The National Law Forum

When the Third Circuit Court of Appeals issued its decision in City Select Auto Sales Inc. v. BMW Bank of North America, Inc., in the middle of last year, many interpreted the decision as significantly lowering the bar to certification of class actions. By recognizing, for the first time, the use of affidavits as a legitimate method of identifying class members, some wondered whether City Select was a shift away from the “administrative feasibility” requirement for ascertainability consistently upheld by the Third, Fourth, and Eleventh Circuits. Two recent district court decisions in In re Tropicana Orange Juice Mktg. & Sales Practices Litig.^[1] and Hargrove v. Sleepy’s, LLC,^[2] demonstrate that the “administrative feasibility” requirement—a requirement that to certify a class its members must be capable of being readily identified through an administratively feasible process—remains alive and well in the Third Circuit.

In City Select, the Third Circuit reversed the district court’s denial of class certification of a claim under the Telephone Consumer Protection Act (TCPA) on lack of ascertainability grounds.^[3] The plaintiff, a car dealership, filed a class action case against BMW’s financing arm, BMW Bank of North America (BMW), alleging that BMW, along with one of its vendors (Creditsmarts), had violated the TCPA by repeatedly sending unsolicited fax advertisements to several thousand dealerships across the country. The plaintiff sought certification of a nationwide class described as “auto dealerships included in the Creditsmarts database on or before December 27, 2012,” ^[4]and moved to compel production of the same database. The district court in New Jersey denied the dealership’s motion to compel, and further denied class certification, explaining that the plaintiff had failed to demonstrate that class members could be identified using administratively feasible means.^[5]

On appeal, the Third Circuit vacated and remanded for two reasons:

First, our ascertainability precedents do not categorically preclude affidavits from potential class members, in combination with the Creditsmarts database, from satisfying the ascertainability standard. Second, because the Creditsmarts database was not produced during discovery, plaintiff was denied the opportunity to demonstrate whether a reliable, administratively feasible method of ascertaining the class exists based, in whole or in part, on that database.^[6]

Put another way, the Third Circuit determined that the plaintiff had been unfairly disadvantaged by Creditsmarts’ refusal to produce the very database that could potentially have been used, in combination with class member affidavits, to demonstrate an administratively feasible method of identifying class members.

Some observed that by allowing class representatives to rely upon affidavits to identify class members, City Select marked a notable departure from prior Third Circuit decisions where the court expressed class member identification concerns with the use of affidavits.^[7] While not entirely ruling out the use of affidavits to identify class members, the Third Circuit’s decision in City Select acknowledged that “[a]ffidavits from potential class members, standing alone, without ‘records to identify class members or a method to weed out unreliable affidavits,’ will not constitute a reliable and administratively feasible means of determining class membership.”^[8]City Select therefore clarified that the same standards previously applied by the court in assessing ascertainability for class certification remained in effect in the Third Circuit.

Two recent New Jersey District Court decisions demonstrate that City Select did not alter the “heightened” ascertainability requirement in the Third Circuit. On January 22, 2018, the U.S. District Court for the District of New Jersey issued its decision in In re Tropicana, denying class certification for lack of ascertainability, among other grounds.^[9] In that case, the plaintiffs alleged that Tropicana had violated common law and state consumer protection laws in connection with the sale of orange juice. Specifically, the plaintiffs alleged that “[d]espite Tropicana’s ‘100% pure and natural’ claim, Tropicana’s [not from concentrate] juice is heavily processed, colored, and flavored—it is neither 100% pure nor 100% natural orange juice.”^[10] In support of their class certification motion, the plaintiffs proposed a methodology for identifying class members whereby their expert would create a computer program to reconcile bulk retailer loyalty card data against the identifying information submitted by putative class members.^[11] The same expert would then create a second computer program to “cross-check” the results and ensure that putative class members had been properly identified.^[12]

The district court in Tropicana engaged in a lengthy ascertainability analysis, ultimately concluding plaintiffs had failed to show that their proposed methodology for identifying class members employed a “reliable and administratively feasible mechanism,” as required under the Third Circuit’s decision in Byrd v. Aaron’s, Inc.^[13] To the contrary, the court opined, “Dr. Narayanan’s methodology assumes that the retailer data exists and contains the necessary information required to properly ‘cross-check’ against putative class members’ claim forms. It further assumes that all retailers will produce their consumer data to him in a useable electronic format.”_^[14] The court further found that the plaintiffs’ proposed methodology would necessarily exclude persons for whom retailer data was unavailable, explaining, “class member will still be bound by any judgment on the merits emanating from this Court. That defies one of the principal rationales of ascertainability—identifying persons bound by the final judgment—and simply cannot be permitted.”^[15]

