For the last several years, the class action defense bar has made much fuss over the so-called “no-injury class”. Conflating several different notions into one amorphous nametag, class action opponents contend that such “no-injury classes” result when courts ignore Article III standing requirements or the predominance requirements of Rule 23(b)(3). In fact, these critics themselves ignore the way in which a class action is litigated, conflate a judicial award of damages with a defendant’s voluntary decision to settle, and disregard the desire for a class definition whose members are objectively ascertainable for notice, due process, and res judicata purposes, independently of the merits of any class-wide or individual class member’s claim.
For a long time, courts have had to wrestle with cases in which the defendant claims the plaintiff suffered no injury or harm. While these cases may sometime be filed as putative class actions, the questions of injury-in-fact and redress are generally resolved at the Rule 12 pleading stage, whether on Article III grounds or as a matter of substantive law, before the case ever reaches the class certification stage. When a case survives dismissal, and is certified, the defendant may disagree or otherwise feel aggrieved, but to call such an action a “no-injury class” is certainly a misnomer, as the court has already recognized the existence of a cognizable injury.
What the class action opponents really seem to be complaining about are class actions that involve clear, legitimate and often serious injuries, but whose class definitions also encompass some persons or entities who were not injured by the defendant’s conduct. Again, the term “no-injury class” is a misnomer when applied in this context; an allegedly “overbroad” class is what they really mean.
Contrary to the defense arguments regarding the parade of horribles that will arise from the certification of an allegedly “overbroad” class, however: (i) an over-inclusive class definition is the natural result of defining the potentially affected persons and entities by objectively ascertainable criteria for notice, due process and res judicata purposes; (ii) in a certified class action, the court almost never tries the class representative’s claim, and then extrapolates the result to each and every other defined class member, but, rather, tries only the common and class-wide issues in a common and class-wide trial, with individual causation, damages and other conditions precedent to recovery left to be individually established by participating class members in subsequent proceedings; and (iii) knowing this, there is no reason for a defendant desiring to settle a certified class action to voluntarily compensate class members whom the defendant knows will not be able to obtain an individual recovery at the end of the day.
What the class action opponents really want is a Catch-22 under which no class can ever be certified: If the class proponents define the class in terms of injury, the defendant will argue that the class cannot be certified, because the class definition is not objectively ascertainable, but is, rather, intertwined with the merits. If, on the other hand, the class proponents properly define the class in terms of objectively ascertainable criteria, untethered to the merits, the defendant will argue that the class cannot be certified because the class definition is “overbroad” and the class is therefore a “no-injury class.” Hence, class actions involving clear, legitimate and often serious injuries will infrequently, if ever, be certified, and the baby will be thrown out with the bathwater.
Complaints About the So-Called “No-Injury” Class Ignore the Purpose of the Class Definition, and the Distinction Between Class Membership and Actual Recovery
It is well-settled that a class should be defined by objectively ascertainable criteria, so that the class members, for notice, opt out and due process purposes, and the courts, for res judicata purposes, can determine who will be or has been bound by any class-wide judgment at the end of the day. The class should be fixed before the merits are considered, and its membership should not change based on the outcome of any class-wide or individual merits determination.
The fact that a person or entity falls within a class definition simply means that he, she or it will be bound by any class-wide judgment, as a matter of res judicata; it does not mean that, assuming the class is successful on common or class-wide issues, he, she or it will automatically be entitled to relief. Rather, the class should be defined separately and distinctly from the subgroup of people or entities expected to actually recover (assuming that the plaintiffs prevail on the common issues) at the end of the day.
Therefore, if done correctly, the class definition will almost always be “over-inclusive” in the sense that the class will be larger than the group of individual persons or entities who are ultimately entitled to recover, based on various legal and/or factual parameters, proofs and/or determinations.
As noted, the class opponents’ arguments regarding allegedly “overbroad” classes are attempts to place the class proponents in an unwinnable situation: By forcing them to define the contours of the class to be coterminous with the exact group of people or entities who will ultimately recover (assuming that the class prevails), the class proponents will frequently be required to inject merits, causation, or other subjective elements into the class definition, and thereby compromise the objective ascertainability of the class.
Concerns About “Overbroad” Classes Largely Ignore the Way in Which Certified Class Actions Are Actually Litigated
The concern that a defendant will be unfairly required to compensate persons or entities that fall within the class definition but suffered no injury seem to stem from the premise that, once a class is certified, the class representative’s action or claim will be litigated to conclusion, with that result then applied to the actions or claims of all of the other absent class members whom he or she represented at trial.
