The Ninth Circuit Further Narrows The Meaning Of ATDS Under The Telephone Consumer Protection Act

Among other things, the federal TCPA imposes liability for calling/texting cell phone numbers using an Automatic Telephone Dialing System (“ATDS”) without sufficient prior express consent. As defined by the TCPA, ATDS is “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.” The TCPA grants a private right of action and allows a plaintiff to recover statutory penalties of $500 per call/text in violation, or up to $1,500 for a knowing or willful violation. These statutory penalties have made the TCPA a favorite among class action plaintiffs’ attorneys seeking to hold companies liable for calls/texts over a four year statute of limitations period.

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FDA Boosts Protein Preemption Defense

Recent FDA guidance for determining and declaring the protein grams in a serving has helped muscle a class action out of federal court. Continue Reading

Are Flavor Cases Fizzling? Two More Courts Grant Motions to Dismiss

Since 2019, a staggering number of “flavor” lawsuits have been filed, with dozens of putative class actions filed in a single month and more than 100 in 2021 alone.  While some lawyers appear to have an insatiable appetite for filing these suits, courts appear to find them mostly unpalatable.  The complaints  allege that packaging on food and beverage items is false and misleading because the challenged products do not contain certain ingredients or because the flavor is achieved by using ingredients other than or in addition to what consumers “expect” to be the source of the flavor.  Manufacturers of plant and dairy milks, yogurts, ice creams, creamers, cereals, chips, cakes, cookies and brownies have faced such claims.  Vanilla, lime, butter, milk, strawberry, smoked, chocolate and fudge flavors have all been dragged into court.  All of this litigation begs the question – will the gluttonous plaintiff’s class action counsel ever be satiated?  It seems that, by and large, the federal courts are not swallowing the case theme.  Two back-to-back decisions from the Southern District of New York, Boswell v. Bimbo Bakeries USA, Inc. and Kamara v. Pepperidge Farm, Inc., chucked flavor claims on the basis that a reasonable consumer could not be misled by the product labels.  In Boswell, the court dismissed plaintiff’s claims that she was misled by the packaging on Entenmann’s “All Butter Loaf Cake.”  The district court noted that this was “the latest in a long string of putative class actions brought by the same lawyer” and identified six prior cases that had been dismissed.

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Class Action Waivers Redux: Ninth Circuit Upholds Arbitration Provision Delegating Enforceability Determination to Arbitrator

In Brice v. Haynes Investments LLC, No. 19-15707 (9th Cir. Sept. 16, 2021), the Ninth Circuit considered an appeal by shareholders in Native American tribe-linked online lenders of a district court order denying the shareholders’ motion to compel arbitration. The Ninth Circuit reversed the order because, under the terms of the parties’ agreement, the enforceability of the arbitration agreement was a question for the arbitrator, not the judge, to decide.

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Illinois Appellate Court Affirms 5-Year Statute of Limitations Period for Certain BIPA Claims

Continuing the trend of recognizing Illinois’ Biometric Information Privacy Act (“BIPA”) as a muscular privacy-protective statute, the Illinois Appellate Court for the First District has ruled that the most common statutory violations of BIPA are subject to a five-year statute of limitations. BIPA imposes several duties on companies that collect, store or use biometric data—e.g., fingerprints, facial geometry scans—from Illinois residents. Prevailing plaintiffs may recover liquidated damages ranging from $1,000 to $5,000 for each BIPA violation (plus attorneys’ fees), and these provisions incentivize plaintiffs’ lawyers to bring BIPA claims as class actions.

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Supreme Court Addresses Class Action Standing in Ramirez Case: Requires “Concrete” Injury for Article III Standing for Class Members

The Supreme Court further limited consumer lawsuits in TransUnion, LLC v. Ramirez, siding with credit reporting agency TransUnion in a 5-4 decision holding that thousands of consumers improperly flagged as potential terrorists do not have standing to sue the company for damages. TransUnion expands upon Spokeo, Inc. v. Robins, 2578 U.S. 330, 340 (2016) in limiting standing under the Fair Credit Reporting Act (FCRA) and Article III to plaintiffs who have suffered a concrete harm, not just the violation of a statutory right. As a practical matter, TransUnion significantly narrows plaintiffs’ ability to assert claims in federal court on behalf of broad classes without proving a concrete injury to each member.

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Eighth Circuit Holds Rule 23(b)(3)’s Predominance Requirement Not Met in Securities Fraud Action Against Brokerage Firm

In Ford v. TD Ameritrade Holding Corp., 2021 U.S. App. LEXIS 12008 (8th Cir. Apr. 23, 2021), the United States Court of Appeals for the Eighth Circuit reversed a district court’s order certifying a class of customers who had used the defendant’s brokerage services to trade securities and were allegedly injured by defendant’s undisclosed “order routing practices.”  The Eighth Circuit determined that plaintiff’s expert’s proposed algorithm could not overcome the complex, trade-by-trade inquiry needed to adjudicate each class member’s economic loss, and so failed to satisfy Federal Rule of Civil Procedure 23(b)(3)’s requirement that common issues of law or fact predominate of issues affecting individual class members.  The decision is significant because the Eighth Circuit did not view recent technological advances in simplifying the analysis of voluminous, complex data as necessarily altering the nature of what is an inherently individualized analysis for Rule 23(b)(3) purposes.

Securities brokers have a duty of “best execution,” requiring their “reasonable efforts to maximize the economic benefit to the client in each transaction.”  Defendant TD Ameritrade, Inc.’s (“TD Ameritrade”) order routing practices allegedly violated this duty by systematically sending customer orders to trading venues that paid TD Ameritrade the most money, rather than to venues that provided the best economic outcome for its customers.  As a result, it allegedly left orders unfilled, or filled orders at a sub-optimal price or in a manner that adversely affected performance after execution.  Plaintiff, a customer, claimed that, by this conduct, TD Ameritrade, its parent, and its CEO violated Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5.

