FOR IMMEDIATE RELEASE
NEWS ADVISORY
May 17, 2016
For More Information, contact:
Luther Strange
Mike Lewis (334) 353-2199
Alabama Attorney General
Joy Patterson (334) 242-7491
Page 1 of 1
ATTORNEY GENERAL STRANGE HAILS U.S. SUPREME COURT DECISION LIMITING
CLASS ACTION LAWSUITS WHERE PERSONS SUFFER NO ACTUAL HARM
(MONTGOMERY) – Attorney General Luther Strange hailed a U.S. Supreme Court decision
Monday clarifying that persons filing lawsuits must be able to prove actual harm. The ruling
serves to place limits on costly class action lawsuits based on technical violations of the law in
which persons have suffered no actual damage.
On May 16, the Supreme Court ruled 6-2 in favor of the on-line company Spokeo in a lawsuit
from a plaintiff who had been unable to prove actual harm. The high court returned the case to
the lower court for reconsideration.
“The Supreme Court’s decision in Spokeo, Inc. v. Robins addressed a legal flaw exposing
American businesses to class actions seeking millions – if not billions – of dollars in awards for
litigants who have suffered no actual damages,” said Attorney General Strange. “These no-
harm, windfall class actions are the result of a startling loophole in the law.
“Over the past several decades, Congress has enacted an alphabet soup of statutes with
acronyms like RESPA, the FCRA, the FDCPA, and the DPPA that are intended to protect
consumers from abusive practices. These laws allow aggrieved parties to not only recover for
their injuries, but also award statutory damages, typically $1,000 per violation. But what was
intended as a mechanism to streamline recovery for consumers with legitimate complaints has
allowed creative litigants to file actions based on technical statutory violations that harm no
one.
“Laws protecting consumers from unfair practices are important, but they have been abused.
On July, 9, 2015, my office led a coalition of eight states urging the Supreme Court via an
amicus brief to follow the principles enshrined in the Constitution and restore the actual harm
requirement to our system of litigation. The Supreme Court’s decision ensures that these laws
are used as they were intended – not to line the pockets of innovative plaintiffs, but to right
wrongs and to make the injured whole,” Attorney General Strange observed.
Joining Alabama in the July 9, 2015, amicus brief in the Spokeo case were the states of Colorado,
Michigan, Nebraska, Tennessee, West Virginia, Wisconsin and Wyoming.
A copy of the Alabama-led amicus is attached.
–30–
501 Washington Avenue * Montgomery, AL 36104 * (334) 242-7300
www.ago.alabama.gov
No. 13-1339
In the Supreme Court of the United States
————-?————-
SPOKEO, INC.,
PETITIONER,
V.
THOMAS ROBINS,
RESPONDENT.
