Last month, in Arkansas Teachers Retirement System v. Goldman Sachs Group, Inc., the Second Circuit vacated the Southern District of New York’s order certifying a class in a Rule 10b-5 securities fraud class action. At issue was whether defendants had rebutted the so-called “fraud on the market” presumption of reliance that applies in securities fraud class actions by showing that the alleged misrepresentations did not have any impact on the price of the defendant company’s stock. In reversing the district court, the Second Circuit held that the district court had improperly required defendants to come forward with evidence that “conclusively” proved the “complete absence” of price impact, when, according to Second Circuit, a “preponderance of the evidence” will do. Moreover, the Second Circuit criticized the district court for failing to consider certain aspects of defendants’ price impact evidence, making clear that the court should have considered any evidence that could sever the link between an alleged misstatement and a stock price movement. In so doing, Goldman is likely to become a helpful tool for defendants challenging class certification in 10b-5 cases.

What is the “fraud on the market” presumption?

Just as it is with common-law fraud claims, reliance is an essential element of a securities fraud claim brought under Rule 10b-5. Plaintiffs must prove that they relied upon an alleged misrepresentation when determining whether to purchase or hold a given security. Without such reliance — in other words, where the evidence shows that the plaintiff would have made the same investment decision even if the alleged misrepresentation had not been made — you cannot say that a plaintiff’s loss is the result of the alleged misrepresentation.

As a general matter, reliance is an inherently individualized inquiry, which is why the run-of-the-mill fraud claim is usually not susceptible to class treatment  (see e.g., McLaughlin v. Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008). But securities fraud claims under 10b-5 are different.

In Basic Inc. v. Levinson, 485 U.S. 224 (1988), the Supreme Court adopted a presumption that the price of a stock traded in an efficient market reflects all public, material information—including misrepresentations—and that investors rely on the integrity of the market price when they choose to buy or sell stock. Because of the Basic presumption—aptly named the “fraud-on-the-market” presumption—courts may presume that investors relied upon all public, material misrepresentations through their “reliance on the integrity of the price set by the market.” To invoke the Basic presumption, plaintiffs must show that:

  1. The defendant’s stock traded in a generally efficient market.
  2. The alleged misrepresentations were publicly known.
  3. The relevant stock purchase occurred between the time the misrepresentations were made and the truth was revealed.

Although the Supreme Court in Basic also recognized that defendants can rebut the fraud-on-the-market presumption by showing that the alleged misrepresentation did not actually distort the stock price, after Basic, few lower courts actually permitted defendants to make such a showing. Most often, courts found that the question of whether an alleged misrepresentation had impacted the stock price was too closely tied to “merits” issues (such as materiality or loss causation) to be addressed at the class certification stage. As a result, following Basic, class certification became almost a foregone conclusion in securities fraud actions, particularly for cases involving stocks traded on major exchanges such as the NYSE or Nasdaq. (Stocks traded on OTC markets were a different story.)

The altogether unsurprising result of making class certification a fait accompli in most securities fraud suits? An incredible proliferation of securities fraud class actions—and with it, an ever-increasing number of high-dollar settlements following class certification.

In Halliburton II, SCOTUS reaffirmed the “fraud on the market” presumption, but made clear that the presumption can be rebutted.

Over the years, many economists and scholars have disputed the theoretical underpinnings of the presumption—that the stock price in an “efficient” market reflects all public material information or that all (or even most) investors rely upon the integrity of the price. The defense bar took issue with how Basic seemed so out of place with the rest of the Supreme Court’s class action jurisprudence, which generally rejected presumptions. Public companies (and insurers) bemoaned the explosion of often-dubious securities fraud claims and the (unfair) settlement pressure that resulted from rubber-stamp class certifications. But for more than 25 years, the Supreme Court did not revisit Basic.

That changed in 2014 with Halliburton Co. v. Erica P. John Fund, Inc. In that case (commonly called “Halliburton II”), the Supreme Court took up two issues:

  1. Whether to abandon (or modify) Basic’s fraud-on-the-market presumption in securities fraud cases.
  2. Whether (and how) securities fraud defendants can rebut the Basic presumption at the class certification stage.

In taking up the case, the Court was presumably motivated by its decisions just a few years earlier in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast Corp. v. Behrend, 569 U.S. ___ (2013), which clarified that class certification requires a “rigorous analysis” of Rule 23’s requirements, and that this rigorous analysis may overlap with merits issues – arguably at odds with Basic’s presumption of reliance.

