By: Alexander M. Smith

In 2017, the Supreme Court held in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), that a defendant in a mass tort action is not subject to specific personal jurisdiction as to the claims of non-resident plaintiffs whose injuries lack a sufficient connection to the forum state. The Court did not decide, however, whether its holding applied to nationwide class actions. And in the four years following Bristol-Myers, district courts in the Ninth Circuit have reached highly divergent results:

• Some district courts have “agree[d] . . . that Bristol-Myers Squibb applies in the nationwide class action context” and have dismissed claims brought on behalf of putative nationwide classes, reasoning that “a state cannot assert specific personal jurisdiction for the claims of unnamed class members that would not be subject to specific personal jurisdiction if asserted as individual claims.” Carpenter v. PetSmart, Inc., 441 F. Supp. 3d 1028, 1035 (S.D. Cal. 2020); see also, e.g., Wenokur v. AXA Equitable Life Ins. Co., No. 17-165, 2017 WL 4357916, at *4 (D. Ariz. Oct. 2, 2017) (“The Court notes that it lacks personal jurisdiction over the claims of putative class members with no connection to Arizona and therefore would not be able to certify a nationwide class.”).

By: Clifford W. Berlow, Alexander E. Cottingham, and Lindsay C. Harrison

Introduction

On June 25, 2021, the US Supreme Court in TransUnion LLC v. Ramirez[1] narrowed the scope of Article III standing for plaintiffs who allege the violation of a statute but cannot show they otherwise suffered harm. Though decided in the context of a Fair Credit Reporting Act (FCRA) class action, the decision has major implications for parties litigating state and federal statutory claims of all varieties in federal courts. In particular, TransUnion seems poised to limit the viability of class actions arising from data breaches. The decision likely means, for example, that plaintiffs lack Article III standing when their information may have been accessed but was not misused in a manner causing concrete harm—a subject on which the courts of appeals previously had split. The decision also will limit plaintiffs’ ability to assert Article III standing merely based on the violation of privacy statutes alone without any resulting harm. 

Defendants litigating data breach class actions can take advantage of this new precedent in federal court to seek dismissal of data breach class actions for lack of Article III standing. But doing so is not without consequence. If federal courts are not available to adjudicate these claims, plaintiffs likely will pursue them in state courts, where standing precedent may be more lenient for plaintiffs. Defendants thus will need to be strategic about how aggressively they pursue TransUnion-based dismissals.

By: Ali M. Arain, Stephen L. Ascher, Howard S. Suskin, and Reanne Zheng

Introduction

On June 21, 2021, the US Supreme Court issued its decision in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System,[1] providing guidance to lower courts regarding class certification in securities fraud class actions. On balance, the opinion favors defendants, and potentially signals a backlash against the tide of securities fraud class actions based on vague and generic misstatements. Importantly, the Court instructed that all relevant evidence should be considered when making the class certification decision, sending a message that lower courts must grapple with and cannot ignore relevant evidence at the class certification stage simply because it overlaps with the merits-related evidence. The Court also stressed that the generic nature of a misrepresentation is often important evidence of lack of price impact, which lower courts should consider when deciding whether to grant or deny a class certification motion. 

Although the Supreme Court’s decision was not as sweeping as the defendants wanted, it does signal the Supreme Court’s concern that companies are too frequently held liable for securities fraud as a result of adverse legal or business developments, even where the company had never made any specific statements about the matters in question.

By: Gabriel K. Gillett, Megan B. Poetzel, and Ariana Kanavy

In a high-profile decision in AMG Capital Management, LLC v. Federal Trade Commission, No. 19-508 (Apr. 22, 2021), the US Supreme Court held that the Federal Trade Commission’s (FTC) statutory authority to obtain a “permanent injunction” does not permit it to obtain “equitable monetary relief” such as restitution or disgorgement. The Court’s unanimous decision interpreted Section 13(b) of the FTC Act to “mean what it says”[1]—contrary to what the FTC and many courts have long read the statute to mean—and strips the FTC of a tool it has often used in antitrust and consumer protection cases. If the FTC wants that tool back, the Court explained, it must look to Congress.

