Kessler v. Samsung Electronics America Inc

REPLY BRIEF in Support

E.D. Wis.September 5, 2018

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WISCONSIN MILWAUKEE DIVISION DALE KESSLER, individually and on ) behalf of all others similarly situated ) ) Plaintiff, ) ) v. ) No. 2:17-cv-00082-LA ) SAMSUNG ELECTRONICS AMERICA, INC., ) ) Defendant. ) REPLY IN SUPPORT OF DEFENDANT SAMSUNG ELECTRONICS AMERICA, INC.’S MOTION TO DENY CLASS CERTIFICATION OR STRIKE CLASS ALLEGATIONS Case 2:17-cv-00082-LA Filed 09/05/18 Page 1 of 23 Document 38 i TABLE OF CONTENTS Page I. INTRODUCTION ...............................................................................................................1 II. ARGUMENT .......................................................................................................................2 A. Plaintiff Fails to Identify Any Discovery That Would Alter the Conclusion that He Cannot Represent Individuals Who Agreed to Arbitrate. ...........................2 B. Plaintiff’s Opposition Confirms that He Cannot Represent Putative Class Members Who Agreed to Arbitrate on a Non-Class Basis. .....................................5 1. Samsung Has a Well-Established Right to Enforce the Arbitration Agreement Against Putative Class Members. .............................................5 2. Plaintiff’s Opposition Makes Clear that He Cannot Satisfy Rule 23(a)’s Adequacy, Typicality or Commonality Requirements, Let Alone All Three. ....................................................................................7 3. Plaintiff Fails to Show How He Has Standing to Challenge the Arbitration Agreement, and His Attack on the Arbitration Agreement is Meritless. .............................................................................10 C. Courts in the Seventh Circuit Have Rejected Plaintiff’s Argument that Bristol-Myers Does Not Apply to Class Actions. ..................................................13 III. CONCLUSION ..................................................................................................................15 Case 2:17-cv-00082-LA Filed 09/05/18 Page 2 of 23 Document 38 ii TABLE OF AUTHORITIES Page(s) Federal Cases Am. Express. Co. v. Italian Colors Rest., 570 U.S. 228 (2013) ...............................................................................................................5, 6 Am. Health & Res. Ctr. Ltd. v. Alcon Labs., Inc., No. 16-cv-04539 (N.D. Ill. June 15, 2018) ........................................................................13, 14 Beckwith v. Caliber Home Loans, Inc., No. 3:15-CV-00581-RDP, 2015 WL 3767187 (N.D. Ala. June 17, 2015) ...............................7 Boatwright v. Walgreen Co., No. 10 C 3902, 2011 WL 843898 (N.D. Ill. Mar. 4, 2011) .......................................................4 Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773 (2017) .................................................................................................13, 14, 15 CE Design Ltd. v. King Architectural Metals, Inc., 637 F.3d 721 (7th Cir. 2011) .....................................................................................................8 Chamberlain v. LG Elecs. U.S.A., Inc., No. CV172046MWFPLAX, 2017 WL 3084270 (C.D. Cal. June 29, 2017) ...........................12 Conde v. Open Door Mktg., LLC, 223 F. Supp. 3d 949 (N.D. Cal. 2017) .................................................................................3, 10 De Falco v. Vibram USA, Inc., No. 12 C 7238, 2013 WL 1122825 (N.D. Ill. Mar. 18, 2013) ...................................................3 DeBernardis v. NBTY, Inc., No. 17 C 6125, 2018 WL 461228 (N.D. Ill. Jan. 18, 2018) ....................................................14 Falbe v. Dell Inc., No. 04-C-1425, 2004 WL 1588243 (N.D. Ill. July 14, 2004) .................................................11 Fond Du Lac Bumper Exch., Inc. v. Jui Li Enter. Co., Ltd., No. 09-CV-0852, 2016 WL 3579953 (E.D. Wis. June 24, 2016) .............................................8 Gore v. Alltel Comms., LLC, 666 F.3d 1027 (7th Cir. 2012) ...................................................................................................6 Greene v. Mizuho Bank, Ltd., 289 F. Supp. 3d 870 (N.D. Ill. 2017) .......................................................................................15 Case 2:17-cv-00082-LA Filed 09/05/18 Page 3 of 23 Document 38 iii Herrera v. LCS Fin. Servs. Corp., 274 F.R.D. 666 (N.D. Cal. 2011) ...............................................................................................8 Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997) .................................................................................................10 Hill v. Wells Fargo Bank, N.A., 946 F. Supp. 2d 817 (N.D. Ill. 2013) .......................................................................3, 10, 11, 12 ISI Int’l, Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548 (7th Cir. 2001) ...................................................................................................14 Junka v. Suntrust Bank, No. 114CV01056WBHAJB, 2014 WL 12284032 (N.D. Ga. Oct. 31, 2014) ............................7 Karpilovsky v. All Web Leads, Inc., No. 17 C 1307, 2018 WL 3108884 (N.D. Ill. June 25, 2018) ...............................................4, 7 Kasalo v. Harris & Harris, Ltd., 656 F.3d 557 (7th Cir. 2011) .....................................................................................................4 Kimberly-Clark Corp. v. Tyco Healthcare Retail Group, No. 05-C-985, 2007 WL 218721 (E.D. Wis. Jan. 26, 2007) .....................................................8 Kindred Nursing Centers Ltd. P’ship v. Clark, 137 S. Ct. 1421 (2017) ...............................................................................................................6 Landgraf v. USI Film Prods., 511 U.S. 244 (1994) ...................................................................................................................7 Legg v. PTZ Insurance Agency, Ltd., 321 F.R.D. 572 (N.D. Ill. 2015) ...............................................................................................13 Lim v. Helio, LLC, No. CV119183PSGACRX, 2012 WL 12884439 (C.D. Cal. Apr. 18, 2012) ............................8 Lysik v. Citibank, N.A., No. 17 C 2277, 2017 WL 4164037 (N.D. Ill. Sept. 20, 2017) ...............................................6, 7 McNamara v. Samsung Telecomms. Am., LLC, No. 14 C 1676, 2014 WL 5543955 (N.D. Ill. Nov. 3, 2014) ...............................................9, 11 Midland Paper Co. v. Digital Pro, Inc., No. 17 C 8124, 2018 WL 3190819 (N.D. Ill. May 7, 2018) ...................................................13 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) ...............................................................................................................5, 6 Case 2:17-cv-00082-LA Filed 09/05/18 Page 4 of 23 Document 38 iv Mora v. Harley-Davidson Credit Corp., No. 1:08-CV-01453-AWI, 2012 WL 1189769 (E.D. Cal. Apr. 9, 2012) ..................................8 Muir v. Nature’s Bounty, Inc., No. 15 C 9835, 2017 WL 4310650 (N.D. Ill. Sept. 28, 2017) ...................................................3 Nitsch v. Dreamworks Animation SKG Inc., 315 F.R.D. 270 (N.D. Cal. 2016) ...............................................................................................8 Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279 (9th Cir. 2017) .................................................................................................12 Pablo v. ServiceMaster Glob. Holdings Inc., No. C 08-03894 SI, 2011 WL 3476473 (N.D. Cal. Aug. 9, 2011) ......................................8, 13 Phillips Petroleum Co. v. Shutts, 105 S. Ct. 2965 (1985) .............................................................................................................15 Practice Mgmt. Support Servs., Inc. v. Cirque du Soleil, Inc., No. 14 C 2032, 2018 WL 1255021 (N.D. Ill. Mar. 12, 2018) ...........................................14, 15 Samsung Elecs. Am., Inc. v. Ramirez, No. 117CV01462AWISAB, 2018 WL 2198721 (E.D. Cal. May 14, 2018) ...........................12 In re Samsung Galaxy Smartphone Mktg. & Sales Practices Litig., No. 16-CV-06391-BLF, 2018 WL 1576457 (N.D. Cal. Mar. 30, 2018) .................................12 In re Samsung Galaxy Smartphone Mktg. and Sales Practices Litig., 298 F. Supp. 3d 1285 (N.D. Cal. 2018) ...................................................................................11 Santangelo v. Comcast Corp., No. 15-CV-0293, 2017 WL 6039903 (N.D. Ill. Dec. 6, 2017) ..............................................3, 9 Schmidt v. Samsung Elecs. Am., Inc., No. C16-1725-JCC, 2017 WL 2289035 (W.D. Wash. May 25, 2017) .............................11, 12 Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) ...................................................................................................................6 Taylor v. Samsung Elecs. Am., No. 16 C 50313, 2018 WL 3921145 (N.D. Ill. Aug. 16, 2018) ...........................................5, 11 Tickanen v. Harris & Harris, Ltd., 461 F. Supp. 2d 863 (E.D. Wis. 2006) .....................................................................................11 Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016) ...............................................................................................................7 Case 2:17-cv-00082-LA Filed 09/05/18 Page 5 of 23 Document 38 v Velasquez-Reyes v. Samsung Elecs. Am., Inc., No. ED CV 16-1953-DMG, 2017 WL 4082419 (C.D. Cal. Sept. 13, 2017) ...........................12 Federal Statutes 28 U.S.C. § 2072(b) .........................................................................................................................5 Rules Federal Rules of Civil Procedure, Rule 12(b) ................................................................................14 Federal Rules of Civil Procedure, Rule 12(b)(2) ...........................................................................13 Federal Rules of Civil Procedure, Rule 12(b)(6) ...........................................................................14 Federal Rules of Civil Procedure, Rule 23 ............................................................................ passim Federal Rules of Civil Procedure, Rule 23(a) ..........................................................................1, 7, 8 Federal Rules of Civil Procedure, Rule 23(a)(3) .............................................................................7 Federal Rules of Civil Procedure, Rule 23(c)(1)(A) ..............................................................3, 4, 13 Federal Rules of Civil Procedure, Rule 23(d)(1)(D) .................................................................4, 13 Constitutional Provisions U.S. Constitution, Article III .........................................................................................................10 Case 2:17-cv-00082-LA Filed 09/05/18 Page 6 of 23 Document 38 1 I. INTRODUCTION Samsung’s Motion to Deny Class Certification or Strike Class Allegations (the “Motion”) showed that Plaintiff opted out of the Arbitration Agreement included with his smartphone and thus cannot represent those who agreed to pursue their individual claims, if any, in arbitration. Samsung’s Motion also showed that Plaintiff cannot represent non-Wisconsin residents who have no connection to this forum because this Court lacks personal jurisdiction over Samsung regarding any non-resident claims. None of Plaintiff’s responses is persuasive, and Samsung’s Motion should be granted. First, Samsung’s Motion is ripe. Plaintiff contends that Samsung’s Motion is premature because he needs discovery. Resp. at 5. But he does not identify any discovery that is necessary, and