The Third Circuit, in City Select, had recognized that “[t]he determination whether there is a reliable and administratively feasible mechanism for determining whether putative members fall within the class definition must be tailored to the facts of the particular case.”^[16] Adopting that rationale and distinguishing the case against Tropicana from City Select, the district court instead drew a parallel to the Third Circuit’s 2013 decision in Carrera v. Bayer Corp., which similarly involved products distributed to consumers through a broad variety of retail stores unaffiliated with the defendant.^[17] In Carrera, the Third Circuit vacated the district court’s order granting class certification and remanded for further consideration on the grounds that the plaintiff’s exclusive reliance on affidavits from potential class members was not a sufficiently reliable means of identification.^[18] Likewise, in In re Tropicana, the district court concluded that the plaintiffs’ proposed method for identifying class members would run afoul of the two critical rationales underlying the ascertainability requirement: “facilitating opt-outs and identifying persons bound by the final judgment.”^[19]

More recently, on February 28, 2018, the New Jersey district court issued its decision in Hargrove v. Sleepy’s, LLC, another case involving the denial of class certification on ascertainability grounds.^[20] In Hargrove, a group of former delivery drivers for Sleepy’s, LLC, a New York-based mattress retailer, filed a complaint under the Employee Retirement and Income Security Act (ERISA), alleging that Sleepy’s had misclassified them as independent contractors, rather than employees, and thereby denied them base and overtime wages due under New Jersey state law.^[21]

In its opinion and order denying class certification, the district court concluded that the plaintiffs were unable to offer a methodology by which individuals falling within the class definition could be identified in a reliable and administrative feasible manner.^[22] The court found instead that, even following the deposition of the paralegal at the plaintiff’s firm who was primarily responsible for reconciling driver rosters, gate logs, and pay statements to identify class members, the several “gaps” in the record “would make assessing the size, as proposed by the [p]laintiff, tenuous or speculative.”^[23] In other words, because the records available to the parties did not enable an administratively feasible identification of class members, the plaintiffs had run afoul of the prohibition on “specific fact-finding as to each individual” previously set forth in the Third Circuit’s decision in Marcus v. BMW of North America.^[24]

Taken together, In re Tropicana and Hargrove demonstrate that the administrative feasibility requirement remains a prime consideration in class certification proceedings within the Third Circuit. While City Select clarified that in certain limited circumstances, class member affidavits might find their place in ascertaining class membership, the overarching requirement is that class members be identified accurately and without the need for individualized fact-finding.

---

_{[1] 2018 U.S. Dist. LEXIS 9797 (D.N.J. Jan. 22, 2018, Civ. No. 2:11-cv-07382).}

_{[2] 2018 U.S. Dist. LEXIS 32323 (D.N.J. Feb. 28, 2018, Civ. No. 3:10-cv-01138).}

_{[3] 867 F.3d 434 (3d Cir. 2017).}

_{[4] City Select, 867 F.3d at 441.}

_{[5] Id. at 436, 438.}

_{[6] Id. at 440-41.}

_{[7] See Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012); Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013); Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349 (3d Cir. 2013).}

_{[8] City Select, 867 F.3d at 441 (quoting Byrd v. Aaron’s Inc., 784 F.3d 154, 163 (3d Cir. 2015)).}

_{[9] See 2018 U.S. Dist. LEXIS 9797, *36-38.}

_{[10] Consolidated Amended Complaint at ¶ 1, In re Tropicana (Dkt. No. 32).}

_{[11] Id. at *29.}

_{[12] Id. at *29-30.}

_{[13] Id. at 29 (quoting Byrd v. Aaron’s, Inc., 784 F.3d 154, 163 (3d Cir. 2015)).}

_{[14] Id. (internal citations omitted).}

_{[15] Id. at 37-38 (citing City Select, 867 F.3d at 441).}

_{[16] Id. at 34 (quoting City Select, 867 F.3d at 442).}

_{[17] Id. at 35.}

_{[18] Carrera, 727 F.3d at 303-04.}

_{[19] In re Tropicana, 2018 U.S. Dist. LEXIS at *36 (citing City Select, 867 F.3d at 441; Carrera, 727 F.3d at 307-09).}

_{[20] See Hargrove, 2018 U.S. Dist. LEXIS 32323.}

_{[21] Id. at *1-3.}

_{[22] Id. at *17-21.}

_{[23] Id. at *21.}

_{[24] Id. at *17 (citing Marcus v. BMW of N. Am., LLC, 687, F.3d 583, 593 (3d Cir. 2012)), *21}

This article was written by John J. Atallah of Foley & Lardner LLP

The Commercial Court has recently handed down its judgment in the case of Midtown Acquisitions LP v Essar Global Fund Limited and Others [2018] EWHC 789. The decision provides useful guidance on whether “first past the post” is really a legal principle when it comes to charging orders.

