“It’s Good!”: Eighth Circuit Upholds NFL Publicity-Rights Class Settlement

The Eighth Circuit upheld a class settlement over the objections of six of the twenty-three class representatives.  The case involved a settlement among the NFL and nearly 25,000 former NFL players over the use of the players’ likenesses and identities, and it provided class members with two benefits: (1) the establishment and $42 million funding of the Common Good Entity, a non-profit organization charged with disbursing the money to charitable organizations or health and welfare organizations for the benefit of class members; and (2) the establishment of the Licensing Agency intended to assist class members with marketing their publicity rights.  Marshall et al. v. Nat’l Football League, No. 13-3581 (8th Cir. May 21, 2015).

At the outset, the Court tackled the question of whether the settlement benefits were appropriate given constraints on certain cy pres distributions.  The Court emphasized that the Licensing Agency provided class members with a direct benefit, sacking any argument that the settlement only provided monies to the third party Common Good Entity.  Moreover, the Court explained that the Common Good Entity was more analogous to a trust rather than an objectionable cy pres fund because the Entity was expressly created for the benefit of the class.

Other issues making the highlight reel include the Court’s assessment of objectors and opt outs.  Six of the twenty-three class representatives objected to the settlement, and nearly 10% of the class (or 2,073 class members) opted out.  Recognizing that “the fact that a considerable number of the named plaintiffs objected to the settlement suggests it may not have been particularly favorable to what they believed their particular claims were worth,” the Court was reassured that the fact that 90% of class members remained on the settling team indicated that the settlement “was favorable to what most members believed their claims were worth.”  The Court explained that the class representatives could have opted out if they felt they had meritorious individual claims, and the Court noted the district court’s deference for the “quiet, absent majority” over “the vocal minority.”

    Dealing with premature motions for class certification (filed to avoid Rule 68 offers)

    Filing an bare-bones motion for class certification alongside the class-action complaint is one tactic to avoid the mooting effect of a Rule 68 offer. But what are defendants and the courts supposed to do with such a motion and its flimsy thread-bare recitals of the Rule 23 requirements?

    Federal judges do not like motions lingering on their dockets longer than six months; it hurts their stats and gets reported to Washington.  See, e.g., Singer v. Illinois State Petroleum Corp., 2013 wl 2384314, at *2 (N.D. Ill. May 24, 2013) (“[T]his Court is unwilling to contemplate the prospect of shattering its unbroken record of more than three decades of reporting no ‘stale’ pending motions in its statutorily-required September 30 report where, as here, such purported staleness is occasioned by lawyer-caused delays rather than by this Court’s failing to act on a live motion.”).

    Instead of agreeing to an arbitrarily fast six-month class-cert discovery and briefing schedule – all to avoid the prospect of a “stale” class certification motion – here are some better options:

    Immediately dismiss the class-cert motion without prejudice to refiling later.

    • Radha Geismann v. BeThin, Inc., 2015 WL 2182737 (E.D. Mo. May 11, 2015) (“The Court sees no benefit in allowing a motion to languish on the dockets while waiting for discovery to proceed which may take several months.  Therefore, Plaintiff’s Motion for Class Certification will be dismissed with leave to refile once an offer of judgment has been made necessitating such a filing or when the facts have developed enough to allow for a ruling on class certification.”)
    • Physicians Healthsource, Inc. v. Purdue Pharma L.P., 2013 WL 4782378, *1 (D.Conn. Sep 06, 2013) (“[I]t does not follow that an initial, under-developed motion—like the one at bar—must linger on the docket while the court awaits the filing of a later, fully-developed motion following discovery . . . .  To the extent that class allegations are preserved from mootness by the filing of a premature motion for certification, they are no less preserved by an order denying that motion without prejudice to renewal before final judgment.”)
    • 3081 Main Street, LLC v. Business Owners Liability Team LLC, 2012 WL 4755048, *1 (D.Conn. Sep 24, 2012) (“[T]here is nothing to be gained by formally staying plaintiff’s current, underdeveloped motion while the court awaits the filing of a later, fully-developed motion. An order denying certification, much like an order granting certification, is ‘inherently tentative’ and the court ‘remains free to modify it in light of subsequent developments in the litigation.’ Therefore, plaintiff’s motion for class certification is denied without prejudice to renewal after discovery.”) (citations omitted)

    Withdraw the motion and stipulate that defendant will not “pick off” the named plaintiff.  

