Category: Class Action Defense

Supreme Court Further Restricts Class Arbitration Finding It Must be Unambiguously Authorized

Supreme Court Further Restricts Class Arbitration Finding It Must be Unambiguously Authorized

In a 5-4 decision authored by Chief Justice Roberts, joined by Justices Thomas, Alito, Gorsuch, and Kavanaugh, the U.S. Supreme Court in Lamps Plus Inc. v. Varella held that courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis. Lamps Plus Inc. v. Varella involved an employee who had filed a class action against his employer. Lamps Plus responded by seeking to compel arbitration on an individual rather than a classwide basis. The district court dismissed the case and compelled arbitration, but on a class basis. Lamps Plus appealed, and the Ninth Circuit upheld the district court’s decision. The Ninth Circuit’s reasoning hinged on the fact that the arbitration agreement was ambiguous about the availability of class arbitration. The Ninth Circuit thus distinguished Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662 (2010), arguing that in Stolt-Nielsen the parties had stipulated that the agreement was silent about class arbitration, whereas the parties had no such stipulation in Lamps Plus. Because the Ninth Circuit held that the agreement was ambiguous, the appellate court turned to California’s contra proferentem rule and held that this state law contract principle required the court to...

Supreme Court Holds That 14-Day Appeal Deadline Established by Rule 23(f) Cannot Be Tolled

Supreme Court Holds That 14-Day Appeal Deadline Established by Rule 23(f) Cannot Be Tolled

On February 26, 2019, the Supreme Court unanimously held in Nutraceutical Corporation v. Lambert, that the 14-day deadline imposed by Federal Rule of Civil Procedure 23(f), seeking permission to appeal an order granting or denying class certification, cannot be tolled. After initially certifying a class, the District Court, on February 20, 2015, decertified the class after finding that common issues did not predominate among the class members. Pursuant to Rule 23(f)’s 14-day deadline, the plaintiff, Lambert, had until March 5, 2015 to seek permission to appeal. But, on March 2, 2015, Lambert orally informed the District Court that he would seek reconsideration and did not file his motion for reconsideration until March 12, 2015. Lambert’s motion for reconsideration was denied on June 24, 2015. Fourteen days after that, almost four months past his 14-day deadline, Lambert petitioned the Ninth Circuit seeking permission to appeal the District Court’s order decertifying the class. The Court of Appeals granted Lambert’s petition, finding that the 14-day deadline under Rule 23(f) should be tolled given the circumstances. Specifically, the Court of Appeals found that because Lambert had informed the court within 14 days that he would be seeking reconsideration, he acted diligently. The Supreme Court...

Third Circuit Clarifies Scope of Liability for Insurance Companies Under the Consumer Fraud Act

Third Circuit Clarifies Scope of Liability for Insurance Companies Under the Consumer Fraud Act

In a precedential decision interpreting the New Jersey Consumer Fraud Act (CFA), the Third Circuit determined that an automobile insurance carrier may be liable under the CFA for deceptively inducing one of its customers into releasing claims against another party represented by the carrier. In Alpizar-Fallas v. Favero, Defendant’s car struck Plaintiff’s vehicle, causing serious injury and damages. Both parties were insured by Defendant’s insurance company, Progressive. A Progressive claims adjuster arrived at Plaintiff’s home and presented her with a document that he claimed required her signature. The adjuster represented that by signing the document Plaintiff would expedite the claim process. Plaintiff signed the document relying on the adjuster’s statements. The document, however, was a “comprehensive general release of any and all claims” against defendant driver, also insured by Progressive. Plaintiff was not advised by the adjuster to seek counsel. Plaintiff subsequently brought a putative class action against Progressive for violation of the CFA. On Progressive’s motion, the district court dismissed Plaintiff’s claims, reasoning that the CFA did not apply to “an insurance company’s refusal to pay benefits” but only to the “sale or marketing” of the policies. On appeal, the Third Circuit reversed, holding that the district court mischaracterized...

