THE BRIEF FINANCIAL SERVICES LITIGATION QUARTERLY - WINTER 2022
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THE BRIEF
FINANCIAL SERVICES
LITIGATION QUARTERLY
WINTER 2022
1
TABLE OF CONTENTS
When Can Statistical Evidence Be Used to Show
Rule 23 Predominance?—Implications of Tyson Foods 3
Courts Divided on Tolling of Class Claims
After China Agritech 7
Noteworthy 9
Sixth Circuit Holds That Injuries Caused by a
Plaintiff’s Own Decision Can Create Article III Standing 9
Seventh Circuit Reaffirms Condition in Which a
Failure To Provide Statutorily Required Information
Can Confer Article III Standing 10
Sixth Circuit Clarifies Contours of
American Pipe Tolling 10
Eleventh Circuit Revisits Holding Subjecting
Communications Between Debt Collectors and
Their Vendors to FDCPA Liability 11
Third Circuit Approves the Certification of Issues
Classes, Even if Resolution of Those Issues Will
Not Determine Liability 12
Ninth Circuit Ruling Restricts the Use of Common
Contracts for Class-Wide Proof of Actual Reliance 13
Ninth Circuit Ruling Highlights the Risks of
Class-Action Settlements with Non-Cash Relief 14
Seventh Circuit Finds No FDCPA Liability For
Debt Collector Seeking “Fees-On-Fees” 15
Contributors 16
2 HuntonAK.com
WHEN CAN STATISTICAL
EVIDENCE BE USED TO SHOW
RULE 23 PREDOMINANCE?—
IMPLICATIONS OF TYSON FOODS
Rule 23(b)(3) requires that a court find that “questions of law or
fact common to class members predominate over any questions
affecting only individual members, and that a class action is superior
to other available methods for fairly and efficiently adjudicating the
controversy” before certifying a class seeking damages.
This predominance requirement statistical sampling and analyses Foods, the Supreme Court held that
demands that a plaintiff provide (such as regression analysis) to show statistical sampling methods can
evidence that the defendant’s that the defendant is liable to each be used to establish predominance
liability to all (or nearly all) class member of a class or that each of as long as it is established that
members can be established without those members has been injured “each class member could have
considering each class member by a defendant’s wrongful conduct, relied on that sample to establish
individually. This can be a challenge without having to make the individual liability if he or she had brought
when the claim of any particular factual determinations that would an individual action.” Id. at 455.
class member depends on his or her bar certification. Under Tyson Foods, then, a
particular circumstances, e.g., when plaintiff cannot establish that the
the class member’s claim depends on The Supreme Court’s decision in requirements of Rule 23(b)(3) are
his or her knowledge or is subject to Tyson Foods, Inc. v. Bouaphakeo, satisfied simply by determining the
a defense that he or she consented 577 U.S. 442 (2016), has encouraged liability of a representative sample
to the defendant’s conduct. In such the use of statistical methods to of individual class members and
cases, plaintiffs sometimes use establish predominance. In Tyson then extrapolating those results to
3
the class as a whole, for as many be used to establish predominance, liability is based. The Court further
courts have held, a defendant cannot holding instead that whether such stated that determining whether a
be found liable to one individual evidence was appropriate for proposed sampling methodology
simply because that defendant has establishing class-wide liability satisfies that requirement demands
been found to be liable to other in a given case would “depend on more than simply ascertaining that
individuals. In Wal-Mart Stores, the purpose for which the sample it might reliably demonstrate the
Inc. v. Dukes, 564 U.S. 338 (2011), is being introduced and on the defendant’s liability for each class
for instance, the plaintiffs proposed underlying cause of action.” 577 U.S. member; in addition, the district
a so-called “Trial by Formula,” in at 454-55. court must resolve—at the class
which the claims of a sample of class certification stage—any factual
members would be adjudicated Because the Supreme Court did not disputes between the experts
on an individualized basis and the identify precisely when the conditions concerning whether the methodology
proportion of those claims found to were appropriate for the use of in fact reliably shows liability on an
be valid would then be extrapolated statistical evidence, it often remains individual class member basis.
to the class as a whole and used to unclear in particular cases when such
determine liability on a class-wide evidence can properly be used to The plaintiffs in Olean sought to
basis. The Supreme Court rejected establish predominance and when certify classes of purchasers of tuna
that “novel project” of holding a it cannot, and even what factors a products against three defendants
defendant liable to some class court should consider when deciding alleged to have engaged in price-
members solely on the basis of its if such evidence is appropriate. fixing between June 2011 and July
being liable to other class members. Compare, e.g., In re Processed Egg 2015. To establish predominance, the
Id. at 367; see also Bais Yaakov of Prods. Antitrust Litig., 310 F.R.D. 134 plaintiffs’ statistical expert analyzed
Spring Valley v. ACT, Inc., 12 F.4th (E.D. Pa. 2015) (plaintiff’s statistical more than 1.5 million observations
81, 104 (1st Cir. 2021) (Barron, J., analysis “supports a finding that of tuna prices and sales from before,
concurring) (noting that “statistical a successful supply-reduction during, and after the scheme was
evidence would neither have conspiracy would have had an impact alleged to have been in place. After
established that any single class on the entire egg industry—i.e., controlling for several factors that
member [had a valid claim] nor virtually all class members”), with might legitimately affect price—
even provided a basis for finding by Maeda v. Kennedy Endeavors, Inc., including product characteristics,
a preponderance that any one of 2021 WL 2582574, at *17 (D. Haw. input costs, customer type,
them [did]”); In re Wells Fargo Home June 23, 2021) (statistical analysis of and consumer preference and
Mortg. Overtime Pay Litig., 268 F.R.D. consumer-preference data could not demand—the plaintiffs’ expert
604, 612 (N.D. Cal. 2010) (“Assume establish predominance in deceptive- concluded that on average, direct
that the court permitted proof labeling class action). purchasers—retailers like Walmart
through random sampling of class and Target—were overcharged an
The Ninth Circuit’s recent decision estimated 10.28% as a result of
members, and that the data, in fact,
in Olean Wholesale Grocery Coop. the defendants’ collusion, and that
indicated that one out of every ten
v. Bumble Bee Foods LLC, 993 F.3d 94% of those direct purchasers
[employees] is exempt [and so have
774 (9th Cir. 2021), provides useful were significantly overcharged. The
claims]. How would the finder of fact
guidance regarding the narrow plaintiffs’ expert then used that
accurately separate the one exempt
conditions under which statistical estimated overcharge and data
[employee] from the nine nonexempt
evidence can be used to satisfy the from distributors of the products
[employees] without resorting to
predominance requirements. The to conclude that more than 99% of
individual mini-trials.”).
