Background Data privacy law is rapidly developing; significant updates to data privacy and protection laws (now enacted in over 100 jurisdictions worldwide) are of increasing importance to class action litigation. Especially after the enactment of the EU General Data Protection Regulation (GDPR) and the Chinese Cybersecurity Law (and its supporting guidelines and regulations), there is a strong push for the enactment of stricter data protection laws in the United States. Practitioners must consider the implications of…
Almost exactly 6 months ago, we reported in this blog that the European Commission was exploring ways it might expand consumer access to justice, and in particular increase the availability of “class” or collective civil litigation across the EEA, while avoiding what it characterizes as US style excess in class litigation. One proposal is to introduce a new law allowing collective litigation led by representative consumer associations across a number of economic sectors (the “Proposed…
The US Supreme Court issued a highly anticipated decision on May 21, 2018 in Epic Systems Corp. v. Lewis, holding that class action waivers in arbitration agreements are fully enforceable, notwithstanding the right to engage in concerted activity under the National Labor Relations Act (NLRA). With a 5-4 opinion authored by Justice Neil Gorsuch, an ideologically divided Supreme Court resolved a circuit court split in favor of class and collective action waivers, allowing employers to require workers to arbitrate claims on an individual rather than group basis. Although employers now have a tool to effectively eliminate most employment class actions through the use of arbitration agreements, several other important nuances remain to be considered before rolling out an arbitration program. But the Supreme Court’s decision is nevertheless a clear win for employers seeking to avoid the expense and disruption of class litigation. And the Court’s broad opinion lends support to the enforcement of employment arbitration agreements in other contexts, notwithstanding state laws that might otherwise impede arbitration.
Procedural history
In August 2016, the US Judicial Conference’s Committee on Rules of Practice and Procedure (“Committee”) published proposed amendments to Federal Rule of Civil Procedure 23 governing class actions. The proposed amendments were available for public comment from August 12, 2016 through February 15, 2017. The Committee held several public hearings to discuss the proposed amendment in late 2016 and early 2017. The proposed changes were submitted to the Supreme Court on October 4, 2017. If the Supreme Court accepts the Committee’s proposal, the changes will become effective on December 1, 2018.
Proposed changes and practical implications
The proposed amendments are intended to modernize the notice process, to allow for notice to class members via electronic communications; impose affirmative obligations on a court to consider specific factors relevant to the fairness, reasonableness, and adequacy of a proposed settlement; to curb abuses from “bad faith” objectors; and clarify that certain orders granting “preliminary approval” of class certification may not be appealed.. Each is summarized briefly below.
EUROPE – The European Commission is exploring ways that it might expand consumer access to justice, and in particular increase the availability of “class” or collective civil litigation across the EEA while avoiding what it characterises as US style excess in class litigation.
Alternative Proposals
- Non-legislative options: to enhance qualified entities’ capacity to manage both injunction and redress actions.
- Targeted revision of the Injunctions Directive: amends several key areas, in particular by expanding the scope of the Injunctions Directive to protect consumers in areas such as financial services, energy, telecommunications and environment.
- Targeted revision of the Injunctions Directive + consumer collective redress: aims to introduce further procedural efficiencies such as a “one stop shop” where representative bodies could ask the courts and/or administrative authorities to stop any breach of the law that harms consumers and obtain redress for anyone that has suffered loss.
UNITED STATES – Companies that operate in Illinois should take notice of the flurry of litigation that has arisen under the Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/1, et seq. The State of Illinois promulgated the BIPA in 2008 amid the public’s growing concerns relating to companies’ collection of biometric data for business and security purposes. The General Assembly cited “finger-scan technologies at grocery stores, gas stations, and school cafeterias” as an example of the biometric data that it intended to regulate. 740 ILCS 14/5(b). Under the BIPA, among other requirements, a company must inform the person whose biometric data is being collected that it is collecting their data and specific details relating to its data collection and preservation. 740 ILCS 14/15(b). Companies must also receive a “written release” from the person before collecting any biometric data. Id.
