Class Action Quarterly Update – Winter 2017

Class Action Defense Alert

Overall Trends

Telephone Consumer Protection Act (“TCPA”) cases have continued to dominate class action filings over the past quarter. Second in volume to TCPA cases are those alleging claims of false advertising. These cases are heavily concentrated in California, with New York, New Jersey, Florida, and Illinois with significant activity. There was an uptick in the number of consumer fraud cases in March by about 50%. [1]  This appears to most likely be an aberration, although we measured an increase in class action cases related to fuel-emissions during the same time. We also observed that, while a high volume of the food product cases relate to claims of “natural” ingredients or “healthy” composition of products, many others are aimed at products touted as “green” or otherwise “eco-friendly,” goods that are described as “craft” or “handmade,” or products utilizing “compare at” pricing taglines. Targeted industries include food and beverage, automobile, and electronics manufacturers.

The New “Natural”

No longer do filings show large scale attacks on use of the specific phrase “All Natural.” Instead, recent filings attack assertions of natural ingredients in any capacity. Any package indicating it contains somehow “natural” components may create a target for litigation.

While these “natural” cases continue to dominate class litigation targeted at the food and beverage industry, new trends are beginning to develop. The first quarter of 2017 saw a handful of cases aimed at food products marketed as raw, unpasteurized, or cold-pressed. A total of 5 cases were filed across both state and federal courts in California and New York. While small in number, the allegations resemble those that put “All Natural” litigation on the map. It could be that “raw” is the new “natural” in terms of class action litigation.

The Spokeo Legacy

It goes without saying that interpretation of landmark decision in Spokeo has been closely watched during the first quarter of 2017. The Spokeo decision, which addressed Article III standing in the context of class action challenges, has given rise to the increasingly popular and eponymously named Spokeo Challenge. [2]  But recent decisions suggest that Spokeo Challenges may present unanticipated strategic concerns in instances where Plaintiffs originally filed in state court. At least two recent decisions have denied motions to dismiss based on Spokeo Challenges, but remanded the cases back to state court on the theory that Plaintiffs’ ability to satisfy Spokeo had no bearing on their position in state court (where Article III standing is not required). This theme of case treatment may make Defendants – who prefer for a case to be in federal court – wary of raising Spokeo challenges for fear of ending up back in state court.

Proposed Legislative Reform

On February 2, 2017, Representative Bob Goodlatte (R-VA) introduced H.R. 985, the Fairness in Class Action Litigation Act (the “Act”). The self-stated purpose of the Act is to “amend the procedures used in federal court class actions and multidistrict litigation proceedings to assure fairer, more efficient outcomes for claimants and defendants.” If passed, the Act would dramatically affect both the scope and the approach employed in class action litigation. Among the changes proposed, the Act suggests (1) prohibiting federal courts from granting class certification unless each class member suffered “the same type and scope of injury” based on “a rigorous analysis of the evidence presented;” (2) prohibiting class certification unless the class is defined based on “reference to objective criteria,” requiring class representatives to “affirmatively demonstrate[] that there is a reliable and administratively feasible mechanism” to identify class members and distribute monetary relief directly to a substantial majority of the class; (3) providing an automatic right to appeal an order certifying a class; (4) automatically staying discovery during the pendency of preliminary motions (motions to transfer, dismiss, strike, or otherwise dispose of class allegations) unless “the particularized discovery is necessary to preserve evidence or prevent undue prejudice;” and (5) required reporting of settlement data to the Federal Judicial Center.

On March 9, 2017, the Act passed in the House with no amendment. It will be considered in the Senate within the coming months.

For a more in depth discussion of the Act, see Big Changes Could Be Coming In Class Action Litigation.

[1] This number takes into account those cases Orrick tracks as “consumer fraud” cases. For a more detailed discussion of data tracking, see A Note On Data Compilation.

[2] A Spokeo Challenge is a motion to dismiss on the basis that plaintiff has suffered no injury and thus cannot meet the standing requirement in federal court.