Gibbons Law Alert

Gibbons Law Alert

Category: Class Action Defense

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

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Posted in Class Action Defense

On June 18, 2018

Last month, the Third Circuit upheld the dismissal of a putative class action against TD Bank, finding that plaintiffs’ conclusory allegations lacked sufficient evidence and failed to satisfy Rule 9(b)’s heightened pleading standard for claims that sound in fraud. In MZL Capital Holdings, Inc. et al. v. TD Bank, N.A. et al., two account holders with TD Bank filed a proposed class action accusing the Bank of obscuring its exchange rates and improperly charging an embedded fee for converting foreign currency, thereby defrauding its customers in violation of the New Jersey Consumer Fraud Act. Shortly thereafter, plaintiffs amended their complaint to add claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of numerous other state consumer-protection laws. TD Bank moved to dismiss plaintiffs’ claims for failure to state a claim, and the District Court granted TD Bank’s motion, dismissing all of plaintiffs’ claims. On appeal, the Third Circuit affirmed the district court’s decision, concluding that plaintiffs’ claims were inadequately pled. At the outset, the Court re-affirmed the basic principle that claims brought under the Consumer Fraud Act sound in fraud and therefore must comply with Rule 9(b)’s particularity requirement. The Third Circuit held that plaintiffs’ general allegations, which failed to identify any provision in their agreement...

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

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Posted in Class Action Defense

On June 15, 2018

The New Jersey Supreme Court has noted that both “federal and state policies favor[] arbitration.” Nevertheless, the High Court’s Atalese v. Legal Servs. Grp. decision—rejecting the enforceability of an arbitration clause—continues to raise questions about whether New Jersey state courts view such provisions with more skepticism than other jurisdictions. In this regard, the Appellate Division’s recent decision in Signor v. GWC Warranty Corp. provides some welcome guidance. In Signor, the trial court refused to dismiss and compel arbitration of class claims grounded in a particular automobile service contract. The contract contained an arbitration provision with language including: ARBITRATION PROVISION: READ THE FOLLOWING ARBITRATION PROVISION (“Provision”) CAREFULLY, IT LIMITS CERTAIN RIGHTS, INCLUDING YOUR RIGHT TO OBTAIN RELIEF OR DAMAGES THROUGH COURT ACTION. Any and all claims, disputes, or controversies of any nature whatsoever . . . shall be resolved by binding arbitration before a single arbitrator. You agree that any arbitration proceeding will only consider Your Claims. Claims by, or on behalf of, other individuals will not be arbitrated in any proceeding that is considering Your Claims. You and We understand and agree that because of this Provision neither You nor Us will have the right to go to court except as provided above and to have a jury trial or to participate as any member of a...

Third Circuit Holds Agreement to Arbitrate in Illusory Forum Is Unenforceable

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Posted in Class Action Defense

On June 11, 2018

The Third Circuit Court of Appeals recently held, in a precedential decision, that when parties enter an agreement directing them to arbitrate in an illusory forum, the forum selection clause is not severable and the entire agreement to arbitrate is unenforceable. In MacDonald v. CashCall, Inc. et al., a plaintiff brought suit on behalf of himself and a putative class, alleging a loan agreement between the parties was unconscionable and usurious. The agreement at issue included “(1) a provision requiring that all disputes be resolved through arbitration conducted by a representative of the Cheyenne River Sioux Tribe (‘CRST’) and (2) a clause that delegates questions about the arbitration provision’s enforceability to the arbitrator.” The defendants moved to compel arbitration. The district court declined to compel arbitration because the agreement at issue expressly disavowed federal and state law, thus rendering the arbitration provisions invalid as an impermissible prospective waiver of federal and state statutory rights. The district court further held that the arbitration agreement was unenforceable because the forum was illusory, as the selected forum did not conduct arbitrations or have rules for conducting arbitrations. The Third Circuit affirmed the district court’s conclusion that the loan agreement’s arbitration provision cannot direct arbitration to an illusory forum—here, the CRST. Similar to its sister circuits, the Third Circuit...