Background Facts

Two creditors, Midtown Acquisitions LP (“M”) and ICICI Bank Limited (“ICICI”) had lent funds to the debtor (Essar Steel Minnesota LLC) in respect of the same project, guaranteed by the defendant (Essar Global Fund – “Essar”) under loan agreements.

M secured a US judgment against Essar in respect of those funds on 25 August 2016, which it then used to obtain a summary judgment totalling USD 171 million, from the English Commercial Court on 17 March 2017.   M then obtained an interim charging order on 11 September 2017 and on 16 January 2018, appeared before Mr Justice Robin Knowles CBE in order to seek a final charging order.

ICICI followed a similar path, however, was slightly behind M, with ICICI commencing proceedings in the US on 2 September 2016 and obtaining a US judgment on 27 April 2017. The US judgment was used to obtain a summary judgment (also in the Commercial Court) on 10 November 2017, in the sum of USD 588 million. ICICI then filed a charging order application on 28 November 2017 and obtained its interim charging order on 20 December 2017.   ICICI was also seeking a final charging order at the hearing on 16 January 2018.

It is important to point out that whilst Essar’s solvency was clearly debatable (given the sums owed to M and to ICICI), insolvency proceedings were not in contemplation at the time of the Commercial Court hearing and Essar did not oppose either M or ICICI’s request for final charging orders.   The issue in question was the fact that ICICI considered that its charging order should rank equally to that of M, irrespective of the fact that its interim charging order was granted some three months’ after M’s interim charging order.

Representations

 Neither M nor ICICI was seeking equality of all creditors.   The judgment refers to the clear “objective” of both M and ICICI to “obtain priority over the general body of unsecured creditors of Essar”.

Counsel for M sought to rely upon the “first past the post” rule – which was relied upon in British Arab Commercial Bank plc v Ahmad Hamad Algosaibi and Brothers Coin 2011. It was submitted that “first past the post” was a “default rule” which had been around some time. However, Counsel for ICICI pointed out that Lord Goddard in James Bibby Ltd v Woods & Howard (1949) expressed himself “not in language of articulating a principle, but rather in language of observation of what can happen”.

Mr Justice Knowles in the present case had regard to the fact that precedent (particularly Mr Justice Flaux in the British Arab Commercial Bank case referred to above), made it clear that “first past the post” was the type of “rule” to which there would be exceptions and indeed, Counsel for M did accept that it was not an absolute principle.

Judgment

 Mr Justice Knowles therefore decided that the “rule” could be taken into account, however, what was important was to achieve an equitable outcome having regard to all the circumstances of the case. He referred in his judgment to the fact that The Charging Orders Act 1979 itself sets out that “all the circumstances” must be considered before the making of a charging order.

Other factors considered by Mr Justice Knowles were:

• That both M and ICICI are significant commercial parties – i.e. equally able to look out for their own commercial interests;
• M secured its interim charging order first and this is not a case where the debtor (Essar) did anything to “engineer” that outcome;
• ICICI was not seeking equality of all creditors – simply, equality of itself and M;
• The material in the case suggests that Essar sought to delay M – a factor to be considered in circumstances where M was procedurally ahead of ICICI in terms of the Court process.

In weighing up his conclusion, Mr Justice Knowles states that it is not “inequitable to prefer one diligent party over another diligent party, if in all the circumstances that seems appropriate”.   After balancing all of the factors, it was decided that M’s charging order would rank above ICICI’s in order of priority.   As such, in this case, the party that was “first past the post” is the party who enjoys priority.

Comments

The important message from this judgment is that “first past the post” cannot be relied upon as a principle where final charging orders are being sought.   However, a party can have some confidence that if all other circumstances are equal/equitable, being the first to have been granted an interim charging order could afford that party the benefit of priority when a final charging order is sought.   As such, the underlying message is not to unduly delay in getting on with the court process in circumstances where a decision has been made to seek the award of a charging order.