Accepting the Risks of Arbitration Clauses: The Southern District of New York Upholds Arbitrator’s Decision Allowing Class-Wide Arbitration

Accepting the Risks of Arbitration Clauses: The Southern District of New York Upholds Arbitrator’s Decision Allowing Class-Wide Arbitration

On January 2, 2019, the Southern District of New York (SDNY) in Wells Fargo Advisors LLC v. Tucker, declined to vacate an arbitrator’s clause construction award, which construed the parties’ arbitration agreement as permitting class-wide arbitration. Importantly, prior decisions from the SDNY and Second Circuit concluded the parties’ arbitration agreement clearly and unmistakably expressed the parties’ intent that an arbitrator should decide the gateway issue of whether the agreement permitted class arbitration. Having delegated that authority to the arbitrator, the District Court found no basis in law to overturn that clause construction award. The two prior decisions in this matter, addressing the issue of who should decide whether an agreement permits class arbitration, align well with the United States Supreme Court’s January 9, 2019 holding in Henry Schein, Inc. v. Archer & White Sales, Inc. There—resolving a circuit split—the High Court held that when the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract, and possesses no power to decide the arbitrability issue, even if the court believes the argument that the arbitration agreement applies to a particular dispute is “wholly groundless.” The clause construction award in Wells Fargo Advisors LLC arose out...

Third Circuit Rejects Buyer’s Remorse as a Cognizable Injury Under Article III

Third Circuit Rejects Buyer’s Remorse as a Cognizable Injury Under Article III

In In Re: Johnson & Johnson Talcum Powder Products Marketing, Sales Practices and Products Liability Litigation, the United States Court of Appeals for the Third Circuit held that buyer’s remorse, without more, does not constitute an economic injury sufficient to establish standing under Article III of the United States Constitution. Plaintiff brought a putative class action against defendant Johnson & Johnson, alleging that perineal use of defendant’s baby powder by women could lead to an increased risk of ovarian cancer. Plaintiff did not allege that she had developed or was at an increased risk of developing ovarian cancer. Nor did she allege that the product was defective in performing the functions for which it was advertised. Furthermore, Plaintiff had used all the product and, thus, was not seeking reimbursement for a product she cannot use. Rather, Plaintiff alleged that she would not have bought the baby powder had she known that it could lead to an increased risk of cancer. The District Court of New Jersey dismissed her complaint for lack of Article III standing. The Third Circuit affirmed. It relied on its analyses in Finkelman v. Nat’l Football League and Cottrell v. Alcon Laboratories to determine that Plaintiff’s allegations were too...

Eleventh and Seventh Circuits Hold Class and Collective Arbitration Are Questions of Arbitrability

Eleventh and Seventh Circuits Hold Class and Collective Arbitration Are Questions of Arbitrability

In two recent precedential decisions, JPay, Inc. v. Kobel and Herrington v. Waterstone Mortgage Corp., the Eleventh and Seventh Circuits, respectively, held that whether an arbitration may proceed on a class-wide basis (or as a collective action when a claimant is seeking relief under the Fair Labor Standard Act) is a “question of arbitrability” to be decided by the courts, unless the parties specifically delegate that responsibility to an arbitrator. The Supreme Court previously noted the lack of a majority decision on the subject in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. and declined to address this question in Oxford Health Plans LLC v. Sutter, leaving the decision to the circuits. In JPay, the dispute arose when two plaintiffs, users of JPay’s fee-for-service amenities to send money to inmates, filed suit alleging the service dissuaded users from sending funds through free paper money orders, and that the fees charged by JPay were “exorbitant” and used to “fund kickbacks to corrections departments.” JPay’s Terms of Service included a provision that the American Arbitration Association (AAA) would arbitrate and govern any disputes, claims, or controversies that arose between the parties and “[t]he ability to arbitrate the dispute, claim or controversy shall likewise be determined in...

Ninth Circuit Adopts Expansive Definition of Autodialer Under the TCPA, Creating Circuit Split With Third Circuit

Ninth Circuit Adopts Expansive Definition of Autodialer Under the TCPA, Creating Circuit Split With Third Circuit

In Marks v. Crunch San Diego, the Ninth Circuit Court of Appeals, considering anew the statutory definition of automatic telephone dialing system (ATDS) under the Telephone Consumer Protection Act (TCPA), held that an ATDS includes a device that stores telephone numbers to be called, “whether or not those numbers have been generated by a random or sequential number generator.” The Ninth Circuit expressly declined to follow the Third Circuit’s interpretation of ATDS in Dominguez v. Yahoo, Inc., thus setting up a clear Circuit split. Both Marks and Dominguez were issued after the D.C. Circuit invalidated the FCC’s interpretation of ATDS in ACA International v. Federal Communications Commission. In Marks, plaintiff brought a TCPA class action after receiving three text messages from Crunch Fitness where he had a gym membership, asserting that the texts were sent using an ATDS. The messaging system was a “web-based marketing platform designed to send promotional text messages to a list of stored telephone numbers.” Phone numbers were either manually entered into the system or provided directly by customers. To send text campaigns, a Crunch employee would log in, select the intended recipients, generate the content of a message, and select the time and date for...

