KT Class Action Blog

Category: Injunctive relief

Posted on Monday, January 22 2018 at 10:22 am by
We don’t know where we stand – three recent takes on injunctive relief standing in the Ninth Circuit

by Jay Bogan

Takeaway: “Most courts to have considered the issue agree . . . that consumer plaintiffs cannot pursue injunctive relief if they are already aware of the alleged deceptive practice.” Ulrich v. Probalance, Inc., No. 16 C 10488, 2017 WL 3581183, at *7 (N.D. Ill. Aug. 18, 2017). That sounds like common sense, given pronouncements by the U.S. Supreme Court that, for injunctive relief standing, the threat of injury must be “actual and imminent, not conjectural or hypothetical”; that the “threatened injury must be certainly impending to constitute injury in fact”; and that “allegations of possible future injury are not sufficient.” But the Ninth Circuit recently took a markedly different route in Davidson v. Kimberly-Clark Corp., 873 F.3d 1103 (9th Cir. 2017), where the panel elected to follow a pro-plaintiff line of district court authority. This post contrasts Davidson’s pro-plaintiff standing ruling with two unpublished Ninth Circuit decisions – issued before and after Davidson – holding that similarly-situated plaintiffs lacked standing to press injunctive relief claims.

Last April, a Ninth Circuit panel decided Long v. Ingenio, Inc., 690 Fed. Appx. 497 (9th Cir. 2017), a case we discussed in a prior post. [The Ninth Circuit affirms district court’s dismissal of putative class action where named plaintiff lacked standing to assert claims for injunctive and declaratory relief]. In Long, a business (Long Photo) claimed to have been defrauded into purchasing worthless “pay per call” advertising from an advertising and publishing company (Yellowpages) and sought to represent a putative class. But Long Photo never paid for the advertising, an essential requirement for seeking restitution. It also pressed claims for injunctive and declaratory relief.

The district court granted summary judgment in favor of Yellowpages and the Ninth Circuit affirmed. Regarding Long Photo’s claim for injunctive relief, the Ninth Circuit ruled that it did not have standing to pursue a claim for injunctive relief because the parties no longer were in a contractual relationship, Long Photo was no longer threatened by the alleged misconduct, and there was no real or immediate threat of irreparable injury. 690 Fed. Appx. at 498 (citing Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1021-22 (9th Cir. 2004)). The Court of Appeals also ruled that the claim for declaratory relief was moot, because Yellowpages had represented it would not pursue a claim for monetary relief and had made a binding waiver of any compulsory counterclaim against Long Photo for the unpaid charges. Id. (citations omitted).

Six months later, in October, the panel in Davidson v. Kimberly-Clark Corp., 873 F.3d 1103 (9th Cir. 2017), went in an entirely different direction. In that case, the plaintiff (Jennifer Davidson) paid extra for wipes labeled as “flushable” because she believed that flushable wipes would be better for the environment, and more sanitary, than non-flushable wipes. She alleged that the Kimberly–Clark wipes she purchased were not, in fact, flushable. She sought not only to recover the premium paid for the allegedly flushable wipes, but also an order requiring Kimberly–Clark to stop marketing its wipes as “flushable.”

The district court granted summary judgment on all of Davidson’s claims but the Ninth Circuit reversed. On the issue of standing to seek injunctive relief, Davidson argued she alleged a cognizable injury because “she will be unable to rely on the label ‘flushable’ when deciding in the future whether to purchase Kimberly–Clark’s wipes.” Id. at 1112. The panel agreed with this argument: “We hold that Davidson properly alleged that she faces a threat of imminent or actual harm by not being able to rely on Kimberly–Clark’s labels in the future, and that this harm is sufficient to confer standing to seek injunctive relief.” Id. at 1113.