On the first issue—whether to jettison the fraud-on-the-market presumption—the Supreme Court decided that Halliburton had not shown “special justification” needed to overcome stare decisis. But on the second issue, the court reaffirmed that defendants may rebut the Basic presumption by showing that the alleged misrepresentations did not actually distort the market price of the company’s stock and clarified that this rebuttal may take place at the class certification stage (thereby defeating class certification). Even though examining a misrepresentation’s price impact may dovetail with questions of materiality and loss causation, the court saw no reason to defer it to a later stage of the case. The court thus rejected numerous decisions—including the Fifth Circuit’s decision below—that had refused to consider price impact evidence at the class certification stage.

Since Halliburton II, lower courts have struggled to determine precisely how a defendant can rebut price impact.

Although making clear that defendants could defeat class certification in 10b-5 cases by showing an absence of price impact, Halliburton II unfortunately did not explain how defendants can make that showing. Among the many issues left unaddressed were the defendants’ burden of proof in rebutting the fraud-on-the-market presumption, as well as the types of evidence that would be admissible (and sufficient) to meet that burden, whatever it may be. Does the defendant bear the burden of persuasion in rebutting the presumption, or does the plaintiff bear that burden in obtaining the presumption?  Would evidence of no statistically significant price movement following the alleged misrepresentation be sufficient, or would a defendant also need evidence of no price movement following the alleged corrective disclosure? Should courts ever consider evidence about the absence of price movements on days other than the alleged misrepresentation and corrective disclosure days, such as on days where the purported truth was first revealed to the market? Should courts consider alternative explanations for a price movement following an alleged misrepresentation or corrective disclosure?

Lower courts have struggled to reach clear, consistent, and coherent answers to these questions; unfortunately, in most cases addressing price impact since Halliburton II, courts have restricted the defendants’ evidence in meaningful ways. For example, in Aranaz v. Catalyst Pharm. Partners, Inc., 302 F.R.D. 657 (S.D. Fla. 2014), the court refused to consider evidence that showed that the market already knew the information that was allegedly misrepresented, even though if the market already knew the “truth,” then the alleged misrepresentation or corrective disclosure could not possibly have added to the total mix of information available to the market and thus could not possibly have impacted the stock price. And in Goldman, the district court rejected evidence about the absence of a price movement when the purported truth was revealed, reasoning that such evidence went to materiality, which, under Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 133 S. Ct. 1184 (2013), is not supposed to be addressed at the class certification stage. With these sorts of evidentiary limitations, it is no wonder that the vast majority of courts that have addressed price impact since Halliburton II have found that the defendants failed to rebut the fraud-on-the-market presumption.

In Goldman, the Second Circuit made clear that courts should consider all evidence that could bear on the price impact of an alleged misrepresentation, even if that evidence is also probative of materiality.

Fortunately for securities fraud defendants, the tide may be starting to turn. On appeal in Goldman, the Second Circuit reversed the district court’s grant of class certification based (in part) on the district court’s refusal to consider evidence about the absence of a price impact when the truth was revealed, even though that evidence also “touche[d] on materiality.” As the court explained, price impact “differs from materiality in a crucial respect”—“[i]f a defendant shows that an ‘alleged misrepresentation did not, for whatever reason, actually affect the market price’ of defendant’s stock, ‘there is no grounding for any contention that the investor indirectly relied on that misrepresentation through his reliance on the integrity of the market price.’” Accordingly, the Second Circuit’s opinion makes clear that district courts should consider all evidence that could bear on price impact, even if that evidence is also potentially probative of materiality. The court was also bothered by the fact that the district court failed to hold an evidentiary hearing or hear oral argument—which was at odds with the district court’s duty under Wal-Mart and Comcast to “rigorously” scrutinize class certification.

Not everything in Goldman was helpful for securities fraud defendants, however. The Second Circuit also agreed with the district court that defendants bear the burden of persuasion to rebut the fraud-on-the-market presumption—which would mean that plaintiffs do not bear the burden of persuasion to invoke the presumption. In so holding, the Second Circuit split from the Eighth, which in IBEW Local 98 Pension Fund v. Best Buy Co., 818 F.3d 775 (8th Cir. 2016), held that under Federal Rule of Evidence 301, defendants merely bear the burden of production in rebutting the Basic presumption—plaintiffs retain the burden of persuasion. The Second Circuit did, however, disagree with the district court’s conclusion that defendants had to meet their burden with “conclusive” proof of the “complete absence of price impact.” Showing the absence of price impact by a mere “preponderance of the evidence” is sufficient, according to the court.

