The Fifth Circuit has now resolved the challenges to BP’s Deepwater Horizon settlement, as follows:
1. In October 2013, in three separate opinions, First Panel remanded for more fact findings as to accounting issues about the settlement.
2. In January 2014, in a 2-1 decision, Second Panel affirmed the settlement over challenges based on Rule 23 and related standing issues.
3. In March 2014, satisfied with the results of the remand, First Panel affirmed the mechanics of the settlement in a 2-1 decision.
4. On May 19, 2014:
A. First Panel denies panel rehearing, concluding in a 2-1 opinion: “In settling this lawsuit, the parties agreed on a substitute for direct proof of causation by a preponderance of the evidence. By settling this lawsuit and agreeing to the evidentiary framework for submitting claims, the claimants did not abandon their allegations of Article III causation.”
B. Second Panel also denies panel rehearing, also in a 2-1 opinion, noting its “complete agreement” with the denial of panel rehearing by First Panel.
C. The full court denied en banc rehearing as to First Panel and also as to Second Panel, both over dissents that stressed Article III issues.
That’s all folks!
Odle v. Wal-Mart Stores, Inc. presents an interesting, if unlikely to recur, issue about the tolling of limitations during appellate review of class certification. No. 13-10037 (April 1, 2014). The question was whether one of the plaintiffs in the original Wal-Mart v. Dukes class action was barred by limitations, when the Ninth Circuit’s en banc ruling had remanded the “former employee” claims (which included hers) for further consideration under a different part of Rule 23 that what the district court used. The Fifth Circuit concluded that, under the considerations detailed by American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974) and later Circuit cases applying it, the claim was not time-barred: “To rule otherwise would frustrate American Pipe‘s careful balancing of the competing goals of class action litigation on the one hand and statutes of limitation on the other, by requiring former class members to file duplicative, needless individual lawsuits before the court could resolve the class certification issue definitively.”
BP’s continuing efforts to reduce the scope of its Deepwater Horizon settlement program again produced three separate opinions from a panel in In re Deepwater Horizon (several cause numbers, March 3, 2014). Judge Southwick found that the plan’s requirement of a “certification on the document that the claimant was injured by the Deepwater Horizon disaster” resolved any lingering jurisdictional issues. Judge Dennis concurred in a shorter opinion. Judge Clement dissented, arguing: “This agreement, as implemented, is using the powers of the federal courts to enforce obligations unrelated to actual cases or controversies.”
After a recent panel remanded an appeal about the Deepwater Horizon settlement for further proceedings about its payment formula, another panel examined challenges to the settlement based on the guidelines of Rule 23, the Rules Enabling Act, and Article III. In re Deepwater Horizon — Appeals of the Economic and Property Damage Class Action Settlement, No. 13-30095 (Jan. 10, 2014). The panel found that, at the stage of certifying a settlement class, it did not violate those guidelines to have class members who may not be able to prove causation or damages on the merits: “It is sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered, because we assume arguendo the merits of their claims at the Rule 23 stage.” In particular, the panel found that outcome consistent with Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011), as it requires evidence “that a particular contention is common, but not that it is correct.” The panel also found no abuse of discretion in the district court’s handling of subclasses or damage calculations. A dissent contended: “Absent an actual causation requirement for all class members, Rule 23 is not being used to simply aggregate similar cases and controversies, but rather to impermissibly extend the judicial power of the United States into administering a private handout program.
In D.R. Horton Inc. v. NLRB, the Fifth Circuit reviewed an NLRB decision that invalidated an arbitration agreement as to collective or class claims related to employment. No. 12-60031 (Dec. 3, 2013). The court deftly sidestepped a difficult constitutional issue, presently before the Supreme Court, about President Obama’s “recess appointments” to the NLRB. On the merits, the Court reversed the NLRB. The Board relied upon Section 7 of the NLRA, which guarantees the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Court found that this statute did not create a right to pursue collective or class claims in court that trumped the language and policy goals of the Federal Arbitration Act. A recent Texas Lawbook article discusses the significance of this opinion for employers.
The district court handling the Deepwater Horizon litigation rebuffed BP’s complaints that the agreed-upon claims processing formula was not working correctly. Lake Eugenie Land & Development v. BP Exploration & Production, No. 13-30315 (Oct. 2, 2013). A fractured opinion from the Fifth Circuit reversed in substantial part. It required remand for further development of the record on how the agreement was intended to handle several accounting issues about claimed losses. The Court then imposed a “tailored stay” on further payments to “allow the time necessary for deliberate reconsideration of these significant issues on remand.” Judge Clement wrote the plurality, which Judge Southwick joined on the foregoing grounds. Her opinion went on to note that, for standing reasons, a court lacked jurisdiction to administer a settlement “that included [class] members that had not sustained losses at all, or had sustained losses unrelated to the oil spill . . . .” Judge Dennis dissented as to the reasons for remand and disagreed with the standing analysis.
A district court vacated a previously-granted class certification in a securities case in 2004. The putative class refiled in Texas in 2009. The district court found the action time-barred, concluding that any tolling effect under American Pipe & Construction Co v. Utah, 414 U.S. 538 (1974) ended with the order of vacatur. Hall v. Variable Annuity Life, No. 12-20440 (August 15, 2013). The Fifth Circuit affirmed, finding no meaningful distinction in this context between a vacatur order and a decision not to certify in the first instance.