New Jersey Appellate Division Finds Individual Causation Issues Related to Ascertainable Loss Detrimental to Class Certification

New Jersey Appellate Division Finds Individual Causation Issues Related to Ascertainable Loss Detrimental to Class Certification

In Polanco v. Star Career Academy, the New Jersey Appellate Division vacated a $10.7 million final verdict against Star Career Academy (“Star”), a New Jersey for-profit school. At issue in the New Jersey Consumer Fraud Act (“CFA”) class action trial below was whether Star concealed and failed to disclose necessary information to Surgical Technology (“ST”) program applicants and students. Specifically, it was alleged that the school did not have the required accreditation needed for students to gain employment upon graduation. Trial resulted in a verdict against Star in the amount of $9 million, with a $1.7 million fee award. On appeal, the appellate panel first found that students seeking an education from a school like Star have the right to know, before enrollment, whether the school has proper accreditation. This is to afford students the opportunity to attend an accredited institution instead. The panel found that because the record contained evidence that Star had made material misrepresentations to students regarding the lack of proper accreditation, Star’s pre-trial summary judgment motion had properly been denied. However, the appellate panel concluded that the trial court had improperly certified the class because the class-wide claims did not predominate over individual allegations by the...

New Jersey Appellate Division Affirms Dismissal of Four Putative Class Actions Claiming Violations of Section 16 of the TCCWNA

New Jersey Appellate Division Affirms Dismissal of Four Putative Class Actions Claiming Violations of Section 16 of the TCCWNA

In Duke v. All American Ford, the New Jersey Appellate Division affirmed dismissal of four putative class actions (consolidated for appeal) alleging that agreements to purchase, lease, or rent motor vehicles violated the Truth in Consumer Contracts, Warranty, and Notice Act’s (TCCWNA) Section 16. The trial courts had dismissed all such claims for failure to plead a violation of Section 16. While the appeals in these matters were pending, the Supreme Court issued its decision in Spade v. Select Comfort, holding that “an adverse consequence is a necessary element of the TCCWNA cause of action.” As a result of the Supreme Court’s decision in Spade, the Appellate Division in Duke rejected the appeals and affirmed the orders of dismissal without even considering the various substantive Section 16 arguments. Each of the putative class action complaints alleged that certain clauses in purchase, lease, or rental documents violated Section 16 of the TCCWNA, which, among other things, prohibits language in a written contract “that any of its provisions is or may be void, unenforceable, or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey.” Three of the cases (Duke,...

Third Circuit Affirms Remand of Class Action to State Court Under “Local Controversy” Exception

Third Circuit Affirms Remand of Class Action to State Court Under “Local Controversy” Exception

In a decision that may broaden application of the “local controversy” exception to removal under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(4), the Third Circuit recently affirmed the remand of a putative class action to New Jersey state court holding a corporate defendant with New Jersey citizenship could be considered a “local defendant” because it did not fully divest itself of liability after previously transferring its potential liabilities to a Delaware entity and, thus, remained a real party in interest. In Walsh v. Defenders, Inc., putative class members filed their complaint in New Jersey Superior Court alleging that the contracts they entered into with Defendants related to the class members’ purchase of home security equipment and monitoring services violated New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”) and the New Jersey Consumer Fraud Act (“NJCFA”). Defendants removed the matter to federal court asserting CAFA jurisdiction, and Plaintiff moved to remand under CAFA’s local controversy exception. After initially denying Plaintiff’s motion to remand, the District Court granted Plaintiff’s motion for reconsideration when additional discovery showed that the only defendant with New Jersey citizenship, ADT SSI-Tyco, had contracted with 35.3% of the putative class members. Defendants appealed and...