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November 16, 2017 by Mindee J. ReubenDownload PDF

Why the "Fairness in Class Action Litigation Act of 2017" Is Anything But Fair - UPDATEMindee J. Reuben

On March 9, 2017, the House passed H.R. 985 (as amended) and the Act has made its way to the Senate Judiciary Committee (which has not taken any action). The amended version only slightly modified from the original bill, so consumers in class actions still face a serious roll-back of their ability to maintain a class action.

Unless every class member suffers identical harm, a class cannot be certified. Like the original bill, the current version of the Act requires plaintiffs to affirmatively demonstrate that each unnamed class member suffered precisely the same type and scope of injury as the named class representative before a class can be certified. Such a requirement eviscerates a multitude of class actions in which the harm to class members varies, such as in civil rights matters, even if a class action is the superior method of resolving the dispute. (§ 1716(a)).

The Act prohibits any class member from recovering damages, even if they can be identified, unless a “substantial majority” of the class can also be definitively identified. It is often difficult to identify class members in consumer class actions because the defendants do not have records of who purchased their products. For example, a producer of shell eggs does not know who went down to their local store and purchased a carton of eggs. Accordingly, the moving plaintiffs cannot identify class members until notice is given to the class and class members self-identify. By requiring plaintiffs to definitively establish that a “substantial majority” of a class can be identified before a class is certified, even if some of the class can be identified, the amended Act allows defendants to escape liability for serious violations and effectively eviscerates the majority of consumer class actions. (§ 1718(a)).

The efficiencies of issue certification will be lost.
Under Federal Rule of Civil Procedure 23, plaintiffs may move to certify a class as to all issues. Plaintiffs may also move to certify a class as to certain issues (e.g., plaintiffs may move to certify the issue of liability on a class basis, but proceed individually on damages). However, the Act requires that even issue classes satisfy all the class certification elements, thereby eviscerating issue certification (§ 1720).

The Act will needlessly prolong litigation and remove discretion from the courts.
The federal courts of appeals have discretion to hear an appeal from the grant or denial of class certification. Under the Act, federal courts of appeals would be required to entertain all appeals from the grant or denial of class certification, even if such an appeal is entirely frivolous, unnecessarily delaying the case and taxing an already over-taxed judiciary. (§ 1723).

The Act also automatically freezes all discovery while defendants bring a myriad of motions to transfer or dismiss the case or to otherwise dispose of the class allegations. The ability to manage discovery in litigation is within the discretion of the federal district courts. For example, in cases where a defendant has pleaded guilty, or has produced documents to the federal government in a related criminal action, courts will often authorize limited discovery while such motions are pending. Under the Act, the district courts would no longer have the ability to substantively advance the litigation until defendants run out of motions to file. (§1721).

One modification to the bill is somewhat positive, although it too comes with certain limitations. The original bill prohibited consumers and businesses from retaining counsel with whom they have a pre-existing relationship; the current Act removes that restriction. The Act now provides: “A Federal court shall not issue an order granting certification of any class action in which any proposed class representative or named plaintiff is a relative or employee of class counsel.” (§ 1717(b)). The new language is problematic in at least two ways. First, it does not define “class counsel”—is the Act referring to counsel appointed to a leadership position under Federal Rule of Civil Procedure 23, or to any attorney who files a class action? Second, state ethics rules and decisions generally determine whether an attorney has a conflict in representing a particular client. This language runs afoul of a court’s ability to monitor the attorneys practicing before it.