Despite the tension between Goldman and Best Buy, the Second Circuit’s decision is a helpful tool for defendants seeking to defeat class certification in dubious securities fraud cases. The principal takeaway from Goldman is that in opposing class certification in 10b-5 cases, defendants should be prepared to offer any evidence that could potentially sever the link between the alleged misrepresentations and an impact on the stock price—and to use the Goldman decision to convince district courts to consider that evidence. This includes evidence about price movements (or the lack thereof) on days not at issue in the complaint, but that could be probative of the market’s reaction to the revelation of the purported truth that was misrepresented or withheld. This also includes evidence showing plausible alternative explanations for statistically significant price movements following an alleged misrepresentation or corrective disclosure.

Goldman is now back before the district court on remand, where the court is once again considering whether to certify a class. We will continue to monitor the case to see how the district court applies the Second Circuit’s price impact guidance.

The Supreme Court’s decision last summer in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017), is my pick for “2017 Class Action Practitioners’ Case of the Year”––and it’s not even a class case.

One of the most exciting areas in the class action arena is personal jurisdiction. Stifle that yawn. The Supreme Court’s recent decisions in this area could have a major effect on the scope of class actions where the claims sound in state law. Plaintiffs’ lawyers have long sought to bring class actions in the most plaintiff-friendly venues. As a general proposition, a plaintiff would prefer to cram a big nationwide class of claims into the most favorable venue instead of having to bring either several single-state class actions in several venues or a nationwide class in a less-favorable venue. Where plaintiffs are successful, this kind of forum shopping makes class cases all the more difficult for defendants: Not only do defendants have to face the high stakes of a large number of aggregated claims in one action, they also have to fight all those claims in a hostile venue.

The Supreme Court’s recent decision in Bristol-Myers Squibb, has given defendants a powerful new argument against this tactic. Bristol-Myers Squibb involved a mass action in which nearly 600 plaintiffs who did not live in California joined their claims with California residents’ claims. The defendant challenged personal jurisdiction, but the California courts found specific jurisdiction to exist. By an 8-1 vote, the United States Supreme Court reversed, holding that the California courts could not exercise personal jurisdiction over the defendant as to claims of non-resident defendants who could not satisfy the well-settled test for specific jurisdiction. As a result, the plaintiffs face the choice of either bringing their nationwide class in a forum where the defendant is subject to general jurisdiction (i.e., state of incorporation of principal place of business, thanks to the Supreme Court’s recent Daimler decision) or limiting the class to those plaintiffs whose claims involve the kind of minimum contacts necessary to support the exercise of specific jurisdiction.

As mentioned above, Bristol-Myers Squibb is not a class action case––but that is likely of no consequence. The decision rests on the constitutional due process rights of defendants, and, under the Rules Enabling Act, the purely procedural class action rules cannot abrogate those rights. (We’ll address this point further in a future post, along with looking at how lower courts have applied Bristol-Myers Squibb in the class context.)

Practically speaking, Bristol-Myers Squibb should curb the most blatant forum shopping in diversity cases. Defendants should use it to channel more litigation to the jurisdictions where defendants are incorporated or headquartered or where the plaintiffs reside. The case may also lead to an increase in single-state class cases, which is a potential downside—but defendants can waive personal jurisdiction as a defense to permit consolidation where appropriate. The increase in state-specific suits may also make removal under diversity or CAFA easier, as plaintiffs will be less free to use joinder to defeat diversity jurisdiction and will likely run afoul of the no-similar-case rule of 28 U.S.C. § 1332(d)(4)(A)(ii). We also predict an uptick in multidistrict-litigation petitions, which both plaintiffs and defendants can perceive as an advantageous way of consolidating geographically dispersed litigation.

A Look Back at Significant Developments in Class Action Law in 2017From the standpoint of class action practice, 2017 was as important for what did not happen as for what did.  Here are some of the highlights and lowlights of the 2017 class action scorecard, with a look forward to how the impact of some of those developments may be felt in 2018.

