The Ninth Circuit recently held that a class could be certified with class members who lost less than a penny of interest.  But it also held that where some class members may have lost nothing at all, the district court must take a hard look at whether the predominance requirement has been met. 

In Van v. LLR, Inc., 2023 WL 2469909, at *4 (9th Cir. Mar. 13, 2023), the plaintiff and putative class members had been improperly charged sales tax on clothing purchases.  Although they were all eventually reimbursed for the sales tax amount, they argued they were owed interest to account for their lost use of that money.  Id.  For the named plaintiff, this lost interest amounted to $3.76.  Id.  The district court originally held that this amount was too small to support standing and dismissed the case, but the Ninth Circuit reversed, holding that a few dollars is enough for standing.  Id. at *5.  On remand, the district court granted class certification, including for class members who were owed “less than $0.01 in interest.”  Id. at *7.  The Ninth Circuit affirmed that part of the ruling, holding that “[a]ny monetary loss, even one as small as a fraction of a cent, is sufficient to support standing.”  Id.

Although the Ninth Circuit agreed that losing even a fraction of a penny is good enough for standing, it took issue with a different aspect of the district court’s decision: the court certified a class containing some members who were not injured at all.  Id. at *11–12.  In its class certification opposition, the defendant showed that for 13,680 of the 72,373 clothing transactions at issue in the case, the retailer had discounted the transaction at the time of sale, sometimes with the intention of completely offsetting the improper sales tax.  Id. at *3.  For 18 of those 13,680 discounted transactions, in particular, the defendant was able to show that the discount did, in fact, completely offset any improper sales tax.  Id. at *11–12.  For that reason, the class members in that situation had suffered no injury at all.  Id. at *11.  Despite this showing, the district court still certified the entire class, writing off the issue as “de minimis.”  Id.  The Ninth Circuit disagreed.  Id. at *12.

As the Ninth Circuit noted, because it was unclear why a discount was given in any particular case, “an inquiry into the circumstances and motivations behind each of the 13,680 discounts might be necessary” to determine whether the discount had been intended to offset the improper sales tax.  Id. at *12.  Because getting to the bottom of that issue could “potentially involve up to 13,680 depositions and months of trial,” the Ninth Circuit held that it “certainly cannot be described as de minimis.”  Id.  For that reason, the court remanded to the district court to determine whether, in light of this issue, common issues of fact and law predominate over individualized issues.  Id.  In a footnote, the Ninth Circuit also left for the district court to decide whether it was ever proper to certify a class if any of the class members lack standing, given that “The Supreme Court expressly held open the question whether every class member must demonstrate standing before a court certifies a class.”  Id. at *11 n.12 (internal marks omitted).

There are two key takeaways coming out of the Van decision.  The first is that if a company is seeking to avoid class-action litigation by reimbursing potential class members, it should consider throwing in at least a few extra cents to ensure each class member is fully refunded.  Without that buffer, even class members who accept the full reimbursement may still have standing to sue by claiming they are entitled to recover lost interest.  The second takeaway is that at the class certification stage, a defendant should be on the lookout for arguments that certain class members—even if only a handful—may not have been injured.  Where it is difficult to identify which class members were injured (or not), that issue may create a roadblock to proof of predominance for the entire class.

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Photo of Alex Setzepfandt Alex Setzepfandt

Focusing on class actions, Alex Setzepfandt regularly advises clients in the life sciences and financial services industries in complex litigations involving product defects and mass torts. He also has experience representing both plaintiffs and defendants in commercial actions, including breach of contract, insurance…

Focusing on class actions, Alex Setzepfandt regularly advises clients in the life sciences and financial services industries in complex litigations involving product defects and mass torts. He also has experience representing both plaintiffs and defendants in commercial actions, including breach of contract, insurance recovery, and business tort actions.

Alex handles all phases of litigation, including initial pleadings, discovery, trial, and appeals. His experience includes drafting complaints and dispositive motions, arguing discovery motions, taking and defending depositions, negotiating discovery and pre-trial stipulations, and assisting with a broad range of tasks at trial.

Through his active pro bono practice, Alex has honed his oral advocacy skills. His experience includes:

  • Directly examining his client and giving the closing argument at a jury trial in SDNY;
  • Arguing motions in limine and other pre-trial matters;
  • Presenting an oral argument in the 11th Circuit; and
  • Acting as lead counsel at multiple mediations in federal courts.
Photo of Andrew Soukup Andrew Soukup

Andrew Soukup has a wide-ranging complex litigation practice representing highly regulated businesses in class actions and other high-stakes disputes. He has built a successful record of defending clients from consumer protection claims asserted in class-action lawsuits and other multistate proceedings, many of which…

Andrew Soukup has a wide-ranging complex litigation practice representing highly regulated businesses in class actions and other high-stakes disputes. He has built a successful record of defending clients from consumer protection claims asserted in class-action lawsuits and other multistate proceedings, many of which were defeated through dispositive pre-trial motions.
Andrew is co-chair of the firm’s Class Action Litigation practice group.

Andrew has helped his clients achieve successful outcomes at all stages of litigation, including through trial and appeal. He has helped his clients prevail in litigation against putative class representatives, government agencies, and commercial entities. Representative victories include:

  • Delivered wins in multiple nationwide class actions on behalf of large financial companies related to fees, disclosures, and other banking practices, including the successful defense of numerous lenders accused of violating the Paycheck Protection Program’s implementing laws, which contributed to Covington’s recent recognition as a “Class Action Group Of The Year.”
  • Successfully defending several of the nation’s leading financial institutions in a wide variety of litigation and arbitration proceedings involving alleged violations of RICO, FCRA, TILA, TCPA, FCBA, ECOA, EFTA, FACTA, and state consumer protection and unfair and deceptive acts or practices statutes, as well as claims involving breach of contract, fraud, unjust enrichment, and other torts.
  • Successfully defended several of the nation’s leading companies and brands from claims that they deceptively marketed their products, including claims brought under state consumer protection and unfair deceptive acts or practices statutes.
  • Obtained favorable outcomes for numerous clients in commercial disputes raising contract, fraud, and other business tort claims.

Because many of Andrew’s clients are subject to extensive federal regulation and oversight, Andrew has significant experience successfully invoking federal preemption to defeat litigation.

Andrew also advises clients on their arbitration agreements. He has successfully helped numerous clients avoid multi-district class-action litigation by successfully enforcing the institutions’ arbitration agreements.

Clients praise Andrew for his personal attention to their matters, his responsiveness, and his creative strategies. Based on his “big wins in his class action practice,” Law360 named Mr. Soukup a “Class Action Rising Star.

Prior to practicing law, Andrew worked as a journalist.