State Bans on Consumer Class Actions in Jeopardy
Numerous states have adopted statutory bans on "unfair" or "deceptive" trade practices. When state legislatures enacted those statutes, most of them decided to let consumers sue directly for damages. However, many state legislatures also barred consumers from bringing class actions under those state consumer-protection statutes. See, e.g., Ala. Code § 8-9-10(f) (barring class actions under Alabama's Deceptive Trade Practices Act); O.C.G.A. § 10-1-399(a) (barring class actions under Georgia's Fair Business Practices Act); Miss. Code § 75-24-15(4) (barring class actions under Mississippi's consumer protection act); Tenn. Code § 47-18-109(a)(1) (barring class actions under the Tennessee Consumer Protection Act). Previously, federal courts had enforced those restrictions, refusing to allow plaintiffs to bring state-law consumer class actions in federal court if the relevant state law barred class actions. Those days may be coming to an end. In Lisk v. Lumber One Wood Preserving, LLC, No. 14-11714, 2015 WL 4139470 (11th Cir. July 10, 2015), the plaintiff filed a putative nationwide class action alleging claims under Alabama's consumer protection statute (the ADTPA). The district court dismissed the complaint because the ADTPA does not authorize private class actions. The plaintiff appealed. The U.S. Court of Appeals for the Eleventh Circuit held that Federal Rule of Civil Procedure 23, which governs class actions in federal court, preempted Alabama's ban on consumer class actions. The court concluded that the Alabama ban was not meaningfully different from the New York ban the U.S. Supreme Court concluded was preempted by Rule 23 in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 550 U.S. 393, 130 S. Ct. 1431 (2010). The Eleventh Circuit decided that it was required to follow that Supreme Court precedent, and it reinstated the class action. The defendant in Lisk has asked for rehearing by the entire Eleventh Circuit, and it may petition the U.S. Supreme Court for review. Nevertheless, at this point, there is little reason to believe the Lisk decision will not stand. Assuming Lisk stands, individual plaintiffs who want to bring ADTPA class actions can now do so if they are able to bring their claims in a federal court within the Eleventh Circuit. But the ADTPA may be only the tip of the iceberg. Georgia also has a consumer protection statute (the GFBPA), and it also bars class actions. If a plaintiff challenges in federal court the bar on GFBPA class actions, courts in the Eleventh Circuit are almost certain to apply the reasoning used in Lisk. As a result, if Lisk stands, individual plaintiffs will likely be able to bring GFBPA class actions in federal court as well. The Lisk decision is also likely to embolden plaintiffs to try to bring state-law class actions in federal courts despite similar statutory bans on class actions. For example, it does not appear that any U.S. Court of Appeals has decided whether Rule 23 preempts the class-action bans in the Mississippi and Tennessee consumer protection acts. After Lisk, it is probably only a matter of time before the Fifth and Sixth Circuits are asked to resolve those questions.
Posted in: Class Action
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