A brave new world for personal jurisdiction

If you got out of law school more than a decade or so ago, most of what you learned about personal jurisdiction is now obsolete.  The once determinative “minimum contacts” analysis has now all but gone the way of the human tail. Whatever remains of it is fairly insignificant at this point.  What matters now is the “general” versus “specific” jurisdiction dichotomy. In simplified terms, to the extent the defendant is being sued specifically for sales or other conduct in the forum state, specific jurisdiction perhaps attaches. Otherwise, the defendant is likely subject to suit only where it is incorporated or has its principal place of business.  This lesson was driven home in Bristol-Myers Squibb v. Superior Court of California, San Francisco County, 582 U.S. ___ (2017), where a large number of nonresident plaintiffs joined a large number of resident plaintiffs in a mass action alleging tort claims associated with the drug Plavix.  In an 8-1 decision, the Supreme Court ruled as a matter of substantive due process that there was personal jurisdiction over BSM only as to the claims of the resident plaintiffs.  The prevailing wisdom, and the view of a majority of courts to address the issue since this decision came down, is that the same analysis applies to class actions (e.g., LDGP, LLC v. Cynosure, Inc., Case No. 15 C 50148 (N.D. Ill. Jan. 16, 2018); McDonnell v. Nature’s Way Prods., LLC, No. 16-cv-5011 (N.D. Ill. Oct. 26, 2017); Spratley v. FCA US LLC, No. 3:17-cv-62 (N.D.N.Y. Sept. 12, 2017); In re Dental Supplies Antitrust Litig., No. 16-cv-696 (E.D.N.Y. Sept. 20, 2017); Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., No. 16-cv-665 (E.D. Pa. July 24, 2017); Jordan v. Bayer Corp., No. 4:17-cv-865 (E.D. Mo. July 14, 2017)).  The effective result would seem to be that a corporation can now be subjected to nationwide class certification only in its home states.  Smart corporations now domiciled in class-friendly jurisdictions will now therefore evaluate whether there is reason to relocate their domicile and principal place of business to more defendant-friendly jurisdictions.

Spokeo produces mixed results for subject matter jurisdiction in statutory damages class actions

It has been more than a year and a half since the Supreme Court handed down its landmark Spokeo, Inc. v. Robins, 578 U.S. ___ (2016) decision, which made clear that Article III requires all plaintiffs to have suffered a “concrete” injury to bring suit in federal court.  Unfortunately, in that time, Spokeo has not become the statutory class action panacea that the defense bar hoped for—and, as we documented in a previous blog post, lower courts attempting to apply Spokeo have done so in often confusing and inconsistent ways.  Spokeo’s application to claims brought under some of the most frequently sued-under federal consumer protection statutes provide a good illustration of this.  For example, courts have reached mixed results when it comes to applying Spokeo to alleged FDCPA violations.  Mere technical timing FDCPA violations, such as a slight delay in sending a required notice that does not result in any prejudice, are almost certainly insufficient to confer Article III standing.  But the outright denial of information may be sufficient, even where there are no allegations that the denial caused any real harm.  Or maybe not.

Alleged FACTA violations have also generated mixed results, including divergent views on whether printing a credit card expiration date is alone sufficient to confer Article III standing (compare Meyers v. Nicolet Rest. Of De Pere, LLC, 843 F.3d 724 (7th Cir. 2016) with Deschaaf v. Am. Valet & Limousine Inc., 234 F. Supp. 3d 964 (D. Ariz. 2017)).  And perhaps most confused is how courts have applied Spokeo to FCRA claims.  For example, in Dreher v. Experian Information Solutions, Inc., the Fourth Circuit held that the failure to provide the sources of credit information on the plaintiff’s credit report was not, by itself, a sufficiently concrete harm to confer Article III standing; a plaintiff must show that the denial of information has caused him “‘real’ harm with an adverse effect.”  In sharp contrast, in In re Horizon Healthcare Services Inc. Data Breach Litigation, the Third Circuit refused to require any showing of harm or a material risk of harm from an alleged FCRA violation, holding instead that in creating a private right of action to enforce the FCRA, Congress demonstrated its judgment that any “violation of FCRA causes a concrete harm to consumers.”  The only relative consistency:  TCPA violations—which generally result in the plaintiff’s phone line being tied up and ink and paper being used—are almost always sufficient to confer Article III standing.

Unfortunately, it doesn’t look like the Supreme Court will provide additional guidance any time soon about how to determine whether an alleged statutory violation has resulted in a sufficiently “concrete” injury for Article III standing purposes.  Earlier this week, the Court denied the Spokeo defendants’ cert petition, which had sought review of the Ninth Circuit’s decision on remand that the plaintiff’s alleged injury in that case—dissemination of false credit information that may have actually improved the plaintiff’s credit score—was sufficient to confer standing under Article III.

