Recent Developments in Class Actions
CERTIFICATION AND HAVE NARROWED THE SCOPE OF THE COMMONALITY AND PREDOMINANCE REQUIREMENTS
The aforementioned U.S. S.Ct. cases suggest that plaintiffs seeking class certification face an increasingly uphill battle to satisfy the elements of Fed. R. Civ. P. 23 and that, where appropriate, a defendant may be able to defeat certification by rebutting a presumption of common damages.
The line between proving a case on the merits and satisfying elements such as predominance or commonality has become somewhat blurred at least with cases involving mass torts, products liability, discrimination claims, antitrust violations, and securities fraud.
The Wal-Mart decision expresses a narrow interpretation of the commonality requirement set forth in Fed. R. Civ. P. 23(b)(2) and, at least on the facts of the case, requires a party seeking to certify a class and bring discrimination claims to offer
“significant proof” of a general policy of discrimination to bridge the gap between an individual’s discrimination claim and the “existence of a class of persons who have suffered the same injury.”
o The decision specifically acknowledged the overlap between proof of commonality and proof of discrimination on the merits.
The Wal-Mart decision further holds that plaintiffs seeking class certification must share common damages. Damages for backpay, for example, are too individualized to award to a class as a whole. The court must make a person-by-person analysis, which necessarily defeats the purpose of a class action – to resolve common issues in one fell swoop.
The Comcast decision expanded upon Wal-Mart, but focused primarily on the predominance requirement of Fed. R. Civ. P. 23(b)(3) – that the common facts and issue of law predominate over individual facts or issues. While the plaintiffs sought relief from purported gender discrimination, they could not prove a causal connection between liability and the harm and damages suffered by the class. The court noted that individual questions of damages could predominate over liability issues common to a purported class.
Courts have been cautious to certify classes with respect to mass tort cases because of the individual causal analysis required for each member. It is understandable that one individual will suffer different injuries than another based on a myriad of factors.177 Although Comcast did not explicitly cite such a theory or make the analogy, it implicitly determined that causal issues may create problems for classes seeking redress in areas of law other than tort.
Plaintiffs seeking to certify a class must expect a “rigorous analysis” from the court, which will require plaintiffs to show some evidentiary proof of underlying claims in addition to proving facts that there are sufficiently numerous parties, common questions of law or fact, typicality, and adequacy of representation. Comcast, 122 S.Ct. at 1432.
Halliburton also heightens a purported class’ burden of proof. Parties seeking certification and a presumption of reliance on the fraud-on-the-market theory should be prepared to prove reliance and price impact knowing that a defendant now has the ability to rebut the presumption and defeat the class. Again, as with Wal-Mart and Comcast, a discussion of causal connection becomes relevant and damages may be too individualized to be common among the class. A purported class action seeking redress under the fraud-on-the-market theory must show some causal connection between alleged misrepresentations and the class’ economic losses in order to invoke the presumption of reliance. Without this showing, a purported class cannot satisfy the predominance factor and cannot certify.
While the U.S. S.Ct. has attempted to clarify issues of confusion between proof on the merits and class certification pursuant to Rule 23, it appears that defendants now have more ammunition to dispute certification than they once did in the past. It is also apparent that parties seeking class certification may fail the commonality or predominance factors with respect to damages if the damages are too individualized to be common among a purported class. Defendants can thus defeat certification by challenging damages under these factors.
177 See e.g. Amchem Products, Inc., 521 S.Ct. at 2250 (advising caution in mass tort certification when individual stakes are high and vast disparities exist among members) Steering Committee v. Exxon Mobil Corp., 461 F.3d 598, 604-605 (5th Cir. 2006) (denial of class certification appropriate for injuries sustained from chemical fire where predominance of individual issues detracted from superiority of class action device).
IV. ISSUES WITH ARTICLE III STANDING IN CYBER SECURITY AND SURVEILLANCE CLASS ACTION LAWSUITS
Cyber security and surveillance class action lawsuits are trending in today’s world of fast-paced technology and, while the court has attempted to keep pace, this area of law is still in its early developmental stage.
