THE BRIEF FINANCIAL SERVICES LITIGATION QUARTERLY - SPRING 2022
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THE BRIEF
FINANCIAL SERVICES
LITIGATION QUARTERLY
SPRING 2022
1
TABLE OF CONTENTS
No Clarity on Standing to Assert Statutory Claims 3
Noteworthy 7
Seventh Circuit Affirms Denial of TCPA Class
Certification on Predominance Grounds 7
Ninth Circuit Endorses “Least Sophisticated Debtor”
Standard for FDCPA Claims 8
Fourth and Eleventh Circuits Clarify Requirements
for Responding to QWRs 9
Fourth Circuit Clarifies Class Notice Requirements 10
Ninth Circuit Denies Certification for Failure to
Show Class-wide Injury 11
Fifth Circuit bars Class Certification When Proposed
Class Includes Members Who Benefited from the
Complained-of Conduct 12
Contributors 14
2 HuntonAK.com
NO CLARITY ON STANDING TO
ASSERT STATUTORY CLAIMS
A plaintiff must show a concrete and particularized injury in fact to
establish standing to bring a claim in federal court.
Last year, the US Supreme Court Id. That framework has not put the held that a plaintiff did not have
provided guidance on the injury in standing issue to rest and has instead standing to assert a Telephone
fact requirement in TransUnion LLC created a new question: how close Consumer Protection Act claim
v. Ramirez, 141 S.Ct. 2190 (2021), is close enough? And does it suffice for receipt of an unwanted text
in which it largely reiterated the for the alleged harms to be closely message because the alleged injury
test it first articulated in Spokeo aligned with an interest traditionally was not similar enough to the
v. Robins, 578 U.S. 330 (2016), protected by the law, or must the tort of intrusion upon seclusion.
for standing in cases involving plaintiff’s allegations also align with a The Seventh Circuit reached the
intangible statutory injuries. That traditional cause of action? opposite conclusion in Gadelhak v.
test requires courts to determine AT&T Svcs., Inc., and held that the
whether the plaintiff’s alleged In the five years after Spokeo, lower plaintiff there had standing to assert
injury has “a close relationship to courts differed widely in how they a TCPA claim because “[t]he harm
harms traditionally recognized as applied its framework to intangible posed by unwanted text messages
providing a basis for lawsuits in statutory injuries. The differing is analogous” to the same “type
American courts.” Ramirez, 141 S.Ct. views led to different outcomes on of intrusive invasion of privacy” as
at 2204. The Spokeo test though nearly indistinguishable facts. In intrusion upon seclusion. 950 F.3d
“does not require an exact duplicate Salcedo v. Hanna, 936 F.3d 1162, 458, 462 (7th Cir. 2020) (Barrett,
in American history and tradition.” 1172 (2019), the Eleventh Circuit J.); see also Van Patten v. Vertical
3
Fitness Group, LLC, 847 F.3d 1037, Thornley v. Clearview AI, Inc., the plaintiff’s allegations fit closely
1042-43 (9th Cir. 2017) (receipt of 984 F.3d 1241, 1250 (2021) (Hamilton, with a cause of action that has been
unwanted text messages sufficient to J., concurring). recognized by American courts. The
establish standing). difference is not merely semantic.
There was some hope that, in Courts have reached differing
The Sixth and Seventh Circuits deciding Ramirez, the Supreme conclusions, depending on which
likewise reached opposite Court would clarify its views on of the two general approaches
conclusions on whether a debt standing requirements, resulting in is applied.