————-?————-
On Writ of Certiorari to the United States Court
of Appeals for the Ninth Circuit
————-?————-
BRIEF OF ALABAMA, COLORADO, MICHIGAN,
NEBRASKA, TENNESSEE, WEST VIRGINIA, WISCONSIN,
AND WYOMING AS AMICI CURIAE IN SUPPORT OF
PETITIONER
————-?————-
Luther Strange
Alabama Attorney General
Andrew L. Brasher
Solicitor General
Counsel of Record
Brett J. Talley
Deputy Solicitor General
OFFICE OF THE ALABAMA
ATTORNEY GENERAL
501 Washington Ave.
Montgomery, AL 36130
(334) 242-7300
abrasher@ago.state.al.us
Counsel for Amici Curiae
July 9, 2015
Cynthia Coffman Patrick Morrisey
Colorado Attorney General West Virginia Attorney General
Ralph L. Carr Colorado 1900 Kanawha Blvd. E
Judicial Center Charleston, WV 25305
1300 Broadway, 10th Fl. (304) 558-2021
Denver, CO 80203
(720) 508-6000 Brad D. Schimel
Wisconsin Attorney General
Bill Schuette 17 W. Main Street
Michigan Attorney General Madison, WI 53707
P. O. Box 30212 (608) 266-1221
Lansing, MI 48909
(517) 373-1110 Peter K. Michael
Wyoming Attorney General
Douglas J. Peterson 123 Capitol Building
Nebraska Attorney General Cheyenne, WY 82002
2115 State Capitol (307) 777-7841
Building
Lincoln, NE 68509
(402) 471-2683
Herbert H. Slatery III
Tennessee Attorney General
425 5th Avenue North
Nashville, TN 37027
(615) 741-3491
i
QUESTION PRESENTED
May Congress confer Article III standing upon
a plaintiff who suffers no concrete harm, and who
therefore could not otherwise invoke the jurisdiction
of a federal court, by authorizing a private right of
action based on a bare violation of a federal statute*
ii
TABLE OF CONTENTS
QUESTION PRESENTED ………………………………………….. i†
TABLE OF AUTHORITIES ……………………………………….. iv†
INTRODUCTION AND INTEREST OF AMICI CURIAE ………. 1†
SUMMARY OF ARGUMENT ………………………………………. 3†
ARGUMENT ………………………………………………………….. 6†
I.† The States have a strong interest in
ensuring a balanced legal system. ………………….. 6†
A.† The amici States have borne
witness to the magnitude of abuse
the class action can invite …………………….. 7†
B.† Many states recognized the problem
and, together with Congress and the
judiciary, implemented reforms ………….. 10†
II.† Lower court decisions weakening the
injury-in-fact requirement have upset the
balance of our judicial system ………………………. 12†
A.†Our Constitution and judicial
system create a balance between
securing the right of the injured to
receive restitution and protecting
defendants from abusive litigation ………. 13†
B. † The statutory-damages class action
and the effective elimination of the
injury-in-fact requirement have
upset the balance ………………………………. 15†
C. Weakening the injury-in-fact
requirement collapses the standing iii
analysis and the test for class-action
certification ……………………………………….. 17†
III.†The Court can restore balance by
reiterating that injury in fact requires
actual harm ………………………………………………… 20†
A.† A proper application of the injury-
in-fact requirement will eliminate
unfair windfall class actions ……………….. 21†
B.† A robust standing requirement
helps accomplish, rather than
hinders, the goals of statutory-
damages laws ……………………………………. 24†
CONCLUSION ……………………………………………………… 31†
iv
TABLE OF AUTHORITIES
Cases†
AT&T Mobility LLC v. Concepcion,
131 S. Ct. 1740 (2011) …………………………………….. 16
Bateman v. American Multi-Cinema, Inc.,
623 F.3d 708 (9th Cir. 2010) …………………………… 20
Beegal v. Park W. Gallery,
925 A.2d 684 (N.J. 2007) ………………………………… 11
Benn v. BancBoston,
No. 3:96-CV-0974-J (N.D. Tex. Oct. 4,
1996) ………………………………………………………………. 9
BMW of N. Am., Inc. v. Gore,
517 U.S. 559 (1996) ………………………………………… 14
Comcast Corp. v. Behrend,
133 S. Ct. 1426 (2013) …………………………………….. 12
Compaq Computer Corp. v. Lapray,
135 S.W.3d 657 (Tex. 2004) …………………………….. 11
Coopers & Lybrand v. Livesay,
437 U.S. 463 (1978) ………………………………………… 16
Donoghue v. Bulldog Investors Gen. P’ship,
696 F.3d 170 (2d Cir. 2012) …………………………….. 22
Dukes v. Wal-Mart, Inc.,
509 F.3d 1168 (9th Cir. 2007), rev’d,
Wal-Mart Stores, Inc. v. Dukes, 131 S.
