Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jerry Maatman and special counsel Brandon Spurlock with their discussion of key decisions addressing a myriad of procedural issues in class action litigation.
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Episode Transcript
Jerry Maatman: Thank you loyal blog readers for joining us on our next episode of our weekly podcast series, the Class Action Weekly Wire, I’m Jerry Maatman, a partner at Duane Morris, and joining me today is Brandon Spurlock. Thanks so much for being here on our podcast.
Brandon Spurlock: Great to be here, Jerry.
Jerry: Today we wanted to discuss trends and important developments with procedural issues in class action litigation. This is somewhat of a catch-all term in the Duane Morris Class Action Review in terms of our analysis of key rulings throughout the year. In 2023, federal and state courts address procedural issues and a wide range of class certification issues. Brandon, to your way of thinking, what are some highlights that corporate counsel should be aware of?
Brandon: Yes, jurisdiction is always an important consideration. Class action litigation jurisdictional defenses are often dispositive when a defendant challenges the ability of plaintiffs to maintain their class action in court. The Tenth Circuit issued a very interesting ruling on jurisdiction in Boulter, et al. v. Noble Energy Inc. There the plaintiffs, a group of oil and gas lessors filed a class action against the defendants for alleged underpaid royalties. The defendants then argued that the district court lacked jurisdiction because the plaintiffs failed to exhaust administrative remedies required by Colorado’s Oil and Gas Conservation Act, which grants jurisdiction to the COGCC to determine the amount of proceeds due to a payee. However, the Act excludes resolution of disputes over contract interpretation from the COGCC’s jurisdiction. The district court then agreed with the defendants, and granted their motion to dismiss. Plaintiffs did not appeal this decision, but filed a nearly identical second complaint in Boulter II three months later. While the second complaint was pending, the Colorado Court of Appeals issued a decision regarding the COGCC’s jurisdiction in another action. The district court dismissed Boulter II for the second time, and plaintiffs filed a third complaint, Boulter III in December 2021. The district court again dismissed the action on plaintiffs’ appeal. This Tenth Circuit affirmed the district court’s ruling. The Tenth Circuit considered whether the district court’s decision in Boulter I should preclude the jurisdictional arguments in Boulter II and Boulter III, and whether an exception to issue preclusion, based on an intervening change in the law applied. The Tenth Circuit concluded that the ruling in Boulter I did preclude the jurisdictional arguments, and the subsequent complaints. The Tenth Circuit also determined that the decision from the Colorado Court of Appeals did not change the law or provide a basis for plaintiffs to avoid exhausting their remedies with the COGCC. Therefore, the Tenth Circuit affirmed the district court’s dismissal for lack of jurisdiction.
Jerry: I’ve always found jurisdiction to be a very powerful argument for the defense in a Rule 23 situation. But equally pertinent is the concept of standing, and whether or not a named plaintiff has standing to prosecute a class action. In 2023, however, the plaintiffs’ bar secured a pretty plaintiff-friendly ruling on the issue of standing out of the Ninth Circuit in a case called Vargas, et al. v. Facebook, Inc. The district court had dismissed the named plaintiff’s claim in a class action for lack of standing where the named plaintiff, a New York resident and a Facebook user, claimed that as a member of a protected category group, she was unable to view housing ads that similarly situated White Facebook users were able to access based on the algorithms at issue in the Facebook platform. On appeal, the Ninth Circuit reversed the dismissal of the class action and remanded the district court’s ruling. The Ninth circuit held that sufficient allegations were asserted in the complaint with respect to the disparate treatment of the named plaintiff as compared to white users of Facebook, and as a result, there was a viable cause of action and an injury-in-fact sufficient to confer standing. Many legal commentators think that the Vargas decision is kind of on the outer edge of standing principles, but nonetheless shows in a very plaintiff-centric, or plaintiff-friendly way, how standing can exist in a class action complaint sufficient for the class action to go forward.
Brandon, are there other areas that you think are impacted that is favorable either to the defense bar or to the plaintiffs’ bar in the class action space?
Brandon: Yes. Jerry also wanted to address the issue of consolidation in class action litigation, since consolidation issues often surface when defendants are subject to multiple class actions, and whether or not to consolidate multiple cases in one forum is often a strategic imperative. For instance, in the case of In Re Tiktok In-App Browser Consumer Privacy Litigation, the plaintiffs filed multiple class actions alleging that TikTok illegally intercepted users, communications and activities on third-party websites through the web browser within the TikTok app. The plaintiff, and the class action pending in the U.S. District Court for the Central District of California moved under 28 U.S.C. § 1407 to centralize three of the actions in the Central District of California. Since filing the motion, the Judicial Panel on Multidistrict Litigation, the JPML, have been notified of 14 potentially related actions pending in three additional districts. All of the plaintiffs supported centralization, but the plaintiffs in five actions supported the movement’s position. So, while the plaintiffs in seven actions requested centralization in the Northern District of Illinois, and the plaintiff in one related action alternatively requested centralization in the District of New Jersey, and also in the Northern District of Georgia, and one plaintiff opposed centralization entirely. Because the in-app browser actions raised questions relating to the interpretation and the scope of settlement and the related MDL, the JPML ruled that those questions would be most appropriately resolved by the transferee court. Therefore, denied the motion to centralize those actions.
Jerry: I’ve always thought consolidation of multiple class actions in one quarter of consolidated class actions is a big money saver for the defense in terms of defending something once rather than multiple times, so that’s a key ruling. What about the area of sanctions in class action litigation – were there any particular rulings of note in 2023?
Brandon: Another good question, Jerry. Given the cost of defending a class action, corporate defendants sometimes move for sanctions if the claims are frivolous. For instance, the Sixth Circuit examine this issue in Garcia, et al. v. Title Check, LLC. There the plaintiff filed a class action against the defendant, alleging that its additional buyer’s fee violated Michigan’s General Property Tax Act. The district court dismissed the plaintiff’s claims, finding that the fee was not prohibited by statute. Subsequently, the defendant moved for sanction against plaintiffs’ attorneys on the grounds that the case was frivolous, and forced the defendant to incur unnecessary legal fees. The district court granted the motion, and ordered plaintiffs’ counsel to pay attorneys’ fees and costs over $73,000. On appeal, the Sixth Circuit affirmed the district court’s ruling. Plaintiffs’ counsel argued that the district court erred in opposing sanctions because the legal issues in the case were debatable and because the district court misunderstood Michigan law. The Sixth Circuit agreed with the district court’s conclusion, however, the plaintiffs’ counsel had unreasonably pursued frivolous claims based on an implausible interpretation of statute. The Sixth Circuit also found that the plaintiffs’ counsel should have known their claims lacked merit. The Sixth Circuit further rejected the argument of plaintiffs’ counsel that sanctions should have been limited to the specific filings related to the unnecessarily claims. Instead, it deemed the entire action frivolous and vexatious, and affirmed the district court’s ruling. So, very powerful use of sanctions that support a defendant’s position in that case.
Jerry: Those are great insights and analysis, Brandon. It certainly underscores the notion that non-merits issues in essence procedural issues can be important to the overall outcome of a class action and the method by which a corporation defends itself in class action litigation. Well, loyal blog readers thanks so much for joining us in this installment of the Class Action Weekly Wire. And thank you, Brandon, for providing your thought leadership in this space.
Brandon: Thanks for having me, Jerry