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| Statutory Class Actions: Developments and Strategies
Statutory Class Actions: Developments and Strategies
By Michael R. Pennington, John E. Goodman, and Robert J. Campbell
In today’s litigation and regulatory climate, class actions alleging statutory
violations can pose some of the most persistent and troublesome threats to lenders,
mortgage servicers, and financial service businesses. Consumer protection statutes,
whether adopted at the federal or state level, frequently go beyond prohibiting certain
types of business conduct and impose affirmative obligations on the target businesses,
often including highly technical disclosure requirements to consumers. In addition to
providing for a private right of action, such statutes often allow for the recovery of
statutory damages on behalf of plaintiffs without imposing any explicit statutory
requirement of proof of actual damage and injury. Class actions brought under such
statutes can represent huge exposure for companies in many cases. The applicability of
a uniform federal law for a nationwide statutory damage class action (or a uniform state
law for statewide statutory damage class actions brought under state law), combined
with judicial constructions loosening or eliminating the necessity of proof of actual
injury and causation, make it considerably easier for plaintiffs to obtain class
certification and coerce classwide settlement in the statutory context, or alternatively
demand disproportionately favorable individualized settlements prior to certification
proceedings.
That of course does not mean that surrender is the only option. To obtain class
certification and establish liability, a plaintiff still must satisfy Rule 23’s requirements as
well as those of the statute(s) at issue. See, e.g., Halliburton Co. v. Erica P. John Fund,
Inc., — U.S. —, 134 S. Ct. 2398 (2014) (Securities Exchange Act of 1934); Comcast Corp.
v. Behrend, — U.S. —, 133 S. Ct. 1426 (2013) (Sherman Act); Wal-Mart Stores, Inc. v.
Dukes, — U.S. —, 131 S. Ct. 2541 (2011) (Civil Rights Act). But the strategy for defending
such actions will frequently involve considerations that may be given less focus and
import in the defense of other forms of class litigation.
Bradley Arant Boult Cummings LLP |
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I. AN ASPECT OF ADEQUACY: DO TRADITIONAL STANDING
REQUIREMENTS APPLY TO STATUTORY CLASS ACTIONS?
Plaintiff standing is rarely the subject of great debate in most forms of litigation,
including class litigation. When common law tort or contract claims are at issue, a
plaintiff’s standing or lack thereof is generally obvious and rarely debatable. Statutory
damage actions are different. A statutory damage plaintiff must demonstrate not only
statutory standing, but Constitutional standing as well. Lerner v. Fleet Bank, N.A., 318
F.3d 113, 126 (2d Cir. 2003). Exactly how these two types of standing interrelate is
currently the subject of substantial judicial uncertainty and debate.
The necessity and meaning of the traditional “injury-in-fact” component of
Constitutional standing in the context of statutorily-based claims is the primary focal
point of this debate.. Where a plaintiff brings a putative statutory class action seeking
only statutory damages for technical violation of the statute, but asserts no allegations of
actual injury to herself or others, some courts have been willing to find the requirements
of both statutory and Constitutional standing satisfied, even though traditional injury-
in-fact does not exist. Such decisions have engendered an ongoing debate over whether
a legislative body may, consistent with separation of powers principles, eliminate or
modify the Constitutional requirement (or, at the state level, state constitutional or
judicially created requirements) that a plaintiff allege and later prove the type of injury-
in-fact that has traditionally been required to demonstrate a bona fide case or
controversy exists between her and the defendant within the meaning of Article III (or
its state analogue).
Obviously, this ongoing debate complicates the defense of statutory class actions,
but at the same time presents important opportunities for a defendant. A defendant
should always evaluate whether the plaintiff has adequately alleged—and can prove—not
just a statutory violation, but also whether that violation inflicted an injury in fact on the
named plaintiff. The nature of such an injury (particularly if it is individualized in
nature), and the associated issue of causal link between the statutory violation and the
injury, can impact not just the merits of the named plaintiff’s claims but also a
company’s defenses to class certification
A. WHAT CONSTITUTIONAL PRINCIPLES ARE WE TALKING ABOUT?
At the federal—and often the state—level, courts are subject to restraints on the
exercise of their judicial power. At the federal level, such restrictions derive directly
from the Constitution. See U.S. CONST., art. III., § 2, cl. 1. At the state level, such
restrictions may derive from provisions of state constitutions,1 or they may be creatures
of judicial creation.2 The point is that where constitutional standing rules apply,
“threshold individual standing is a prerequisite for all actions, including class actions.”3
“In [this] era of frequent litigation, class actions, sweeping injunctions with prospective
1 See, e.g., Greg ory v. Shurtleff, 299 P.3d 1098, 1102-03 (Utah 2013); Harrison v. Monroe Cnty., 716 S.W.2d 263,
265-67 (Mo. 1986).
2 See, e.g., IndyMac Bank v. Miguel, 184 P.3d 821, 830 (Haw. Ct. App. 2008); State v. Baltimore, 495 N.W.2d 921,
926 (Neb. 1993).
