En banc 9th Circuit takes up certification of classes with uninjured plaintiffs

The James R. Browning U.S. Court of Appeals Building, home of the 9th U.S. Circuit Court of Appeals, is pictured in San Francisco
The James R. Browning U.S. Court of Appeals Building, home of the 9th U.S. Circuit Court of Appeals, is pictured in San Francisco, California February 7, 2017. REUTERS/Noah Berger

(Reuters) - The en banc 9th U.S. Circuit Court of Appeals intends to clarify whether the federal rules for class action litigation preclude the certification of class actions in which more than a minimal number of class members could turn out not to have suffered an injury.

Chief Judge Sidney Thomas said in an order on Tuesday that the circuit’s judges had voted to rehear a controversial class decertification decision from a divided three-judge panel in a case alleging price-fixing in the market for packaged tuna fish. Tuesday’s order in Olean Wholesale Grocery Cooperative Inc v. Bumble Bee Foods LLC vacated the panel’s decision from last April, in which the majority held that trial judges may not certify classes that contain more than a minimal number of uninjured class members.

The panel itself – with Judges Andrew Kleinfeld and Patrick Bumatay in the majority and Judge Andrew Hurwitz in dissent – called for supplemental briefing on whether to rehear the case en banc in an April 28 order. The panel judges asked plaintiffs, defendants and amici to address whether Rule 23’s predominance requirement means that trial judges must be sure, before certifying a class, that potentially uninjured class members make up no more than a tiny percentage of the class.

This issue of class certification and uninjured class members, as you know, has been roiling for years, including at the U.S. Supreme Court in last term’s TransUnion LLC v. Ramirez.

Broadly speaking, defendants contend that courts must require plaintiffs to establish that all class members have claims before the class can be certified. But there are a couple of different theories beneath that broad umbrella – one based on constitutional standing to sue and the other rooted in class action procedural rules.

In TransUnion, for instance, the U.S. Chamber of Commerce and other business groups called on the Supreme Court to preclude class certification unless every class member can show Article III standing. (The Supreme Court declined to go that far in its TransUnion ruling in June, writing in a footnote that the decision did not address “whether every class member must demonstrate standing before a court certifies a class.”)

In the tuna case at the 9th Circuit, by contrast, defendants focused on the Rule 23 requirement that classwide issues must predominate over individual issues in order for classes to be certified. Specifically, tuna supplier defendants argued that plaintiffs’ own damages model showed that not every purchaser in the three prospective classes overpaid because of suppliers’ alleged price-fixing. The percentage of uninjured class members, according to defendants, could be 28% or more – too high a number for the trial judge to conclude that classwide issues predominated.

The 9th Circuit majority agreed, citing rulings in which the 1st and D.C. Circuits balked at the certification of classes with significant numbers of uninjured class members, about 13% in the D.C. case and 10% in the 1st Circuit. “While we do not set the upper bound of what is de minimis, it's easy enough to tell that 28% would be out-of-bounds,” wrote Bumatay in the majority opinion. “If 28% of the class were uninjured, common questions of law or fact would not be shared by substantially all the class members.”

Class counsel said in their brief calling for en banc review that the 9th Circuit majority opinion would improperly turn trial judges into fact-finders. Trial judges, wrote plaintiffs lawyers from Hausfeld and Wolf Haldenstein Adler Freeman & Herz (among other firms), must determine before class certification whether plaintiffs have offered evidence – including statistical models – that can answer the question of whether class members were injured. But judges aren’t supposed to quantify the number of potentially uninjured class members when plaintiffs and defendants dispute that percentage, class counsel said. That’s a merits decision for the jury, they argued, not a class certification issue.

The remaining defendants in the class action, StarKist Co and Dongwon Industries Co Ltd, argued in their supplemental brief that the majority opinion merely aligned the 9th Circuit with the 1st and D.C. Circuits in analogous antitrust class actions. “There is no reason to grant en banc review to create a circuit conflict,” wrote defense counsel from Latham & Watkins.

The class got lots of amicus support backing its call for en banc review, including briefs from the public interest groups Impact Fund and Public Citizen. Public Justice’s brief provided a particularly lucid explanation of how the 9th Circuit majority seemed to have blurred the distinction between the court’s role in determining whether to certify a class and jury’s ultimate role in deciding if class members were harmed.

“The question whether a class member could have been injured by a defendant’s alleged misconduct is relevant to determining the proper scope of a class definition,” the Public Justice brief said. “But whether members of a proposed class actually suffered injury is an issue that must be resolved on the merits and is thus not relevant to whether class certification is appropriate.”

Plaintiffs lawyer Thomas Burt of Wolf Haldenstein said in an email statement that his side is pleased the panel opinion was vacated and looking forward to arguing before the en banc court. Defense counsel Gregory Garre of Latham declined to comment.

There’s a chance, of course, that the en banc hearing could go terribly wrong for plaintiffs. Latham hinted in its supplemental brief opposing en banc review that if the full court were to take the case, defendants will likely raise Article III arguments, citing decisions from the 2nd and 8th Circuits that suggest classes cannot be certified unless every class member can show an injury. As I mentioned, class action defendants are champing for the Supreme Court to take up that issue.

If the 9th Circuit's en banc ruling creates a clear circuit split on Article III standing and class certification, tuna could turn out to be just what the defense bar ordered.

Read more:

9th Circuit decertifies tuna price-fixing classes, clamps down on uninjured class members

Business lobby wants SCOTUS to rein in ‘uninjured’ classes, DOJ wary of ‘atypical’ plaintiff

Supreme Court grants review of ‘no-injury’ class action. This could be big

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Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.