The path to the Court’s decision is relatively straightforward. In 2012, the FTC sued a payday lender, alleging deceptive practices in violation of § 5(a) of the Federal Trade Commission Act. Invoking § 13(b), which authorizes the FTC to obtain a “permanent injunction” in “proper cases” where a party “is violating, or is about to violate, any provision of law” that the FTC enforces, the FTC asked the District Court to grant a permanent injunction and order $1.27 billion in restitution and disgorgement. The District Court granted the request. On appeal, the Ninth Circuit affirmed based on binding circuit precedent holding that § 13(b) permitted the relief the FTC sought. Two of the three judges on the panel “expressed doubt as to the correctness of that precedent” as well as of similar precedent in at least eight other circuits stretching back more than thirty years.

In a unanimous decision, the Court validated the judges’ skepticism, rejected “precedent in many Circuits,” and held that § 13(b) does not permit the FTC to seek disgorgement and restitution. Looking to the text, the Court reasoned that “the language refers only to injunctions,” contemplates prospective (not retrospective) relief, and “the words ‘permanent injunction’ have a limited purpose” which “does not extend to the grant of monetary relief.”[2] In addition, other provisions of the FTC Act (§ 5(l) and § 19) explicitly provide for limited equitable monetary remedies—but only after the FTC undertakes administrative proceedings that are “more onerous” than simply filing a complaint in federal court, obtains a cease and desist order, and satisfies various other conditions and limitations. Reading § 13(b) to permit the FTC to obtain the same relief without that additional process or those additional requirements “would allow a small statutory tail to wag a very large dog.”[3] By contrast, reading § 13(b) “to mean what it says … produces a coherent enforcement scheme.”[4]

By: Madeleine V. Findley and Emma J. O’Connor

On April 1, 2021, the Supreme Court of the United States unanimously reversed the Ninth Circuit Court of Appeals decision[1] in Facebook Inc. v. Duguid et al., No. 19-511, and held that in order for a device to be an “automatic telephone dialing system” (ATDS), a key term in the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. § 227, it must have the capacity to use a random or sequential number generator to either store or produce phone numbers to be called.[2] This decision represents a significant victory for entities defending against TCPA claims.

The TCPA prohibits making calls or sending text messages to mobile telephones using an ATDS (often simply referred to as an “autodialer”) without the prior express consent of the recipient. What precisely that means has become a heated dispute in TCPA litigation because using an ATDS to place a call is an essential component of many TCPA claims. The statute defines an ATDS as “equipment which has the capacity—(A) to store or produce telephone numbers to be called using a random or sequential number generator; and (B) to dial such numbers.”[3] Lower courts had split on the provision’s meaning. The Third, Seventh, and Eleventh Circuits interpreted the provision narrowly, holding that an ATDS must have the capacity to generate random or sequential phone numbers, not merely to store and dial the numbers automatically.[4] The Second, Sixth, and Ninth Circuits had taken a broad approach, holding that an ATDS need only have the capacity to store numbers to be called and to dial those numbers automatically.[5]

By: Michael T. Brody, Gabriel K. Gillett, Howard S. Suskin and Adam G. Unikowsky

On April 24, 2019, the US Supreme Court issued its decision in Lamps Plus, Inc. v. Varela, No. 17-988, holding that classwide arbitration is not available unless clearly authorized by the parties.^[1]  In a 5-4 decision authored by Chief Justice Roberts, the Court reasoned that when an arbitration agreement is ambiguous or silent about classwide arbitration, the parties have not actually agreed to it.^[2]  As a result, the Federal Arbitration Act (FAA) does not allow a party to be forced into classwide arbitration based on an ambiguous agreement, even if state-law contract interpretation principles would construe ambiguity against the agreement’s drafter.^[3]

Lamps Plus is just the latest in a long string of victories for arbitration advocates.  Building on prior decisions rejecting classwide arbitration in the consumer and employment contexts, the Court has now suggested that classwide arbitration is presumptively unavailable and that a clear expression of intent is required to overcome that presumption.  The practical result is that classwide arbitration may only be available against corporate defendants that specifically subject themselves to it.  And that may be a null (or very small) set, at least for companies that take the majority opinion’s view that classwide arbitration “‘sacrifices the principal ad­vantage of arbitration—its informality—and makes the process slow­er, more costly and more likely to generate procedural morass than final judgment.’”^[4]

By Kate T. Spelman

Five months have passed since the Supreme Court’s decision in Spokeo, Inc. v. Robins, where the Court held (on the one hand) that a “violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact,” but also (on the other hand) that a plaintiff cannot establish standing by alleging a “bare procedural violation” because “Article III standing requires a concrete injury even in the context of a statutory violation.”  In the intervening time period, Spokeo has been cited by almost 200 federal district courts attempting to apply the Supreme Court’s directives.  However, only a handful of federal courts of appeal have waded into the fray.  A review of these appellate decisions provides helpful insights into how the lower federal courts are (or should be) applying the Supreme Court’s opinion.  In fact, three general rules can be gleaned from these decisions:

First, a plaintiff may have standing to sue based solely on a defendant’s failure to disclose information when such disclosure is statutorily mandated.

