Class Actions

• Publication year: 2017

Class Actions

Thomas M. Byrne

Stacey McGavin Mohr

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Class Actions

by Thomas M. Byrne^*

and Stacey McGavin Mohr^**

The past year saw a mix of results in class-action litigation in the United States Court of Appeals for the Eleventh Circuit. with both plaintiffs and defendants notching victories in class certification controversies.¹ Of significance to class-action practice was the court's first foray into applying the challenging new Article III² standing decision of the Supreme Court of the United States, Spokeo, Inc. v. Robins.³ The court also continued to address arbitration issues arising in putative class actions, while the prospects for curbing the availability of arbitration as an alternative to class litigation appeared to fade with the changing political climate.⁴

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I. Class Certification and Predominance: Brown v. Electrolux and Carriuolo v. General Motors Co.

The Eleventh Circuit handed Electrolux a major victory in Brown v. Electrolux Home Products, Inc.⁵ when it vacated the classes certified in an opinion authored by Judge William Pryor.⁶ The opinion was not an unqualified victory, however, as the court was unwilling to adopt key arguments made by Electrolux and remanded the case for further class certification proceedings without a great deal of direction on certain key issues.⁷

The case came to the court from the United States District Court for the Southern District of Georgia by interlocutory appeal under Rule 23(f) of the Federal Rules of Civil Procedure.⁸ The district court had certified separate California and Texas classes consisting of persons who had purchased Frigidaire front-loading washing machines of a particular type. The underlying claim was one of a series of actions brought against manufacturers of front-loading washing machines, which have been plagued by allegations that they are subject to mildew that stains clothes and creates odors. The plaintiffs asserted claims for breach of warranty and claims under the respective unfair and deceptive trade practice statutes of the two states. The complaint sought money damages in the form of a refund or the difference in resale value of the washing machines, plus compensation for any injuries caused by the mildew.⁹

One of the issues facing the Eleventh Circuit arose in a pair of cases that came before the Supreme Court of the United States in 2013. In light of Comcast v. Behrend,¹⁰ both Butler v. Sears, Roebuck & Co.¹¹ and In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation¹² were vacated and remanded by the Supreme Court.¹³ The circuit courts

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in each of these cases later reaffirmed the certification of plaintiff classes, and the Supreme Court ultimately denied further review.¹⁴ The overarching issue raised by these cases is the extent to which uninjured class members may be included in a certified class. The issue has prompted proposed legislation requiring each class member to have suffered an injury of the same type and scope as the class representatives.¹⁵

In the course of certifying the two classes in Brown, the district court stated that it resolved doubts related to class certification in favor of certifying the class and that it accepted the allegations of the complaint as true.¹⁶ Both statements clashed with well-settled law from the Supreme Court and from the Eleventh Circuit. On appeal, Electrolux argued that the district court articulated the wrong standard for class certification and that the plaintiffs could not satisfy the predominance requirement of Rule 23(b)(3).¹⁷ The plaintiffs conceded the errors in the district court's description of the standard for class certification but argued that they were harmless.¹⁸ The Eleventh Circuit, however, took the occasion to elaborate on the errors, pointing out that the party seeking class certification has the burden of proof and citing the Supreme Court's decision in Comcast for the proposition that

[a]ll else being equal, the presumption is against class certification because class actions are an exception to our constitutional tradition of individual litigation. A district court that has doubts about whether 'the requirements of Rule 23 have been met should refuse certification until they have been met.¹⁹

The court then pounced on the district court's statements that it accepts all allegations of the complaint as true for class certification purposes and draws all inferences in a light most favorable to the plaintiffs, pointing out that the party seeking class certification has more than a burden of pleading: it bears a burden of proof that often entails factual inquiry. "[I]f a question of fact or law is relevant to that determination,

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then the district court has a duty to actually decide it and not accept it as true or construe it in anyone's favor."²⁰

