A series of recent U.S. Supreme Court and Ninth Circuit decisions are helping to bolster defendants’ position against plaintiffs’ attempts to certify class actions, but defendants still have their work cut out for them when fighting these high-stakes motions that can drive up the potential claimants and damages.
Businesses have caught a break in the class action context in recent years with the U.S. Supreme Court’s April 2011 ruling in AT&T Mobility LLC v. Concepcion, which held that arbitration agreements barring classwide relief and subjecting consumer complaints to individual arbitration are enforceable under the Federal Arbitration Act, as well as the Ninth Circuit’s January 2012 ruling in Mazza et al. v. American Honda Motor Co., which concluded that California’s consumer protection laws couldn’t apply to a nationwide class action.
In light of the Concepcion case, the California Supreme Court ruled Monday in Iskanian v. CLS Transportation Los Angeles LLC that arbitration agreements with class waivers were generally enforceable, though it did carve out an exception for the state’s Private Attorneys General Act claims.
“It does seem like the case law is moving in favor of defendants in class actions in some instances,” said Benedict Hur, a partner at Keker & Van Nest LLP. “The law on compelling arbitration from the Supreme Court has been pretty favorable to honoring arbitration agreements, including class action waivers. And the Mazza ruling appears to make it harder for plaintiffs to get a nationwide class, depending on the type of claims being brought.”
Two other business-friendly rulings handed down by the Supreme Court are Wal-Mart Stores Inc. v. Dukes, which held in June 2011 that issues of common fact and law must be analyzed with a “rigorous analysis” and put the burden on the movant to show compliance with Rule 23, and Comcast Corp. v. Behrend, which found in March 2013 that plaintiffs need to show a connection between their theories of liability and damages at the class certification stage.
“There is a lot of recent case law that has developed as to what the plaintiff must establish to obtain certification, and the more guidance defense counsel receives with respect to these issues, the more ammunition defendants will have to argue that the plaintiff has not met his or her burden of proof,” said Mona Hanna, managing partner at Michelman & Robinson LLP’s Orange County, California, office.
But defendants still have to do much more than merely cite these previous opinions to prevail in class certification fights.
Here, experts offer five tips on how to successfully knock down a certification bid:
Dig Into the Merits Early
Defendants used to primarily focus on the procedural aspects of a case to oppose a certification motion, but, for many cases, the Comcast ruling has blurred the line between merit-based and procedural discovery and made it more appropriate for defendants to prepare for the merits right at the outset of the case, according to Sascha Henry, a partner at Sheppard Mullin Richter & Hampton LLP.
“Now that plaintiffs have to come up with a damages model that is viable, it has defense lawyers rethinking how to defeat class cert. motions,” she said. “It’s really important for the defense to get involved in investigating, analyzing and understanding the merits of the case early on.”
Defendants should try to understand what merit issues are at stake, what their defenses should look like and what the implications could be if the plaintiff’s damages model is found to be viable, she said.
“By getting involved in the merits, you may be able to argue how difficult it’s going to be to show a claim against the defendant and point to instances where some class members don’t have a valid claim,” she said. “That may be very persuasive to a judge who is looking at whether the class action device is superior to individual actions.”
If the defendant has a good handle on its class certification arguments early on, that will inform it on when to bring other arguments in the case, according to Hur.
“If its best arguments are not on class certification, the defendant may want to consider bringing an early motion for summary judgment or judgment on the pleadings to try to get rid of legally or factually deficient claims that would effectively win the case before the certification hearing,” he said.
Seek Out Individual Differences
In the class action arena, defendants should be looking for factors that could make the named plaintiff unique and ill-suited to represent an entire class, such as that the named plaintiff suffered from a different type of injury from the rest of the class or has more knowledge of the subject matter than the average class member, according to Carlos Lazatin, a partner at O’Melveny & Myers LLP.
“The defendant generally wants to argue that the differences among class members create the need for individualized inquiries that preclude certification of a class,” he said.
Defendants should be scouring for admissible evidence showing that the experience of each member of the class will have to be evaluated by the court to determine if he or she has a claim, according to James Evans Jr., a partner at Alston & Bird LLP.
