The Brief Case: DRI Committee News

From the Governmental Liability Committee

Civil Rights and Governmental Liability Seminar 

By Mary G. Erlingson 

Mary G. Erlingson is a founding member and the managing partner of Erlingson Banks, PLLC. Mary serves as general counsel to several law enforcement agencies in Louisiana.  In addition, Mary represents various public entities in civil litigation.  Her dual role as general counsel and defense attorney has provided Mary with the unique opportunity to develop many related areas of practice including governmental relations, employment law, ethics law, law enforcement defense, corrections defense, and administrative law.   

Cases of Interest from the U.S. Second Circuit

By Alexandra A. Calhoun, Esq.

In re New York City Policing During Summer 2020 Demonstrations, 27 F.4th 792 (2022) 

Individuals present at demonstrations for racial justice and police reform brought civil rights’ actions asserting claims against city, city police department, and police officers regarding defendants’ allegedly unconstitutional conduct in response to demonstration and allegedly unconstitutional department policies. Police Benevolent Association of the City of New York, Inc. (PBA) moved to intervene as a right pursuant to FRCP 24(a).  

The PBA is the collective bargaining agent for NYPD police officers. The PBA argued that it had interests at stake as to both the merit and remedy phases of the litigation, citing specifically an interest in maintaining officer safety that would be affected if the policies that governed front-line officers’ rules of engagement with demonstrators were declared unlawful. The PBA also criticized the leadership of the City and the NYPD for failing to provide guidance in advance of protests. The Second Circuit held that PBA had a “direct, substantial, and legally protectable interest in officer safety” and granted PBA’s motion to intervene.  

Vengalattore v. Cornell University, 36 F.4th 87 (2022)  

Mukund Vengalattore, a former Assistant Professor of Indian descent, appealed from a judgment dismissing his amended complaint which alleged that in disciplining him in response to an inappropriate relationship with a student, the university discriminated against him on the basis of gender and national origin, in violation of Title IX of the Education Amendment and Title VI of the Civil Rights Act.  

Regarding gender bias, the complaint alleged instances where the student was alleged to have been “sexist against men” and a tenure committee’s comments that while the faculty considered the student’s accusations to be false and malicious, they would be taking no action against her as she was a woman. As for national origin, the complaint noted the student made racial comments and a comment by another tenure committee member that “the only students who are prepared to take the abuse [Vengalatorre] dishes out are both men and they are both from the Indian subcontinent, where perhaps the culture between advisor and protégé is different.” 

Defendants moved for dismissal arguing that Title IX did not authorize a private right of action for discrimination in employment and that the complaint lacked sufficient allegations of national origin discrimination to state a claim under Title VI.  

The Second Circuit held that Title IX allowed a private right of action for a university’s international gender-based discrimination against a faculty member, and that Vengalattore’s Title IX claim should not have been dismissed. However, the Second Circuit held that the allegations were not sufficient to raise a claim under Title VI as the complaint failed to demonstrate reliance upon the discriminatory statements in making its decision.  

Felder v. United State Tennis Association, 27 F.4th 834 (2022)  

A black security guard brought an action against United State Tennis Association (USTA), alleging race discrimination, age discrimination, and retaliation in violation of Title VII of Civil Rights Act when the association refused to issue his security credentials. The 2nd Circuit noted the issue as “what a Title VII plaintiff must adequately allege to plead the existence of an employer-employee relationship pursuant to the joint employer doctrine.”  

USTA contracts with security firms that employ and assign security guards to work at USTA, most notably, the U.S. Open Tennis Championships. AJ Squared Security hired Felder as a security guard and assigned him to work at the 2016 U.S. Open. Felder alleges that USTA failed to give him credentials. At issue was whether the USTA was an employer so as to establish a Title VII claim. The Second Circuit held that merely refusing to issue credentials is not enough to adequately plead a joint-employment relationship. “Were it enough to say that the USTA’s refusal to issue credentials automatically rendered it a joint employer to Felder, we would be required to say that issuing credentials also renders it a joint employer, as both equally demonstrating the exertion of some control over who may work as a security guard at the U.S. Open. But this would eliminate the need to consider any other indicia of a common law agency relationship in applying the joint employer doctrine; would vastly expand Title VII liability in a manner that no other Circuit has endorsed; and would contravene the Supreme Court’s instruction that we turn to a multi-factor analysis under the common law agency for discerning whether an employer-employee relationship exists.”  

Anilao v. Spota, 27 F.4th 855 (2022) 

Ten nurses filed claims under §1983 for false arrest and malicious prosecution due to defendants’ allegedly improper prosecution for child endangerment and endangerment of a physically disabled person. Defendants Spota and Lato were prosecutors at the District Attorney’s Office. At issue was whether Spato and Lato were entitled to absolute immunity for actions they undertook as prosecutors. 

The Second Circuit held that absolute immunity must apply even though the plaintiffs plausibly alleged “disgraceful behavior” by the prosecutors. “But the impediments to the fair, efficient functioning of a prosecutorial office that liability could create lead us to find that immunity must apply here.” Evidence that the charges were brought for improper purposes does not necessarily deprive prosecutors of their immunity.  

Morales v. City of New York, 2022 WL 2840035 (2022) 

Morales alleged that he was terminated from his position as Deputy Commissioner of the New York City Department for Citywide Administrative Services (DCAS) in violation of his First Amendment rights because he provided unfavorable statements to investigators during interviews regarding the City’s involvement in two transactions made during his tenure.  

The Second Circuit noted that to prevail on a First Amendment retaliation claim, a plaintiff must establish that protected speech was a but-for cause of some adverse employment action. Morales conceded that he could not produce any direct evidence of retaliatory animus and instead relied upon the five-month span between his allegedly protected speech and the final decision to terminate him. The 2nd Circuit noted that the timing of an adverse employment action is not evidence of causation when the employer began considering the action before the allegedly protected activity took place. As DCAS established that it had been considering terminating Morales before his comments, the Second Circuit established there was no causation. As such, Morales’ claim must fail.  

Thomas v. Wellenruether, 2022 WL 1026047 (2022)  

Thomas brought suit against Wellenruether alleging that Wellenruether violated Thomas’s Fourth Amendment rights by using excessive force. Wellenruether entered a gas station and observed a man (Thomas) inside the convenience store holding up his arm at a right angle, pointed at the attendant.  As Thomas was departing, the store attendant left the store, pointed at Thomas and shouted he had been robbed. Wellenruether, though off-duty, was permissibly carrying his service revolver.  