no amount of discovery will change the conclusions that (1) proposed class members are subject to arbitration on an individual basis, and (2) non-Wisconsin residents have no connection to this forum. Second, Samsung has a substantive right to arbitration. Plaintiff argues that arbitration is merely a procedural issue (Resp. at 7-10), ignoring that arbitration agreements are contractual and govern the substantive rights and obligations of absent class members, as the U.S. Supreme Court has repeatedly recognized. Third, Plaintiff cannot satisfy the requirements of Rule 23(a). Plaintiff argues that, notwithstanding the Arbitration Agreement that accompanied all Galaxy S7, S7 Edge, and S7 Active devices, he may be able to satisfy the adequacy, typicality and commonality requirements of Rule 23(a) because arbitration is a “peculiar” affirmative defense that cannot defeat certification. Resp. at 10-11. But that mischaracterizes the law and the record. Affirmative defenses are a key component of the certification analysis. And the record here shows that every Samsung device sold to individuals in Plaintiff’s proposed class was accompanied by Terms and Case 2:17-cv-00082-LA Filed 09/05/18 Page 7 of 23 Document 38 2 Conditions, which included an Arbitration Agreement that applied to any disputes regarding the device’s sale, condition or performance. In other words, arbitration is a not a “peculiar” defense in this case; it is a threshold issue that precludes certification. Fourth, Plaintiff lacks standing to challenge Samsung’s Arbitration Agreement and his attempt to do so underscores why the class allegations should be stricken. A plaintiff who opted out of an arbitration agreement does not have standing to challenge the enforceability of the agreement, and Plaintiff does not seriously contest this point. Further, evaluating Plaintiff’s enforceability arguments would require consideration of each individual’s device and experience under varying state laws, and would ultimately result in myriad individual motions to compel arbitration, underscoring why no class can be certified in this case. Fifth, non-Wisconsin residents cannot be part of any putative class in this forum. Plaintiff argues there is no personal jurisdiction requirement for absent class members. But courts in this Circuit have overwhelmingly held that a court must have personal jurisdiction over a defendant as to the claims of absent class members. Thus, Plaintiff cannot represent a class that encompasses non-Wisconsin residents whose claims, if any, have no connection to this forum. For all of these reasons, Samsung’s Motion should granted, and the Court should deny certification or strike Plaintiff’s class allegations. II. ARGUMENT A. Plaintiff Fails to Identify Any Discovery That Would Alter the Conclusion that He Cannot Represent Individuals Who Agreed to Arbitrate. As shown, a defendant may move for an order that the action may not be maintained as a class action. Mot. at 4-5. Plaintiff acknowledges this rule but argues that Samsung’s Motion is “premature” before “full class certification analysis” or before class discovery is completed. Resp. at 6. Yet Plaintiff ignores that, under Rule 23, class certification should be decided at an Case 2:17-cv-00082-LA Filed 09/05/18 Page 8 of 23 Document 38 3 “early practicable time,” not after full discovery. Fed. R. Civ. P. 23(c)(1)(A) (“At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.”); 23(d)(1)(D) (“[T]he court may issue orders … requir[ing] that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly”); see also Muir v. Nature’s Bounty, Inc., No. 15 C 9835, 2017 WL 4310650, at *6 (N.D. Ill. Sept. 28, 2017) (“The court may address certification issues [under Rule 23(c)(1)(A)] before the plaintiff files a motion for certification where discovery is not relevant to the determination.”).1 Plaintiff suggests that addressing class certification at an “early practicable time” must be based on the four corners of the complaint, without regard to extrinsic evidence. Resp. at 6. That argument is wrong. An “early practicable time” simply means when it “becomes obvious” that plaintiff cannot satisfy Rule 23. See Hill v. Wells Fargo Bank, N.A., 946 F. Supp. 2d 817, 829 (N.D. Ill. 2013). And the Opposition fails to show why now is not an “early practicable time.” Plaintiff’s suggestion that a “full class certification analysis” is required fails to explain what additional discovery is needed and what “class certification analysis” is missing. As courts have held, only limited facts regarding the Arbitration Agreements are needed. See, e.g., Conde v. Open Door Mktg., LLC, 223 F. Supp. 3d 949, 961 (N.D. Cal. 2017) (“putative class members may be bound by arbitration while Plaintiffs are indisputably not”). Indeed, in similar circumstances, courts within this Circuit have foreclosed a class action based on limited discovery and before a motion for certification. See Santangelo, 2017 WL 6039903, at *3-6 1 Plaintiff cites De Falco v. Vibram USA, Inc., No. 12 C 7238, 2013 WL 1122825 (N.D. Ill. Mar. 18, 2013), but there, the defendant presented no factual record. See Santangelo v. Comcast Corp., No. 15-CV-0293, 2017 WL 6039903, at *3 (N.D. Ill. Dec. 6, 2017) (citing De Falco, but explaining that “there are circumstances when a motion to strike can provide a valuable vehicle to narrow the disputed issues in the case”). Case 2:17-cv-00082-LA Filed 09/05/18 Page 9 of 23 Document 38 4 (striking class allegations after limited discovery “because the factual record is sufficient to decide the motion, and the Court’s determination will significantly impact the scope of the remaining discovery in the case”); see also Kasalo v. Harris & Harris, Ltd., 656 F.3d 557, 563 (7th Cir. 2011) (holding that a court “need not delay a ruling on certification if it thinks that additional discovery would not be useful in resolving the class