Plaintiffs are bringing suits against web companies and the government more and more frequently for invasion of privacy issues, which may include, inter alia, website user tracking and disclosure of an individual or company’s personal information.
A vast majority of recent class action litigation rests on whether the plaintiffs and purported class members have standing to bring their claims.
As previously discussed, Article III of the U.S. Constitution addresses standing and requires an injury to be “concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.” Clapper v. Amnesty Intern. USA, 133 S.Ct. 1138, 1141 (2013).
With respect to websites sharing personal information, federal district courts have frequently determined that plaintiffs and their purported class are unable to establish standing to file suit because they cannot identify any concrete harm sufficient to satisfy Article III. See In re Google, Inc. Privacy Policy Litigation, No. C 12-01382 2012 WL 6738343 (N.D. Cal. Dec. 28, 2012) (holding plaintiffs failed to show any actual or imminent injury in fact by mere disclosure of information) Low v. LinkedIn Corp., No.
11-cv-01468 2011 WL 5509848 (N.D. Cal. Nov. 11, 2011) (holding single plaintiff seeking to certify class failed to establish emotional harm or economic harm where defendant allegedly transmitted plaintiff’s browser history to third-parties).
In Low, the plaintiff brought claims against LinkedIn purporting the website violated, among other acts, the Stored Communications Act, the California Constitution, and the California Unfair Competition Law when it allegedly disclosed user information, including browser history, to third-party advertising and marketing companies by use of cookies. Specifically, LinkedIn’s website linked and transmitted user ID numbers to cookies, which allowed third-parties access to user information. The plaintiff alleged he was harmed by the disclosure by way of embarrassment and humiliation, and that his personally-identifiable browser information constituted valuable personal property with a market value for which he was not compensated when LinkedIn disclosed his information. The court rejected both theories. First, the plaintiff did not allege how third party advertisers would be able to infer personal identity from an anonymous user ID and browsing history. Second, the plaintiff failed to allege facts to demonstrate how he was foreclosed from capitalizing on the value of his personal data. As the plaintiff had not suffered injury in fact, neither he nor the purported class had standing.
In In re Google Inc., the plaintiffs brought a host of claims against Google on behalf of a purported class, alleging violations of, among others, the Wiretap Act, California’s Right of Publicity Statute, and California’s Consumer Legal Remedies Act. The purported class consisted of all persons and entities in the U.S. who acquired a Google email account over an eight-year period. The plaintiffs took issue with Google’s 2012 policy change, which combined user’s accounts and information across multiple Google platforms, such as YouTube, Maps, and Reader. Plaintiffs argued expectations of privacy differed from one platform to the other. The court held that the plaintiffs did not have standing because they failed to articulate anything more than an unauthorized disclosure of personal information and could not show any actual or imminent injury in fact.
While the aforementioned cases dealt with the abstract nature of proving standing in cyber security cases, it is clear that plaintiffs may be able to achieve standing and potentially certify a class where statutory claims define injury as a defendant’s mere
violation of the statute. See Perkins v. LinkedIn Corp., 13-cv-04303 2014 WL 2751053 (N.D. Cal. June 12, 2014) (holding plaintiffs had standing with purported class with respect to statutory claims allowing same); In re Google Inc. Gmail Litigation, 13-MD-02430 2013 WL 5423918 (N.D. Cal. Sept. 26, 2013) (holding plaintiffs established standing by mere allegation that Google violated the California Invasion of Privacy Act, which authorized statutory damages for a violation without need to show actual damages).
In In re Google Inc. Gmail Litigation, the plaintiffs brought claims on behalf of several purported class groups alleging Google intercepted emails to provide advertisements and create user profiles to advance Google’s profit interests. Plaintiffs pursued claims under California state and federal anti-wiretapping statutes. The court determined that the Wiretap Act and California Invasion of Privacy Acts were analogous in that they
“authorize[] an award of statutory damages any time a defendant violates the provisions of the statute[s] without any need to show actual damages. Any person who has an electronic communication intercepted or disclosed in violation of the Acts may recover from the violating entity. Accordingly, the plaintiffs had proper standing merely by alleging violations of the act.