collector’s failure to advise a greater predictability and uniformity
debtor in a notice that a dispute or for standing decisions in the lower In Lupia v. Medicredit, Inc., 8
request to verify a debt had to be in courts.1 Clarity and uniformity though F.4th 1184 (2021), the Tenth Circuit
writing was sufficient to establish remain elusive. Of the four circuit considered intangible harm in a case
standing for violation of the Fair Debt court opinions after Ramirez that are in which the debt collector called
Collection Practices Act. Compare discussed below, two drew spirited the plaintiff (but failed to reach
Macy v. GC Svcs. Ltd. P’Ship, 897 dissents, and one was withdrawn her) the day after she disputed the
F.3d 747 (6th Cir. 2018) (violation of pending en banc review. debt and advised the defendant to
in-writing requirement sufficient to stop calling her. Plaintiff alleged in
establish standing), with Casillas v. The post-Ramirez opinions, and her FDCPA complaint that the call
Madison Ave. Assoc., Inc., 926 F.3d in particular the dissents to two caused her “‘intangible harms’ that
329 (7th Cir. 2019) (no standing). of those opinions, suggest that Congress ‘made legally cognizable
Judge Hamilton of the Seventh Circuit two approaches are emerging for in passing the FDPCA,’” but did not
summed up the state of affairs after assessing standing for intangible specify any particular injury from
Spokeo when he recounted the harms. One approach looks to the the single unanswered call. Id. at
differing lines of interpretation in a harm alleged by the plaintiff and 1193 (citation omitted). Though
case involving an Illinois privacy law considers whether the harm alleged not characterized as such in the
and wrote “I confess that I have not is of a type that could be redressed complaint, the court found that
yet been able to extract from these through a cause of action historically plaintiff’s claim was analogous to
different lines of cases a consistently recognized by American courts. The the tort of intrusion upon seclusion
predictable rule or standard.” other approach considers whether and therefore that she had standing
to pursue her claims in federal
court. The court did little though to
show how the claim was analogous
other than to say that the tort
“imposes liability for intrusions on a
plaintiff’s privacy.” Id. True enough,
though intrusion on seclusion also
requires the alleged conduct to be
offensive to a reasonable person,
see Restatement (Second) of Torts,
at §652B, an important element
arguably not met in a case involving
a single unanswered telephone call.
The Tenth Circuit thus approached
standing by looking at whether
redress for the type of harm alleged
could historically have been had,
rather than whether plaintiff’s claim
aligned closely with a recognized
cause of action.
1 See “Supreme Court Clarifies Little About Spokeo Standing in Transunion LLC v. Ramirez,” The Brief, Summer 2021, at 8.
4 HuntonAK.com
The Eleventh Circuit applied a similar through his attorney. The Plaintiff
analytical approach in Hunstein v. claimed stress and confusion as a
Preferred Collection & Mgmt. Svcs., result of receiving the garnishment
Inc., 17 F.4th 1016 (11th Cir. 2021), documents, but the Eighth Circuit
which involved the transmission held that those alleged injuries
of personal information to a debt “‘fall short of cognizable injury
collector’s mailing vendor. Plaintiff as a matter of general tort law.’”
claimed that the transmission to Id. at 463, quoting Bucholz v. Meyer
the mailing vendor violated Section Njus Tanick, PA, 946 F.3d 855, 864
1692c(b) of the FDCPA, which (with (6th Cir. 2020). The Eighth
certain exceptions) prohibits debt Circuit’s decision was based in
collectors from communicating with part on reasoning in a Seventh
anyone other than the consumer Circuit opinion, Pennell v. Global
“in connection with the collection Trust Mgmt, LLC, 990 F.3d 1041,
of any debt.” The Eleventh Circuit 1045 (2021), which held that
held that the transmission of the emotional distress with no physical
plaintiff’s information to the mailing manifestations and no medical
vendor was akin to the tort of public diagnosis did not constitute a
disclosure of private facts and found concrete injury. The Eighth Circuit
that the plaintiff had standing to thus based its holding (at least in
pursue his claims in federal court. part) on the fact that the
Id. at 1023. As in Lupia, the court plaintiff had not met one of the
only loosely lined up plaintiff’s claims elements of a cause of action for
and the historical cause of action, emotional distress.
which drew a dissent from Judge
Tjoflat. The majority opinion, he The Seventh Circuit reached a
said, gave short shrift to two of the conclusion similar to Ojogwu in
three elements of the tort of public Pierre v. Midland Credit Mgmt., Inc.,
disclosure which resulted in a “sheer No. 19-2993, 2022 BL 114787 (Apr. 1,
misfit” between plaintiff’s claim and 2022) and held that “psychological
the tort itself. Id. at 1043.2 The test states” induced by a debtor’s letter
used by the majority thus amounted “fall short” of establishing standing.
to a “distant-relative test,” rather Pierre is notable though for a dissent
than a more rigorous look that Judge by Judge Hamilton, who took the
Tjoflat believes is required by Spokeo view opposite of Judge Tjoflat in
and Ramirez. Hunstein. Judge Hamilton wrote
that “emotional distress, stress, and
Two circuits have considered whether harm to reputation” were “all real
stress, confusion and emotional and foreseeable results of unfair
distress are enough to show standing and deceptive debt-collection
for FDCPA claims. The plaintiff in practices…. Congress has authorized
Ojogwu v. Rodenburg Law Firm, 26 private actions like this case to seek
F.4th 457 (8th Cir. 2022), received damages for them.” Id. at *5. He went
a garnishment notice from a debt on to state that Pierre’s stress and
collector after disputing the debt emotional distress “easily fit[] into
and advising the debt collector this dimension of the common law of
that all communications should go torts.” Id.
