Posted on Monday, December 4 2017 at 8:58 am by

Seventh Circuit: American Pipe tolling stops when a class action is dismissed – with or without prejudice – before a class is certified

by Joe Reynolds

Takeaway: In Collins v. Village of Palatine, Ill., — F.3d —, 2017 WL 5490819, at *1 (7th Cir. November 16, 2017), the Seventh Circuit announced a “simple and uniform” rule for determining when a once-tolled statute of limitations starts running again: “Tolling stops immediately when a class-action suit is dismissed—with or without prejudice—before the class is certified.” Applying this rule in Collins, the Seventh Circuit upheld the district court’s dismissal of the class representative’s claim as time-barred (as well as its summary denial of class certification). The Seventh Circuit’s ruling brings clarity to this oftentimes confusing area of class action practice.

In August 2010, Jason Senne filed a class action against the Village of Palatine, after the Village issued him a parking ticket displaying his personal information. The suit alleged the parking ticket and disclosures on it violated the Driver’s Privacy Protection Act (“DPPA”). In September 2010, the district court granted the Village’s motion to dismiss for failure to state a claim, but in 2012 the Seventh Circuit reversed. On remand, the district court deferred ruling on Senne’s motion for class certification and instead invited the Village to file a motion for summary judgment. The Village obliged and the district court granted its motion, further ruling the class certification motion had been “terminated” as moot. This time, the Seventh Circuit affirmed the judgment, and the Supreme Court denied certiorari (on November 2, 2015).

But Senne’s attorney filed a successor class action the same day the Supreme Court denied certiorari (naming himself as the class representative). He filed the suit simply as a “placeholder” to preserve the claims of the class. He then filed another, independent class action naming another individual (Michael Collins) as the class representative. Like Senne, Collins claimed that a parking ticket issued by the Village violated the DPPA. The Village then moved to dismiss Collin’s claim as time-barred by DPPA’s four-year statute of limitations, since Collins’ parking ticket issued on June 14, 2007. In response, Collins argued that the limitations period was tolled from the time Senne filed his original suit in August 2010 until the time the Supreme Court denied Senne’s petition for certiorari in November 2015. Rejecting this argument, the district court dismissed the complaint as time-barred and summarily denied Collins’s motion for class certification (without stating any reason for the denial of certification).

The Seventh Circuit affirmed. The court observed that under American Pipe tolling (see American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983)), “the filing of a proposed class action immediately pauses the running of the statute of limitations for all class members.” Collins, 2017 WL 5490819, at *3. The court then observed that these cases do not address whether tolling continues during the pendency of an appeal. After surveying the law in other circuits, the Seventh Circuit held that the “consensus view” is that the limitations clock immediately resumes once certification has been denied or upon “other procedural intervals,” such as when a class member opts out or the court dismisses a suit for lack of subject matter jurisdiction. Id. Finding no difference between these situations and the dismissal of an action with prejudice, the court held that American Pipe tolling does not continue during the pendency of an appeal of an action that has been dismissed with prejudice.

Posted on Monday, November 27 2017 at 8:51 am by

FCRA Injury Requirement Remains Murky Following Supreme Court Denial of Certiorari

by Annica Bianco

On November 12, 2017, the U.S. Supreme Court declined to hear a case that would have clarified an important issue in Fair Credit Reporting Act (FCRA) litigation, a popular source of no-injury class action litigation. The petition sought review of a Ninth Circuit decision in a putative class action holding that an “informational injur[y]” constitutes a “real-world harm” sufficient to establish standing for purposes of FCRA litigation. Petition for Writ of Certiorari at 4, M-I LLC v. Syed, No. 16-1524 (June 19, 2017).

What constitutes an informational injury, practically speaking? The answer is far from clear. In Syed, the alleged “informational injury” arose from the simple fact that the prospective employer combined into one document the required FCRA disclosure with a liability waiver. Syed v. M-I, LLC, 853 F.3d 492, 499 (9th Cir. 2017). Plaintiff’s signature on that single document served as both an authorization for the employer to procure his consumer report and as a broad release of liability. Id. Plaintiff alleged that the combination generated confusion concerning his rights and that he would not have authorized the disclosure had it been a standalone document. Id. The Ninth Circuit held those allegations were sufficient to establish standing. Id. at 500.

Stated more generally, the Ninth Circuit found that an informational injury can arise in the FCRA context “when applicants are deprived of their ability to meaningfully authorize [a] credit check.” Id. at 499. In reaching this conclusion, the court reasoned that FCRA’s requirement that a job candidate authorize the collection of consumer information by a prospective employer creates a right to privacy because the candidate can withhold permission. Id.

But the takeaway is broader: so-called “informational injuries” can provide the requisite injury-in-fact to establish standing to pursue a FCRA claim. This is important because FCRA violations can result in statutory penalties ranging from $100 to $1,000 per violation, as well as punitive damages at the discretion of the court, and attorneys’ fees and costs. On a class level, these numbers add up. In a 1,000 member class, for example, statutory penalties alone can reach $1,000,000.

Syed broadened the universe of harms that may give rise to a FCRA claim, and following the Supreme Court’s denial of certiorari in Syed, the concept of an “informational injury” will continue to be subject to broad judicial interpretation.

The Supreme Court’s decision not to hear Syed is also important because it leaves intact the Ninth Circuit’s ruling on the merits. After finding the plaintiff had standing, the court went on to hold that the prospective employer’s combination of the required FCRA disclosure with a liability waiver was not only a statutory violation, but a willful violation of the statute. Id. at 503. Effectively, the court held that the combination of the forms was knowing or reckless. Id. (citing Safeco Insurance co. of America v. Burr, 551 U.S. 47 (2007)). Under this precedent, employers will continue to face the risk of FCRA liability from even technical violations.