This article was written by Garon Anthony and Helen Cain of Squire Patton Boggs (US) LLP

When do you have to give notice to your underinsured motorist (UIM) carrier—right after the accident occurs, or only when it becomes clear that the tortfeasor’s policy limit will be insufficient to make you whole? That was the fundamental question at stake in Shugarts v. Mohr, 2018 WI 27, a case recently decided by the Wisconsin Supreme Court. Based upon the language of the UIM policy at issue and applicable Wisconsin statutes, the Court concluded, in a unanimous decision, that notice is required upon tender of the tortfeasor’s underlying policy limit, and no earlier. That meant, in this case, that the first notice to the UIM carrier, which came more than four years after the accident, was timely and that there was no need to look into whether the carrier was prejudiced by the delay.

The Facts

On Oct. 11, 2000, an Eau Claire County deputy sheriff, Shugarts, gave chase to a suspect, Mohr. Unfortunately, Mohr’s vehicle struck Shugarts’ squad car, severely injuring him. Shugarts hired counsel, who sent notice of retainer to Mohr’s auto insurance carrier, Progressive, in late 2011.

Progressive denied coverage, on the grounds that Mohr’s striking of the squad car was an intentional act. Years went by, settlement efforts did not succeed, and Shugarts ultimately filed suit against Progressive in mid-2013. Finally, in mid-October 2014, nearly four years to the day after the accident, Progressive offered to pay its policy limit of $50,000.

Several weeks later, Shugarts’ attorney sent notice of retainer to Allstate, Shugarts’ UIM insurer. Four months after that, the attorney followed it up with a more detailed notice, sharing Progressive’s limits offer and explaining that Shugarts’ claim was well in excess of that limit.

In short order thereafter, Shugarts added Allstate as a defendant in the lawsuit. Not surprisingly, Allstate raised untimeliness as a defense and moved for summary judgment. The Eau Claire County Circuit Court granted the motion and the court of appeals affirmed.

The Policy

The Court looked first at the applicable Allstate policy. That policy had seven separate coverage parts, with the two critical ones being “Automobile Liability Insurance” and “Underinsured Motorists Insurance.” The Automobile Liability Insurance section included a provision requiring the insured to notify Allstate “of all details” of an “auto accident” “as soon as reasonably possible.” The Underinsured Motorists Insurance section, however, said nothing about notice of an “accident.” Instead, it only required the insured to submit notice of “claim” “as soon as possible.” According to the Court, Shugarts did not have a UIM “claim” until Progressive tendered its underlying policy limit. Because that did not occur until mid-October 2014, and Shugarts’ attorney promptly communicated with Allstate thereafter, the notice was timely. In the Court’s view, the Allstate policy did not require notice of an accident, only notice of claim, and the notice of claim was timely.

The Court also addressed Allstate’s argument that Wis. Stat. § 631.81 required Shugarts to provide notice earlier. Rejecting Allstate’s contention, the Court noted that while section 631.81 requires “notice or proof of loss” to be furnished “as soon as reasonably possible and within one year after it was required by the policy,” that section did not apply because the policy at issue did not require “proof of loss” for UIM claims, only proof of “claim.” In other words, because the policy did not require proof of loss, the statute could not impose a requirement that was not in the policy itself.

The Upshot

The Court’s decision puts UIM carriers in a tough spot. The purpose of a notice provision is to allow insurers to investigate while the evidence is fresh. If a carrier does not even find out about an accident until four years after it happened, however, it will be rather difficult to explore the situation and preserve the key evidence. One can easily imagine situations where the delay will prejudice the insurer.

To the extent they wish, insurers can probably solve the problem by revising the language in their UIM policies. For example, insurance companies could take the notice of accident language from the liability sections of their policies and insert the essence of it into the UIM sections. Perhaps that would inundate carriers with too many unwanted notices in situations where the UIM coverage is never likely to come into play, but that seems like a small price to pay for the cases in which having early notice and an early opportunity to investigate will help to efficiently and effectively resolve the claim.

This article was written by Kendall W. Harrison of Godfrey & Kahn S.C.

Employee discharge decisions often form the basis for disputes – whether they arise in court or before administrative agencies. Such decisions routinely are challenged by unions before the National Labor Relations Board (NLRB), and the agency has overturned terminations and reinstated workers in situations even where egregious misconduct was at issue. The board recently issued a decision where it overturned two employee terminations as a result of selective rules enforcement, which demonstrates yet again the importance of consistency by management when administering discipline.

In Advanced Masonry Associates, LLC, a company discharged two workers who violated the company’s “fall-protection policy.” That policy required employees working at certain heights to wear specified safety equipment to minimize risks from falling. Over the years, employees generally were issued warnings and /or suspensions for violations of the policy. After a union filed a petition to represent the company’s workforce, however, two know union-supporters were discharged for their first violations of the policy. The NLRB ultimately found the two terminations violated labor law because, among other things, the employer had not consistently discharged employees under the policy on prior occasions (which can give rise to an inference that the true reason for the termination was retaliation for union activities).

