The US Court of Appeals for the Second Circuit recently closed the door on a potential argument for defendants fighting multi-state class certification. In Langan v. Johnson & Johnson Consumer Companies, Inc., as part of an appeal of a Rule 23 petition, the Second Circuit held that named plaintiffs in a purported class action concerning alleged violations of consumer protection laws in several states have Article III standing to bring claims on behalf of class members that reside in different states and are subject to those states’ laws. 2018 WL 3542624 (2d Cir. July 24, 2018). However, the Second Circuit then asked the district court to readdress certification, specifically to consider whether material differences exist among the state consumer protection laws and, if so, whether those differences predominate over the similarities.

The Second Circuit’s ruling provides that lower courts must conduct a rigorous analysis of variations in applicable state law under Rule 23, leaving open a clear avenue for defendants facing multi-state consumer protection claims to challenge class certification. In essence, defendants can challenge certification by identifying variations among the different state laws, emphasizing the difficulties that would arise from the application of those states’ laws, and arguing that those difficulties would run afoul of Rule 23’s predominance and manageability requirements.

In Langan, the Second Circuit expressly held that there is no Article III standing issue when named plaintiffs in a purported class action bring claims on behalf of out-of-state class members, even where those class members have claims arising under different state consumer protection laws. The decision effectively eliminates one of the potential arguments defendants have attempted to use to derail plaintiffs seeking to certify nationwide classes. The Second Circuit reasoned that “class actions necessarily involve plaintiffs litigating injuries that they themselves would not have standing to litigate,” id. at *5, and that, if a defendant’s wrongful conduct has impact in multiple states, the harm is no more or less definite in any one state than the others, id. at *6.

The Seventh Circuit previously reached the same conclusion as the Langan court, stating that possible reliance on other states’ laws in a class action “has nothing to do with standing, though it may affect whether a class should be certified.” Morrison v. YTB Int’l, Inc., 649 F.3d 533, 536 (7th Cir. 2011). But the Seventh Circuit is the only other circuit court to explicitly address this issue of Article III standing—meaning that defendants operating outside the Second and Seventh Circuits may still make this argument, but should understand that other circuits might be persuaded by the reasoning of the Second and Seventh Circuits. It is worth noting, as the court in Langan did, that there is a clear tension in Supreme Court precedent as to whether variation between the named plaintiff’s claims and other putative class members’ claims is a question of constitutional standing or class certification. Langan, 2018 WL 3542624 at *3. Other circuits very well may come down the other way.

Defendants in the Second and Seventh Circuits, however, still have viable means of combatting the propriety of a nationwide class under Rule 23. Like multiple other circuits, the court in Langan made clear that plaintiffs in a putative class action have the burden to demonstrate that variations in state laws “do not predominate over the similarities.” Id. at *6. Moreover, the Second Circuit expressly stated that lower courts must rigorously assess the variations in state laws and their impact on predominance and prepare a fully reasoned, rather than cursory, opinion. Indeed, the court in Langan remanded the case because it did not feel that the district court had sufficiently considered the impact of any differences among the applicable consumer protection laws. Variations among different state laws can present significant issues to the litigation of a class action—for example, even statutes that address similar wrongful conduct can require proof of entirely different elements. See Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 591 (9th Cir. 2012). It is also possible that variations among state laws could cause the interests of class members to diverge.

Although the majority of circuits have recognized that variations in relevant state laws can impact predominance, the circuits vary in their sensitivity to these differences. In one case, the Ninth Circuit was unconcerned about what it called “idiosyncratic differences” between the various applicable state consumer protection laws, ultimately finding that class certification was appropriate. See Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998). In contrast, the Fifth Circuit determined in one case that the plaintiffs’ “extensive catalog of the statutory text” of the applicable laws from the 51 relevant jurisdictions was insufficient because it failed to probe beyond the “textual similarities,” thereby oversimplifying the law and ignoring substantive variations among the different jurisdictions. See Cole v. General Motors Corp., 484 F.3d 717, 725 (5th Cir. 2007).

Ultimately, when facing a putative nationwide class, there are multiple steps that defendants can take to contest certification under Rule 23. For example, defendants should be aware of a plaintiff’s attempt to apply a single state’s law, which would avoid the preponderance and manageability problems caused by variations among the laws of different states. Where necessary, defendants can push for a full choice-of-law analysis for all putative class members. Assuming that multiple state laws apply, defendants can delve beyond just statutory or textual similarities among state laws and dig into variations based on state court precedent, state legislation, administrative regulations, or available remedies. Even slight differences in the kind of proof acceptable to meet the elements of the respective claims may be enough to tip the balance. Finally, defendants can highlight any deficiencies in subclasses proposed by the plaintiffs—for example, plaintiffs may suggest that the class members be grouped into subclasses based on those members who are required to prove reliance and those who are not. Multiple courts have found subclasses to be unmanageable, whether based on the difficulties associated with sorting class members into subclasses or because of the number of subclasses required. Defendants can and should consider the logistical challenges related to any such proposed subclass.

Although it is tempting to assert that Langan makes it easier for plaintiffs to bring nationwide class actions, Langan actually holds the parties and the lower courts to a stringent standard for assessing the impact of variations in applicable state law on predominance and manageability. Defendants facing nationwide class actions should take a close look at the purported class, the laws involved, and any variations in those laws that may overwhelm preponderance or could make litigating the class action unmanageable.

[View source.]