Page 6 - Litigation

S6 | MONDAY, FEBRUARY 22, 2016 | Litigation
| NYLJ.COM
BY JENNIFER L. GRAY
Banks and financial services companies continued to face an onslaught of civil and regulatory litigation during 2015 and there is no indication that this trend is likely to slow in 2016. The U.S. Supreme Court is considering a number of cases that have the potential to expand or limit so-called “no injury” class actions and the extent to which statistical averages may be used to prove class-wide injury. Class action plaintiffs con- tinue to devise new theories or liability and update old ones. Here we discuss a few of the issues that are likely to impact consumer finance class action litigation over the com- ing year.
Important Supreme Court Decisions
The Supreme Court is considering four cases this term that may significantly impact consumer finance class action litigation. As of this writing, two have been decided and two are still under consideration.
Campbell-Ewald Co. v. Gomez. The Supreme Court recently issued its much- anticipated decision in Campbell-Ewald Co. v. Gomez, 577 U.S. ___ (2016), which deals with the practice of “picking-off” named plaintiffs in putative class action suits by extending offers of judgment that provide complete relief to the named plaintiff. In a 6-3 opinion, Justice Ginsburg, writing for the majority, held that an unaccepted Rule 68 offers of judgment does not “moot” a claim because “[u]nder basic principles of con- tract law,” an offer without acceptance is a legal nullity.” If a plaintiff does not accept a defendant’s offer, the court reasoned, “the parties remain[] adverse; both retain[] the same stake in the litigation they had at the outset.”
Chief Justice John G. Roberts, joined by Justices Antonin Scalia and Samuel A. Alito Jr., dissented. “The question, however, is not whether there is a contract; it is whether there is a case or controversy under Article III.” Roberts explained, “[t]his Court has long held that when a defendant unilaterally rem- edies the injuries of the plaintiff, the case is moot—even if the plaintiff disagrees and refuses to settle the dispute, and even if the defendant continues to deny liability.” “Applying those basic principles to this case,” he concluded, “it is clear that the lawsuit is moot.”
Justice Roberts went on to observe that “[t]he good news is that this case is limited to its facts ... . The majority does not say that payment of complete relief leads to the same result.” “The majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court.” The majority declined to address whether the result in this case would be different if the defendant had tendered pay- ment and the court had entered judgment in favor of the plaintiff. “That question is appropriately reserved for a case in which it is not hypothetical.”
JENNIFER L. GRAY is a shareholder in Greenberg Trau- rig’s New York and Los Angeles offices.
Consumer Finance
Class Action Trends
For 2016
The Second Circuit’s recent decision in Tanasi v. New Alliance Bank, 786 F.3d 195, 200 (2d Cir. 2015) reached the same result as the Campbell-Ewald majority, finding that a mere offer of judgment standing alone does not moot a claim. However, the Second Cir- cuit, as well as the Sixth Circuit, have held that an offer of judgment, coupled with entry of judgment in plaintiff’s favor, does moot a claim for Article III purposes. Thus, courts within these circuits have granted defense motions seeking entry of judgment in favor of a named plaintiff in the amount of a complete offer of relief.1 Given that even the Campbell-Ewald majority leaves open the question that an offer of judgment, coupled with actual relief, could moot a claim, we can expect continued litigation over how Rule 68 may be used to moot a named plaintiff’s claim.
DirecTV v. Imburgia. In this recent deci- sion, the Supreme Court once again rebuked a lower court for undermining an agreement to arbitrate. Writing for the six-member majority, Justice Stephen G. Breyer rejected a California state court’s interpretation of a class arbitration waiver in a way that invali- dated an entire arbitration agreement. The court found that the state court’s interpreta- tion violated the Federal Arbitration Act’s requirement that agreements to arbitrate be placed on the same footing with all other contracts. While the ruling does not make new law, it underscores that circuit court efforts to circumvent arbitration agreements will not be tolerated. The Consumer Finan- cial Protection Bureau (CFPB) is considering proposing rules that would ban consumer financial companies from including arbitra- tion clauses in their customer agreements. A CFPB ban on arbitration waivers would almost certainly be challenged. For now, arbitration clauses and class action waiv- ers remain enforceable, but we can expect to see a lot of activity on this issue over the coming year.
Spokeo v. Robins. In Spokeo v. Robins, the Court is considering whether a statutory violation alone is sufficient to confer Article III standing. In this case, the plaintiff alleged that the defendant had published false infor- mation about him on its website, but he did not allege that he had been injured by the information. So-called “no-injury” class actions are increasingly common and pose tremendous legal exposure to consumer finance companies because so many laws regulating the industry do not require a showing of actual injury, like the FCRA. The court may ultimately decide this case on narrow grounds and find, for example, that Robins did have injury-in-fact based on the publishing of false information. But, should the court decide the case on broader grounds—either in favor of the plaintiff or defendant—its impact on “no-injury” class actions would be significant.
Tyson Foods v. Bouaphakeo. In Tyson Foods v. Bouaphakeo, No. 14-1146, the Supreme Court is reviewing whether a class action plaintiff may “prove” liability and dam- ages 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
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