Greenberg Traurig and the ACC Southern California Financial Services Committee hosted a Hot Topics & Recent Developments in Financial Services Law program on Aug. 6 in Los Angeles. The interactive roundtable program discussion was led by Greenberg Traurig shareholders, Jennifer Gray and Eric Rowen, co-chair of the Real Estate Litigation Practice and chair of the western region Real Estate Litigation Practice.
The program included a discussion of three significant cases that will be heard by Supreme Court next term. Each of these cases carries the potential to significantly expand class action exposure for by financial institutions.
Campbell-Ewald Co. v. Gomez, No. 14-857, involves the practice of “picking-off” named plaintiffs in putative class actions. Many statutes that regulate financial services providers (such as the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, among others) allow consumers to recover statutory penalties for violations. A common practice among the class action defense bar is to offer the named plaintiff the full amount of the statutory damages that he or she would recover if successful in the action. The theory is that the named plaintiff’s claim becomes “moot” because a case or controversy no longer exists. Circuit courts are divided on whether or not this strategy can “moot” either the individual claim or the putative class claims. Some circuit courts have held that an offer of judgment for the full amount that the named plaintiff could recover moots the entire case, while others have held that it does not. Thus, the question certified by the Supreme Court is whether a putative class action becomes moot, and thus beyond the judicial power of Article III of the Constitution, when the named plaintiff receives an offer of complete relief on his claim before a class is certified.
Spokeo v. Robins, No. 13-1339, also involves Article III standing. The issue in this case is whether Congress may confer Article III standing upon a plaintiff who claims that a statute has been violated, but does not allege to have suffered any actual injury. Generally, a party cannot invoke jurisdiction of the federal courts without some showing of injury. The question raised in the Spokeo case is whether the violation of a federal statute alone satisfies the injury-in-fact requirement of Article III standing, even in the absence of any actual injury. While the Spokeo case involves the Fair Credit Reporting Act, the Supreme Court’s ruling is likely to impact litigation brought under the many federal statutes that provide for statutory damages even in the absence of actual damages.
Tyson Foods Inc. v. Bouaphakeo, No. 14-1146. This case addresses whether class action plaintiff may “prove” liability and damages with “common” statistical evidence that assumes that all class members are identical to a fictional “average” class member, even if many actual class members do not share the assumed characteristics and may not have suffered any injury. The district court permitted the named plaintiff to prove its case using such statistical evidence. The result was a single-sum class-wide verdict, from which each purported class member, damaged or not, would receive a pro-rata portion of the jury’s one-figure verdict. The U.S. Court of Appeals for the Eighth Circuit affirmed the trial verdict. In appealing the Eighth Circuit’s ruling, the defendant argued that the district court’s approach violates Article III of the Constitution and the Rules Enabling Act, because it impermissibly expands the category of parties who may bring lawsuits to include those who have suffered no injury.
These three cases have the potential to dramatically alter generally understood principles of standing and justifiability in federal court.