    • Kurgan v. Chiro One Wellness Centers LLC, 2014 WL 642092 (N.D.Ill. Feb 19, 2014) (noting that in the Seventh Circuit, often “motions are withdrawn shortly after the initial status hearing because defendants are willing to enter into a stipulation that they will not attempt to ‘pick off’ the named plaintiff in an early settlement”)

     

      Griffioen v. Cedar Rapides, et al. – How to Remove In Bulk

      We all know that each defendant must consent to removal, which is easy when one or a couple of defendants are in the case.  But what do you do when the plaintiff has sued everyone under the sun and the clock is ticking?   Talk about a logistical nightmare.

      In Griffioen (no, that’s not as typo – that’s how the plaintiff spells his name), the plaintiffs in this putative class action sued a lot of entities, including some railroads, some corporations, some individuals, and some municipalities, over flood damage.  The theories and allegations aren’t terribly important.  What is interesting is that certain defendants sought to remove the case to federal court, and while most of the defendants either signed the notice of removal or filed their own written indication of consent, some did not.  Instead, the removing defendants represented in their notice of removal that they had contacted counsel for those non-signing defendants and that those defendants had consented to removal.  The plaintiffs moved to remand.  The district court denied the motion to remand, and an appeal to the Eighth Circuit ensued.

      In a pragmatic and efficient opinion authored by Judge Wollman, the Eighth Circuit joined the Fourth, Sixth, and Ninth Circuits in holding that a representation (made pursuant to Rule 11 of course) in the notice of removal stating that all codefendants consent to removal can satisfy 28 U.S.C. Section 1446’s unanimity requirement.   The Seventh and Fifth Circuits, however, still prefer to stand on ceremony by requiring each defendant to either sign the notice of removal or file its own notice within thirty days of the date of service of the removing defendant.  While this is not a life-changing decision, it is a nice piece of functional guidance, which is much appreciated.

       

        Eighth Circuit Explains How to Prove Up CAFA’s Local-Controversy Exception

        Here’s a quick refresher (plus a lesson) on CAFA’s local-controversy exception: a district court must decline jurisdiction when more than two-thirds of the proposed class members are citizens of the state in which the action was filed.  The two-thirds is determined as of the date of the filing of the complaint.  The party seeking remand (typically the class representative / plaintiff) has the burden of proving the exception applies.

        So what’s the lesson?

        You cannot prove citizenship using solely a putative class member’s last-known address.  Residency does not establish citizenship – i.e. the fact that a class member has (or once had) a residential address in Missouri does not mean that person is a citizen of Missouri.

        So how may class representatives meet their burden to prove CAFA’s local-controversy exception?  Two ways:

        1. submit affidavit evidence or statistically significant surveys showing two-thirds of the class members are local citizens, or
        2. redefine the class as only local citizens.

        Approach #1 requires some statistical rigor.  You cannot just mail a survey to the putative class members and then extrapolate the results of those who responded to get the required two-thirds.  But that’s what the district court did in Hood (which we blogged about here).  The Eighth Circuit explained “fallacy” of that approach:

        The district court extrapolates the citizenship of the Missouri citizens who responded, to the citizenship for those potential class members who did not respond. The fallacy is apparent. Those still at the last-known address were more likely to respond, and those not at the last-known address were less likely to respond (and more likely not to be Missouri citizens, or even have a valid address).

        See Hood v. Gilster-Mary Lee Corp., No.  15-1458 (8th Cir. May 1, 2015).  The Eighth Circuit reversed the district court’s decision to remand under the local-controversy exception.

