THE BRIEF FINANCIAL SERVICES LITIGATION QUARTERLY - SUMMER 2021 - Hunton ...
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THE BRIEF
FINANCIAL SERVICES
LITIGATION QUARTERLY
SUMMER 2021
1
TABLE OF CONTENTS
Developing Issues in Class Action Jurisprudence 3
Supreme Court Clarifies Little About Spokeo
And Standing in TransUnion LLC v Ramirez 7
Noteworthy 9
Florida Enacts “Mini-TCPA” To Apply To Telemarketers 9
Eighth Circuit Holds “Boilerplate” Disclosures
Do Not Show Communications Are “In
Connection With The Collection Of A Debt”
For Purposes Of The FDCPA 9
Eleventh Circuit Holds That Steps To
Mitigate Effects Of A Data Breach Are
Sufficient “Injury In Fact” To Bestow Standing 10
Seventh Circuit Articulates Its “Fundamental
Principle” For Alleging A Concrete Injury
Under § 1692(C) Of The FDCPA 11
Eleventh Circuit Holds That Outsourcing
The Printing Of Debt-Collection Letters Risks
Liability Under The Fdcpa’s Restrictions On
Transmittal Of Consumers’ Debt Information 11
Third Circuit Holds No Article III Standing
For A Single TCPA Violation 12
Third Circuit Rules Denial Of Class Certification
Not Required For American Pipe Tolling 13
Ninth Circuit Holds Amendments To FRCP 23(E)
Require Heightened Scrutiny Of Attorney’s Fees
In Class Settlements 14
Second Circuit Holds Violations Of State Statutes
Can Satisfy The “Injury-In-Fact” Requirement For
Article III Standing 14
Fourth And Eleventh Circuits Reach Conflicting
Results On “Administrative Feasibility” 15
Contributors 16
2 HuntonAK.com
DEVELOPING ISSUES IN CLASS
ACTION JURISPRUDENCE
In the past decade, the Supreme Court has decided a number of
cases that have clarified important issues concerning when and
how Rule 23 class actions should be certified.
In Wal-Mart Stores, Inc. v. Dukes, WHEN MUST ABSENT See In re Prudential Ins. Co. Am.
564 U.S. 338, 350 (2011), the Sales Practice Litig. Agent Actions,
Court observed that the “common
CLASS MEMBERS SHOW 148 F.3d 283, 306-07 (3d Cir. 1998);
questions” required under Rule 23(a) ARTICLE III STANDING? Kohen v. Pac. Inv. Mgmt. Co. LLC,
(3) must be ones whose answers It is well established that “Article 571 F.3d 672, 676-78 (7th Cir. 2009);
“resolve an issue that is central to III does not give federal courts the Stearns v. Ticketmaster Corp., 655
the validity of each one of the claims power to order relief to any uninjured F.3d 1013, 1020-21 (9th Cir. 2011);
in one stroke.” In Comcast Corp. v. plaintiff, class action or not.” Tyson DG ex rel. Stricklin v. Devaughn, 594
Behrend, 569 U.S. 27, 34 (2013), the Foods, Inc. v. Bouaphakeo, 577 F.3d 1188, 1197-98 (10th Cir. 2010).
Court clarified the requirements for U.S. 442, 466 (2016) (Roberts, J., Other circuits, however, have held
predominance, holding that damages concurring). What is less certain is that, while class members need not
must be “capable of measurement on whether federal courts may certify a submit evidence of standing, “no
a classwide basis,” and that courts class before it has been shown that class may be certified, that contains
must perform a “rigorous analysis” all its members have been injured. members lacking Article III standing.
to ensure that that requirement is See TransUnion LLC v. Ramirez, The class must therefore be defined
satisfied before certifying a Rule 141 S. Ct. 2190, 2208 n.4 (2021) in such a way that anyone within
23(b)(3) class. (declining to address question of it would have standing.” Denney v.
whether absent class members Deutsche Bank AG, 443 F.3d 253,
But there are a number of important must demonstrate standing before 264 (2d Cir. 2006); accord Avritt v.
class certification issues that have certification). Reliastar Life Ins. Co., 615 F.3d 1023,
not yet been resolved by the Supreme 1034 (8th Cir. 2010). The Eleventh
Court. We summarize below five of Courts in the Third, Seventh, Ninth, Circuit has charted a middle course,
the most salient issues: and Tenth Circuits have all held that allowing that a court might certify a
a class can be certified even if absent class that includes “some” putative
members have not been injured. members who lack standing and
3
“deal with the problem later on in the for class certification is evidence As with the question of standing
proceeding,…before it awarded any admissible under the Federal Rules for absent class members, the
relief.” Cordoba v. DIRECTV, LLC, 942 of Evidence. This division largely disagreement as to the admissibility
F.3d 1259, 1277 (11th Cir. 2019); see id. concerns the use of expert testimony of expert evidence concerns not if,
(“[T]here is a meaningful difference and the standard for admissibility but when such evidence must be
between a class with a few members under Daubert v. Merrell Dow found to be admissible. The answer
who might not have suffered an injury Pharms., Inc., 509 U.S. 579 (1993). to that question of timing is also
traceable to the defendants and a likely to affect class-action litigation,
class with potentially many more, The Sixth, Eighth, and Ninth Circuits for if plaintiffs have the burden of
even a majority, who do not have have held that class certification may establishing admissibility before
Article III standing.”). be based on expert evidence that has certification, defendants will have
not yet been found to be admissible. an additional arrow in their quiver of
While courts on each side of this E.g., In re Zurn Pex Plumbing Prod. defenses against certification.
