Uninjured Class Members - How Many Is Too Many? Ninth Circuit Weighs In On Class Action Article III Standing
Jocelyn D. Larkin, Executive Director, The Impact Fund
As will be familiar to readers of our Practitioner Blog, Article III standing has become an increasingly potent strategy for corporations to limit access to federal court for injured victims. One of SCOTUS’s most important class action cases this term, TransUnion LLC v. Ramirez, considers whether class members whose credit reports wrongly included information suggesting they were on a government terrorist watch list have suffered a cognizable Article III injury if the reports were never accessed by third parties.
So how exactly does Article III work in a class action? It is generally understood that, at the outset of a class action, Article III standing is determined based on the claims of the named plaintiffs. At the tail end, if the case goes to judgment, unnamed class members must prove an Article III injury in order to receive damages. But what about in the middle of the case? What about at class certification? Most case law recognizes that, at the certification stage and before the merits have been addressed, there may be some uninjured class members within the class definition. Since an uninjured class member cannot ultimately recover, their mere presence in the class during the litigation likely does not affect a defendant’s overall liability or rights. Torres v. Mercer Canyons Inc., 835 F.3d 1125, 1136 (9th Cir. 2016) (“fortuitous non-injury to a subset of class members does not necessarily defeat certification of the entire class”). On the other hand, if only a small portion of the class is actually injured, this might call into question the case theory or the precision of the class definition. Id.
A Ninth Circuit panel weighed in on the “how many is too many” question this week in Olean Wholesale Grocery Coop. v. Bumble Fee Foods LLC, No. 19-56514 (9th Cir., Apr. 6, 2021), a Rule 23(f) appeal of the certification of three classes challenging a price-fixing conspiracy against packaged tuna producers. In a 2-1 decision, Judge Bumatay held that the percentage of uninjured class members must be “de minimis,” or Rule 23(b)(3) predominance may not be satisfied. How much exactly is de minimus? Read on.
In this case, there was little dispute that the price-fixing conspiracy existed. At class certification, the plaintiffs’ expert concluded that all but 5.5% of the class members had been overcharged. The defense expert objected to the plaintiffs’ expert’s methodology and asserted that 28% of class members suffered no injury at all (in other words, close to three out of four class members were injured!). The district court had declined to resolve the expert dispute, concluding that despite “potential flaws” in methodology, the plaintiffs’ analysis was “reliable and capable of proving impact,” and it certified three classes. The panel held that the district court must resolve this factual dispute and remanded for reconsideration of the number of uninjured class members.
The court held that the percentage of uninjured class members must be “de minimis,” or Rule 23(b)(3) predominance may not be satisfied.
The panel read the text of Rule 23(b)(3) to require not just that common question predominate over individual questions but that “questions of law or fact be shared by substantially all the class members.” Relying on the First Circuit’s decision in In re Asacol Antitrust Litig., 907 F.3d 42, 53 (1st Cir. 2018), the panel concluded that questions of law or fact common to class members would not predominate over any questions affecting only individual members if the defense expert were correct: “If 28% of the class were uninjured, common questions of law or fact would not be shared by substantially all the class members, nor would they prevail in strength or pervasiveness over individual questions.” While the panel claimed not to be setting a numerical or bright-line test, it cited to cases finding that 10–12% uninjured class members was above its new de minimus standard.
In his dissent, Judge Hurwitz explained why the majority’s analysis is neither tethered to the text of Rule 23 nor consistent with circuit precedent. He disputed the majority’s reading of the text of Rule 23(b)(3) predominance: “the Rule . . . simply instructs the district court to determine whether common questions exceed others.” Noting that Torres explicitly allows for the inclusion of uninjured class members so long as there is a means to eventually “winnow [them] out,” he observed that “no Ninth Circuit case imposes a cap on the number of uninjured plaintiffs as a prerequisite to class certification.” Moreover, circuit precedent also consistently permits the certification of classes even where class member damages vary. Accusing the majority of rewriting Rule 23, Judge Hurwitz reminded his colleagues that “we should not legislate from the appellate bench based on our personal concerns with the class action device.”
The majority’s new “not more than de minimis” rule might work in an antitrust or securities class action in which an economist can, at the class certification stage, estimate losses associated with the allegedly illegal conduct. But many types of class actions do not permit this kind of analysis at class certification. Indeed, in civil rights class actions, Teamsters hearings are required after a finding of classwide liability precisely to answer the question of which class members have been the victims of a pattern or practice of discriminatory conduct. The panel fails to address such practical issues. I expect this issue will continue to percolate within and among the circuits.
If there is any bright side, it is that the de minimus cap should not apply in Rule 23(b)(2) injunctive relief cases because the panel grounded its analysis in the text of Rule 23(b)(3).
UPDATE 08.03.21:
The full Ninth Circuit vacated the panel opinion and ordered en banc rehearing in Olean Wholesale Grocery v. Bumble Bee Foods. The Impact Fund welcomes this news and opportunity for the full court to reject the unwritten class certification requirement that the class include no more than a de minimus number of uninjured class members.
UPDATE 04.28.21:
In a surprising development, one of the judges on the Ninth Circuit has sua sponte called for a vote of the full court on rehearing en banc. The parties are directed to file briefs within 21 days expressing their views on the need for en banc review.