        We’ll continue to watch this case and see if Plaintiffs seek remand again using one of the Eighth Circuit’s recommended approaches to prove CAFA’s local-controversy exception.

          Out-Standing: The Supremes Grant Cert Review of Spokeo v. Robins, 742 F.3d (9th Cir. 2014): Guidance Coming on Article III Standing and Statutory Damages Claims

          In a development that could have huge class action implications not only for Missouri and Kansas, but also the rest of the nation, the United States Supreme Court on April 27, 2015 granted certiorari review of the Ninth Circuit’s decision in Spokeo v. Robins, 742 F.3d 409 (9th Cir. 2014).  This case raises the critical issue of whether the mere violation of a federal statute can supply Article III standing to an unharmed private litigant seeking only statutory (not actual) damages under the Fair Credit Reporting Act (FCRA) – or any of a host of other federal statutes like it.

          By way of background, we all know that in order to maintain Article III standing in federal court, the plaintiff must show: 1) injury in fact, ie injury in fact that is both concrete and particularized and actual and imminent, as opposed to conjectural or hypothetical; 2) causation, ie the injury is fairly traceable to the challenged action of the defendant; and 3) redressability, ie. the likelihood that a favorable decision will redress the injury.

          The question is, then, how do these constitutional requirements square with congressional enactments that provide for statutory damages (as opposed or in addition to actual damages) for the willful violation of certain statutory requirements?  In other words, what happens when a plaintiff pleads willful violation of a statutory provision providing for a private cause of action for statutory damages, such as FRCA Section 1681(n)(a)(1) and (2), which provide for statutory damages from $100-$1000 as well as punitive damages for the willful violation of its requirements?  Without showing actual damages, how can a plaintiff pleading violation of such statutory provisions in the abstract meet the Article III threshold?  What if such a plaintiff pleads a willful violation, but pleads no concrete injury to himself fairly traceable to the violation and redressable by his claim?

          That is the issue raised by the petition in Spokeo, or as, framed by the petitioner Spokeo, whether “a mere statutory injury-in-law – standing alone – is sufficient to satisfy the Article III injury-in-fact requirement even when the plaintiff did not sustain any tangible harm.”   The facts of the case below, however,  are not as clear-cut as they could be.  Spokeo is a website that provides users with information about other individuals, including contact data, age occupation, economic health, and wealth level.  The plaintiff, Thomas Robins, alleged willful violation of the FCRA because Spokeo’s website described him inaccurately (interestingly, the website described him as better-educated and wealthier than he claims to have been), and alleged that this insidious misinformation caused “actual harm to [his] employment prospects” as well as “anxiety, stress, concern, and/or worry about his diminished employment prospects.”  (I’m sure we can all commiserate at the worry we endure when people assume we are wealthier and better-educated than we are.  This happens to me often).   This pleading raises the issue of whether Robins even tried to plead actual injury.  First the district court ruled that he had, then reversed itself and ruled he had not, and dismissed the case for lack of Article III standing.

          Robins appealed, and the Ninth Circuit reversed.  As a preliminary matter, the Ninth Circuit panel was unclear as to whether Robins had really tried to plead actual injury to himself, characterizing his allegations of injury as “sparse,” which is hardly a legal term of art. Regardless, the panel rejected Spokeo’s position that Article III standing requires a showing of actual harm, concluding instead that a cause of action for a violation of a statute like FCRA does not require a showing of actual harm when a plaintiff sues for willful violations.  The Ninth Circuit concluded that such a claim satisfies Article III so long as the plaintiff is “among the injured” in the sense that he or she alleges that the defendant violated “her statutory rights,” and the statutory right at issue protects against “individual rather than collective harm.”  The Ninth Circuit characterized the issue not so much as whether Congress was creating a right to sue that potentially violated Article III, but as Congress “elevating to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.”  In doing so, the panel candidly recognized that their analysis of statutory claims essentially collapsed the three-part standing analysis into the injury-in-fact step, and assumed redressability and causation would follow.