divide agree that each class member Liab. Litig., 644 F.3d 604, 611-13 (8th
must have standing in order to Cir. 2011) (rejecting requirement that DOES AMERICAN
recover, they disagree as to when expert testimony be found admissible
absent class members’ standing before considering whether it
PIPE TOLLING APPLY
must be shown. That disagreement supports class certification, noting TO PLAINTIFFS WHO
is likely to have a significant effect the “tentative,” “preliminary,” FILE INDIVIDUAL
on class-action litigation. If, for and “limited” scope of inquiry on SUITS BEFORE CLASS
example, plaintiffs must establish class certification). Instead, these
the standing of all absent class courts have applied a less stringent
CERTIFICATION IS
members before certification, the standard for allowing expert DECIDED?
difficulty of certifying a class will testimony at the class certification In American Pipe & Constr. Co.
likely increase significantly, and stage, such as a “tailored” Daubert v. Utah, 414 U.S. 538 (1974), the
defendants will have an additional analysis in which the court considers Supreme Court held that when a
argument for opposing certification the reliability of the expert opinions class action is filed, the statute of
(or at least restricting the size “in light of the available evidence.” limitations for the claims of all the
of any certified class). If proof of Id. at 612; see also Sali v. Corona purported class members is tolled
standing can be deferred until Reg’l Med. Ctr., 909 F.3d 996, until a decision on class certification
after a class is certified, however, 1006 (9th Cir. 2018) (court should is rendered.
plaintiffs appear to have the edge, consider Daubert factors, to assess
for once certification is granted, a “ultimate admissibility” in light of While the rule appears simple, there
defendant may find it impossible to “persuasiveness of the evidence are disagreements among the circuits
resist settlement, rather than risk presented”). about precisely how to apply it. The
being found liable to an entire class First and Sixth Circuits have held that
– notwithstanding the potential for In the Third, Fifth, Seventh, and if a plaintiff files her own lawsuit prior
challenging the standing of individual Eleventh Circuits, however, expert to a decision on class certification,
class members. testimony cannot be used to she forfeits the benefit of any tolling
establish the requirements for class at all. See Wyser-Pratte Management
MUST EXPERT EVIDENCE certification unless it clears the Co. v. Telxon Corp., 413 F.3d 553,
hurdle of admissibility. E.g., Prantil v. 568-69 (6th Cir. 2005); Glater v.
IN SUPPORT OF Arkema Inc., 986 F.3d 570, 575 (5th Eli Lilly & Co., 712 F.2d 735, 739 (1st
CERTIFICATION BE Cir. 2021) (“[W]hen the cementing of Cir. 1983). As a consequence, an
ADMISSIBLE? relationships among proffered class individual claim filed in those circuits
Comcast established that a party members of liability or damages or before a class-certification decision
seeking to certify a class must show both turns on scientific evidence may be time-barred but would not
at least one provision in Rule 23(b) is should we insist that the metric be time-barred if the plaintiff waited
satisfied “through evidentiary proof.” of admissibility be the same for until after certification was denied.
But circuits are divided as to whether certification and trial. We answer The Second, Third, Ninth, and Tenth
the “evidentiary proof” required that question in the affirmative.”). Circuits have taken a contrary view,
4 HuntonAK.com
holding that all class members get MUST THERE BE AN
the benefit of American Pipe tolling,
whether they file their individual
“ADMINISTRATIVELY
claims before a decision on class FEASIBLE” METHOD OF
certification or after it. E.g., Aly v. DETERMINING CLASS
Valeant Pharms. Int’l Inc., 1 F.4th 168, MEMBERSHIP?
176 (3d Cir. 2021); State Farm Mut.
Another split among the circuits
Auto. Ins. Co. v. Boellstorff, 540 F.3d
concerns whether, in addition to the
1223, 1228 (10th Cir. 2008).
requirements of Rule 23(a) and (b),
Underlying this split are two named plaintiffs must also establish
fundamentally different views of the that there is an “administratively
purpose of American Pipe tolling. feasible” method of ascertaining the
For those that apply the doctrine to membership of a class as a condition
every plaintiff (including those who of certification.
bring their individual suits while a
The First, Third, and Fourth Circuits
class action is pending), the primary
treat administrative feasibility as a
purpose is “to protect class members
prerequisite to class certification.
from being forced to file individual
E.g., Byrd v. Aaron’s, Inc., 784 F.3d
suits in order to preserve their
154, 163 (3d Cir. 2015) (requiring
claims.” In re Worldcom Sec. Litig.,
“a reliable and administratively
496 F.3d 245, 256 (2d Cir. 2007)
feasible mechanism for determining
(emphasis in original). For those that
whether putative class members fall
decline to extend it to plaintiffs who
within the class definition” before
bring their own suits, the purpose of
certification); see also Peters v.
American Pipe tolling is principally
Aetna Inc., 2 F.4th 199, 241-42 (4th
a matter of efficiency, and the
Cir. 2021) (“Rule 23 contains an
doctrine aims to prevent plaintiffs
implicit threshold requirement that
from racing to court to assert their
the members of a proposed class be
individual claims in case class
‘readily identifiable.’”). These courts
certification is denied. That purpose
have characterized “administrative
would be thwarted if it were applied
feasibility” in terms of whether class
to those who do not wait until a
membership can be determined
class-certification decision to file
without engaging in “extensive
suit, which in turn would encourage
and individualized fact-finding” or
the “multiplicity” of individual
“numerous fact-intensive inquiries.”
cases that, according to the court in
Id. at 242; Carrera v. Bayer Corp., 727
American Pipe, Rule 23 was designed
F.3d 300, 308 (3d Cir. 2013).
to prevent. Precisely how the clash
between those competing views of The Second, Sixth, Seventh, Eighth,
the purpose of American Pipe tolling Ninth, and the Eleventh Circuits,
will be resolved is unclear and may on the other hand, hold that, while
ultimately require further guidance a proposed class must be defined
from the Supreme Court. so that its membership is “capable
of determination,” “administrative
5
feasibility” – understood as a MUST A COURT serious questions as to whether that
“convenient” way of determining “general consensus” is consistent
class membership – “is not a
HAVE PERSONAL with due process for the defendant
requirement for certification under JURISDICTION OVER and the extent to which Rule 23’s
Rule 23.” Cherry v. Dometic Corp., ABSENT CLASS requirements are an “adequate
986 F.3d 1296, 1303-04 (11th Cir. MEMBERS? substitute for normal principles
2021); see also In re Petrobras Sec. of personal jurisdiction.” Molock,
In Bristol-Myers Squibb Co. v.