In Church v. Accretive Health, Inc., the Eleventh Circuit found that the plaintiff had standing to assert a claim for violation of the Fair Debt Collections Practices Act based solely on the defendant’s alleged failure to include in its letter to the plaintiff certain disclosures required by the Act.  For example, the letter did not expressly state that it was sent by a “debt collector ... attempting to collect a debt and that any information obtained will be used for that purpose,” nor did it alert the plaintiff that “unless the consumer, within thirty days after receipt of notice, disputes the (Continued) validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”  The plaintiffs alleged no actual damages aside from the defendant’s alleged failure to include the required disclosures.  However, the court noted that, in certain instances, a plaintiff can rest on the deprivation of a Congressionally-created right to satisfy the standing inquiry.  Because Congress had created “a new right—to receive the required disclosures in communications governed by the FDCPA—and a new injury—not receiving such disclosures,” the plaintiff satisfied Article III’s injury-in-fact requirement.   

By Reena R. Bajowala

The Supreme Court started another term this week.  One granted petition of interest is DeKalb County Pension Fund v. Transocean Ltd., which arises out of the Second Circuit’s ruling that the filing of a putative Rule 23 class action does not suspend the three-year period of repose for claims brought under Section 14(a) of the Securities Exchange Act.  In so ruling, the Second Circuit declined to extend to “statutes of repose” the Supreme Court’s landmark holding in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), that “statutes of limitations” are tolled for all putative class members.  Quick primer:  A statute of limitations is typically based on when a plaintiff experiences harm associated with the legal injury.  A statute of repose, on the other hand, is a time limit that is triggered by an event unconnected to the harm – such as the date a stock was first offered for sale.  Courts have typically held that statutes of limitations can be equitably tolled, while statutes of repose are stricter and cannot.  In DeKalb County, the consequences of applying the statute of repose were significant.  The plaintiff filed suit within the period of repose and moved for lead plaintiff status after the period of repose had expired.  The court denied the motion, finding him to be a flawed representative, and consequently held that the claims of the class were time-barred.  With DeKalb County, the Court will resolve a circuit split.  In Joseph v. Wiles, 223 F. 3d 1155 (10^th Cir. 2000), the Tenth Circuit held that American Pipe tolling does apply because statutes of repose are subject to tolling that is legal (as opposed to equitable) in nature, like that which occurs when an action is commenced and class certification is pending, and arises from the procedures set forth in Rule 23.  The Court granted certiorari on this question two years ago, but later dismissed its order as “improvidently granted.”  Public Employees’ Retirement System v. IndyMac MBS, 134 S. Ct. 1515 (2014). 

By Michael A. Scodro and Ramon Villalpando

On April 29, 2016, the Supreme Court will consider whether to grant the certiorari petition in POM Wonderful et al v. Federal Trade Commission (15-525), which asks the Court to identify the standard of review applicable to agency decisions that prohibit truthful, yet allegedly misleading, advertising.  The case arises out of an FTC complaint filed against POM claiming, among other things, that certain POM ads misleadingly implied that pomegranate juice was a scientifically-established treatment for disease.  An administrative law judge determined that a subset of the challenged ads contained this implied message, but the full Commission later banned a substantially larger group of ads, concluding that these ads made implied, misleading claims.  On appeal, the D.C. Circuit deferred to the FTC’s determination and upheld the ban, rejecting POM’s argument that—to safeguard POM’s First Amendment rights—the court should have reviewed the Commission’s decision de novo.

By Jill M. Hutchison

In a recent New York Law Journal article, Partner Jeremy M. Creelan and Associate Daniel H. Wolf explore class action cases before the US Supreme Court.  They explain that the Court in recent years has raised the thresholds for class action plaintiffs and other plaintiffs to bring and sustain their claims.  “At the start of this Supreme Court term, the court appeared poised to continue this threshold-raising trend,” the authors observe.  They examine Campbell-Ewald Co. v. Gomez and Microsoft Corp v. Baker.  Associate Jacob D. Alderdice assisted with preparing the article. 

To read more on what they have to say, click here.