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SCOTUS May Weigh In—Class Members And Article III Standing – Trials & Appeals & Compensation



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KEY TAKEAWAY:

  • The Eleventh Circuit’s decision in Drazen v. Pinto
    deepens the divide among circuit courts regarding treatment of
    uninjured class members in class actions.

  • If the Supreme Court considers and affirms
    Drazen’s holding that class settlements must be
    limited to class members with standing, fewer class actions may be
    filed, it could be harder to obtain class certification, and class
    actions may be less likely to settle early.

On August 19, 2022, we wrote about the Eleventh Circuit’s decision in Drazen v.
Pinto
, which held that a class action settlement agreement may receive
final approval only if every class member has standing to recover
individual damages. 41 F.4th 1354 (11th Cir. 2022). The case is
significant not only because it establishes the standing
requirement for absent class members at the settlement stage, but
also because it serves as bait for SCOTUS to take up the issue.

Indeed, the Drazen decision joins a host of split
decisions from other circuits that have grappled with the issue of
uninjured class members and whether that issue is a matter to be
addressed at class certification or, later, at the damages phase.
Compare Olean Wholesale Grocery Coop., Inc. v. Bumble
Bee Foods LLC
, 31 F.4th 651, 669 (9th Cir. 2022) (finding that
a class that potentially includes more than a de minimis
number of uninjured class members is not precluded from being
certified); In re Rail Freight Fuel Surcharge Antitrust
Litig
., 934 F.3d 619, 624–25 (D.C. Cir. 2019) (endorsing
a de minimis rule to meet predominance at the class
certification stage); In re Asacol Antitrust Litig., 907
F.3d 42, 58 (1st Cir. 2018) (holding that not every class member is
required to demonstrate standing when a class is certified);
Messner v. Northshore Univ. HealthSystem, 669 F.3d 802,
825 (7th Cir. 2012) (finding that damages class may be certified
where not “a great many” members of the class are
uninjured); with Denney v. Deutsche Bank AG, 443
F.3d 253, 264 (2d Cir. 2006) (“[N]o class may be certified
that contains members lacking Article III standing.”);
Halvorson v. Auto-Owners Ins. Co., 718 F.3d 773, 779 (8th
Cir. 2013) (“a named plaintiff cannot represent a class of
persons who lack the ability to bring a suit themselves.”);
Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th
Cir. 2003) (“[W]here fact of damage cannot be established for
every class member through proof common to the class, the need to
establish antitrust liability for individual class members defeats
Rule 23(b)(3) predominance.”); In re Hydrogen Peroxide
Antitrust Litig
., 552 F.3d 305, 311 (3d Cir. 2008) (where
“every class member” cannot prove at least individual
injury through common proof, Rule 23(b)(3)’s predominance
requirement is not met).

These split decisions beg the question whether now is the time
for SCOTUS to weigh in on this meaningful issue. Defendants in
Olean recently filed a petition for writ of certiorari.
Plaintiffs in Drazen have filed for rehearing en banc, but
assuming the en banc court affirms the decision, an appeal to the
Supreme Court might follow.

If Drazen is appealed to the Supreme Court, and if the
Supreme Court grants certiorari and affirms, attorneys representing
plaintiffs bringing class action lawsuits may very likely face a
new reality. There will no longer be an incentive to draft class
definitions broadly, without concern for whether any members of the
class were injured and thus lack Article III standing. Instead,
attorneys would be forced to engage in that investigative and
economic legwork upfront if the goal is to obtain a settlement that
a court could approve. Moreover, should SCOTUS consider the
decision in Drazen, the Court might in tandem with, or in
a separate examination of the Olean case, be inclined to
resolve the circuit split with a decision stating every class
member must have standing, and thus must prove injury, at the class
certification stage. This might particularly be the case if, under
Drazen, plaintiffs are already incentivized to make those
economic determinations on the front end. Such a decision from
SCOTUS could result in fewer class actions being filed, greater
difficulty in obtaining class certification, and fewer instances of
class actions settling early in the life of a case.

Drazen and Olean present the Supreme Court an
opportunity to resolve this long-standing circuit split, but only
time will tell whether SCOTUS will weigh in.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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