Wellenruether yelled for Thomas to stop and identified himself as a police officer. He also testified that Thomas “spun around” toward him, putting Wellenruether in fear for his life. Wellenruether then fired a single shot (First Gunshot) at Thomas which missed. Thomas then began to run away throwing the BB gun away from his person. Wellenruether heard and saw the gun being thrown away and concluded Thomas had discarded it.  

Wellenruether then testified that he saw Thomas reach into his waistband and spin around. Wellenruether then fired a second shot (Second Gunshot), which struck the back of Thomas’s neck. The magistrate judge ruled the First Gunshot was not excessive force, but the Second Gunshot was. The Second Circuit declined to overrule this.  

Wellenruether appealed, among other issues, the question of waiver of the defense of qualified immunity. Wellenruether failed to raise qualified immunity as a defense in answer to plaintiff’s amended complaint and did not move for summary judgment on qualified immunity. Further, qualified immunity was not mentioned in his proposed jury instructions. The 2nd Circuit held that under those circumstances, Wellenruether’s litigation strategy evinced an intentional decision not to assert qualified immunity, so the affirmative defense was waived.  

Henderson v. Greenville Central School District 2022 WL 2236949  

Rachel Henderson alleged that Greenville Central School District (“Greenville”) fired her from her job as an aide in retaliation for her inquiries about a potentially dangerous student at Greenville High School. The District Court granted summary judgment for Greenville, holding that Henderson’s inquiries were not speech on a matter of public concern and thus were not constitutionally protected. The Second Circuit affirmed.  

The Second Circuit articulated the rule that in determining whether speech was a matter of public concern it must focus on the motive of the speaker and attempt to determine whether the speech was calculated to redress personal grievances or whether it has a broader public purpose. Henderson argued that she was concerned about a dangerous person at the school, but the record showed that Henderson’s safety concern centered on that allegedly dangerous person’s relationship to Henderson’s son. Further, it was undisputed that the content of Henderson’s speech suggested a lack of firsthand knowledge. Affirming the District Court’s decision, the 2nd Circuit held “her search for personal comfort ‘to get to the bottom of this situation’ may be understandable but it does not suggest that her fact-gathering inquiries should be elevated to a matter of public concern.”  

Alexandra Calhoun is an associate at Sugarman Law Firm LLP.

Cases of Interest from the U.S. Sixth Circuit

By Dale Conder, Jr. 

Laborers’ Int’l Union, Local 860 v. Neff, 29 F.4th 325 (6th Cir. 2022)  

Ohio juvenile court and its employees’ union tried negotiating a new contract. When the parties could not reach an agreement, the union sued the juvenile court. Because Ohio juvenile courts are an arm of the state, the court held that sovereign immunity barred most of the claims. The Sixth Circuit also rejected the union’s Contracts-Clause claim. Under Sixth Circuit precedent, a Contracts-Clause violation is not actionable under § 1983. The court rejected the union’s request for an injunction under the Takings Clause because the union had a state-law provision for obtaining just compensation, i.e., filing suit in state court.  The union’s individual-capacity claims failed because qualified immunity protected the individuals. Qualified immunity applied because there was no precedent clearly establishing that the individuals breached the contract. 

Judge Sutton concurred in his opinion to highlight the split of authority on the issue of whether contracts-clause violations are actionable under § 1983. In his concurring opinion, he urged the Supreme Court to address this issue in an appropriate case.  

Lindke v. Tomlinson, 31 F.4th 487 (6th Cir. 2022) 

This case arose from a nasty custody battle. In response to the mother’s motion, the state judge entered a personal protective order (PPO) against Lindke, the father. The father had been harassing the mother by assaulting her, threatening her, and sending nude photos of the mother to family and friends. Lindke continued to violate the PPO. The judge issued a second PPO. After the mother obtained sole custody of the child, Lindke’s harassment continued. The judge found that the First Amendment protected most of Lindke’s Facebook posts. But tagging the mother “in a specific Facebook post violated the PPO.” Lindke disagreed with the judge’s conclusion; rather than appeal, Lindke sued the judge in federal court claiming violations of his rights under the First and Fourteenth Amendments. Under Article III, a federal court lacks jurisdiction if there is not a live case or controversy between the parties. In Lindke, the state-court judge acted in an adjudicatory capacity. The judge was not adverse to Lindke, she merely applied a state statute based on the law and the facts. Article III does not grant federal courts jurisdiction in these circumstances because the judge did not act in an enforcement capacity. Therefore, the court lacked subject matter jurisdiction over the claims against the state-court judge.  

Novak v. City of Parma, 33 F.4th 296 (6th Cir. 2022) 

Novak decided to exercise the “‘fundamental American right’ of ‘mocking our government officials.’” He did this by creating a Facebook account that was a knockoff of the Parma police department’s actual page. He then began publishing posts mocking the police, e.g., the page offered “free abortions in a police van.” The police arrested Novak for violating a statute making it illegal to use a computer to disrupt or impair police functions. Following a grand jury indictment and a trial, the jury acquitted Novak. He then sued the police officers. If his posts were protected speech, the police could not use protected speech to establish probable cause. The Sixth Circuit, however, stopped short of deciding if the First Amendment protected Novak’s Facebook activity. The court determined that qualified immunity protected the officers. The court also rejected Novak’s Fourth Amendment claim. The court held that it was reasonable for the officers to rely on the warrants issued by a magistrate judge. Novak’s malicious-prosecution claim failed because he did not show that the officers did not aid in the decision to prosecute. Because Novak failed to establish any threats or orders from the police, his prior-restraint claim failed.  

Smith v. Kentucky, 36 F.4th 671 (6th Cir. 2022) 

A probation officer working for the state of Kentucky raped plaintiffs on multiple occasions. Plaintiffs sued the governor and the state alleging that the defendants “‘directly violated plaintiffs’ rights . . . to be free from involuntary sexual servitude guaranteed by’” the Thirteenth Amendment. The court rejected plaintiffs’ Thirteenth Amendment claims because the amendment does not create a private cause of action. Also, the ratification of the Thirteenth Amendment did not waive a state’s sovereign immunity.  

Carr v. Louisville-Jefferson Cnty., 37 F.4th 389 (6th Cir 2022) 

In 2008, the plaintiff entered an Alford plea to second-degree manslaughter. Several years later, the governor pardoned her. She then sued several police officers, the city, and the county. The district court found that Heck v. Humphrey barred her §1983 claims. The Sixth Circuit reversed. The court held that a full pardon removes all legal consequences of the conviction. The pardon removes the risk of inconsistent results arising out of the same facts. In other words, Heck prevents using §1983 to collaterally attack a conviction. The full pardon removes this risk; therefore, Heck did not bar plaintiff’s §1983 action. 