determination”).2 The Court has everything needed to determine that Galaxy S73 phones were sold with Terms and Conditions requiring non-class arbitration, and that Plaintiff opted out. See McBeth Decl. (Dkt. 31-1), at ¶ 11, Ex. B. 3-10, Ex. A. The Declaration of Joy McBeth submitted with Samsung’s Motion supplies these facts, describing the Arbitration Agreement that applies to the Galaxy S7, including the phone purchased by Plaintiff. See id., ¶¶ 6-10, Ex. A. Plaintiff’s proposed class does not exclude individuals subject to the Arbitration Agreements, but instead seeks to assert claims in court on behalf of all purchasers nationwide, regardless of whether those individuals agreed to non-class arbitration. Compl. at ¶ 36 (defining the proposed class as “All persons and entities in the United States who purchased or leased a Samsung Galaxy S7, Galaxy S7 Edge, or Galaxy S7 Active”). Moreover, Plaintiff admits he opted out of arbitration (Kessler Decl. (Dkt. 35), at ¶¶ 5-6), and he has not identified any discovery that is needed before these issues are decided.4 In short, Samsung’s Motion is ripe and should be decided now. 2 Plaintiff cites Boatwright v. Walgreen Co., No. 10 C 3902, 2011 WL 843898 (N.D. Ill. Mar. 4, 2011), but in that case the court merely noted that Rule 23(d)(1)(D) is “procedurally inseparable from Rule 23(c)(1)(A),” but did not suggest that a defendant must await a certification motion. Id. at *2. 3 For ease of use and purposes of this Motion only, “Galaxy S7” refers collectively to the Galaxy S7, Galaxy S7 Edge and Galaxy S7 Active devices. 4 To the extent Plaintiff suggests that a substantial percentage of Samsung consumers opted out of arbitration, that suggestion is irrelevant and untrue. Plaintiff’s proposed class is not limited to people who opted out, making it irrelevant how many people did so. Compl. at ¶ 36. And, as shown in the attached McBeth Reply Declaration (Ex. 1), approximately 374 individuals nationwide who purchased a Galaxy S7 exercised their right to opt out of the Arbitration Case 2:17-cv-00082-LA Filed 09/05/18 Page 10 of 23 Document 38 5 B. Plaintiff’s Opposition Confirms that He Cannot Represent Putative Class Members Who Agreed to Arbitrate on a Non-Class Basis. 1. Samsung Has a Well-Established Right to Enforce the Arbitration Agreement Against Putative Class Members. Samsung’s right to arbitrate disputes with individuals who agreed to arbitration is protected by the Rules Enabling Act (28 U.S.C. § 2072(b)), which prohibits Rule 23 from being used to “abridge, enlarge or modify any substantive right.” See Mot. at 6. Plaintiff contends that “including in a class a group of people who might otherwise be bound by arbitration clauses would, at most, abridge only a ‘procedural’ right of Samsung, and thus would not run afoul of the Rules Enabling Act.” Resp. at 8. That assertion is incorrect. An agreement between private parties is not a mere procedural right, and an arbitration provision in that agreement is no less substantive than the agreement’s other provisions. See Am. Express. Co. v. Italian Colors Rest., 570 U.S. 228, 234 (2013) (noting that “invalidating private arbitration agreements denying class adjudication, would be an ‘abridge[ment]’ or ‘modif[ication]’ of a ‘substantive right’ forbidden to the Rules [Enabling Act]”); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985) (“Having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.”); see also Taylor v. Samsung Elecs. Am., No. 16 C 50313, 2018 WL 3921145, at *2 (N.D. Ill. Aug. 16, 2018) (explaining that the FAA “reflects both a liberal federal policy favoring arbitration and the fundamental principle that arbitration is a matter of contract”) (citation omitted). Plaintiff argues that arbitration agreements are merely procedural, not substantive, citing Mitsubishi Motors. Resp. at 9. But Plaintiff misreads that case. In Mitsubishi Motors, the Agreement, confirming that the overwhelming majority of the proposed class is subject to an Arbitration Agreement providing for non-class arbitration. McBeth Reply Decl., at ¶ 10. Case 2:17-cv-00082-LA Filed 09/05/18 Page 11 of 23 Document 38 6 Supreme Court held that the FAA was broad enough to require arbitration of statutory claims, as well as contract claims. 473 U.S. at 626-28 (holding antitrust claims were subject to arbitration). The Court explained that, when the parties’ agreements to arbitrate reach statutory claims, the next step is to consider whether “legal constraints external to the parties’ agreement foreclose[] the arbitration of those claims.” Id. at 628 (concluding antitrust claims were arbitrable). But Mitsubishi Motors did not find that agreements to arbitrate were mere procedural rights that could be disregarded. To the contrary, the Court noted that “as with any other contract, the parties’ intentions control, but those intentions are generously construed as to issues of arbitrability.” Id. at 626.5 Similarly, Plaintiff’s citation to cases holding that procedural defenses like venue are evaluated only as to the proposed class representatives misses the point that the Arbitration Agreement here is a matter of private contract and thus governed by the substantive rights of each putative class member’s contract. See Gore v. Alltel Comms., LLC, 666 F.3d 1027, 1032 (7th Cir. 2012) (“[C]ourts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.”) (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)).6 5 Plaintiff cites Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010) for the proposition that arbitration is procedural, ignoring the long line of Supreme Court cases finding that arbitration agreements confer substantive contract rights like any other agreement. See Kindred Nursing Centers Ltd. P'ship v. Clark, 137 S. Ct. 1421, 1428 (2017) (“A rule selectively finding arbitration contracts invalid because improperly formed fares no better under the [FAA] than a rule selectively refusing to enforce those agreements once properly made.”); Am. Exp. Co., 570 U.S. at 234 (“To begin with, it is likely that such an entitlement, invalidating private arbitration agreements denying class adjudication, would be an ‘abridg[ment]’ or ‘modif[ication]’ of a ‘substantive right’ forbidden to the Rules”). Further, Shady Grove concerned a New York law prohibiting class actions in suits seeking penalties, and did not address—or even mention—arbitration. 