Skip to main content

Search

Consumer Class Actions: 10.6.3.4 When a Statute Requires Proof of Consumer Status

Claims under the Truth in Lending Act (TILA), Consumer Leasing Act, Fair Debt Collection Practices Act (FDCPA), unfair and deceptive acts and practices (UDAP) statutes, and other similar statutes generally require proof that the plaintiff is a consumer. Class defendants in such cases often argue that whether each class member engaged in a transaction for non-business purposes is an individual issue, and so the common issues do not predominate.

Consumer Class Actions: 10.6.3.5 Warranty-Type Claims

Certification of a case alleging a product defect and seeking relief relating only to the diminished value of the goods purchased—for example, that a car with a defective part is worth $500 less than represented—is usually straightforward.660 Generally there are common issues of product defect, diminished value of the goods, and perhaps industry awareness of the defect.661 At least one court, however, has rejected diminished value as a basis for class certification.

Consumer Class Actions: 10.6.3.8 Do Affirmative Defenses Impede Certification?

Although, as discussed later in this subsection, there are exceptions, assertions that affirmative defenses or counterclaims may be available against individual members often do not defeat predominance or manageability.710 Sometimes this is because the defense is also common to the class.711 Sometimes it is because the defendant fails to present sufficient concrete examples of class members’ claims that would be barred by the asserted defense.712

Consumer Class Actions: 10.7.1 History of Rule 23(c)(4)

Issue class certification under Federal Rule of Civil Procedure 23(c)(4) first appeared as part of the 1966 amendments to Rule 23. At that time, the subsection stated:

When appropriate (A) an action may be brought or maintained as a class action with respect to particular issues, or (B) a class may be divided into subclasses and each subclass treated as a class, and the provisions of this rule shall then be construed and applied accordingly.716

Consumer Class Actions: 10.7.2.2 The View That the Cause of Action As a Whole Must Meet the Requirements of Rule 23(b)(3)

The general consensus among courts and commentators following the adoption of Rule 23(c)(4) in 1966 was that issue class certification did not require the cause of action as a whole to meet the predominance criterion of Rule 23(b)(3). However, the Fifth Circuit was the first circuit to directly consider the issue and it rejected that consensus view in Castano v. American Tobacco Co.727 In Castano, the plaintiffs brought a case against seven tobacco companies and the Tobacco Institute, Inc.

Consumer Class Actions: 10.7.3 Rule 23(b)(2) and Issue Classes

Rule 23(b)(2) certification focuses on the defendant’s conduct, which often makes the use of certification for resolution of a particular issue highly useful.753 This approach was validated by the Second Circuit when it ruled that a trial court erred in failing to certify a Rule 23(b)(2) class under Rule 23(c)(4) for determining the issue of whether a defendant’s conduct constituted a practice or pattern of activity for the purposes of an employment discrimination statute.754 An unusual feat

Consumer Class Actions: 10.8 Can a Class of Opt-Outs Be Certified?

There is little authority on the subject of whether a court may certify a class consisting of persons who opted out of a prior class action that raised identical claims. However, there does not appear to be any valid impediment to certification under the criteria specified in Rule 23.

Consumer Class Actions: 14.1 Two Guiding Principles

If the defendants cannot win the case by a motion to dismiss or motion for summary judgment, they may be amenable to a settlement without trial. The likelihood of settlement increases significantly if the court grants class certification, but a case that is legally and factually strong often draws settlement talks even prior to certification. This chapter discusses many of the considerations that the plaintiff’s counsel should bear in mind during settlement discussions at any step of the litigation, starting with two guiding principles:

Consumer Class Actions: 14.2.1 Individual Settlements Before Certification

A class action should never be filed with the intention of leveraging a favorable individual settlement using the “threat” of class treatment as a club against a defendant. Nonetheless, the subject of a possible individual settlement sometimes arises. Particularly when the defendant has broached this subject, counsel should be wary of agreeing readily to negotiation. The fact that the defendant wishes to settle quickly may be a reflection of its perceived liability on a broader basis to the class.

Consumer Class Actions: 14.2.2 Classwide Settlement Before Certification

In many suits filed as class actions, the parties agree to settle on behalf of a class before the court rules on certification. The rationale for such settlement at this stage is that class certification is itself a litigation risk for both plaintiffs and defendants. For many class actions, particularly consumer cases in which the individual claims at issue may be relatively small, not being certified on a classwide basis could effectively doom the chances for any recovery by any members of the putative class.

Consumer Class Actions: 14.3 Settling with Some of Several Defendants

In cases involving multiple defendants, it may be desirable to negotiate a settlement with only some of the defendants for less than all of the damages claimed by the plaintiff. The partial settlement may provide meaningful relief to the class and may encourage settlements by other defendants. However, class counsel should be aware of some of the practical implications of a partial settlement with only one or some of several defendants. First, counsel will still have to get settlement approval from the court under Rule 23(e).

Consumer Class Actions: 14.5 Settlements When Related Legislation Is Passed

Issues have arisen when intervening changes in law affect the underlying claims of a settlement. However, a change in law does not give a settling party the chance to repudiate a valid settlement to which it is contractually bound.46 Otherwise, parties could pull out of a settlement any time there is a change in law. As one court has stated, given the “expensive and time-consuming process” of the class approval process, “[i]t is essential that . . .

Consumer Class Actions: 14.6 Settlements Over the Opposition of Class Representatives

Where some, but not all, class representatives oppose a settlement that class counsel believes is in the best interest of the class, those opposing the settlement may become objectors and will be treated procedurally the same as other class members who object. In this situation, if no class representative supports the proposed settlement, the court nevertheless has authority to permit substitution of a new representative who agrees with the proposal supported by class counsel.48

Consumer Class Actions: 14.8.1 Overview

All too often, defendants will try to compel negotiation of a class settlement before the plaintiffs’ counsel has had an opportunity to fully explore the strength of the class claims and possible damages. Class counsel has a duty of due diligence and should insist upon information that would permit an intelligent evaluation of the size of the class, the strength and scope of the class claims, and damages.

Consumer Class Actions: 14.9.3 Value of Coupons If Redeemed

The key factor for a court in approving a coupon settlement, and for class counsel in negotiating such a settlement, is whether the coupon provides reasonable value to the class.230 Certificate settlements should not be considered unless the real value of the coupons to the class (not their face value) exceeds the value to class members of an all-cash settlement. Determining the value of a coupon settlement may be difficult, but it is essential to an evaluation of whether a settlement is reasonable.

Consumer Class Actions: 14.8.2.1 Generally

Class actions can be settled for monetary or injunctive consideration, or both. If the case is primarily one for money damages, monetary benefits will typically constitute the predominant relief. Quite often, however, a significant benefit can inure to the class from compelling a defendant to reform its wrongful practices without necessarily sacrificing the monetary recovery.52 Counsel should therefore routinely consider obtaining some form of injunctive, sometimes called “programmatic,” relief.

Consumer Class Actions: 14.8.2.2 Requirement That Class Members Submit Claim Forms

Counsel should bear in mind that, effective December 1, 2018, Rule 23(e)(2)(c)(ii) lists “the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims” as one of the factors a court must consider in deciding whether to approve a proposed settlement.