Significantly, the BIPA provides a private right of action for any person aggrieved by a BIPA violation, and allows a claimant to recover liquidated damages of $1,000 for each negligent violation, and $5,000 for each intentional or reckless violation (or actual damages, whichever is greater). 740 ILCS 14/20. The BIPA also expressly provides that the prevailing party in a BIPA action may recover its reasonable attorneys’ fees and costs. Id.
CANADA – Allegations of “Add-on pricing”, or “drip pricing”, have become a hot topic in recent years as consumers have moved towards making more purchases online. Drip pricing can be thought of as the incremental disclosure of additional fees. Bit-by-bit, these add-ons can cause a discrepancy between the final price of an item and the original listed price. One common example is the addition of airline baggage fees, which can dramatically increase total airfare prices. Other examples of drip pricing include:
- delivery fees for event tickets;
- municipal taxes charged by hotels;
- rental car insurance fees; and
- bank withdrawal fees.
While the concept of drip pricing has existed for some time, the advent of e-commerce has given rise to increased litigation and regulatory risk for businesses selling online services and products. Website interface design allows businesses to be more flexible in how they display and structure their pricing, however, the same flexibility can lead to pitfalls, prompting consumers to respond with class proceedings based on allegations of deceptive marketing practices.
UNITED STATES – On October 24, 2017, the Senate voted 51-50 to nullify a Consumer Financial Protection Bureau (CFPB) regulation that restricted banks and credit card companies from requiring customers to submit to mandatory arbitration in the event of a dispute. Vice President Mike Pence provided the tiebreaking vote. The Senate’s resolution now goes to President Trump, who is expected to sign the resolution into law.
The rule, which was introduced by the CFPB in July but had not yet taken effect, would have restricted financial institutions from including mandatory arbitration clauses in the fine print of its consumer contracts. This restriction on arbitration agreements would have enabled aggrieved consumers to bring class-action lawsuits against financial institutions with increased ease. Mandatory arbitration clauses are commonly utilized in many types of consumer contracts across the financial industry, including credit card agreements and private student loans. As a result of the Senate’s vote, financial institutions will face fewer class-action suits from its consumers.
CANADA – In Lavender v. Miller Bernstein, 2017 ONSC 3958, a recent class action decision of the Ontario Superior Court, the auditor of a now-insolvent securities dealer was found liable for financial losses sustained by the dealer’s clients. The decision of Justice Belobaba focuses on the question: does an auditor have a duty of care to its client’s clients, including where there is no direct relationship with or reliance by these third party clients?
The dealer, Buckingham Securities (the “Dealer”), held the investments of roughly 1000 retail customers (the “Class Members”). The defendant auditors, Miller Bernstein LLP (the “Auditor”), was found to have negligently signed-off on Form 9 reports, which are filed annually with the Ontario Securities Commission (the “OSC”), the provincial securities regulator, to ensure compliance with segregation of assets and minimum free capital requirements. The Dealer had not segregated the Class Members’ funds, which it later misappropriated causing an alleged loss of $10.6 million. These facts were later admitted by the Auditor in disciplinary proceedings against the Auditor.
UNITED STATES – On August 25, 2017, the Seventh Circuit Court of Appeals offered a stern reminder of its distaste for “hollow class-action settlements” that benefit the plaintiffs’ lawyers but not the plaintiffs themselves. See In re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652, 2017 U.S. App. LEXIS 16260 (7th Cir. 2017). In In re Subway, the Seventh Circuit evaluated a class action settlement that arose from claims (not ultimately supported in the lawsuit) that Subway’s “foot long sub” sandwiches (“footlong subs”) did not always live up to their twelve-inch billing. In reversing the district court’s approval of the settlement, the Seventh Circuit reinforced the significance of Rule 23(a) of the Federal Rules of Civil Procedure — requiring that class action representatives “fairly and adequately protect the interests of the class” — and Rule 23(e)(2) — requiring that class action settlements be “fair, reasonable and adequate.” The Seventh Circuit also reinforced the uniqueness of the class action context, in which settlement agreements not only can be, but must be, scrutinized by the district court judge with “the high duty of care that the law requires of fiduciaries.” In so ruling, the Seventh Circuit made clear that district courts facing proposed class action settlements, and the lawyers who prepared them, each have an obligation to ensure that the real people who brought the case are the ones who receive Rule 23’s protection.