In reaching this conclusion, the panel identified what it considered to be a split on this issue at the district court level. On one side of this split – the “no standing side” – district courts generally conclude that “plaintiffs who are already aware of the deceptive nature of an advertisement are not likely to be misled into buying the relevant product in the future and, therefore, are not capable of being harmed again in the same way.” Id. at 1114 (quoting Pinon v. Tristar Prods., Inc., No. 1:16-cv-00331-DAD-SAB, 2016 WL 4548766, at *4 (E.D. Cal. Sept. 1, 2016)). On the other side are district courts who reason “that the plaintiff faces an actual and imminent threat of future injury because the plaintiff may be unable to rely on the defendant’s representations in the future, or because the plaintiff may again purchase the mislabeled product.” Id. (citing, among other cases, Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523, 527 (N.D. Cal. 2012)).

In siding with the courts finding standing, the Davidson panel reasoned: “Knowledge that the advertisement or label was false in the past does not equate to knowledge that it will remain false in the future.” 873 F.3d at 1114. Thus, a consumer can show standing by alleging “she will be unable to rely on the product’s advertising or labeling in the future, and so will not purchase the product although she would like to.” Id. The panel also noted the possibility a consumer could allege “she might purchase the product in the future, despite the fact it was once marred by false advertising or labeling, as she may reasonably, but incorrectly, assume the product was improved.” Id.

In December, another unpublished decision, Payne v. Office of the Commissioner of Baseball, 705 Fed. Appx. 654 (9th Cir. 2017), found the named plaintiffs lacked standing to seek injunctive relief. There, two plaintiffs (Stephanie Smith and Gail Payne), seeking to represent a putative class, sued Major League Baseball for injunctive relief, on the ground that inadequate safety measures are taken at baseball games to protect fans from the dangers posed by foul balls entering the stands.

The district court dismissed for lack of standing and, this time, the Ninth Circuit affirmed. The panel in Payne took the more traditional route, ruling that Ms. Smith could not demonstrate a “certainly impending” or “substantial risk” of future injury from a foul ball, because she did not plan to attend any future ball game unless seated in a location protected by a net. As for Ms. Payne, her chance of being hit by a foul ball in her chosen sections was only 0.0027% per game, which alleged injury was not “certainly impending.” The panel also rejected the plaintiffs’ argument that the inadequate safety measures interfered with their use and enjoyment of their baseball tickets, ruling that “[a] person does not suffer ‘an invasion of a legally protected interest’ solely because the owner of a facility open to the public has failed to implement a particular safety measure.” Id. at 655. The Payne panel did not cite the Davidson decision issued two months earlier.

Can these seemingly disparate decisions be reconciled? Or do they reflect a genuine conflict? Kimberly-Clark views Davidson as the anomaly and, on November 3, 2017, petitioned for rehearing en banc. The panel later directed the plaintiff to file a response, indicating at least some interest in hearing more on the issue. And an amicus brief in support of the petition for rehearing has been submitted by the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Grocery Manufacturers Association. We may have yet another decision from the Ninth Circuit soon about standing to seek injunctive relief, or possibly a cert petition asking the Supreme Court whether Davidson can be reconciled with the high court’s recent standing rulings.

Posted on Friday, May 26 2017 at 11:57 am by
The Ninth Circuit affirms district court’s dismissal of putative class action where named plaintiff lacked standing to assert claims for injunctive and declaratory relief

by Jay Bogan

Takeaway: While courts continue to grapple with efforts by class action defendants to “pick off” a named plaintiff by mooting his or her individual damages claim, class representatives pressing claims for injunctive and declaratory relief remain subject to well-settled Article III standing limitations. Where a class defendant has an independent basis for challenging the named plaintiff’s damages claim (such as an inability to prove an essential substantive requirement for monetary relief), these standing limitations provide powerful tools to terminate the class representative’s injunctive and declaratory relief claims prior to any class certification determination.

Since the advent of modern class action practice – following the amendments to Rule 23 in 1966 – class action defendants have tried a variety of strategies to “pick off” a named plaintiff’s damages claim. In Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), the Supreme Court held that an unaccepted offer of judgment for the full amount of the plaintiff’s individual damages claim has no force and does not serve to moot the representative’s claim. But the Supreme Court reserved judgment on whether a plaintiff’s claims would be mooted if a district court entered judgment in the plaintiff’s favor upon the defendant’s depositing the full amount of the plaintiff’s individual claim into an account payable to the plaintiff.

