Q1 2022 Class Action Update
April 28, 2022
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This update provides an overview of key class action developments during the first quarter of 2022 (January to March).
First part deals with Eleventh and Ninth Circuit cases regarding the diversity and amount of controversy requirements for federal court jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”).
Part II covers a recent Seventh Circuit decision analyzing when immaterial harm resulting from a violation of law is sufficient for Article III to be valid in putative class actions.
Additionally, while not covered in this update, the Ninth Circuit recently issued a significant en banc advisory regarding class certification issues in Olean Wholesale Grocery c. Bumble Bee Foods— F.4th —, 2022 WL 1053459 (9th Cir. Apr. 8, 2022) (en banc), including burden of proof for a plaintiff seeking group certification, evaluation of expert testimony at the collective certification stage and the interaction between Rule 23 and injury and Article III. olean is discussed in our separate Customer Alert.
I. The Eleventh and Ninth Circuits Take an Expanded View of CFAA Jurisdiction
During the past quarter, the Eleventh and Ninth Circuits issued notable decisions regarding aspects of federal court jurisdiction under the CAFA (minimum diversity and amount of controversy).
In Cavalieri vs. Avior Airlines CA, 25 F.4th 843 (11th Cir. 2022), the Eleventh Circuit addressed the CAFA’s “minimum diversity” requirement, which provides federal jurisdiction over a class action if there is more than $5 million controversy and “every member of a plaintiff class is a citizen of a state and every defendant is a foreign state or a citizen or subject of a foreign state”. 28 USC § 1332(d)(2)(C). The court held that this requirement can be satisfied in a foreign defendant case by plausible claims that a domestic class includes at least one U.S. citizen.
In Riders, two Venezuelan citizens, one of whom is a lawful permanent resident of the United States, filed a class action lawsuit against a Venezuelan airline for breach of contract. 25 F.4th at 848. On appeal, the Eleventh Circuit spontaneously considered whether the Complainants had sufficiently asserted diversity competence. Identifier.
The court first ruled that a foreign citizen who is a permanent resident is not considered a “citizen of a State” under the 2011 CFAA Amendments, which meant that the case did not meet general diversity requirements because the plaintiffs and defendant were non-nationals. 25 F.4th at 848–49 (citing 28 USC § 1332(a)). Nonetheless, the Eleventh Circuit found that the allegations supported a minimum diversity competency under the CAFA because the plaintiffs had plausibly alleged that “at least one unnamed class member is a U.S. citizen and resident and , therefore, is different from” the Venezuelan airline. Identifier. at 849. The court added that it was for “a later stage in the litigation for the district court to make the factual determination on the actual existence of jurisdiction”. Identifier. at 850 (citation omitted).
The Ninth Circuit addressed the CFAA’s Amount in Dispute requirement in Jauregui v Roadrunner Transportation Services, Inc., 28 F.4th 989 (9th Cir. 2022). In this case, the plaintiff filed a putative class action lawsuit over wages and hours on behalf of all of the defendant’s current and former hourly workers. Identifier. at 991. Although the defendant remanded the case to federal court under the CFAA and presented substantial evidence to establish the requirement of the amount in dispute, the district court nevertheless remanded the matter to the court of ‘State. Identifier.
The ninth circuit reversed. He held that by erroneously excluding substantial evidence from the defendant showing that the amount in dispute was satisfied, the district court had impermissibly imposed a “heavy burden” on the defendant which “contravenes the text and understanding of the CAFA and ignores the previous one”. 28 F.4th at 992. In particular, the District Court improperly “put a thumbs-up against withdrawal” by assigning a value of $0 to most of Plaintiff’s claims simply because he was not agree with the assumptions underlying the defendant’s estimates. Identifier. at 992. But “the mere fact of preferring an alternative hypothesis is not an appropriate basis for setting aside a claim” and “at most, it only justifies reducing the claim to the amount resulting from the alternative hypothesis”. Identifier. at 994. Thus, the district court’s approach to “turn[ed] the process of removing the CFAA into an unrealistic all-or-nothing exercise of guessing the precise presumption the court will choose, even if . . . the defendant has provided substantial evidence and analysis in support of its amount in the controversy estimate. » Identifier. The Ninth Circuit also reaffirmed the “broad understanding of the CAFA” under Circuit precedent, and encouraged district courts to give defendants “latitude” when analyzing withdrawal “so long as the [defendant’s] the underlying reasoning and assumptions are reasonable. Identifier. at 993.
II. The Seventh Circuit deals with cases where a violation of consumer financial protection laws gives rise to Article III
As noted in our previous updates, federal courts have continued to apply a combination of approaches to determining whether plaintiffs alleging violations of law have alleged concrete harm to satisfy Article III under TransUnion LLC vs. Ramirez, 141 S.Ct. 2190 (2021). The Seventh Circuit weighed in this quarter in a case analyzing quality under the Fair Debt Collection Protection Act (“FDCPA”).
In Ewing vs. MED-1 Solutions, LLC, 24 F.4th 1146 (7th Cir. 2022), the Seventh Circuit held that the failure of debt collectors to report a customer’s debt dispute to credit reporting agencies is sufficient concrete harm to justify the quality under the FDCPA. Although the defendants argued that the plaintiffs lacked standing under Trans Union because “there is no evidence that [the credit agencies] Send it [plaintiffs’] credit reports to potential creditors,” the court said in disagreement. 24 F.4th at 1150, 1152. “In the wake of Trans Union“, the Seventh Circuit framed the ongoing analysis as asking “whether the [plaintiffs] suffered a concrete injury when the [debt collectors] provided false information (ie, undisputed debt reports) about them to a credit reporting agency. » Identifier. at 1152. Because the FDCPA protects against “damage to reputation”—which “is analogous to damages caused by defamation, which has long roots in common law”—the claim satisfied Trans Unionthe requirement that the harm must have a close connection with a traditionally recognized harm. Identifier. at 1153. Also, the failure of credit reporting agencies to release credit reports to third parties was “a red herring” as debt collectors released false information to the agency of credit, and complainants did not need to show that the credit agency then”also shared this false information” to other third parties. Identifier. at 1152–53.
The following Gibson Dunn attorneys contributed to this client update: The following Gibson Dunn attorneys contributed to this client update: Jessica Pearigen, Gillian Miller, Yan Zhao, Wesley Sze, Lauren Blas, Bradley Hamburger, Kahn Scolnick and Christopher Chorba.
Gibson Dunn attorneys are available to answer any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Class Actions, Litigation or Appeals and Constitutional Law practice groups, or one of the following lawyers:
Theodore J. Boutrous, Jr. – Los Angeles (+1 213-229-7000, [email protected])
Christopher Chorba – Co-Chair, Class Actions Practice Group – Los Angeles (+1 213-229-7396, [email protected])
Theane Evangelis – Co-Chair, Litigation Practice Group, Los Angeles (+1 213-229-7726, [email protected])
Kahn A. Scolnick – Co-Chair, Class Action Practice Group – Los Angeles (+1 213-229-7656, [email protected])
Bradley J. Hamburger – Los Angeles (+1 213-229-7658, [email protected])
Lauren M. Blas – Los Angeles (+1 213-229-7503, [email protected])
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