2 A majority of the active judges of the Eleventh Circuit voted to re-hear the Hunstein appeal en banc, so the opinion
has been vacated. Oral argument in the en banc proceeding was held on February 22, 2022, but no opinion has been
issued as of the date of publication of this article.
5
The results of these cases seem hard The split in approaches seems most an intangible harm giving rise to
to square: one unanswered phone likely to affect standing in cases standing. But claims involving other
call after debtor disputed debt implicating intangible privacy- alleged harms, such as emotional
and directed contacts through an related harms. Consider the single distress, will be impacted too. What
attorney (standing=yes); garnishment unanswered phone call in Lupia. debtor has not felt at least a tinge
notice to debtor after debtor Judge Tjoflat likely would not find an of stress or anxiety upon receiving
disputed debt and directed contacts injury in fact because the allegations a communication from a debt
through an attorney (standing=no); would not satisfy the elements of collector? Judge Tjoflat’s school of
letter to debtor regarding the tort of intrusion upon seclusion thought would appear to require
time-barred debt (standing=no); (offensiveness to a reasonable person a physical manifestation of that
communication of personal being the unmet element). Judge harm to find standing (in keeping
information to a mailing vendor Hamilton’s approach though seems with his approach of requiring a
(standing=yes). The results appear likely to result in agreement with the close fit between the claim and a
to be driven by the court’s differing Tenth Circuit’s reasoning. historical cause of action), but Judge
approaches to standing. The dissents Hamilton likely would not. Unless the
discussed above best illustrate the If more circuits adopt Judge Supreme Court issues new guidance
issue. Judge Tjoflat, before finding an Hamilton’s view, what does that in the near future, it seems likely
injury in fact, would appear to require mean for standing and intangible that outcomes in seemingly similar
close alignment between a plaintiff’s harms? If all that’s required is some standing scenarios will continue to
claim and a historically recognized allusion to a right to privacy being vary considerably, depending on
cause of action. Judge Hamilton’s impacted (no matter how trivial the which analytical approach is used.
approach takes a broader view and incursion may seem), then focus Financial services companies should
would find standing if a plaintiff’s on the injury only (and not close expect more battles over a federal
claims align with injuries that alignment with a historical cause court’s gatekeeping role
historically had redress at common of action) will give rise to standing for determining standing for
law and that generally are aligned being found more often for cases intangible harms.
with a harm that motivated Congress involving tangible harms. A single
to pass the underlying statute. unanswered phone call, after all, is
not a high bar to clear for showing
6 HuntonAK.com
NOTEWORTHY
SEVENTH CIRCUIT The Northern District of Indiana In Gorss, the fax numbers Brigadoon
refused to certify a class because used were obtained in multiple
AFFIRMS DENIAL common issues did not predominate. ways, and Brigadoon provided
OF TCPA CLASS Gorss appealed. The Seventh Circuit, specific evidence about the various
CERTIFICATION ON in Gorss Motels, Inc. v. Brigadoon relationships, contracts and
PREDOMINANCE Fitness, Inc., 29 F.4th 839 (7th Cir. personal contacts that it had with
2022), affirmed and addressed the fax recipients, necessitating
GROUNDS four issues. individualized analysis of prior
Gorss Motels, Inc., brought a putative express permission. Gorss, in
class action under the Telephone First, prior express invitation contrast, did not carry its burden
Consumer Protection Act (“TCPA”) or permission is an affirmative to show that common issues of law
against Brigadoon Fitness, Inc., defense for which Brigadoon, as or fact would predominate when
seeking class-wide redress for the defendant, would bear the resolving the permission question.
purportedly unsolicited facsimile burden of proof at trial. That defense The Seventh Circuit therefore
advertisements. Gorss operated would have been the key issue to agreed with the district court that
a motel pursuant to a franchise be resolved at trial, in order for the “there is no generalized proof that
agreement. In that franchise putative class to recover under the can be used to resolve the issue
agreement, Gorss agreed, among TCPA. However, when considering of prior permission on a classwide
other things, to purchase equipment whether to certify a class, the trial basis across the various methods
from franchisorapproved vendors. court must ascertain whether the that Brigadoon used to obtain fax
Brigadoon was a franchisor-approved express-permission issue could numbers.” Id.