Lindke v. Freed, 37 F.4th 1199 (6th Cir. 2022)  

Freed was the city manager for Port Huron, Michigan. Freed had a Facebook account that he used to connect with friends and family. In the “About” section, he described himself as “Daddy to Lucy, Husband to Jessie and City Manager, Chief Administrative Officer for the citizens of Port Huron.” He linked to the city’s page and provided his city email. When the pandemic hit, he posted about policies he implemented for Port Huron. Lindke did not agree with Freed’s handling of the pandemic, and he responded with criticism. Freed deleted Lindke’s comments and blocked Lindke. Lindke believed this violated his First Amendment rights and sued. The district court disagreed and Lindke appealed. The Sixth Circuit held that Freed was not a state actor when posting to his Facebook page.  There was no law requiring Freed to maintain a social-media account as part of his job.  Freed’s page was a personal page.  He created the account years before the city hired him as city manager.  Freed’s page did not belong to the city. For example, when Freed leaves the city-manager job, his successor will not inherit the page.  Freed did not use city employees to update or post to his page. The Sixth Circuit rejected other circuits’ reliance on the appearance of the Facebook page, and focused on Freed’s official duties and use of government resources or government employees in determining if the Facebook page was a government page.  

Dale Conder, Jr. is a member of the law firm Rainey, Kizer, Reviere & Bell, P.L.C., with offices in Memphis and Jackson, Tennessee. Mr. Conder is a resident in the firm’s Jackson, Tennessee office. He practices in the areas of general insurance defense, employment law, and defense of municipalities and their employees, particularly police officers in § 1983 litigation. Mr. Conder has published and lectured in the areas of trial practice, civil procedure and civil rights litigation. He is a member of DRI and the Tennessee Defense Lawyers Association.

Interested in joining the Governmental Liability Committee? Click here for more information.

From the Governmental Liability Committee (Cont.)

Cases of Interest from the U.S. Eighth Circuit

By Rebecca Mann

Doe v. Aberdeen School District, 42 F.4th 883 (8th Cir. 2022). Parents of minor child sued speech education teacher and school officials for violating Fourth and Fourteenth Amendment rights of three students for removing students, sometimes forcibly, to a separate area for disciplinary action and forcing the children to participate in physical activities (such as swimming and horseback riding). There were also allegations of general physical and emotional abuse. The Eighth Circuit concluded that secluding children in a small room or calm-down corner constituted a seizure and violated the children’s Fourth Amendment rights, in part because the children were forcibly brought to the area and barred from leaving. The Eighth Circuit also determined that forcibly removing a child’s clothes to put on his bathing suit was also a seizure. However, these actions of physical or verbal abuse did not meet the “high bar” to violate the plaintiffs’ substantive due process rights.  

Roberson v. Dakota Boys & Girls Ranch, 42 F.4th 924 (8th Cir. 2022). A minor child was diagnosed with multiple mental illnesses, including bipolar disorder and substance abuse. After she stole a vehicle and threatened to attack people, she was declared a delinquent, removed from her parents’ care, and placed in a psychiatric facility where she later committed suicide. The Eighth Circuit determined that the private facility was a state actor and therefore constitutionally required to provide adequate medical care.  The minor child’s parents were permitted to assert a 1983 claim for deliberate indifference to their daughter’s medical needs against the private hospital. 

McDaniel v. Neal, 44 F.4th 1085 (8th Cir. 2022). Plaintiff was arrested for shoplifting and tried to escape. During the altercation, he was thrown to the ground and suffered a skull fracture and a traumatic brain injury. He sued the police officers for violating his rights due to excessive force. The Eighth Circuit determined that the police officer was entitled to qualified immunity because there was no previously established case law that tackling an individual after they dodged a taser while attempting to escape was excessive force. 

Saunders v. Thies, 38 F.4th 701 (8th Cir. 2022). Police officers initiated a traffic stop after a vehicle made an “abrupt” turn and stopped in front of a fire hydrant. After approaching the vehicle, the officers also noticed an open liquor bottle and a child not properly restrained in a booster seat. Plaintiff passed the preliminary breath test and was only cited for an open bottle of liquor in the vehicle. Despite the stop lasting 22 minutes, it was not an unreasonable length of time because Plaintiff was on the phone for a significant amount of time and the police also had discussions with family members who came out of the house during the stop. The Eighth Circuit determined the district court properly granted qualified immunity to the officers and dismissed plaintiffs’ claims. 

Rebecca Mann is a partner at Gunderson Palmer Nelson Ashmore LLP, licensed to practice in South Dakota, North Dakota, and Montana. She specializes in Workers’ Compensation, Insurance Defense, and Civil Rights/Governmental Tort Liability. Rebecca routinely practices in both state and federal courts as well as administrative tribunals.

Cases of Interest from the U.S. Eleventh Circuit

By Michael D. Strasavich, Esq. 

Michael D. Strasavich practices with the Mobile, Alabama law firm of Burr & Forman LLP. He represents companies in insurance defense, insurance coverage, ERISA, products, real estate, and bankruptcy litigation. He is a member of DRI and the Alabama Defense Lawyers Association.

Interested in joining the Governmental Liability Committee? Click here for more information.

Insurance Law: Covered Events

Eleventh Circuit Reiterates Uphill Battle for Cedents Seeking to Imply Follow-the-Fortune Clauses in Reinsurance Contracts

By Sharon D. Stuart

Edited by Regen O'Malley

Historically, the duty of utmost good faith has been held to require a ceding insurer to place its reinsurer in the same position as itself and to give to the reinsurer the same means and opportunity of judging the value of the risks. Unigard Sec. Ins. Co., v. North River Ins. Co., 4 F.3d 1049, 1069 (2d Cir. 1993). Under this doctrine, the cedent: will carefully underwrite its business; will provide to the reinsurer all facts and information material to the risk; does not conceal facts which ought in good conscience to be communicated to the reinsurer; and takes the interests of its reinsurer into consideration when settling claims. The reinsurer, on the other hand, does not second guess the cedent’s claim practices and pays claims upon demand. In other words, the reinsurer follows the fortunes of its cedent as if it were a party to the original insurance contract. See, e.g., Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485 (1883); N. River Ins. Co. v. Ace Am. Reins. Co., 361 F.3d 134, 139-40 (2d Cir. 2004).  

A typical follow-the-fortunes clause might say:  

“All claims involving this reinsurance when settled by the Company, shall be binding on the Reinsurer, which shall be abound to pay its portion of such settlements....”  

American Bankers Ins. Co. of Fla. v. Northwestern Nat. Ins. Co., 198 F.3d 1332, 1334 (11th Cir. 1999). 

