President Signs Legislation Modernizing Federal Chemical Regulation Law
Overhaul of Toxic Substances Control Act (TSCA) has important business implications for consumer product manufacturers and retailers.
By James Votaw, Partner, Environment
Why it matters
After a decade of negotiation, Congress has overwhelmingly approved legislation that, for the first time in 40 years, would modernize the federal Toxic Substances Control Act (TSCA)—the nation’s premier chemical control law. The TSCA amendments have deep, bipartisan support among industry, and environmental and consumer protection groups. It was signed by the President June 22.
In the past, TSCA has been primarily a concern only for manufacturers and importers of new chemicals. The new TSCA amendments, however, have the potential to disrupt existing chemical supply chains and to taint the reputation of well-accepted consumer goods made with any of the 65,000 chemicals in commerce that have never previously been reviewed for safety by EPA. These aspects make TSCA reform a potential concern for companies throughout the value chain, including consumer product manufacturers and retailers. It may not be possible to prevent all these disruptions, but there are proactive measures to take to minimize risks from the amendments and, for some companies, opportunities to develop competitive advantage.
Detailed discussion
Safety Review of “Grandfathered” Chemicals Is the Centerpiece of Reforms
The novel risk to existing supply chains arises from a new mandate and broader practical authority, under TSCA, for the US Environmental Protection Agency (EPA) systematically to prioritize and conduct risk evaluations for all chemicals currently in commerce in the United States, and to take risk management actions (everything from ordering product warning labels to complete bans) where warranted, taking into account how the chemical is used and the extent of environmental release and human exposure in workplaces and among the general public (e.g., through consumer products). For the first time, the thousands of chemicals listed on EPA’s inventory of chemicals in commerce (the “TSCA Inventory”) will be prioritized for formal risk review using measures of hazard and exposure, and EPA will be able to order testing where needed to assess hazards or exposure.
TSCA Creates New Risks for Consumer Product Manufacturers and Retailers
Risks arise for particular companies when chemicals in their product supply chain and important to their business (e.g., as a component of an important product) come under EPA safety review, or are prioritized by EPA for an early safety review. EPA is charged with reviewing the most problematic chemicals first, so the mere act of publicly listing a chemical as a high priority for safety review may cause retailers or their retail customers to deselect products containing that “high priority” chemical, even if it is used in a way in which there is no relevant exposure to the customer. Similarly, the results of toxicological testing compelled under EPA’s new, broader authorities may hurt the reputations of products containing tested chemicals that may be unwarranted, for example, when hazard study results are released to the public without relevant context necessary to understand risk. This kind of reputational damage may force companies as a practical matter to discontinue or attempt to reformulate products made with the chemical. At the end of the safety review process, EPA has the authority to restrict or set terms for the use of particular chemicals where necessary, in EPA’s view, to control risks. This may be a good outcome for companies where EPA has appropriately identified previously unknown risks and reasonable means to avoid them. On the other hand, it may be quite harmful if EPA’s review process is flawed in some way (e.g., incorrect understanding of how the chemical is used or the extent to which people are exposed in end-use products), resulting in unwarranted restrictions on use. The amendments also present (or at least perpetuate) two other supply risks relevant to retailers and consumer product manufacturers.
TSCA Inventory Reset
In the next 18 months, EPA will require all chemical manufacturers to identify and report all chemicals they have made or imported in the past 10 years. EPA will use this information to cull its list of chemicals in commerce that must be prioritized and reviewed for safety by eliminating those no longer used. Once the inventory reset is complete, chemicals previously manufactured but not on the current list (intentionally or by error) can be used again in the future, but not until after a formal notice is submitted to EPA. The rules are not yet written, but EPA may require that notice include a wide variety of health and safety information, and it may trigger new use restrictions. The reporting process also may lead manufacturers to discover that some of their products had been on the market without undergoing the pre-manufacturing review process applicable to all new chemicals introduced since 1976—a serious violation. These kinds of issues often arise where the company and EPA unknowingly assign the same substance different chemical identities. Either of these issues has the potential to significantly disrupt supply chains for consumer product manufacturers and retailer customers.
