WEBVTT - Circuit Courts Split Over Class Action Suits (Audio) 0:00:03.480 --> 0:00:06.640 You're listening to Bloomberg Law. I'm June Gralso in New 0:00:06.720 --> 0:00:10.520 York with Greg's Store in Washington, d C. Class actions 0:00:10.520 --> 0:00:13.080 are often a controversial area, and now the Ninth Circuit 0:00:13.119 --> 0:00:15.800 has widened the split among the circuit courts over one 0:00:15.880 --> 0:00:19.160 aspect of starting a class action. The case involved the 0:00:20.200 --> 0:00:24.200 natural labels on Western cooking oils. Consumers in eleven states 0:00:24.239 --> 0:00:27.560 claimed that label was false and misleading. But the question 0:00:27.720 --> 0:00:29.639 was how could all the members of the class be 0:00:29.760 --> 0:00:34.239 identified when consumers generally don't save grocery receipts might not 0:00:34.360 --> 0:00:38.280 even remember purchasing a particular cooking oil. The Ninth Circuit 0:00:38.360 --> 0:00:40.879 ruled the plaintiff's attorneys don't have to lay out a 0:00:40.920 --> 0:00:43.920 feasible plan to identify the class members at the time 0:00:43.960 --> 0:00:46.960 the class is being formed. That puts the Ninth Circuit 0:00:47.040 --> 0:00:49.800 in line with the sixth, seventh, and Eighth Circuits, but 0:00:50.040 --> 0:00:53.520 in conflict with the Third Circuit. Our guest is securities 0:00:53.520 --> 0:00:58.000 and class action attorney Mark Rifkin, a partner at Wolf Haldenstein. Mark, 0:00:58.160 --> 0:01:01.760 this is about what's called class certification. Will you start 0:01:01.800 --> 0:01:06.600 by explaining what that is and how this issue came up? Sure, 0:01:07.120 --> 0:01:09.120 I'd be pleased to do that. Early in a case 0:01:09.200 --> 0:01:11.160 that's brought us a class action, the court has to 0:01:11.200 --> 0:01:13.959 make a determination that the case is suitable to be 0:01:14.040 --> 0:01:16.360 maintained as a class action, that the point off is 0:01:16.400 --> 0:01:19.680 an appropriate representative of the class, and that the pointiff's 0:01:19.720 --> 0:01:22.800 lawyer is competent to represent the class as well. Because 0:01:23.520 --> 0:01:26.880 the case is brought on behalf of thousands or tens 0:01:26.880 --> 0:01:29.520 of thousands or even more people who are not present 0:01:29.560 --> 0:01:33.000 in court to represent themselves, so the court has to 0:01:33.040 --> 0:01:37.679 be satisfied that the representative plaintiff can proceed on behalf 0:01:37.720 --> 0:01:41.080 of everyone. And the court makes that determination following a 0:01:41.120 --> 0:01:43.440 specific set of rules that are set forth in the 0:01:43.440 --> 0:01:47.640 Federal Rules of Civil Procedure Rule twenty three. And in 0:01:47.680 --> 0:01:50.680 this case, the court looked at the rule and analyzed 0:01:50.720 --> 0:01:55.760 whether the district court properly followed the class certification Rule 0:01:56.360 --> 0:02:00.680 rule three in certifying the class to seed as a 0:02:00.720 --> 0:02:05.480 class action, and mark, how does this whole issue of 0:02:05.560 --> 0:02:08.560 ascertainability fit into that? Or let me ask it a 0:02:08.560 --> 0:02:12.880 different way, what what in this case did contagras claim 0:02:13.040 --> 0:02:16.400 that the plaintiffs needed to show at the certification stage? 0:02:16.720 --> 0:02:21.320 Sure the issue is this? The Third Circuit said that 0:02:21.480 --> 0:02:24.320 in order to have a class certified, in addition to 0:02:24.440 --> 0:02:28.000 meeting the specific requirements of Rule twenty three, the plaintiff 0:02:28.080 --> 0:02:32.359 also has to demonstrate during the class certification process that 0:02:32.520 --> 0:02:35.120 the absent members of the class, all those tens of 0:02:35.120 --> 0:02:37.880 thousands of people who bought in this case West and Oil, 0:02:38.800 --> 0:02:44.119 are reasonably identifiable through some means that the plaintiff identifies 0:02:44.160 --> 0:02:48.280 in the process of class certification. And the Ninth Circuit 0:02:48.320 --> 0:02:52.000 looked at that argument and disagreed and said that Rule 0:02:52.040 --> 0:02:56.320 twenty three does not have a special requirement for ascertainability. 0:02:56.520 --> 0:02:59.160 And and so the Court said, we're not going to 0:02:59.440 --> 0:03:03.200 create a new requirement. We think the we think we 0:03:03.240 --> 0:03:06.040 should apply Rule twenty three the way it was drafted. 