rather on whether the text of the rule leaves room for such flexibility.” Slip op. at 4. “Where the pertinent rule or rules invoked show a clear intent to preclude tolling, courts are without authority to make exceptions merely because a litigant appears to have been diligent, reasonably mistaken, or otherwise deserving.” Id. The Court focused on Federal Rule of Appellate Procedure 26(b)(1), which provides that “the court may not extend the time to file: . . .a petition for permission to appeal . . . .” Id. at 5. The Court found no way around the “clear intent” of this rule.
This case is a good reminder for lawyers that not all deadlines can be extended, even if the trial court wants to grant an extension. The Supreme Court noted that some courts of appeals have concluded that a motion for reconsideration filed within the 14-day period extends the deadline for a petition for permission to appeal, on the theory that the class certification order is not “final.” But the Court did not address that issue, so the safest approach would be to file the petition within the 14 days. (And such petitions are limited to approximately 20 pages of large font text.) The Court also noted that a different result might be reached if the district court had misled the plaintiff’s lawyer, but that did not happen in this case.
The First Circuit recently addressed an issue of broad significance in class action law. It explained how a class cannot be certified when there are more than a small number of uninjured class members, and how a defendant must be allowed to demonstrate on an individual basis that class members were not injured.
United Food & Commer. Workers Unions & Emplrs. Midwest Health Bens. Fund v. Warner Chilcott Ltd. (In re Asacol Antitrust Litig.), No. 18-1065, 2018 U.S. App. LEXIS 28920 (1st Cit. Oct. 15, 2018), is an antitrust class action alleging that a drug manufacturer withdrew a drug from the market shortly before its patent expired, and then introduced a similar substitute, to preclude competitors from effectively introducing generic versions of the drug. The parties’ experts were largely in agreement that roughly 10% of consumers would still purchase the brand-name drug even if a generic version were available, and thus would not be injured by the allegedly unlawful practice. The district court assumed that this was the case, but nevertheless certified the class, adopting the plaintiffs’ proposal that a claims administrator could eventually remove uninjured persons from the class if plaintiffs prevailed. Id. at *8-9.
Our inability to fairly presume that these plaintiffs can rely on unrebutted testimony in affidavits to prove injury-in-fact is fatal to plaintiffs’ motion to certify this case. Testimony that is genuinely challenged, certainly on an element of a party’s affirmative case, cannot secure a favorable summary judgment ruling disposing of the issue. Fed. R. Civ. P. 56(a). And the affidavits would be inadmissible hearsay at trial, leaving a fatal gap in the evidence for all but the few class members who testify in person. Nor have the plaintiffs provided any basis from which we could conclude that the number of affidavits to which the defendants will be able to mount a genuine challenge is so small that it will be administratively feasible to require those challenged affiants to testify at trial.
We also reject any invitation to rewrite Nexium as sanctioning the use of inadmissible hearsay to prove injury to each class member at or after trial. The fact that plaintiffs seek class certification provides no occasion for jettisoning the rules of evidence and procedure, the Seventh Amendment, or the dictate of the Rules Enabling Act, 28 U.S.C. § 2072(b). See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1048, 194 L. Ed. 2d 124 (2016) (evidence may not be used in a class action to give “plaintiffs and defendants different rights in a class proceeding than they could have asserted in an individual action”). A “claims administrator’s” review of contested forms completed by consumers concerning an element of their claims would fail to be “protective of defendants’ Seventh Amendment and due process rights.” Nexium, 777 F.3d at 19. Plaintiffs’ proposed claims process provides defendants no meaningful opportunity to contest whether an individual would have, in fact, purchased a generic drug had one been available. A “class cannot be certified on the premise that [the defendant] will not be entitled to litigate its statutory defenses to individual claims.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 367, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011). Here, we have more than a statutory defense; rather, we have a challenge to a plaintiff’s ability to prove an element of liability.
The First Circuit further concluded that the use of an aggregate classwide damages award would not render class certification appropriate because “here, the aggregate damage amount is the sum of damages suffered by a number of individuals, such that proving that the defendant is not liable to a particular individual because that individual suffered no injury reduces the amount of the possible total damage.” Id. at *30-31. The First Circuit concluded by explaining that “a class cannot be certified based on an expectation that the defendant will have no opportunity to press at trial genuine challenges to allegations of injury-in-fact,” “[a]nd to determine whether a class certified for litigation will be manageable, the district court must at the time of certification offer a reasonable and workable plan for how that opportunity will be provided in a manner that is protective of the defendant’s constitutional rights and does not cause individual inquiries to overwhelm common issues.” Id. at *37.