fitness equipment vendor. As part be resolved at trial with generally
of the arrangement, the franchisor applicable, class-wide proof. In Second, the Seventh Circuit held
periodically provided to Brigadoon other words, “it is the method of that the district court did not
contact information, including determining the answer and not err by rejecting the argument
fax numbers, for its franchisees. the answer itself that drives the that Brigadoon must show with
The contact information had been predominance consideration.” specific evidence that a “significant
collected at various times and under Id. at 845. percentage” of the class was subject
differing circumstances. to the priorexpress-permission
defense. The court held that Gorss’
7
argument had overread prior cases. advertisements, not only from [I]f you dispute this debt or
In those prior cases, the defendants the franchisors but also from the any portion thereof, you must
presented evidence that a significant franchisors’ approved vendors and notify this office in writing
percentage of the putative class affiliates. Such express permission within thirty (30) days of
consented to being contacted. The is distinguishable from permission receipt of this letter. After
Seventh Circuit explained that such given to one entity and then merely notifying this office of a dispute,
evidence was sufficient—but not transferred to another. all debt collection activities will
necessary—to show that issues of cease until this office obtains
individualized consent predominated In short, it was not Brigadoon’s verification of the debt and a
over common questions of law or burden, as a defendant, to prove the copy of such verification is mailed
fact. The court noted that “[T]here merits of its permission defense at to you. If you do not dispute the
are many ways to demonstrate that the class certification stage. Rather, validity of this debt or any portion
issues of individualized consent it was Gorss’ burden, as the plaintiff, thereof within thirty (30) days of
predominated over any common to demonstrate that the issue of receipt of this letter, the debt will
questions.”. Id. at 848. permission could be resolved on a be assumed valid.
class-wide basis, without having to
resort to individualized proof with Almada v. Kriger L. Firm, A.P.C., 2021
Third, the Seventh Circuit held that
respect to each member of the class. WL 1134388, at *4 (S.D. Cal. Mar. 8,
the district court did not misapply
This marks yet another loss for Gorss, 2021) (bold in original letter).
the legal standard for “prior express
permission” when it analyzed the a serial TCPA plaintiff, whose TCPA
The plaintiff argued that this letter
predominance issue. Rather, the class actions in the Second and
can reasonably be read as requiring
district court applied a definition Eleventh Circuits have also failed.
any dispute of the validity of the debt
that was consistent with a narrowed be in writing, contrary to 15 U.S.C.
standard that the Seventh Circuit NINTH CIRCUIT § 1692g(a)(3), which does not require
announced later in Physicians ENDORSES “LEAST that a dispute as to the validity of a
Healthsource, Inc. v. A-S Medication
Solutions, LLC, 950 F.3d 959 (7th Cir.
SOPHISTICATED debt be in writing. The district court
rejected that argument. It found that
2020). Specifically, the refinements DEBTOR” STANDARD
the first two sentences (including the
in Physicians Heathsource did not FOR FDCPA CLAIMS bolded text) complied with § 1692g(a)
affect the trial court’s predominance Five Courts of Appeals, including (4), which requires the letter state
analysis because Gorss offered no the Second, Third, Sixth, Ninth and that “if the consumer notifies the
generalized, class-wide method to Eleventh Circuits, have adopted debt collector in writing within the
resolve the permission question the “least sophisticated consumer” thirty-day period that the debt, or
under either formulation of the standard for determining whether a any portion thereof, is disputed, the
standard. In contrast, Brigadoon’s communication violates the Fair Debt debt collector will obtain verification
claim of permission was “based on a Collection Practices Act (“FDCPA”). of the debt … and a copy of such
multitude of contracts, relationships, A recent decision from the Ninth verification or judgment will be
memberships and personal contacts, Circuit suggests how deferential that mailed to the consumer by the debt
evidence sufficient for the district standard is to plaintiffs and should collector” (emphasis added). It
court to conclude that class-wide alert debt collectors to the care they further found that the third sentence
analysis of the permission issue should take in ensuring that their complied with § 1692g(a)(3) since
would not be feasible.” Gorss, 29 communications comply with that sentence informed the plaintiff
F.4th at 848-49. the FDCPA. that he had 30 days to dispute the
debt and did not state that the
Fourth, the district court did not Almada v. Krieger L. Firm, A.P.C., dispute had to be made in writing.
erroneously allow Brigadoon to No. 21-55275, 2022 WL 213269 (9th The district court held that merely
rely on “transferred” permission Cir. Jan. 24, 2022), involved a claim reversing the order of the notices
from the franchisor. Brigadoon that a collection letter violated the and putting some of the text in bold
provided evidence that the FDCPA’s prohibition on requiring that type did not affect whether the
franchise agreements granted a debtor dispute a debt in writing. letter complied with the FDCPA and
express permission to receive faxed The letter at issue stated that: dismissed the claim.