In the absence of such an express provision, courts and arbitrators are often asked to imply a following provision. The Eleventh Circuit recently examined a case in which a cedent claimed that its reinsurer had a duty to follow its fortunes and reimburse it for a settlement and defense costs although the reinsurance contract did not contain an explicit follow-the-fortunes clause. Public Risk Mgmt. of Fla. v. Munich Reinsurance Am., Inc., 38 F.4th 1298 (11th Cir. 2022). 

Public Risk Management of Florida (“PRM”) is a self-insured public entity risk management program. PRM exclusively insures certain local government entities in Florida, including the City of St. Pete Beach (“St. Pete”). PRM provided Public Officials Errors and Omissions Coverage (“E&O coverage”) to St. Pete under a Coverage Document covering the period from April 1, 2008 to April 1, 2009 (the “Coverage Document”). Munich Reinsurance America, Inc. (“Munich Re”) reinsured the E&O coverage provided by PRM’s Coverage Document from April 1, 2008 to April 1, 2009. Prior to this policy period, Certain Underwriters at Lloyds (“Underwriters”) provided reinsurance to PRM. Public Risk Management, 38 F.4th at 1301. 

In 2006, Chester and Katherine Chmielewski, a couple residing in St. Pete, sued the city in state court to quiet title to their beach property after the city allowed the public to access their land and publicly took the position that the couple could not exclude the public from their property. The state court entered a Stipulated Final Judgment in the Chmielewskis’ favor and quieted title to the beach property. However, St. Pete continued to allow public access to their property and kept taking the position that the Chmielewskis had no right to keep the public off their beach parcel. So, in November 2009, the couple again sued St. Pete in state court, alleging inverse condemnation. PRM denied coverage to St. Pete for this suit because the Coverage Document excluded coverage for inverse condemnation claims. Id. at 1302. 

In 2013, the Chmielewskis amended their complaint to assert a Section 1983 claim alleging violation of their Fourth Amendment rights and an inverse condemnation claim under the Florida Constitution. St. Pete removed the case to federal court. PRM covered the Section 1983 claim but would not cover the inverse condemnation claim. In December 2013, PRM gave Munich Re notice of the Section 1983 suit against St. Pete. Id. 

In January 2014, Munich Re denied coverage for the Section 1983 claim because it arose from alleged wrongful acts that occurred prior to the Reinsurance Agreement’s coverage period of April 1, 2008, to April 1, 2009. Munich Re encouraged PRM to notify Underwriters of the claim, and PRM did advise Underwriters that it believed the wrongful acts underlying the claim occurred in their reinsurance policy period. Underwriters eventually denied coverage for the Section 1983 claim shortly before the October 2015 trial of the inverse condemnation/Section 1983 case. The Chmielewskis won a jury award of $725,000 for the Section 1983 claim and $1.5 million for inverse condemnation. Id. 

PRM did not communicate with Munich Re from the time of its denial until after the verdict. Based on the evidence at trial, PRM contacted Munich Re, contending that the date of loss was November 28, 2008 – within the Reinsurance Agreement coverage period – and asked Munich Re to reconsider its position. Munich Re again denied coverage on the basis that the testimony relevant to the Section 1983 claim showed the damages for interference with property rights had gone on since at least 2005. PRM settled the Section 1983 claim for $750,000, and Munich Re refused to reimburse it. Id. at 1302-03. 

PRM sued Munich Re in federal court in Florida for breach of contract, seeking $750,000 for the settlement and $200,000 in defense costs. It further sought a judgment declaring that Munich Re owed defense and indemnity under the Coverage Document and Reinsurance Agreement. The trial court granted summary judgment in favor of Munich Re. PRM appealed to the Eleventh Circuit. Id.  

The Eleventh Circuit first considered whether the text of the Reinsurance Agreement and Coverage Document provided coverage for St. Pete. The Court held that the plain language of the Reinsurance Agreement required Munich Re to reimburse PRM for amounts PRM had paid to its insured, St. Pete, and to prove that the Reinsurance Agreement provided coverage for such payment. However, because the Reinsurance Agreement covered only “sums paid by PRM for which it is liable, under the Coverage Document reinsured hereunder,” the Court found that Munich Re was not obligated to reimburse PRM for the amounts PRM had paid but was not required to pay as defense or indemnity on St. Pete’s behalf. Id. at 1304-05. The Court thus found that the case turned on whether the Coverage Document (reinsured by Munich Re) required PRM to defend against the Section 1983 claim and indemnify St. Pete for the settlement of that claim. The Coverage Document was an “occurrence” policy, defining a series of wrongful acts as one occurrence, and fixing the date of that one occurrence as the date of the first wrongful act in the series. Because the evidence showed that the first wrongful act occurred as early as 2003, or in any case by 2005, i.e., prior to the time frame of the Coverage Document, the Court found no duty to defend or indemnify under the Coverage Document, and thus no duty by Munich Re to reimburse PRM. Id. at 1305-09. 

The primary issue considered by the Eleventh Circuit, however, was whether Munich Re was required under the follow-the-fortunes doctrine to reimburse PRM for its decision to defend and indemnify St. Pete. Id. at 1310. The court noted that the doctrine provides that “reinsurers are generally bound by the reinsured’s decision to pay the claim and must refrain from second guessing a good faith decision to do so.” Id. (quoting Am. Bankers Ins. Co. of Fla. v. Nw. Nat’l Ins. Co., 198 F.3d 1332, 1335 (11th Cir. 1999)). The court explained that the doctrine is supported by several policy reasons: (1) reinsurers do not examine risks, receive notice of loss from the original insured, or investigate claims, so reinsurers generally rely on the exercise of the reinsured’s exercise of utmost good faith; and (2) to avoid placing insurers in “the untenable position of advancing defense costs in coverage contests that would be used against them by reinsurers seeking to deny coverage.” Id. (quoting N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1206 (3d Cir. 1995)). 

PRM argued that the Reinsurance Agreement contained a follow-the-fortunes clause and that, even if it did not, the Court should infer such a clause. The Court determined that the Reinsurance Agreement was inconsistent with the follow-the-fortunes doctrine, because it expressly required PRM to submit to Munich Re proof not only that it had paid its insured but also proof that the Reinsurance Agreement provides coverage for such payment: 

Payment by the Reinsurer of its portion of loss and expense, paid by or on behalf of PRM, will be made by the Reinsurer to PRM promptly after proof of payment by PRM and coverage hereunder is received by the Reinsurer. 

Id. Further, the court noted that Munich Re had agreed only to indemnify PRM for occurrences during the Coverage Document: 

The Reinsurer agrees to indemnify PRM, on an excess of loss basis, for Ultimate Net Loss paid by PRM as a result of Occurrences . . . during the term of this Agreement under PRM’s Coverage Document underwritten by PRM and covered by this Agreement. 