The Circuit split over ascertainability gets even deeper

2017 saw the Ninth Circuit join the Sixth, Seventh, and Eighth Circuits in rejecting the (until recently) long-settled notion that Rule 23’s “numerosity” requirement implicitly contains a requirement that the class be ascertainable in an administratively feasible way before a class can be certified.  To varying degrees, these courts endorse concepts like “fluid recovery” and self-identification through affidavits in addition to finding that Rule 23 does not require that the actual class member be known before proceeding past certification to the merits.  This of course presents all sorts of due process concerns for class defendants, who protest the unfair settlement pressure, one-way res judicata effect, and due process problems associated with kicking the class member identification problem to the very end of the class litigation timeline.  The Second, Third, and Eleventh Circuits all still require some meaningful degree of ascertainability.  This is an issue class defendants will want to be sure to preserve if they find themselves in a jurisdiction hostile to the ascertainability requirement.  Class defendants in jurisdictions hostile to an ascertainability requirement will also want to recast any ascertainability problem as one of commonality, predominance, and/or superiority.

American Pipe re-fitting

In a pair of cases, the Supreme Court used 2017 to answer some long unsettled questions relating to class action tolling under American Pipe and Construction Co. v. Utah, 414 U.S. 538 (1974), and Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983).  The American Pipe rule generally holds that the statute of limitations is tolled for the claims of class members during the pendency of a class action until certification is denied or abandoned.  In California Public Employees’ Retirement System v. ANZ Securities, Inc., et al., 137 S. Ct. 2042 (2017), the Supreme Court held that there is no such tolling with regard to rules of repose, and in China Agritech, Inc. v. Resh, Dkt. No. 17-432, it granted cert to resolve a circuit split over whether such tolling applies only to subsequent individual claims by class members or also to successive class actions by class members.

The Congressional Review Act trumps the CFPB’s effort to prevent financial institutions from utilizing class waivers

In 2017, the CFPB finally made good on its threat to ban financial entities from utilizing arbitration clauses with class waivers to avoid or limit class actions. A few weeks later, both houses of Congress invoked the Congressional Review Act to nullify this CFPB rule.  President Trump then signed the nullification resolution, which under the CRA has the effect of prohibiting the CFPB from attempting any similar rule again.  Bradley’s Class Action team chair Mike Pennington was a principal author of DRI’s written comments opposing the CFPB rule.

New amendments to Rule 23 proposed to become effective in December 2018

In 2017, a set of settlement-related amendments to Rule 23 were formally set in motion, on a track likely to make them effective this December. The amendments front-load the evidentiary proof and modernize the notice and objection procedures necessary to achieve so-called “preliminary approval” and “final approval” of a class settlement. On behalf of DRI, Bradley’s Class Action team members Mike Pennington (whose hearing transcript is available here), Scott Smith, and John Parker Sweeney all submitted written comments and testified in public hearings before the Advisory Committee on Civil Rules and its Rule 23 Subcommittee regarding these and other proposed amendments to Rule 23.

SCOTUS holds that voluntary dismissal cannot be used as a tool to seek mandatory appellate review of class certification denials

In Microsoft v. Baker, a unanimous Supreme Court closed a loophole recognized in some circuits that permitted class action plaintiffs to seek immediate appellate review of an adverse class certification decision by voluntarily dismissing their claims with prejudice.  The practical effect of the Court’s ruling is that class action plaintiffs no longer have a mechanism for seeking immediate mandatory appellate review of class certification denials.  Instead, to obtain interlocutory review, plaintiffs must rely on either Rule 23(f), 28 U.S.C. § 1292(b), or a writ of mandamus, all of which give circuit courts discretion on whether to hear an appeal.

Judge Posner retires after nearly 40 influential years on the bench

Arguably the country’s most influential non-Supreme Court jurist ever, Judge Richard Posner retired abruptly from the Seventh Circuit in September 2017.  During his nearly 40 years on the bench, he had tremendous impact in shaping legal views and discourse on a host of issues.  Rule 23 was no exception, as Judge Posner’s views on the appropriateness of class certification have become deeply ingrained in the collective legal consciousness.  For example, relatively early in his career as a jurist, Judge Posner authored several opinions that reigned in class certification excesses, recognizing that plaintiffs often use class certification of dubious claims as a tool to extract “blackmail settlements.”  Notably, in In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995), Posner is credited with sounding the death knell for the class treatment of personal injury class actions.