Litig., 862 F.3d 250, 268 (2d Cir. 952 F.3d at 307-08 (Silberman, J.,
Superior Court, 137 S. Ct. 1773 (2017),
2017) (“We conclude that an implied dissenting); Lyngaas, 992 F.3d at
the Supreme Court held that a
administrative feasibility requirement 438-41 (Thapar, J., dissenting).
California state court did not have
would be inconsistent with the
specific jurisdiction over several out- At least one district court has agreed
careful balance struck in Rule 23,
of-state plaintiffs in a mass tort case with those dissenters, holding in
which directs courts to weigh the
who were not injured in California. a thoughtful opinion that “the due
competing interests inherent in any
As Justice Sotomayor noted in her process concerns recognized in
class certification decision.”). For
dissent, the Court did not consider Bristol-Myers and other Supreme
these courts, the ease with which
how its decision would apply to a Court precedent would foreclose
class membership can be determined
class action in which absent class a nationwide class action that
is relevant to certification but only
members were not injured in the is not limited to a nonresident
insofar as it is one factor among
forum state. Id. at 1789 n.4. defendant’s conduct in the forum
many that affects the manageability
of the case as a class action under state.” Stacker v. Intellisource, LLC,
Several district courts subsequently
Rule 23(b)(3). E.g., Briseno v. 2021 WL 2646444, at *8 (D. Kan.
did apply Bristol-Myers to class
ConAgra Foods, Inc., 844 F.3d 1121, June 28, 2021). Such a result, of
actions, striking from proposed
1127 (9th Cir. 2017). course, would not be an absolute
classes absent class members
barrier to nationwide class actions.
over whom the court did not
The disagreement between those It would, however, likely change
have personal jurisdiction. See
courts that require a plaintiff to where such cases are filed (i.e., in
Am.’s Health & Res. Ctr., Ltd. v.
show on class certification that class the defendant’s own state) or
Promologics, Inc., 2018 WL 3474444
membership can be “readily” or encourage more statewide class
(N.D. Ill. July 19, 2018) (collecting
“feasibly” identified and those that actions, and so have a significance
cases). The D.C., Sixth, and Seventh
do not may have a significant effect effect on the contours of class-action
Circuits have pushed back on those
on the prospects for some types of litigation generally.
decisions to uphold the “general
class actions. For instance, it may
consensus” that absent class
be very difficult for a plaintiff to
members are for most purposes not
satisfy an administrative feasibility
considered “parties,” which makes
requirement in cases involving low-
personal jurisdiction for absent class
cost consumer purchases, in which
members irrelevant before the class
membership likely can be determined
is certified. Molock v. Whole Foods
only if class members keep their
Mkt. Grp., Inc., 952 F.3d 293, 299
receipts. The Supreme Court has
(D.C. Cir. 2020); Mussat v. IQVIA, Inc.,
declined to take up the question of
953 F.3d 441, 445 (7th Cir. 2020);
ascertainability in recent cases, e.g.,
Lyngaas v. Curaden AG, 992 F.3d 412,
ConAgra Brands, Inc. v. Briseno, 138
433 (6th Cir. 2021).
S. Ct. 313 (2017) (denying certiorari),
and Direct Digital, LLC v. Mullins, But, while the tide is against the
577 U.S. 1138 (2016) (same), which application of Bristol-Myers to
suggests that the current split class actions, its fate has yet to be
is likely to continue for the conclusively resolved. Dissenters in
foreseeable future. both Lyngaas and Molock have raised
6 HuntonAK.com
SUPREME COURT CLARIFIES
LITTLE ABOUT SPOKEO
AND STANDING IN
TRANSUNION LLC V RAMIREZ
The U.S. Supreme Court closed its 2020-21 term with a decision in
TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), a decision again
addressing injury in fact as a predicate to Article III standing. The
decision was expected to clarify the “concrete harm” test the Court
announced in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016). Ramirez
does little to alter the landscape on standing, though it invites
focus on when standing must be assessed in class actions and
may help defendants opposing the certification of classes seeking
redress for technical statutory violations.
The plaintiff in Ramirez applied Plaintiff alleged that TransUnion
for a car loan at a dealership. The violated FCRA by failing to use
dealer requested a credit report reasonable procedures to ensure
from TransUnion. The report flagged the accuracy of its credit files and by
plaintiff as a possible match to a failing to include in its second mailing
person on the Office of Foreign Asset a summary of his right to dispute
Control’s list of potential terrorists items in his file. Plaintiff brought his
and other serious criminals. After claims individually and on behalf of a
plaintiff inquired with TransUnion class of persons that also had OFAC
about his report, TransUnion sent references in their credit files.
him a copy of his credit report,
which omitted mention of the The Court held in Spokeo that a “bare
possible OFAC match but included procedural violation [of a statute],
a summary of his right to request divorced from any concrete harm”
corrections. TransUnion then sent was insufficient to satisfy the injury
a second letter that referred to the requirement for Article III standing.
possible OFAC match but did not The decision in Spokeo left for
advise plaintiff of his right to request another day what exactly constitutes
a correction. a “concrete harm.” In the five years
since Spokeo was decided, lower
7
federal courts have struggled to 2210-11. A risk of future harm, the services providers: when in a class
implement its guidance on standing Court held, only confers standing if action should standing be addressed?
