Consumer Class Action Blog

News, analysis and commentary on state and federal consumer class action litigation

Posts Tagged ‘TILA’

7th Cir. Weighs In On Class Action Circuit Split

Posted by Philip Kay on September 3, 2009

If the named plaintiff in a putative class action settles her own claim but reserves the right to appeal the denial of class certification, can she appeal the denial of class certification?  This was the question facing the 7th Circuit in Muro v. Target Corp., 2009 WL 2707537 (7th Cir. Aug 31, 2009).

In Muro, Target mailed a Target Visa Card to Ms. Muro along with a credit agreement.  The problem was that Muro never applied for the card.  Muro had a Target credit card years before but paid the balance and closed the account.  She did not activate the new Visa Card and did not incur any charges or fees associated with the card.

Muro filed a TILA class action against Target based on the unsolicited credit card.  Her suit alleged that Target violated TILA sections 1642 and 1637.  The court denied class certification of the 1642 claim on typicality grounds and granted summary judgment to Target on the 1637 claim.

Muro and Target then settled the 1642 claim.  In the settlement agreement, Muro “reserved her right” to appeal the denial of class certification.  Muro then appealed the denial of 1642 class certification and the 1637 summary judgment.

On appeal, the 7th Circuit addressed an issue that has split the circuits:  whether a reservation of the right to appeal the class certification issue is sufficient to permit a named plaintiff in a putative class action who has settled her individual claim to appeal the class certification ruling.

The Court answered “no” to the question.  The Court noted that several circuits have confronted the more general issue of whether a prospective class representative who has settled her personal claim can still appeal the denial of class certification.  All of the circuits acknowledge that a plaintiff seeking to appeal such a ruling must have a “personal stake in the definitive adjudication of the class-certification issue.”  Thus, most of the circuits that have considered the issue have held that “a named plaintiff’s unqualified release of claims relinquishes not only his interest in his individual claims but also his interest in class certification.”

There is, however, disagreement among the circuits as to whether a reservation of the right to appeal the class certification issue is sufficient to permit a prospective class representative who has settled her individual claim to appeal the class certification ruling. The 4th and 8th Circuits have made it clear that, in their view, the mere recitation in a settlement agreement that the plaintiff reserves the right to appeal the denial of class certification is not sufficient to create the sort of concrete interest in the class certification issue required for the plaintiff to have standing to prosecute the appeal.  By contrast, the 5th and 11th Circuits have indicated that a reservation of the right to appeal the class certification issue in a settlement agreement is sufficient to give the proposed class representative standing to appeal the class certification issue without any further showing of a concrete interest in the resolution of the issue.  In fact, the 11th Circuit has implied that a proposed class representative who settles her individual claim may appeal the denial of class certification even without an explicit reservation of the right to appeal that issue.

The Muro Court agreed with the 4th and 8th Circuits on this issue and held that issues personal to the prospective class representative must “remain alive in the litigation”  for the plaintiff to have standing to prosecute the appeal.  Thus, when a plaintiff settles her claim, “the settling individual has elected to divorce himself from the litigation and no longer retains a community of interests with the prospective class” and does not have standing to prosecute the appeal even if he “reserves” his right to appeal.

My gut says the Supreme Court would agree with the 4th, 7th and 8th Circuits on this issue.  The Supreme Court is pretty strict about the case-or-controversy requirement and won’t hesitate to dismiss a case for lack of standing as they very recently demonstrated in Summers v. Earth Island Institute, 129 S.Ct. 1142 (March 3, 2009).

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Class (Sort of) Certified in Predatory Lending Action

Posted by Philip Kay on August 22, 2009

In a TILA class action brought by the victims (predatees?) of a complicated mortgage scheme, the Northern District of California denied TILA class certification but only for as long as it takes plaintiffs’ counsel to find a better class representative.

In Plascencia v. Lending 1st Mortg., 2009 WL 2569732 (N.D.Cal., Aug. 21, 2009), the court ruled that the plaintiffs failed to satisfy the typicality requirement of F.R.C.P. 23(a)(3) because their claim was brought after TILA’s one-year limitations period had expired. The plaintiffs knew their claim was barred by limitations but were relying on a class-wide equitable tolling argument.  The court rejected the argument. The court reasoned that to adjudicate the equitable tolling issue would require the type of individualized evidence that is inappropriate in the liability phase of a class action, and it refused to arbitrarily select a specific number of days beyond the normal limitations period to toll the statute for all class members.  The court did certify the plaintiffs’ state-law fraud and UCL classes, but refused class certification on the TILA claim.

The only question remaining is how fast it takes plaintiffs’ counsel to find a class representative whose claim isn’t barred by the one-year TILA limitations period.  The Court practically invited plaintiffs’ counsel to do so and even went so far as to analyze and answer in the affirmative the moot question of whether Plaintiffs’ TILA claim passes muster under F.R.C.P. 23(b)(3)’s predominance requirement.  The court engaged in this analysis “because counsel may move to substitute a new class representative whose TILA claim satisfies the typicality requirement.”   May?

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