Settlement Class Defined to Include Uninjured Members Cannot Be Approved

An appeal concerning the meaning of coupon settlements under the Class Action Fairness Act instead produced an important opinion, Drazen v. Pinto, 2022 LEXIS 20766 (11th Cir. July 27, 2022), addressing the certification of classes that are defined to include members who have not been injured.

Some background may be helpful in understanding the ruling. In TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), the Supreme Court held that class members who do not have standing are not entitled to participate in any damage recovery by the class. The Court vacated a jury’s award of damages under the Fair Credit Reporting Act to class members who had not been injured sufficiently to assert FCRA claims. But the Court expressly reserved the question of whether the class should have been certified in the first place. Other circuits have weighed in on the question and are divided on whether a class which is defined to include more than a de minimis number of uninjured members should be certified. Compare Olean Wholesale Grocery Coop. v. Bumble Bee Foods LLC, 31 F.4th 651 (9th Cir. 2022), with In re Asacol Antitrust Litig., 907 F.3d 42 (1st Cir. 2018). The Eleventh Circuit has not, until Drazen, begun to directly address the issue.

Drazen was a putative nationwide class action under the Telephone Consumer Protection Act against GoDaddy.com, LLC based on allegations of unwanted texts and cell phone calls. The parties reached a class settlement and requested the district court’s approval. The district court asked for briefing on the application of Salcedo v. Hanna, 936 F.3d 1162 (11th Cir. 2019), which held that receipt of a single text in violation of the TCPA was not an injury sufficiently concrete to confer Article III standing. The district court concluded that only the named representatives must have standing and that only 7% of the class members may have only received a single text message. Still, that amounted to 91,000 class members with no standing. The court approved a class settlement. Then an objector appeared and argued, among other things, that the settlement involved GoDaddy vouchers which, he contended, were coupons and thus fell under 28 U.S.C § 1712(e), part of CAFA. Use of coupons generally restricts the amount of attorneys’ fees that may be awarded in a proposed settlement. The district court ultimately disagreed that the settlement was a coupon settlement but did reduce the attorneys’ fees award to $7 million. The objector appealed.

On appeal, the parties’ briefing did not address subject-matter jurisdiction. In an opinion by Senior Judge Tjoflat, however, the court vacated approval of the settlement and remanded to give the parties an opportunity to revise the class definition so as not to encompass class members with no standing. The court began with the principle that every class member must have Article III standing to recover individual damages, as TransUnion held. The court went on to hold that “when a class seeks certification for the sole purpose of a damages settlement under Rule 23(e), the class definition must be limited to those individuals who have Article III standing.”

The court also pointedly rejected an argument that if a class member would have a claim in the circuit in which he or she resides then the class member could be properly included in the class.

The court took on a “more difficult question,” which was whether individuals who received a single cell phone call also have standing. An earlier case, Glasser v. Hilton Grand Vacations Co., 948 F.3d 1301, 1306 (11th Cir. 2020), held that receipt of more than one unwanted telemarketing call was sufficient to meet Article III concrete injury requirements. But the court did not decide whether a single phone call to a cell phone was a concrete injury for Article III standing purposes. And without briefing, the court was unwilling to answer that question, instead vacating class certification to give the parties an opportunity on remand to redefine the class consistently with TransUnion.

Drazen does not hold that a class definition at the certification stage that includes uninjured class members must never be certified. Its prohibition on the inclusion of uninjured class members in a class applies when a settlement that includes a monetary award is proposed.

Posted by Tom Byrne.

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