The Roundup covers notable class action decisions each month from federal appellate courts, as well as notable Supreme Court class action cert petitions.
Second Circuit
Behrens v. JPMorgan Chase Bank, N.A. – In this decision, the Second Circuit answered a question of first impression for that court: “whether the existence of subject-matter jurisdiction requires a district court to exercise it, even if it is invoked belatedly—on analogy to the rule that a party can object to the lack of such jurisdiction at any time” (cleaned up). The Second Circuit followed the First, Fifth, and Tenth Circuits in endorsing a “one-way” view of subject matter jurisdiction whereby it cannot be established by waiver but it can be defeated by waiver. The putative class in this case asserted both federal and state law claims. The district court dismissed the federal claims with prejudice and declined to exercise supplemental jurisdiction over the state law claims, which were thus dismissed without prejudice. The defendants filed an untimely motion for reconsideration, arguing for the first time that the district court was required by CAFA to exercise subject matter jurisdiction over the state law claims. The district court denied the reconsideration motion as untimely and the Second Circuit affirmed. The Second Circuit acknowledged that exercising subject matter jurisdiction under CAFA (when it applies) is not discretionary, but as stated above, the court held that while subject matter jurisdiction can be challenged at any time it cannot be invoked at any time.
Fourth Circuit
Elegant Massage LLC v. State Farm Mutual Automobile Insurance Co. – This case shows how a defendant can occasionally use an interlocutory appeal of a class certification order to obtain early appellate review of broader, dispositive issues in a case. Under Federal Rule of Civil Procedure 23(f), a federal court of appeals may in its discretion review an order on class certification before final judgment. But the interlocutory appeal must be limited to the class certification order. In this case, with one judge dissenting, the Fourth Circuit applied a narrow exception to expand its appellate jurisdiction and reverse both the order certifying a class and an order denying a motion to dismiss. The case began when spas and massage parlors sued State Farm after it denied coverage under an “all risk” commercial property insurance policy for business losses caused by COVID-19 closure orders. The Fourth Circuit held it could review the order denying the motion to dismiss because that order addressing the insurance coverage’s scope was intertwined with the order certifying a class. Because identical insurance policies covered each class member, the district court had found common legal issues predominated over individual ones. The Fourth Circuit reversed, holding as a matter of law that the property insurance policies did not cover COVID-19 business losses and, in one swoop, reversed class certification and ordered the case dismissed on the merits. Judge Wynn dissented, arguing that the court could have reversed class certification on facts specific to the lead plaintiff and therefore lacked jurisdiction to rule on the insurance coverage issue before final judgment.
Fifth Circuit
Cheapside Minerals Ltd. v. Devon Energy Production Co. – This decision is about the local controversy exception to CAFA jurisdiction, specifically the local controversy exception’s requirement that “principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed.” A putative class of oil-and-gas royalties owners sued Devon Energy (and other defendants) in Texas state court, alleging that Devon had underpaid their royalties. Devon removed the case to federal court, invoking CAFA jurisdiction, and the plaintiffs argued that the case should be remanded pursuant to CAFA’s local controversy exception. The district court agreed with the plaintiffs but the Fifth Circuit reversed, holding that the case should remain in federal court because the local controversy exception’s requirements were not satisfied. The requirement at issue on appeal was the “principal injuries” requirement quoted above. The Fifth Circuit held that this requirement is satisfied only when every putative class member suffered his or her primary injury in the state where the suit was originally filed. In this case, the primary injury to each putative class member was economic—alleged underpayment of royalties. Because economic injuries are normally sustained where the plaintiff resides, the court explained, and because some of the putative class members had asked Devon to send their royalty payments to addresses outside of Texas, the principal injuries requirement of the local controversy exception was not satisfied.
Ninth Circuit
DZ Reserve v. Meta Platforms Inc. – In dueling opinions by Judge Sid Thomas, a Clinton appointee, and Judge Danielle Jo Forrest, a Trump appointee, the Ninth Circuit clashed over the commonality and materiality of allegedly uniform misrepresentations in a nationwide class action over social media ads. Advertisers alleged that Meta had falsely represented the number of people reached through ads on its websites because its Ads Manager program displayed a figure called “potential reach” estimating the number of people an ad might reach. In fact, the “potential reach” referred to the number of accounts, not people, the ad might reach. Writing for the panel, Judge Thomas held that the uniform alleged misrepresentation presented a common question, even though Meta argued that the “potential reach” varied for each advertiser based on its budget and target audience. The court also relied on California law to presume that advertisers uniformly relied on the alleged misrepresentation in buying ads. Judge Forrest dissented. She argued that the “potential reach” only provided an estimate and was not misleading for all advertisers since a significant deviation did not always exist between the number of accounts and people. For some ads, the difference was as low as 1%; for other ads, the deviation was as high as 50%. Moreover, she argued that the court could not presume that all advertisers relied on the “potential reach” figure when placing ads. Instead, the court should individually evaluate how advertisers relied on the “potential reach” figure, along with other data Meta provided, on an ad-by-ad basis.
Tenth Circuit
Shields Law Group LLC v. Stueve Siegel Hanson LLP – Courts often say that disputes over attorneys’ fees should not degenerate into their own, separate litigation. But, unsurprisingly, that’s exactly what happened when attorneys battled over $503 million in attorneys’ fees awarded as part of a $1.51 billion class settlement. The class case involved claims arising from releasing genetically modified corn seeds without regulatory approval. The subsequent, multiyear fee case involved disputes over the division of fees among various law firms. Some of those disputes were settled, and others took a trip to the Tenth Circuit. The journey ended anticlimactically, with the Tenth Circuit dismissing the consolidated appeals for lack of subject matter jurisdiction. In the procedurally complex fee case, the court held that non-settling law firms lacked standing to challenge a settlement order allocating a portion of the fees among various firms. The other appellant lacked standing to challenge the settlement because the resolution of the dispute would not impact its fees. The court said the ruling aligned with the general principle that “non-settling parties have no standing to challenge a settlement.”
Supreme Court
Country Mutual Insurance Co. v. Sudholt – This petition poses two questions about competing tests for exceptions to federal jurisdiction under CAFA. First, the petition asks the Court to decide the legal standard for applying CAFA’s “home state” exception, which applies where the “primary” defendant is a citizen of the forum state. Some circuits allow a court to inquire about the defendant’s ability to pay the judgment in assessing whether the defendant is the “primary” defendant. Other circuits instead ask whether the defendant is the “real target” of the litigation. Second, the petition asks the Court to decide whether a court can “look beyond” the internal affairs of a corporation and consider other legal issues when applying CAFA’s “internal affairs” exception to federal jurisdiction.