Ct. 2541 (2011) ………………………………………………… 7
Dura Pharm., Inc. v. Broudo,
544 U.S. 336 (2005) ………………………………………… 12 v
Ex parte Am. Bankers Life Assur. Co. of
Fla.,
715 So. 2d 186 (Ala. 1997) ………………………………. 10
Ex parte Citicorp Acceptance Co., Inc.,
715 So. 2d 199 (Ala. 1997) ………………………………. 11
Graham Cnty. Soil & Water Conservation
Dist. v. U.S. ex rel. Wilson,
559 U.S. 280 (2010) ………………………………………… 14
Hammer v. Sam’s E., Inc.,
754 F.3d 492 (8th Cir. 2014) cert. denied,
135 S. Ct. 1175 (2015) …………………………………….. 22
Heckler v. Chaney,
470 U.S. 821 (1985) ………………………………………… 29
Hoffman et al. v. BancBoston Mortg. Corp.,
No. CV-91-1880 (Ala. Cir. Ct., Jan. 24,
1994) ………………………………………………………………. 8
Kamilewicz v. Bank of Boston Corp.,
92 F.3d 506 (7th Cir. 1996) …………………………… 8, 9
Leysoto v. Mama Mia I., Inc.,
255 F.R.D. 693 (S.D. Fla. 2009) ……………………….. 26
Linda R.S. v. Richard D.,
410 U.S. 614 (1973) ………………………………………… 21
Lopez v. KB Toys Retail, Inc.,
No. CV 07-144-JFW (CWx) (C.D. Cal.
July 18, 2007) …………………………………………… 26, 27
Lujan v. Defenders of Wildlife,
504 U.S. 555 (1992) …………………………………. passim vi
McReynolds v. Merrill Lynch, Pierce,
Fenner & Smith, Inc.,
672 F.3d 482 (7th Cir. 2012) …………………………….. 7
Mitchell v. H & R Block, Inc.,
783 So. 2d 812 (Ala. 2000) ………………………………… 8
Murray v. GMAC Mortg. Corp.,
434 F.3d 948 (7th Cir. 2006) ……………………… 18, 20
Parker v. Time Warner Entm’t Co., L.P.,
331 F.3d 13 (2d Cir. 2003) ………………………………. 27
Phillips Petroleum Co. v. Shutts,
472 U.S. 797 (1985) ………………………………………… 14
Raines v. Byrd,
521 U.S. 811 (1997) ………………………………………… 24
Ramsey v. Nestle Waters N. Am., Inc.
d/b/a Poland Spring Water Co.,
No. 03 CHK 817 (Ill. Cir. Ct., Nov. 5,
2003) ………………………………………………………………. 9
Robins v. Spokeo, Inc.,
742 F.3d 409 (9th Cir. 2014) cert.
granted, 135 S. Ct. 1892 (2015) ……………………….. 17
Safeco Ins. Co. of Am. v. Burr,
551 U.S. 47 (2007) ………………………………………….. 18
Scott v. Blockbuster Inc.,
No. DI62-535, (Jefferson Cnty., Tex.,
2001) …………………………………………………………….. 10
Seminole Cnty. v. Tivoli Orlando Assocs.
Ltd.,
920 So. 2d 818 (Fla. Dist. Ct. App. 2006) ………….. 11 vii
Shady Grove Orthopedic Associates, P.A. v.
Allstate Ins. Co.,
559 U.S. 393 (2010) ………………………………………… 16
Sierra Club v. Morton,
405 U.S. 727 (1972) ………………………………………… 21
Sony Corp. of Am. v. Universal City
Studios, Inc.,
464 U.S. 417 (1984) ………………………………………… 14
Standard Fire Ins. Co. v. Knowles,
133 S. Ct. 1345 (2013) …………………………………….. 12
Stillmock v. Weis Markets, Inc.,
385 F. App’x 267 (4th Cir. 2010) ……………………… 15
Summers v. Earth Island Inst.,
555 U.S. 488 (2009) ………………………………………… 23
Taylor v. Acxiom Corporation,
No. 2:07-cv-0001 (E.D. Tex. Jan. 4, 2007) …………. 27
Tourgeman v. Collins Fin. Servs., Inc.,
755 F.3d 1109 (9th Cir. 2014)………………………….. 22
Trans Union LLC v. Federal Trade
Comm’n,
536 U.S. 915 (2002) ………………………………………… 16
Valley Forge Christian Coll. v. Americans
United for Separation of Church &
State, Inc.,
454 U.S. 464 (1982) ………………………………………… 29
Vermont Agency of Natural Res. v. U.S. ex
rel. Stevens,
529 U.S. 765 (2000) …………………………………… 15, 29 viii
Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541 (2011) ……………………………….. 12, 18
Warth v. Seldin,
422 U.S. 490 (1975) ……………………………… 21, 22, 23
Statutes†
15 U.S.C. ß 1681 ……………………………………………….. 25
15 U.S.C. ß 1692 ……………………………………………….. 25
ALA. CODE ß 6-5-641 ………………………………………….. 11
COLO. REV. STAT. ß 13-20-901 …………………………….. 12
GA. CODE ANN. ß 9-11-23 ……………………………………. 12
KAN. STAT. ANN. ß 60-223 …………………………………… 12
LA. CODE CIV. PROC. ANN. arts. 591-97 ……………….. 11
MO. REV. STAT. ß 512.020 …………………………………… 12
OHIO REV. CODE ANN. ß 2505.02 …………………………. 12
TENN. CODE ANN. ß 27-1-125 ………………………………. 12
TEX. CIV. PRAC. & REM. CODE ß 26.001 et
seq. ……………………………………………………………….. 11
TEX. CIV. PRAC. & REM. CODE ß 51.014 ………………… 12
Rules†
FED. R. CIV. P. 23 ………………………………………………. 19
Sup. Ct. R. 37 ……………………………………………………… 1
Constitutional Provisions†
U.S. CONST. art. III, ß 2, cl. 1 ……………………………… 14 ix
Legislative History†
149 Cong. Rec. 21734 (2003) …………………………. 25, 26
H.B. 4 (Tex. 2003) …………………………………………….. 12
H.B. 1027 (Colo. 2003) ……………………………………….. 12
H.B. 1211 (Mo. 2004) …………………………………………. 12
H.B. 1984 (La. 1997) …………………………………………. 11
H.B. 2008/S.B. 1522 (Tenn. 2011) ……………………….. 12
H.B. 2764 (Kan. 2004) ……………………………………….. 12
H.B. 394 (Ohio 1998) …………………………………………. 12
H.B. 4, 78 Leg. Reg. Sess. (Tex. 2003) …………………. 11
S. Rep. No. 109-14 (Feb. 28, 2005) ………………………. 10
S.B. 19 (Ga. 2005) ……………………………………………… 12
Other Authorities†
AM. TORT REFORM ASS’N, 2014/2015
JUDICIAL HELLHOLES (2015) ……………………………. 13
Barry Meier, Math of a Class-Action Suit:
‘Winning’ $2.19 Costs $91.33, N.Y.
TIMES, Nov. 21, 1995 ……………………………………….. 9
Blockbuster Settles Late-fee Suit with
Certificate Plan, HOUSTON CHRON., Jan.
13, 2002 ………………………………………………………… 10
Eddie Curran, You Win, You Pay, MOBILE
REG. (Ala.), Dec. 29, 1999 …………………………………. 9
Edward D. Murphy, Poland Spring Settles
Purity Suit, PORTLAND PRESS HERALD,
Nov. 6, 2003 ……………………………………………………. 9 x
Holly S. Hosford, Avoiding Annihilation:
Why Trial Judges Should Refuse to
Certify A FACTA Class Action for
Statutory Damages Where the Recovery
Would Likely Leave the Defendant
Facing Imminent Insolvency, 81 MISS.
L.J. 1941 (2012) …………………………………………….. 19
John C. Coffee, Jr., Rescuing the Private
Attorney General: Why the Model of the
Lawyer As Bounty Hunter Is Not
Working, 42 MD. L. REV. 215 (1983) …………………. 28
John H. Beisner, Matthew Shors, Jessica
Davidson Miller, Class Action “Cops”:
Public Servants or Private
Entrepreneurs?, 57 STAN. L. REV. 1441
(2005) ………………………………………………………. 27, 28
John S. Haddock, Articulating A “Rational
Connection” Requirement in Article III
Standing, 66 STAN. L. REV. 1423 (2014) …………… 22
Lawyers Get $1.5 Million, Clients Get 50
Cents Off, FULTON COUNTY DAILY REP.,
Nov. 21, 1997 ………………………………………………… 10
Richard A. Nagareda, Aggregation and Its
Discontents: Class Settlement Pressure,
Class-Wide Arbitration, and CAFA, 106
COLUM. L. REV. 1872 (2006) ……………………………. 30
Sheila B. Scheuerman, Due Process
Forgotten: The Problem of Statutory
Damages and Class Actions, 74 MO. L.