6 Plaintiff cites Lysik v. Citibank, N.A., No. 17 C 2277, 2017 WL 4164037 (N.D. Ill. Sept. 20, 2017), but in that case, the court simply ruled that an arbitration provision in plaintiffs’ Case 2:17-cv-00082-LA Filed 09/05/18 Page 12 of 23 Document 38 7 2. Plaintiff’s Opposition Makes Clear that He Cannot Satisfy Rule 23(a)’s Adequacy, Typicality or Commonality Requirements, Let Alone All Three. Plaintiff criticizes Samsung for relying on “recent opinions” holding that plaintiffs who opt out of arbitration agreements (like Plaintiff here) cannot satisfy Rule 23(a) when seeking to represent putative class members who remain bound. Resp. at 11. Plaintiff argues, citing a sentence in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016)—an opinion that does not mention arbitration even once—that there is no impediment to class certification here because separate trials on “some affirmative defenses peculiar to some individual class members” do not preclude certification. Id. at 1045 (emphasis added). This argument fails for at least two reasons. First, Plaintiff’s suggestion that affirmative defenses are irrelevant to class certification analysis is wrong. As numerous courts and the Federal Rules indicate, affirmative defenses are a key component of the certification analysis. See Fed. R. Civ. P. 23(a)(3) (discussing the typicality of defenses), (b)(3) (requiring analysis of whether managing the entire litigation as a class action is superior); see also Karpilovsky v. All Web Leads, Inc., No. 17 C 1307, 2018 WL 3108884, at *8 (N.D. Ill. June 25, 2018) (“Predominance fails where affirmative defenses will require a person by person evaluation of conduct to determine whether [a defense] precludes individual recovery.”) (Emphasis added) (quotation marks and citation omitted). Second, there is nothing “peculiar” about the arbitration issue in this case, nor does it employment agreements was unenforceable based on the retroactive application of the Consumer Financial Protection Act (CFPA). Lysik misapplied Landgraf v. USI Film Prods., 511 U.S. 244 (1994) in concluding the arbitration provision was a “procedural, forum-shifting term” for purposes of determining whether the CFPA would retroactively apply to the arbitration provisions (which pre-dated the implementation of the CFPA). Lysik, 2017 WL 4164037 at *4. Other courts considering Landgraf have properly recognized “parties’ substantive contractual right to arbitrate the claims against them, a right that Congress has recognized as ‘irrevocable.’” Beckwith v. Caliber Home Loans, Inc., No. 3:15-CV-00581-RDP, 2015 WL 3767187, a *4 (N.D. Ala. June 17, 2015); see also Junka v. Suntrust Bank, No. 114CV01056WBHAJB, 2014 WL 12284032, at *6-7 (N.D. Ga. Oct. 31, 2014) (rejecting plaintiff’s attempt, citing Shady Grove and Landgraf, to conclude arbitration is merely procedural). Case 2:17-cv-00082-LA Filed 09/05/18 Page 13 of 23 Document 38 8 only go to “some” or “certain” putative class members. Rather, arbitration is a threshold issue that goes to which putative class members’ claims, if any, can be litigated in court. Here, nearly every putative class member is subject to a threshold defense that the named plaintiff does not face. McBeth Reply Decl., at ¶ 10. In these circumstances, courts hold that the named plaintiff cannot satisfy Rule 23(a)’s requirements. See, e.g., CE Design Ltd. v. King Architectural Metals, Inc., 637 F.3d 721, 724 (7th Cir. 2011) (“[A] class representative’s atypical claim may prevail on grounds unavailable to the other class members, leaving them in the lurch.”).7 Plaintiff asserts that “Samsung offers no basis to conclude that Kessler would be conflicted or would otherwise not vigorously advocate on behalf of absent class members in opposing the enforceability of the arbitration clause.” Resp. at 15. But, in making this argument, Plaintiff waives the attorney-client privilege, testifying that his counsel alerted him to the Arbitration Agreement and apparently advised him to opt out.8 Far from showing that Plaintiff can “vigorously 7 Plaintiff’s cases are not to the contrary. In Herrera v. LCS Fin. Servs. Corp., 274 F.R.D. 666, 681 (N.D. Cal. 2011), Nitsch v. Dreamworks Animation SKG Inc., 315 F.R.D. 270, 284 (N.D. Cal. 2016), and Mora v. Harley-Davidson Credit Corp., No. 1:08-CV-01453-AWI, 2012 WL 1189769 (E.D. Cal. Apr. 9, 2012), the courts’ analyses were cursory or there was no evidence showing that arbitration agreements applied to most putative class members, unlike in this case. In Fond Du Lac Bumper Exch., Inc. v. Jui Li Enter. Co., Ltd., No. 09-CV-0852, 2016 WL 3579953 (E.D. Wis. June 24, 2016), the court stated without any analysis that “individual defenses against certain class members” do not preclude class certification. Id. at *11 (emphasis added). Here, however, Samsung has an affirmative defense against almost the entire putative class that is not available against Plaintiff. See also Lim v. Helio, LLC, No. CV119183PSGACRX, 2012 WL 12884439, at *3 (C.D. Cal. Apr. 18, 2012) (denying certification where evidence suggested that the vast majority of class members were subject to arbitration agreements with class waivers); Pablo v. ServiceMaster Glob. Holdings Inc., No. C 08-03894 SI, 2011 WL 3476473, at *3 (N.D. Cal. Aug. 9, 2011) (distinguishing Herrera on a similar basis and rejecting class allegations based on an arbitration agreement that applied to most of the proposed class). 