In Chen v. Allstate Ins. Co., 819 F.3d 1136 (9th Cir. 2016), the Ninth Circuit addressed the issue left open by the Supreme Court, holding that a “pick off” executed via an unconditional payment to the plaintiff did not suffice to moot the claim. But do these rules apply to non-monetary claims for injunctive and declaratory relief? A recent decision by the Ninth Circuit confirms that, whatever special rules courts may apply to prevent “mooting” of damages claims, injunctive and declaratory claims asserted by a putative class plaintiff remain subject to long-settled limitations on Article III standing. Long v. Ingenio, Inc., No. 15-16810, 2017 WL 1532057 (9th Cir. Apr. 28, 2017).

In Long, a business (Long Photo) claimed to have been defrauded into purchasing worthless “pay per call” advertising from an advertising and publishing company (“Yellowpages”). But Long Photo never paid for the advertising, an essential requirement for seeking restitution. It also pressed claims for injunctive and declaratory relief as a means of contesting the amounts owed to Yellowpages for the “pay per call” advertising. Long Photo not only sought individual relief, but relief on behalf of a putative class.

Yellowpages moved for summary judgment, challenging Long Photo’s ability to press any damages claim and further arguing that the parties no longer had any ongoing relationship, such that Long Photo’s claims for injunctive and declaratory relief were moot. Among other things, Yellowpages explicitly represented that it would not seek to file a claim against Long Photo for payment and deliberately did not assert a compulsory counterclaim seeking to recover the charges at issue.

The district court granted summary judgment in favor of Yellowpages and the Ninth Circuit affirmed. Regarding Long Photo’s claim for injunctive relief, the Ninth Circuit ruled that it did not have standing to pursue a claim for injunctive relief, given that the parties were no longer in a contractual relationship, Long Photo was no longer threatened by the alleged misconduct, and there was no real or immediate threat of irreparable injury. 2017 WL 1532057, at *1 (citing Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1021-22 (9th Cir. 2004)).

Regarding Long Photo’s claim for declaratory relief, that claim also was moot, because of Yellowpages’ representation it would not pursue a claim for monetary relief and its binding waiver of any compulsory counterclaim against Long Photo for the unpaid charges. Id. (citations omitted).

Having affirmed the grant of summary judgment on Long Photo’s individual claims, the Ninth Circuit also affirmed the dismissal of the putative class action in its entirety. “Although Long’s claims for declaratory relief are moot, any class member who had paid money to Yellowpages would be free to pursue class-wide monetary and declaratory relief and could reject Yellowpages’s efforts to satisfy the original claims.” 2017 WL 1532057, at *1 (citing Campbell-Ewald, 136 S. Ct. at 670). Because other members of the putative class (unlike Long Photo) may have viable damages claim, the class claims were not “‘transitory’ so as to keep the case alive until the district court has the opportunity to rule on class certification.” Id. (citing, inter alia, Chen, 819 F.3d at 1142-43). Thus, the district court properly had dismissed “the entire lawsuit before reaching class certification.” Id. (citations omitted).

The Long decision shows that, while it continues to be difficult for class defendants to moot a named plaintiff’s damages claim (especially in the Ninth Circuit), defendants with a separate basis for attacking the named representative’s monetary claim still can employ traditional standing limitations on declaratory and injunctive relief claims to terminate putative class actions. Particularly if the Supreme Court resolves the open “damages mootness” question from Campbell-Ewald favorably for defendants, these long-established requirements for equitable relief can provide the remaining tools a defendant needs to extinguish the named plaintiff’s non-monetary claims.

