What’s Hot in Class Actions (Part 3/3): Potential Rule 23 Amendments Narrowed, Congress Tackles No-Injury Class

US Gov building 000004688650Medium[1]Class actions consume considerable company resources and can pose significant risk of exposure in the $ millions or $ billions. Therefore, it is critical for companies to prepare themselves – to know the trends in class action litigation and the tools available to minimize their exposure to class action liability. Over the last several weeks, the Supreme Court has heard arguments in three cases that have potential to further define the landscape of class action litigation: Campbell-Ewald Co. v. Gomez (No. 14-857), Spokeo, Inc. v. Robins (No. 13-1339), and Tyson Foods, Inc. v. Bouaphakeo (No. 14-1146). Recently, we have seen the advancement of federal legislation seeking to address particular aspects of class action fairness that would limit membership in certified classes. And the Rule 23 Subcommittee of the Advisory Committee on Civil Rules is considering whether to initiate proposed modifications to Federal Rule of Civil Procedure 23 to address several aspects of class litigation. We hit the highlights of these developments in this three-part “What’s Hot in Class Actions” series. Part 1 and Part 2 provided insight into the significant class action cases currently under consideration by the U.S. Supreme Court. This Part 3 covers recent legislative and federal procedural class action developments.

The Fairness in Class Action Litigation Act of 2015 Sent to Full House for Consideration

 The no-injury class is also the subject of Congressional reform efforts. Ten years ago, Congress tackled several perceived abuses of the class action mechanism by passing the Class Action Fairness Act of 2005, which allows defendants to remove certain class actions filed in state court to the more neutral ground of the federal system. In February 2015, the House Judiciary Committee held a hearing to examine the state of class action litigation and current concerns. And on April 22, 2015, House Judiciary Committee Chairman Bob Goodlatte introduced H.R. 1927 - The Fairness in Class Action Litigation Act of 2015, which seeks to further improve the fairness of class actions by imposing limits on a court’s ability to certify classes in which members have not suffered the same types of alleged injury/damages. The Act, as originally introduced, also explicitly required that proof of similarity of alleged damages must be established using admissible evidence at the class certification stage:

No Federal court shall certify any proposed class unless the party seeking to maintain a class action affirmatively demonstrates through admissible evidentiary proof that each proposed class member suffered an injury of the same type and extent as the injury of the named class representative or representatives.

The House Judiciary Committee voted this summer to send an amended version of H.R. 1927 to the full House for review. The Act as amended was reported by the Committee to the full House on November 5, and placed on the calendar. The amended Act no longer requires “admissible evidentiary proof” and limits its applicability to class actions seeking monetary relief for personal injury or economic loss:

  1. In general. No Federal court shall certify any proposed class seeking monetary relief for personal injury or economic loss unless the party seeking to maintain such a class action affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives.
  2. Certification order. An order issued under Rule 23(c)(1) of the Federal Rules of Civil Procedure that certifies a class seeking monetary relief for personal injury or economic loss shall include a determination, based on a rigorous analysis of the evidence presented, that the requirement in subsection (a) of this section is satisfied.

The expectation is that the legislation will curb the size of classes to which defendants might have to pay damages, while also allowing injured individuals to recoup the damages to which they are entitled and keeping uninjured individuals from being forced into class actions.

Rule 23 Subcommittee Continues to Assess Possibility of Amendments to Class Action Rule

The Rule 23 Subcommittee was formed in 2011 to consider modifying the federal rule governing class actions for the first time since the 2001-2003 cycle of amendments. Since its formation, the Subcommittee has identified several issues that may necessitate changes to Rule 23 and has moved forward to seek input from industry professionals, as well as the full Advisory Committee. In October 2014, the Subcommittee reported to the Advisory Committee on its activities and its initial list of “front burner” issues and since has gathered industry input on the issues presented. On September 11, 2015, the Subcommittee held a “mini-conference” with a spectrum of judges, academics and lawyers to gain perspective on these issues using “sketches” of preliminary rule amendments to spark discussion. The issues discussed at the mini-conference include settlement approval procedure/criteria, cy pres provisions in settlements, settlement class certification, settlement objectors, issues classes, notice issues, Rule 68 offers, and ascertainability. The Subcommittee also has participated in multiple conferences and held several meetings and conference calls over the course of the year to develop recommendations for the Advisory Committee.

The Subcommittee submitted its most recent report to the Advisory Committee at the Committee’s November 2015 Fall meeting, presenting what the Subcommittee described as “the six rule-amendment ideas that presently seem to hold the most promise for productive effort.” According to the report, the list of “front-burner” issues has been narrowed since the mini-conference in light of feedback and discussion during Subcommittee meetings, conference calls, and the mini-conference. The topics on which the Subcommittee proposes to focus its immediate attention are:

  1. "Frontloading,“
  2. Excluding "preliminary approvals" of class certification and orders regarding notice to a class about possible settlements from immediate appeal under Rule 23(f),
  3. Clarifying Rule 23(c)(2)(B) to state that Rule 23(e)(1) notice triggers the opt-out period,
  4. Notice to unnamed class members,
  5. Handling objections by class members to proposed settlements, and
  6. Criteria for judicial approval of class-action settlements.

Ascertainability and Rule 68 offers were “put on hold” by the Subcommittee due to case law developments, including the Supreme Court’s consideration of Campbell-Ewald. The Subcommittee decided to bring the issue of whether to draft a new Rule 23(b)(4) on settlement class certification to the full committee without a recommendation, and it recommended taking cy pres and issues classes off the agenda for this round of rule amendments. The Subcommittee noted that the issues and rule amendment sketches continue to evolve, and stressed that “[i]t remains quite uncertain whether any formal proposals to amend Rule 23 will emerge from this process. If formal proposals do emerge, it is also uncertain what those proposals would be.” The Subcommittee is still planning a schedule that would permit publication of preliminary drafts of rule amendments in August, 2016.

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