Last month, this blog covered the Eleventh Circuit’s denial of a petition to rehear Johnson v. NPAS Solutions, LLC, a decision that held that class action incentive awards are per se unlawful.  See 2022 WL 3083717 (11th Cir. Aug. 3, 2022).  That denial left the Eleventh Circuit as the only circuit where class action incentive awards can never be included in settlements under any circumstances. Now, the Department of Justice has relied on the Eleventh Circuit’s decision in Johnson to try to block class action incentive awards in a class action settlement with the federal government. 

The Third Circuit recently vacated an order denying class certification, and in the process provided more clarity on what plaintiffs must do to satisfy Rule 23’s predominance and ascertainability requirements.

In Kelly v. RealPage Inc., — F.4th —, 2022 WL 3642113 (3d Cir. Aug. 24, 2022), the plaintiffs alleged that their rental applications were denied based on inaccurate consumer reports generated by RealPage, and that RealPage would not correct the reports unless plaintiffs obtained proof of the error from RealPage’s sources. The identities of the sources were not included in RealPage’s disclosures to plaintiffs. Plaintiffs claimed that this conduct violated the Fair Credit Reporting Act, which requires a consumer reporting agency to disclose to a consumer, upon request, “[a]ll information in the consumer’s file at the time of the request” and “[t]he sources of [that] information.” 15 U.S.C. § 1681g(a)(1), (a)(2). The district court denied plaintiffs’ class certification motion because Rule 23’s predominance and ascertainability requirements were not met, but the Third Circuit held that the district court was wrong to do so.

The Third Circuit conclusion that plaintiffs had failed to establish predominance turned on an interpretation of the FCRA. The district court had misinterpreted Section 1681g(a) to require a consumer to specifically request his or her “file” rather than just a “report.” Because a generalized request by a consumer for information is sufficient to trigger Section 1681g(a), the Third Circuit held that the district court erred in finding that individualized proof would be needed to distinguish between requests for “reports” from those for “files.”

The Third Circuit also held that the district court misapplied the ascertainability requirement. “[A]scertainability does not mean that ‘no level of inquiry as to the identity of class members can ever be undertaken[.]’” Kelly, 2022 WL 3642113, at *16 (quoting Byrd v. Aaron’s Inc., 784 F.3d 154, 171 (3d Cir. 2015)). The court rejected the argument that identifying class members would be administratively infeasible where RealPage’s records on requests were kept in a separate database from reports sent out in response to those requests, and no unique identifier was used across both systems. The court noted that a “straightforward ‘yes-or-no’ review of existing records to identify class members is administratively feasible even if it requires review of individual records with cross-referencing of voluminous data from multiple sources.” Id. at *17. The Third Circuit has historically been more restrictive on the issue of ascertainability than some other circuits, and this decision might suggest further softening of that view. It remains to be seen whether this decision signals a further departure from the Third Circuit’s restrictive stance on ascertainability or is instead properly viewed as limited to its facts – a situation in which identifying class members, although challenging, would nonetheless be feasible without imposing excessive effort.

The Third Circuit recently reinstated the putative class action Clemens v. ExecuPharm Inc., concluding there was sufficient risk of imminent harm after a data breach to confer standing on the named plaintiff when the information had been posted on the Dark Web.

Banks, lenders, and other financial institutions who submit information to credit reporting agencies should take note of a recent Third Circuit decision adopting a “reasonable reader” standard for evaluating whether a credit report was inaccurate or misleading under Fair Credit Reporting Act (“FCRA”).

When a class action is filed, defendants often wonder whether tendering a payment to a class representative can defeat the claims. In a recent decision, the Third Circuit held that a mid-litigation payment to a class representative plaintiff does not moot her claim if the check is not cashed. Duncan v. Governor of the Virgin Islands, — F.4th —-, 2022 WL 3906213 (3d Cir. Aug. 31, 2022). But tendering the payment, even if the check is uncashed and even if the plaintiff claims the payment does not cover the full value of her claim, did make the plaintiff an atypical class representative and provided a basis to defeat certification of a damages class.

A court in the Southern District of New York recently compelled arbitration in the putative class action Skillern et al v. Peloton Interactive, Inc. (No. 1:21-cv-06808), concluding that the defendant did not waive its ability to seek arbitration by defaulting in a prior unrelated arbitration proceeding.  The judge differentiated between this case and a series of other decisions where a movant had failed to pay arbitration fees in an earlier arbitration proceeding involving the same parties.  This case is another helpful precedent strongly favoring arbitration as an alternative dispute resolution process in lieu of class actions.

We previously wrote about Chamber of Commerce v. Bonta, 13 F.4th 766 (9th Cir. 2021), in which a split panel of the Ninth Circuit held that the Federal Arbitration Act does not preempt a California Labor Code provision prohibiting employers from requiring applicants or employees “to waive any right, forum, or procedure” for certain claims. The majority reasoned that the California law escaped preemption because it was not specific to arbitration and regulated “pre-agreement” behavior as opposed to the agreements themselves.

Shortly thereafter, appellees sought rehearing en banc. In February 2022, the same panel majority agreed to defer consideration of the petition pending disposition of Viking River Cruises v. Moriana, where the Supreme Court was poised to decide whether the FAA preempted a different California law.

In June, the Supreme Court decided Viking River Cruises v. Moriana, 142 S. Ct. 1906 (2022), holding that the FAA preempted a California rule to the extent that the rule precluded division of certain representative claims via an agreement to arbitrate because that indivisibility “effectively coerce[d] parties to opt for a judicial forum” – a result that the Court deemed “incompatible with the FAA.” By order dated August 22, 2022, a different majority of the Bonta panel voted sua sponte to grant panel rehearing, withdrawing the original Bonta opinion and denying as moot the petition for rehearing en banc. The order did not explain its reasons for granting rehearing or indicate how the panel now expects to decide the case.

The Fifth Circuit reversed a class certification order for claims under the Fair Debt Collection Practices Act (“FDCPA”) because the plaintiff lacked Article III standing. Perez v. McCreary, Veselka, Bragg & Allen, P.C., No. 21-50958, 2022 WL 3355249 (5th Cir. Aug. 15, 2022). The Court held that merely sending a letter to collect a time-barred debt, although a violation of the FDCPA, does not satisfy Article III’s injury-in-fact requirement.

On the heels of the Ninth Circuit’s recent decision in Bowerman—which held that questions concerning the “existence of damages” for each class member can prevent certification—the Eleventh Circuit became the latest in a growing number of courts to conclude that class certification should be denied when plaintiffs cannot prove that each individual class member actually suffered damages.

Last week the Third Circuit reversed a summary judgment ruling in favor of Harriet Carter Gifts and NaviStone for alleged violations of Pennsylvania’s Wiretapping and Electronic Surveillance Control Act, or WESCA. See Popa v. Harriet Carter Gifts, Inc., Case No. 21-2203, 2022 WL 3366425 (3rd Cir. Aug. 16, 2022). This lawsuit is one of many recent putative class actions attempting to apply decades-old wiretapping laws against websites and their service providers. The named plaintiff is a consumer that allegedly shopped on Harriet Carter Gifts’ website while NaviStone’s marketing software was installed on the website. Plaintiff argued that defendants violated WESCA by simultaneously sending her interactions with Harriet Carter’s website to NaviStone.