Court’s decision there rested on indirect purchasers—consumers
The Court’s endorsement of Tyson Foods’ guiding principle—that who purchased the defendants’ tuna
statistical sampling in Tyson Foods, statistical sampling methods can be from the direct purchasers—would
therefore, was highly qualified, for used to establish predominance only have had the overcharge to direct
while it rejected any “categorical if those methods could have been purchasers passed through to
exclusion” of the use of statistical used to prove that any one of the them. The district court held that
evidence, it also rejected the claim individuals in the class was injured the plaintiffs’ statistical analysis,
that statistical evidence could always by the defendant’s conduct on which supplemented with other factual
4 HuntonAK.com
determinations, was “sufficient relevant period, but for the alleged
to show common questions wrongdoing. As the court noted, such
predominate as to common impact,” statistical analyses are commonly
and so certified the plaintiffs’ classes. used in individual antitrust cases
to establish a “baseline” that can
On appeal, the Ninth Circuit rejected be used to determine if the alleged
the defendants’ argument that misconduct resulted in an overcharge
statistical evidence generally cannot to the individual plaintiff. 993
be used to satisfy Rule 23(b)(3)’s F.3d at 788. Such analyses do not
predominance requirement, and extrapolate factual findings made
found that the plaintiffs’ statistical with respect to one individual to
evidence by itself was capable of another individual, but quantify the
establishing class-wide liability. effect of a defendant’s conduct that,
However, the Court remanded the because of how the class is defined,
case for the district court to resolve must apply to each member of the
certain disagreements between the class. See, e.g., In re Neurontin
parties’ experts concerning whether, Mktg. & Sales Practices Litig.,
under the circumstances of the case, 712 F.3d 60, 68-69 (1st Cir. 2013)
the plaintiffs’ evidence in fact would (statistical evidence of increased
establish liability for any individual cost resulting from alleged fraudulent
class member. marketing campaign was sufficient
to show the effect of the alleged
The Court in Olean based its
wrongdoing on a class-wide basis and
conclusion that plaintiffs’ statistical
so establish predominance).
evidence was, as required under
Tyson Foods, capable of establishing Second, the Court held that
liability for each class member statistical evidence must connect
individually on its determination the injury of each class member to
that the statistical evidence the defendants’ alleged wrongdoing.
offered by plaintiffs satisfied three Plaintiffs’ statistical analysis satisfied
key conditions. that requirement because it did
not simply compare the price of
First, the Court read Tyson Foods
the defendants’ products while the
to require that statistical evidence
alleged scheme was in place with the
must test the effect of the alleged
prices before and after that period.
wrongdoing on each member of the
Such an analysis might show that
class, not just determine defendants’
class members paid higher prices
liability to a representative sample of
while the alleged scheme was in
class members and then extrapolate
place than at other times, but if it
those findings to other class
does not control for other factors
members. The plaintiffs’ statistical
that might affect the prices class
analysis satisfied that requirement
members paid, it cannot establish
because it did not just extrapolate
predominance, since it cannot show
results from a sample of the class
that the reason the class members
members to the entire class; rather,
paid more was the conduct for
by comparing price data during the
which the defendant is allegedly
alleged scheme to price data from
liable, rather than some other
before and after that period, the
entirely legitimate factor. Comcast
plaintiffs’ expert aimed to identify
Corp. v. Behrend, 569 U.S. 27, 48
what the prices would have been
(2013) (analysis could not establish
for every class member during the
predominance because it “does
5
not purport to show precisely how away the very differences that make (estimating a single overcharge
Comcast’s conduct led to higher the case inappropriate for classwide instead of individual overcharges
prices in the Philadelphia area”). resolution,” and masked significant might be more “statistically robust”).
Plaintiffs’ expert in Olean avoided differences among class members Ultimately, however, the Court held
that criticism by using a regression that should defeat predominance. that the fact that the plaintiffs’
model, which allowed him to control Id.; see also In re Plastics Additives, expert’s analysis might demonstrate
for the effects of a variety of factors 2010 WL 3431837 , at *6 (E.D. Pa. Aug. that the defendants are liable to each
likely to affect the price of the 31, 2010) (holding regression analysis class member is not enough to satisfy
product and so to isolate the average could not establish predominance the predominance requirement of
effect resulting from the defendants’ because it provided an estimate of Rule 23(b)(3). Although the Court
alleged price-fixing, as opposed to the average overcharge paid by class acknowledged that the district court
those other factors. 993 F.3d at 789; members, rather than calculating had “walked through the strengths
see also In re Aftermarket Auto. the overcharge paid by each and weaknesses of the experts’
Lighting Prods. Antitrust Litig., individual class member considered competing testimony,” it “needed
276 F.R.D. 364, 371 (C.D. Cal. 2011) in isolation). to go further” and actually decide
(“Regression analysis can be used which experts’ analysis was correct.
to isolate the effect of an alleged The Ninth Circuit acknowledged 993 F.3d at 793-94. Because the
conspiracy on price, taking into defendants’ general point that, by district court had failed to make that
consideration other factors that assuming each class member was additional determination, its decision
might also influence price, like subject to the same overcharge, to rely on the plaintiffs’ expert’s
cost and demand.”). the plaintiffs’ analysis inevitably analysis to certify the class was an
“papered over” individual differences abuse of its discretion.