in a uniform and predictable manner. “exposure to the risk of future harm The Court specifically left this
Some observers had expected a itself causes a separate concrete question unaddressed – “[w]e do not
clarification in Ramirez that would harm,” e.g., a cognizable emotional here address the distinct question
help the lower courts resolve injury. Id. at 2211. The whole class whether every class member must
standing issues consistently. further lacked standing as to the demonstrate standing before a court
FCRA claim for failure to provide a certifies a class” (141 S. Ct. at 2208
The Court held in Ramirez that summary of rights because there n.4) – though it then cited to an
tangible harms, such as physical was no evidence that class members Eleventh Circuit decision, Cordoba v.
and monetary harms, readily qualify other than the named plaintiff even DIRECTV, LLC, 942 F.3d 1259 (2019),
as concrete harms. The Court also opened the communications, so where the court stated that absent
held that intangible harms could there was no harm. class members’ lack of standing
be concrete, and thus suffice for “poses a powerful problem under
standing purposes, if the injury The Court’s analysis in Ramirez broke Rule 23(b)(3)’s predominance factor.”
had “a close relationship to harms little new ground with respect to The Ramirez opinion then ends with
traditionally recognized as providing discerning what statutory violations this sentence: “On remand, the Ninth
a basis for lawsuits in American are not actionable in the federal Circuit may consider in the first
courts.” Ramirez, 141 S. Ct. at 2204. courts because the harm resulting instance whether class certification is
from them is not sufficiently concrete. appropriate in light of our conclusion
For about 23 percent of the class, In Spokeo, the Court suggested that about standing.” 141 S. Ct. at 2214.
credit reports with the misleading the standing analysis should be
OFAC information had been sent to rooted in an assessment of whether When standing is assessed is
third parties. The Court held that this the alleged injury had a “close an important issue for financial
group of class members had standing relationship” to a harm “traditionally” institutions, because requiring all or
because providing misleading recognized as providing a basis for a a majority of class members to show
information was akin to defamation, lawsuit in English or American courts. standing could be a significant hurdle
a harm traditionally recognized as Spokeo, 578 U.S. at 341. Ramirez for plaintiffs to clear at the class
providing a basis for a lawsuit in an largely reiterates the Spokeo holding certification stage, whereas allowing
American court. But, for the other and therefore seems unlikely to do standing to be determined after
77 percent of the class, the OFAC much to curb the deluge of cases certification would allow plaintiffs
reports had not been provided to in the lower courts contesting the to wield certification as leverage in
any third party. This group therefore concreteness of statutory injuries. settlement negotiations, even though
lacked standing because their Continued uncertainty over standing some or even the majority of class
reports were not disclosed to third may push claims for technical members may lack standing. Ramirez
parties, so they suffered no harm that statutory violations from federal provides an opening for defendants
traditionally provided a basis for a court into state courts, where in class actions alleging technical
lawsuit in the US. standing requirements can be more statutory violations to push courts
lenient, though Ramirez does little to to resolve standing issues before
The Court also held that the risk
change the landscape and so seems certifying a class.
for the 77 percent group that
unlikely itself to have a significant
the misleading information may
effect on where such cases are filed.
be disclosed in the future was
insufficient to confer standing Ramirez leaves one question
because they suffered no injury from unresolved, though it is one with
the risk itself. Ramirez, 141 S. Ct. at significant implications for financial
8 HuntonAK.com
NOTEWORTHY
FLORIDA ENACTS numbers or the playing of a recorded the legitimate interests of other
message” when the call is made businesses that need a cost-effective
“MINI-TCPA” TO APPLY “without the prior express written means of communicating with their
TO TELEMARKETERS consent of the called party.” The customers and so it may provide a
Since 1992, the Telephone Consumer statute which also specifies the model for similar state statutes.
Protection Act (“TCPA”) has placed disclosures that must be made to
federal restrictions on the use individuals before obtaining their EIGHTH CIRCUIT
of autodialers and pre-recorded written consent to be called with HOLDS “BOILERPLATE”
messages. In its recent decision an autodialer, bars a party from
in Facebook, Inc. v. Duguid, 141 S. requiring such consent as a condition
DISCLOSURES
Ct. 1163 (2021), the Supreme Court of any purchase, restricts the time DO NOT SHOW
held that the TCPA’s restrictions on and number of telemarketing calls COMMUNICATIONS ARE
the use of autodialers apply only that can be made and makes the “IN CONNECTION WITH
to devices that have the capacity use of “spoofing” technology that
to store a telephone number using conceals the identity of the caller
THE COLLECTION OF A
a random or sequential number from the recipient a misdemeanor. DEBT” FOR PURPOSES
generator or to produce a telephone OF THE FDCPA
number using a random or sequential Because the Florida statute applies
The Fair Debt Collection Practices
number generator. As a result, those to any “automated system for the
Act (“FDCPA”) bars debt collectors
restrictions on the use of autodialers selection or dialing of telephone
from using any “false, deceptive,
do not apply to devices that dial numbers or the playing of a recorded
or misleading representation” “in
from lists of numbers, rather than message” and requires prior written
connection with the collection of any
employing a random or sequential consent, liability under Florida’s
debt.” 15 U.S.C. § 1692e. In Heinz v.
number generator. mini-TCPA is potentially broader than
Carrington Mortg. Servs., LLC, 3 F.4th
liability under its federal analogue. At
1107 (8th Cir. 2021), the Eighth Circuit
In the wake of Duguid, Florida has the same time, however, the Florida
joined the Sixth and Seventh Circuits
amended its Telemarketing Act to statute is limited to telemarketing
in holding that some communications
create its own “mini-TCPA” that calls and so would not apply to
from debt collectors should not be
restricts some uses of autodialers autodialers used by debt collectors
treated as having been made “in
that now fall outside the scope of and other businesses who use such
connection with the collection of
the TCPA. The amendment, which devices to make non-telemarketing
any debt” – and so not be subject
took effect on July 1, 2021, prohibits calls to their customers. Florida’s
to liability under the FDCPA – even
making “telephonic sales calls” that version of the TCPA thus appears
though they expressly state that they
involve “an automated system for to balance a concern for limiting
are for the purpose of collecting
the selection or dialing of telephone unsolicited sales calls against
a debt.