In 2012, he helped Yellow Cab of San Diego successfully oppose a motion to certify a collective action in San Diego County Superior Court by 200 taxicab drivers who claimed that they were improperly classified and were entitled to be treated as employees under wage and hour laws. The cab company offered declarations of about 20 drivers, with each telling a separate story showing that they had their own clients, did their own advertising, made more than minimum wage, enjoyed their schedule flexibility and were not subject to controls of the company, according to Evans.
“We persuaded the court that it would have to conduct mini-trials for each of the 200 drivers to determine the level of control exerted over each, and that it would not be efficient to try this as a collective action,” he said.
Stay on Top of Evolving Case Law
As the Concepcion, Mazza, Dukes and Comcast decisions show, courts are continuing to churn out decisions that have implications for class actions, and it’s up to defense lawyers in opposing class certification efforts to make sure they are providing courts with the most current information on the law.
“Be aware of cases that are pending or have been recently determined,” Hanna said. “One of the worst things to do when writing your opposition brief is to fail to cite the current state of the law. If you’re not aware of what’s pending or what has recently been ruled on, that could harm your position and will reflect poorly on your credibility with the court.”
At the same time, defendants aren’t doing themselves much good if they are spending a lot of time citing decisions without developing their arguments, according to Lazatin. A number of district courts, for instance, have recently observed defendants are opposing certification of nationwide classes by citing the Mazza case, but they are failing to explain the material differences in state law.
“In successful challenges to nationwide class certification because of differences in state law based on Mazza, defendants have taken the time in their opposition to lay out in detail the differences in state law that govern plaintiffs’ claims and why those differences are material,” he said.
Attorneys should also be tracking lawsuits against defendants that are similarly situated to their clients, according to Henry.
“If you are representing a clothing manufacturer, you should be following similar lawsuits against others in the industry,” she said. “Reaching out to competitors to find out what is going on in their cases and sharing best practices can also be helpful.”
Don’t Underestimate Seemingly Minor Defenses
Although plaintiffs and defendants typically don’t spend much time arguing over the adequacy of the class representative or numerosity of the proposed class, those factors can still be used as weapons to dismantle a certification bid, according to Hanna, who has been successful in attacks on both fronts.
In defending an insurer three years ago in a proposed class action in Los Angeles County Superior Court alleging it inappropriately charged fees above the premium for insurance that potentially affected thousands of individuals, Hanna disputed the credibility of the class representative by pointing out that a background check had revealed that the plaintiff had prior felony convictions and was using two Social Security numbers. That information helped push the judge to block class certification, she said.
“While adequacy of the class representative may not have been the sole reason we won, the judge spent a significant portion of the decision from the bench outraged over the lack of credibility of the representative and the fact that class counsel had learned about the information at deposition, but decided to keep her as the class representative despite these clear shortcomings,” she said.
Hanna also notched a win for a different insurance company this year in a proposed class action in Orange County Superior Court over employee misclassification by first negotiating with class counsel to define the class as narrowly as possible — which took the case involving hundreds of employees to fewer than 20 — and then defeating on numerosity and superiority issues.
“These are two elements for certification that are often not sufficiently challenged because they are often considered as ‘throwaway arguments,’” she said. “But it is always important for defense attorneys to not overlook small or peripheral arguments because they can sometimes be the winners.”
Make Use of Expert Witnesses
The class certification stage is also a good time for defense attorneys to retain experts who can help bolster their arguments and punch holes in the plaintiff’s case, according to Lazatin.
Defense lawyers may need a marketing expert in a false advertising action to testify how different consumers perceive an ad campaign and the array of messages they are taking away from the ad that may conflict with the interpretation over which the plaintiff is suing, he said. Or attorneys may need to enlist an expert to show that plumbing fixtures that have come under fire in a class action failed due to individual factors and not based on a common defect as the plaintiff is alleging, he said.
“These cases often come down to a battle of the experts, but counsel sometimes don’t realize that experts often have a critical role to play at class certification,” he said. “Experts should not just be used for the merits, but can also play an important role in courts’ class certification decisions.”
Attorneys also would be wise to become experts themselves in their client’s business, according to Henry.
“If a suit is over a consumer product, lawyers should get their hands on the product, and if a suit is over a practice at a retail outlet, lawyers should go experience that and see what’s being complained about right away,” she said. “In addition, reaching out to people involved in the business to understand what’s at stake and what’s important or not can help lawyers in their overall representation of their client.”