The Practical Impact of Mass Actions

Mass actions, suits in which multiple plaintiffs join their claims without bringing or vigorously prosecuting class allegations, have become increasingly commonplace. However, serious questions remain as to the legitimacy of this litigation format. Defendants, be they natural persons or corporate citizens, have basic procedural rights that must be satisfied in any innovation in civil procedure. Mass actions often cut into defendants’ due process rights and have been misused to harass, annoy, and extort nuisance settlements. One successful strategy against mass actions has been to demand that the mass action meet the rules of adjudication or "get out of the courthouse." This article analyzes the issue of procedural irregularities of the mass action format, and considers the impact of the Class Action Fairness Act on mass actions.

Judges nationwide, including some in jurisdictions not known for offering a helping hand to defendant corporations, have had little difficulty recognizing the wisdom and necessity of breaking apart mass actions. For example, Reed Smith successfully represented a national mortgage company in a series of mass actions alleging form-driven violations of the Truth in Lending Act (TILA). Banks v. GMAC Mortgage Corp., (C.D. Cal. 2005); Hamilton v. GMAC Mortgage Corp., (M.D. Fla. 2005); Null v. GMAC Mortgage Corp., (M.D. Fla. 2004); Donley v. GMAC Mortgage Corp., (N.D. Ga. 2004, Magistrate). In each case, the defendants argued that such alleged violations, even if comprised of substantively identical defects, did not arise out of the same transaction or series of transactions. United States Courts for the Middle District of Florida, Central District of California, and a Magistrate for the Northern District of Georgia agreed, finding that each loan transaction constituted a separate and distinct event, and that severance of the misjoined claims was warranted under Federal Rule of Civil Procedure (Federal Rule) 21.

In mass actions where some plaintiffs present no claims against them, defendants should assert under Federal Rule 12(b)(6) that plaintiffs present no claim against them (and hence, no claim upon which relief can be granted), but also, under Federal Rule 12(b)(1) that plaintiffs do not present a justiciable case or controversy so as to give the court subject-matter jurisdiction under Article III of the Constitution. Even states, such as New Jersey, with constitutions which do not impose an explicit "case or controversy" limitation on their judiciaries generally prohibit the rendering of advisory opinions. Any named plaintiff who completely fails to present a claim as to any defendant is, in effect, asking for an impermissible advisory opinion.

While the demand for proof of standing sounds in basic constitutional principles, the plaintiffs bar continues to create novel procedural postures and arguments requiring necessarily complex rebuffs from defense counsel. Especially contentious are plaintiffs’ claims that all defendants may be properly joined through the so-called juridical link theory. A juridical link may be a statute, a contractual relationship, or a conspiracy among defendants such that any plaintiff harmed by any such defendant should be able to sue each defendant, even those with whom that plaintiff had no dealings. To defend against this theory, a defendant must fend off the efforts of the plaintiffs to extend the juridical link theory beyond the narrow factual context for which it was developed.

Even where mass action claims meet the joinder requirements of Federal Rule 20(a) or its state equivalent, courts have power under Federal Rule 20(b) to "order separate trials or make other orders to prevent delay or prejudice." Especially in large mass actions with multiple defendants, application should be made to the court for such severance. Although courts are loathe to recognize that properly instructed juries may nonetheless be confused by large amounts of evidence, multiple causes of action between multiple parties, and partially overlapping claims, the sheer scale of the mass action context can prompt reassessment. Moreover, the administrative cost and delay of participating in such an unnecessarily complex action-even just keeping track of pleadings and correspondence or scheduling depositions-can in itself constitute a form of prejudice to the defendant with no causal relationship to any plaintiff.