0:03:06.600 --> 0:03:09.440 The Court went through a complex analysis of the legislative 0:03:09.480 --> 0:03:13.040 history of the rule and said, the rule covers these issues, 0:03:13.080 --> 0:03:17.200 and we don't need to create a whole new additional 0:03:17.240 --> 0:03:20.720 requirement for point offs. What was the argument that the 0:03:20.800 --> 0:03:23.960 Third Circuit made in saying that you have to identify 0:03:24.040 --> 0:03:28.960 the people up front. There were essentially three principal issues 0:03:29.000 --> 0:03:31.680 that the Third Circuit said the first. The first of 0:03:31.680 --> 0:03:35.080 those issues is the Court says that one of the 0:03:35.120 --> 0:03:38.960 reasons we go through the certification process, is to identify 0:03:39.080 --> 0:03:43.240 class members who are entitled to receive notice of appending 0:03:43.320 --> 0:03:46.880 class action so they can decide whether to participate in 0:03:46.880 --> 0:03:50.480 the class action or request exclusion to pursue their own 0:03:50.520 --> 0:03:53.360 individual claims. And the court says, if you can identify 0:03:53.480 --> 0:03:57.880 the members of the class easily, you can't send notice out. 0:03:58.160 --> 0:04:01.120 So that's one issue. And then Ninth Circuit disagreed and 0:04:01.120 --> 0:04:04.520 it said, no, you don't. Number one, the neither the 0:04:04.640 --> 0:04:11.200 rules nor general principles of federal law require UH that 0:04:11.280 --> 0:04:15.800 kind of mandatory individual notice to every conceivable member of 0:04:15.840 --> 0:04:18.640 the class. And the Court also said, then, in a 0:04:18.839 --> 0:04:21.840 consumer case like this, and this had to do with 0:04:21.960 --> 0:04:27.200 the labeling of West and brand UH cooking oils. Contagres 0:04:27.200 --> 0:04:30.760 sells Western oil and it markets and advertises them as 0:04:30.800 --> 0:04:34.239 a percent natural. The plaintiffs say, no, they're not add 0:04:34.279 --> 0:04:37.279 percent natural. And that's the essence of the dispute. And 0:04:37.320 --> 0:04:39.960 the Ninth Circuit says, in a case like this, in 0:04:40.000 --> 0:04:43.360 a consumer case like this, where any individuals damages are 0:04:43.360 --> 0:04:48.440 going to be extremely small, the real interest that any consumer, 0:04:48.520 --> 0:04:52.800 anyone consumer has in opting out and pursuing an individual 0:04:52.839 --> 0:04:55.560 claim for two or three or four dollars in damages 0:04:55.640 --> 0:04:59.520 or whatever it may be, is so remote as to 0:04:59.600 --> 0:05:04.240 be consequential. So we're not too worried about notice, well, 0:05:04.480 --> 0:05:08.360 Mark Mark at some point, uh they if the plaintiffs 0:05:08.440 --> 0:05:10.479 win this case, you know, there's going to have to 0:05:10.520 --> 0:05:13.080 be uh, you know, they're gonna have to ascertain who 0:05:13.200 --> 0:05:17.320 is entitled to the damages. What's the problem with with 0:05:17.400 --> 0:05:21.559 requiring the plaintiffs lawyers to say up front, and here's 0:05:21.600 --> 0:05:23.720 how we would do that, which which is what sort 0:05:23.760 --> 0:05:26.640 of sounds like what Knager was asking them to do. 0:05:26.960 --> 0:05:31.200 Well in and of itself, there's nothing wrong with asking 0:05:31.279 --> 0:05:35.920 the plaintiff, do you have a mechanism for identifying class 0:05:35.920 --> 0:05:38.360 members at the end of the day, And and I 0:05:38.400 --> 0:05:43.000 suppose the courts analysis permits that to be done, but 0:05:43.279 --> 0:05:47.080 only within the context of the specific inquiry that's required 0:05:47.120 --> 0:05:49.680 under Rule twenty three. There's two parts to Rule twenty three. 0:05:49.800 --> 0:05:53.320 The first part says that the plaintiff has to identify 0:05:53.600 --> 0:05:59.320 for specific criteria for certification being a sufficient number of people. 0:05:59.360 --> 0:06:03.320 We call that moorosity, that they all share common interests. 0:06:03.400 --> 0:06:09.160 That's called commonality. That the pointiff's claim is typical of 0:06:09.200 --> 0:06:11.599 the claims of the absent class members, that it's the 0:06:11.640 --> 0:06:15.120 same kind of a claim and and that the pointiff 0:06:15.360 --> 0:06:19.080 is an adequate class representative. And the Ninth Circuit says, 0:06:19.120 --> 0:06:23.159 we're we're going to infer from the rule that the 0:06:24.920 --> 0:06:28.200 this is the limit of our inquiry. The second part 0:06:28.240 --> 0:06:33.039 of Rule twenty three has an additional requirement, and that's manageability. 