The court held that the district court abused its discretion in assessing predominance.²¹ The opinion is the court's most significant treatment of predominance since its landmark opinion in Sacred Heart Health Systems, Inc. v. Humana Military Healthcare Services, Inc.²² In considering predominance in Brown, the Eleventh Circuit instructed that the district court should "first identify the parties' claims and defenses and their [respective] elements. The district court should then classify these issues as common questions or individual questions by predicting how the parties will prove them at trial."²³

Furthermore, the district court is to determine whether the common questions predominate over the individual ones. To guide this determination, the court quoted from its prior opinion in Klay v. Humana, Inc:²⁴

[I]f common issues truly predominate over individualized issues in a lawsuit, then the addition or subtraction of any of the plaintiffs to or from the class [should not] have a substantial effect on the substance or quantity of evidence offered . . . . If, on the other hand, the addition of more plaintiffs leaves the quantum of evidence introduced by the plaintiffs as a whole relatively undisturbed, then common issues are likely to predominate.²⁵

The court noted, however, that predominance requires a qualitative assessment, as well, and that the relative importance of the common versus individual questions also matters.²⁶

Applying this standard, the court concluded that the claim under California's Unfair Competition Law²⁷ could not be certified because the class representative admitted he never saw any false advertisements from the defendant.²⁸ As for the Texas Deceptive Trade Practices²⁹ claim, the court found that the required detrimental reliance on the defendant's conduct could not be established by presumption, contrary to the district court's reasoning.³⁰

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The Eleventh Circuit then turned to the breach of warranty claims and held that the district court could not properly decide predominance without first deciding whether California and Texas laws required presuit notice, an opportunity to cure, and manifestation of the defect. The court pointed out that these questions were not common questions that could be decided after class certification.³¹ Instead, they needed to be resolved to determine whether the class could be certified. The court remanded the case to the district court for these determinations without expressing any view of the answers.³²

Electrolux also argued that none of the plaintiffs' claims could satisfy the predominance requirement because the damages would require individual proof, citing Comcast.³³ Here, Electrolux ran into resistance. The Eleventh Circuit endorsed a statement from Newberg on Class Actions³⁴ that "individual damage calculations generally do not defeat a finding that common issues predominate."³⁵ The court then elaborated that "relatively speaking, individual issues of damages are sometimes easy to resolve because the calculations are formulaic."³⁶ The court rejected Electrolux's argument that Comcast altered "the black-letter rule that individual damages do not always defeat predominance."³⁷ The court noted this rule has always been subject to the exceptions articulated in Klay, where the task of computing damages is "so complex, fact-specific, and difficult that the burden on the court system would be simply intolerable."³⁸

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The court cited a controversial United States Court of Appeals for the Second Circuit case, In re Visa Check / MasterMoney Antitrust Litigation,³⁹ for the roster of tools the district court may use to decide individual damage questions, including bifurcating liability and damages, appointment of a special master, and decertifying the class after the liability trial. The court did not have occasion to indicate what constitutional limits might apply to these practices.⁴⁰

Electrolux also argued that the warranty claims could not satisfy predominance because causation cannot be established without individual proof. The Eleventh Circuit disagreed with the district court that product misuse could be proven classwide, but the court did agree that "individual affirmative defenses generally do not defeat predominance."⁴¹ The court stated that "affirmative defenses could apply to the vast majority of class members and raise complex, individual questions"⁴² that would preclude class certification, but it also observed that "affirmative defenses are often easy to resolve."⁴³ Ultimately, the court expressed no view on the outcome of the predominance determination, leaving it for the district court on remand.⁴⁴

The issue of individualized damages determinations also arose in Carriuolo v. General Motors Co.,⁴⁵ a decision affirming the district court's partial grant of a motion for class certification.⁴⁶ The plaintiffs' motion in the district court involved four classes relating to four claims, but the district court denied certification of three and only granted class certification of the Florida class relating to a claim under the Florida Deceptive and Unfair Trade Practices...