Posted on Friday, April 28 2017 at 4:47 pm by
Back to the class-action waiver drawing board: California Supreme Court holds arbitration agreement cannot extinguish a claimant’s right to seek a public injunction

by Jon Michaelson

Takeaway: Businesses operating in California now face another hurdle in drafting enforceable arbitration agreements. The California Supreme Court has invalidated a provision in an aggressive class action waiver purporting to preclude any relief on behalf of non-parties, on the ground that it prohibits injunctive relief for the benefit of the public. If such a provision cannot be severed from the remainder of the arbitration agreement, a business with an otherwise enforceable arbitration provision may find itself facing a full-blown class action in court.

The California Supreme Court once again targeted class action waivers in arbitration agreements in McGill v. Citibank, No. S224086, 2017 WL 1279700 (Cal. Apr. 6, 2017). But beyond echoing a theme which often puts California jurisprudence at odds with directives of the U.S. Supreme Court, McGill offers an important lesson in how efforts to craft comprehensive waiver provisions can backfire.

The facts in McGill are hardly extraordinary. In 2001, the plaintiff purchased credit protection when she opened a credit card account with Citibank. Under that plan, the bank agreed to defer or credit certain amounts if a qualifying event (such as loss of employment) occurred. The plan included arbitration provisions containing class waivers. Over several years, terms were changed slightly and with each such modification plaintiff was offered the opportunity – but declined – to opt out of the program.

In 2008, plaintiff lost her job but did not receive what she later alleged were promised benefits of the plan. She later sued, claiming that in marketing the credit protection plan and in handling her claim, Citibank had violated California’s Unfair Competition Law, false advertising statute, Consumer Legal Remedies Act, and insurance code. In addition to damages, plaintiff sought an injunction to prevent Citibank from continuing to engage in its allegedly illegal and deceptive practices.

Citibank petitioned to compel arbitration of plaintiff’s claims on an individual basis. The Superior Court granted the petition with respect to plaintiff’s damages claims, but denied it to the extent the complaint sought injunctive relief. In refusing to compel arbitration of the injunctive relief claims, the trial court cited Broughton v. Cigna Healthplans, 21 Cal. 4th1066 (1999), and Cruz v. Pacificare Health Systems, Inc., 30 Cal. 4th 303 (2003), which together invalidate agreements to arbitrate claims for public injunctive relief under the UCL, CRLA, or false advertising law.

On appeal, the District Court of Appeal reversed and remanded. The intermediate court directed the trial court to compel arbitration of all of plaintiff’s claims, ruling that AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), had interpreted the Federal Arbitration Act in a manner which preempted the Broughton-Cruz rule.

At oral argument before the District Court of Appeal and in a request for reconsideration, the plaintiff challenged the enforceability of the arbitration agreement not only under Broughton-Cruz, but also because it prevented her from pursuing public injunctive claims in any forum. The intermediate court did not address this argument in its opinion or in its order denying plaintiff’s request for rehearing. The California Supreme Court, however, took up the issue on review. In its holding, the unanimous California Supreme Court found in favor of plaintiff on the public injunction waiver basis alone, and therefore did not reach the question of whether Broughton-Cruz remained good law following Concepcion.

The underlying agreement between McGill and Citibank made all claims arising from or related to the credit protection plan subject to compulsory arbitration, regardless of the legal theory asserted or remedy sought (including, specifically, injunctive or declaratory relief). The waiver provisions in the agreement stated: (1) “[a]n award in arbitration shall determine the rights and obligations between the named parties only, and only in respect of the Claims in arbitration, and shall not have any bearing on the rights and obligations of any other person, or on the resolution of any other dispute”; (2) “[t]he arbitrator will not award relief for or against anyone who is not a party”; (3) “the arbitrator may award relief only on an individual (non-class, representative) basis”; and (4) “neither you, we, or any other person may pursue the Claims in arbitration as a class action, private attorney general action, or other representative action.” These waiver provisions, as McGill argued and Citibank conceded, purported to extinguish McGill’s right to seek public injunctive relief – relief which would cause Citibank to halt allegedly improper practices and misleading representations rather than directly benefit the plaintiff – in any forum whatsoever (including in arbitration).