More recently, Judge Posner authored opinions permitting class certification where the class action device was seen by him as the most efficient (and, as a practical matter, only) tool for resolving the class members’ disputes.  As Posner stated in Carnegie v. Household International, Inc., 376 F.3d 656 (7th Cir. 2004), which affirmed certification of a settlement-turned-litigation class, if the individual claims in a putative class are of sufficiently low value, then the “realistic alternative to a class action” may not be “17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”  Most recently, Judge Posner overturned a series of class action settlements that offered little benefit to the class but huge fees to class counsel (see, e.g., In re Walgreen Co. Stockholder Litig., 832 F.3d 718 (7th Cir. 2016); Redman v. Radioshack Corp., 768 F.3d 622 (7th Cir. 2014); Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014)).  Judge Posner’s immense impact on class action litigation will not be soon forgotten.

SCOTUS to clarify SLUSA’s application to class claims brought under the Securities Act of 1933

Currently pending before the Supreme Court is Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439 (filed May 24, 2016), which concerns the preemptive scope of the Securities Litigation Uniform Standards Act of 1998 (SLUSA).  By way of refresher, SLUSA preempts all state law causes of action for fraud in connection with the purchase or sale of securities—any such fraud claim must be based on federal law, i.e., the Securities Act of 1933 or the Securities Exchange Act of 1934.  At issue in Cyan is whether SLUSA also divests state courts of jurisdiction to hear class action claims brought under the Securities Act of 1933 (e.g., claims based on fraudulent misrepresentations or omissions in a registration statement).  Federal courts already have exclusive jurisdiction over claims brought under the Securities Exchange Act of 1934 (e.g., 10b-5 securities fraud claims).

Oral argument in Cyan occurred on November 28, 2017, although it only revealed the Court’s complete confusion about how to interpret SLUSA, which was (aptly) described as “obtuse,” “odd,” and, by Justice Alito, “gibberish.”  The Justices’ confusion has been mirrored in the state and lower federal courts, which have reached wildly inconsistent and chaotic results on the issue.  If the Court rules in Cyan’s favor, then all class claims under the Securities Act will have to be brought in federal court, subject to the procedural strictures of the PSLRA.  But if the Court rules in the plaintiffs’ favor, then investors will be able to avoid the PSLRA by filing their Securities Act claims in more favorable state court jurisdictions.  The Solicitor General has also entered the fray, advocating for a hybrid position: that SLUSA permits plaintiffs to bring Securities Act claims in state court, but also permits defendants to then remove those claims to federal court, should they so choose.  We anticipate a decision in the first half of 2018.

A welcome narrowing of the scope of the TCPA

As everyone reading this blog well knows, the TCPA has become a boon for the consumer protection plaintiffs’ bar.  This shouldn’t be surprising, given the TCPA’s (mostly) strict liability, statutory damages of at least $500 per violation (and up to $1500 for “willful” violations), and no damages cap.  Fortunately, however, a pair of D.C. Circuit cases may be beginning to reverse the tide.  First, was the D.C. Circuit’s decision in Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017), which struck down an FCC rule that had required senders of faxes to include opt-out notices on all messages, even though the statute itself only required such notices on non-solicited messages.  Now, pending before the D.C. Circuit is ACA International v. FCC, Case No. 15-1211 (D.C. Cir., filed Nov. 25, 2015), which challenges the validity of the FCC’s broad and oft-criticized interpretation of what constitutes an Automatic Telephone Dialing System, as well as FCC rules concerning the identity of the “called party” in the reassigned number context and the means by which a called party may revoke consent.  How the D.C. Circuit resolves ACA International could potentially have a huge impact on stemming the tide of rampant TCPA class actions.

The Fairness in Class Action Litigation Act stalls in the Senate

Finally, the House passed H.R. 985, also known as the “Fairness in Class Action Litigation” Act, in March 2017 by a largely party-line vote.  We have already discussed in detail how the current version of the bill could potentially change class action litigation—and made proposals to improve the bill.  Thus far, the Senate has taken no action on the bill, just as the Senate took no action on an earlier and more modest version of the Fairness in Class Action Act previously passed by the House.  It remains to be seen whether the bill will be revisited this year, although currently there does not appear to be any political momentum to do so.  If the bill does not become law by the end of 2018, then the legislative process will go back to square one.