A putative plaintiff class alleged violations of federal securities law by alleged misstatements about asbestos liabilities, the quality of certain receivables and the claimed benefits of a merger. Erica P. John Fund Inc. v. Halliburton, Inc., No. 12-10544 (April 30, 2013). Reviewing recent Supreme Court cases about relevant evidence at the certification stage, including one that reversed the Fifth Circuit about proof of loss causation, the Court held: “price impact fraud-on-the-market rebuttal evidence should not be considered at class certification. Proof of price impact is based upon common evidence, and later proof of no price impact will not result in the possibility of individual claims continuing.” (citing Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, ___ U.S. ___ (Feb. 27, 2013)) The Court rejected a policy argument about the potential “in terrorem” effect of not considering such potentially dispositive evidence about the merits at the certification stage. The district court ruling about this evidence, and the resulting class certification, were affirmed.
Teta v. Chow involved a WARN Act claim asserted by a putative class in bankruptcy court. No. 12-40271 (March 29, 2013, revised April 19, 2013). The Fifth Circuit began its review by comparing the rules for adversary proceedings, which automatically adopt Fed. R. Civ. P. 23, with those for a class proof of claim, which would not automatically implicate that rule. Applying Rule 23, the Court agreed that factors unique to the bankruptcy process can be considered in certification of a class by a bankruptcy court, but remanded for additional explanation by the district court on the issues of numerosity and superiority. A dissent would simply reverse the denial of class certification.
The parties’ agreement said: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.” Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012). Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case. State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given. The Fifth Circuit affirmed the remand order, finding that the terms “any” and “cases” were not ambiguous. The Court’s emphasis on contract wording, especially in the insurance context, is consistent with other recent cases, see, e.g., Ballard v. Devon Energy, 678 F.3d 360 (5th Cir. 2012).
In Ackal v. Centennial Beauregard Cellular, the Fifth Circuit reversed the certification of a class of Louisiana governmental entities who contracted with the class defendants for cell phone service. No. 12-30084 (Oct. 26, 2012). The Court reasoned that because Louisiana law requires many of the entities to follow a specific process before retaining outside legal counsel, the class was essentially “opt in” — a class structure expressly foreclosed by Rule 23(b)(3), which allows only class member “opt out.” Id. at 6 (citing Kern v. Siemens Corp., 393 F.3d 120 (2d Cir. 2004)).
After a 3-day hearing, a bankruptcy court certified a class for injunctive relief about foreclosure-related fees during the debtors’ bankruptcy proceedings. Rodriguez v. Countrywide Home Loans, No. 11-40056 (Sept. 14, 2012). The Fifth Circuit affirmed, finding that Countrywide’s acts were “generally applicable” to the “narrowly certified . . . class of approximately 125 individuals.” Id. at 6 (distinguishing Wilborn v. Wells Fargo, 609 F.3d 748 (5th Cir. 2010)). The Court also found that the relevant records were readily searched and that Countrywide had a consistent “practice” even though it had no formal company policy as to the fees. Id. at 9, 10-11 (distinguishing Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011)).
A consumer group sued under the Clayton Act about the market for funeral caskets, and then settled all compensatory damages with one of the defendants. Funeral Consumers Alliance v. Service Corp. Int’l, No. 10-20719 (Sept. 13, 2012). The Fifth Circuit held that, even after that settlement, the group had standing to proceed against the remaining defendants for attorneys fees. Id. at 4-14. Noting, however, that “[t]he fact that death is inevitable is not sufficient to establish a real and immediate threat of future harm,” the Court found no standing for injunctive relief. Id. at 15, 18. The Court also affirmed the denial of class certification, finding that the scope of the putative nationwide class fit poorly with the evidence of localized market activity for funeral services and casket sales. Id. at 27 (distinguishing United States v. Grinnell Corp., 384 U.S. 563 (1996)).
In Ahmad v. Old Republic National Title Insurance, the Court reversed a grant of class certification in a case about title insurance premiums. No. 11-10695 (Aug. 13, 2012). The Court relied on Benavides v. Chicago Title, 636 F.3d 699 (5th Cir. 2011), which declined to certify a similar class of title insurance buyers because “[t]he resulting trial would require the factfinder to determine whether each individual qualified for the discount based on the evidence in his or her file.” Op. at 9. The Court declined to distinguish Benavides even though a particular discount was mandatory once “the requirements of R-8 [a Texas Insurance Code provision]” were satisfied, because each plaintiff would present unique facts about those requirements. Id. at 10-11. Therefore, the class did not meet the commonality requirement of Fed. R. Civ. P. 23(a)(2).
In a significant case applying Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), the Court vacated a class arbitration award as exceeding the arbitrator’s authority. Reed v. Florida Metropolitan University, No. 11-50509 (May 18, 2012). The Court found that the “any dispute” and “any remedy” clauses in the parties’ agreement did not authorise class arbitration, acknowledging a different conclusion by the Second Circuit in Jock v. Sterling Jewelers, Inc., 646 F.3d 113 (2011). Op. at 19-22. Before reaching that result, the Court reviewed the applicable AAA rules and concluded that they allowed the threshold matter of class arbitration to be reviewed by the arbitrator. Id. at 8.