This opinion thoroughly addresses an important issue that is present in many consumer class action suits. I expect it will be cited and likely followed by other circuits.
The U.S. Supreme Court recently granted certiorari in Home Depot U.S.A. Inc. v. Jackson, No. 17-1471 to decide whether a defendant to a class-action counterclaim can remove the case to federal court under the Class Action Fairness Act (CAFA) where the jurisdictional requirements under CAFA are otherwise satisfied. At one level, the dispute involves the meaning of “any” versus “the,” an esoteric battle that only a lexicographer or civil procedure nerd would find interesting. At another level, the dispute is over whether plaintiffs can strategically avoid federal jurisdiction by filing class action counterclaims or claims against third-party defendants in small suits, typically debt collection suits. When the big corporation sues for $5,000 in some little state court, it gets hit with a $50 million putative class action that courts have held cannot be removed to federal court.
This case was originally filed in North Carolina state court as a debt collection suit by Citibank against the plaintiff, George W. Jackson. Perhaps because his lawyer recognized that the best defense is a big offense, Jackson filed a counterclaim against Citibank, and also brought class action claims against Home Depot and Carolina Water Systems as third-party defendants. Home Depot removed the case to federal court under CAFA, and moved to realign the parties. Citibank voluntarily dismissed without prejudice its original debt collection claims. The district court remanded the case on the grounds that Home Depot was not a “defendant” under CAFA, and denied the motion to realign. The Fourth Circuit granted permission to appeal, and affirmed.
The Fourth Circuit’s decision noted that Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100 (1941) held that an original plaintiff could not remove a counterclaim under a predecessor statute to 28 U.S.C. § 1441, which only authorized removal by a “defendant.” The Fourth Circuit explained that courts have reached the same result under the current version of § 1441, which is similarly allows removal by “the defendant or the defendants.” CAFA, in section 1453(b), permits removal by “any defendant,” and otherwise broadens the scope of removal in other respects (such as by eliminating the one-year rule, and allowing a defendant to remove in its home state). The Fourth Circuit had previously held that the use of the word “any” defendant rather than “the” defendant did not expand the scope of removal to encompass counterclaim defendants, and thus held that only an original defendant can remove. The Fourth Circuit rejected Home Depot’s argument that the Supreme Court’s decision in Dart Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547 (2014), which noted that there is no antiremoval presumption under CAFA, warranted a different outcome. The Fourth Circuit noted that only the Supreme Court could overrule Shamrock Oil, and it would leave to the Supreme Court whether “defendant” means something different in CAFA than it does in § 1441. The Fourth Circuit also rejected Home Depot’s argument that it was no longer truly a defendant because Citibank had voluntarily dismissed its claims.
The petition argued that, although there is no circuit split, that is because the courts of appeals have consistently, but erroneously, interpreted Shamrock Oil, and only the Supreme Court can clarify Shamrock Oil. The petition also highlighted the practical problem this creates for defendants like Home Depot, where they lose federal jurisdiction under CAFA simply because the class action claim is filed as a tag-along to a run-of-the-mill collections suit brought by another company.
The Court’s order granting certiorari also asked the parties to brief the following question: “Should this Court’s holding in Shamrock Oil & Gas Corp. v. Sheets, 313 U. S. 100 (1941) that an original plaintiff may not remove a counterclaim against it extend to third-party counterclaim defendants?” This suggests that the Court will be considering whether third-party defendants should have the right to remove cases not only under CAFA, but also under traditional diversity jurisdiction.
A recent decision by the Eighth Circuit in a Telephone Consumer Protection Act (TCPA) class action provides an important pointer for defendants and their counsel with respect to strategy in defending a putative class action. The key takeaway is to take into consideration whether the case was originally filed in federal court or removed from state court, and consider whether you want to raise lack of standing as an issue in federal court if a successful outcome in the applicable federal circuit is likely to result in a remand to state court.
In St. Louis Heart Center, Inc. v. Nomax, Inc., No. 17-1794, 2018 WL 3719694 (8th Cir. Aug. 6, 2018), the plaintiff brought suit alleging that the defendant violated the TCPA by transmitting faxes without a proper opt-out notice. The faxes had an opt-out notice on them, it just did not satisfy all of the requirements of regulations implementing the TCPA. The plaintiff conceded that consent was not an issue. The Eighth Circuit affirmed the district court’s conclusion that the plaintiff lacked Article III standing because the plaintiff could have opted out and simply chose not to, and “[a]ny technical violation in the opt-out notices thus did not cause actual harm or create a risk of real harm.” Id. at *4.