8 HuntonAK.com
The Ninth Circuit reversed, holding FOURTH AND ELEVENTH district court granted the servicer’s
that “the least sophisticated motion to dismiss, concluding that
debtor” could not be expected to
CIRCUITS CLARIFY neither letter was a QWR: Morgan’s
“analyze whether each sentence, REQUIREMENTS FOR was not specific enough, and
in isolation, accurately conveys the RESPONDING TO QWRS Johnson’s letter “challenge[d] only
required warnings” in the way the The Real Estate Settlement [the servicer’s] stated denial for the
district court did. 2022 WL 213269, Procedures Act (“RESPA”), 12 U.S.C.A. loan modification,” which “does not
at *1. Instead, such a debtor would § 2605(e)(1)(B), and Regulation X, 12 implicate servicing of the loan.” Id.
“examine the letter as a whole and C.F.R. § 1024.35(a), impose various at 649.
would conclude based on the bold obligations on loan servicers who
text expressly stating that he must The Fourth Circuit reversed the
receive qualified written requests
dispute the debt in writing that he district court regarding Morgan’s
(“QWRs”) from borrowers for
was required to dispute the debt letter, holding that it was sufficiently
information relating to the servicing
in writing.” Id. The Circuit Court detailed because (i) it included
of their loans. Servicers should
thus concluded that bolding some information (including an account
know when and how to respond
of the text of the § 1692g(a)(4) number and the ID number of
to borrower requests, for while
disclosure—which requires a dispute the representative who provided
addressing such requests can be
compelling the debt collector to the servicer’s record of his debt)
costly and time-consuming, failing
send a verification of the debt be in that “enable[d] the servicer to
to respond adequately to a QWR can
writing—and placing it before the identify” the account, and (ii) it
also be costly. Two recent decisions
§ 1692g(a)(3) disclosure—which does stated “reasons for the belief of the
from the Fourth and Eleventh Circuits
not require a dispute of the validity of borrower, to the extent applicable,
help clarify when a request is a QWR
the debt to be in writing—would lead that the account is in error” by
and when a response is adequate.
“the least sophisticated debtor” to describing the conflicting balance
conclude that any dispute of the debt In Morgan v. Caliber Home Loans, information he had received from
had to be in writing. Inc., 26 F.4th 643 (4th Cir. 2022), his employer (showing a debt of
two plaintiffs, Morgan and Johnson, $16,806) and from the servicer’s
Importantly, even those courts sued on behalf of a putative class representative (showing a debt of
that have adopted the “the least of borrowers who had submitted $30,658.89).
sophisticated debtor” standard requests for information to the
acknowledge that there are limits to In contrast, the Fourth Circuit
servicer-defendant. Morgan had
the range of possible interpretations, affirmed the district court’s dismissal
written to the servicer to ask it to
and that because that standard of Johnson’s claim, holding that
“correct [its] records” as to the
“preserve[s] the concept of “correspondence limited to the
amount of debt the servicer had
reasonableness,” it does not extend dispute of contractual issues that
reported to a credit agency. Johnson
FDCPA protection “to every bizarre do not relate to the servicing of
had asked the servicer to investigate
or idiosyncratic interpretation of the loan, such as loan modification
and correct its decision not to finalize
a collection notice” imaginable. applications, do not qualify as
a loan modification. Id. at 647. The
Rubin v. Montefiore Med. Ctr., No.
20-2721-CV, 2021 WL 4538603, at *1
(2d Cir. Oct. 5, 2021). As suggested
by Almada, however, the range
of interpretations that could be
considered “reasonable” to the
“the least sophisticated debtor”
may be extremely broad. Identifying
the precise point at which a lack
of sophistication might become
unreasonable seems likely to remain
difficult for those attempting to
comply with the FDCPA.
