By Alexander M. Smith

Earlier this week, the Eighth Circuit reversed an order by the Western District of Arkansas (Holmes, J.) imposing sanctions on counsel who voluntarily dismissed a putative class action immediately before they re-filed the action and sought approval of a class settlement in Arkansas state court.  Although the district court concluded that counsel for the putative class stipulated to the dismissal for the “improper purpose of seeking a more favorable forum” and used “properly attached federal jurisdiction as a mid-litigation bargaining chip,” the Eighth Circuit found that counsel’s conduct was proper because “a reasonable lawyer would have had a colorable legal argument that a stipulation of voluntary dismissal . . . is permissible in a case in which the class has not yet been certified.” 

By Kali Bracey, Jeremy M. Creelan and Nicolas G. Keller

On July 10, the Consumer Financial Protection Bureau (CFPB) issued a final rule under Section 1028(b) of the Dodd-Frank Act that governs the use of arbitration by providers of a wide swath of consumer financial products and services.^[1]  Once in effect, the rule will preclude providers of these financial products and services from including class action waivers in their pre-dispute agreements.  But the rule’s future in the face of potential legal challenges and in Congress is far from certain. 

Coming after the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion—which held that the Federal Arbitration Act (FAA) preempts state laws that bar the use of classwide arbitration waivers^[2]—the CFPB’s rule operates as an exception to the FAA.^[3]  The rule consists of three main provisions.  First, it prohibits providers and their affiliates from relying on mandatory pre-dispute arbitration agreements to bar consumer participation in class action suits concerning covered financial products and services.^[4]  The CFPB’s definition of “covered products and services” reaches financial products and services that are offered or provided to consumers primarily for personal, family, or household purposes, including providing consumer asset accounts, extending consumer credit, providing credit reporting, and processing consumer payments using financial or banking data accepted “directly from a consumer . . . .”^[5] 

By Stephen L. Ascher, Thomas C. Newkirk and Howard S. Suskin

On June 26, 2017, in California Public Employees’ Retirement System v. ANZ Securities, Inc., the Supreme Court held that the three-year statute of repose in the Securities Act of 1933 prevents plaintiffs from pursuing individual actions under Section 11 more than three years after the challenged offering, even if a class action was pending, because the pendency of a class action tolls statutes of limitations and not statutes of repose.  In resolving the circuit split on the issue, the Supreme Court, in a 5-4 decision, gave defendants a complete defense against suits initiated after the conclusion of that period.  As a result, plaintiffs with Section 11 claims must opt out of a class action and file their own actions (or perhaps move to intervene in the class action) within the three-year period or be barred from pursuing individual claims.  This holding provides class action defendants with greater certainty and predictability concerning their exposure and requires class action plaintiffs to consider filing timely actions to protect their ability to opt out of a future class settlement.  Defendants in other types of class actions will doubtless look to characterize the limitations periods applicable to those types of claims as statutes of repose that also cannot be tolled. 

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