I attended the ABA’s National Institute on Class Actions last week in Chicago, and one theme was clear. Plaintiffs’ lawyers are increasingly fond of asking courts to certify cases so-called “issue classes,” invoking Rule 23(c)(4). They believe that they can pressure companies to settle cases by defining a relatively narrow, yet critical, issue for certification and pushing for trial on that “class issue.” This article takes a closer look at issue classes and potential arguments consumer products companies can use to fend them off.

Before we begin, let me put in a plug for the ABA’s National Institute on Class Actions. This is an outstanding program, with numerous federal judges attending, as well as the entire Advisory Committee on Rule 23. The program was in Chicago this year, but New Orleans looks to be the location for 2015. It’s usually in October, so mark your calendars and plan to attend.

Background on Issue Classes

When appropriate, an action may be brought or maintained as a class action with respect to particular issues. Fed. R. Civ. Proc. 23(c)(4).

The text of Rule 23(c)(4) raises more questions than it answers. The subsection appears in the part of the Rule entitled “Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses,” and is separate from subsections (a) and (b), which delineate the “Prerequisites” of class certification and the “Types of Class Actions” that can be maintained. The Rule does not explain what “when appropriate” means. Nor does it explain what “with respect to particular issues” means.
Continue Reading Growing Risk for Consumer Products Companies – Issue Classes

GavelOn April 27, 2011, the Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), cleared the way for consumer products companies and other businesses to incorporate class action waivers into their arbitration agreements with customers.  On April 7, 2014, the Second District Court of Appeal in California affirmed the denial of a motion to compel arbitration despite Concepcion, relying on language in the arbitration clause that rendered the clause invalid if state law would find the class action waiver unenforceable.  The decision appears to contradict a recent Ninth Circuit decision, calling into question Concepcion’s scope and ensuring further litigation of the issue.

In Imburgia v. DirecTV, Inc., 170 Cal. Rptr. 3d 190 (2014), Plaintiffs accused DirecTV of improperly charging early termination fees and brought a class action against the company for false advertising, violation of California’s Consumer Legal Remedies Act (CLRA) and related claims.  After the trial court granted in part Plaintiffs’ motion for class certification, Concepcion came down and DirecTV moved to decertify the class and compel arbitration.  DirecTV’s arbitration clause included a class action waiver and provided generally that the Federal Arbitration Act (FAA) applied, but also provided:  “If, however, the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section … is unenforceable.”  Id. at 193.
Continue Reading Recent California Appellate Opinion Raises Issue of Concepcion’s Scope

Law books, gavel and scales Berger v. Home Depot USA, Inc., No. 11-55592 (9th Cir. Feb. 3, 2014) This is a great decision for retailers and consumer products companies. The court affirmed a decision denying class certification, recognizing that variability in consumer experience when entering into a retail transaction makes a case inappropriate for class treatment. In Berger, plaintiff challenged the defendant’s “damage waiver surcharge,” which allows the customer to avoid liability if a tool is damaged during the period of rental. Plaintiff claimed the waiver was deceptive because it was automatically added to all transactions and the defendant (allegedly) failed to disclose that it was optional. The trial court denied class certification and the Ninth Circuit affirmed.
Continue Reading Variability in Consumer Experience Dooms Class Action