9
(11th Cir. Mar. 4, 2022), the Eleventh were “incomprehensible” and (ii)
Circuit addressed what the servicer Nationstar failed to perform a
must do in response to a QWR to reasonable search for information
comply with RESPA. The borrower that she requested relating to a prior
there sought, among other things, servicer. Id. at *4.
a “[c]omplete payment history”
with a “breakdown of all charges The Eleventh Circuit rejected those
and credits applied” since the loan arguments and affirmed. The Court
was originated in 2004. Id. at *1. rejected the claim that Nationstar’s
Nationstar provided that information, responses were “incomprehensible,”
but five months later, the borrower holding that Nationstar satisfied its
sent a second QWR asking for “an obligation by providing the borrower
explanation and detailed breakdown with its code sheet and stating that a
of” all payments made to Bank of borrower must allege more than that
America, which had serviced the he was “unsatisfied” or “confused
loan from 2004 to 2013. Nationstar by” a response to state a claim for a
provided that information (which RESPA violation. Id. at *6 (citing Bates
had also been provided in response v. JPMorgan Chase Bank, NA, 768
to the first QWR), but noted that F.3d 1126, 1135 (11th Cir. 2014)). The
the Bank of America transaction Court also rejected the borrower’s
history “was difficult to read and contention that Nationstar did not
told her to contact Bank of America conduct a “reasonable search” for
directly if she wanted a different information from prior servicers
version.” Nationstar also stated and found no authority suggesting
that it could not attest to how funds that a servicer must search “beyond
were disbursed from escrow under its own records” or that “the
the loan’s prior servicers. Within word ‘unavailable’ really means
two months, the borrower sent ‘unobtainable.’” Id.
two more QWRs seeking a “legible”
QWRs.” 26 F.4th at 651. The court account history and a “code sheet” FOURTH CIRCUIT
cited in support of that holding the allowing her to interpret that history. CLARIFIES CLASS
Ninth Circuit’s decision in Medrano v. Nationstar responded with copies of NOTICE REQUIREMENTS
Flagstar Bank, FSB, 704 F.3d 66, 667 its prior responses and a code sheet
In any class-action settlement,
(9th Cir. 2012), which found that a for its own transaction history, but
absent class members must be
letter concerning a loan modification stated that it could not provide a
provided with “direct notice in a
related to the “terms of the loan code sheet for the prior servicers.
reasonable manner to all class
and mortgage documents,” not Id. at *2-3.
members who would be bound by
servicing, and so could not constitute the proposal.” Fed. R. Civ. P. 23(e)(1)
The borrower then filed a purported
a QWR. Because the Johnson letter (B). While courts have generally held
class action, alleging that Nationstar
challenged only the denial of the that an adequate notice must “fairly
violated RESPA by “refus[ing]
loan modification, it “d[id] not fall apprise” absent class members of
to provide [a] complete and
within the ambit of ‘servicing’ so as the terms of the proposed settlement
comprehensible account history[]
to trigger RESPA’s protections against and their options regarding the
and the explanation[] of charges and
providing adverse information to settlement, e.g., Wal-Mart Stores,
credits” requested in her four QWRs.
credit reporting agencies.” 26 F.4th Inc. v. Visa U.S.A., Inc., 396 F.3d
The district court found Nationstar’s
at 651. 96, 114 (2d Cir. 2005), and describe
responses were adequate and
granted it summary judgment. On the settlement in sufficient detail
While Morgan considered whether a
appeal, the borrower argued that to “alert” potential objectors of the
borrower’s letter constitutes a QWR,
Nationstar violated RESPA because settlement, e.g., In re Online DVD-
in Rakestraw v. Nationstar Mortg.,
(i) the account histories it provided Rental Antitrust Litig., 779 F.3d 934,
LLC, No. 21-12850, 2022 WL 656104
10 HuntonAK.com946 (9th Cir. 2015), the level of detail up to $1.3 million for attorney’s fees such a requirement.” Id. at 159. In so
required in the notice in a particular and costs to be deducted from the holding, the Court aligned itself with
case may be contested. $3 million settlement fund, the class the Fifth and Ninth Circuits, which
had been given adequate notice of have also held that a notice for class
In McAdams v. Robinson, 26 F.4th those fees and costs. 26 F.4th at 158. action settlement need not provide
149 (4th Cir. 2022), the Fourth Circuit The Court further found that while an estimated recovery if the estimate
addressed what, precisely, the the longform notice did not explain is considered unreliable. In re
notice must provide. The case arose the settlement’s points system, its Corrugated Container Antitrust Litig.,
from an objection to a class-action statement that “[e]ach Settlement 643 F.2d 195, 224 (5th Cir. 1981);
settlement that was approved in Class Member who files a valid claim Torrisi v. Tucson Elec. Power Co., 8
Robinson v. Nationstar Mortg. LLC, will receive a proportionate share F.3d 1370, 1374 (9th Cir. 1993).