3 Fallick v. Nationwide Mut. Ins. Co ., 162 F.3d 410, 423 (6th Cir. 1998); see also Cole v. Gen. Motors Corp., 484
F.3d 717, 721 (5th Cir. 2007); Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007); Murray v.
Auslander, 244 F.3d 807, 810-11 (11th Cir. 2001).
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| Statutory Class Actions: Developments and Strategies
effect, and continuing jurisdiction to enforce judicial remedies, courts [should] be more
careful to insist on the formal rules of standing, not less so.” Accord Arizona Christian
Sch. Tuition Org. v. Winn, —U.S.—, 131 S. Ct. 1436, 1449 (2011).
In recognition of the fact that their judicial power is not unrestrained, federal
courts may entertain only those cases involving “injury to the complaining party, even
though the court’s judgment may benefit others collaterally.” Warth v. Seldin, 422 U.S.
490, 499 (1975). A federal court’s jurisdiction is only properly invoked when the
plaintiff asserts an actual and personally-particularized injury because the court’s role is
not to resolve “generalized grievances shared in substantially equal measure by all or a
large class of citizens” or claims seeking “relief on the legal rights or interests of third
parties.” Id. Therefore, to evidence standing (e.g., to make out the sort of case involving
a stake sufficiently personal to the plaintiff to warrant invocation of the court’s
jurisdiction), a plaintiff “must show (1) [she] has suffered an ‘injury in fact’ that is (a)
concrete and particularized and (b) actual or imminent, not conjectural or hypothetical;
(2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is
likely, as opposed to merely speculative, that the injury will be redressed by a favorable
decision.” Friends of the Earth, Inc v. Laid-law Envtl. Servs., Inc., 528 U.S. 167, 180
long resisted efforts to water down these minimal requirements, including the injury-in-
fact requirement. Abundant authority recognizes that it is the necessity of
demonstrating a personalized injury, and a casual connection between it and the
defendant’s conduct, which serve to distinguish those claims properly subject to judicial
resolution from the sort of generalized grievances that are best resolved by the
legislative branch of government.5
4 Most states have adopted similar requirements for establishing a plaintiff’s standing. See, e.g., Ex parte Aull, —
So. 3d —, 2014 WL 59030 0 (Ala. Feb. 14, 2014); Carnival Corp. v. Historic Ansonborough Neighborhood Ass’n,
753 S.E .2d 846 (S.C. 2014); Freedom From Religion Found., Inc. v. Brewer, No.12-cv-0684, 2013 WL 2644702
(Ariz. Ct. App. June 1 1, 2013); ORO Mgmt., LLC v. R.C. Mineral & Rock, LLC, 304 P.3d 92 5 (Wyo. 2013); Brown
v. Div. of Water Rights of Dep’t of Natural Res., 228 P .3d 747 (Utah 2010); Godfrey v. State, 752 N.W.2d 413 (Iowa
2008); Hall v. Walter, 969 P.2d 224 (Colo. 1998). But see Lan sing Schools Educ. Ass’n v. Lansing Bd. of Educ.,
792 N.W.2d 686, 699 (Mich. 20 10) (standing is a “limited, prudential doctrine” under which “a litigant has standing
whenever there is a legal cause of action.”).
5 See, e.g., Summers v. Earth Island Inst., 555 U.S. 488, 497 (2009) (“It would exceed Article III’s limitations if, at
the behest of Congress and in the absence of any showing of concrete injury, we were to entertain citize n suits to
vindicate the public’s nonconcrete interest in the proper administratio n of the laws. The party bringing suit must
show that the action injures him in a concrete and personal way.”); Seminole Tribe of Fla. v. Florida, 517 U.S. 44,
65 (1996) (it is “fundamental that Congre ss could not expand the jurisdiction of the federal courts beyond the
bounds of Article III”); Valley Forge Christian College v. A ms. United for Separation of Church and State, 454 U.S.
464, 475 (1982) (“[N]either the counsels of prudence nor the policies implicit in the ‘case or controvers y’
requirement should be mistaken for the rigorous Art. III requirements themselves.”); Gladstone, Realtors v. Village
of Bellwood, 441 U.S. 91, 100 (1979) (“In no event ... may Congress abrogate the Art. III minima ....”); U.S. ex rel.
Kreindler & Krein dler v. United Tech. Corp., 985 F.2d 1148, 1154 (2d Cir. 1993) ( “some injur y-in-fact must be
shown to satisfy constitutional requirements, for Congress cannot waive the constitutional minimum of injury -in-
fact.”); Doe v. Nat’l Bd. of Med. Exam’ rs, 199 F.3d 146, 153 (3d Cir. 1999) (“The proper analysis of standing
focuses on whether the plaintiff suffered an actual injury, not on whether a statute was vio lated. Although Congress
can expand standing by enacting a law enabling someone to sue o n what was already a de facto injury to that person,
it cannot confer standing by statute alone.”); U.S. v. Weiss, 467 F.3d 1300, 1311 (11th Cir. 2006) (“While it is true
that Congress may enact statutes creating legal rights, the invasion of which creates standing, even though no injury
