Ahead of the Class

A recent decision of the United States District Court for the Western District of Pennsylvania dismissed, as a threshold question of jurisdiction, a plaintiff’s allegation seeking a nationwide class, because the plaintiff personally had standing to sue only under the law of the state where the financial services in question were provided to her.  Lauren v. PNC Bank, N.A., No. 2:13-cv-762, 2014 WL 123099 (W.D. Pa. Jan. 14, 2014) (opinion here).  In so limiting the potential class, the court, writing without benefit of binding Third Circuit precedent, adopted the standing analysis of the Eastern District of Pennsylvania in In re Wellbutrin XL Antitrust Litig., 260 F.R.D. 143 (E.D. Pa. 2009) (opinion here), which similarly dismissed nationwide class allegations and limited the potential class to persons in the states where the named plaintiffs lived.  The standing question was resolved before any proceedings on the plaintiff’s request to certify a nationwide class, because, as the court explained, to do otherwise “would trigger extensive discovery costs and delay” that could be avoided if it were determined that plaintiff lacked standing to sue.

In Lauren, the plaintiff alleged that defendants, PNC Bank, Assurant, and American Security Insurance Company, “force-placed” hazard insurance on persons with residential mortgages or lines of credit with PNC.  Plaintiff asserted claims against PNC for breach of the implied covenant of good faith and fair dealing, breach of the mortgage agreement, breach of fiduciary duty/misappropriation of escrow funds, and violation of the Ohio Consumer Sales Practices Act.  Plaintiff asserted claims against Assurant and ASIC for unjust enrichment and aiding and abetting breach of fiduciary duty.

After preliminary motion practice, the only claim remaining against ASIC was for unjust enrichment.  ASIC then moved to dismiss the nationwide class allegations on grounds that the court lacked subject-matter jurisdiction over unjust enrichment claims asserted under the laws of every state.

The court granted ASIC’s motion, and limited the potential class on the unjust-enrichment claim to persons who, like plaintiff, had claims under Ohio law.  The court began by noting that “[t]here is no binding Third Circuit precedent directly on point.”  It then “conclude[d] that Lauren lacks standing to assert unjust enrichment claims based on the laws of states other than Ohio.”  2014 WL 123099, at *1. Relying principally on the Wellbutrin opinion, the court noted that the “Supreme Court has held that the requirement that a named plaintiff have standing is no different in the class action context,” and that “standing must be analyzed on a claim-by-claim and state-by-state basis.”  Id. (citing Wellbutrin, 260 F.R.D. at 152).  It quoted Wellbutrin, 260 F.R.D. at 152, as follows:

A named plaintiff whose injuries have no causal relation to, or cannot be redressed by, the legal basis for a claim does not have standing to assert that claim. For example, a plaintiff whose injuries have no causal relation to Pennsylvania, or for whom the laws of Pennsylvania cannot provide redress, has no standing to assert a claim under Pennsylvania law, although it may have standing under the law of another state.

The court also agreed that Wellbutrin correctly distinguished the opinions of the Supreme Court in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), and Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), which had concluded under their facts that “class certification is ‘logically antecedent’ to standing,” 2014 WL 123099, at *2, and would therefore provide a basis for deferring the standing decision until after a decision on class certification.  As Wellbutrin had observed, Ortiz and Amchem “involved the standing of absent putative class members, not the named plaintiff” as in Lauren.  Id.  Moreover, Wellbutrin noted that in Ortiz and Amchem, the district courts were presented with motions to approve settlement classes, so that if certification was denied, the question of the absent class members’ standing – some of whom were unknown because they had not yet manifested any asbestos-related injuries and therefore did not yet know they had claims – would be moot.  Wellbutrin, 260 F.R.D. at 153.

After agreeing that Ortiz and Amchem were inapposite, the court in Lauren noted, as had the Wellbutrin court, that permitting a class certification motion and its associated discovery to proceed before resolving standing “would trigger extensive discovery costs and delay.”  2014 WL 123099, at *2.  That would be inconsistent with the requirement of Rule 1 of the Federal Rules of Civil Procedure that the rules “be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding.”  For all these reasons, the court concluded that the named plaintiff’s standing to assert claims on behalf of persons whose injuries arose outside of Ohio should be resolved at the outset, before embarking on development and resolution of the class certification motion.  The court concluded that because “Lauren suffered an alleged injury exclusively under Ohio law[, . . .] she does not have standing to assert unjust enrichment claims under the law(s) of any other state.”  2014 WL 123099, at *2 (citing In re Ductile Iron Pipe Fittings (DIPF) Indirect Purchaser Antitrust Litig., 2013 WL 5503308, at *11-12 (D.N.J. Oct. 2, 2013) (“After reviewing the different approaches, this Court agrees that named plaintiffs lack standing to assert claims under the laws of the states in which they do not reside or in which they suffered no injury.”)).  Accordingly, she could only represent a class of persons with unjust-enrichment claims under Ohio law – if the requirements for such a class under Fed. R. Civ. P. 23 were then satisfied.

Lauren and Wellbutrin provide cogent analysis why the standing of named plaintiffs in multistate class actions under state law should, when feasible, be resolved in advance of class certification.  To do otherwise risks a lengthy and expensive exercise to resolve class certification, only to determine afterwards that the plaintiff had no right to bring nearly all of its putative claims in the first place.