The Kobayashi Maru was an impossible test used by Star Trek’s Starfleet Academy to challenge cadets. The plaintiff in Zaragoza v. Union Pacific R.R. Co. faced a similarly difficult challenge with the Ishihara test for color-blindness, leading to a dispute whether he should have been allowed to continue working as a train conductor. The Fifth Circuit held that limitations on his claim had been tolled:

“Zaragoza was included in the Harris class, as pled in February 2016 and as initially certified in February 2019. Therefore, his disability discrimination claims were tolled from the time they accrued until he asserted them, as an individual claimant, with the EEOC in March 2020.”

No. 23-50194 (Aug. 12, 2024).

The Fifth Circuit reversed because of a new trial-court reply-brief argument in Georgia Firefighters’ Pension Fund v. Anadarko Petroleum Corp., reasoning:

A class of stock purchasers allege that Anadarko Petroleum Corporation fraudulently misrepresented the potential value of its Shenandoah oil field project in the Gulf of Mexico, in violation of federal securities law. During the class certification proceedings below, Plaintiffs presented new evidence for the first time in a reply brief. As a result, Anadarko did not have fair opportunity to address that new evidence at an earlier stage in the briefing. So the district court should have permitted Anadarko to file a sur-reply responding to that new evidence contained in Plaintiffs’ reply.

No. 23-20424 (April 24, 2024).

Reiterating a recent holding in a near-identical lawsuit, in Bourque v. State Farm the Fifth Circuit rejected the certification of a class of insureds who were dissatisfied with the amount paid by State Farm for their wrecked cars:

Plaintiffs contended that they had met this standard because any class member who was paid less than the [National Automobile Dealers’ Association] value of their vehicle necessarily received less than [Actual Cash Value] and therefore suffered an injury. But we rejected that premise, explaining that NADA value was just one of many statutorily acceptable methods for calculating ACV, and therefore pinning ACV to NADA value constituted an impermissibly arbitrary choice of a liability model. 

No. 22-30126 (Dec. 22, 2023).

In re Jefferson Parish involved a mandamus petition about the interplay between a putative class action (“Ictech-Bendeck“) with a 500-plaintiff mass action (“Addison“). The Fifth Circuit denied relief, as the opinion’s introduction deftly summarizes:

… This mandamus proceeding arose because the defendants object to the district court’s scheduling of a small group of Addison plaintiffs for trial before Ictech-Bendeck will finish its class certification process, which the defendants have repeatedly delayed.

Petitioners ask us to stop the Addison trial and to order the district court to rule on class certification in Ictech-Bendeck before allowing any further proceedings in Addison. Petitioners raise the novel theory that under Rule 23 of the Federal Rules of Civil Procedure, the filing of a putative class action bars any possible class members from reaching the merits of their own, separate suits until class certification proceedings conclude in the putative class action. …

… Rule 23 establishes a mechanism for plaintiffs to pursue their claims as a class. It does not cause the filing of a putative class action to universally estop all separate but related actions from proceeding to the merits until the class-certification process concludes in the putative class action, after years of motions practice.

No. 23-30243 (Aug. 24, 2023).

Chavez v. Plan Benefit Services, returning to the Fifth Circuit, addressed two class-action issues.

1. Standing. The Court evaluated two competing approaches to class standing. One requires named plaintiffs to establish their own individual standing, then separately analyzes class certification under Rule 23. The second examines named plaintiffs’ standing to raise claims of absent class members before applying Rule 23. As in Angell v. GEICO, 67 F.4th 727 (5th Cir. 2023), the Court avoided choice between the two by finding them both satisfied on this record.
2. Certification. The district court found the overarching question of whether the defendants owed fiduciary duties by managing the benefit trusts was both significant and dispositive of the class’s claims. The Court agreed that this issue, along with the question whether any fiduciary duty was breached, outweighed individualized inquiries into each plan’s fees or structure.

No. 22-50368 (April 11, 2023).