          Spokeo’s cert petition points out the need to resolve a circuit split on this issue.  The Sixth Circuit in Beaudry v. Telecheck Services, Inc., 579 F.3d 702 (6th Cir. 2009) came out the same way as the Ninth on a similar FCRA claim, and Judge Easterbrook authored a decision for a Seventh Circuit panel reversing the district court’s denial of a motion to certify a FCRA class based on similar claims in Murray v.  GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006), although the opinion doesn’t really address the issue of standing.   In contrast, both the Second and Fourth Circuits in Kendall v. Employees Retirement Plan of Avon, 561 F.3d 112 (2nd Cir. 2009), and David v. Alphin, 704 F.3d 327 (4th Cir. 2013), respectively,  have rejected the concept that violation of a statutory right can confer sufficient Article III standing in the absence of showing actual injury to the plaintiff as a result of the breach, such as an actual denial of retirement benefits, in the similar context of ERISA actions.

          Spokeo’s petition also notes the need to resolve this issue due to the profound implications it holds for class certification.  As we know, standing and injury are key issues in most class certification fights.  As Spokeo’s petition notes, more and more putative class actions based on violations of statutes such as the FCRA are being filed.  These actions pose tremendous litigation risks.  To now eliminate the requirement that class members show some level of actual injury would practically lower the bar to Rule 23 certification by effectively eliminating the injury and causation requirements – two of the sharpest arrows in defense counsel’s quiver – and facilitate the certification of massive classes based on common proof that the defendant did nothing more than fail to meet a statutory standard, whether or not that failure actually affected the plaintiff, class members, or anyone else.

          This issue goes well beyond the FCRA, and applies to any federal statute creating a statutory private right of recovery, such as the Telephone Consumer Protection Act (TCPA) (which has recently given rise to a burgeoning docket of class actions), the Truth in Lending Act (TLA), the Fair Debt Collections Act (FDCA), the Employment Retirement Income Security Act (ERISA), the Real Estate Settlement Procedures Act (RSPA), the Fair Housing Act (FHA), the Americans with Disabilities Act (ADA), the Lanham Act, the Video Piracy Act, and more.  In other words, this is an important decision we’ll need to monitor closely.

          So what’s the answer?  Do these statutory provisions really just create laws to redress de facto injuries, or do they unconstitutionally attempt to fiat standing for inchoate violations of statutory rights?  Is there a middle ground?  Once the fact of injury is proven, can these statutory private rights of action be used to short-circuit the calculus of the amount of damages?  Or is the issue moot because Robins really did plead an actual injury?

          Stay tuned.

           

            Proposed Bill Would Implement Daubert Standard in Missouri

            As we discussed back in 2013, the United States Supreme Court’s decision in Comcast left no doubt that any damages model offered up by the proponent of class certification must “be consistent with its liability case.”   This ruling put some teeth into the damages element in the class certification context, and strongly implied that the requirements of Daubert or Frye apply at the class certification stage.  This month, the Third Circuit joined the Seventh, Eighth, and Ninth Circuits have all agreed that the Daubert admissibility standard must be taken into account when assessing admissibility of expert testimony at the class certification stage.

            Now, of course, this is only useful if one’s jurisdiction actually sets some parameters on the admissibility of expert testimony.  Missouri courts, however, follow Mo. Rev. Stat. 490.065, which is somewhat general in its standards, and does not follow either Daubert or Frye in civil matters, relying instead on the discretion of the court once the basic foundational standards of the statute have been satisfied.  See e.g., State v. Robertson, 328 S.W.2d 745, 752, n.2 (W.D. 2010).

            House Bill 697, however, looks to augment Section 490.065 by explicitly applying the Daubert admissibility standards to civil actions (excepting juvenile and family law actions). Should this measure be passed, it would go a long way toward setting some concrete standards for the admissibility of expert testimony.  Combined with Comcast, this measure could prove a useful tool in excluding the type of junk science and ipse dixit damages models used in the past to justify the certification of expansive classes. (Full Disclosure, our colleague Kevin Corlew, who represents the 14th District, is the sponsor of this bill).