Plaintiff moved to certify a customer class.  The magistrate judge recommended denying the motion on the ground that proving each customer suffered an economic loss would require highly individualized, trade-by-trade inquiries, and so Rule 23(b)(3) was not met.  The district judge, however, disagreed.  It held that plaintiff’s expert “had developed an algorithm that could solve the predominance problem by making automatic determinations of economic loss for each customer,” and granted the motion.

The Eighth Circuit granted defendants permission to appeal the district court’s class certification order.  In reversing the district court, the Eighth Circuit first explained that “best execution” cases differ from typical securities fraud actions because the alleged fraud does not directly affect the security’s trading price.  Rather, in a “best execution” case, any economic loss (a liability element) arises, if at all, from the difference between the price at which the customer’s trade was executed and any better price that was then available from an alternative trading source.  Thus, to satisfy Rule 23(b)(3)’s predominance, a plaintiff must propose a class-wide method to establish this particular type of economic loss for each class member.  The Eighth Circuit noted that the Third Circuit in 2001 had rejected efforts to certify a class in a similar “best execution” case on the ground that the proposed method failed to obviate the need for trade-by-trade economic loss determinations.

Plaintiff argued that technological advances since 2001 have enabled courts to now adjudicate “best execution” claims through the class action devise.  Plaintiff pointed out that his expert represented that the proposed algorithm could instantly analyze “hundreds of millions of data points” to assess order-execution quality using TD Ameritrade’s trading history data and published data on market conditions at the time of each trade.  Specifically, the proposed algorithm would identify each trade’s “better price” by comparing the trade’s actual price with published data showing the highest price a buyer was willing to pay, and the lowest price a seller was willing to accept, for a particular stock at any given time.

The Eighth Circuit, however, found the algorithm failed to overcome the individualized nature of this inquiry.  It noted that both sides’ experts agreed that certain transactions had to be excluded from the algorithm’s analysis to account for those instances when unusual market conditions would have prevented TD Ameritrade from executing a trade other than at an “inferior” price.  Although plaintiff’s expert claimed the algorithm could automatically “filter out”’ such instances, the experts disagreed about which transactions should be excluded.  The Eighth Circuit determined that, to resolve this issue, the parties’ respective experts would need to “bring their own judgments to bear on a trade-by-trade basis,” ultimately requiring the trier of fact to make highly individualized determinations.  It further found that, when placing an order, a customer’s trading strategy can bear on the economic loss question but that the algorithm could not account for the customer’s state-of-mind at the time of the trade.  It concluded that “[d]espite advances in technology, individual evidence and inquiry is still required to determine economic loss for each class member.”

In addition to rejecting the proposed algorithm’s ability to deliver as promised, the Eighth Circuit’s opinion also commented on the relationship between advances in computing technology and Rule 23(b)(3)’s requirement that common questions predominate over individualized ones.  While acknowledging that “[a]dvanced computing power can expedite [an economic loss] determination,” it observed that such advances do not necessarily “convert[] individual evidence into common evidence” when the underlying inquiry is inherently individualized.  Hence, the Eighth Circuit’s opinion is significant as it suggests that the speed and efficiency by which technology allows individual questions to be adjudicated does not bear on the Rule 23(b)(3) inquiry which asks whether common questions “predominate” over individual questions.

The U.S. Supreme Court Limits TCPA Liability By Narrowly Interpreting ATDS

On April 1, 2021, the U.S. Supreme Court in the class action case of Facebook, Inc. v. Duguid, No. 19-511, resolved a circuit court split on the meaning of automatic telephone dialing system (“ATDS”) under the Telephone Consumer Protection Act (“TCPA”) by unanimously reversing the Ninth Circuit’s broad definition and narrowly interpreting ATDS.  Bringing much needed clarity the Federal Communications Commission has not been able to provide to date, the Supreme Court held that to qualify as ATDS “a device must have the capacity to store a telephone number using a random or sequential number generator, or to produce a telephone number using a random or sequential number generator.”  This ruling significantly narrows liability, including class action liability, under the TCPA. Continue Reading

Strengthening the TCPA’s Sovereign Immunity Shield—Fourth Circuit Rules Federal Employees Are Not Liable for Government-Mandated Robocalls

In a resounding victory for public-private partnerships, the Fourth Circuit’s decision in Cunningham v. Lester, et al., No. 20-1086, — F.3d —- (4th Cir. Mar. 4, 2021) has affirmed federal employees’ immunity from the Telephone Consumer Protection Act (“TCPA”) when acting in furtherance of a government mandate.  The TCPA imposes strict statutory penalties for unsolicited robocalls ranging from $500 to $1,500 per violation.  But the Supreme Court has held the TCPA does not contain a waiver of sovereign immunity. See Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 166 (2016).  The question presented in Cunningham was whether a plaintiff can avoid the TCPA’s sovereign-immunity shield by suing federal employees for damages in their individual capacities.  The Fourth Circuit ruled that a plaintiff can do no such thing. Continue Reading

More on McGill: Ninth Circuit Affirms Order Enforcing Arbitration of Public Injunctive Relief Claims

Arbitration clauses with class action waivers remain one of the most effective lines of defense against consumer class actions.  They are also one of the most challenged.  As we have discussed in prior posts, including here, here, and here, consumer arbitration clauses have come under fire in California if they prohibit plaintiffs from obtaining “public injunctive relief” in any forum.  This is the so-called McGill rule, which comes from the California Supreme Court’s decision in McGill v. CitiBank, N.A., 2 Cal.5th 945 (2017). Continue Reading


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