In response to such motions to sever, plaintiffs’ counsel will seek to appeal to the conscience and the calendar of the court. In appealing to the court’s conscience, plaintiffs’ counsel will present thematic or policy-focused generalizations concerning the supposed practices of "the industry" without offering any proof (or even allegations) such as would be required for Federal Rule 23 certification. As a matter of calendaring, plaintiffs’ counsel will appeal to the judge’s practical, busy side. "Why not just deal with all of these plaintiffs and all of these defendants at once?" "What do you want me to do, Your Honor, clog your docket with hundreds of separate filings?" While such a facile approach has surface appeal, plaintiffs’ counsel must not be allowed to establish themselves as the court’s helper when they are the very ones who created the logistical dilemma. Defendants can, for example, agree to consolidation of discovery without waiving the right to individual adjudication at the dispositive motion or trial phases of the case, while holding firm that the multiple defendants are legal strangers to one another, and misjoined for purposes of trial.

In fact, it was in England where the administrative impracticality of joining all the manorial tenants of a given landlord as Plaintiffs in one suit spurred the development of the representative action. See, e.g., Brown v. Howard, 21 Eng. Rep. 960 (Ch. 1701). Then, one of the first great stock scandals, the collapse of the speculative South Sea Bubble, further legitimated the idea that Plaintiffs should be permitted to sue in a class to overcome otherwise insuperable administrative hurdles of joinder. See, e.g., Chancey v. May, 24 Eng. Rep. 265 (Ch. 1722). In the United States, we adopted representative actions for the same reason: because justice should not be sacrificed to an unworkable procedural form. See, e.g., West v. Randall, 29 F. Cas. 718 (C.C.D.R.I. 1820)(Story, J.). The mass action turns this principle on its head. Instead of using the formalized, simplified, streamlined procedures available under Rule 23, mass actions revel in the administrative burdens incident to modern, mass-participatory consumer-oriented industries. Mass actions can, and often are, no more than general allegations levied against an entire industry that there has been an across-the-board failure to follow best practices. The joinder of huge numbers of plaintiff-customers with form-driven complaints can drive even the most scrupulous and deep-pocketed company into settlement. When mass action plaintiffs speak to the calendar and conscience of the court, it may be worth noting that those goods are best preserved by the official representative format laid out in Rule 23, shunned by mass action plaintiffs. As the United Kingdom and the rest of Europe considers adopting class action-type litigation formats, fundamental fairness dictates that they consider how best to protect plaintiffs and defendants from the use of administrative burdens as a club.

Until very recently, the term "mass action" had not been used in the United States Code. In passing the Class Action Fairness Act of 2005, Congress used the term for the first time in a statute, perhaps unwittingly providing grist for the mills of those who would legitimatize the mass action format. CAFA, which generally extends the original jurisdiction of district courts to hear class actions, notes that mass actions should be considered subject to the same removal provisions. The act defines a "mass action" as "any civil action…in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claim involve common questions of law or fact," subject to certain exceptions which would tend to indicate that the case belongs in the state system where it was filed. To be removed, the aggregate of such claims must exceed $5 million. Individual claims under $75,000 are not counted for removal purposes.

We must acknowledge that such legislation, however well-intentioned, carries with it an inexorable trade-off. is, Congress may have included mass action provisions to the CAFA exactly because it disapproves of the format as an end-run around class action controls.By setting mass actions on an even keel with class actions for purposes of removal, Congress could be misinterpreted as implicitly approving of the mass action format. A better read is that Congress knows of the mass action format, and can predict that, absent a provision putting mass action suits on par with class actions, mass actions would be even more widely used to circumvent the removal provisions of CAFA. That

On a practical level, it is not at all clear that the mass action provisions of CAFA will have any effect on the use of mass actions in consumer finance cases. The requirement that each claim exceed $75,000 will significantly curtail the usefulness and relevance of CAFA’s mass action provision. It is the rare action based on credit cards, auto loans or even mortgages that presents plaintiffs each seeking more than $75,000 in damages. Moreover, CAFA’s mass action trap to the unwary plaintiffs’ lawyer is easily avoided by bringing a series of mass actions naming 99 plaintiffs each. Like the money launderer making deposits of $9,999.99 to avoid reporting requirements, plaintiffs’ counsel are likely to find ways around the tightly circumscribed mass action provisions of the CAFA.

This article is presented for informational purposes only and is not intended to constitute legal advice.