Class Action Report


As the Supreme Court begins its new term, the trajectory of its recent class certification guidance will be a key issue for many. The spring and summer of 2016 delivered significant new contours in class certification precedent under Rule 23. Two decisions, in particular, will be central to many certification decisions going forward. First, in Tyson Foods, Inc. v. Bouaphakeo, the Court affirmed class certification of a class of employees asserting Fair Labor Standards Act claims and affirmed the sufficiency of representative or statistical evidence to prove the claims of absent class members. Second, in Spokeo, Inc. v. Robins, the Court held that the Ninth Circuit had not properly considered whether the plaintiff asserting Fair Credit Reporting Act claims on behalf of a putative class had properly alleged an injury sufficient to demonstrate Article III standing. The Court held that a plaintiff does not automatically satisfy the injury-in-fact requirement of Article III by alleging a violation of a right conferred by statute.

Below we describe those decisions in more detail with a few comments on their possible impact on class certification analyses, as well as possible cases that might be heard this term.

Tyson Foods, Inc. v. Bouaphakeo et al.

In Tyson, the certified class obtained a jury verdict for $2.9 million based, in part, on the assumption that each class member spent the average amount of time working presented by Plaintiffs’ expert statistical evidence. The Eighth Circuit affirmed. The Supreme Court granted certiorari on two questions: (1) whether a class action may be certified where liability and damages will be determined by statistical techniques that assume class members are identical to average observed in a sample; and (2) whether a class action may be certified when it indisputably contains hundreds of uninjured class members with no right to damages.

The Court answered only the first question and did so narrowly, holding that “in FLSA actions, inferring the hours an employee has worked from a study . . . has been permissible so long as the study is otherwise admissible.” The Court relied heavily on FLSA precedent that permitted employees to rely on representative samples to prove the individual amount of time worked when an employer failed to keep records of the employee’s time. The Court therefore emphasized that representative averaging was acceptable to use in that class action because it would have been proper in an individual claim. That reasoning led the Court to a context-specific holding that “whether and when statistical evidence can be used to establish class-wide liability will depend on the purpose for which the evidence is being introduced and on the elements of the underlying cause of action.”

The Court did not reach the second question regarding uninjured class members because Tyson narrowed its argument in its merits brief, but noted that Tyson could challenge any distribution to uninjured class members at the district court.

Spokeo, Inc. v. Robins

In Spokeo, the district court dismissed the plaintiff’s putative class complaint for lack of standing, but the Ninth Circuit reversed. The Ninth Circuit held that plaintiff sufficiently alleged standing for Article III purposes because he alleged that defendant violated his statutory rights under the Fair Credit Reporting Act and that plaintiff had a personal interest in the handling of his credit information.

The Fair Credit Reporting Act provides certain procedural safeguards to ensure that companies regularly reporting on consumers’ credit worthiness, credit standing, or other personal characteristics report accurate information. A company that fails to comply with the Act’s requirements is liable to the individual for actual or statutory damages of $100 to $1,000 per violation, plus costs and attorneys’ fees.

The Court vacated the Ninth Circuit’s decision on the grounds that Article III “requires a concrete injury even in the context of a statutory violation.” The Court acknowledged that Congress, through legislation, has the power to elevate intangible harms to legally cognizable, concrete injuries. For example, a plaintiff could allege an intangible injury identified by Congress such as a group of voters’ inability to obtain information that Congress decided to make public, and that would be sufficient for Article III purposes. In the FCRA context, the Court explained that some indisputably false information about a person may not cause them any concrete harm, such as an inaccurately reported zip code. Thus, the Court remanded the case for the Ninth Circuit to consider whether the plaintiff had sufficiently alleged a concrete and particularized injury, not merely a violation of the statute.

Class Certification

Both Spokeo and Tyson will likely be central to many class certification disputes arising in the lower courts. Tyson will be cited for the Court’s endorsement of representative evidence as a means to establish liability and damages. Some might point to the Court affirming a class that includes uninjured members as an implication that the Court is prepared to resolve that separate question, an issue over which the circuit courts are currently split. But the Court’s holding was heavily reliant on the substantive cause of action that was before it. Thus, significant questions remain over whether Tyson reduces a non-FLSA plaintiff’s burden to demonstrate each element of a cause of action for all class members.

Meanwhile, Spokeo implicates a number of statutory claims frequently brought as proposed class actions. Putative class plaintiffs that previously relied on an alleged statutory violation to both satisfy standing and, in all likelihood, a common injury among the putative class must now address the additional layer of analysis required by the Court’s decision. Those questions, in turn, may raise issues about the standing of absent class members and whether a class can be certified where some class members lack standing. The Courts of Appeals are currently split on that issue, and recall the Court certified but passed on this issue in Tyson, so the Court’s 2017 term may again prove very meaningful for class litigation throughout the country.

Class Action Petitions to watch in the New Term

As of October 3, 2016, the Court has granted certiorari in one case involving class actions, with four more such petitions pending. The Court will review the Ninth Circuit’s decision in Microsoft Corp. v. Baker for the limited purpose of determining whether a Federal Court of Appeals has jurisdiction under both Article III and 28 U.S.C. § 1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.

 5th Circuit Development

The Fifth Circuit recently issued a potentially important decision, Torres v. S.G.E. Management. Sitting en banc, the Fifth Circuit endorsed two new methods by which a putative class of plaintiffs in RICO cases could prove causation through common proof.

Plaintiffs in fraud cases usually need to provide individualized proof of reliance to satisfy the causation element of their claims, the lone exception being cases involving securities. In Torres, the Fifth Circuit held that (1) the causation element of a claim could be satisfied once the plaintiffs demonstrate that the defendant operated a fraudulent scheme; and (2) in what the court called the “inference-based theory of causation,” that upon showing that the defendant operated a fraudulent scheme, plaintiffs could show that class members commonly relied upon the implicit representations of legitimacy necessary to operate such a scheme.

Under either theory, plaintiffs can use common proof regarding operation of a fraudulent scheme to satisfy the causation element of their claims. The Torres Court’s reasoning was limited to Plaintiffs’ RICO claims, but includes language that Plaintiffs may attempt to apply to other causes of action.

If you have any questions about this e-Alert, contact David Moran at 214.953.6051 or dmoran@jw.com, Edwin Buffmire at 214.953.5939 or ebuffmire@jw.com, David Schlottman at 214.953.6068 or dschlottman@jw.com, or Eric Wong at 214.953.6116 or ewong@jw.com.