9
ELEVENTH CIRCUIT
HOLDS THAT STEPS TO
MITIGATE EFFECTS OF
A DATA BREACH ARE
SUFFICIENT “INJURY
IN FACT” TO BESTOW
STANDING
Data breaches pose an increasingly
serious threat to the privacy and
finances of consumers. One of the
principal challenges for consumers
Heinz arose from a debtor’s claim “[t]his communication is from a debt whose data has been compromised
that the servicer of his mortgage loan collector and it is for the purpose by such a breach and who seek
made false representations to him of collecting a debt and any a remedy in federal court is to
about the state of his loss-mitigation information obtained will be used establish that they have suffered
assistance application and the for that purpose.” a concrete injury, as required to
foreclosure sale of his property. demonstrate Article III standing. The
The letters at issue told the debtor The Eighth Circuit distinguished Eleventh Circuit’s recent decision
that his loss-mitigation assistance Obduskey, holding that that case in In re Equifax Inc. Customer Data
application had been canceled was relevant only for determining Sec. Breach Litig., 999 F.3d 1247
because he had not provided all if a party was a “debt collector” (11th Cir. 2021), may help consumers
of the required information but said for purposes of the FDCPA but not in that regard but at the same time
nothing about the loan (e.g., amount for deciding if a communication highlights the uncertainty concerning
owed or in arrears) beyond the was an attempt to collect a debt. what constitutes a concrete injury.
property address and loan number. It acknowledged, however, that
the inclusion of the “mini-Miranda” The case arose from a class-action
The district court granted the servicer
was “[m]ore troublesome” for the settlement of claims against Equifax
summary judgment, holding that
servicer’s claim that those letters following a data breach involving
under the “animating purpose” test,
were actually not for the purpose the social security numbers, names,
which holds that a communication
of collecting a debt. Nonetheless, addresses, and birth dates of almost
is in connection with the collection
it held that such “boilerplate” 150 million individuals. Several
of a debt only if its purpose is to
disclosures are insufficient to show objections were raised against the
“induce payment by the debtor,”
that the letters were in connection settlement and dismissed by the
the servicer’s communications were
with the collection of a debt and district court, including the claim
not made in connection with the
that a court must instead look to the that the plaintiffs lacked Article III
collection of a debt.
substance of the letters to decide standing. On appeal, the Eleventh
On appeal, the debtor argued if the “animating purpose” was “to Circuit held that the plaintiffs “have
that the Supreme Court’s recent induce payment by the debtor.” easily shown an injury in fact.” That
statement in Obduskey v. McCarthy The court thus held that “a routine was clearly true for those plaintiffs
& Holthus LLP, 139 S. Ct. 1029, disclosure statement that is at odds whose data had actually resulted
1036 (2019), that “foreclosure with the remainder of the letter does in identity theft, since they had to
is a means of collecting a debt” not turn the communication into “spen[d] time, money, and effort
rendered all of the servicer’s letters something that it is not—in this case, trying to mitigate their injuries,
regarding the foreclosure “attempts a communication made in connection including disputing fraudulent
to collect a debt.” The debtor also with the collection of a debt for the activity, filing police reports, and
noted that each letter contained a purposes of the FDCPA,” and affirmed otherwise dealing with identity theft.”
“mini-Miranda” statement that summary judgment for the servicer. Id. at 1263. But the court also held
10 HuntonAK.comthat other plaintiffs who were not On July 14, 2021, the court issued yet the allegation that she had been
victims of actual identity theft had another such decision in Dahl v. confused by the letters, which,
also suffered an injury-in-fact by Kohn L. Firm, 853 F. App’x 1 (7th Cir. under its decision in Pennell v.
virtue of the risk of identity theft and 2020), holding that the plaintiff there Glob. Tr. Mgmt., LLC, 990 F.3d 1041
because those plaintiffs had suffered had not alleged an injury-in-fact (7th Cir. 2021), does not qualify as
“mitigation injuries” by having to and quoting its “fundamental a concrete injury sufficient for
“spen[d] time, money, and effort principle,” articulated in Markakos Article III standing.
mitigating the risk of identity v. Medicredit, Inc., 997 F.3d 778, 779
theft.” Id. (7th Cir. 2021), that “a violation of The court in Dahl did not suggest
the FDCPA ‘does not, by itself, cause that the plaintiff could not have
While the court’s decision should be an injury in fact’ sufficient to confer alleged a concrete injury under the
reassuring to consumers who seek Article III standing.” circumstances. Instead, it indicated
relief in federal court for the risk of that under its decision in Gadelhak
injury posed by large data breaches, The plaintiff in Dahl alleged a debt v. AT&T Servs., Inc., 950 F.3d 458 (7th
there remain serious questions as to collector had sent her letters after Cir. 2020), the plaintiff would have
precisely which injuries are sufficient she had told her creditors not to had standing if she had described her
to create Article III standing. For contact her and so violated 15 U.S.C. injury in her complaint as an invasion
instance, while the court held that § 1692c(c), which states that “[i]f a of privacy caused by the unwanted
“mitigation injuries” by those who consumer notifies a debt collector letters. As such, the “fundamental
were not actually harmed by identity in writing that the consumer refuses principle” for standing – at least
theft was sufficient for standing, to pay a debt or that the consumer under § 1692(c) of the FDCPA – may
that decision is in apparent conflict wishes the debt collector to cease simply amount to a requirement
with another of its decisions earlier further communication with the that plaintiffs describe their alleged
this year, Tsao v. Captiva MVP Rest. consumer, the debt collector shall injuries in a particular manner rather
Partners, LLC, 986 F.3d 1332, 1335 not communicate further with the than a substantive requirement for
(11th Cir. 2021), in which it held that consumer with respect to such debt.” such injuries.