Id. at 1311. Finally, the court noted that the Reinsurance Agreement defines “Ultimate Net Loss” as “the sum or sums paid by PRM for which it is liable, under the Coverage Document reinsured hereunder, i.e., the 2008/2009 Coverage Document.” Id. at 1311. 

The court thus determined that these clauses were the opposite of a follow-the-fortunes clause, because, rather than providing that Munich Re would be bound by PRM’s good faith coverage decisions, they required that PRM provide proof to Munich Re that it had paid amounts to its insured and that the Reinsurance Agreement provided coverage for such payments. Id. at 1311.

Furthermore, the Court rejected PRM’s invitation to infer a follow-the-fortunes clause absent a specific finding that such a clause existed. Confident that the Supreme Court of Florida would not infer application of the follow-the-fortunes doctrine under Florida law based on these facts, the Eleventh Circuit declined to rewrite the Reinsurance Agreement to add meaning or reach conclusions contrary to the intent of the parties. Id.  

The Court’s decision is similar to a 2019 opinion of the federal District Court for the Northern District of New York in Utica Mutual Insurance Company v. Munich Reinsurance America, Inc., 381 F. Supp. 3d 189 (N.D.N.Y. 2019) (Utica II). There, the District Court held that neither “follow the fortunes” nor “follow the settlements” was implicit in facultative certificates issued by Munich Re and that the ceding company had failed to sustain its burden to prove that it was “legally obligated” under its policies to pay the expenses it sought to recover from Munich for payment of asbestos claims. See generally id. The Second Circuit made an analogous finding in 2018, when it held that a follow-the-settlements obligation should not be implied into reinsurance certificates as a matter of law. See Utica Mut. Ins. Co. v. Clearwater Ins. Co., 906 F.3d 12, 17, 25 (2d Cir. 2018) (“We see no reason to read such a term into the contract by implication. Instead, we follow the New York Court of Appeals’ instruction: where a contract is ‘reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its own personal notions of fairness and equity.”). 

The Eleventh Circuit in PRM expressly refused to address whether it might be appropriate to infer the follow-the-fortunes doctrine under other circumstances such as where the reinsurance agreement contained neither a follow-the-fortunes clause or language plainly inconsistent with the follow-the-fortunes doctrine. 38 F.4th at 1311. The Court noted that this is an issue over which courts are divided. See 2 Allan D. Windt, Insurance Claims & Disputes: Representation of Insurance Companies & Insureds § 7:10 (6th ed. Mar. 2022 Update) (stating that “courts in the majority of states” have held that a reinsurer does not have to follow the fortunes of the insurer if their contract does not contain an express follow-the-fortunes clause); Steven C. Schwartz, Reinsurance Law: An Analytic Approach § 9.02 (2021) (noting that “[c]ourts are split as to whether a follow-the-fortunes clause is required, or whether the doctrine is implicit in every reinsurance contract”).  

As the few precedents on the subject make clear, cedents face an uphill battle convincing a court to imply following provisions into a reinsurance contract. Courts are understandably reluctant to imply a term into a contract between sophisticated parties. See Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004) (court was “extremely reluctant to interpret an agreement as impliedly stating something which the parties have neglected to specifically include.”). In the absence of an express follow-the-fortunes clause, courts typically hold that a question of fact exists. In such cases, they look to extrinsic evidence such as industry custom and practice, presented through fact and expert witnesses.  

The insured bears a heavy burden of proof in this regard. See, e.g., Utica Mut. Ins. Co. v. Munich Reins. Am. Inc., 2018 WL 1737632, at *21-22 (N.D.N.Y. Mar. 20, 2018) (Utica I). In Utica I, the court ruled on summary judgment that Utica had failed to prove that follow the fortunes was so “fixed and invariable in the facultative reinsurance industry as to warrant importing them into [the reinsurance contract]”). As a result, Utica was required to prove that the loss was caused by a risk specifically covered by the reinsurance contract. Utica II, 381 F. Supp. 3d at 208 (quoting Clearwater Ins. Co., 906 F.3d at 25). See also Hutner v. Greene, 734 F.2d 896, 900 (2d Cir. 1984) (“Under New York law ... custom and usage evidence must establish that the omitted term is ‘fixed and invariable’ in the industry in question.”). Notably, a case in which the court implies a following provision into a reinsurance agreement as a matter of fact will rarely serve as precedent in other cases, as factual determinations vary from case to case. See Tug Helen B. Moran, Inc. v. Moran Towing & Transp. Co., 607 F.2d 1029, 1031 (2d Cir. 1979).  

Contract wording is crucial in cases seeking implication of a following provision. While the use of the word “follow” is not determinative of whether the clause is a following clause that binds the reinsurer, the Eleventh Circuit’s decision in PRM highlights the importance of including language in the reinsurance contract indicating that the reinsurer is bound by the reinsured’s claim determination. In such cases, the clause is likely to be viewed as a following clause. Without such express language, courts will likely reach a contrary view. 

Sharon Stuart is a founding partner of Christian & Small LLP in Birmingham, Alabama and serves as President and Claims Counsel of Attorneys Insurance Mutual of the South, Inc. Sharon is a member of DRI’s Law Institute and is chair of the Reinsurance SLG of the Insurance Law Committee. She is a member of the IADC, the FDCC, and is a past President of the Alabama Defense Lawyers Association.

SLG Notes

By Rebecca E. Strickland

Edited by Regen O'Malley                  

The Data Breach/Privacy Substantive Law Group monitors the interesting and always changing world of data breach and privacy issues.  We are actively recruiting new members in an effort to increase our network and programming!  I’ll be at the Complex Coverage Forum in November and would love to tell you more about our SLG.  SLG’s offer an opportunity to meet other attorneys in other parts of the country who are interested in the same practice area.  This translates into hearing about recent cases outside your jurisdiction sooner and building a network of potential referrals!  

Our SLG’s article this month provides a survey of state data privacy which become effective next year.   In each Brief Case newsletter, I look forward to learning a little more about a specific practice area.  In addition, the opportunity to author a Brief Case article is a benefit of joining an SLG.  Not only is it an opportunity to share your expertise on current issues, but it is also an opportunity to substantively consider how the law is developing throughout the country.   If you have not yet considered joining an SLG, I strongly recommend it!   

A Growing Patchwork of Data Privacy Regulation

By Rebecca E. Strickland

Edited by Regen O'Malley                  

Five states, including California, Colorado, Virginia, Utah, and Connecticut, have enacted data privacy laws, which become effective next year. Several other states, including Washington, New York, Florida, Oklahoma, Minnesota, and Utah are considering data privacy laws. National companies in particular are increasingly challenged by the need to comply with this growing patchwork of regulations.   

