Category: Class Action Defense

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...

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

In a precedential decision, the Third Circuit affirmed a narrow reading of autodialer under the Telephone Consumer Protection Act (“TCPA”), the first such decision within this Circuit following the D.C. Circuit’s rejection of the FCC’s 2015 definition of autodialer in ACA International. In Dominguez v. Yahoo, Inc., plaintiff purchased a cell phone with a reassigned telephone number, the prior owner of which had subscribed to Yahoo’s Email SMS Service. Because the prior owner of the number never cancelled the subscription, plaintiff received a text message from Yahoo every time the prior owner received an email, which amounted to thousands of text messages. Plaintiff filed a putative class action alleging that Yahoo had violated the TCPA, which requires that plaintiff prove that Yahoo’s Email SMS Service was an “automatic telephone dialing system,” i.e., an autodialer. Following the FCC’s 2015 ruling, plaintiff amended his complaint to allege that the Email SMS Service “ha[d] the potential capacity to place autodialed calls.” Yahoo moved for summary judgment, and both parties submitted expert reports addressing the Email SMS Service’s latent or potential capacity. The District Court granted Yahoo’s motion to exclude plaintiff’s expert reports and granted summary judgment in favor of Yahoo. On appeal, the...

Supreme Court Limits American Pipe Tolling, Holds Tolling Does Not Apply to Successive Class Actions

Supreme Court Limits American Pipe Tolling, Holds Tolling Does Not Apply to Successive Class Actions

The Supreme Court has acted to ensure that the class action device cannot be used to indefinitely extend the statute of limitations, holding in China Agritech, Inc. v. Resh that American Pipe tolling does not apply to successive class actions. American Pipe tolling dates to 1974, when the Supreme Court held that the filing of a class action tolls the statute of limitations for absent class members who seek to intervene after the court has denied class certification. Nine years later, in Crown, Cork & Seal, the Supreme Court extended the rule to toll the statute of limitations for absent class members who choose to file their own individual actions. Resolving a split amongst the Circuits, the Supreme Court held that American Pipe tolling does not apply where class certification is denied and a class member subsequently seeks to bring a new class action after the expiration of the statute of limitations. The Court opined that the “efficiency and economy of litigation” that underpin the American Pipe rule do not support tolling for successive class actions. Rather, the Court determined, barring tolling in such situations will promote efficiency by requiring all litigants who wish to act as class representatives to come...

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Last month, the Third Circuit upheld the dismissal of a putative class action against TD Bank, finding that plaintiffs’ conclusory allegations lacked sufficient evidence and failed to satisfy Rule 9(b)’s heightened pleading standard for claims that sound in fraud. In MZL Capital Holdings, Inc. et al. v. TD Bank, N.A. et al., two account holders with TD Bank filed a proposed class action accusing the Bank of obscuring its exchange rates and improperly charging an embedded fee for converting foreign currency, thereby defrauding its customers in violation of the New Jersey Consumer Fraud Act. Shortly thereafter, plaintiffs amended their complaint to add claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of numerous other state consumer-protection laws. TD Bank moved to dismiss plaintiffs’ claims for failure to state a claim, and the District Court granted TD Bank’s motion, dismissing all of plaintiffs’ claims. On appeal, the Third Circuit affirmed the district court’s decision, concluding that plaintiffs’ claims were inadequately pled. At the outset, the Court re-affirmed the basic principle that claims brought under the Consumer Fraud Act sound in fraud and therefore must comply with Rule 9(b)’s particularity requirement. The Third...

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

The New Jersey Supreme Court has noted that both “federal and state policies favor[] arbitration.” Nevertheless, the High Court’s Atalese v. Legal Servs. Grp. decision—rejecting the enforceability of an arbitration clause—continues to raise questions about whether New Jersey state courts view such provisions with more skepticism than other jurisdictions. In this regard, the Appellate Division’s recent decision in Signor v. GWC Warranty Corp. provides some welcome guidance. In Signor, the trial court refused to dismiss and compel arbitration of class claims grounded in a particular automobile service contract. The contract contained an arbitration provision with language including: ARBITRATION PROVISION: READ THE FOLLOWING ARBITRATION PROVISION (“Provision”) CAREFULLY, IT LIMITS CERTAIN RIGHTS, INCLUDING YOUR RIGHT TO OBTAIN RELIEF OR DAMAGES THROUGH COURT ACTION. Any and all claims, disputes, or controversies of any nature whatsoever . . . shall be resolved by binding arbitration before a single arbitrator. You agree that any arbitration proceeding will only consider Your Claims. Claims by, or on behalf of, other individuals will not be arbitrated in any proceeding that is considering Your Claims. You and We understand and agree that because of this Provision neither You nor Us will have the right to go to court except as provided...