the plaintiff’s “efforts to mitigate The defendant moved to dismiss,
the risk of future identity theft” did arguing that § 1692(c) applies only if ELEVENTH CIRCUIT
not comprise “a present, concrete the notices to cease communication HOLDS THAT
injury sufficient to confer standing.” are sent directly to the debt collector,
The court in In re Equifax cited Tsao not the creditor. The defendant
OUTSOURCING THE
but made no attempt to reconcile also argued that the letters – which PRINTING OF DEBT-
the apparent tension with its simply informed the plaintiff that COLLECTION LETTERS
earlier decision. In so doing, it may the defendant had been retained in RISKS LIABILITY
have simply added to the existing connection with her two accounts
uncertainty regarding what counts as – were themselves mandated under
UNDER THE FDCPA’S
a concrete injury. § 1692(g) of the FDCPA. The district RESTRICTIONS ON
court agreed with defendant and TRANSMITTAL OF
SEVENTH CIRCUIT dismissed the complaint for failure to CONSUMERS’ DEBT
ARTICULATES ITS state a claim.
INFORMATION
“FUNDAMENTAL On appeal, the Seventh Circuit Businesses of all sorts commonly
PRINCIPLE” FOR focused not on whether the plaintiff outsource mass printing and mailing
ALLEGING A CONCRETE had stated a claim, but on whether services to third-party vendors,
she had alleged a concrete injury rather than perform those tasks
INJURY UNDER § sufficient for standing. She had in-house. The Eleventh Circuit’s
1692(C) OF THE FDCPA alleged that the letters “made [her] recent decision in Hunstein v.
Over the past year, the Seventh believe that her attempt to exercise Preferred Collection & Mgmt. Servs.,
Circuit has issued a series of her rights under the FDCPA had been Inc., 994 F.3d 1341 (11th Cir. 2021),
decisions in which it has sought to futile[ ] and that she did not have however, has raised questions as
clarify the requirements for Article the rights Congress had granted to whether using such vendors can
III standing under the Fair Debt her under the FDCPA.” The court subject businesses to liability under
Collection Practices Act (“FDCPA”). held that those amounted only to the Fair Debt Collection Practices
11Act’s (“FDCPA”) restrictions on any debt collector that outsources TCPA is intended to prevent harm
disclosing consumers’ personal its printing and mailing services to stemming from nuisance, invasions
information “in connection with the third parties and “runs the risk of of privacy, and other such injuries,”
collection of any debt.” upsetting the status quo in the debt- and so the plaintiff “must allege one
collection industry” by compelling of those injuries” to have standing;
In Hunstein, the court heard as a debt collectors to “in-source many of merely alleging a violation of the
matter of first impression whether the services that they had previously statute is not enough. Id. at *2.
a debt collector’s transmittal outsourced, potentially at great
of information concerning a cost.” Id. at 1352. However, it rejected The Third Circuit thus joins the
consumer’s debt (including his name, that practical concern as irrelevant Eleventh Circuit in limiting the
outstanding balance, and the nature to its decision and suggested that the conditions under which a TCPA
of his debt) to a third-party vendor proper remedy for the undesirable violation is sufficient for standing. As
to print and mail the consumer a consequences of its decision is a the Eleventh Circuit held in Salcedo
dunning letter violated 15 U.S.C. matter for Congress, not the courts. v. Hanna, 936 F.3d 1162, 1172 (11th
§ 1692c(b)’s prohibition on debt Cir. 2019), while repeated violations
collectors from sharing consumers’ THIRD CIRCUIT of the TCPA may be sufficient for
personal information to third parties standing, a single violation is “the
“in connection with the collection
HOLDS NO ARTICLE kind of fleeting infraction upon
of any debt.” The district court III STANDING FOR A personal property that tort law has
dismissed plaintiff’s claim, holding he SINGLE TCPA VIOLATION resisted addressing” and so under
had not alleged that the transmittal In the years since the Supreme Spokeo is not sufficient to confer
of that information to the vendor was Court’s decision in Spokeo, Inc. v. Article III standing. The Third and
a communication “in connection with Robins, 578 U.S. 856 (2016), courts Eleventh Circuits’ view on standing
the collection of any debt.” have sought to clarify the conditions for TCPA claims, therefore, conflicts
under which a statutory violation will with the views of the Second, Fifth,
On appeal, the Eleventh Circuit Seventh, and Ninth Circuits, which
constitute a concrete injury sufficient
started its analysis by asking if the
to create Article III standing. Courts
plaintiff even had standing to assert
have often considered this question
his claim. It held that the plaintiff had
in the context of the Fair Debt
not suffered a tangible injury and had
Collection Practices Act (“FDCPA”).
not alleged a risk of harm, but that
(See, for instance, the discussions
under Spokeo, Inc. v. Robins, 578 U.S.
of Dahl and Hunstein in this issue of
856 (2016), the statutory violation
The Brief.) The Third Circuit’s decision
plaintiff alleged was sufficient for
in Leyse v. Bank of Am. Nat’l Ass’n,
standing. In so holding, the court
2021 WL 1997452 (3d Cir. May 19,
drew a parallel between the purposes
2021), highlights this uncertainty in
of the FDCPA and the common-law
the context of another statute, the
tort of invasion-of-privacy and noted
Telephone Consumer Protection
that when enacting the FDCPA,
Act (“TCPA”).
