The U.S. Court of Appeals for the Eleventh Circuit recently solidified an important rule about class standing: the definition of a class in a settlement agreement must be limited to class members with Article III standing.

In Drazen v. Pinto, the Eleventh Circuit vacated the district court’s approval of a $35 million settlement agreement because the class definition included members who lacked Article III standing.

Drazen involved a class action against GoDaddy.com LLC alleging that the company violated the Telephone Consumer Protection Act by sending unwanted text messages and calls through a prohibited automatic telephone dialing system.

The class settlement agreement submitted to the district court defined the class as all persons within the United States who received a call or text message from GoDaddy between November 2014 and December 2016. This definition included people who had received just one text message from the company, which directly contradicted the holding in Salcedo v. Hanna that the receipt of a single text message was not a sufficiently concrete injury to give rise to Article III standing.

Despite this precedent, the district court allowed the text message-only recipients to remain in the class even though they lacked standing. The district court reasoned that even though some of the class members would not have standing in the Eleventh Circuit, they do have a viable claim in their respective circuits due to a circuit split. The district court stated that “GoDaddy is entitled to settle those claims in this class action although this Court would find them meritless had they been brought individually in the Eleventh Circuit.”

Potential class members appealed based on an argument about the meaning of “coupon settlements.” However, the Eleventh Circuit decided sua sponte to consider whether it had subject matter jurisdiction under Article III.

The Eleventh Circuit analyzed the U.S. Supreme Court opinion in Frank v. Gaos, which held that there must be Article III standing even at the settlement stage of a class action. The court highlighted Gaos to show that, unlike non-class action matters, class litigation settlements may only be finalized with district court approval and federal courts lack jurisdiction if no named plaintiff has standing. The Eleventh Circuit also highlighted the lodestar principle from TransUnion LLC v. Ramirez that every class member must have standing to recover individual damages.

The Eleventh Circuit vacated the approval of the class certification and settlement and remanded the case to the Southern District of Alabama to revise the class definition.

This decision highlights the importance of Article III standing principles at every stage of litigation. As the court stated: “If every plaintiff within the class definition in the class action in TransUnion had to have Article III standing to recover damages after trial, logically so too must be the case with a court-approved class action settlement.”