United States: Lit Alerts—November 2018

Class Actions: Ninth Circuit Voids Local Rule Setting 90-Day Deadline for Filing Motions for Class Certification

In August, the Ninth Circuit held that a district court's local rule that set a strict deadline for filing a class certification motion is incompatible with the flexible Federal Rules of Civil Procedure. The now void local rule, Central District of California Local Civil Rule 23-3, required that all class certification motions be filed within 90 days after service of the complaint, unless otherwise ordered. The rule was often criticized as unrealistic, in light of the need to establish a sufficient factual record at the class certification stage.

In ABS Entertainment v. CBS Corp., 900 F.3d 1113 (9th Cir. 2018), the parties had twice stipulated to extend the 90-day deadline in order to obtain class action-focused discovery. The district court denied the stipulations and then struck the timely filed class certification motion due to the plaintiff's failure to comply with Local Rule 23-3.

The Ninth Circuit held that Local Rule 23-3 was invalid because it conflicted with the Federal Rules of Civil Procedure. "Although the district court's application and interpretation of its Local Rules is entitled to a large measure of discretion . . . Local Rules cannot be incompatible with Federal Rules." Here, the court concluded, "the bright-line of Local Rule 23-3 is incompatible" with the Federal Rules' flexible approach that calls for a determination on class certification "[a]t an early practicable time after a person sues or is sued as a class representative."

Class Actions/Arbitration: Ninth Circuit Reverses Denial of Uber Technologies, Inc.'s Motions to Compel Arbitration and Certification of Driver Class

The Ninth Circuit recently reversed the Northern District of California's denial of Uber Technologies, Inc.'s motions to compel arbitration of the claims of Uber drivers who alleged that Uber violated various federal and state statutes by misclassifying the drivers as independent contractors rather than employees. In so doing, the Ninth Circuit also reversed the lower court's certification of a class of hundreds of thousands of Uber drivers.

The district court had denied Uber's motions to compel arbitration, holding that Uber's standard arbitration provisions in its agreements with drivers were unconscionable and therefore unenforceable. The district court then certified a class of approximately 160,000 individuals who had driven for Uber in the state of California since August 16, 2009.

The Ninth Circuit reversed. It held that Uber's agreements with the drivers delegated the threshold question of arbitration to the arbitrator, that this delegation was not adhesive under California law or procedurally unconscionable, and that the agreements' provisions permitting drivers to opt out of arbitration were not illusory, relying on its previous decision in Mohamed v. Uber Technologies, Inc., 848 F.3d 1201, 1206 (9th Cir. 2016). The plaintiffs attempted to distinguish Mohamed by arguing that they constructively opted out of the arbitration agreements for the entire class, and that the arbitration agreements were unenforceable because they contained class action waivers that violated the National Labor Relations Act of 1935 (NLRA). The Ninth Circuit rejected both arguments. It held that the lead plaintiffs had no authority to opt out of arbitration agreements on behalf of other drivers, and that their arguments under the NLRA were rejected in Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018).

Because the district court's class certification determination was premised on its conclusion that the arbitration agreements were not enforceable, the Ninth Circuit also reversed that decision and remanded the action to the district court for further proceedings.

Consumer Protection: S.D.N.Y. Throws Out Junior Mints Slack-Fill Suit

In Daniel v. Tootsie Roll Industries, LLC, 2018 WL 3650015 (S.D.N.Y. Aug. 1, 2018), the U.S. District Court for the Southern District of New York dismissed a putative slack-fill class action against Tootsie Roll Industries because the plaintiffs failed to show that the empty space in Junior Mints boxes was "non-functional."

In their complaint, the plaintiffs alleged that Tootsie violated consumer protection laws prohibiting deceptive and false advertising because its boxes of Junior Mints chocolate candies contained 35% to 39% of "non-functional" empty space that supposedly misled consumers as to the amount of candies in the boxes. Tootsie moved to dismiss under Fed. R. Civ. P. 12(b)(6) on the ground that the plaintiffs' conclusory allegations that the empty space was "non-functional" were insufficient to state a slack-fill claim.

The court agreed with Tootsie and granted its motion to dismiss. The court explained that it was not Tootsie's burden to prove that the empty space was functional; rather, the plaintiffs had the burden to show non-functionality. Specifically, the "[p]laintiffs ha[d] not demonstrated . . . that the slack-fill in the Products is unnecessary to protect the Junior Mints, or does not [] reflect the requirements of the machines used for enclosing the packages, or is not the result of unavoidable product settling, or is not the consequence of an inability to increase the level of fill or to further reduce the size of the package."

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