2020 WL 8256177 (D. Md. Dec. 11, of the Settlement Fund remaining
2020). The proposed email and mail after [ ] deductions are made” was NINTH CIRCUIT DENIES
notices informed class members that
there was a $3,000,000 settlement
sufficient to satisfy Rule 23. Id. at 158 CERTIFICATION FOR
n.7. Finally, the Court held that the
fund, explained how to file a claim notice was not inadequate because
FAILURE TO SHOW
and presented the option to opt-out. it did not provide an estimate of CLASS-WIDE INJURY
Those forms of notice also included class members’ recovery because “it A plaintiff seeking to certify a class
a reference to a website containing would be difficult, if not impossible, under Rule 23(b)(3) must establish,
a “longform” notice explaining the for parties to reliably predict the among other things, that “the
settlement in greater detail. The number of valid claims when drafting questions of law or fact common to
objector claimed that those notices notices.” Id. at 158. class members predominate over any
were inadequate because they did questions affecting only individual
not (i) include the attorneys’ fees The Court stated that there was no members, and that a class action is
to be deducted from the settlement “compelling argument” for requiring superior to other available methods
fund, (ii) provide an estimate of the parties to provide an estimated for fairly and efficiently adjudicating
individual class members’ recovery recovery, when nothing in the record the controversy.” Courts have,
or (iii) explain the point-based showed that there was “a reliable however, often found that, while
system used to determine how method of estimating the percentage common issues must predominate,
much each person who submitted of class members who would file a class can be certified if individual
a valid claim would receive. The claims, let alone the average number determinations are limited to the
magistrate judge approved the of points they would claim,” and calculation of damages. E.g., Pulaski
settlement over those objections, when the parties could not know & Middleman, LLC v. Google, Inc.,
and the objector appealed. when drafting the notices what 802 F.3d 979, 987–88 (9th Cir.
amount of attorneys’ fees and costs 2015) (“[W]e have … reaffirmed
The Fourth Circuit rejected the would be awarded. Id. at 158-59. that damage calculations alone
objections and affirmed the It then held that “[w]ithout some cannot defeat class certification.”);
approval of the settlement. It evidence proving an average recovery In re Nexium Antitrust Litig., 777
first noted that, because the calculation would be reliable, we F.3d 9, 21 (1st Cir. 2015) (“It is a
longform notice disclosed that think it inappropriate to impose ‘black letter rule ... that individual
class counsel intended to request
11damage calculations generally do and ages of cars from dealers individualized determinations. Id.
not defeat a finding that common around the country, which are then at 1139. The Court found that, under
issues predominate.’”) (quoting adjusted up or down, according the insurance contracts, class
Newberg on Class Actions § 4:54 to the pre-accident condition of members were entitled to the “actual
(5th ed.)). Plaintiffs thus commonly the totaled car. Id. at 1136-37. The cash value” of the pre-accident car,
argue that individual differences district court denied the plaintiffs’ and that determining whether any
between class members identified motion for class certification, given class member was injured
by defendants are at most relevant finding that the predominance and would require the district court “to
to the calculation of damages and so superiority requirements of Rule look into the actual value of the
cannot bar certification. The Ninth 23(b) were not satisfied. The district [totaled] car, to see if there was
Circuit’s recent decision in Lara v. court reasoned that proving liability an injury.” The Court specifically
First Nat’l Ins. of Am., 25 F.4th 1134 to the class would have required rejected the plaintiffs’ argument
(9th Cir. 2022), highlights the limits proof that each class member’s that those individual determinations
of that argument. insurance claim was adjusted by cannot bar certification because
an “inappropriate” value, and that they concern only the amount of
In Lara, the Ninth Circuit affirmed such a determination could not be damages. The Ninth Circuit rejected
a district court’s denial of class made based on evidence that applied that argument, stating: “that’s not
certification for breach of contract to all members of the class. The right…: if there’s no injury, then the
claims for lack of predominance. district court noted that if individual breach of contract… must fail. That’s
The plaintiffs sought to represent a determinations were needed only to not a damages issue; that’s a merits
class of insureds who made claims calculate the damages awardable issue.” Id.
on their cars that were determined to class members, that would not
to be total losses and alleged that bar class certification. However, Because Lara did not articulate any
the method used by the insurer since individual determinations were principle by which to distinguish
to determine payments for those necessary to establish liability, the individual determinations that are
losses breached the class members’ class could not be certified. relevant only to the calculation
insurance contracts, which contracts of damages—which would not
entitled them to the “actual cash The Ninth Circuit agreed that usually bar class certification in the
value” of their pre-accident cars. certification would be improper Ninth Circuit—from those needed
The method the insurer used was because proof of class members’ to establish liability, its value for
based on a database of values for injuries—required for the breach defendants in other cases may
particular makes, models, conditions of contract claim—would require be limited.