But the Eighth Circuit vacated the district court’s dismissal of the lawsuit and remanded with direction to remand the case to state court. It explained that “the lack of federal jurisdiction does not obviate the remand requirement of § 1447(c), because state courts are not bound by the limitations of an Article III case or controversy.” Id.
The lesson here for defendants is that in cases removed to state court, it might not be worth raising a standing issue in federal court if the outcome is likely to be a remand and state law on standing is not favorable. Courts can and do raise standing issues sua sponte, so you may want to keep that possibility in mind as well.
Standing: In prior opinions, the Third Circuit has taken the view that the standing inquiry focuses only on the named plaintiffs, not on the class members. That’s an issue ripe for the Supreme Court to tackle. In this case, the Third Circuit found it sufficient for standing purposes for the named plaintiffs to allege that they had personally encountered difficulties with parking facilities that they alleged violated the ADA. Whether the plaintiffs could pursue claims involving restaurants they never visited was an issue the court viewed as a Rule 23 issue rather than an Article III standing issue, in the Third Circuit’s view.
Numerosity: The Third Circuit explained how “[i]n recent years the numerosity requirement has been given ‘real teeth.’” (Slip op. at 35.) It requires real evidence, not speculation. Merely because there are millions of persons with mobility disabilities in the United States and it might be fair to assume that at least 40 of them experienced the alleged access issues at the defendant’s restaurants was not enough. The court noted that the numerosity requirement is not “relaxed” in any sense when certification is sought for declaratory or injunctive relief under Rule 23(b)(2). The lesson for defendants here? Think twice before you give up on numerosity.
Commonality: This is the most significant part of the opinion, in my view. The court focused on how, although the case plainly focused on a common legal issue involving one ADA provision, that was not enough for commonality. The class definition encompassed various different types of alleged ADA violations under the same statutory provision and regulations, from parking lots to bathrooms to water fountains. The court said that “the collective claims are so widely divergent that they would be better pursued on either an individual basis or by a sufficiently numerous lass of similarly-aggrieved patrons,” and “[w]ith such a potentially wide array of different claims by members of the class,” commonality was not satisfied. (Slip op. at 51.) Defendants can use this decision effectively in lots of cases that involve similar alleged statutory violations or contract claims. In a footnote, the court suggested (but did not decide) that a very narrowly-pled case might satisfy commonality. But that might make numerosity a challenge, and could make a class case much less attractive for plaintiffs’ counsel to pursue. It will be interesting to see if (and how) the plaintiffs continue to pursue this case on remand.
Rule 23(b)(2): The court did not reach any issue under Rule 23(b)(2). But footnote 24 of the opinion provides some important guidance, reminding the district court that: (1) subsection (b)(2) applies only if a “single” injunction or declaratory judgment would apply to the entire class; and (2) Rule 65 requires specificity and detail in any proposed injunction.
In re District of Columbia, 792 F.3d 96 (D.C. Cir. 2015): Here, Judge Kavanaugh was the presiding judge on the panel but assigned the opinion to Judge Wilkins. The court denied the District of Columbia’s petition for permission to appeal the district court’s order certifying a class. The plaintiffs alleged that the District failed to provide adequate community-based care for Medicare beneficiaries requiring long-term care. In denying permission to appeal, the court held that the District had failed to satisfy the D.C. Circuit’s criteria for granting Rule 23(f) review where the only argument made by the District was that the district court’s decision was “manifestly erroneous.” The court of appeals made clear that the “manifest error” standard was a “high bar,” the court was not deciding the merits of the class certification issues, and it had serious doubts about the district court’s decision. The central question (not decided) was whether there was “a policy or practice affecting all members of the class in the manner Wal-Mart requires for certification.” at 100. I don’t think this case suggests that Judge Kavanaugh would be reluctant to grant certiorari on class action issues, given the nature of the case and the limited basis on which the District sought review.