This article contains an overview of the laws which will become effective next year, focusing on the effective date, applicability, and enforcement of privacy laws. This high-level overview is not a substitute for an in-depth analysis and does not necessarily address state-specific definitions of protected data or detailed information about exceptions (e.g., exceptions for companies regulated by federal law, such as the Gramm-Leach-Bliley Act or Securities Exchange Act; HIPAA information; or non-profits or for the type of data). Further, each state has specific notice requirements, requirements regarding responding to notices, and specific provisions related to controllers and producers of data. Thus, it is important to carefully analyze the specifics of the law of each state. 

California Privacy Rights Act (CPRA) 

The CPRA becomes effective on January 1, 2023, but there are existing data obligations which affect data collected since January 1, 2020. Sean Paisan, Don’t be Fooled by the CPRA Effective Date, Employers Have Current Obligations Under the CCPA, May 21, 2021, available at https://www.workplaceprivacyreport.com/2021/05/articles/california-consumer-privacy-act/dont-be-fooled-by-the-cpra-effective-date-employers-have-current-obligations-under-the-ccpa/.   

The CPRA gives California consumers privacy rights, including the right to know about the personal information a business collects about them and how it is used and shared; the right to delete personal information collected from them (with some exceptions); the right to opt-out of the sale of their personal information; and the right to non-discrimination for exercising their CCPA rights. California Consumer Privacy Act (CCPA) fact sheet, available at https://oag.ca.gov/privacy/ccpa. The CPRA also affords California residents the right to opt out of having their personal data sold and a right to request what personal information has been collected about them. Companies subject to the CPRA must provide notice at the time of data collection of the categories of personal information businesses collect about consumers and the purposes for which each category of information. Further, California residents may request that their personal information be deleted, though exceptions exist, including for warranty/recall information, certain business security practices, compliance with legal obligations, and for internal use. Id. 

The CPRA protects California residents. The personal information protected includes information that identifies, relates to, or could reasonably be linked with a California resident-consumer or their household.  Publicly available information is not protected. Id. 

In order to be subject to the CPRA, a company must do business in California and either have a gross revenue exceeding $25 million; buy, receive, or sell, the personal information of 50,000 or more California residents, households, or devices; or derive 50% or more of their annual revenue from selling California residents’ personal information.  Id. 

In general, the CPRA is enforced by the Attorney General. However, unlike other states, the CPRA provides a limited private right of action. In the event of a data breach, a consumer may be able to sue a company if nonencrypted and nonredacted personal information was stolen in a data breach as a result of the company’s failure to maintain reasonable security procedures and practices to protect it. Under the CPRA, the consumer may sue for monetary damages actually suffered from the breach or “statutory damages” of up to $750 per incident. In order to pursue statutory damages, the consumer must place the company on written notice of the CCPA sections it allegedly violated and give the company 30 days to respond with a written statement that it has cured the violations in the notice and that no further violations will occur. If the company cures the violations, then statutory damages are unavailable unless the company violates the CCPA and its statement. Id. 

Virginia Consumer Data Privacy Act (VCDPA) 

The VCDPA becomes effective on January 1, 2023. Va. Code Ann. § 59.1-575. This Act protects Virginia residents acting only in an individual or household context, not those acting in a commercial or employment context. Va. Code Ann. § 59.1-576. Personal data includes data that is linked or reasonably linkable to an identified or identifiable natural person but does not include de-identified data or publicly available information. Va. Code Ann. § 59.1-571. 

The VCDPA applies to “persons that conduct business in the Commonwealth or produce products or services that are targeted to residents of the Commonwealth and that (i) during a calendar year, control or process personal data of at least 100,000 consumers or (ii) control or process personal data of at least 25,000 consumers and derive over 50 percent of gross revenue from the sale of personal data.” Va. Code Ann. § 59.1-576. 

Under the VCDPA, consumers may confirm whether or not a controller is processing the consumer’s personal data, correct inaccuracies in the data, delete personal data, obtain a copy of the personal data, and opt out of the processing of the personal data for purposes of (i) targeted advertising, (ii) the sale of personal data, or (iii) profiling in furtherance of decisions that produce legal or similarly significant effects concerning the consumer. A controller is required to respond to certain consumer requests. Va. Code Ann. § 59.1-573.   

Under the VCDPA, data controllers should limit the collection of personal data to what is adequate, relevant, and reasonably necessary in relation to the purposes for which such data is processed, as disclosed to the consumer; only process personal data for purposes that are reasonably necessary to or compatible with the disclosed purposes for which such personal data is processed; maintain reasonable data security practices; and process data in a way that is non-discriminatory. Va. Code Ann. § 59.1-574. 

The VCDPA is enforced by the Attorney General and expressly prohibits any private right of action. Va. Code Ann. § 59.1-583-584. 

Colorado Privacy Act (CPA) 

The CPA becomes effective on July 1, 2023.  Colorado Privacy Act (CPA) Rulemaking, available at https://coag.gov/resources/colorado-privacy-act/. 

The CPA protects the personal data of Colorado residents when they act in an individual or household context but not in a commercial or employment context, such as a job applicant.  Id. It applies to entities, including nonprofits, that conduct business in Colorado or deliver commercial products or services targeted to residents of Colorado; and either process the personal data of more than 100,000 individuals in any calendar year or derive revenue or receive discounts on goods or services in exchange for the sale of personal data of 25,000 or more individuals. The CPA also applies to service providers, contractors, and vendors that manage, maintain, or provide services relating to the data on behalf of these companies. Id. 

The CPA focuses on requiring the companies identify how they collect, store, use, share and sell personal data, and clearly identify the purpose for which they do so; minimize the data collected; avoid using the data for reasons individuals were not originally aware of; use reasonable security practices to secure the data; respond to requests by individuals asserting the rights granted to them under the law; and conduct Data Protection Assessments before selling personal data, processing “sensitive data,” or processing personal data that could result in unfair, deceptive or disparate treatment of individuals; financial or physical injury to individuals; a physical or other intrusion on an individual’s privacy that would be offensive to reasonable people; or some other substantial injury. Under the CPA, data controllers may not collect, store, use, share or sell “sensitive data” without an individual’s consent or use personal data in any way that would result in unlawful discrimination. Id. A controller is required to respond to certain consumer requests. 

The CPA is enforced by the Attorney General and does not afford a private right of action to consumers. Id. 