Loy v. Rehab Synergies, LLC allowed a dispute about overtime pay to proceed as a collective action, when the 22 plaintiffs were subject to a similar program that required 90% productivity,” for which “a therapist needed to record 54 minutes of billable time for every hour on-the-clock, leaving the equivalent of just six minutes per hour to complete non-billable tasks.” Given that shared foundation, the Fifth Circuit found no abuse of discretion by the district court in its assessment of the relevant factors. No. 22-40411 (June 21, 2023).

The Fifth Circuit affirmed the certification of a class of GEICO car-insurance policyholders in Angell v. GEICO Adv. Ins. Co., holding, inter alia:

• 3 ways to breach 1 contract = 1 injury. “GEICO’s failure to remit any of the three Purchasing Fees amounts to the same harm—a breach of the Policies. Whether GEICO is liable to Plaintiffs for any of the Purchasing Fees is dependent on an interpretation on the same language in the Policies and how the Policies to support the standing approach …. Although each of the Purchasing Fees may accrue differently, e.g., through the acquisition of a vehicle or upon the expiration of a vehicle’s registration, the complained injury stems from GEICO’s failed remittance, not the costs as assessed by the State.”
• 1 injury = typicality. “The course of conduct here is virtually the
  same across the alleged deprivations of each Purchasing Fee, i.e., whether
  GEICO breached the Policies.”
• 1 injury = predominance. “[T]he need for individual calculation here is relatively minor when compared to the common issues that predominate. And Plaintiffs articulate a reasonably ascertainable formula. Sales tax is equivalent to 6.25% of [Adjusted Vehicle Value], and Plaintiffs contend that it can be calculated for almost 97% of the class without resort to individualized review.”

No. 22-20093 (May 12, 2023) (all citations omitted).

The plaintiffs in Elson v. Black brought a putative class action against the manufacturers of the “FasciaBlaster, a two-foot stick with hard prongs that is registered with the Food and Drug Administration as a massager,” alleging that they “falsely advertised that the FasciaBlaster was able to ‘virtually eliminate cellulite,’ help with weight loss, and relieve pain.” The Fifth Circuit affirmed the dismissal of those class claims, noting that class-wide issues did not predominate:

1. Law. “[V[ariations in state law here ‘swamp any common issues and defeat predominance'” as to reliance and other basic matters; and
2. Fact. “Plaintiffs’ allegations introduce numerous factual differences that in no way comprise a coherent class. … [T]he named plaintiffs do not complain about the same alleged misrepresentations. Some are disgruntled because they expected the FasciaBlaster to reduce cellulite. Others are dissatisfied because they expected it to reduce their pain or address certain health concerns. And others are displeased because they expected it to help them lose weight. … Moreover, even within these groups, the possibility of class analysis disintegrates because the members did not rely on the same alleged misrepresentations.”

No. 21-20349 (Jan. 5, 2023).

In a straightforward application of its class-certification and Daubert case law, the Fifth Circuit rejected the certification of a class of aggrieved buyers of tickets to fly on 737 Max planes operated by Southwest Airlines, finding that the buyers suffered no cognizable injury:

[T]he plaintiffs in this suit have not plausibly alleged that they’re any worse off financially because defendants’ fraud allowed Southwest and American Airlines to keep flying the MAX 8 during the class period. If anything, plaintiffs are likely better off financially. If the MCAS defect had been widely exposed earlier, the MAX 8 flights plaintiffs chose would have been unavailable and they’d have had to take different, more expensive (or otherwise less desirable) flights instead.

The Court reasoned that if information about the MAX’s problems had become publicly known earlier than it did, then some combination of Boeing, Southwest, and the FAA would have grounded the MAX (as in fact happened), thus reducing the available supply of tickets and raising prices. Earl v. The Boeing Co., No. 21-40720 (Nov. 21, 2022).