The landscape is different in other circuits. In August of this year, for example, the Seventh Circuit considered an analogous situation to Syed and came to the opposite conclusion. Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017). In that case, the plaintiff alleged that the prospective employer’s failure to provide a FCRA compliant disclosure constituted a concrete informational injury. In Groshek, like Syed, the alleged violation stemmed from the inclusion of “extraneous information” in the disclosure. Id. at 885. The Seventh Circuit found, however, that while the plaintiff had alleged a statutory violation, it was “completely removed from any concrete harm or appreciable risk of harm.” Id. at 887.

But Groshek distinguished Syed on the facts. The Seventh Circuit reasoned that Syed, unlike Groshek, presented factual allegations plausibly suggesting that the disclosure, as structured, created confusion, and that the plaintiff in Syed would not have signed the disclosure had it been a standalone document, as required by the FCRA. Id. at 889.

The Supreme Court’s denial of certiorari preserves this arguable split in circuit authority for now. But if the plaintiff in Groshek has his way, the issue will be before the Supreme Court soon. On October 30, 2017, the Groshek plaintiff petitioned the Supreme Court for certiorari.

Until the Supreme Court decides whether to hear the Groshek appeal, employers concerned about potential FCRA liability should give careful attention to their disclosure forms to ensure they comply with the letter of the statute, to minimize the risk of litigation. If certiorari is granted, regardless of how the Supreme Court decides the matter, the issue of FCRA standing and injury could finally be clarified.

Posted on Friday, November 17 2017 at 2:39 pm by

Consent Issues Preclude Certification of TCPA Class Action

by Jeff Fisher

Takeaway: A March 2017 D.C. Circuit decision excluding solicited faxes from the scope of the TCPA may spell trouble for class action plaintiffs. The Northern District of Illinois recently ruled that, at least where there is concrete evidence that some class members had consented to receive the fax advertisements, individualized issues involved in determining whether each class member consented preclude class certification. The decision provides another arrow in the quiver of TCPA class action defendants.

In Alpha Tech Pet Inc. v. Lagasse, LLC, No. 16 C 4321, 2017 WL 5069946, at *4 (N.D. Ill. Nov. 3, 2017), the district court granted the defendants’ motion to deny class certification, finding that the mini trials required to determine whether each class member consented to receive faxes would defeat predominance and superiority. Alpha Tech is one of the first class certification decisions rendered since the D.C. Circuit’s decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017).

In Bais Yaakov, the D.C. Circuit invalidated the FCC’s Solicited Fax Rule, which required all fax advertisements (whether solicited or unsolicited) to display a TCPA-compliant opt-out notice, to the extent it required an opt-out notice on solicited fax advertisements. The D.C. Circuit held that, because the plain language of the TCPA extended only to unsolicited fax advertisements, the FCC lacked authority to regulate solicited faxes. After Boris Yaakov, a TCPA class can no longer include class members who consented to receive faxes from the defendant.

The plaintiffs in Alpha Tech argued that Boris Yaakov was binding only in the D.C. Circuit. The Illinois district court easily rejected that argument, finding that, because the petitions challenging the “FCC’s Solicited Fax Rule” were consolidated and assigned to the D.C. Circuit, the decision invalidating the FCC rule’s application to solicited faxes was controlling outside the circuit, including in the Seventh Circuit.

After determining that Boris Yaakov applied, the district court turned to its impact on class certification. The class in Alpha Tech had been previously rejected as “fail-safe” and was re-defined to include all persons who received a fax from the defendants that included a specifically-worded opt-out notice. (A “fail safe” class is a class defined so that whether a person qualifies as a member depends on whether the person has a valid claim. See our prior post, Filing an early motion to strike class allegations.) Prior to Boris Yaakov, so long as the opt-out notice did not comply with the TCPA, every class member could state a TCPA claim, even if he or she had consented to receive faxes. But after Boris Yaakov, a district court is required to assess whether each class member consented to receive fax advertisements from the TCPA defendant. The district court held that determination of consent would require a “form-by-form inquiry” that was sufficiently individualized to preclude class certification.

But Alpha Tech suggests that Boris Yaakov does not preclude class certification in every TCPA fax case. Instead, there must be “concrete evidence of consent.” The defendants in Alpha Tech had produced evidence that thousands of putative class members had submitted consent forms. Identifying the class would thus require cross-checking thousands of consent forms against the tens of thousands of class members. And because the database containing the consent data was unreliable, and some of the consent forms had been destroyed in a hurricane, assessing consent was especially complex and would have required a series of mini-trials.

Posted on Thursday, November 2 2017 at 4:09 pm by

Update: President Trump Sticks a Knife in the CFPB’s Arbitration Rule

by Joe Dowdy and Phillip Harris

Key Takeaway: For now, pre-dispute arbitration clauses with class action waivers are safe.

On November 1, President Trump abrogated a Consumer Financial Protection Bureau (CFPB) rule that would have given consumers the ability to institute class action litigation against financial firms, including banks. Specifically, Trump executed a resolution passed by the House and Senate under the Congressional Review Act that nullifying the CFPB rule.

As we reported in a prior post [Update: Following Razor-Thin Senate Vote, The Consumer Financial Protection Bureau Fails in Effort to Outlaw Class Action-Killing Arbitration Clauses in Consumer Financial Services Contracts], the Senate had recently passed its version a resolution disapproving of this rule by the razor thin margin of 51-50, with Vice President Mike Pence casting the tie-breaking vote.

Under the Congressional Review Act, the Rule is abrogated and the CFPB cannot reissue the Rule in “substantially the same form.” 5 U.S.C. § 801(a)(3), (b).

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