Congress expressly identified the
“invasion[] of individual privacy” as In Leyse, the district court granted
one of the harms against which the summary judgment to the defendant
statute is directed. 994 F.3d at 1347- on the plaintiff’s claim for a single
49. Having found that the statutory violation of the TCPA’s prohibition on
violation was sufficient for standing, the use of prerecorded telephone
the court then went on to hold that messages. The district court held
the transmittal of debt-specific that, because the plaintiff did not
information from the debt collector allege that he suffered annoyance,
to the vendor was a communication nuisance, or wasted time from that
“in connection with the collection of one violation, he did not allege a
[a] debt.” Id. at 1349. concrete injury and so did not have
Article III standing. The Third Circuit
As the court recognized, its standing
affirmed on appeal, holding that “the
analysis raises practical problems for
12 HuntonAK.comhave held that the injury caused her individual claim before the court Circuit reasoned that requiring
by even one or two violations is decides class certification? putative class members to delay
sufficient for standing. E.g., Cranor filing individual claims indefinitely to
v. 5 Star Nutrition, L.L.C., 998 F.3d The Third Circuit addressed this issue benefit from American Pipe tolling
686, 688 (5th Cir. 2021) (standing for in Aly v. Valeant Pharm. Int’l Inc., would serve “no compelling purpose”
one violation); Van Patten v. Vertical 1 F.4th 168 (3d Cir. 2021). In 2015, a and lead to “counterintuitive results.”
Fitness Grp., LLC, 847 F.3d 1037, 1043 class action was filed against Valeant The Court also explained that the
(9th Cir. 2017) (standing for Pharmaceuticals Inc. for alleged importance of judicial economy
two violations). violations of Sections 10(b) and cannot be used to construe the
20(a) of the Exchange Act and Rule American Pipe doctrine in a way
THIRD CIRCUIT 10b-5. By late 2018, the District Court that would undermine its primary
had not ruled on class certification.
RULES DENIAL OF Rather than wait for a certification
purpose—to protect the individual
rights of putative class members.
CLASS CERTIFICATION decision, four putative members of
NOT REQUIRED FOR the class filed their own “opt-out” The Third Circuit’s decision in Aly
AMERICAN PIPE complaint, asserting the same claims shows a growing consensus that
in their individual capacities against American Pipe tolling applies to
TOLLING Valeant. The District Court dismissed individual claims even if they are filed
In American Pipe & Constr. Co. the opt-out complaint under the prior to a decision on certification.
v. Utah, 414 U.S. 538 (1974), the applicable two-year limitations However, the Court in Aly noted that
Supreme Court held that the filing period, holding that American not all Circuits are in accord, citing
of a class action tolls the statute Pipe tolling did not apply to such Glater v. Eli Lilly & Co., 712 F.2d 735,
of limitations for the claims of individual claims because they were 739 (1st Cir. 1983), and Wyser-Pratte
members of the putative class who filed before a certification decision Mgmt. Co., Inc. v. Telxon Corp.,
file individual claims after class was made. 413 F.3d 553 (6th Cir. 2005), which
certification is denied. The court in reached the opposite conclusion.
American Pipe, however, did not The Third Circuit reversed. Siding The growing majority view may set
say what happens if a putative class with the Second, Ninth, and Tenth the stage for the Supreme Court to
member decides to opt-out and file Circuits, the Third Circuit held resolve the Circuit split.
her own individual claim before the that that American Pipe tolls the
court rules on class certification. limitations period for individual
Does such a plaintiff still receive the claims filed both before and after
benefit of American Pipe tolling of the certification stage. The Third
13NINTH CIRCUIT HOLDS distribution of the settlement; (ii) The Second Circuit confronted this
“clear sailing arrangements,” under question in Maddox v. Bank of New
AMENDMENTS TO which the defendant agrees not to York Mellon Tr. Co., N.A., 19-1774,
FRCP 23(E) REQUIRE challenge a request for an agreed- 2021 WL 1846308 (2d Cir. May 10,
HEIGHTENED SCRUTINY upon attorney’s fee; and (iii) “kicker” 2021). Joining the Third, Seventh,
OF ATTORNEY’S FEES IN or “reverter” clauses that return Ninth, and Tenth Circuits, the Second
unawarded fees to the defendant, Circuit held that a state legislature
CLASS SETTLEMENTS rather than the class. also has the power to create legal
For decades, Rule 23(e) has interests via statute, the violation of
required courts to ensure that class The Ninth Circuit found that the which can satisfy Article III. However,
settlements are “fair, reasonable, settlement agreement shortchanged following the Supreme Court’s
and adequate.” In December the class by exhibiting all three of guidance in Spokeo, Inc. v. Robins,
2018, Congress and the Supreme the Bluetooth warning signs. The 578 U.S. 856 (2016), the Second
Court amended Rule 23(e)(2)(C) court first held that the attorney’s Circuit noted that “a bare procedural
to enumerate a list of four issues fees of $6.85 million constituted violation” does not satisfy the injury-
for the court to take into account a disproportionate share of the in-fact requirement of Article III; the
in assessing whether “the relief settlement, since under the claims- harm to the plaintiff must also be
provided for the class is adequate.” made settlement, class members “particularized” and “concrete.”
received “relative scraps,” i.e., less
The third of those newly enumerated than $1 million, substantially less In Maddox, the Second Circuit held
issues, Rule 23(e)(2)(C)(iii), directs than the potential recovery of $67.5 that the bank’s violation of New York’s
courts to consider “the terms of any million if every one of the 15 million mortgage-satisfaction-recording
proposed award of attorney’s fees.” class members filed claims. The statutes was sufficient to confer
In Briseño v. Henderson, 998 F.3d court also noted that the settlement Article III standing on plaintiffs. The
1014 (9th Cir. 2021), the Ninth Circuit included both a clear-sailing Court first evaluated the state law
became the first Court of Appeals to agreement and reverter clause. itself, and concluded, “that the New
address what this provision requires. Accordingly, the Ninth Circuit found York Legislature intended to create
The Court explained that, even in that the district court had abused a legally protected interests that, if
post-class certification settlements, its discretion in approving the class violated, would permit individuals
“a court must examine whether settlement under Rule 23(e). to seek judicial redress.” Next, the
the attorneys’ fees arrangement Court found that a violation of the
shortchanges the class.” The Court SECOND CIRCUIT HOLDS mortgage-satisfaction-recording
highlighted the rationale for the
rule: while a defendant has powerful
VIOLATIONS OF STATE statutes produced a “concrete” harm
in the form of a clouded title and
incentives to minimize the total cost STATUTES CAN SATISFY damage to reputation, both of which
of a settlement, it usually is not THE “INJURY-IN-FACT” are traditional bases for actions at
concerned with how that total is REQUIREMENT FOR common law. Moreover, the harm
divided between the class and class
counsel.