State Chemical Control Regulation Continuing
State chemical control regulation remains an important consideration. Industry support for modernizing TSCA grew in recent years in response to a number of factors, including the breakup of the U.S. as a single market for many products due to a growing patchwork of state laws restricting particular chemicals from particular products. It was anticipated that TSCA reform would include strong state law preemption terms that would prevent states from enforcing their own chemical control laws in deference to national federal standards. The final TSCA amendments do include new preemption provisions, but they largely exempt most current state laws, and generally would allow states to develop and enforce new restrictions for a chemical until EPA reviews and takes action on that chemical, which may be many years. States may also seek waivers to allow continued enforcement of state standards. In addition, the amendments indirectly authorize states to enforce TSCA standards when states enact and enforce state laws that are identical to TSCA. Notwithstanding new TSCA preemption provisions, for these and other reasons, complying with varied state-level chemical product regulation is likely to remain an important consideration for consumer product manufacturers and retailers.
TSCA Amendments Present Benefits and Competitive Opportunities as Well
Although the TSCA amendments create some new risks, they also present opportunities to protect or enhance products and brands. For example, the amendments provide a mechanism for manufacturers to obtain EPA review of a chemical sooner than its risk priority would otherwise indicate. This can be a useful tool to obtain an independent, science-based endorsement by EPA concerning the safety of a chemical for particular uses. Such an endorsement may be invaluable to protect the reputation of a substance or product targeted by environmental or consumer protection groups that influence consumers directly, or may influence large private companies or state legislatures to deselect or regulate the substance in a way that is not warranted by the science, or similarly may confirm that even known dangerous chemicals can be safely used for particular applications. EPA on its own is required to identify chemicals that represent a low priority for review—signaling some confidence by EPA experts that they are relatively “safe’ as used. (EPA has had a program for several years under which, at a manufacturer’s request, it will evaluate retail products for relative safety based on chemical content and related considerations as compared to other products in the same category). Companies may find competitive advantage in using EPA categorizations and, for example, formulating or reformulating retail products to exclude “high priority” chemicals or include only “low-priority” chemicals.
Companies may also benefit from risk reviews that identify previously unknown health risks from particular chemicals in their supply chains, which in turn help make decisions about formulation or handling that reduce long-term enterprise risk, and enhance product sustainability.
Key Takeaway—Know Which Chemicals Are in Your Products and Which Are Important to the Business
The first and most important step for consumer product manufacturers and retailers to manage the risks and potentially take advantage of the opportunities presented by of TSCA reform is to know the supply chain and the chemicals that are important to the business. Coupled with awareness of EPA chemical work plans and initiatives, this gives companies the information they need to know when risks or opportunities are being created and how they should get involved.
In some circumstances, this may mean commencing internal product reformulation work or contingency planning with suppliers. However, retailers and consumer product manufacturers can play an important role in the safety review of individual chemicals, by providing robust information about how the chemical is used in the product and the extent of exposure to consumers and the environment. Manufacturers can use this information to demonstrate that a useful chemical with some hazardous properties nevertheless is handled safely or with such little actual exposure that no regulation is required. Similarly, retailers and consumer product manufacturers also may want to take affirmative steps to assure that chemicals important to their business are reported to EPA as part of the Inventory Reset process and not inadvertently omitted. At a more fundamental level, one of EPA’s first tasks is to decide how it will prioritize chemicals for review. Depending on the circumstances, getting involved in public proceedings (either alone or as part of consortia of companies with common interests) even at this stage may help companies influence that decision process to the advantage of their products or disadvantage of competitors’. Similarly, companies with common interests in the continued availability and use of a particular chemical under attack from states, NGOs or other interests may want to solicit EPA safety evaluation of the chemical ahead of its normal risk prioritization to quell unwarranted criticisms and restrictions.
It will take years for EPA to complete its safety reviews. In the near term, EPA likely can be expected to focus first on the 90 chemicals contained in its 2014 TSCA Work Plan for Chemical Assessments. These chemicals were ranked and selected for review based on a number of considerations, including perceived health or environmental hazard, persistence in the food chain or environment, manufacturing volume, and the extent of potential consumer exposure.
back to top
NAD Vacuums Up Preference Claims
Why it matters
In a challenge brought by a competing vacuum manufacturer, the National Advertising Division recommended that SharkNinja discontinue a claim that "Americans now choose Shark 2-to-1 over Dyson."
The self-regulatory body cautioned advertisers that "total sales are not always synonymous with consumer preference," as there are "a number" of variables that influence consumer preference for one product over another, from the cost of the product to the realities of the marketplace. An advertiser's best bet for substantiating a preference claim: "Survey evidence which directly gauges consumer preference among competing products is the most relevant support for a claim that one product is preferred over another," the NAD wrote.