REV. 103 (2009) ………………………………………… 15, 27 xi
SITE SELECTION, TOP TEN BUSINESS
CLIMATES (2014) …………………………………………….. 13
SMALL BUSINESS & ENTREPRENEURIAL
COUNCIL, SMALL BUSINESS POLICY INDEX
2014: RANKING THE POLICY MEASURES
AND COSTS IMPACTING SMALL BUSINESS
AND ENTREPRENEURSHIP (2014) ………………………. 13
Stateside Assocs., Class Action Lawsuits
in State Courts: A Case Study in
Alabama (1998) (attached to Statement
of Dr. John B. Hendricks at Mass Torts
and Class Actions: Hearings Before the
Subcomm. on Courts and Intellectual
Property of the House Comm. on the
Judiciary, 105th Cong. (Mar. 5, 1998)) ………………. 8
Susan P. Koniak & George M. Cohen,
Under Cloak of Settlement, 82 VA. L.
REV. 1051 (1996) ……………………………………………… 9 1
INTRODUCTION AND INTEREST OF AMICI CURIAE
The amici curiae are States concerned that lower
court decisions have upset the balance between
providing injured parties access to the courts and
ensuring that businesses are not faced with abusive,
1
no-harm lawsuits. By eliminating the injury-in-fact
requirement of standing, these decisions have
unleashed a torrent of potentially firm-killing class
actions for technical statutory violations that have
caused no actual harm to plaintiffs. This Court
should reaffirm that actual harm is necessary to
establish Article III standing and restore a balance
that respects the interests of both consumers and
businesses.
The experience of the amici States demonstrates
the need for balance in our system of civil litigation.
In response to widespread abuse of the class action,
many of the amici States, working with Congress
and the courts, have enacted thoroughgoing reforms
of class action litigation designed to eliminate abuse
while maintaining a vehicle to redress widespread
injuries. The lower court’s decision undermines the
standing requirements of Article III and threatens to
return us to the “bad old days” of class-action abuse,
where lawyer-driven actions were designed to
produce large fees rather than to make injured
parties whole.
By all but eliminating its core component – injury
in fact – the lower court’s decision strips standing of
1
The amici States do not need consent of the parties to file this
brief. See Sup. Ct. R. 37(4). 2
its constitutional role as the “essential and
unchanging part of the case-or-controversy
requirement of Article III.” Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992). Equating injury in
fact with technical statutory violations, named
plaintiffs can drive classes numbering in the
millions. These actions often seek billions or even
trillions of dollars in statutory damage awards on
behalf of putative class members who have suffered
no actual harm. So perverse are the incentives
created under this standing regime that class
members have begun to forgo actual damages
altogether, seeking instead to simplify the expansion
of the class and, consequently, the statutory damage
award.
Requiring concrete injury in fact for statutory
damages restores needed balance. It ensures that the
plaintiffs seeking statutory damages are those who
have been actually harmed by a defendant’s conduct
and have a stake in the litigation beyond the damage
award itself. It ensures that the defendants in such
lawsuits are businesses whose actions have actually
harmed consumers. And it ensures that enforcement
is targeted to practices that have caused actual
harm – as opposed to those most conducive to class
certification.
The Court should reverse the decision of the
lower court and reaffirm that the standing analysis
requires actual harm to establish injury in fact in
statutory damages litigation. 3
SUMMARY OF ARGUMENT
The consequences of the Court’s decision in this
case go far beyond whether Robins can continue his
suit against Spokeo. The Court has the opportunity
to restore balance to a system that has been upset by
the unwillingness of the lower courts to enforce the
injury-in-fact requirement of standing in statutory
damages class actions. This reticence has led to a
wave of no-injury, windfall class actions that
undermine the goals of statutory-damages laws. By
reestablishing the injury-in-fact requirement, this
Court can restore balance to our system of litigation.