Third, the Court held that, to among class members—e.g., their
establish predominance, statistical purchasing power and retail price As Olean shows, statistical evidence
methods must be applied in a way strategies—that could affect the and analyses can, in the proper
that ensures that the effects of price they paid for defendants’ circumstances, be a powerful tool
averaging do not mask individual products. Id. at 790; see also In re for plaintiffs in demonstrating
differences relevant to liability. Mushroom Direct Purchaser Antitrust predominance. At the same, the
The defendants’ expert argued Litig., 319 F.R.D. 158, 202 (E.D. Pa. court made clear that the use of
that because the plaintiffs’ expert 2016) (agreeing with defendants that statistical methods is not a panacea
estimated overcharge of 10.28% was “without more, [plaintiff’s expert’s] for difficulties in establishing
an average for each class member, average effects regression would not predominance, and that the use of
it could not show that each class be sufficient to show that common those methods must be carefully
member was injured, since some impact predominates”). The Court, policed by the courts to protect the
would have been overcharged more however, noted that such averaging defendant’s right to have its liability
and some less—or not overcharged is implicit in all regression analyses, to any particular class member
at all. The defendants’ expert made and to hold that such analyses decided by evidence pertaining to
different individual estimates of were therefore improper on class that individual class member.
the overcharge for several hundred certification would run contrary
individual class members and found to Tyson Foods’ holding that a
that 28% of those direct class “categorical exclusion” of regression
members had not been overcharged analyses would “make little sense.”
at all—significantly more than the
6% that the plaintiffs’ expert’s In the case before it, the Ninth
analysis found, and likely too many Circuit suggested reasons that could
to satisfy Rule 23. Id. at 782-83. The justify the decision to assume all
defendants thus argued that by class members were subject to a
assuming that all class members single overcharge, and so show
were subject to the same overcharge that the plaintiffs’ expert’s analysis
and estimating that single value, was sufficiently reliable to establish
the plaintiffs essentially “assum[ed] predominance. E.g., Id. at 790
6 HuntonAK.com
COURTS DIVIDED ON TOLLING
OF CLASS CLAIMS AFTER
CHINA AGRITECH
Defendants often face multiple individual and class actions after
the filing of an initial class action. Plaintiffs may invoke equitable
tolling to extend the statute of limitations deadline to file these
subsequent claims. When can a defendant be certain that a statute
of limitations bars a follow-on class action?
In American Pipe & Constr. Co. pendency of a putative class because the motion is untimely, or
v. Utah, 414 U.S. 538 (1974), the action, allowing unnamed class to allow for additional discovery), or
US Supreme Court held that members to join the action a class representative may dismiss
commencement of a class action individually or file individual the class claims or voluntarily
suspends the running of the statute claims if the class fails. But narrow the proposed class. In these
of limitations for individual claims American Pipe does not permit circumstances, are follow-on class
brought by members of the proposed the maintenance of a follow-on claims tolled because there is no
class until certification of the class class action past expiration of the denial of class certification, or
is denied. In 2018, in response to statute of limitations. does China Agritech cut off tolling
a circuit split regarding American regardless of whether a district
Pipe’s application to follow-on class The district court in China Agritech court addresses the merits of
actions, the Supreme Court in China had denied certification of the class certification?
Agritech, Inc. v. Resh, 138 S. Ct. original class action. The Supreme
1800, 1804 (2018) considered and Court thus framed the issue as Two 2021 district court opinions
answered the following question: whether “upon denial of class show how the courts are split
certification” a class member could addressing this question. In Ochoa
Upon denial of class certification, rely on American Pipe tolling to bring v. Pershing LLC, plaintiffs brought
may a putative class member, class claims that otherwise would be a putative class action concerning
in lieu of promptly joining an out of time. But what of instances in the Allen Stanford Ponzi scheme.
existing suit or promptly filing which class claims are dismissed, or No. 3:16-CV-1485-N, 2021 WL
an individual action, commence dropped, without the district court 5163196 (N.D. Tex. Nov. 5, 2021).
a class action anew beyond the entering an order addressing class The putative class consisted of
time allowed by the applicable certification? For example, a district borrowers that had been carved out
statute of limitations? Our answer court may deny certification without of a prior class action when the class
is no. American Pipe tolls the prejudice on procedural rather than representative voluntarily narrowed
statute of limitations during the merits-based grounds (for example, the class. Plaintiffs in the follow-on
7
action argued that, because there Southern District court held that the class certification. See, In re Celexa
had been no denial of certification New York class’s claims were tolled and Lexapro Marketing and Sales
while their claims were part of the until the time they were dropped Practices Litig., 915 F.3d 1, 16 (1st
original action, their claims were from the nationwide class, regardless Cir. 2019); Blake v. JP Morgan Chase
tolled until they were dropped from of whether certification had been Bank NA, 927 F.3d 701, 708 (3d Cir.
the narrowed original class and, adjudicated in the original class 2019); Weitzner v. Sanofi Pasteur
therefore, timely. The Ochoa court action, because holding otherwise Inc., 909 F.3d 604, 614 (3d Cir. 2018).