Detailed discussion
Shark told the self-regulatory body that the term "choose" conveyed to consumers that the claim was based on sales volume, especially as it was accompanied by a conspicuous disclosure of "Unit Sales of Upright Vacuums" located directly underneath the claim in bold, clear, easy-to-read font. Consumers' preference for one product over another can be based on a number of different factors, including total sales, the advertiser said.
The challenger, Dyson, countered that the preference claim lacked support. The reasonable implication of the claim is that Shark conducted some form of consumer preference study to support its comparison, Dyson argued, and the mere fact that one brand happens to outsell another does not, by itself, illustrate that consumers prefer the other brand. Sales data are particularly suspect as substantiation for preference claims, when there is a large difference in price between the products, as in the case between Shark and Dyson, the challenger said.
The self-regulatory body agreed. "NAD reviewed the challenged commercials in their entirety and determined that one of the messages reasonably conveyed is that consumers prefer Shark vacuums over Dyson vacuums—a preference message which goes beyond sales superiority," according to the decision.
Although Shark used the word "choose," when combined with the word "over" the ads indicated "that there is a preference between two options," the NAD explained. Further, "within the context of the commercials which contain numerous performance claims, it is a reasonable consumer takeaway that the choice to purchase a Shark is based on consumers' preference for a vacuum that provides such benefits."
For example, in one Shark infomercial, the announcer touted the benefits of the vacuum by stating that it "has more suction than the newest $700 Dyson Cinetic," "makes my home cleaner and my job easier," concluding with "The Powered Lift-Away is the total transformation of the upright vacuum. It's no wonder that Americans now choose Shark 2-to-1 over Dyson."
"Use of the phrase 'it's no wonder' clearly connects the purchasing decision to the aforementioned attributes, thus conveying that consumers have a preference for Shark vacuums over Dyson vacuums because of such qualities," the NAD wrote.
Was Shark's sales data sufficient to provide a reasonable basis for the claim? No, the NAD determined.
"By its nature, a consumer preference claim connotes that a particular group of consumers (representative of a defined population) have made an identifiable product choice between two or more products based upon a particular product attribute (or attributes)," the NAD wrote. "While overall sales may be one indicia of consumer preference, sales alone are not wholly dispositive of individual preference."
Other variables are at play in consumer preference, such as the cost of the product and the accessibility of obtaining the product, the self-regulatory body noted, as well as the realities of the marketplace, which may sometimes "have a serious effect on the opportunity to choose and, thus, sales may not be a truly accurate barometer of consumer preference."
Given the price difference between Shark and Dyson products, "consumers who buy Shark products are not necessarily choosing them over Dyson," the NAD said. Further, Shark's claim "obscures the fact that the comparison is based purely on sales," the decision added. "The disclosure … is not likely to be understood by consumers to mean that Shark brand outsells Dyson and even if it did, that message is contradictory to the main message that consumers 'chose' Shark 'over' Dyson in a head-to-head selection."
The NAD recommended that Shark discontinue the claim that "Americans now choose Shark 2-to-1 over Dyson," but noted that "nothing in this decision precludes Shark from making a comparative claim based on unit sales (e.g., 'Shark outsells Dyson 2-to-1'), provided that such a claim is accurate and does not imply a head-to-head preference."
To read the NAD's press release about the case, click here.
back to top
Uber Steers Litigation With Drivers Into $100M Settlement
Why it matters
Uber announced a settlement agreement in the high-profile litigation challenging the classification of drivers as independent contractors in late April with the possibility of a $100 million payout. Drivers in California and Massachusetts sued the company over its employment practices, claiming the ride-sharing app improperly characterized them as independent contractors when they were actually employees, entitled to additional payments and benefits.
Pursuant to the settlement terms, Uber will continue to classify drivers as independent contractors and not employees. However, the estimated 385,000 drivers will receive a payout and beneficial changes to Uber policy. The company will help with the creation of "drivers associations" in both states and clarify its policy on how and why drivers are "deactivated" from driving for the service. Uber also promised to pay $84 million to the drivers, with an additional $16 million added to the settlement fund if the company holds an IPO and the average valuation of the company increases to one and a half times that of its last financing round ($62.5 billion as of December 2015). The deal still requires approval from the federal court judge overseeing the litigation, but if it gets the go-ahead, it could set the tone for similar deals in other states. It also establishes that Uber will not be budging on its stance that drivers are not employees.