I. The States have worked with Congress and
the judiciary to limit class action abuse and ensure
balance in the judicial system.
A. By restoring injury in fact to its rightful place,
the Court can avoid a return to the Wild West of
class action abuse that states, Congress, and the
judiciary have tried to civilize. The experience of the
amici States demonstrates that class actions are
uniquely vulnerable to abuses that subordinate the
interests of the class members to the interests of the
class’s counsel and representative. In the 1990s,
class actions were out of control. Certain judges
routinely certified nationwide classes without
scrutiny and approved inequitable class settlements
that provided little compensation for absent class
members.
B. Many states recognized these abuses and
instituted significant class-action reforms, such as
heightened certification procedures and interlocutory
appeal of certification orders. The State of Alabama, 4
the lead amicus here, was at the vanguard of both of
these trends. Alabama suffered from its share of
class-action abuses and the economic damage they
cause, but it implemented reforms after those abuses
came to light. If the injury-in-fact requirement is
weakened and abusive statutory class actions are
allowed to proceed, much of this work will be undone.
II. By eliminating the need for actual harm, the
lower court’s approach to injury in fact upsets the
balance and invites a new wave of abusive statutory
damages class actions.
A. The class action and statutory damages are
both important tools that enable an aggrieved party
to vindicate injuries that might otherwise go
unredressed. Combined they are particularly
powerful, as they allow consumers to pursue
significant damages against defendants for
widespread abuses that Congress has sought to
stamp out. But although these devices can do much
good, unmoored from traditional procedural
limitations on litigation, they can also cause great
destruction. By weakening the injury-in-fact
requirement of standing, lower courts have allowed
massive class actions seeking firm-killing damages to
proceed against defendants that have caused no
harm. Doing so not only undermines standing as a
gatekeeper against class-action abuse; it undermines
the class certification process as well.
B. The rule announced by the lower court
collapses the standing analysis and undermines the
four part test of Rule 23(a). The three elements of
injury in fact, causation, and redressability are “the
irreducible constitutional minimum of standing.” 5
Lujan, 504 U.S. at 560. The lower court’s rule,
however, further reduces the analysis down to one
question – did the defendant allegedly fail to conform
its behavior to the statute* This approach obviates
the need for any substantive inquiry into injury in
fact, causation, and redressability.
Similarly, the Rule 23(a) requirements of
numerosity, commonality, typicality, and adequate
representation are a necessary check on class-action
abuse. In no-harm class actions, however, these
requirements have no real force. No-harm classes
tend to number in the millions, and since they seek
compensation for mere technical statutory violations,
commonality and typicality present no bar to class
certification. In fact, class members may even agree
to forgo actual damages so as to make the class as
homogeneous as possible. The goal of the class
action – making injured parties whole – becomes
subordinate to the goal of creating a bigger and more
lucrative class.
C. No-harm class actions routinely seek statutory
damages in the billions or even trillions of dollars for
class members that suffer no concrete injury.
Although a windfall for class counsel, these massive
suits are often potential firm killers with substantial
in terrorem effect. Since class certification in these
cases is a foregone conclusion, defendants are faced
with a “your money or your life” choice. They can
either settle or bet the firm on a favorable outcome.
III. The Court can restore needed balance by
reaffirming that injury in fact requires actual harm.
The Court can end this confusion and stave off a
new wave of class-action abuse by simply 6
acknowledging that Congress passes statutes against
the backdrop of constitutional requirements,
including standing. Doing so restores injury in fact to
its proper place and ensures that statutory-damages
schemes better accomplish their goals. Defendants
would face parties they had harmed by their conduct.
Plaintiffs would have a stake in the litigation beyond
the damage award itself, directing litigation towards
practices that cause harm to consumers and against
parties who engage in those practices. Restoring
balance would thus better accomplish the goals
Congress set out to achieve in passing statutory-
damages laws while avoiding the danger of
overenforcement.