However, virtually no class action is tried in this way.
A class action trial will almost always be structured to resolve only the common class-wide issues, claims and/or defenses, on a class-wide basis. In some cases, the class representative will not even present evidence that is uniquely relevant to his or her own particular claim. Yet even where the class representative’s action or claim is tried, (perhaps for standing, or efficiency, or “bellwether” purposes), the findings that are unique to the class representative – such as specific causation, quantum of damages, or an individualized defense – are almost never imputed, extrapolated or applied to the class as a whole.
There are, of course, various securities, antitrust, ERISA, discrimination, and other cases where a formulaic damage model can be established and applied across the class from a database or other common sources of proof. In some cases, the class will be entitled to a class-wide remedy, such as disgorgement, in which the relief turns not on any injury to any individual class member, but upon the defendant’s ill-gotten gains. But even in the context of a compensatory damages remedy, the damages for which the defendant is ultimately liable is a function of the common and class-wide determinations, as applied to the individual facts and circumstances of the class members, as reflected in the data.
Even in less formulaic class action cases, the triable common class-wide issues are, by their nature, common and class-wide. They are based on common and class-wide bodies of evidence, and not the vagaries of the individual class members’ facts and circumstances. If the class loses on the necessary common elements, the individual facts become irrelevant. If the class wins on some or all of the common elements, many of the class members may still not be entitled to recover unless they come forward with evidence of causation or injury. In some cases, the individual class representatives themselves might not ultimately recover, even though they have prevailed on common issues for the rest of the class. Yet, whether or what, if anything, the class representative is found entitled to receive, it is not that recovery (or lack thereof), but subsequent claim form submissions, or mini-trials, or other proceedings, that will dictate whether and the extent to which absent class members will prevail.
Or, stated another way: The defendant is not cast in judgment to provide compensation to an individual class member who has suffered no injury, even when the court has certified an allegedly “overbroad” class.
A Settling Defendant’s Complaints About “Overbroad” Classes Makes Little Sense in the Settlement Context
When a settlement establishes a capped or limited fund, (and particularly where the settlement class is defined after the size of the fund has already been agreed upon), a potentially “overbroad” class presents a risk to the settling class members who have suffered the clearest or most serious injuries, that must be protected with structural safeguards under Rule 23(a)(4) and by a determination that the relief is fair, reasonable and adequate to those class members under Rule 23(e).
It is curious, at the same time, that a settling defendant would be complaining about an “overbroad” class in this context – as the defendant is getting the benefit of a broader class-wide release.
Class opponents seem to suggest that a class defendant is somehow “forced” to settle with absent class members who could not prevail if his or her claim were individually litigated. They speak of the supposed leverage that accompanies these “no-injury” claims through class certification. But it is the class defendant who has leverage in being able to force class counsel to waste time, money and effort litigating the claims of individual class members who cannot recover at the end of the day. Nevertheless, and in any event, there can be no class settlement unless the defendant has agreed to the class definition, (and other terms), and voluntarily decided whom to pay or not pay.
Defendants settle disputed, and even arguably “implausible” claims all of the time. Even an arguably implausible claim, however, may result in a litigated victory or the revelation of damaging discovery. The parties should be permitted to weigh costs and benefits, just as they do in every variety of litigation. There is no Article III requirement or limitation on a defendant’s ability to settle a claim.
Indeed, public policy strongly favors settlements, both in the class and non-class context. As long as the settling class members are protected under Rule 23, why would we want to prevent a defendant from attempting to voluntarily resolve purported “no-injury” claims?
with James Bilsborrow
[NOTE – The actual paper which is available in PDF (see above) includes Footnotes with further observations as well as formal legal references and citations.]
Post Script – I recently came across a short Chuck Klosterman piece from when he was serving as “The Ethicist” rejecting the notion of the so-called “no-injury” class: A letter writer had inquired whether it was ethical to accept a payment as a member of a class who was not knowingly affected by a latent defect in his automobile? Klosterman rightly says: “The fact that the deficiency didn’t affect you doesn’t mean that it won’t come into play later, or that you did not unknowingly take on the risk of driving a car that did not perform to the company’s own standard.” And: “Imagine if this transaction happened at the time of purchase. While you’re buying a car, the dealer says: ‘We have reason to believe there’s a 2 percent chance this vehicle will have an irreversible defect. As a result, we proactively reducing the sticker price by 2 percent.’ No reasonable person would expect you to embargo that rebate until something actually went wrong.” – New York Times Magazine, Jan. 25, 2015, p.19.
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