disagreed and held that China would force subclasses to bring This view is emerging as the majority
Agritech cut off American Pipe tolling suit while an original class action position, as district courts in the Fifth
of class claims regardless of whether remained pending, which would (in Ochoa), Seventh, Eighth, and
the court in the original class action “create ‘a multiplicity of litigation Ninth Circuits have also adopted it,1
adjudicated class certification: “[a] that squanders resources and though most district courts within the
chieving robust involvement by undermines judicial economy.’” Second Circuit, and at least one in
multiple constituencies at the outset Id. at *2, quoting Chavez v. the Ninth Circuit, reach the opposite
of class litigation favors applying Occidental Chem. Corp., 35 N.Y.3d conclusion.2 For now, the weight of
[China Agritech’s] holding to any 492, 503-04 (2020). authority and the initial trend suggest
attempt to bring a follow-on class China Agritech prohibits American
action, regardless of whether denial The Ochoa and Famular courts thus Pipe tolling for follow-on class claims
has occurred in the original action or agree broadly that considerations of regardless of whether the court in
not.” Id. at *3 (emphasis original). efficiency and judicial economy drive the original class action ruled
the answer to the tolling question, on class certification. The issue
The Southern District of New York but arrive at different conclusions though will almost certainly receive
took the opposite view in a case with on which outcome best serves those additional attention soon in the
indistinguishable facts. Plaintiffs in purposes. To date only the First appellate courts.
Famular v. Whirlpool Corporation, and Third Circuits have considered
16-cv-944(VB), 2021 WL 395468 this issue on appeal. Both hold,
(S.D.N.Y. Feb. 3, 2021), were part like Ochoa, that China Agritech
of a New York subclass that had prohibits American Pipe tolling for
been voluntarily dismissed from a follow-on class actions even when
nationwide class action pending the original class action did not
in New Jersey district court. The reach a decision on the merits of
1
Prac. Mgmt. Support Servs., Inc. v. Cirque du Soleil Inc., No. 14 C 2032, 2018 WL 3659349, at *4 (N.D. Ill. Aug. 2, 2018); Dormani v. Target Corp., No. 17-CV-4049 (JNE/SER),
2018 WL 3014126, at *2 (D. Minn. June 15, 2018), aff’d, 970 F.3d 910 (8th Cir. 2020); Torres v. Wells Fargo Bank, No. CV179305DMGRAOX, 2018 WL 6137126, at *3 (C.D. Cal. Aug.
28, 2018); Carmel v. Mizuho Bank, Ltd., No. LACV1802483JAKEX, 2019 WL 10186488, at *21 (C.D. Cal. Nov. 14, 2019); Fabian v. LeMahieu, No. 19-CV-00054-YGR, 2019 WL
4918431, at *9 (N.D. Cal. Oct. 4, 2019).
2
Betances v. Fischer, 403 F. Supp. 3d 212, 224 (S.D.N.Y. 2019); Hart v. BHH, LLC, No. 15CV4804, 2018 WL 5729294, at *2 (S.D.N.Y. Nov. 2, 2018); Bos. Ret. Sys. v. Uber Techs., Inc.,
No. 19-CV-06361-RS, 2021 WL 4503137, at *3 (N.D. Cal. Oct. 1, 2021); but see Dennis v. JPMorgan Chase & Co., 439 F. Supp. 3d 256, 266 (S.D.N.Y. 2020).
8 HuntonAK.com
NOTEWORTHY
SIXTH CIRCUIT HOLDS because of the defendant’s failure “break the causal chain” between
to correctly report the status of the defendant’s violation and his
THAT INJURIES CAUSED his loan. Instead, he claimed that injury. 2021 WL 4145565, at *2. The
BY A PLAINTIFF’S OWN he had been injured because his court noted that the plaintiff’s credit
DECISION CAN CREATE credit score—which was lowered by score was 515 while the defendant
ARTICLE III STANDING defendant’s false report—caused him was reporting the loan as past due,
to decide not to purchase a new car, and the court took that low score to
Since the Supreme Court’s decision
with the result that he continued to be evidence that the plaintiff’s injury
in Spokeo, Inc. v. Robins, 136 S. Ct.
drive a car that, he claimed, was not (i.e., not being able to replace his
1540 (2016), courts have struggled to
“always in the best of shape.” Id. at car) was caused by the defendant’s
determine exactly when a statutory
*2. The trial court concluded that the action, rather than the plaintiff’s
violation causes a concrete harm
plaintiff lacked standing and granted decision not to apply for a loan.
and when it does not. In Krueger v.
the defendant summary judgment,
Experian Info. Sols., Inc., 2021 WL It is unclear what standard the court
noting that the plaintiff “concede[d]
4145565 (6th Cir. Sept. 13, 2021), the used to decide that the plaintiff’s
that he did not apply for credit” and
Sixth Circuit faced that question with credit score resulting from the
so “cannot demonstrate that any
respect to an alleged violation of the FCRA violation was sufficiently low
alleged misreporting ‘caused the
Fair Credit Reporting Act (“FCRA”), to show that his injury was caused
loss of credit or some other harm.’”
with the added wrinkle that the by that violation and not his own
Krueger v. Experian Info. Sols., Inc.,
alleged injury resulting from the FCRA decision. Krueger is thus a reminder
2020 WL 5801214, at *7 (E.D. Mich.
violation was directly the result of the that the thorny question of when a
Sept. 29, 2020).
plaintiff’s own decision. statutory violation satisfies Spokeo’s
The Sixth Circuit reversed and concrete-injury requirements may
In Krueger, the plaintiff alleged that,
rejected the defendant’s argument be exacerbated by other questions
for over a year, the defendant had
that, because the plaintiff himself concerning standing, such as
reported his loan as past due to
decided not to apply for a loan for determining whether a plaintiff’s
credit-reporting agencies, despite
a new car, he could not trace his own conduct is a significant enough
knowing that it had been discharged
injury to the defendant’s conduct. factor to break the causal link
in bankruptcy. The plaintiff did not
The court instead held that the between a defendant’s violation and
allege that he had been denied credit
plaintiff’s role in causing his own the injury alleged.
or had to pay a higher interest rate
injury was not significant enough to
9
SEVENTH CIRCUIT the bonus but was fired a year “impairs the [debtor’s] ‘ability to use
later. A week after her termination, [that information] for a substantive
REAFFIRMS CONDITION the defendant, a debt collector, purpose that the statute envisioned.’”
