The United States Supreme Court has granted certiorari in Laboratory Corporation of America Holdings v. Davis. The case raises a pivotal question: Can a federal court certify a Rule 23(b)(3) damages class when some proposed class members lack Article III standing? The answer will undoubtedly influence litigation strategies in damages class actions.
1. The Background: A Brewing Circuit Split
In 2021, the Supreme Court confirmed that "Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not." TransUnion LLC v. Ramirez, 594 U.S. 413, 431 (2021). The TransUnion court was clear that in the class action context, "every class member must have Article III standing in order to recover individual damages." Id. But TransUnion was decided following a final judgment long after the certification stage. Accordingly, courts have grappled with how its holding might influence the predominance inquiry at class certification, creating fertile ground for conflicting rulings.
Defendants have long argued (correctly, in our view) that, since uninjured class members cannot recover in a class action, it is necessary to separate those class members that have a concrete injury from those that do not. Those individualized inquiries therefore overwhelm common questions and preclude a finding of predominance at the certification stage.
Not all district and appellate courts have agreed, however. LabCorp argued in its cert petition that a three-way split on this issue has emerged. While the Ninth Circuit permits certification even when more than a de minimis number of class members lack standing, other circuits such as the Second and Eighth have taken a stricter approach, barring certification in such cases outright. Meanwhile, the D.C. and First Circuits adopt a middle-ground approach, allowing certification if the number of uninjured members is "de minimis."
2. How the Inclusion of Uninjured Class Members at Certification Impacts Businesses
For defendants, the inclusion of uninjured members in certified classes can dramatically inflate exposure, particularly in statutory damages cases like LabCorp. That case stems from a class action lawsuit filed by two legally blind plaintiffs, alleging that LabCorp's self-service kiosks violated the Americans with Disabilities Act (ADA) and California's Unruh Act, which provide for statutory damages of $4,000 per violation. But a substantial portion of the class never used, wanted to use, or intended to use the kiosks, rendering them uninjured (and therefore without Article III standing). LabCorp argued that certifying a class with uninjured class members could expose the company to nearly half a billion dollars a year in damages. As LabCorp argued in its cert petition, a certification order on such claims is often "the ball game" because plaintiffs can easily inflate the size of a class with uninjured persons and drive up potential liability.
That concern is not limited to ADA statutory damages claims. As businesses know, the proliferation of false advertising class actions continues unabated. The most common theory of injury in such cases is that plaintiffs and the putative class would not have made their purchases, or would have paid less for them, had they been aware that the challenged representations were false or misleading. Accordingly, defendants have rightly argued that individualized inquiries over which class members actually suffered concrete harm overwhelm common ones and preclude certification. Like statutory damages claims, these false advertising class actions pose a risk of artificially inflating exposure by including uninjured class members (and some false advertising statutes, like New York's General Business Law, potentially carry statutory damages). But here too courts have grappled with what level of evidentiary support plaintiffs must put forth at the certification stage. Reframing these issues as one of standing provides additional certification defenses to businesses facing such lawsuits.
3. A Clearer Standard on the Horizon?
While the Supreme Court's decision in LabCorp is likely to resolve the circuit split, the outcome is far from certain. A ruling that applies the strictest interpretation of TransUnion could spell the end of certification for any class that includes uninjured members, creating substantial hurdles for plaintiffs. On the other hand, an endorsement of the Ninth Circuit's more lenient approach could provide tailwinds for plaintiffs' counsel bringing class actions with dubious injury allegations.
Additionally, the Court's ruling will have implications for how parties approach evidentiary burdens at certification. If the Court tightens standing requirements, plaintiffs' counsel may need to invest heavily in individualized standing analyses before reaching the certification stage—a costly and potentially prohibitive endeavor.
4. What's Next?
Merits briefing in LabCorp is set to conclude in April 2025, with a decision possible by the end of the Court's term in June. While the ruling should resolve the circuit split, it also has the potential to introduce new questions and challenges for lower courts to navigate. For now, the case serves as a reminder of the Supreme Court's increasing interest in procedural questions that have outsized effects on class actions.
We'll be monitoring, so stay tuned!