United States: Decision In Faber v. Ciox Health, LLC (Sixth Circuit)

Key Issue

Whether a summary judgment decision in favor of defendants—granted after class certification but before notice of certification was sent to the class— can bind the absent class members, if those absent class members are provided with post-judgment notice.⁶

Background

Two plaintiffs brought a class action suit in the Western District of Tennessee against Ciox, a medical-records provider, alleging that they had been charged excessive fees for the retrieval of their medical records, in violation of the Health Insurance Portability and Accountability Act ("HIPAA") and the Tennessee Medical Records Act. In February 2018, plaintiffs moved to certify the class, and in April 2018, plaintiffs and defendant each crossmoved for summary judgment. On July 10, the district court granted plaintiffs' motion for class certification—but only two weeks later on July 24, the court granted Ciox's motion for summary judgment, holding that the relevant statutes did not provide plaintiffs with a private right of action against Ciox. No opt-out notice had been issued to the certified class in the interim. On appeal, plaintiffs argued that, even if the order granting summary judgment were affirmed, it could only bind the two named plaintiffs. Because the absent class members had never received notice of the certified class, and never received the opportunity to opt out, their due process rights would be violated if the judgment were asserted against them as res judicata.⁷

Defendant Ciox agreed that the district court's judgment, without more, was insufficient to bind the absent class members, admitting that the "recommended practice" was to issue opt-out notices shortly after class certification and before any judgment on the merits.⁸ However, Ciox argued that the Sixth Circuit could remedy this deficiency by remanding the case back to the district court with instructions to issue post-judgment notice to the absent class members. Absent class members would then have the opportunity to opt out of the class post hoc so that they would not be bound by the summary judgment decision.

Decision

On December 5, 2019, the Sixth Circuit affirmed the district court's summary judgment decision on the merits, but unanimously rejected Ciox's argument that opt-out notice provided after summary judgment would comport with Rule 23 or due process. The Sixth Circuit stressed that notice is a mandatory feature of the Rule 23 mechanism. Certification notice has to be given "before class members can be legally bound," and certification under Rule 23(b)(3) is not binding unless the absent class members are "provid[ed] adequate notice as required by the Due Process clause."⁹

Defective notice, the Sixth Circuit stated, does not satisfy due process any more than the failure to give notice at all. Post-judgment notice like that proposed by Ciox would merely apprise class members that a class had been certified. It would not afford them a meaningful opportunity to litigate the issues at stake, and consequently it would be defective. As a result, the Sixth Circuit held that the procedural anomalies in the case operated to nullify the earlier grant of class certification. Although class certification had been valid when it was issued, the effect of the district court's premature summary judgment order was to render "the class members who could receive fair notice at this stage . . . an empty set."¹⁰ Since there were no absent class members who could receive fair notice of class certification, there were no individuals who would be bound by a classwide judgment. The earlier certification now "carri[ed] no effect" and was "therefore a nullity."¹¹

Thoughts & Takeaways

Addressing an "issue of first impression in [the] circuit," the Sixth Circuit adopted "the general rule" that "[w]hen a defendant moves for and obtains summary judgment before the class has been properly notified, the defendant waives the right to have notice sent to the class, and the decision binds only the named plaintiffs."¹²

This rule—which the court characterized generally as "movant beware"—represents a fairly straightforward application of the text and logic of Rule 23, and serves as a warning to defendants of the potential risks of moving for summary judgment before the court has the chance to resolve class certification. However, it is hard to accuse Ciox of jumping the gun: the defendant submitted its motion for summary judgment on "the final day for submitting dispositive motions" as provided in the district court's scheduling order.¹³ In light of Faber, defendants faced with looming dispositive motion deadlines before class certification has been decided may find it advisable to seek a modification of the scheduling order. If they simply trust that the district court will provide full notice to any certified class before turning to motions for summary judgment, defendants may receive a pyrrhic victory that binds only the named plaintiffs.

Read the decision here.

Footnotes

6 Faber v. Ciox Health, LLC, 944 F.3d 593, 596 (6th Cir. 2019).

7 Brief of Appellants at 35-36, Faber, No. 18-5896 (6th Cir. Oct. 22, 2018), ECF No. 20.

8 Brief of Defendant-Appellee Ciox Health, LLC at 45, Faber, No. 18-5896 (6th Cir. Dec. 20, 2018), ECF No. 23.

9 Faber, 944 F.3d at 603.

10 Id. at 604.

11 Id.

12 Id. at 602.

13 Brief for Defendant-Appellee Ciox Health, LLC, supra note 8, at 12-13.

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