IN WHICH A contacted the plaintiff by letter and Id. at 668 (quoting Bazile v. Fin. Sys.
FAILURE TO PROVIDE telephone to claw back the bonus. of Green Bay, Inc., 983 F.3d 274, 280
STATUTORILY REQUIRED Id. at 666. (7th Cir. 2020)).
INFORMATION CAN The plaintiff then sued, alleging As applied in Wadsworth, that
CONFER ARTICLE III violations of the FDCPA because principle implied that the defendant’s
STANDING she was not given “complete violation did not result in a concrete
written notice of her statutory injury because the plaintiff admitted
Over the past few years, the
rights within five days of the initial that she had not repaid the bonus
Seventh Circuit has issued a series
communication” and because the after receiving the collection letter
of decisions concerning when a
person who called her did not and calls, and so the alleged lack of
violation of the Fair Debt Collection
identify herself as a debt collector information must not have impaired
Practices Act (“FDCPA”) constitutes
or say she was attempting to collect her ability to keep the bonus. The
a concrete injury that confers Article
a debt. Id. at 666-67. The district plaintiff thus “offered … no basis to
III standing and when it is a “bare
court granted the plaintiff summary believe that her substantive interests
procedural violation” that cannot
judgment. Id. at 667. under the Act would have been
create subject-matter jurisdiction.
better protected if [the defendant]
Its decision in Wadsworth v. Kross, The Seventh Circuit reversed. While had complied with the FDCPA.” Id.
Lieberman & Stone, Inc., 12 F.4th 665 the defendant did not challenge at 668.
(7th Cir. 2021), is one of the latest in the plaintiff’s standing on appeal,
that series of decisions. the court held sua sponte that the Wadsworth thus represents the
plaintiff had not suffered a concrete Seventh Circuit’s commitment to
Wadsworth arose out of an
injury and so lacked standing. The the principle articulated in Bazile
employment agreement that
court based its holding on a principle that the failure to provide statutorily
promised the plaintiff a bonus after
articulated in its recent decisions required information by itself cannot
180 days of employment but required
that a debt collector’s failure to constitute a concrete injury sufficient
the plaintiff to return the bonus if she
inform a debtor of her statutory to confer standing.
left voluntarily or was terminated for
rights can constitute a concrete
cause within 18 months of receiving
that payment. The plaintiff received
injury only if that lack of information SIXTH CIRCUIT
CLARIFIES CONTOURS
OF AMERICAN PIPE
TOLLING1
Under the equitable tolling doctrine
established by the Supreme Court in
American Pipe & Constr. Co. v. Utah,
414 U.S. 538 (1974), the statute of
limitations for absent class members
is tolled from the time the class
action is filed until there is a decision
on class certification. It is clear from
American Pipe that, once the district
court finds that a lawsuit cannot
proceed as a class action, the tolling
period ends. As the court in Potter v.
Comm’r of Soc. Sec., 9 F.4th 369, 371
(6th Cir. 2021), recently observed,
however, other events might end
1
For further discussion of American Pipe tolling, see
“Courts Divided on Tolling of Class Claims after China
Agritech” on page 7 of this issue.
10 HuntonAK.comAmerican Pipe tolling as well. One the running of statutes of limitations docket ahead of a long stay” and so
question the court addressed was as to absent class members.” Id. On held that “the reasonable reliance
whether appealing the dismissal of that issue, the Sixth Circuit joined interests of the putative Hughes class
a class action when no decision on the Fifth, Seventh, and Federal members favor applying American
class certification has been made Circuits in holding that the dismissal Pipe tolling to these circumstances.”
can extend American Pipe tolling. of a class action terminates American Id. at 378.
Another question is whether the Pipe tolling, even if that dismissal
denial of class certification “solely is appealed. ELEVENTH CIRCUIT
as a matter of docket management,
The court also answered the second
REVISITS HOLDING
without deciding that certification is
unwarranted,” is sufficient to question in the negative, holding SUBJECTING
end tolling. that an “administrative denial” does COMMUNICATIONS
not terminate tolling. Hughes was BETWEEN DEBT
The court answered the first question stayed in 2017 pending the outcome
in the negative. The plaintiffs in Potter of another case that was likely
COLLECTORS AND THEIR
argued that the 60-day statute of to control the outcome, and the VENDORS TO FDCPA
limitations for seeking judicial review pending motion for certification was LIABILITY
of the denials of their claims for dismissed “without prejudice” to In an April 21, 2021, decision with
Social Security disability benefits was clear the court’s docket. On August potentially far-reaching effects on
tolled during the pendency of two 13, 2019, the claims in Hughes were the business practices of debt
class actions, Martin v. Commissioner remanded to the Social Security collectors, a three-judge panel of the
of Social Security, No. 7:15-cv-00046 Administration, and three plaintiffs Eleventh Circuit held unanimously
(E.D. Ky. 2015), and Hughes v. in Potter, believing their claims had that a plaintiff stated a claim against
Commissioner of Social Security, been tolled by Hughes until August a defendant debt collector by
No. 5:16-cv-00352 (E.D. Ky. 2016). 13, 2019, filed their lawsuits within alleging that the defendant violated
Martin was dismissed in 2015 without the statutory period. Id. at 372. the Fair Debt Collection Practices Act
a decision on class certification (“FDCPA”) by transmitting personal
because the plaintiffs in that case All three plaintiffs’ claims were
information about his debt to a
failed to exhaust their administrative dismissed as untimely, with the
vendor for the purpose of printing
remedies. The plaintiffs in Martin district court holding that the
and mailing a collection letter.