8 By revealing his communications with his counsel to use as a “sword,” Plaintiff has waived the attorney-client privilege. Kimberly-Clark Corp. v. Tyco Healthcare Retail Group, No. 05-C-985, 2007 WL 218721, at *2 (E.D. Wis. Jan. 26, 2007) (“[W]hen a party defends its actions by disclosing an attorney-client communication, it waives the attorney-client privilege as to all such communications regarding the same subject matter.”) (citation omitted). Case 2:17-cv-00082-LA Filed 09/05/18 Page 14 of 23 Document 38 9 advocate” on behalf of putative class members, this testimony creates additional individualized questions regarding how Plaintiff learned about the Arbitration Agreement, why he decided to opt out, and how he came to that conclusion. The purported fact that someone (in this case, an attorney) may have told Plaintiff about the Arbitration Agreement does not put him in the same position as those who did not opt out. Just the opposite; Plaintiff’s decision to opt out means he is incapable of credibly arguing that he was compelled to accept the Arbitration Agreement or that the Agreement itself is not valid. See Santangelo, 2017 WL 6039903, at *5 (“[B]y virtue of the fact that he successfully opted out of the arbitration provision, Santangelo would be unable to assert, in any credible fashion, a number of arguments that would potentially undermine the provision’s enforceability.”) Plaintiff also ignores that he is asserting warranty claims on behalf of the proposed class based on language located in the same Health & Safety and Warranty Guide that contains the Arbitration Agreement. See McBeth Decl. (Dkt. 31-1), at ¶ 6 and Ex. A. This means that Plaintiff would have to argue that the warranty terms are binding, but that the Arbitration Agreement in the same document somehow is not. See McNamara v. Samsung Telecomms. Am., LLC, No. 14 C 1676, 2014 WL 5543955, at *2 (N.D. Ill. Nov. 3, 2014) (“Plaintiffs dispute [the arbitration agreement’s] location in the warranty section but that is precisely where it belongs as least as far as Plaintiffs are concerned. What they are seeking to do is prove a breach of the warranty.”). In short, Plaintiff’s Opposition confirms that arbitration is not a “peculiar” defense, and his arguments raise issues unique to him, further underscoring that he is neither typical of the putative class nor an adequate representative.9 9 Plaintiff asks the Court—in the event it agrees with Samsung—for leave to add an additional plaintiff who did not opt out. Resp. at 17, n.7. But the deadline to join other parties or amend the pleadings has passed (May 25, 2018). Order Following Scheduling Conference (Dkt. 25) at ¶ 1. Case 2:17-cv-00082-LA Filed 09/05/18 Page 15 of 23 Document 38 10 3. Plaintiff Fails to Show How He Has Standing to Challenge the Arbitration Agreement, and His Attack on the Arbitration Agreement is Meritless. Plaintiff misunderstands Samsung’s standing argument. Mot. at 8-10. Plaintiff focuses on whether he has standing under Article III to file suit (Resp. at 17-19), but the point is that Plaintiff does not have standing to challenge the Arbitration Agreement because he is not a party to it. Numerous cases have held that a plaintiff cannot challenge an arbitration agreement where he opted out or the agreement otherwise does not apply. See Mot. at 8-10 (citing cases). Plaintiff attempts to distinguish these cases by noting they discuss standing “in the context of arbitration clauses” and not Article III. Resp. at 18. That is correct, and that is the point: Plaintiff does not have standing to challenge agreements to which he is not a party. He does not directly address this issue, leaving it undisputed that he lacks standing to challenge the enforceability of the Arbitration Agreements that bind proposed class members.10 Despite his undisputed lack of standing, Plaintiff nonetheless contests the enforceability of the Arbitration Agreement that he opted out of. Resp. at 21-25.11 Even if the Court were to consider these arguments, they demonstrate why Samsung’s Motion should be granted. Plaintiff finds it “inexplicabl[e]” that Samsung relies on Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997)—the seminal case on in-the-box contracts from the Seventh Circuit—yet offers no principled way to distinguish the case. Plaintiff resorts to calling Hill outdated, but the Further, any such plaintiff would be bound by the Arbitration Agreement and barred from litigating in court and Samsung would promptly move to compel arbitration. Thus, even among putative class members who did not opt out, issues frustrating class adjudication would persist. 10 Because Plaintiff lacks standing, the Court may disregard this attack on enforceability. See Conde, 223 F. Supp. 3d at 960-61 (declining to consider plaintiff’s argument that arbitration agreement was unenforceable because plaintiff lacked standing). 11 By exercising his contractual right to opt out, Plaintiff effectively concedes that the Arbitration Agreement is valid. If Plaintiff believed the Agreement was invalid, there was no reason to opt out. But Plaintiff wants to have it both ways; he opted out of the Agreement, so he could file a lawsuit, yet still wants to challenge the Agreement on behalf of others who did not opt out. Case 2:17-cv-00082-LA Filed 09/05/18 Page 16 of 23 Document 38 11 decision is on point and has been followed in this District and elsewhere, including in recent cases involving Samsung arbitration agreements. See Tickanen v. Harris & Harris, Ltd., 461 F. Supp. 2d 863, 867 (E.D. Wis. 2006); Taylor, 2018 WL 3921145, at *2; McNamara, 2014 WL 5543955, at *2; Falbe v. Dell Inc., No. 04-C-1425, 2004 WL 1588243, at *4 (N.D. Ill. July 14, 2004); see also Schmidt v. Samsung Elecs. Am., Inc., No. C16-1725-JCC, 2017 WL 2289035, at *2 (W.D. Wash. May 25, 2017). Indeed, cases addressing Samsung arbitration