Utah Consumer Privacy Act (UCPA) 

The UCPA becomes effective on December 31, 2023. Utah SB0227, available at https://le.utah.gov/~2022/bills/static/SB0227.html. It protects the personal data of consumers who are residents of Utah acting in an individual or household context, not in an employment or commercial context. Id. Personal data does not include deidentified data, publicly available information, or “aggregated data,” which is defined as “information that relates to a group or category of consumers: (a) from which individual consumer identities have been removed; and (b) that is not linked or reasonably linkable to any consumer.” Id. 

The UCPA applies to data controllers or processors who conducts business in Utah or produce a product or service that is targeted to consumers who are residents of Utah, have annual revenue of $25,000,000 or more; and either “(i) during a calendar year, controls or processes personal data of 100,000 or more consumers; or (ii) derives over 50% of the entity's gross revenue from the sale of personal data and controls or processes personal data of 25,000 or more consumers.” 

Under the UCPA, consumers may confirm whether a controller is processing the consumer’s personal data and access their data. They have the right to delete their data and obtain a copy of their personal data. A consumer also “has the right to opt out of the processing of the consumer’s personal data for purposes of: (a) targeted advertising; or (b) the sale of personal data.” Id. Like the VCPA, under the UCPA, a controller is required to respond to certain consumer requests. 

The UCPA is enforced by the Attorney General and does not afford a private right of action to consumers. Id. 

Connecticut Data Privacy Act (CTDPA) 

The CTDPA becomes effective on July 1, 2023. (S.B. 6, Gen. Assemb., Reg. Sess. (Conn. 2022)). 
The CTDPA protects the personal data of Connecticut residents.  Id. 

The CTDPA applies to individuals who conduct business in Connecticut or “produce products or services that are targeted to residents of this state and that during the preceding calendar year: (1) Controlled or processed the personal data of not less than one hundred thousand consumers, excluding personal data controlled or processed solely for the purpose of completing a payment transaction; or (2) controlled or processed the personal data of not less than twenty-five thousand consumers and derived more than twenty-five per cent of their gross revenue from the sale of personal data.” Id. 

The CTDPA gives consumers the right to confirm whether or not a controller is processing the consumer’s personal data and access such personal data, unless such confirmation or access would require the controller to reveal a trade secret; correct inaccuracies, delete personal data,  obtain a copy of the consumer’s personal data, and “opt out of the processing of the personal data for purposes of (A) targeted advertising, (B) the sale of personal data, except as provided in subsection (b) of section 6 of this act, or (C) profiling in furtherance of solely automated decisions that produce legal or similarly significant effects concerning the consumer.” Id. 

Data controllers should limit the collection of personal data to what is adequate, relevant, and reasonably necessary in relation to the purposes for which such data is processed, as disclosed to the consumer; only process personal data for purposes that are reasonably necessary to or compatible with the disclosed purposes for which such personal data is processed; maintain reasonable data security practices; and process data in a way that is non-discriminatory. Id. 

Under the CTDPA, data controllers should limit the collection of personal data to what is adequate, relevant, and reasonably necessary in relation to the purposes for which such data is processed, as disclosed to the consumer; only process personal data for purposes that are reasonably necessary to or compatible with the disclosed purposes for which such personal data is processed; maintain reasonable data security practices;  process data in a way that is non-discriminatory; comply with certain regulations when processing a minor’s data; provide a mechanism to revoke consent for use oof data; and not process personal information for targeted advertising or sell the consumer’s personal data without the consumer’s consent, under circumstances where a controller has actual knowledge. Id. 

The CTDPA is enforced by the Attorney General and does not afford a private right of action to consumers. Id. 

Above, state data privacy laws that have already been enacted are summarized. However, in 2022 alone, lawmakers in twenty-nine states introduced some type of data privacy legislation. With a renewed focus on data privacy, particularly in the aftermath of the Dobbs decision, further legislation is anticipated, either at the state level or, perhaps, more uniform federal legislation. See Dobbs v. Jackson Women’s Health Organization, 597 U. S. ____ (2022) (overturning Roe v. Wade). 

Rebecca Strickland defends insurance carriers, as well as insured businesses and individuals, in coverage disputes, commercial litigation, premises liability and commercial transactions that involve nuances or special complexities.  Her practice is focused on first-party property claims, third-party claims, and bad faith claims.  She has represented insurance carriers through verdict both in the defense of claims and in pursuing the rights of the carrier against other parties.  Prior to becoming an attorney, Rebecca was an IT consultant, assisting major corporations in implementing new financial and human resources software.

Interested in joining the Insurance Law Committee? Click here for more information.

Commercial Litigation: The Business Suit

The Ninth Circuit’s “Tuna Case” Lets Uninjured Class Members Off the Hook at Certification but May Reel in the Supreme Court 

By Joe Hammond and Kyle Medin 

Attorneys interested in class actions and antitrust law will read the Ninth Circuit’s recent opinion in the “tuna case”—Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC—with relish.  31 F.4th 651 (2022).  The case contains important takeaways for class action and antitrust attorneys, and also—the focus of this post—highlights a deepening circuit split, one which the Supreme Court may be angling to resolve. These takeaways have ably been covered by other commentators.  The takeaways include that 1) the preponderance-of-the-evidence standard applies to class certification motions; 2) all evidence in support of class certification motions must be admissible; and 3) as discussed more extensively in this post, rejecting a rule precluding class certification where the proposed class includes more than a de minimis number of uninjured members.  See, e.g., https://www.gibsondunn.com/ninth-circuit-issues-important-en-banc-opinion-regarding-class-certification-issues/.     

In the tuna case, the district court certified classes of direct and indirect purchasers of canned tuna based on an alleged conspiracy among major tuna suppliers to fix the price for canned tuna in violation of antitrust law.  The conspiracy was not in doubt; indeed, the Department of Justice had already prosecuted four executives, three of whom pleaded guilty to their roles in the conspiracy, and one of whom was convicted by a jury.  However, class certification was fiercely contested. The parties jousted over how many uninjured members the proposed class contained and whether such bycatch class members should be thrown back before class certification.       

Ultimately, the Ninth Circuit, sitting en banc, affirmed certification of the class and subclasses under review.  The majority highlighted that the class put forth an expert’s model that estimated that the conspiracy resulted in a 10.28% overcharge on tuna for the entire class. Accordingly, the majority determined that the defendants’ expert’s assertion that the model did not show a statistically-significant price difference for 28% of the class was not sufficient to threaten certification.   

The majority and dissent interpreted the defense expert’s finding differently: the majority highlighted that the 28%—for whom no statistically-significant difference in price was shown—had that result because they did not make enough pre-collusion purchases to serve as control prices, and that therefore the 28% figure did not necessarily represent the amount of uninjured class members.  The dissent found that explanation fishy, seeing the lack of a demonstrated price increase for 28% of the class as indication that up to 28% of the class was potentially uninjured.  The majority appeared to agree that injury had not yet been demonstrated for these 28%, but nevertheless believed that the 10.28% classwide overcharge was enough to demonstrate that injury could be proven through common proof.  The dissent, discussing cases from the First and D.C. Circuits, argued that the majority “needlessly create[d] a split with other circuits that have endorsed a de minimis rule.”   