appealed that dismissal; that appeal dismissal of the certification
Hunstein v. Preferred Collection &
was resolved on January 16, 2018, motion “without prejudice” in
Mgmt. Servs., Inc., 994 F.3d 1341,
after those plaintiffs properly filed Hughes restarted the clock on the
1349-52 (11th Cir. 2021). The court
separate individual actions. One of plaintiffs’ claims. The Sixth Circuit
further held that that procedural
the plaintiffs in Potter argued that the reversed, holding that their claims
violation constituted a concrete
statute of limitations on his claim, continued to be tolled after the
injury sufficient for Article III
which had accrued while Martin was purely administrative dismissal
standing. Id. at 1345-49. On May
pending, should have been tolled of the motion. Stressing that the
26, 2021, the defendant in Hunstein
while the appeal of the dismissal in purpose of American Pipe tolling was
petitioned the Eleventh Circuit for
Martin was pending. 9 F.4th at 380. to “encourage absent members to
a rehearing.
The Sixth Circuit rejected that claim, rely on representatives to vindicate
noting that “the courts of appeals their rights,” Id. at 371, the court A month after the petition for
that have considered this issue are found that “a reasonable absent rehearing was filed, the Supreme
unanimous that the dismissal of an class member” would have seen the Court decided TransUnion LLC v.
uncertified class action terminates dismissal as “a case management Ramirez, 141 S. Ct. 2190 (2021), which
American Pipe tolling and resumes tool meant only to clear [the court’s] held, among other things, that class
11members whose misleading credit be inconsistent with TransUnion’s
reports were provided to third-party holding, since it would effectively
businesses had a concrete injury, require a “perfect match” between
while those whose reports were the plaintiff’s alleged injury and a
not disclosed to third parties did common-law cause of action. Id. at
not have a concrete injury. Id. at 1031-32.
2208-13. In a footnote, the Supreme
Court also said that courts had not But even this new decision has
“necessarily recognized disclosures not resolved the controversy over
to printing vendors as actionable Hunstein because, on November 17,
publications” and suggested that in 2021, the Eleventh Circuit sua sponte
such a case a plaintiff might need to ordered the decision to be reheard
provide evidence that “the document en banc. Briefing on that rehearing
was actually read and not merely is scheduled to be complete by
processed.” Id. at 2210 n.6. February 22, 2021.
On October 28, 2021, the Eleventh THIRD CIRCUIT
Circuit panel, citing the petition for APPROVES THE
rehearing, seventeen amicus briefs,
and the Supreme Court’s decision
CERTIFICATION OF
in TransUnion, vacated its April ISSUES CLASSES, EVEN
decision and substituted another that IF RESOLUTION OF
again held—albeit with a dissent this THOSE ISSUES WILL NOT organization that certifies that
time—that the plaintiff had standing
and had stated a claim based on
DETERMINE LIABILITY graduates of foreign medical
Rule 23(c)(4) allows district courts schools satisfy certain requirements.
the debt collector’s disclosure
to certify particular issues for Plaintiffs alleged the Commission
of information about his debt to
class treatment. In Russell v. Educ. had been negligent in certifying an
a vendor. Hunstein v. Preferred
Comm’n for Foreign Med. Graduates, applicant who fraudulently obtained
Collection & Mgmt. Servs., Inc., 17
15 F.4th 259 (3d Cir. 2021), the Third a medical license and went on to
F.4th 1016 (11th Cir. 2021).
Circuit addressed whether Rule 23(c) treat each class member. Id. at
The court relied on TransUnion’s (4) can be used to certify an issue 263-64. The district court certified for
holding that, when a plaintiff alleges class, even if the resolution of that class treatment the questions of (i)
an injury caused by a statutory issue will not resolve the question of whether the Commission owed legal
violation, that injury need not be an liability. The court decided that such duties to class members that were
“exact duplicate” of a common-law an issue class could be certified as then breached and (ii) whether the
cause of action to create standing; long as certification “substantially Commission owed duties to hospitals
it is sufficient that the alleged injury facilitates the resolution of the and medical boards that would allow
be similar in kind to one addressed civil dispute, preserves the parties’ it to be held liable by class members.
under the common law, even procedural and substantive rights Id. at 264-65. The Commission’s
though the degree of the injury is and responsibilities, and respects the liability to each of the class members
not actionable as a common-law constitutional and statutory rights of would then be determined in
tort. Id. at 1025-27. The court also all class member and defendants.” individual cases.
distinguished the Supreme Court’s Id. at 270.