agreements under Seventh Circuit law have held those agreements to be valid. See Taylor, 2018 WL 3921145, at *2 (applying Seventh Circuit precedent to enforce Arbitration Agreement packaged with Note7 on facts virtually identical to those here); Schmidt, 2017 WL 2289035, at *1-4 (likewise applying Hill to enforce Arbitration Agreement packaged with Note7); McNamara, 2014 WL 5543955, at *2 (applying Seventh Circuit law to enforce arbitration for Galaxy S4). Rejecting the same arguments Plaintiff makes here, the courts in Taylor and Schmidt explained that Samsung provided reasonable notice of the Arbitration Agreement that came with consumers’ phones, which was enforceable. See Taylor, 2018 WL 3921145 at *6 (rejecting argument that Arbitration Agreement was hidden in the guidebook); see also Schmidt, 2017 WL 2289035, at *4 (finding that a reasonable person was on notice). Plaintiff, on the other hand, cherry-picks cases applying different law on different facts. Those cases are neither persuasive nor dispositive, and even under more restrictive California law, courts have reached different outcomes. See, e.g., In re Samsung Galaxy Smartphone Mktg. and Sales Practices Litig., 298 F. Supp. 3d 1285, 1296-97 (N.D. Cal. 2018) (enforcing arbitration agreement under California law for all but one version of the Galaxy S7).12 Appeals 12 The court denied arbitration as to one S7 model where the box also referred consumers to a website, which the court believed might be confusing. See In re Samsung, 298 F. Supp. 3d at 1298. The court, however, also dismissed that plaintiff’s claims, which made an appeal Case 2:17-cv-00082-LA Filed 09/05/18 Page 17 of 23 Document 38 12 are pending in the cases where courts have not enforced the Arbitration Agreement for S7 devices, and those cases were decided under different law. See Ninth Cir. Nos. 17-56556 and 18- 16094 in Velasquez-Reyes v. Samsung Elecs. Am., Inc., No. ED CV 16-1953-DMG (KKx), 2017 WL 4082419 (C.D. Cal. Sept. 13, 2017) and Samsung Elecs. Am., Inc. v. Ramirez, No. 117CV01462AWISAB, 2018 WL 2198721, at *1 (E.D. Cal. May 14, 2018), respectively. Those cases also differ in that neither asserted breach of warranty claims based on the warranties found next to the Arbitration Agreement, whereas Plaintiff cannot credibly make the same arguments regarding lack of notice here. See Compl., at Counts II-IV.13 Even if absent class members could not be compelled to arbitrate in every jurisdiction, they are indisputably subject to arbitration in the Seventh Circuit, and determining class membership would devolve into myriad mini-trials on arbitrability—further highlighting why this case is not suitable for class resolution. Indeed, based on Plaintiff’s nationwide class definition, the contract formation analysis will necessarily depend not only on a particular consumer’s experience and the device at issue, but also the applicable state law. See Chamberlain v. LG Elecs. U.S.A., Inc., No. CV172046MWFPLAX, 2017 WL 3084270, at *5 (C.D. Cal. June 29, 2017) (recognizing that, in jurisdictions applying Hill, in-the-box arbitration provisions are enforceable). Thus, absent an order denying class certification or striking class allegations, the Court will need to hear numerous motions to compel arbitration based on the unnecessary. See In re Samsung Galaxy Smartphone Mktg. & Sales Practices Litig., No. 16-CV- 06391-BLF, 2018 WL 1576457, at *3 (N.D. Cal. Mar. 30, 2018). 13 Furthermore, Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279 (9th Cir. 2017) involved an S4 device and a markedly different arbitration agreement in a 101-page guidebook that did not mention arbitration until page 76, and then only in a Q&A format. Id. at 1284. As noted in Schmidt, the improved arbitration disclosures (which are virtually identical to those here) take the case outside of the holding in Norcia. 2017 WL 2289035, at *3-4; see also Norcia, 845 F.3d at 1290 (indicating that Seventh Circuit law with respect to in-the-box contracting was not being applied there). Case 2:17-cv-00082-LA Filed 09/05/18 Page 18 of 23 Document 38 13 facts relevant to each putative class member’s device and experience, as well as applicable contract law, further showing why class allegations cannot be maintained. See Pablo, 2011 WL 3476473, at *2-3 (denying certification where significant litigation would be devoted to enforcement of arbitration agreements).14 C. Courts in the Seventh Circuit Have Rejected Plaintiff’s Argument that Bristol- Myers Does Not Apply to Class Actions. Plaintiff also cannot represent non-Wisconsin residents whose claims, if any, have no connection to this forum, because the Court does not have personal jurisdiction over Samsung as to those claims. Mot. at 17-20. Plaintiff suggests Samsung waived this argument because it should have been brought under Rule 12(b)(2). But that is wrong. Samsung did not bring this Motion under Rule 12(b)(2) because, as Plaintiff acknowledges, the putative class members are not parties,15 and “[a] motion to dismiss under Rule 12(b)(2) challenges whether the court has jurisdiction over a party.” Midland Paper Co. v. Digital Pro, Inc., No. 17 C 8124, 2018 WL 3190819, at *2 (N.D. Ill. May 7, 2018) (emphasis added). Instead, Samsung brings its motion to strike under Rules 23(c)(1)(A) and (d)(1)(D) because Plaintiff’s proposed class is not limited to Wisconsin residents and, therefore, cannot be sustained under Rule 23. See Am. Health & Res. Ctr. Ltd. v. Alcon Labs., Inc., No. 16-cv-04539 (N.D. Ill. June 15, 2018) (rejecting contention that motion to strike class allegations should be treated as a Rule 12(b)(2) motion) (Dkt. 190) (Ex. 1 to Mot.); Legg v. PTZ Insurance Agency, Ltd., 321 F.R.D. 572, 575 (N.D. Ill. 2015) (motions to strike class allegations are analyzed under Rule 23). Regardless, courts in this Circuit have routinely excused any purported waiver when 14 That approximately 374 people across the nation indisputably had actual knowledge of the Arbitration Agreement and chose to opt out further illustrates the individualized analysis that would be necessary. McBeth Reply Decl., at ¶ 10. 