In Clapper v. Amnesty International USA, 133 S.Ct. 1138 (2013), the U.S. S.Ct.
addressed the issue of standing in a class action suit which alleged violations of the Foreign Intelligence Surveillance Act (“FISA”). Attorneys, human rights, labor, legal, and media entities brought suit seeking to declare a provision of FISA unconstitutional and seeking to enjoin any surveillance authorized by the provision. The provision allowed the Attorney General and the Director of National Intelligence to acquire foreign intelligence by monitoring communications made by persons who were not U.S.
citizens, legal aliens, or corporations and who were reasonably believed to be located outside of the U.S. Respondents were citizens, legal aliens, and corporations who alleged their work required them to “engage in sensitive international communications with individuals who they believe are likely targets of surveillance under FISA.” Respondents offered two theories of recovery: (1) there was an objectively reasonable likelihood that their communications will be intercepted under FISA in some time in the future; and (2) present injury exists where FISA has forced Respondents to take “costly and burdensome measures to protect the confidentiality of their international communications. The U.S. S.Ct. determined Respondents did not have Article III standing to pursue claims on behalf of themselves or the purported class. First, Respondents did not allege any facts beyond mere speculation that the Government would imminently target Respondents’ communications. Indeed, Respondents had no actual knowledge of the Government’s “targeting” practices. Second, even if Respondents could demonstrate imminent targeting, they could not show that the Government would use FISA as opposed to other methods of surveillance. Third, even if Respondents could prove both of the aforementioned elements, they could not show that that a court would even authorize such surveillance. Fourth, Respondents could not show that the Government would succeed in acquiring such communications. Finally, Respondents could not show that the Government would incidentally intercept their communications even if all other factors were satisfied. Accordingly, fear of speculative surveillance was insufficient to establish standing.
o The court also dismissed Respondent’s argument that the threat of FISA surveillance required them to minimize certain communications or travel to communicate in person. The court concluded any costs associated with such fears were unnecessary because future harm was speculative and not impending as required by Article III. Respondent’s injuries were “self-inflicted” and could not be linked to the Government’s alleged surveillance under FISA.
V. CONCLUSION
The recent U.S. S.Ct. cases, and federal district cases on cyber security and wiretapping, provide evidence that class actions will face new and uncharted challenges in the future.
As Wal-Mart and Comcast suggest, the court may need to engage in a causal analysis of a plaintiff’s claims at the class certification stage, which necessarily overlaps with the party’s case on the merits. Purported class members’ damages may also be too individualized to apply to an entire class and may overshadow common liability claims.
While courts have historically applied this reasoning to mass tort and products liability cases, they are now applying the theory to other areas of law, such as anti-trust and employment discrimination.
Further, as the U.S. S.Ct. held in Halliburton, defendants may have particular opportunities to contest a plaintiff’s case on the underlying merits at the class certification stage. While the court seemingly glossed over this notion, it noted that price impact is an underlying element of a fraud-on-the-market claim and indicated a class of plaintiffs must 1) prove the theory on the merits and 2) prove the theory to certify the class.
The development of cyber security and surveillance law also poses problems for plaintiffs seeking to certify a class or groups of classes. Even where a plaintiff is able to establish standing by bringing claims under specified statutes, or in some other manner, it appears that commonality, adequacy of representation, and predominance may pose problems as these cases continue to develop. Similar to mass tort cases, surveillance poses problems unique to each person, and determining whether a party suffered damages (absent a statute such as the Wiretap Act) and, if so, the extent of such damages, will involve a causal inquiry which courts may not be able to apply to an entire class because of an infinite number of factual variables.
Brian P. Voke, Esq.
Campbell Campbell Edwards & Conroy One Constitution Center, 3rd Fl.
Boston, Massachusetts 02129 T: (617) 241-3000