Please Remain Standing: 11th Circuit Rejects $35 Million GoDaddy Settlement Due to Absent Class Members Lack of Standing

Class actions for money damages that involve class members who do not have Article III standing in the Eleventh Circuit are improper even if such members would have standing in other jurisdictions. In a unanimous decision late last month, a three-judge panel of the Eleventh Circuit vacated approval of a $35 million settlement between GoDaddy and a nationwide class of consumers who received automated GoDaddy marketing calls between 2014 through 2016. The court rejected the settlement because the class definition included some members who did not have Article III standing under Eleventh Circuit precedent.

The case began in August 2019, when Susan Drazen filed suit in the Southern District of Alabama, alleging GoDaddy had violated the Telephone Consumer Protection Act (TCPA) by allegedly calling and texting Drazen and other consumers using an automatic telephone dialing system to market its products. The case, Drazen v. GoDaddy, was ultimately consolidated with two related class cases brought against GoDaddy by Jason Bennett and John Herrick in Arizona district court.

Following negotiations with GoDaddy, Drazen, Bennett, and Herrick submitted a proposed class settlement agreement that defined the class, in part, as:

All persons within the United States to whom, from November 4, 2014 through December 31, 2016, Defendant placed a voice or text message call to their cellular telephone pursuant to an outbound campaign facilitated by the web-based software application used by 3Seventy, Inc., or the software programs and platforms that comprise the Cisco Unified Communications Manager.

The district court in Drazen raised concerns about the impact of Salcedo v. Hanna — an Eleventh Circuit case holding that receipt of a single unwanted text message is not a sufficiently concrete injury to give rise to Article III standing — on the proposed settlement class. The district court ultimately decided only the named plaintiffs needed to have Article III standing and, even though the class definition included some class members who would not have a viable claim in the Eleventh Circuit, those absent class members might have standing in other circuits.

The district court approved certification of the class on the condition that Herrick, who received a single text message, be removed as a named plaintiff. Following submission of an amended settlement agreement without Herrick as a named plaintiff, the district court certified the class and preliminarily approved the settlement. The settlement agreement provided for, among other things, compensation tracks for class members as well as class counsel’s attorneys’ fees.

Enter objector Juan Pinto. Following the district court’s approval of attorney’s fees, Pinto objected to the settlement agreement, arguing, inter alia, that the settlement was subject to heightened scrutiny under the Class Action Fairness Act (CAFA) because of the method of compensation provided in the agreement. The district court rejected Pinto’s argument, and Pinto appealed to the Eleventh Circuit.

The Eleventh Circuit never reached Pinto’s CAFA objections; instead, the court vacated the district court’s certification order and approval of the class settlement because some of the class members lacked Article III standing, which the court noted went to the “heart of our jurisdiction to hear cases in the first place.” The Eleventh Circuit continued, stating, “We cannot, therefore, check our Article III requirements at the door of the class action.” The court explained, “Any class definition that includes members who would never have standing under our precedent is a class definition that cannot stand.”

This result, the Eleventh Circuit explained, was mandated by the United States Supreme Court’s decision in TransUnion LLC v. Ramirez and the Eleventh Circuit’s own precedent in Cordoba v. DirecTV, LLC. In TransUnion. The Supreme Court held that (1) establishing an injury sufficient for Article III standing requires a plaintiff asserting a statutory violation to demonstrate a “close historical or common-law analogue for their asserted injury,” and (2) that “[e]very class member must have Article III standing in order to recover individual damages.” In Cordoba, the Eleventh Circuit explained that the standing of absent class members “may be exceedingly relevant to class certification” under Rule 23 of the Federal Rules of Civil Procedure given that “at some time in the course of the litigation the district court will have to determine whether each of the absent class members has standing before they could be granted any relief.”

The court therefore analyzed the parties’ class definition under Salcedo’s rule that a single unwanted text message does not meet the injury requirements for standing. Because the parties’ class definition included members who received a single text message, the class definition was improper. The court did not provide guidance on whether receipt of a single unwanted cell phone call meets the concrete injury requirement for Article III standing, as the parties had not briefed the issue. The Eleventh Circuit ultimately vacated class certification and approval of the settlement, and remanded the case with instructions to have the parties “redefine the class with the benefit of TransUnion and its common-law analogue analysis.”

For companies defending against class actions, this case underscores the importance of thoroughly analyzing the existence of standing at every stage of the litigation, including the settlement of any class claims considering that class settlements require court approval. Not only is standing essential for named plaintiffs but for each and every absent class member seeking monetary relief. Companies and counsel must be precise when drafting proposed class definitions and be prepared to demonstrate during the settlement approval process that all class members satisfy the existence of a “concrete injury” sufficient to satisfy constitutional standing and access to the federal courts.