15 See Resp. at 27-28 (quoting Williams v. Gen. Elec. Capital Auto Lease, Inc., 159 F.3d 266, 269 (7th Cir. 1998) (“absent class members are not ‘parties’”)). Case 2:17-cv-00082-LA Filed 09/05/18 Page 19 of 23 Document 38 14 applying Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773 (2017) to class actions, including where (as here) a defendant’s Rule 12(b)(6) motion was brought before Bristol-Myers was decided. See Am. Health & Res. Ctr. Ltd., No. 16-cv- 04539, at *8 (Ex. 1 to Mot.) (rejecting waiver argument); Practice Mgmt. Support Servs., Inc. v. Cirque du Soleil, Inc., No. 14 C 2032, 2018 WL 1255021, at *16 (N.D. Ill. Mar. 12, 2018) (rejecting waiver argument because Bristol-Myers was decided after the time to assert Rule 12(b) defenses had passed).16 These cases are consistent with the longstanding position of the Seventh Circuit that the court can apply the correct law even if a party has waived a defense. See ISI Int’l, Inc. v. Borden Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir. 2001) (reasoning that “[f]ederal courts are entitled to apply the right body of law, whether the parties name it or not”); see also Practice Mgmt., 2018 WL 1255021, at *16 (same). Addressing the merits, Plaintiff argues that “courts have long recognized” that personal jurisdiction is required over a class action defendant only as to the claims of the plaintiff, not absent class members, and that Bristol-Myers has not changed this purported fact. Plaintiff mostly relies on case law outside the Seventh Circuit, while ignoring or simply rejecting the conclusions of the decisions from within this Circuit. See Resp. at 23. First, Plaintiff’s contention that Bristol-Myers does not apply because class actions are “representational” in nature is wrong. Under Plaintiff’s view, the court’s exercise of personal jurisdiction as to the named plaintiff’s claims is sufficient as to putative class members with no connection to the state because “unnamed class members [supposedly] are irrelevant to the question of specific jurisdiction.” Resp. at n.17. But this argument has been repeatedly rejected by the courts in this Circuit and others. See, e.g., DeBernardis v. NBTY, Inc., No. 17 C 6125, 16 Samsung filed its Rule 12(b)(6) motion on March 30, 2017 (Dkt. 6) and its reply brief on June 15, 2017 (Dkt. 13). Bristol-Myers was decided on June 19, 2017. Case 2:17-cv-00082-LA Filed 09/05/18 Page 20 of 23 Document 38 15 2018 WL 461228, at *2 (N.D. Ill. Jan. 18, 2018) (rejecting purported distinction between mass tort actions and the representational nature of class actions); Practice Mgmt., 2018 WL 1255021, at *16 (“Indeed, it is not clear how [a plaintiff] can distinguish the Supreme Court’s basic holding in Bristol-Myers simply because this is a class action.”). Second, Plaintiff argues that the “due process safeguards” of Rule 23 are sufficient to address the Supreme Court’s concerns in Bristol-Myers. But the case Plaintiff cites, Phillips Petroleum Co. v. Shutts, 105 S. Ct. 2965 (1985), “dealt with the due process rights of nonresident class members—not the due process rights of defendants.” Practice Mgmt., 2018 WL 1255021, at *16 (emphasis in original); see also Greene v. Mizuho Bank, Ltd., 289 F. Supp. 3d 870, 875 (N.D. Ill. 2017) (“Shutts does not speak to the propriety of asserting personal jurisdiction over a defendant”). Plaintiff’s argument boils down to the specious assertion that what adequately protects due process rights of absent class members must, ipso facto, also protect due process rights of defendants. That is wrong, as the Supreme Court made clear in Bristol-Myers when stating that Shutts “has no bearing” on due process rights of the defendant. Bristol-Myers, 137 S. Ct. at 1783. Put simply, class actions do not function outside the ordinary limits of federalism and due process. The putative class members Plaintiff seeks to represent admittedly have no connection to Wisconsin and could never bring their claims against Samsung, if any, here. Plaintiff cannot overcome Bristol-Myers’ requirement that “[w]hat is needed . . . is a connection between the forum and the specific claims at issue.” Bristol-Myers, 137 S. Ct. at 1781 (emphasis added). That connection is absent in this case. III. CONCLUSION For the foregoing reasons, Samsung respectfully requests that the Court grant this Motion and strike Plaintiff’s class allegations or deny certification. Case 2:17-cv-00082-LA Filed 09/05/18 Page 21 of 23 Document 38 16 DATED: September 5, 2018 Respectfully submitted, s/ Francis A. Citera Francis A. Citera Brett M. Doran Greenberg Traurig, LLP 77 West Wacker Drive, Suite 3100 Chicago, IL 60601 Phone: (312) 456-8400 Fax: (312) 456-8435 citeraf@gtlaw.com doranb@gtlaw.com Richard A. Edlin MetLife Building 200 Park Avenue New York, NY 10166 Phone: (212) 801-9200 Fax: (212) 801-6400 edlinr@gtlaw.com David E. Sellinger Yangho C. Shin 500 Campus Drive, Suite 400 Florham Park, NJ 07932 Phone: (973) 360-7900 Fax: (973) 301-8410 sellingerd@gtlaw.com shinc@gtlaw.com Attorneys for Defendant Samsung Electronics America, Inc. Case 2:17-cv-00082-LA Filed 09/05/18 Page 22 of 23 Document 38 17 CERTIFICATE OF SERVICE I hereby certify that on September 5, 2018, I electronically filed the foregoing Reply in Support of Defendant Samsung Electronics America, Inc.’s Motion to Deny Class Certification or Strike Class Allegations with the Clerk of Court for the United States District Court for the Eastern District of Wisconsin by using the Electronic Court Filing System (“CM/ECF”). I certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the CM/ECF system. s/ Francis A. Citera Case 2:17-cv-00082-LA Filed 09/05/18 Page 23 of 23 Document 38