Mills v. Giant of Md., LLC, 508 F.3d 11 (D.C. Cir. 2007): Judge Kavanaugh wrote this opinion about a year after he joined the D.C. Circuit. It was a class action in which the plaintiffs claimed that sellers of milk should be required to put warning labels on containers advising consumers that some people are lactose intolerant. The court of appeals affirmed the district court’s dismissal of the case on the grounds that District of Columbia tort law did not protect against such a “widely known” risk. Judge Kavanaugh explained that “[a] bout of gas or indigestion does not justify a race to the courthouse,” “30 to 50 million Americans suffer from some level of lactose intolerance,” “products targeted to lactose-intolerant individuals are now commonplace,” and “the problem of lactose intolerance has received an extraordinary amount of attention in the media and in the medical community.” He wrote a short opinion, noting that “[w]e will not belabor the obvious.” The outcome here is not remarkable. The opinion suggests that Judge Kavanaugh is unlikely to use the more colorful language than Justices Scalia or Kagan might use in deciding such a case.
Cohen v. United States, 650 F.3d 717 (D.C. Cir. 2011): This is an en banc decision in which Judge Kavanaugh wrote a dissenting opinion. It involved a class action in which the plaintiffs challenged the sufficiency of a refund procedure created by the IRS to refund excessive taxes collected on long-distance telephone calls (remember those days when long-distance calls were more expensive?). The majority opinion focused on jurisdictional issues and the Administrative Procedure Act, concluding that the plaintiffs could pursue their suit without having to file refund claims or individual tax refund suits. Judge Kavanaugh wrote a dissent that focused on how the refund procedure was relatively simple, and the plaintiffs could have filed refund claims or brought individual tax refund suits. He wrote that: “Plaintiffs’ ultimate objectives are class certification and a court order that the U.S. Government pay billions of dollars in additional refunds to millions of as-yet-unnamed individuals who never sought refunds from the IRS or filed tax refund suits. It seems that plaintiffs have deliberately avoided filing individual refund claims with the IRS and filing tax refund suits because they think they have a better chance of obtaining class certification if they don’t take those steps. And class certification is a necessary prerequisite to the class-wide jackpot plaintiffs are seeking here.” at 737 (Kavanaugh, J., dissenting). Judge Kavanaugh and the judges who joined his opinion would have held that individual tax refund suits would be an adequate forum for plaintiffs to pursue their claims. This opinion seems to demonstrate that Judge Kavanaugh has a good handle on the reality and practicalities of modern class action litigation and might be persuaded, at least in some circumstances, that under the superiority requirement for certification under Rule 23(b)(3), individual suits and/or a voluntary refund process are a superior means of resolving class claims.
Overall, we have few data points to draw from, but I found no reason to think that a Justice Kavanaugh would consistently vote differently in class action cases as compared with Justice Kennedy.
After a decades-long drought, the Supreme Court recently decided a case involving the Contracts Clause of the Constitution. You might not recall that provision because it is so rarely invoked in modern-day litigation (due to how it has been construed). It provides that “[n]o state shall . . . pass . . . any Law impairing the Obligation of Contracts.” U.S. Const. art I, § 10, cl. 1. Given that many class action suits involve contracts with consumers and state laws applicable thereto, I thought this case was worthy of mention on my blog.
Sveen v. Melin involved a Minnesota statute providing that a divorce automatically revokes a prior beneficiary designation by the insured under a life insurance policy that designated the former spouse as a beneficiary. The ex-spouse whose rights were divested by the statute argued that applying the statute to a life insurance policy that was issued and beneficiary designation that was executed before the statute was enacted was a violation of the Contracts Clause. The Eighth Circuit found a violation of the Contracts Clause. But the Supreme Court reversed, in an 8-1 decision by Justice Kagan.
In Sveen, the Court found no “substantial impairment” because the Minnesota law was “designed to reflect a policyholder’s intent,” was “unlikely to disturb any policyholder’s expectations,” and “supplies a mere default rule.” (Id. at 7-8.) The Court reasoned that most people who get divorced generally do not want to maintain their former spouse as the beneficiary of their life insurance policy (unless otherwise agreed or ordered by the court in the divorce settlement, which were carveouts in the Minnesota statute). And it would be quite easy to reestablish prior intent simply by re-executing another beneficiary designation form. Justice Kagan described this as a mere “paperwork obligation” of the type the Court had long held does not violate the Contracts Clause.
