On February 9, 2017, the Fairness in Class Action Litigation Act of 2017, H.R. 985 (“FCALA”), was introduced in the United States House of Representatives by Rep. Robert Goodlatte (R-Va.). On March 9, 2017, the bill passed 220 to 201 and now proceeds to the Senate. The FCALA, if passed through Congress, will be the most extensive class action reform since the 2005 Class Action Fairness Act, which was also authored by Rep. Goodlatte. The FCALA will transform class actions as each stage of litigation will be impacted.
Class Member Typicality Regarding Injuries. Under Rule 23(a) of the Federal Rules of Civil Procedure, class representatives must show that their claims are “typical” of the class members. The FCALA clarifies and arguably heightens the typicality requirement. Representatives would be required to show that they suffered the same type and scope of injury as each other class member. For example, a class representative in a class action under the Telephone Consumer Protection Act (“TCPA”) who alleges invasion of privacy, emotional distress, loss of battery life, loss of data, etc. would arguably not meet the typicality requirement, absent a showing that each other class member suffered these same alleged harms to the same degree or “scope.”
Conflicts of Interest for Class Counsel. Rule 23(a) also requires that the named plaintiff and class counsel be adequate representatives of the proposed class. Under the FCALA, class counsel would be required to disclose an array of potential conflicts of interest with the class representative(s). For example, class counsel would have to disclose the following types of relationships: prior client, employee, or relative. Even more importantly, any one of these relationships (past or current) would be a bar to class certification. Again, using TCPA as an example, this provision would bar class counsel from using the same cell phone user as a “tester” and serial class representative.
Ascertainability. Courts generally agree that under Rule 23, a class must be defined by reference to objective criteria, and sometimes refer to this implied requirement as “ascertainability.” There is currently a split on what ”ascertainability” means: the Third Circuit—and, at least in an unpublished opinion, the Eleventh Circuit—require administrative feasibility for identifying class members, while the Sixth, Seventh, Eighth and Ninth Circuits do not. The FCALA would break the split and require that class representatives demonstrate a reliable and administratively feasible means of identifying class members before an action could be certified as a class.
This addition would be a significant win for TCPA defendants—especially in so-called “wrong number” cases. For example, depending on the format of a defendant’s electronic records, identification of wrong number class members may require a search of all records which cannot be accomplished via an automated means, such as running data search terms. As a result, identifying class members may not be administratively feasible. A wrong-number plaintiff could proceed individually, but not on behalf of others.
Limitations on Recovery of Attorneys’ Fees for Class Counsel. Quite often, the only people who benefit from class actions are plaintiffs’ attorneys. The FCALA specifically addresses this issue and seeks to rein in such class counsel abuse. Fee awards would be based on the amount actually distributed to the class. So, for example, in the case of a claims-made settlement of a TCPA case, class counsel’s fees would be limited by the actual number of claims filed and would not be subject to distribution until the claims process was completed. Attorneys’ fees could not exceed the monetary class recovery. Class counsel would still, however, be allowed to recover some fees for obtaining equitable relief on behalf of the class.
Issue Classes Not Allowed. Faced with problems of proving predominance of common issues under Rule 23(b)(3), class counsel seeking money damages often turn to Rule 23(c)(4) to bifurcate the pesky individual issues. The circuits are split on whether such claim-splitting in the interest of certification is permissible. Under FCALA, an order certifying a class with respect to a particular issue must include a determination that the entirety of the cause of action from which the particular issue arises satisfies all the class certification prerequisites. Thus, courts would no longer be able to certify a class by splitting a cause of action under Rule 23(c)(4). A class could only be certified by evaluating the entire cause of action under Rules 23(a) and (b).
Stay of Discovery. Expensive and burdensome class discovery is often central to strategy decisions in defending against class actions. For the same reasons, class wide discovery is often used by plaintiffs to leverage settlements. The FCALA, however, would require that discovery be stayed pending motions to dismiss, transfer, or strike. In the TCPA context, a defendant would have an opportunity to drill down on whether class discovery will look at calls made by a specific line of business or an entire enterprise. The same defendant would have an opportunity to evaluate more thoroughly the scope of the potential class and consider the business impacts of settlement without being pressured by a shortened timeline.
Right to Appeal Class Certification Decisions. Under Rule 23(f), circuit courts currently have discretion on whether to grant interlocutory review of class certification orders. Under the FCALA, an order to grant or deny class certification would be immediately appealable. In the TCPA context, this would relieve some of the settlement pressure from the gargantuan dollar exposure faced by defendants following class certification of claims which are otherwise weak on the merits or untested. As things now stand, a defendant denied interlocutory review of a questionable class certification order is sometimes left with no choice but to settle.
Stay tuned as this bill moves through the Senate, which received it on March 13, 2017.
For more information regarding the TCPA generally, or FCALA specifically, contact Genevieve R. Walser-Jolly at grw@severson.com.