Detailed discussion
While ride-sharing apps like Lyft and Uber Technologies have seen enormous growth over the last few years, the companies have also faced significant employment issues. Drivers in several states have sued the companies alleging they were misclassified as independent contractors instead of employees, seeking additional wages or reimbursement.
Facing a putative class action in California federal court, Lyft recently reached a deal with drivers. The company agreed to make changes to its terms of service to provide drivers with greater protections and pay $12.25 million to the class but refused to alter the classification of drivers to employees going forward.
Uber reached a similar agreement, albeit on a larger scale. The company was facing consolidated class actions filed in California and Massachusetts where the drivers had successfully moved for class certification. But after three years of litigation and with trial scheduled to begin on June 20, the parties put on the brakes.
The deal includes both policy changes and a monetary payout by Uber. The approximately 385,000 drivers in the two states will receive portions of an $84 million settlement fund that could be bumped up to $100 million if the company holds an IPO and the average valuation of the company increases to one and a half times that of its last financing round, $62.5 million as of December 2015. Awards will be based on the number of miles driven, with those logging 25,000 or more miles receiving in the range of an estimated $8,000.
Policywise, Uber agreed to provide more details about how and why drivers are "deactivated" from the service and clarify policies on tips, as well as helping with the creation of a drivers' association in both states. Specifically, the company said riders will be informed that tips are not included in the fare and drivers will be permitted to put signs in their cars stating that "tips are not included, they are not required, but they would be appreciated." Uber also provided a list of the reasons why a driver may be deactivated, ranging from using drugs and alcohol to carrying a firearm to unsafe driving.
Perhaps most significantly, Uber will not change its business model pursuant to the deal, and drivers will continue to be classified as independent contractors. The company still faces litigation in other states (including Arizona, Florida, and Pennsylvania) on the issue, and the legal question of the appropriate characterization of drivers for ride-sharing apps remains unanswered.
To read the motion for preliminary approval of the settlement agreement in O'Connor v. Uber Technologies, click here.
back to top
Seventh Circuit Reinstates Data Breach Suit Against P.F. Chang's
Why it matters
The Seventh Circuit Court of Appeals reversed the dismissal of a data breach suit against P.F. Chang's, holding that the risk of future fraudulent charges and identity theft created by a data breach constituted a "certainly impending" future injury to establish standing for the plaintiffs.
The Seventh Circuit has now firmly established itself as a plaintiff-friendly jurisdiction for data breach litigation, with the Lewert decision building upon the generous standing position adopted in a prior data breach case in Remijas v. Neiman Marcus Group. The Remijas ruling provided a road map for data breach plaintiffs to win the battle over standing. As noted by the panel, the Lewert plaintiffs alleged "the same kind" of injuries as the successful plaintiffs in the Remijas case. In addition, companies should note that the court relied upon statements released by P.F. Chang's after the breach to support the plaintiffs' contentions, including advice to review credit reports and comments on the scope of the breach.
Detailed discussion
Like many other companies, the national restaurant chain recently suffered a data breach. In June 2014, P.F. Chang's announced that its computer system had been breached and consumer credit and debit card data had been stolen. As a precaution, the company switched to a manual card processing system at all locations in the United States. A few weeks later the company announced that it had determined data was stolen from just 33 restaurants and only one in Illinois.
Two Illinois residents filed separate suits against P.F. Chang's. Lucas Kosner alleged that a few weeks after he paid with his debit card at the restaurant, four fraudulent transactions were made. He cancelled the card immediately and, believing the charges occurred because of the data breach, purchased a credit monitoring service for $106.89. John Lewert dined at the same restaurant, also paying with his debit card. Although no fraudulent transactions were made with his card, his complaint stated that he spent time and effort monitoring his card statements and his credit report after he learned of the breach. Neither plaintiff dined at the Illinois restaurant identified by the chain as being impacted by the breach.
P.F. Chang's moved to dismiss the consolidated cases, arguing that the plaintiffs lacked standing to bring suit. A federal district court agreed, but a three-judge panel of the Seventh Circuit reversed.
As a starting point, the court referenced the prior decision on standing in Remijas, where the Seventh Circuit concluded that the plaintiffs' increased risk of fraudulent credit and debit card charges and identity theft was concrete and particularized enough to support Article III standing. Standing was further supported by the time and money class members spent protecting against future identity theft or fraudulent charges, the Remijas court said.