ARTICLE III STANDING was “particular” to plaintiffs, as
the appearance that plaintiffs had
The “injury-in-fact” prong of Article
not paid their mortgage “created
The Ninth Circuit held that a court III standing is often a sticking point
a real risk of financial harm that
must assess class settlement in class actions alleging statutory
affected the [plaintiffs] in a personal
attorney’s fees under the “heightened violations. The Supreme Court has
and individual way.” Accordingly,
scrutiny” previously set forth in consistently held that Congress has
the Court found that plaintiffs had
In re Bluetooth Headset Products the power to confer legal interests on
satisfied Article III’s “injury-in-fact”
Liability Litigation, 654 F.3d 935, 941 individuals through the enactment
requirement.
(9th Cir. 2011). Bluetooth identified of statutes, and that a violation of
three “warning signs” of potential such interests can satisfy Article III’s
collusion between class counsel and injury-in fact requirement. But do
the defendant regarding fees: (i) state legislatures have similar power?
counsel’s receiving a disproportionate
14 HuntonAK.comFOURTH AND ELEVENTH too rigidly, particularly in light of noted that administrative feasibility
plaintiff’s equitable claims. The court (a phrase that appears nowhere
CIRCUITS REACH vacated the district court’s ruling in Rule 23) may be relevant to the
CONFLICTING RESULTS and remanded the case for a full manageability criterion of FRCP 23(b)
ON “ADMINISTRATIVE reevaluation of the motion for class (3)(D), which involves a comparative
FEASIBILITY” certification. The appellate court analysis. But the court clarified that
recognized an implicit threshold a plaintiff is not required to explain
In addition to Rule 23(a)’s
requirement that all members of a exactly how class members can be
requirements of numerosity,
proposed class be readily identifiable identified in a convenient manner.
commonality, typicality, and
using objective criteria. Id. at 242-44. Id. at *25. The crucial question is
adequacy, a heightened showing
The appellate court explained that, whether class membership is capable
is required in some circuits: that
while a plaintiff is not required to of determination, and plaintiffs are
identification of class members
identify every class member at the not required to explain precisely how
must be “administratively feasible.”
time of certification, it is an error to class members will be identified. Id.
Recent appellate decisions in the
certify a class if the trial court cannot This is not quite the same approach
Fourth and Eleventh Circuits, decided
identify class members without as the Fourth Circuit in Peters.
only a week apart, highlight the
extensive and individualized fact-
disagreement over whether Rule 23 In rejecting an administrative
finding or mini-trials. Id.
includes this implied administrative feasibility requirement and relegating
feasibility requirement. The Fourth In contrast, the Eleventh Circuit’s it to an aspect of the manageability
Circuit held that class members must decision in Rensel v. Centra Tech, analysis, the Eleventh Circuit aligned
be “readily identifiable;” the Eleventh Inc., 2 F.4th 1359, 2021 U.S. App. itself with the Second, Sixth, Seventh,
Circuit disagreed, holding that there LEXIS 19275 (11th Cir. 2021), applied a Eighth, and Ninth Circuits. The Fourth
is in fact no such requirement. starkly different legal standard to the Circuit, on the other hand, stayed
identification of class members. The the course and required a showing
In Peters v. Aetna Inc., 2 F.4th 199
Rensel trial court addressed class- of administrative feasibility as a
(4th Cir. 2021), a putative ERISA class
wide allegations of securities fraud prerequisite to class certification, as
action, the Fourth Circuit took up the
in connection with an ICO (an Initial do the First and Third Circuits. Will
district court’s denial of plaintiff’s
Coin Offering, the cryptocurrency the Supreme Court step in to resolve
motion for class certification.
analog of an IPO). The district court this circuit split?
The district court had focused
denied class certification, requiring
on plaintiff’s claims for monetary
the plaintiffs to demonstrate an
damages and the idea that it “would
“administratively feasible” method of
be forced to engage in a highly
identifying class members that was
individualized inquiry of every plan,
“manageable” and did “not require
every participant and every claim in
much, if any, individual inquiry.” Id.
those participants’ claim histories”
at *23. The Eleventh Circuit reversed,
to ascertain the members of the
consistent with its decision in Cherry
proposed class. Id. at 241. The Fourth
v. Dometic Corp., 986 F.3d 1296 (11th
Circuit determined that the district
Cir. 2021) (summarized in the Spring
court analyzed ascertainability
2021 edition of The Brief). The court
15CONTRIBUTORS
BRIAN V. OTERO RYAN A. BECKER
Co-Head, Financial Services Partner
Litigation rbecker@HuntonAK.com
botero@HuntonAK.com +1 212 309 1055
+1 212 309 1020
STEPHEN R. BLACKLOCKS ERIC TAYLOR
Partner Partner
sblacklocks@HuntonAK.com etaylor@HuntonAK.com
+1 404 888 4109
+1 212 309 1052
MICHAEL B. KRUSE GRAYSON L. LINYARD
Counsel Counsel
mkruse@HuntonAK.com glinyard@HuntonAK.com
+1 212 309 1387 +1 214 468 3313
SIMA KAZMIR ANDREW S. KOELZ
Associate Associate
skazmir@HuntonAK.com akoelz@HuntonAK.com
+1 212 309 1112 +1 404 888 4121
Hunton Andrews Kurth’s Financial Services Litigation Team—based in New York,
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