Justice Gorsuch was the sole dissenter. He argued that there was a “substantial impairment” here because the designation of the beneficiary is the “whole point” of a life insurance policy. It appears that he also would have been inclined to change the Court’s prior precedent because the requirement of a “substantial impairment” seems inconsistent with the text of the Contracts Clause and some indications of its original purpose. He noted that “Many critics have raised serious objections” to the Court’s Contracts Clause jurisprudence, citing several law review articles, and “[t]hey deserve a thoughtful reply, if not in this case then in another.” (Gorsuch, J., dissenting, at 4.) He also would have found the second part of the test not satisfied in this case because there are various other means by which a state could achieve its goal of informing people of their right to change the beneficiary following a divorce without retroactively changing the contract.
To make this case more interesting for what I deal with on a regular basis, let’s turn things around a bit. The Court’s principles presumably work both ways. From the insurer’s perspective, it’s fairly common for an insurance statute to be contrary to the insurer’s intent and interfere with the insurer’s reasonable expectations under preexisting policies. Is that enough to move the analysis to the second part of the Contracts Clause test? And if so, would the Court consider abandoning or modifying the second part of its test to reform its jurisprudence closer to the original meaning of the clause? (See footnote 2 of the Court’s opinion, finding that the Court did not need to reach that issue here.) Justice Gorsuch’s dissent makes it pretty clear that he would grant certiorari to take those issues up in the right case. Would there be four justices willing to take such a case?
Yesterday, in China Agritech, Inc. v. Resh, the U.S. Supreme Court ruled that, under its prior decision in American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974), the filing of a putative class action suit tolls the statutes of limitations only to allow individual, non-class suits to be filed after class certification is denied or the putative class action otherwise ends. The practice of “piggyback” class action filings, where an otherwise untimely class suit is filed on the theory that the time to sue was extended by the pendency of a prior class case, has come to an end. In a nearly unanimous opinion by Justice Ginsburg, the Court held that “American Pipe does not permit the maintenance of a follow-on class action past expiration of the statute of limitations.” (Slip opinion, at 2.) The Court reasoned that American Pipe is an equitable rule to promote efficiency in litigation, and that is not supported by allowing the filing of serial, “piggyback” class actions. Such a rule would also be contrary, the Court says, to Rule 23’s instruction that class certification should be resolved at “an early practicable time.” And equitable tolling requires diligence on the part of plaintiffs, which is not demonstrated by late piggyback filings.
Justice Ginsburg offers some advice for plaintiffs’ lawyers, suggesting that “any additional class filings should be made early on, soon after the commencement of the first action seeking class certification.” (Id. at 6.) She suggests that where there are several early filings, district courts can then select lead plaintiffs and lead counsel in non-securities cases (that is mandated by the Private Securities Litigation Reform Act (“PSLRA”) where it applies).
There has been some debate about whether this decision will cause more copycat class action suits and lead to more MDL proceedings. Perhaps, but China Agritech is not a change in the law of most circuits that had addressed the issue (see id. at 5). So we might not see much more in terms of repetitive filings.
Justice Sotomayor concurred only in the judgment. She would have ruled on narrower grounds, limiting the decision to class actions subject to the PSLRA. She expresses concern that outside of PSLRA class actions (where early notice by publication is required), class members may not learn of the pendency of class suits that are not certified. But that is true of class members who may want to file individual suits as well. She suggests that outside of the PSLRA context, it might be appropriate to allow tolling if the first case failed on a ground such as the lack of an adequate class representative. But the majority chose not to rule so narrowly.
One advantage I see for defendants here is that it is now clear that if the first class action is filed near the end of the limitations period, and the claims are not ongoing in nature, the defendant should have to litigate only one class action. If class certification is not granted, any follow-on suits could only be individual ones.
The Court will review the Ninth Circuit’s unpublished decision in Varela v. Lamps Plus, Inc., No. 16-56085 (9th Cir. Aug. 3, 2017), which affirmed the district court’s order compelling a class-wide arbitration. The Ninth Circuit opinion explained that the Supreme Court’s decision in Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 559 U.S. 662 (2010) “accepted the parties’ stipulation that silence meant ‘there’s been no agreement that has been reached,” and concluded that the fact that an arbitration clause “does not expressly refer to class arbitration is not the ‘silence’ contemplated in Stolt-Nielsen.” The arbitration clause at issue provided that “arbitration shall be in lieu of any and all lawsuits or other civil legal proceedings relating to my employment.” The Ninth Circuit held that “[a] reasonable – and perhaps the most reasonable – interpretation of this expansive language is that it authorizes class arbitration.” (Emphasis in original.) The Ninth Circuit further concluded that, where the court found two reasonable interpretations of the agreement, it was ambiguous, and should be construed against the defendant based on California principles of contract construction. Judge Fernandez dissented, stating simply that in his view the agreement was not ambiguous, and that the plaintiff’s position was a “palpable evasion” of Stolt-Nielsen. The petition for certiorari argues that the Ninth Circuit decision was contrary to the Court’s reasoning in Stolt-Nielsen as well as Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (blog post) and AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (blog post).