"In the present case, several of Lewert and Kosner's alleged injuries fit within the categories we delineated in Remijas," the court wrote. "They describe the same kind of future injuries as the Remijas plaintiffs did: the increased risk of fraudulent charges and identity theft they face because their data has already been stolen. These alleged injuries are concrete enough to support a lawsuit."
The plaintiffs also pled sufficient facts to establish standing on their present injuries, the panel added, with Kosner asserting that he already experienced fraudulent charges and Lewert claiming that he spent time and effort monitoring his card statements and other financial information.
The restaurant chain attempted to distinguish Remijas by arguing that the plaintiffs' data was not actually exposed in the breach, noting that Lewert and Kosner dined at a restaurant not identified as one of those impacted by the data theft. "To the extent this is a valid distinction (and that is questionable), it is one that is immaterial," the court said. The plaintiffs plausibly alleged that their data was stolen and that P.F. Chang's public statements addressed customers who had dined at all of its stores in the United States.
"This creates a factual dispute about the scope of the breach, but it does not destroy standing," the Seventh Circuit explained. "P.F. Chang's will have the opportunity to present evidence to explain how the breach occurred and which stores it affected. Perhaps it can trace which specific data files were stolen. Perhaps each individual location's data is behind a separate firewall. Or perhaps it is being too optimistic and the breach was greater than it suggests."
"When the data system for an entire corporation with locations across the country experiences a data breach and the corporation reacts as if the breach could affect all of its locations, it is certainly plausible that all of its locations were in fact affected," the court added.
Addressing the plaintiffs' other asserted injuries, the panel said the cost of their meals was not an injury, despite their claim they would not have dined at the restaurant had they known of its poor data security. Nor did the panel accept their contention that they had a property right in their personally identifiable data.
Lewert and Kosner did manage to satisfy the requirements for causation and redressability, however. The court again rejected the defendant's argument that they dined at a restaurant not hit by the hackers, as that would assume the answer to a disputed fact. "All class members should have the chance to show that they spent time and resources tracking down the possible fraud, changing automatic charges, and replacing cards as a prophylactic measure," the court said.
To read the decision in Lewert v. P.F. Chang's China Bistro, Inc., click here.
back to top
New York AG Reports on Data Breaches
Why it matters
In a new report, the New York Attorney General's Office revealed that it received 459 data breach notices between January 1, 2016, and May 2, 2016, an increase of 40 percent over the same time period in the prior year, when the office received a total of 327 notices.
"Data breaches are an escalating threat to our personal and national security, and companies need to do more to ensure reasonable security practices and best standards are in place to protect our most sensitive information," Attorney General Eric T. Schneiderman said in a press release. "I am committed to stemming the data breach tide. Making notification to my office easier for companies who have experienced a data breach means quicker notification and quicker resolution for New York's consumers."
Detailed discussion
New York's Information Security Breach and Notification Act requires companies to provide notice to the AG's Office and consumers in the event of a data breach. Last year, the Office received 809 data breach notices. Given the upward trend already visible in the first half of 2016, the Office expects to receive "well over 1,000 notices" this year, Attorney General Schneiderman said—a new record high.
To improve efficiency with the increased volume, the AG's Office provided companies with the ability to file notice electronically via a submission form on the Office's website. Previously, companies were required to mail, fax, or e-mail their notices.
In addition to details about the entity breached, the form requires companies to select a description of the breach (an external systems breach, for example, or insider wrongdoing), as well as the information acquired in combination with a name or other personal identifier (such as a Social Security number or financial information). Entities must report the total number of consumers affected, and how many New Yorkers were impacted, along with the dates of the breach and when it was discovered. A copy of the notice to affected consumers must be provided to the AG's Office, along with information about whether the company has suffered any other breach notifications within the prior 12 months.
Attorney General Schneiderman has kept a close eye on data breaches in the state during his tenure, releasing a report in 2014 titled "Information Exposed: Historical Examination of Data Security in New York State." Analyzing eight years of security breach data for the state, the report found that the number of reported data security breaches in New York more than tripled between 2006 and 2014. The roughly 5,000 data breaches impacted 22.8 million personal records of New Yorkers, according to the report, with hacking intrusions by third parties the number-one cause of breaches.
To read the AG's press release, click here.
To view the New York State security breach reporting web submission form, click here.
back to top
Spokeo, Inc. v. Robins: What Does It Mean for TCPA Lawsuits?