              It’s Congress’s Prerogative: Citizenship of LLCs Under CAFA

              Everybody’s talkin’ all this stuff about LLCs. Well, not exactly, but the Tenth Circuit is talking about LLC citizenship. Joining the chorus of every other circuit court to consider the issue, the Tenth Circuit recently held that citizenship of an unincorporated association (e.g., an LLC) for removal-diversity purposes is to be determined by reference to the citizenship of each of its members. See Siloam Springs Hotel, L.L.C. v. Century Sur. Co., No. 14-6119, 2015 WL 1430335 (10th Cir. Mar. 31, 2015).

              Were this a class action, the result would be different. For purposes of CAFA, said the Court in footnote 1, an LLC’s citizenship for removal-diversity purposes is determined in the same manner as a corporation—by its state of organization and principal place of business. Why the different result under CAFA? As the Tenth Circuit put it: Not my prerogative. The prerogative to expand the established citizenship rule for corporations to other entities is legislative. Congress exercised its prerogative by including § 1332(d)(10) in CAFA.

              So for all those LLC members finding themselves involved in a class action and asking, Why don’t they just let me live? Keep § 1332(d)(10) in mind when preparing the notice of removal. Live wherever you want, LLC members! Your citizenship won’t count when applying CAFA’s minimal-diversity requirement. And for the counsel preparing that removal notice, no need to worry about tracking down the details of each LLC member. Under CAFA, you don’t need to prepare a lengthy affidavit outlining the citizenship of each member of an LLC.

              As for LLCs involved in individual cases, well, they’ll have to wait for a “New Edition” of the removal statute to change the citizenship rules.

                Going Meta: A Class of Class Action Lawyers in the GMO Rice MDL

                In a very meta turn, Riceland Foods, Inc. found itself on the receiving end of a class action composed of class action firms and plaintiffs from the GMO Rice MDL overseen by Judge Catherine D. Perry of the USDC of the Eastern District of Missouri.  Riceland had been a co-defendant along with defendant Bayer in that litigation and had then cross-claimed Bayer and settled for $ 92 million.  Following the District Court’s orders awarding common benefit expenses and fees, three law firms that had incurred legal fees and expenses while performing class benefit work sought to certify a class representing not only other law firms but also clients who had paid for common benefit services and expenses.  The proposed class brought claims of unjust enrichment and quantum meruit against Riceland on the basis that Riceland had benefitted from the putative class’s common benefit work in obtaining a judgment against Bayer, and sought ten per-cent of Riceland’s gross recovery against Bayer.

                The District Court certified a 23(b) class in a March 19 Memorandum and Order.  Before delving into the 23(b) requirements, the District Court performed a limited choice of law analysis to determine which state’s laws would govern the unjust enrichment and quantum meruit claims of the multi-state putative class.  Using Missouri’s “Significant Relationship Test,” the District Court found that Missouri had the most significant relationship to the unjust enrichment claim and the quantum meruit claim, primarily because the claims arose from an MDL venued in Missouri.  Other important contacts, such as where a benefit was conferred or received, or the location of the parties, were dismissed out of hand as either of “little significance” or “too taxing” to determine individually.  This begs the question of why such contacts would be disregarded rather than considered as creating individualized choice of law issues potentially compromising the superiority or manageability of a (b)(3) class, as well as the wisdom of basing choice of law considerations of happenstance as variable as the predilection of the JPML.

                The District Court also concluded that common questions of law and fact predominated over individual ones, and rejected Riceland’s assertion that each plaintiff must first identify each attorney that created each piece of work product utilized by Riceland in its cross-claim against Bayer and then identify which particular class member paid for each piece of work in order to determine at whose expense Riceland was unjustly enriched or which party conferred a benefit on Riceland.  The District Court specifically distinguished the facts of this case from prior cases denying the certification of such claims on the basis that because the putative class members undertook to “pool their resources” in the MDL as part of a “collective effort,” they need not show which client or counsel paid for specific items, only that the class jointly incurred expenses to provide a benefit on Riceland.  This is an interesting distinction, and it will be instructive to see if the members of the class agree that they all jointly agreed to pool their efforts regardless of which client or counsel undertook those efforts when it comes time to divide the common benefit pie amongst them.