Another recent decision from the agency shows there are limits and that the NLRB will uphold terminations where employers build a solid record – including by showing consistent rules enforcement – but this case serves as yet another reminder that consistency in discipline administration remains key.

This article was written by David J. Pryzbylski of Barnes & Thornburg LLP

In Jesner v. Arab Bank, PLC, 584 U.S. ___, 2018 WL 1914663 (U.S. Apr. 24, 2018) (Kennedy, J.), the Supreme Court of the United States held that foreign corporations may not be sued under the Alien Tort Statute(“ATS”), 28 U.S.C. § 1350. The Court, disagreeing with opinions from the Seventh, Ninth and District of Columbia Circuits (see blog articles hereand here), concluded that United States courts do not have authority under the ATS to impose liability on foreign corporations for violations of international human rights laws where the law of nations does not impose such liability. This decision provides relief to foreign corporations that otherwise could have been held liable for committing violations of international law under the ATS, in the area of human rights and beyond.

About 6,000 plaintiffs filed five lawsuits between 2004 and 2010 in the United States District Court for the Eastern District of New York, claiming that they or their family members (predominantly foreign nationals) were injured or killed by terrorist attacks in the Middle East. They alleged that defendant Arab Bank, PLC conducted electronic transfers through its New York City office that funded these injurious terrorist operations — aid which is presumptively illegal under international law. The questions facing the Supreme Court revolved around the liability of corporations for human rights violations by their employees who provide such aid through the corporation.

The Supreme Court was first presented with this question in Kiobel v. Royal Dutch Petroleum Co, 569 U.S. 108 (2013). In that case, the Supreme Court declined to decide the narrow question of whether the ATS extended to suits against foreign corporations, and instead held on broad grounds that the ATS does not apply to conduct that is entirely foreign in nature. (See blog article here). The Court left open the issue of whether an ATS claim might appropriately be asserted against a corporation based upon acts occurring outside the United States, but in some way touching and concerning the United States.

The district court dismissed the Jesner plaintiffs’ claims based upon Kiobel. The United States Court of Appeals for the Second Circuit affirmed, applying the reasoning in its own decision in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), that, because international criminal tribunals typically limit their jurisdiction to natural persons, the ATS does not apply to violations of international law by corporations. (See blog article here).

In the plurality opinion written by Justice Kennedy, the Court held that there is no “specific, universal, and obligatory norm” in international law providing for corporate liability. Rather, the Court held that there is significant doubt as to whether prevailing international law imposes criminal liability on corporations and, in light of that doubt and the daunting foreign policy consequences (such as mounting tensions with the Hashemite Kingdom of Jordan over this very case), the decision to extend the application of the ATS to foreign corporations is the role of Congress and not the courts.

In concurring portions of the plurality opinion, Justices Kennedy and Thomas, joined by Chief Justice Roberts, note that limited application of the ATS to foreign corporations may likely be deemed favorable by Congress leading legislative action. Concurring with the opinion of the Court in full, Justice Thomas briefly highlighted and supported the views of his concurring colleagues. Justice Gorsuch wrote an opinion concurring in part and concurring in the judgment, urging that the Supreme Court should not be creating new causes of action under the ATS, and arguing more broadly that the ATS likely does not apply to suits between foreign plaintiffs and foreign defendants. Justice Alito penned his particular concerns where doing so may create just the “diplomatic strife” the ATS was intended to prevent.

In a dissenting opinion, Justices Sotomayor, Ginsburg, Breyer and Kagan expressed their view that the international treaty standard rendering the financing of terrorism a violation of international law, not the method of enforcing that standard, is the relevant “specific, universal, and obligatory norm” at issue. The dissenting Justices determined that this is not the proper inquiry at all, and instead believed that the Court should look at whether any reason exists to distinguish between natural persons and corporations under the ATS. Analogizing to pirate ships’ liability under the ATS centuries ago, the dissenting Justices interpreted the corporate form as not being inherently devoid of responsibility under international law, and observed that foreign policy concerns identified by the plurality could instead be addressed on extraterritoriality grounds.

The new precedent set by the Jesner plurality decision reflects this Court’s hesitation to engage in what its consider judicial overreach. It will therefore be up to Congress to decide whether to expand the ATS to allow victims to sue foreign corporations — often the only “deep pocket” for recovery in light of foreign sovereign immunity — in federal courts for their participation or assistance in violations of human rights.

This article was written by John P. Stigi III and Alyssa M. Shauer of Sheppard, Mullin, Richter & Hampton LLP