In Defective Shingles Class Action, Third Circuit Rejects Novel “Expected Useful Life” Defect Theory Premised on Warranty Period

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Posted in Class Action Defense

On June 8, 2018

The Third Circuit recently confirmed that plaintiffs must provide evidence of a specific defect, capable of classwide proof, in order to prevail on proposed class claims, holding that, where defective design is “an essential element of Plaintiffs’ misrepresentation-based claims,” whether proof of the defect “is susceptible to classwide evidence is dispositive of whether Plaintiffs can satisfy predominance” under Rule 23(b)(3). In Gonzalez v. Owens Corning, the plaintiffs sued the manufacturer of Oakridge fiberglass roofing shingles, claiming that their shingles, which were subject to warranties of 25 years or more, were “plagued by design flaws that result in cracking, curling and degranulation” and “will eventually fail.” The plaintiffs argued that the product warranties amounted to representations about the shingles’ expected useful life. Plaintiffs did not dispute that the design specifications for all shingles met the applicable industry design standard (“ASTM”), but claimed that compliance with the ASTM specifications did not consistently yield shingles that would last the stated warranty period. Thus, plaintiffs claimed that the issue of “defectiveness should be judged by the expected useful life of the shingles as represented by the applicable warranty period.” The plaintiffs’ expert, whose testimony was largely stricken as unreliable under Daubert, acknowledged that there was no single set of measurements applicable to all shingles that would constitute a design...

New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

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Posted in Class Action Defense

On April 19, 2018

The New Jersey Supreme Court’s April 16, 2018 decision in Spade v. Select Comfort (consolidated with Wenger v. Bob’s Discount Furniture, LLC), entirely destroys the viability of “no injury” class actions under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) and will also surely erode the viability of TCCWNA class certification more broadly. Via referred questions from the Third Circuit Court of Appeals, the N.J. Supreme Court held that in order to be an “aggrieved consumer” under the TCCWNA, a plaintiff must demonstrate an adverse consequence caused by an unlawful provision in a consumer contract or other writing. The TCCWNA essentially prohibits businesses from including in any written consumer contract, warranty, or sign any provision that “violates any clearly established legal right of a consumer or responsibility of a seller” or other business. N.J.S.A. § 56:12-15. Although the TCCWNA on its face appears to only allow an “aggrieved consumer” to sue to recover a “civil penalty” of not less than $100 or actual damages, this Statute has been used—some might say abused—with increasing frequency by the plaintiff class action bar to bring “no injury” class actions premised solely upon the existence of a contract containing some unenforceable or illegal provision. Naturally, tens or hundreds of thousands of uniform consumer contracts with allegedly offending...

TCPA Update: When Revocation of Consent Is Unreasonable

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Posted in Class Action Defense

On April 11, 2018

The District of New Jersey recently made clear that when attempting to cancel unwanted commercial text messages, if the recipient does not follow the sender’s simple instructions, any other attempts to revoke consent to the text messages may be found unreasonable. In Rando v. Edible Arrangements International, LLC, a class action lawsuit claiming violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, et seq., plaintiff claimed that she was sent commercial text messages from defendant using an automatic telephone dialing system (“ATDS”). Though plaintiff had originally consented to receive such text messages, and never followed defendant’s instruction to text “STOP to cancel,” the complaint alleged that plaintiff had revoked her consent to receive the messages via other return text messages of varying content and that defendant had impermissibly designated an exclusive means for the revocation of consent.” The Rando court held that the complaint failed to state a TCPA claim by failing to allege that the plaintiff’s chosen method of revoking consent was reasonable. Plaintiff had replied to the text with language which would clearly indicate to a human being that she wanted to revoke her consent, but she did not text back “STOP” as instructed in the original text itself. Although District Court Judge Simandle found that the FCC’s statements on...

D.C. Circuit’s Rejection of FCC’s 2015 “Autodialer” Definition is Welcome News for Businesses in TCPA Class Actions

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Posted in Class Action Defense

On March 23, 2018

On March 16, 2018, the D.C. Circuit Court of Appeals issued a long awaited decision in its review of the Federal Communications Commission’s (FCC) 2015 Declaratory Ruling and Order, which among other things, had sought to clarify various aspects of the Telephone Consumer Protection Act’s (TCPA) general bar against using automated dialing devices (ATDS) to make uninvited calls or texts messages. The FCC’s 2015 Order was largely viewed by businesses as having greatly expanded the scope of the TCPA, opening the floodgates of class action litigation against businesses utilizing virtually any type of text messaging to communicate ads to customers. In ACA International v. FCC, the D.C. Circuit, among other things, struck down the Commission’s broad definition of autodialer. The TCPA generally makes it unlawful to call a cell phone using an ATDS, i.e., “equipment which has the capacity-(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Id. § 227(a)(1). The FCC’s 2015 Order declined to define a device’s “capacity” in a manner confined to its “present capacity,” but rather, construed a device’s “capacity” to encompass its “potential functionalities” with modifications such as software changes. Thus, under the Commission’s 2015 interpretation, calls or texts made with a device having the capacity...

Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

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Posted in Class Action Defense

On March 16, 2018

In answering a certified question from the Third Circuit, the Pennsylvania Supreme Court recently issued a decision that greatly expands the reach of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL). In Danganan v. Guardian Protection Services, the Supreme Court held that “a non-Pennsylvania resident may bring suit under the UTPCPL against a [Pennsylvania]-headquartered business based on transactions that occurred out-of-state.” Plaintiff Danganan contracted with Guardian Protection Services (“Guardian”), a Pennsylvania-headquartered business, for home security equipment and services at the plaintiff’s then-home in Washington, DC. The contract contained, inter alia, a choice-of-law provision, stating that the “Agreement shall be governed by the laws of Pennsylvania.” After moving to California, the plaintiff attempted to cancel the agreement, but Guardian continued to bill the plaintiff, claiming the agreement authorized ongoing charges through the contract’s term, regardless of cancellation attempts. The plaintiff brought suit in Pennsylvania state court, and Guardian removed the matter to the United States District Court for the Western District of Pennsylvania. Guardian then moved to dismiss, arguing that the plaintiff had not, pursuant to the UTPCPL, demonstrated a “sufficient nexus” between Pennsylvania and the improper conduct alleged in the complaint. The district court agreed and dismissed the complaint. On appeal, the Third Circuit certified two questions to the Pennsylvania Supreme Court: (1) Whether...

Ninth Circuit Reverses $200 Million Settlement and Class Certification For Lack of Proper Choice of Law Analysis

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Posted in Class Action Defense

On February 14, 2018

In a decision that may make it harder to settle cases on behalf of nationwide classes, the Ninth Circuit recently overturned a $200 million class action settlement and vacated the certification of a nationwide class of consumers, finding the district court failed to examine whether different states’ laws applied to the class members’ claims and whether Rule 23’s predominance requirement was satisfied. The dispute was rooted in a 2012 investigation which found that Hyundai and Kia deviated from U.S. Environmental Protection Agency fuel economy testing protocols and overstated the fuel efficiency estimates in advertisements and car window stickers for certain 2011, 2012, and 2013 vehicles. A California federal court approved the settlement in June 2015. However, in In re Hyundai and Kia Fuel Economy Litigation, a split three-judge panel of the Ninth Circuit vacated the District Court’s approval order and certification of a nationwide class of consumers. Five objectors appealed from the class settlement arguing, among other things, that the settlement violated consumer rights in states other than California. The Ninth Circuit held that the District Court erred by failing to apply California’s choice of law rules to determine whether California law could apply to all plaintiffs in a nationwide class or, alternatively, if the court had to apply the law of each state. According to...

Class Certification Denied in Tropicana Orange Juice Labeling MDL

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Posted in Class Action Defense

On February 12, 2018

In the Tropicana Orange Juice multidistrict litigation (MDL), plaintiffs’ bid for class certification has been rejected due to the need for individualized proofs and inability to ascertain class members. On January 22, 2018, U.S. District Judge William J. Martini (DNJ) denied class certification in the multidistrict litigation, In re Tropicana Orange Juice Marketing and Sales Practices Litigation. The lawsuit claimed that “Tropicana Pure Premium” (TPP) orange juice was mislabeled and misbranded as “100% pure and natural” because the juice contains undisclosed natural flavoring in violation of FDA standards of identity for pasteurized orange juice. Plaintiffs also attacked the marketing of TPP as “pure, natural and fresh from the grove” as demonstrably false given the added flavoring. The MDL judge, however, concluded that plaintiffs’ common law and N.J. Consumer Fraud Act (“CFA”) claims were “plainly unsuitable for class certification” because each claim “requires individualized proof.” Plaintiffs argued that their unjust enrichment claim was uniform because it focused on the TPP label and consumers uniformly paid for pasteurized orange juice that they did not receive. But the court held that defendant would be unjustly enriched only if a consumer did not receive the benefit of the bargain for which she paid, thus “compel[ling] an inquiry as to what exactly was the benefit of the bargain” in each...

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