Gibbons Law Alert

Gibbons Law Alert

Tagged: Courts of Appeal – Third Circuit

Third Circuit Affirms Remand of Class Action to State Court Under “Local Controversy” Exception

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Posted in Class Action Defense

On July 25, 2018

In a decision that may broaden application of the “local controversy” exception to removal under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(4), the Third Circuit recently affirmed the remand of a putative class action to New Jersey state court holding a corporate defendant with New Jersey citizenship could be considered a “local defendant” because it did not fully divest itself of liability after previously transferring its potential liabilities to a Delaware entity and, thus, remained a real party in interest. In Walsh v. Defenders, Inc., putative class members filed their complaint in New Jersey Superior Court alleging that the contracts they entered into with Defendants related to the class members’ purchase of home security equipment and monitoring services violated New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”) and the New Jersey Consumer Fraud Act (“NJCFA”). Defendants removed the matter to federal court asserting CAFA jurisdiction, and Plaintiff moved to remand under CAFA’s local controversy exception. After initially denying Plaintiff’s motion to remand, the District Court granted Plaintiff’s motion for reconsideration when additional discovery showed that the only defendant with New Jersey citizenship, ADT SSI-Tyco, had contracted with 35.3% of the putative class members. Defendants appealed and argued that ADT SSI-Tyco should have been ignored in the District Court’s diversity of citizenship...

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

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Posted in Class Action Defense

On July 3, 2018

In a precedential decision, the Third Circuit affirmed a narrow reading of autodialer under the Telephone Consumer Protection Act (“TCPA”), the first such decision within this Circuit following the D.C. Circuit’s rejection of the FCC’s 2015 definition of autodialer in ACA International. In Dominguez v. Yahoo, Inc., plaintiff purchased a cell phone with a reassigned telephone number, the prior owner of which had subscribed to Yahoo’s Email SMS Service. Because the prior owner of the number never cancelled the subscription, plaintiff received a text message from Yahoo every time the prior owner received an email, which amounted to thousands of text messages. Plaintiff filed a putative class action alleging that Yahoo had violated the TCPA, which requires that plaintiff prove that Yahoo’s Email SMS Service was an “automatic telephone dialing system,” i.e., an autodialer. Following the FCC’s 2015 ruling, plaintiff amended his complaint to allege that the Email SMS Service “ha[d] the potential capacity to place autodialed calls.” Yahoo moved for summary judgment, and both parties submitted expert reports addressing the Email SMS Service’s latent or potential capacity. The District Court granted Yahoo’s motion to exclude plaintiff’s expert reports and granted summary judgment in favor of Yahoo. On appeal, the Third Circuit relied heavily on ACA International and held that it was required to interpret...

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

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Posted in Class Action Defense

On June 18, 2018

Last month, the Third Circuit upheld the dismissal of a putative class action against TD Bank, finding that plaintiffs’ conclusory allegations lacked sufficient evidence and failed to satisfy Rule 9(b)’s heightened pleading standard for claims that sound in fraud. In MZL Capital Holdings, Inc. et al. v. TD Bank, N.A. et al., two account holders with TD Bank filed a proposed class action accusing the Bank of obscuring its exchange rates and improperly charging an embedded fee for converting foreign currency, thereby defrauding its customers in violation of the New Jersey Consumer Fraud Act. Shortly thereafter, plaintiffs amended their complaint to add claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of numerous other state consumer-protection laws. TD Bank moved to dismiss plaintiffs’ claims for failure to state a claim, and the District Court granted TD Bank’s motion, dismissing all of plaintiffs’ claims. On appeal, the Third Circuit affirmed the district court’s decision, concluding that plaintiffs’ claims were inadequately pled. At the outset, the Court re-affirmed the basic principle that claims brought under the Consumer Fraud Act sound in fraud and therefore must comply with Rule 9(b)’s particularity requirement. The Third Circuit held that plaintiffs’ general allegations, which failed to identify any provision in their agreement...

New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

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Posted in Class Action Defense

On April 19, 2018

The New Jersey Supreme Court’s April 16, 2018 decision in Spade v. Select Comfort (consolidated with Wenger v. Bob’s Discount Furniture, LLC), entirely destroys the viability of “no injury” class actions under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) and will also surely erode the viability of TCCWNA class certification more broadly. Via referred questions from the Third Circuit Court of Appeals, the N.J. Supreme Court held that in order to be an “aggrieved consumer” under the TCCWNA, a plaintiff must demonstrate an adverse consequence caused by an unlawful provision in a consumer contract or other writing. The TCCWNA essentially prohibits businesses from including in any written consumer contract, warranty, or sign any provision that “violates any clearly established legal right of a consumer or responsibility of a seller” or other business. N.J.S.A. § 56:12-15. Although the TCCWNA on its face appears to only allow an “aggrieved consumer” to sue to recover a “civil penalty” of not less than $100 or actual damages, this Statute has been used—some might say abused—with increasing frequency by the plaintiff class action bar to bring “no injury” class actions premised solely upon the existence of a contract containing some unenforceable or illegal provision. Naturally, tens or hundreds of thousands of uniform consumer contracts with allegedly offending...

Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

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Posted in Class Action Defense

On March 16, 2018

In answering a certified question from the Third Circuit, the Pennsylvania Supreme Court recently issued a decision that greatly expands the reach of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL). In Danganan v. Guardian Protection Services, the Supreme Court held that “a non-Pennsylvania resident may bring suit under the UTPCPL against a [Pennsylvania]-headquartered business based on transactions that occurred out-of-state.” Plaintiff Danganan contracted with Guardian Protection Services (“Guardian”), a Pennsylvania-headquartered business, for home security equipment and services at the plaintiff’s then-home in Washington, DC. The contract contained, inter alia, a choice-of-law provision, stating that the “Agreement shall be governed by the laws of Pennsylvania.” After moving to California, the plaintiff attempted to cancel the agreement, but Guardian continued to bill the plaintiff, claiming the agreement authorized ongoing charges through the contract’s term, regardless of cancellation attempts. The plaintiff brought suit in Pennsylvania state court, and Guardian removed the matter to the United States District Court for the Western District of Pennsylvania. Guardian then moved to dismiss, arguing that the plaintiff had not, pursuant to the UTPCPL, demonstrated a “sufficient nexus” between Pennsylvania and the improper conduct alleged in the complaint. The district court agreed and dismissed the complaint. On appeal, the Third Circuit certified two questions to the Pennsylvania Supreme Court: (1) Whether...

Third Circuit Holds That Challenges to the Validity of a Contract Containing an Arbitration Provision Can Only Be Adjudicated by the Arbitrator

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Posted in General Litigation

On November 30, 2016

In a recent precedential decision, South Jersey Sanitation Co., Inc. v. Applied Underwriters Captive Risk Assurance Co., Inc., the Third Circuit held that although arbitration agreements may be invalidated by generally applicable contract defenses, like fraud, in order for the court to decide the issue, the challenge “must focus exclusively on the arbitration provision, rather than on the contract as a whole.” “If the challenge encompasses the contract as a whole, the validity of that contract, like all other disputes arising under the contract, is a matter for the arbitrator to decide.”

In Suit Alleging Misleading Employment Rates, Third Circuit Rejects Class Certification Premised Upon Invalid Damages Theory

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Posted in Class Action Defense

On September 26, 2016

The Third Circuit recently affirmed a decision from the District Court of New Jersey denying class certification in an action alleging that Widener University School of Law defrauded its students by publishing and marketing misleading statistics about graduates’ employment rates. In its precedential opinion adjudicating plaintiffs’ interlocutory appeal pursuant to Fed. R. Civ. P. 23(f), the Third Circuit concluded that although the District Court misconstrued plaintiffs’ damages theory, the error was harmless because the Court would have nonetheless concluded that plaintiffs failed to satisfy the predominance requirement. This opinion, authored by Circuit Judge Chagares, is an example of defendants defeating class certification when plaintiffs cannot proffer a valid method of proving class-wide damages, as required by the U.S. Supreme Court in Comcast v. Behrend several years ago.

Third Circuit Holds That Absent Class Members Need Not Show Standing and Reiterates Comcast’s Reiteration of Basic Rule 23 Principles

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Posted in Class Action Defense

On October 29, 2015

In a precedential opinion in Neale v. Volvo Cars of North America, the U.S. Court of Appeals for the Third Circuit held that putative class members need not establish Article III standing, and emphasized that the Supreme Court’s decision in Comcast v. Behrend, 133 S. Ct. 1426 (2013) “was not breaking any new ground” because “the predominance analysis was specific to the antitrust claim at issue.”

Third Circuit Says Bananas to Forum Shoppers Seeking Second Bite at the Apple

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Posted in Class Action Defense

On September 15, 2015

In a recent precedential 2-1 decision, Chavez, et al. v. Dole Food Company, Inc., et al., the Third Circuit emphasized the importance of the “first filed” rule and affirmed the dismissal of a Delaware suit that was “materially identical” to one first brought in Louisiana. The Circuit Court reiterated that “[t]he ‘first filed’ rule is a well-established policy of the federal courts that in all cases of concurrent jurisdiction, the court which first has possession of the subject must decide it. This rule permits the district courts, in their discretion, to stay, transfer, or dismiss cases that are duplicates of those brought previously in other federal fora.”

Third Circuit Confirms Prospective Application of New Jersey Supreme Court’s Shelton Decision, Dooming Underlying Class Action

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Posted in Class Action Defense

On May 21, 2015

In a recent precedential decision, the Third Circuit, in Bohus, et al. v. Restaurant.com, held that the New Jersey Supreme Court’s Shelton decision — responding to a question of law certified by the Third Circuit as to the proper interpretation of the Truth in Consumer Contract, Warranty, and Notice Act (“TCCWNA”) — may be applied prospectively, thus defeating the class claims and leaving only two individual claims for a $100 penalty.

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