The California Supreme Court had little difficulty finding such a broad waiver to be illegal and unenforceable. California Civil Code section 3513 states that “[a]ny one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.” And as the Court itself already had held in Broughton and Cruz, the UCL, CRLA, and false advertising law serve to “‘remedy a public wrong,’” rather than to “‘resolve a private dispute.’” 2017 WL 1279700, at *7 (quoting Broughton, 21 Cal. 4th at 1080). Thus, “any benefit to the plaintiff requesting such relief ‘likely…would be incidental to the general public benefit of enjoining such a practice.’”   Id. (quoting Broughton, 21 Cal. 4th at 1080 n.5).

Citibank did not argue the validity of the waiver language. Instead, it contended the FAA preempted application of Civil Code section 3513: “‘[A] court,’ Citibank asserts, ‘may not avoid the FAA by applying state-law rules of contract interpretation to limit the scope of an agreement to arbitrate.’” 2017 WL 1279700, at *8. The McGill court rejected this contention based on its reading of U.S. Supreme Court precedents. Based on Concepcion, for example, the court found Civil Code section 3513 fell within the definition of a statute which applied to all contracts, and thus was covered by the FAA’s savings clause (permitting arbitration agreements to be invalidated on the same grounds as any contract). Id.

Relying on Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), and American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013), the McGill court emphasized that “‘by agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute.’” 2017 WL 1279700, at *8 (quoting Mitsubishi, 473 U.S. at 628). By insisting on a waiver of public injunction claims, the court reasoned, Citibank sought to limit a consumer’s rights under California’s statutory law. Id. at *8-*9.

And based on Concepcion and Italian Colors, the California Supreme Court rejected Citibank’s argument a request for public injunctive relief could be equated with a procedural device (such as a class action) impairing the benefits of an arbitration protected by the FAA: “Under Italian Colors, because the waiver at issue here is a waiver of the right to pursue statutory remedies – rather than of a procedural path to vindicating the statutory claim – it is … distinguishable from a waiver of class procedures.” 2017 WL 1279700, at *10. The McGill court then cited additional U.S. Supreme Court authorities as holding the bifurcation of proceedings between arbitrable and non-arbitrable claims did not offend the FAA. Id.

Having found the public injunction waiver unenforceable, McGill briefly addressed whether the entire arbitration agreement should be invalidated. The last modification of the agreement provided: “‘If any portion of the arbitration provision is deemed invalid or unenforceable, the entire arbitration provision shall not remain in force.’” 2017 WL 1279700, at *11. Because the parties had not discussed this language on appeal, the Supreme Court remanded to the District Court of Appeal to determine the enforceability of the remainder of the arbitration agreement.

Assuming the U.S. Supreme Court does not review the decision, the McGill ruling sends class-action waiver drafters back to the drawing board. The California Supreme Court’s reasoning does not bar all class action waivers, only waivers that purport to preclude public injunctive relief. And even the inclusion of such waivers would not necessarily invalidate the entire clause, assuming it could be severed. The ultimate lesson of McGill may be to limit the scope of class action waivers to no more than absolutely necessarily to avoid class litigation or class arbitration.

Posted on Friday, February 10 2017 at 12:52 pm by
GORSUCH ON RULE 23 AND CAFA

 by Ron Raider and Allen Garrett

President Trump has nominated Tenth Circuit Judge Neil M. Gorsuch to replace Justice Antonin Scalia on the United States Supreme Court, and we expect that his nomination will eventually be confirmed. Since 2006, Judge Gorsuch has issued a limited set of decisions concerning Rule 23 and the Class Action Fairness Act (“CAFA”). Here is our take on his class action jurisprudence:

Judge Gorsuch addressed the interplay of Rule 23(b)(2) (governing injunctive relief classes) and the general requirements for injunctive relief under Rule 65(d) in upholding an order denying class certification in Shook v. Board of County Commissioners, 543 F.3d 597 (10th Cir. 2008). The Shook plaintiffs sought to certify a class consisting of all present and future mentally ill inmates at Colorado’s El Paso County Jail. Gorsuch ruled that “[a]t the class certification stage, the injunctive relief sought must be described in reasonably particular detail such that the court can at least ‘conceive of an injunction that would satisfy [Rule 65(d)’s] requirements,’ as well as the requirements of Rule 23(b)(2).” Id. at 605 (quoting Monreal v. Potter, 367 F.3d 1224, 1236 (10th Cir. 2004)). Analyzing the different types of class members suffering from mental illness as well as “the fluid nature of the class” (given that it included not only current but future inmates), he found that any injunction would have to distinguish class members “based on individual characteristics and circumstances” rather than “prescribing a standard of conduct applicable to all class members.” Id. at 605 (emphasis in original). Moreover, while the problems inherent in formulating appropriate class-wide injunctive relief could have been “mitigated, or perhaps avoided, by the use of subclasses,” the district court did not sua sponte create any subclasses and was under no obligation to do so. Id. at 606-607. Accordingly, Gorsuch ruled that the district court did not abuse its discretion in declining to certify an injunctive relief class under Rule 23(b)(2).

In a 2010 opinion, Judge Gorsuch allowed a corporate defendant to appeal a federal district court order remanding a “mass action” to state court – one that that had been removed to federal district court under CAFA. BP America, Inc. v. Oklahoma ex. rel. Edmondson, 613 F.3d 1029 (10th Cir. 2010). BP raised two issues: (1) whether the appellate court had jurisdiction to consider the appeal (given that appellate courts are generally prohibited from reviewing district court remand orders under 28 U.S.C. § 1447), and (2) whether, if the order was appealable under CAFA’s exception to this general rule (28 U.S.C. § 1453), the appellate court should accept the interlocutory appeal. On the issue of appellate jurisdiction, Judge Gorsuch found that Congress had authorized appellate courts in § 1453(c)(1) to review district court remand orders of “mass actions.” Accordingly, the appellate court had jurisdiction over the appeal. On the issue of whether the appellate court should take the appeal, Gorsuch considered the factors listed by the First Circuit in terms of whether to grant leave to appeal under CAFA. Gorsuch ruled that the appellate court should accept the appeal, because (among other reasons) the “case raise[d] the important and unsettled legal questions whether CAFA’s mass action provision applies to suits by a state attorney general; . . .” Id. at 1035.

Just two months ago, Judge Gorsuch addressed how to prove the amount “in controversy” in terms of determining CAFA’s $5 million jurisdictional threshold in Hammond v. Stamps.com, Inc., 844 F.3d 909 (10th Cir. 2016). Hammond involved a class of Stamps.com subscribers who allegedly had been deceived into paying a monthly subscription fee. Stamps.com removed the case to federal court, asserting that the putative class sought damages that well exceeded $5 million. The district court remanded the case to state court, however, noting that the class consisted of persons who were “actually deceived,” and that, without proof as to how many class members were so deceived, Stamps.com could not satisfy the $5 million “in controversy” requirement. Examining the historical meaning of the term “in controversy,” Gorsuch ruled that Stamps.com need only show what a fact finder “might legally conclude,” as opposed to what the “factfinder would (or probably would) find” on the issue of damages. Id. at 912 (emphasis in original). Because the district court applied the wrong standard, it abused its discretion and improperly remanded the case to state court.

Takeaways:

All three of these Gorsuch opinions are pro-defendant decisions. In Hammond, Judge Gorsuch joined the Seventh, Eighth, and Ninth Circuits in holding that a party may satisfy the amount “in controversy” requirement under CAFA by showing what a fact-finder could award in damages, as opposed to proving up the likely outcome, a decision that makes it easier for a defendant to remove a case under CAFA. See also Jay Bogan and Allen Garrett, Establishing CAFA Jurisdiction in the Face of Contradictory Allegations, January 4, 2017. BP was another pro-defendant removal decision. Finally, in Shook, Judge Gorsuch used the general injunctive relief requirements under Rule 65 to affirm the denial of certification of an injunctive relief class under Rule 23(b)(2). Shook should prove useful to any corporate defendant opposing Rule 23(b)(2) certification, especially in the Tenth Circuit.

 

 

 

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