                Hopefully the parties can agree on how to allocate any common benefit fees and expenses from this class action so that we won’t need a class action to recover fees and expenses from a class action to recover fees and expenses from an MDL.

                  Missouri Court of Appeals Prohibits Fact-Finding, Reverses Denial of Certification in Asbestos Medical-Monitoring Suit

                  In a decision emphasizing the continuing viability of medical-monitoring class actions, the Missouri Court of Appeals clarified plaintiffs’ burden of proof at the class-certification stage by holding that the trial court may not consider expert testimony or other evidence that contradicts the plaintiffs’ theory of the case.

                  In Elsea v. U.S. Engineering Company, No. 77687 (Mo. App. W.D. Mar. 17, 2015), the plaintiffs sought certification under Mo. Rule 52.08(b)(3) (the state-law counterpart to Rule 23(b)(3)) of a class of individuals who had spent two consecutive weeks or eighty hours in the Jackson County Courthouse after the defendants had performed a retrofit of the building.  According to the plaintiffs’ allegations and experts, asbestos dust was blown and tracked through the courthouse during the retrofit, putting putative class members at a significantly increased risk for latent disease.  The plaintiffs sought recovery of compensatory damages for the expense of necessary prospective medical monitoring.

                  Following a four-day evidentiary hearing, the trial court denied the plaintiffs’ motion for class certification due to a number of individualized issues relating to exposure, causation, and the medical necessity of a monitoring regime for each class member.  After accepting interlocutory review, the Court of Appeals reversed.  Significantly, the court held that the trial court undertook improper findings of fact and that it should have accepted the allegations and evidence presented by the plaintiffs as true, citing its previous holdings in Hope v. Nissan N. Am., Inc., 353 S.W.3d 68 (Mo. App. W.D. 2011) and Hale v. Wal-Mart Stores, Inc., 231 S.W.3d 215 (Mo. App. W.D. 2007).  The court then went on to emphasize that “the common and predominant fact of exposure” warranted certification and that “individual factors are not relevant in a medical monitoring claim.”  It further rejected the defendants’ arguments regarding the threshold level of exposure that would trigger the need for medical monitoring, reiterating that the plaintiffs’ allegations must be taken as true at the class-certification stage and any factual issue should have been reserved for the jury at the class trial.

                  In contrast to Elsea, the United States Supreme Court’s recent decisions in Wal-Mart Stores, Inc. v. Dukes and Comcast v. Behrend underscores putative class plaintiffs’ evidentiary burden under Rule 23 and the unavoidable overlap between merits and class issues during certification; the Elsea opinion also creates an uneasy tension with the court’s previous statements that “federal interpretations of Rule 23 are relevant in interpreting Rule 52.08.” Craft v. Philip Morris Cos., 190 S.W.3d 368, 376 (Mo. App. 2005).  To the extent the Missouri Supreme Court seeks to bring Rule 52.08 more in line with the federal standard, we may well hear from it soon.

                    Law360’s 6 Recent Class Certification Rulings You Need to Know

                    Although this blog is focused on highlighting recent orders and opinions from courts within the 8th and 10th Circuit, there are countless others from courts around the country that will inevitably impact and influence class action jurisprudence.  Law360 published the “6 Recent Class Cert. Rulings Every Litigator Needs To Know,” a nice compilation of recent rulings that may affect your practice (of course, none were from the 8th and 10th Circuit – otherwise you would have already heard about it here!).

                    In addition to the cases highlighted in the Law360 article, Andrew Trask of Class Action Countermeasures also published “The Ten Most Significant Class Action Cases of 2014,” a nice summation of impactful cases from the last year.