On appeal, the Third Circuit vacated
footnoted suggestion that the mere
In Russell, plaintiffs sought to assert the certification of those issues
transmission of information between
claims for negligent infliction of classes and remanded the case to
a debt collector and its vendor
emotional distress on behalf of the district court, holding that the
does not, in itself, constitute an
a class against the Educational district court had erred by failing
actionable injury as dicta. It further
Commission for Foreign Medical to determine whether the issues
explained that to read that dictum
Graduates (“Commission”), an to be certified—i.e., the duty and
as barring the plaintiff’s claim would
breach elements of the plaintiffs’
12 HuntonAK.comclaims—satisfied Rule 23(b)(3). Id. NINTH CIRCUIT RULING The Ninth Circuit affirmed the
at 271. At the same time, the court denial of class certification. The
clarified its leading Rule 23(c)(4)
RESTRICTS THE USE OF plaintiffs argued that class-wide
decision, Gates v. Rohm & Haas Co., COMMON CONTRACTS reliance was established because
655 F.3d 255 (3d Cir. 2011), to make FOR CLASS-WIDE PROOF the PACE loan agreements for each
clear that certification of issues OF ACTUAL RELIANCE of the putative class members
classes could be proper even if the “both misrepresented and omitted
Establishing that the predominance
liability of the defendant had to be material information concerning
requirement for a Rule 23(b)
left to individual adjudication, as in transferability.” Notwithstanding the
(3) class is generally difficult for
the case before it. 15 F.4th at 269. fact that California law presumes
claims involving fraud, since actual
In support of that holding, the court that a party who signs an agreement
reliance is required to establish
held that the text of Rule 23(c)(4) has “read it and… understands its
liability. In such cases, plaintiffs
expressly “permits an action to be contents,” the majority held that,
seeking certification often argue that
brought or maintained as a class in finding individual reliance, the
predominance is satisfied because
action ‘with respect to particular district court would also have to
class members have been exposed
issues,’ not just those that decide “individually determine whether
to a common agreement that either
liability.” Id. at 270. disclosure of the complained-of
includes misleading information
omissions would have impacted the
The court also reaffirmed its holding or omits material information. The
putative class members’ contracting
in Gates that certification of an Ninth Circuit’s recent 2-1 decision in
decision.” The court thus concluded
issue class can be proper even if Woolley v. Ygrene Energy Fund, Inc.,
that plaintiffs could not establish
the action as a whole cannot be 2021 WL 4690971 (9th Cir. Oct. 7,
actual reliance on a class-wide basis.
certified under Rule 23(b)(3) for 2021), however, suggests that even a
Id. at *1-2. The majority justified its
lack of predominance, rejecting the common contract may be insufficient
decision by noting that the plaintiffs’
Fifth Circuit’s minority view holding to overcome the predominance
argument that a common contract
that “a cause of action, as a whole, hurdle, although that decision
could establish actual reliance on a
must satisfy the predominance appears to be in tension with existing
class-wide basis “turns the concept
requirement of (b)(3) and that (c)(4) Ninth Circuit precedent.
of actual reliance on its head” by
is a housekeeping rule that allows
In Woolley, each of the plaintiffs
courts to sever the common issues
had taken out Property Assessed
for a class trial.” Id. at 274 (quoting
Clean Energy (“PACE”) loans. They
Castano v. Am. Tobacco Co., 84
alleged California statutory and
F.3d 734, 745 n.21 (5th Cir. 1996)).
common-law fraud claims against
Finally, it also expressed skepticism
the defendant, whom they alleged
that allowing the certification of
had misrepresented their ability to
issues classes that do not themselves
transfer their loan balances without
determine liability would “permit
paying an additional fee. The district
a flood of abusive class actions”
court denied the plaintiffs’ motion
because, it speculated, the plaintiffs’
for class certification under Rule
attorneys whose “payday” arises
23(b)(3), holding that individualized
from a damages award would not
questions regarding the reliance
have an incentive to seek certification
element of the fraud action defeated
of issues classes. Id. at 275. Whether
commonality, typicality, and
the court’s speculations as to the
predominance. Id. at *1.
incentive of plaintiffs’ attorneys and
their use of issues classes are correct
remains to be seen.
13“stacking” one “bare inference”— fees…” The Class Action Fairness
i.e., that parties are deemed to Act (“CAFA”), 28 U.S.C. § 1711 et seq.,
understand the terms of their also requires “[j]udicial scrutiny” of
contracts – on another— i.e., that class-action settlements in which
those parties would have behaved claimants receive “coupons,” rather
differently if the omitted terms are than a cash payment, and also places
ones that a reasonable person would conditions on how attorney’s fees
consider important. Id. at *2. must be calculated in such a case.
28 U.S.C. § 1712(b), (c) & (e). As the
The majority’s reasoning suggests Ninth Circuit’s decision in McKinney-
that the mere exposure to a common Drobnis v. Oreshack, 16 F.4th 594
contract would never be sufficient (9th Cir. 2021), indicates, inattention
to establish class-wide actual to those restrictions may doom
reliance, since any such argument a settlement.
would appear to require “stacked”
inferences as to what the contracting In McKinney-Drobnis, the defendant,
parties understood and what a membership-based spa, settled
effect disclosure of that omitted a class action by former members
information would have led them to and agreed to provide claimants a
do. As the dissent noted, however, voucher for future purchases from
that conclusion is apparently the defendant. The settlement was
inconsistent with the Ninth Circuit’s approved over the objection that
recent decision in Walker v. Life the vouchers were coupons under
Insurance Co. of the Southwest, CAFA and that the provisions of the
953 F.3d 624 (9th Cir. 2020), that settlement regarding attorney’s
a class defined as including just fees did not comply with CAFA’s
those individuals who were exposed restrictions triggered by the use
to alleged misrepresentations of those coupons. The objector
may “automatically trigger” a further argued that, even if CAFA
presumption of reliance. The majority did not apply, the district court
did not explain how that apparent disregarded warning signs of
tension might be resolved, suggesting collusion. Id. at 600-01.
that it will be an issue that the court
will need to address in the future. The Ninth Circuit vacated the
approval. The court first held the
NINTH CIRCUIT RULING district court erred in applying the
factors used to decide whether
HIGHLIGHTS THE RISKS the settlement’s vouchers were
OF CLASS-ACTION “coupons” under CAFA, i.e., “(1)
SETTLEMENTS WITH whether class members have ‘to
NON-CASH RELIEF hand over more of their own money
before they can take advantage of’ a
Rule 23(e) requires court approval
credit, (2) whether the credit is valid
of any class-action settlement and
only ‘for select products or services,’
requires that, before issuing such
and (3) how much flexibility the
approval, the court must hold a
credit provides…” Id. at 602 (quoting
hearing and find that the settlement
In re Easysaver Rewards Litig., 906
is “is fair, reasonable, and adequate.”