12 HuntonAK.comFIFTH CIRCUIT BARS class members are all injured so found that because one-fifth of the
that “anyone within it would have class benefited from the defendant’s
CLASS CERTIFICATION standing”).1 However, given the valuation method, the named
WHEN PROPOSED Supreme Court’s reluctance to plaintiffs had a conflict of interest
CLASS INCLUDES resolve whether Article III standing with those members of the putative
MEMBERS WHO for absent class members is required class. The court went on to hold that
for class certification, see TransUnion the conflict rendered the plaintiffs
BENEFITED FROM LLC v. Ramirez, 141 S. Ct. 2190, 2208 inadequate representatives.
THE COMPLAINED-OF n.4 (2021), the issue remains to
CONDUCT mature at the Circuit Court level. The Fifth Circuit affirmed on
adequacy grounds and did not
The Circuit Courts are divided on
In Prudhomme v. Gov’t Emps. address the district court’s holding
whether a federal court may certify
Ins. Co., No. 21-30157, 2022 WL regarding commonality and
a class before it has been shown
510171 (5th Cir. Feb. 21, 2022), the predominance. It noted that Rule
that all class members have been
Fifth Circuit addressed a different 23(a)(4) requires that “representative
injured by the defendant’s conduct.
argument sometimes made when a parties [in a class-action] will fairly
Compare, e.g., In re Prudential Ins.
proposed class includes members and adequately protect the interests
Co. Am. Sales Practice Litig. Agent
who were not all injured by the of the class,” and that in order to
Actions, 148 F.3d 283, 306-07 (3d
conduct of the defendant. In that be an adequate representative, a
Cir. 1998); Kohen v. Pac. Inv. Mgmt.
case, the plaintiff sought to represent plaintiff must “‘possess the same
Co. LLC, 571 F.3d 672, 676-78 (7th
a class of insured parties and alleged interest and suffer the same injury’ as
Cir. 2009) (holding a class may
that the insurer’s methods for valuing the class members” so as to reduce
be certified even if absent class
total-loss automobile claims were the “risk of ‘conflicts of interest
members have not been injured),
unfair. (The main valuation method between the named plaintiffs and
with Avritt v. Reliastar Life Ins. Co.,
at issue was the same one at issue the class they seek to represent.”
615 F.3d 1023, 1034 (8th Cir. 2010)
in Lara v. First Nat’l Ins. of Am., 25 2022 WL 510171, at *1 (quoting
(plaintiff cannot represent a class
F.4th 1134 (9th Cir. 2022), discussed Amchem Prods., Inc. v. Windsor, 521
containing individuals who were
above.) The Western District of US 591, 625–26 (1997), and Slade v.
not injured).
Louisiana denied class certification. Progressive, 856 F.3d 408, 412 (5th
The analyses in those cases have It found that, because the defendant Cir. 2017)).
focused on whether uninjured used different methods to value the
absent class members have claims of different class members,
Article III standing. E.g., Denney v. there were no common questions
Deutsche Bank AG, 443 F.3d 253, that, when answered, would
264 (2d Cir. 2006) (a class must be determine the defendant’s liability
defined in such a way that absent to the class. The district court also
1
See also our discussion of the circuit split on this question in The Brief from September 2021.
13CONTRIBUTORS
BRIAN V. OTERO RYAN A. BECKER
Co-Head, Financial Services Litigation Partner
botero@HuntonAK.com rbecker@HuntonAK.com
+1 212 309 1020 +1 212 309 1055
JASON M. BEACH MICHAEL B. KRUSE
Counsel Counsel
jbeach@HuntonAK.com mkruse@HuntonAK.com
+1 404 888 4219 +1 212 309 1387
Hunton Andrews Kurth’s Financial Services Litigation Team—based in New York,
Dallas, Miami, Atlanta and Washington, DC—has the knowledge, skill and experience
necessary to represent clients nationwide.
Our partners have represented many of the country’s largest businesses in
high-profile disputes presenting multifront challenges to fundamental
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