The Court’s decision in Lamps Plus is unlikely to impact arbitration provisions that many companies currently have in use, which specifically preclude a classwide arbitration procedure. This case will be closely watched, however, by companies that have issued contracts with arbitration provisions that do not specifically preclude classwide arbitration.
The case involves claims under the Stored Communications Act and various state common law claims, alleging that Google violated users’ privacy rights by disclosing the search terms used to owners of websites. The district court approved a settlement that called for Google to provide a disclosure of how it shares users’ search terms, and for an $8.5 million settlement fund. $5.3 million of the settlement fund would be distributed to six cy pres recipients, non-profit organizations that would use the funds to promote Internet privacy, and the remaining $3.2 million would go to attorneys’ fees, administrative costs and incentive payments for the named plaintiffs. The Ninth Circuit affirmed. It explained that cy pres-only settlements are “the exception, not the rule,” but that they are appropriate where the settlement is “non-distributable” because it would not be feasible to distribute money to individual class members. Here, the class size is estimated at 129 million class members, who would be entitled to 4 cents each, and the cost of sending out the payments would exceed the benefit. The objectors argued that there should be a lottery system whereby some class members would receive say $5 or $10, and that if the settlement was nondistributable, the court should instead rule that the superiority requirement for class certification was not satisfied. The Ninth Circuit found that the district court’s rejection of these arguments and approval of the settlement was not an abuse of discretion.
The objectors also argued that the cy pres recipients were inappropriate because Google had previously donated to some of them, three of them previously received funds in other Google class settlements, and three of them were affiliated with class counsel’s alma maters. The Ninth Circuit rejected these contentions, noting that the organizations had a strong nexus to the interests of the class, Google had previously donated to hundreds of organizations, there was no fraud or collusion, and the mere fact that class counsel graduated from schools that had connections to some of the organizations did not warrant rejecting the settlement. The Ninth Circuit also found the attorneys’ fees reasonable because they were 25% of the settlement fund and consistent with a lodestar calculation.
Judge Wallace wrote an opinion concurring in part and dissenting in part. He dissented only on the issue involving the relationships between the cy pres recipients and the alma maters of class counsel, concluding that the district court should have looked into that issue further. He wrote that “I would vacate the district court’s approval of the class settlement, and remand with instructions to hold an evidentiary hearing, examine class counsel under oath, and determine whether class counsel’s prior affiliation with the cy pres recipients played any role in their selection as beneficiaries.” Id. at 748 (Wallace, J., concurring in part and dissenting in part). In my view, requiring such a hearing could present substantial concerns about the protection of the attorney-client privilege and work product doctrine – ultimately it is the clients on both sides who are making settlement decisions, and examining counsel as to their thinking (or their advice to their client) behind such decisions seems problematic, although that may not be something the Supreme Court addresses in this case.
From a defense perspective, this case may present a challenge with respect to what position industry organizations may wish to take in amicus briefs. If the Court were to rule that cases where settlements would be “non-distributable” do not satisfy the superiority requirement and should never be certified class actions at all, defendants might welcome that result. But how would such a rule be applied, and where would the line be drawn? In most cases like this, one might be able to calculate a theoretical class recovery (e.g., with punitive damages) that might, in theory, be large enough to be distributable, although such an amount is very unlikely to be awarded. If a “non-distributable” settlement means only that the settlement is rejected and the parties are forced to continue to litigate, that forces defendants to incur large litigation expenses and risk in cases that they would prefer to resolve. The reality is that there needs to be a route to settling cases like this when appropriate. To the extent the Court is granting certiorari to provide some guidance around when to use cy pres relief and how to do it, that may be welcomed by both sides, provided the Court does not make it unduly difficult to satisfy whatever criteria are ultimately adopted.

References: v. 
 v. 
 § 2072
 v. 
 v. 
 v. 
 v. 
 § 1441
 § 1441
 v. 
 § 1441
 v. 
 v. 
 § 1447
 v. 
 v. 
 § 10
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.