United States: House Passes Bill To Clamp Down On Class Actions

The U.S. House of Representatives passed H.R. 985, the "Fairness in Class Action Litigation Act," on March 9, 2017. The bill would add eight new sections to the "Consumer Class Action Bill of Rights," enacted as part of the Class Action Fairness Act of 2005, and potentially spells big changes for class action plaintiffs and defendants alike.

Overview

H.R. 985 would impose strict new requirements for motions for class certification and attorneys' fee applications. The likely effect would be to discourage the filing of small-claim, big-dollar class actions in federal court, particularly if the identity of each class member or the amount of each class member's alleged damages is difficult to ascertain. For other class actions, H.R. 985 may slow and intensify the pre-certification litigation process. Also, in the event of settlement, class notification campaigns may be more expensive to administer under H.R. 985, because the bill may financially incentivize class counsel to demand best-technology notice, rather than best "practicable" notice, to maximize settlement payouts to class members.

Injury allegations

H.R. 985 would prohibit class certification absent affirmative evidence that "each proposed class member" suffered the same "type" and "scope" of injury as the proposed class representative.

This standard may be impossible for plaintiffs' counsel to satisfy. Movants for class certification usually know very little about "each proposed class member" when they file the motion. Also, in most cases, the class members' injuries will vary in some way or degree. This may make it easy for the defendant to show impermissible variation by, say, obtaining declarations from willing putative class members attesting that he or she did not incur the "same type and scope" of injury as others. Depending on how courts interpret and apply this new strict standard, such declarations may be sufficient to successfully counter a plaintiff's motion for class certification.

For their part, plaintiffs' counsel may adapt to the new standard by making broader pre-certification discovery demands, like seeking the names of putative class members, their contact information and relevant work or purchase records. Such demands could trigger privacy concerns for a defendant, requiring permission from each customer or employee prior to releasing personal information. Plaintiffs' counsel may want this information to prove that the "same type and scope of injury" standard can be satisfied. If the defendant is compelled to comply, the attendant burdens and costs could be substantial.

Class member benefits

H.R. 985 would prohibit class certification unless the class is defined "with reference to objective criteria" and there is an affirmative showing of a "reliable and administratively feasible mechanism" to (a) identify class members and (b) allocate monetary relief to "a substantial majority."

This proposal, if adopted, would resolve a circuit split on whether a class may be certified if class members cannot be readily "ascertained." Whereas the First, Second, Third, Fourth, and Eleventh Circuit Courts of Appeal have adopted a restrictive "ascertainment" test espoused by H.R. 985, the Sixth, Seventh, Eighth and Ninth Circuits declined to do so. Under the more restrictive test, a class is per se uncertifiable if it would be difficult to identify class members without individualized fact-finding.

Attorneys' fees

H.R. 985 would expand upon the attorneys' fee rules for "coupon settlements" under 28 U.S.C. § 1712. The bill would require attorneys' fees to be calculated as a percentage of money actually paid to class members, rather than the total recovery obtained for class members. This restriction would have serious implications for class counsel because in cases where class members must affirmatively request payment, the difference between recovery obtained and recovery actually paid can be substantial.

Moreover, the traditional "lodestar" approach (i.e., calculating fees by multiplying actual hours worked by reasonable hourly rate) appears unavailable under H.R. 985. Also, any cy pres distribution for the class members' indirect benefit appears irrelevant. Only "payments directly distributed to and received by class members" are taken into account by H.R. 985. (emphasis added).

H.R. 985 additionally provides that "no attorneys' fees may be determined or paid ... until the distribution of any monetary recovery to class members has been completed." Under some settlements, it can take years to "complete" class member payouts. The waiting period will likely pose a significant financial obstacle for some class counsel.

For class action settlements, H.R. 985 may incentivize class counsel to demand the use of best-technology notification procedures to maximize pay-outs to class members and, thereby, the attorneys' fee award. Such procedures can be highly burdensome, expensive and duplicative. Today, only "best notice that is practicable under the circumstances" is required by FRCP 23(c)(2)(B). (emphasis added).

Appeals

H.R. 985 would establish a right to appeal any grant or denial of a Rule 23 class certification motion. Today, pursuant to FRCP 23(f), parties must request permission to file an appeal. Unlike FRCP 23(f), H.R. 985 does not specify a time for initiating an appeal. Giving litigants an interlocutory right to appeal may slow cases and impose unknown burdens on appellate dockets.

Conclusion

If H.R. 985 becomes law, its provisions would apply to "any civil action pending" on the day of its enactment. As of this writing, the House passed the bill, 220-to-201, on March 9, 2017, with 14 Republican votes against it. Interestingly, some of the 14 Republicans who voted against H.R. 985 were formerly in private law practice. The Senate Judiciary Committee received the bill on March 13, 2017.

Whether H.R. 985 becomes law, or resurfaces with amendments, or, like the Class Action Fairness Act of 2005, triggers a prolonged wave of litigation over the meaning of its provisions, remains to be seen.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Reed Smith
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Reed Smith
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions