Last week, the Eleventh Circuit addressed an issue that many class action practitioners probably haven’t given much thought to: whether approval of a class action settlement requires that each class member obtaining relief have standing bring an action under Article III. Defendants generally want a broad definition of class because they focus on finality and buying peace. Plaintiffs are more concerned with the relief class members get than whether anyone falling within the class definition would have standing. But the Eleventh Circuit struck down and remanded a settlement because a relatively small portion of the class as defined would not have standing.
In Drazen vs. Pinto, No. 21-10199, – F.4th -, 2022 WL 2963470 (11th Cir. July 27, 2022), the Eleventh Circuit heard an appeal by an opponent of final approval of a class action settlement in a case under the Telephone Consumer Protection Act (TCPA). The issue raised by the objector was whether the settlement qualified as a “coupon settlement” under the Class Action Fairness Act and therefore required the claim for attorney’s fees to be analyzed differently. But the Eleventh Circuit never addressed this issue, instead raising and deciding a separate issue: whether all class members had standing under Article III.
The issue arose because an earlier Eleventh Circuit ruling had ruled that receiving a single spam text message was not a sufficiently concrete injury to establish standing under Supreme Court precedent. About 7% of the class fell into this category, plus potentially those class members who had only received one unwanted phone call. (The members of Congress who signed the TPCA into law in 1991, in the days of landlines, wasted fax paper, and unwanted interruptions during family dinner, certainly did not expect that three decades later, millions of dollars in attorneys’ fees and hundreds of hours of court time would be spent resolving the number of unwanted text messages or cellphone calls labeled “potential spam” needed to gain standing to sue in justice). According to the Supreme Court decision in TransUnion LLC vs. Ramirez, 141 S.Ct. 2190 (2021), “[e]Each class member must have standing under Article III to recover individual damages. But some lower courts have concluded that this need not be determined at the pleadings stage and can potentially be dealt with at class certification, or perhaps even later, but it must happen before the damages are recovered. Applying this principle to a class action settlement, the Eleventh Circuit ruled that “where a class seeks certification for the sole purpose of settling damages under Rule 23(e), the definition of group should be limited to persons who have standing under Article III.” This is because “[o]Otherwise, persons without standing would receive what are effectively damages, in violation of Trans Union.” So those hoping for potentially $35 (depending on the number of class members making claims) in compensation for a spam text message will be out of luck. The case returns to the district court for redefinition of the class, including the resolution of the delicate question of “whether a single cell phone call is sufficient to meet the concrete injury requirement”, an issue on which the eleventh circuit had not yet given its opinion, and so it left that to the district court to resolve.
So what’s the lesson for lawyers settling class actions in federal court? Remember to ask yourself if everyone in the class will have standing, as well as everything else.
Copyright © 2022 Robinson & Cole LLP. All rights reserved.National Law Review, Volume XII, Number 213