In Fessler v. Porcelana Corona de Mexico, the Fifth Circuit flushed an attorneys-fee award in a class-action case about allegedly defective toilets, concluding that the district court had not plunged deeply enough into the factor of “degree of success obtained” — “[T]he [district] court stated simply that ‘the work done did not prove fruitless—it resulted in two settled classes receiving a host of monetary and non-monetary benefits they would not have received but for the Class Counsel’s diligent work.’ In other words, not receiving every bit of relief requested is no reason to reduce the lodestar. But this misconstrues Fifth Circuit precedent. The court was required to consider what was sought— compensatory, punitive, and treble damages for five tank models manufactured across nine years. Yet, the Class members only received a maximum of $4000 in damages for two tank models manufactured in one year.” No. 20-40357 (Jan. 10, 2022) (footnote omitted).

The district court certified a class based on a Texas statute about late fees, which says: “A landlord may not charge a tenant a late fee for failing to pay rent unless … the fee is a reasonable estimate of uncertain damages to the landlord that are incapable of precise calculation and result from late payment of rent.” 

The panel majority in Cleven v. Mid-Am. Apartments disagreed with the district court’s reading of the statute, and thus remanded: “[T]here is no requirement that a landlord engage in a process to arrive at its late fee so long as the fee is a reasonable estimate at the time of contracting of damages that are incapable of precise calculation. Therefore, the district court erred in interpreting section 92.019 and the case is remanded to the district court to determine if class certification is appropriate.”

A dissent saw matters differently: “That the plaintiffs all raised a common contention about how § 92.019 should be interpreted that is central to their claims for relief is sufficient reason for us to affirm class certification, and we do not have jurisdiction to review the district court’s partial summary judgment ruling on only the issue of liability at this stage in the litigation.” No. 18-50846 (Dec. 9, 2021).

A Louisiana-based defendant removed a class action brought by an individual citizen of Louisiana, contending that a co-defendant’s “non-diverse Louisiana citizenship could be disregarded because the [statutory] claims against [the co-defendant] were ‘improperly and egregiously misjoined’ with the assignment-based bad faith claim against the removing defendant.”

This concept — called “fraudulent misjoinder” and reliant upon state-law procedural rules — is distinct from the traditional concept of “improper joinder” (a/k/a “fraudulent joinder”), which focuses on the viability of the claim against the nondiverse defendant.

The panel majority in Williams v. Homeland Ins. Co., written by Judge Haynes and joined by Judge Ho, soundly rejected removal based on fraudulent misjoinder, emphasizing the doctrine’s practical consequences: “Adopting the fraudulent misjoinder doctrine will dramatically expand federal jurisdiction, putting the federal district courts in this circuit in the position of resolving procedural matters that are more appropriately resolved in state court—all without a clear statutory hook.” No. 20-30196 (Nov. 30, 2021).

A concurrence by Judge Ho emphasized the importance of the statutory text in rejecting the doctrine; a dissent by Judge Jones focused on “the unusual circumstances here, which bespeak obvious joinder machinations undertaken to avoid federal court.” (both opinions are in the above link). The trio of opinions suggests that this case may receive serious consideration for en banc review.

The Fifth Circuit rejected class claims about the handling of funds in an ERISA plan, identifying a basic standing problem arising from the links in the causal chain of the plaintiffs’ damages theory: “[Plaintiffs’] expert has provided calculations for the returns that they would have earned had they not invested in the FCU Option but  had instead placed their money in a stable value fund. This ‘lost investment income’ is a ‘concrete’ and redressable injury for the purposes of standing.  That said, another question we must ask is whether Plaintiffs would have in fact invested in a stable value fund to earn the higher returns had [Defendants] never offered the FCU Option. In other words, the question is whether Plaintiffs have demonstrated that it is ‘substantially probable that the challenged acts of the defendant, not of some . . . third party[]’ (including themselves) caused the injury.  If anything, the record reveals that Plaintiffs would not have invested in a stable value fund in a counterfactual world since they did not place their money in one when given the opportunity to do so.” (citations omitted, emphasis added). Oritz v. American Airlines, No. 20-10817 (July 19, 2021).

Prantil v. Arkema, No. 19-20723 (Jan. 22, 2021), involved class claims about property damage that resulted from a  chemical explosion caused by Hurricane Harvey. The Fifth Circuit vacated and remanded the trial court’s class-certification order, holding:

• “[T]he Daubert hurdle must be cleared when scientific evidence is relevant to the decision to certify”;
• The trial court’s Rule 23(b)(3) analysis fell short in its “discussion of how proof of Arkema’s conduct will affect trial”–specifically, on plaintiff-specific defensive issues about causation, injury, and damages; and
• As to injunctive relief, the order “leaves us uncertain” as to how the extent of necessary property remediation can be determined, and whether a responsive injunction can be fashioned to account for Arkema’s past remediation efforts”–especially if the injunction will rely on the analysis of the class’s experts.

The appropriate “gatekeeping” procedures for FLSA cases, which involve the question whether claims are “similarly situated” and thus trigger notice obligations, was thoroughly reviewed in Swales v. KLLM Transport Services, No. 19-60847 (Jan. 12, 2021): “This case poses an issue that has been under-studied but whose importance cannot be overstated: how stringently, and how soon, district courts should enforce § 216(b)’s ‘similarly situated’ mandate. As explained above, the FLSA’s similarity requirement is something that district courts should rigorously enforce at the outset of the litigation.” In reaching this conclusion, the Fifth Circuit disapproved of the widely-cited analysis of this issue in Lusardi v. Xerox Corp., 975 F.2d 964 (3d Cir. 1992).

“Jackson [National Life]’s objection to personal jurisdiction concerned only class members who were non-residents of Texas. Those members, however, were not yet before the court when Jackson filed its Rule 12 motions. What brings putative class members before the court is certification: ‘Certification of a class is the critical act which reifies the unnamed class members and, critically, renders them subject to the court’s power.’ When Jackson filed its pre-certification Rule 12 motions, however, the only live claims belonged to the named plaintiffs, all Texas residents as to whom Jackson conceded personal jurisdiction.” Accordingly, Jackson did not waive the issue of personal jurisdiction by raising it in the proceedings about certification. Cruson v. Jackson National Life, No. 18-40605 (March 25, 2020).

A gentle spring breeze can be refreshing, but not when it involves “reversibly … breezy” analysis of class certification. For a putative 90,000-member class action about certain ERISA plans, the Fifth Circuit found the district court’s review lacking as to two parts of Fed. R. Civ. P. 23:

• Commonality. “Nor does the court explain why clarifying [Defendant’s] status as a fiduciary will in one stroke resolve an issue that is central to the claims of each one of the class members. Most noticeably, the order neglects to consider asserted differences among class members that could prevent the suit from generating “common answers apt to drive the resolution of the litigation.” (footnotes omitted);
• Class Type.  The court notes that, just as in Ortiz [v. Fibreboard Corp.], the
  plaintiffs’ case relates to one of the historical models—namely, an action against a fiduciary seeking an accounting to restore the subject of the trust (in this case, benefits plans). But, parting ways with Ortiz, the court’s analysis begins and ends there. It fails to examine the facts of this specific class to ensure that it qualifies.” (citation omitted).

Chavez v. Plan Benefit Services, No. 19-50904 (April 29, 2020). Cf. Seeligson v. Devon Energy, No. 20-90011 (May 15, 2020) (unpublished) (“In short, the district court complied with this Court’s instructions on remand and reconsidered its findings on both commonality and predominance. Particularly given the fact that we have already addressed this class certification once, we are not inclined to postpone consideration of the merits any further. DEPCO’s petition for permission to file a Rule 23(f) appeal is denied.”).

A putative class action failed for lack of commonality: “Every member of the putative class received the same allegedly threatening letter from Medicredit. But the FDCPA penalizes empty threats, not all threats. So the letter alone is insufficient to certify a class. As in Dukes, there is no ‘glue’ here ‘holding the alleged reasons for all those [letters] together’—namely, evidence of a uniform intention by Seton regarding suit. So it is likewise ‘impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question’ why was I threatened.” Flecha v. Medicredit, Inc., No. 18-50551 (Jan. 8, 2020) (citations omitted, emphasis in original).

In a dispute about the allocation of a fee award in a successful class action case, the trial court expressly declined to follow the customary factors about reasonableness, instead focusing on the equities of earlier agreements among counsel. Applying a prior Circuit case on the issue, the Fifth Circuit reversed: “Although sympathetic to the difficult task the lawyers gave to the district court, we must vacate the award allocating attorney’s fees and remand for proceedings consistent with this opinion and with due consideration of the Johnson factors. While nothing forecloses an agreement among all, its absence leaves no choice but to ‘do it by the book.’ The result will be ‘equitable’ but not necessarily the extant result.” Torres v. SGE Management, LLC, No. 18-20801 (Dec.18, 2019).

“Ordinarily, courts must refrain from interfering with arbitration proceedings. But as our sister circuits have held, and as we now hold today, class arbitration is a ‘gateway’ issue that must be decided by courts, not arbitrators—absent clear and unmistakable language in the arbitration clause to the contrary.” 20/20 Communications, Inc. v. Crawford, No. 1810260 (July 22, 2019).

The Fifth Circuit’s new opinion in Seeligson v. Devon Energy changed its holding about a class-wide damages theory from its earlier opinion. The Court now concludes that while “it is possible that Plaintiffs could demonstrate that [Defendant] breached its implied duty to market” at a certain price, and “[i]f so, this is precisely the type of common question” that would support certification – “this court remains open as to whether damages can be ascertained on a classwide basis” and remanded for further evaluation of whether breach and damages “can be evaluated classwide or if a well-by-well analysis is required.” No. 17-10320 (revised February 20, 2019).

In Seeligson v. Devon Energy, the Fifth Circuit made a good, and a not-good, finding for a putative class of mineral-interest holders.

• Good: The Court found that a putative class had established commonality as to the question whether the defendant “breached its implied duty to market by basing its price on a higher processing fee than the fee that a ‘reasonably prudent operator would have received at the wellhead,’ reasoning that “[t]his issue is precisely the type of common question ‘that . . . will resolve an issue that is central to the validity of each one of the claims in one stroke.'”
• Not good: “Despite the potential for individual questions based on [Defendant’s] statute of limitations defense, the district court did not mention the role, if any, the tolling or limitations issues would play in this class action litigation,” and remanded for analysis of whether the common questions would predominate over individual issues raised by these defenses.

No. 17-10320 (Oct. 16, 2018).

Duggan, an non-named member of a class certified under Fed. R. Civ. P. 23(b)(1), made an untimely objection to the fairness of the class settlement. While he was not a named party, he sought to appeal under the doctrine recognized by Devlin v. Scardelletti, 536 U.S. 1 (2002), which allowed non-named class members “who have objected in a timely manner to approval of the settlement at the fairness hearing have the power to bring an appeal without first intervening.”  Unfortunately for Duggan, the Fifth Circuit found no reason to excuse his late objection, in particular rejecting the argument that his opponent was required to move to strike the objection in district court as a prerequisite to arguing waiver on appeal. Farber v. Crestwood Midstream Partners LP , No. 16-20742 (July 17, 2017).

In Slade v. Progressive Insurance, a putative class survived a challenge to its damages model based on Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Fifth Circuit concluded that the class avoided Scylla “by essentially rerunning Defendant’s calculation of actual cash value [for a damaged car] but with a lawful base value, Plaintiffs’ damages theory only pays damages resulting from the allegedly unlawful base value.” But the class then encountered Charybdis when a new issue arose from that calculation: “[B]y accepting Defendant’s condition score calculation as is, [named] Plaintiffs may have impermissibly waived unnamed class members’ ability to assert a future claim contesting Defendants’s computation” of a figure called “the condition factor.” This potential waiver raised a question as to whether the class representatives could adequately represent the class memebrs who might wish to challenge that factor, and the Court remanded for further consideration of that aspect of class certification. The Court also reminded that “a fraud class action cannot be certified when individual reliance will be an issue”; a particularly relevant reminder after the recent approval of class certification in Torres v. SGE Management, 838 F.3d 629 (5th Cir. 2016) (en banc). No. 15-30010 (May 9, 2017).

In Torres v. S.G.E. Management LLC, the en banc Fifth Circuit reversed a panel opinion about a class action involving an alleged pyramid scheme. The case alleged RICO claims about the multi-level marketing program associated with Stream Energy; the panel rejected class certification, finding that individual causation issues would predominate at trial.

The en banc court disagreed, reasoning: “The Defendants’ challenge to predominance rests on their belief that th[e] causation element will require individualized proof. But that premise . . . is at odds with recent decisions from the Supreme Court and this court emphasizing that RICO claims predicated on mail and wire fraud do not require first-party reliance to establish that the injuries were proximately caused by the fraud.” Accordingly, “[b]ecause pyramid schemes are per se mail fraud, which include inherent concealment about the deceptive payment scheme, one who participates in a pyramid scheme can be harmed ‘by reason of’ the fraud regardless of whether he or she relied on a misrepresentation about the scheme.” Additionally, the Court concluded that “if the Plaintiffs prove that Ignite is a fraudulent pyramid scheme, they may use a common inference of reliance to prove proximate causation under RICO.”

This is a significant ruling from a court that is generally considered hostile to class actions, in an area of the economy – multi-level marketing programs – that involves millions of participants. No. 14-20129 (Sept. 30, 2016) (en banc).

A putative class of New Orleans landowners sought damages arising from the construction of a flood-control canal. The Fifth Circuit affirmed the denial of class certification, noting: “This lawsuit seeks to recover different damages caused by different acts committed by different defendants at different times over a five year period.” Even under Louisiana state law theories that arguably reduced the proof problems, the Court still found fatal problems as to “individual questions regarding causation” (and the exclusion of other potential causes), as well as damages: “Any . . . formula would at a minimum need to take account of the variances in age, size, type, construction, condition, soil composition, and location of the properties.” The Court distinguished other cases that affirmed class certifications as involving “single episodes of tortious conduct usually committed by a single defendant.” Crutchfield v. Sewerage & Water Board, No. 15-30709 (July 13, 2016).

In EEOC v. Bass Pro Outdoor World LLC, the Fifth Circuit addressed a “pattern or practice” suit by the EEOC, which is related to a traditional class action certified under Fed. R. Civ. P. 23, but has additional features by statute. The Court observed several features of the Federal Rules that can reduce the risk of unfair prejudice in such a large-scale case — EEOC or otherwise — including bifurcation, sequenced special interrogatories during the liability phase, and careful attention to the availability of injunctive remedies. No. 15-20078 (

The district court granted the plaintiff’s motion for conditional class certification under the Fair Labor Standards Act. The defendant sought mandamus review, and the Fifth Circuit held the petition in abatement for more information: ” Although there is generally no ‘inflexible rule requiring district courts to file a written order explaining their decisions,” in this case the district court’s ‘lack of explanation makes it impossible for us to determine’ whether mandamus relief would be appropriate here.” In re Schlumberger Tech. Corp., No. 16-20267 (May 13, 2016, unpublished).

The issue in Seacor Holdings v. Mason was whether a party had “informally” opted out of a class action related to the Deepwater Horizon disaster.  Acknowledging that a party can opt out of a class without strictly complying with specified procedures, especially if the party is unsophisticated and unrepresented by legal counsel, the Fifth Circuit found no abuse of discretion in not finding an opt-out here.  “The gargantuan size and extraordinary complexity of this litigation therefore supports the district court’s decision. . . .  . When the district court approved the Agreement, it noted the class had potentially 200,000 members and that over 1,700 individuals sent opt-out requests to the claims administrator. Given the size and complexity of this MDL proceeding, the court and parties should not have to intuit an opt out from vague statements made in one of thousands of filings before the court. To hold otherwise would allow class members to make ambiguous statements and motions while waiting to see if the outcome of the class action is favorable.”  No. 15-30597 (April 6, 2016).

The panel majority in Torres v. SGE Management, 805 F.3d 145 (5th Cir. 2015) decertified a class action about the operation of a multilevel marketing program.   The full Court has now granted en banc review of this important decision about a significant area of the economy.

A failed class action alleging sex discrimination by Wal-Mart concluded as follows:

1. The named plaintiffs settled with Wal-Mart, and the district court entered final judgment on May 15, 2015;
2. Appellants intervened on June 2; and then
3. Appellants filed a notice of appeal (as to the dismissed class claims) on June 12.

While the notice of appeal divested the district court of jurisdiction over the pending motion to intervene, the Fifth Circuit may dismiss such an appeal and remand for purposes of considering the motion, which it did here with the agreement of the parties.  Odle v. Wal-Mart Stores, Inc., No. 15-10571 (Dec. 16, 2015, unpublished).

In a case that has now gone en banc, the plaintiffs in Torres v. S.G.E. Management, 805 F.3d 145 (5th Cir. 2015), alleged that they were victims of an alleged pyramid scheme about a multi-level marketing program to sell electricity.  The district court certified a class, acknowledging that the plaintiffs could not show a common misrepresentation, but concluding that they could show a common failure to disclose the illegality of such a scheme.  In other words, “Because it can rationally be assumed (at least without any contravening evidence) that the legality of the Ignite program was a bedrock assumption of every class member, a showing that the program was actually a facially illegal pyramid scheme would provide the necessary proximate cause.”

The Fifth Circuit disagreed: “[A]n investor could reasonably choose to knowingly invest in a pyramid scheme in the hope that they would make money. As we have already explained, a pyramid scheme provides an opportunity for those at the top of the pyramid to profit from their investments. While many of the Plaintiffs might have decided to invest in the scheme in the belief that it was legal, it is equally possible that many of the Plaintiffs chose to invest in the scheme in the belief that, legal or illegal, it provided them with an opportunity to make money.”  Accordingly, because Plaintiffs had to establish reliance with individualized proof, the Court decertified the class.

A detailed dissent warned: “By erecting this barrier to class certification based on nothing more than the theoretical possibility of prior knowledge of illegality, the panel majority creates an insurmountable barrier in this circuit to future class certification of cases that claim the presence of an illegal pyramid scheme. But, even worse, because individuals who are duped into joining such schemes uniformly invest relatively few dollars, none will possibly be able to afford to litigate their individual claims separately. Absent the availability of a class action, there simply will be no possibility of court challenges to such pyramid schemes.”

A dispute about the scope a “Chinese drywall” settlement illustrates the operation of complex class settlements.  Defendants settled with a broadly-defined group of claimants about defective drywall, but limited to claims involving “Affected Property.”  Defendants sought to enjoin a case by a class member who alleged that his condominium – which did not have Chinese drywall – had lost value because of its association with a neighboring property that did have defective Chinese drywall (also called or a “stigma” claim).  The district court denied the request and the Fifth Circuit affirmed.  Mangiarelli v. Sixty-Fifth and One, LLC, No. 14-31355 (Oct. 2, 2015, unpublished).  The Court distinguished between the situation when “individuals [are] ‘class members’ under a settlement agreement, yet [are] barred from recovery under the terms of that agreement” from this situation, where the plaintiff “was never entitled to a benefit under the . . . agreements in exchange for releasing his stigma claims.”

Hooks sued Landmark Industries, the operator of an ATM, as the representative of a putative class alleging that Landmark failed to give proper notices under the Electronic Funds Transfer Act about withdrawal fees.  Hooks v. Landmark Industries, Inc., No. 14-20496 (Aug. 12, 2015).  Pursuant to Fed. R. Civ. P. 68, Landmark offered $1,000 (the maximum allowable statutory damages) and costs and fees “through the date of acceptance of the offer, as agreed by the parties, or to be determined by the court if agreement cannot be reached.”  Hooks did not accept it, and the district court dismissed, finding the action mooted by the unaccepted Rule 68 offer.

Sidestepping the thorny question of whether this offer was “complete” under Rule 68, the Fifth Circuit  reversed.  It reasoned: “[i]t is hornbook law that the rejection of an offer nullifies the offer,” and expressed concern that “[a] contrary ruling would serve to allow defendants to unilaterally moot named-plaintiffs’ claims in the class action context — even though the plaintiff, having turned the offer down, would receiver no actual relief.  This holding places the Fifth Circuit in the minority of a 6-3 circuit split on the issue of whether an unaccepted offer of judgment can moot a named plaintiff’s claim in a putative class action.

The latest appeal about BP’s class settlement of Deepwater Horizon claims — a long and winding path — involved the rights of claimants to appeal a benefit decision to the Fifth Circuit, after review in the district court.  While the Court’s ultimate holdings turn on the specific parts of the settlement at issue, on the threshold issue of the claimants’ appeal right, the Court held: “We choose to follow these other circuits’ decisions in similar cases involving consent decrees to hold that, where a settlement agreement does not resolve claims itself but instead establishes a mechanism pursuant to which the district court will resolve claims, parties must expressly waive what is otherwise a right to appeal from claim determination decisions by a district court. Given that there has been no such express waiver in the instant case, the parties have preserved their right to appeal from the district court to this court.”  Lake Eugenie Land & Development v. BP Exploration & Production, No. 13-30843 (May 8, 2015).

In Frey v. First National Bank Southwest, No. 13-10375 (Feb. 20, 2015),  an appeal that was stayed in deference to the ruling in Mabary v. Home Town Bank, N.A., 771 F.3d 820 (5th Cir. 2014), the Fifth Circuit again affirmed the certification of a class related to notice requirements about ATM fees: “The primary questions with regard to First National’s liability are whether and when First National failed to provide the on-machine fee notice in violation of the EFTA’s requirements during the class period; if so, the appropriate amount of statutory damages; and whether the bank can avail itself of either of the two statutory defenses to liability. The answers to these questions will affect all class member’s claims.”

Plaintiffs, alleging that the defendant wrongfully printed the expiration dates of credit cards on its store receipts, sought to certify a class of “[a]ll persons who made in-store purchases from the Defendant using a debit or credit card, in a transaction occurring from May 8, 2010, through May 10, 2012, at one of the [specified] stores . . . .” Ticknor v. Rouse’s Enterprises, LLC, No. _____.  Noting a split in authority about similar class actions, and applying Mims v. Stewart Title, 590 F.3d 298 (5th Cir. 2009), the Fifth Circuit found no abuse of discretion in denying certification: “The district court determined that the plaintiffs needed to prove that they: (1) were not using someone else’s card to make their purchases, (2) were consumers rather than business purchasers, and (3) took their receipts.  Rouse’s argued that these factors differed among the putative class members. First, it noted one instance in which an individual had used his mother’s credit card to make a purchase, suggesting there would be many similar situations. Second, Rouse’s observed that it markets to professional chefs and other business customers who shop at its stores. These customers are not “consumers” protected under [the federal statute]. Finally, Rouse’s showed that numerous customers leave its stores without their receipts.”

Mabary withdrew money from an ATM machine. While she received an on-screen notice about a $2.00 fee, the machine did not have a posted external notice about the fee — a violation of the Electronic Funds Transfer Act at the time.  After amendments to the EFTA that eliminated the Bank’s liability (if applicable), the district court dismissed Mabary’s claim and denied certification of a related class.  Mabary v. Home Town Bank, N.A., No. 13-20211 (Nov. 5, 2014).  The Fifth Circuit reversed, holding: (1) Mabary had Article III standing as a result of EFTA’s definition of injury, even though she did receive a form of notice; (2) a Rule 68 offer of proof to her – precertification – did not moot her claim; and (3) EFTA’s amendments did not fall within the exception to the general presumption against statutory retroactivity.  A dissent took issue with the standing holding as “respectfuly, silly stuff,” reasoning: “Mabary cannot show that she suffered a cognizable injury in fact, so she can sue only if the existence of her statutory cause of action sufficed to satisfy Article III.”

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)).