By Christine M. Reilly | Marc Roth | Diana L. Eisner
Why it matters
As reported in our recent TCPA Connect, on May 16 the United States Supreme Court issued its highly anticipated ruling in Spokeo, Inc. v. Robins. The High Court ruled that a plaintiff must show a "concrete" injury-in-fact to pursue a claim arising under the Fair Credit Reporting Act (FCRA). However, the Court's reasoning was not confined to FCRA and its decision will likely have far-reaching implications in a variety of class action lawsuits brought under other federal consumer protection statutes, including the Telephone Consumer Protection Act (TCPA).
Detailed discussion
As the Court recognized, "Congress' role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation." Alleging a "bare procedural violation" of a statute is insufficient to confer standing where there is no real harm.
At the pleading stage, then, the plaintiff must "clearly allege facts" demonstrating a concrete injury. "Concrete" means that the injury must be "real" and not abstract; in other words, an injury must "actually exist." However, the Supreme Court left open the possibility that the "violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact." In such a case, a plaintiff need not allege any additional harm beyond the one identified by Congress.
It remains to be seen how Spokeo will be applied in TCPA cases, but Spokeo certainly adds to a defendant's arsenal of arguments designed to dispose of a case at an early stage and may help curb the explosion of TCPA lawsuits over the last several years. TCPA plaintiffs and their attorneys often take a "kitchen sink" approach to litigation and pursue TCPA lawsuits in mass volume. Complaints are typically boilerplate, containing minimal, if any, connection between the defendant's alleged violation and any actual injury. Thus, many plaintiffs pursuing claims under the TCPA do not allege a "real" injury, other than a violation of a statutory right.
In the "robocall" context, for example, many plaintiffs simply allege receipt of an unwanted call or text message. Other plaintiffs acknowledge they consented to receive text messages, but the messages do not contain the precise disclosure language required by the FCC's regulations. Now, after Spokeo, it is possible that such allegations cannot ipso facto establish standing to sue. Plaintiffs may need to allege a concrete or real harm. This may be difficult, given that so many Americans are on "unlimited" or flat-rate cell phone plans where no charges are incurred for incoming calls or text messages and no other "injury" exists other than an alleged privacy invasion. In cases where the plaintiff did not answer the phone or know about the call absent the use of Caller ID, the plaintiff may be unable to allege a concrete harm stemming from the unanswered call, potentially shuttering the lawsuit.
In the fax context, TCPA plaintiffs often allege that the opt-out notice on junk faxes does not comply with the TCPA's technical requirements, including the specific disclosure that failure to remove the recipient from the distribution list within 30 days of receipt of the opt-out request violates the law. Complaints are usually devoid of any alleged harm stemming from this type of technical violation, particularly where the fax otherwise contains opt-out instructions. Before Spokeo, this allegation may have been sufficient to establish Article III standing, despite the absence of any alleged concrete harm to the recipient. Now, this type of allegation may very well be insufficient to confer Article III standing, given the lack of any alleged harm from what appears to be a "bare procedural violation."
Importantly, standing under Article III of the U.S. Constitution is a threshold requirement to bringing suit in federal court—a plaintiff without Article III standing cannot maintain suit. Moreover, this jurisdictional issue can be raised at any time, including on appeal. So, even for defendants currently engaged in TCPA litigation, Spokeo may provide another avenue for limiting or disposing of TCPA cases.
Beyond the threshold standing issue, Spokeo has the potential to constrain a plaintiff's ability to certify a class under Rule 23 of the Federal Rules of Civil Procedure. Under Rule 23, the primary inquiry is whether questions of law or fact are common to all class members. If commonality is lacking, no class can be certified. In TCPA cases, plaintiffs have obtained class certification based on the mere receipt of an alleged call, text message, or fax giving rise to a cause of action. However, based on Spokeo, arguably each class member must demonstrate a concrete harm, which may create an individualized inquiry that is inapt for class resolution.
In practice, Spokeo may force plaintiff lawyers to select putative class representatives more carefully, and to ensure that the named representative has suffered a "concrete" injury from a purported violation. Spokeo could also curb federal lawsuits based solely on a technical violation of the TCPA, such as an insufficient or imperfect disclosure. And, given the potential impact on class certification under Rule 23, narrowed class definitions could become the trend. TCPA classes are typically broadly defined and include all persons who received the alleged call or text during the four-year statute of limitations. Class composition could shift from a class that includes everyone on the defendant's call log to a class composed only of those who have suffered specified injuries.
back to top