F.3d 747, 755 (9th Cir. 2018)). While
Under the 2018 amendments to
the court found that the third factor
Rule 23(e), the court making that
did not support considering the
finding must consider “the terms of
vouchers to be coupons, it held that
any proposed award of attorney’s
14 HuntonAK.comthe first and second factors did, since SEVENTH CIRCUIT by MED-1 to collect the $375 in
the smallest voucher was not enough attorney’s fees—the “fees-on-fees.”
to pay for the defendant’s main
FINDS NO FDCPA Id. at 656. The plaintiff alleged that
service—a massage—and because LIABILITY FOR DEBT the cost-of-collection provision in
the defendant sold only specialized COLLECTOR SEEKING her agreement did not cover fees-
products, none of which are available “FEES-ON-FEES” on-fees, and so MED-1’s efforts to
for online sales. Id. at 604-05. collect those additional fees violated
The Fair Debt Collection Practices
§ 1692f(1). She further argued that,
The court further held that the Act (“FDCPA”) prohibits the use of
by claiming that it was entitled to
district court failed to “substantively “unfair or unconscionable means
the fees-on-fees, MED-1 made a false
grapple” with the “potentially to collect or attempt to collect any
representation of the legal status
problematic… relationship between debt,” including the “collection
of the debt, and so also violated §
attorneys’ fees and the benefit to of any amount… unless such
1692e. The magistrate judge rejected
the class.” Id. at 606. The court was amount is expressly authorized by
plaintiff’s arguments and granted
particularly concerned about how the agreement creating the debt
MED-1 summary judgment.
the settlement’s combination of a or permitted by law.” 15 U.S.C. §
clear-sailing provision and a reverter 1692f(1). On its face, that provision The Seventh Circuit affirmed. It first
provision might undermine the suggests that a debt collector held that, by agreeing to pay the
incentives of class members to object violates the FDCPA if it seeks to “costs of collection,” plaintiff had
to unreasonably high fee requests, recover not just the debt owed, agreed to pay “all costs associated
since only the defendant—not the but also the costs it incurred in with collection, including the cost
class members—would benefit from recovering the debt if the agreement of collecting attorney’s fees.” Id.
having the fee request reduced, creating the debt does not require at 659 (emphasis in original). More
and so class members would be the debtor to pay those costs. The significantly, perhaps, the court
unlikely to challenge the request. Seventh Circuit’s recent decision in further stated that, even if its
Id. at 610. While the district court Robbins v. MED-1 Sols., LLC, 13 F.4th contract interpretation was wrong,
acknowledged the existence of 652 (7th Cir. 2021), however, suggests MED-1 may not have violated the
those two features of the settlement that debt collectors may be able to FDCPA at all by seeking to recover
agreement, the Ninth Circuit held collect such fees, even if the relevant fees-on-fees. The court reasoned
that it did not conduct the required agreement is silent as to those costs. that the purpose of the FDCPA
“heightened inquiry” or “provide is to protect debtors from unfair
In Robbins, the plaintiff alleged
the necessary explanations” for why practices, not to “provide a windfall
a debt collector, MED-1, violated
those warning signs did not suggest for debtors who prevail against debt
the FDCPA by seeking payment
collusion in the settlement. collectors who bring nonfrivolous
for medical bills along with $375
collection suits.” Id. The court thus
McKinney-Drobnis thus is a warning in attorney’s fees incurred for
suggested that fees-on-fees and
to settling parties of the risks posed collecting the debt. The plaintiff
other collection-related amounts
by some commonly used settlement paid the debt, but refused to pay
may be subject to a general equitable
terms and by the use of non-cash the attorney’s fees, despite the fact
exception to the requirement that
relief, all of which may subject that she had agreed to pay the “costs
amounts to be collected must be
them to heightened scrutiny by the of collection, including attorney[’s]
“expressly authorized” in
certifying court and the denial of fees and interest.” MED-1’s counsel
the agreement.
their settlement. informed her that if she did not pay
the attorney’s fees, she would also be
liable for the additional fees incurred
15CONTRIBUTORS
BRIAN V. OTERO RYAN A. BECKER
Co-Head, Financial Services Litigation Partner
botero@HuntonAK.com rbecker@HuntonAK.com
+1 212 309 1020 +1 212 309 1055
STEPHEN R. BLACKLOCKS MICHAEL B. KRUSE
Partner Counsel
sblacklocks@HuntonAK.com mkruse@HuntonAK.com
+1 212 309 1052 +1 212 309 1387
MICHAEL R. HORNE
Associate
mhorne@HuntonAK.com
+1 214 979 2931
Hunton Andrews Kurth’s Financial Services Litigation Team—based in New York,
Dallas, Miami, Atlanta and Washington, DC—has the knowledge, skill and experience
necessary to represent clients nationwide.
Our partners have represented many of the country’s largest businesses in
high-profile disputes presenting multifront challenges to fundamental
business practices.
If you would like to receive our quarterly newsletter and other
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