0:06:33.320 --> 0:06:35.880 And the Ninth Circuit says that if you're going to 0:06:35.960 --> 0:06:39.880 consider this question of identifying class members, you should do 0:06:39.960 --> 0:06:44.400 so in the context of that inquiry, the manageability inquiry. 0:06:44.400 --> 0:06:48.400 Will it be possible to identify these class members without 0:06:48.480 --> 0:06:51.200 imposing such a burden on the court or on the 0:06:51.240 --> 0:06:55.000 litigants that it would be inappropriate to certify the class 0:06:55.160 --> 0:06:59.160 But that's within the delicate balance that the statute Rule 0:06:59.240 --> 0:07:05.200 twenty three itself puts in place, not a judicial creation. 0:07:05.400 --> 0:07:08.960 This this fifth element that the Third Circuit has suggested, 0:07:09.000 --> 0:07:15.400 this reasonable identifiabilities, uh element, So, Mark, what kind of 0:07:15.520 --> 0:07:18.600 impact does it have that the Ninth Circuit is now 0:07:18.640 --> 0:07:21.280 in line with the sixth, seventh, and Eighth Circuit and 0:07:21.440 --> 0:07:24.080 the Third Circuit is the outlier. I mean, is it 0:07:24.120 --> 0:07:26.240 going to go to the Supreme Court, or is it 0:07:26.320 --> 0:07:29.320 just easier in those circuits. Well, Junior asked a good question. 0:07:29.360 --> 0:07:34.080 It highlights the split between the circuits, the first, second, 0:07:34.080 --> 0:07:37.360 and third Circuit at one end of the spectrum having 0:07:37.440 --> 0:07:41.160 this additional requirement, and the sixth, seventh, eighth, and ninth 0:07:41.160 --> 0:07:45.360 circuits now having said no to the additional requirement. Uh. 0:07:46.200 --> 0:07:48.520 We often see cases go up to the Supreme Court 0:07:49.040 --> 0:07:52.000 when there is a split among the circuits. And and 0:07:52.120 --> 0:07:55.480 there was a split because already the sixth, seventh, and 0:07:55.520 --> 0:08:00.760 eighth circuits had rejected the Third Circuits approach a this case, 0:08:00.800 --> 0:08:04.160 I think number one highlights the difference. But number two 0:08:04.200 --> 0:08:07.280 it lends some weight to the view of the Seventh Circuit, 0:08:07.360 --> 0:08:10.160 which was the first circuit to say no to the 0:08:10.240 --> 0:08:14.320 Third Circuits requirement. And and I think it it does 0:08:14.360 --> 0:08:18.679 so in a in a very clear, very persuasive way, 0:08:19.200 --> 0:08:23.840 analyzing the language of the statute and applying what Justice 0:08:23.880 --> 0:08:28.520 Scalia would refer to as strict construction of rule Tree. 0:08:29.280 --> 0:08:33.640 We have just about three seconds left with the new 0:08:33.679 --> 0:08:36.120 Supreme Court coming up. You think it's going to be 0:08:36.120 --> 0:08:40.120 tougher on class actions? You know, I don't think so. 0:08:40.280 --> 0:08:43.079 I As you know I've said before, I think this 0:08:43.160 --> 0:08:47.559 Court has in recent years been fairly good for class certification, 0:08:48.280 --> 0:08:52.160 and I think it's likely that we'll see the same 0:08:52.240 --> 0:08:54.640 trend continue. I don't think there's going to be a 0:08:54.640 --> 0:08:59.600 sea change, but I think, um with with the new 0:08:59.600 --> 0:09:05.520 admitted station coming in, anything is possible. Thank you so much. 0:09:05.600 --> 0:09:07.680 It's always a pleasure to have you on. That's Mark 0:09:07.800 --> 0:09:10.120 rift In, a partner at Will Paul Denstein. He is 0:09:10.160 --> 0:09:14.120 a securities and class action attorney. Coming up on Bloomberg Law. 0:09:14.240 --> 0:09:17.360 Chief Justice John Roberts drops out of a case after 0:09:17.440 --> 0:09:21.240 hearing arguments because he discovered a possible conflict of interest 0:09:21.280 --> 0:09:24.600 from his stockholdings. Seems to be a pattern among the 0:09:24.600 --> 0:09:28.680 three justices who hold individual stocks. What about that pattern 0:09:28.800 --> 0:09:32.440 and should there be changes made. I'm June Groslo with 0:09:32.480 --> 0:09:36.040 Greg Store. That's coming up on Bloomberg Law. This is 0:09:36.080 --> 0:09:36.680 Bloomberg