This Court should reverse the lower court.
ARGUMENT
Our system strikes a hard-fought balance
between the right of the injured to recover damages
and the right of defendants to be free from abusive
litigation. By failing to enforce the injury-in-fact
requirement, lower courts have upset that balance,
allowing windfall class actions to continue against
defendants who have harmed no one. By restoring
injury in fact to its rightful place in the standing
analysis, this Court can reset that balance while
vindicating the purpose of statutory-damages laws.
I. The States have a strong interest in
ensuring a balanced legal system.
In the amici States’ experience, class actions are
an important procedural device for efficient
consumer litigation, but also uniquely vulnerable to 7
abuse. These vulnerabilities are driven in large part
by the huge damage awards waiting at the end of a
successful litigation, leading to two problems. First,
class counsel has “a powerful financial incentive to
[litigate] the case on terms favorable to themselves,
but not necessarily favorable to their unknown
clients,” and certainly not favorable to the public at
large. Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1199
(9th Cir. 2007) (Kleinfield, J., dissenting), rev’d, Wal-
Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).
Secondly, because of the leverage of aggregated
claims, a court’s preliminary decision to certify a
class may coerce a defendant to settle, especially
when the only alternative is to ”bet[] [the] company
on a single jury verdict.” McReynolds v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482,
491 (7th Cir. 2012). Without proper safeguards to
prevent the certification of abusive class actions,
class counsel have an incentive to bring bigger and
bigger classes seeking larger and larger damages,
with defendants all but compelled to settle.
A. The amici States have borne
witness to the magnitude of abuse
the class action can invite.
The threat of class-action abuse is not
speculative. During the 1990s, the amici States were
inundated with frivolous class actions that came
with significant economic cost. The lead amicus here,
Alabama, had a front-row seat to many of the worst
of these abuses. Alabama judges in certain counties
were known to certify nationwide class actions with
little or no analysis. From 1995 to 1997, a total of 91
putative class actions were filed in six Alabama 8
counties. Stateside Assocs., Class Action Lawsuits in
State Courts: A Case Study in Alabama (1998)
(attached to Statement of Dr. John B. Hendricks at
Mass Torts and Class Actions: Hearings Before the
Subcomm. on Courts and Intellectual Property of the
House Comm. on the Judiciary, 105th Cong. (Mar. 5,
2
1998)). Judges certified classes in 43 of those cases;
in at least 38, the certification was ex parte and
entered on or shortly after the day the complaint was
filed. Id. Lawyers coined a colorful term for these
quick, ex parte certification orders: the “drive-by”
class action. See, e.g., Mitchell v. H & R Block, Inc.,
783 So. 2d 812, 818 (Ala. 2000) (Hooper, C.J.,
dissenting).
Compounding this problem, many judges were
similarly lax in reviewing proposed class
settlements. This lack of diligence led to collusion
between named plaintiffs and defendants and
unfairness to absent class members. In Hoffman, et
al. v. Bank of Boston, for example, a homeowner
challenged the Bank of Boston’s practice of holding
too much money in its mortgage escrow accounts,
which prevented the homeowners from spending that
money until they had paid off their mortgages. See
Kamilewicz v. Bank of Boston Corp., 92 F.3d 506 (7th
Cir. 1996) (discussing Hoffman, et al. v. BancBoston
Mortg. Corp., No. CV-91-1880 (Ala. Cir. Ct., Jan. 24,
1994)). The settlement in that case, approved by an
Alabama judge, required the bank to return the
overages immediately, but also awarded more than
$8.5 million in attorneys’ fees to be paid by class
2
Available at http://commdocs.house.gov/committees/judiciary/
hju59921.000/hju59921_0f.htm (last visited July 7, 2015). 9
members out of pocket. Kamilewicz, 92 F.3d at 508-
- The upshot was that many absent class members
paid out more in fees than they received in refunds.
For one Maine resident, the settlement resulted in a
$2.19 credit and $91.33 debit from his bank account.
See Kamilewicz, 100 F.3d at 1349 (Easterbrook,