The circuit split highlighted by the dissent has two lines of fracture: first, whether the presence of any uninjured class members poses a barrier to class certification, and second, if some uninjured class members can pass certification, how many uninjured class members is too many?  We know, from TransUnion v. Ramirez, that every class member must have standing—and therefore be injured—in order to recover individual damages in a class action.  But TransUnion left unanswered whether every member of the class must also show standing and injury at class certification, as Best in Class pointed out last year.   

Contrary to the dissent’s warning in the tuna case that the majority would “create” a circuit split, based on our research the circuit courts are already split on this question, though the tuna case majority certainly deepened it.  Six circuits have held that all class members must be injured for a class to be certified, five have held that there is some de minimis number of uninjured class members that will not preclude certification, and two circuits (the 10th and Federal Circuits) have yet to weigh in.  

In one corner, six federal Circuits have held, either expressly or by implication, that there is no “de minimis” number of uninjured class members that will be allowed to sail by at class certification.  These are the Second, Third, Fifth, Sixth, Eighth, and D.C. Circuits.  See Barrows v. Becerra, 24 F.4th 116, 128 (2d Cir. 2022) (“[N]o class may be certified that contains members lacking Article III standing.”) (citing Denney v. Deutsche Bank AG, 443 F.3d 253, 263–64 (2d Cir. 2006)); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311–12 (3d Cir. 2008), as amended (Jan. 16, 2009) (plaintiffs must prove that injury as to all members is able to be shown through common proof, or able to be presumed in certain circumstances); Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003) (“[W]here fact of damage cannot be established for every class member through proof common to the class, the need to establish antitrust liability for individual class members defeats Rule 23(b)(3) predominance.”); Rikos v. Procter & Gamble Co., 799 F.3d 497, 505 (6th Cir. 2015) (plaintiffs must be able to prove “that all members of the class have suffered the same injury” in order to satisfy Rule 23(a)(2)); Halvorson v. Auto-Owners Ins. Co., 718 F.3d 773, 779–80 (8th Cir. 2013) (“A district court may not certify a class ... if it contains members who lack standing.”); In re Rail Freight Fuel Surcharge Antitrust Litig. - MDL No. 1869, 934 F.3d 619, 624 (D.C. Cir. 2019) (“[T]he plaintiffs, to establish predominance, must ‘show that they can prove, through common evidence, that all class members were in fact injured by the alleged conspiracy.’”) (citing In re Rail Freight Fuel Surcharge Antitrust Litig.-MDL No. 1869, 725 F.3d 244, 252 (D.C. Cir. 2013)). 

In the other corner, five circuits have held that where a proposed class contains some de minimis number of uninjured plaintiffs, this fact will not hold up the certification of the class at the initial stage, even though these members will need to be picked off before ever collecting damages.  Among these five, the Ninth Circuit’s majority in the tuna case does seem to have ventured the furthest in allowing a potentially substantial number of uninjured class members to pass certification, allowing as many as 28% uninjured class members in the putative class without compromising certification.  Olean, 31 F.4th at 669. 

However, the Ninth Circuit is not entirely alone: in the other four Circuits to address the issue, each has held (or signaled) that some undefined de minimis number of uninjured plaintiffs can exist in a class without threatening certification; these are the First, Fourth, Seventh, and Eleventh Circuits. The Tenth Circuit would likely join this camp if given the opportunity.  It has previously held similarly in class actions for injunctive relief, see Colorado Cross Disability Coal. v. Abercrombie & Fitch Co., 765 F.3d 1205, 1214 (10th Cir. 2014). Further, the District of Kansas recently “predict[ed] the Tenth Circuit would follow” the Seventh Circuit in allowing a de minimis number of uninjured class members to pass certification.  In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Pracs. & Antitrust Litig., No. 17-MD-2785-DDC-TJJ, 2020 WL 1873989, at *32 (D. Kan. Feb. 27, 2020) (unpub.).  See In re Asacol Antitrust Litig., 907 F.3d 42, 58 (1st Cir. 2018) (Rule 23 does not “require that a plaintiff demonstrate prior to class certification that each class member is injured,” but at certification a district court must “offer a reasonable and workable plan for how” defendants will be able to challenge uninjured class members’ allegations); Krakauer v. Dish Network, L.L.C., 925 F.3d 643, 658–59 (4th Cir. 2019) (stating that it is not resolving this issue, but also rejecting argument that uninjured class members should preclude certification because “there is simply not a large number of uninjured persons included within the plaintiffs’ class.”) (emphasis added); Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 825 (7th Cir. 2012) (“[A] class should not be certified if it is apparent that it contains a great many persons who have suffered no injury at the hands of the defendant.  There is no precise measure for ‘a great many.’”) (emphasis added) (internal citation omitted); Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1277 (11th Cir. 2019) (“[W]hen it appears that a large portion of the class does not have standing,” a district court “must consider under Rule 23(b)(3) before certification whether the individualized issue of standing will predominate over the common issues in the case”). 

This split may yet be resolved, if the Ninth Circuit’s decision in the tuna case is appealed to the United States Supreme Court.  The deadline for the defendants to file a petition for writ of certiorari has not elapsed, but it has been extended to August 8, signaling that the defendants intend to petition.  This case would give the Court a chance to can the deepening split between the circuits, and to finally address the question left unanswered in TransUnion: what does the presence of uninjured class members mean for class certification?  Class action attorneys will be watching to see whether the Court will take a bite, or whether the tuna case will be the one that got away. 

Joseph D. Hammond is an attorney at Ellis & Winters. Before joining Ellis & Winters, Joe worked as an associate at Quinn Emanuel Urquhart & Sullivan LLP in New York City, where he practiced in the areas of commercial litigation, antitrust, and product liability. Throughout his career, he has represented plaintiffs and defendants in federal and state courts throughout the United States. Joe graduated from New York University School of Law, where he was a Robert McKay Scholar.

Kyle Medin is a litigation attorney who focuses his practice primarily on toxic torts, specifically asbestos cases, and general litigation. Prior to joining Ellis & Winters in 2020, Kyle worked as a Legal Fellow at the Duke University Office of Counsel where he investigated EEOC charges, assisted the University with meeting its renewable energy goals, and tackled land use issues. He received his J.D. from Duke University School of Law, and was awarded a Duke Law School Dean’s Scholarship.

Interested in joining the Commercial Litigation Committee? Click here for more information.