The Alabama Legislature Solves Problem Created by the Eleventh Circuit

The Alabama legislature recently adopted legislation to prevent class actions in federal court under the Alabama Deceptive Trade Practice Act (“ADTPA”). As reported here last summer, the Eleventh Circuit held in Lisk v. Lumber One Wood Preserving LLC, 792 F.3d 1331 (11th Cir. 2015) that the ADTPA’s prohibition on class actions does not apply in federal court. Thus, a private plaintiff could bring a class action under the ADTPA by suing in federal court. Not surprisingly, several plaintiff counsel began bringing these previously unavailable class actions following the Lisk decision.

Like the consumer fraud statutes in many states, the ADTPA gives private plaintiffs a powerful claim. The ADTPA covers a broad swath of conduct—with some exceptions, it literally applies to any deceptive, misleading, or unconscionable trade practice. The statute also eliminates many of the traditional elements of causation and provides for enhanced damages and attorneys’ fees. A court has discretion to treble any damages award under the ADTPA upon finding a willful violation. In states were private party class actions are allowed, these statutes have been a hotbed of class action litigation. Regardless of whether these class actions have actually deterred consumer fraud, they have certainly been a boon for plaintiffs’ counsel.

Up until Lisk, Alabama had not seen any private-party class actions under the ADTPA because Ala.Code § 8-10-10(f) expressly prohibits them: “A consumer . . . bringing an action under [the ADTPA] may not bring an action on behalf of a class.”  The Eleventh Circuit in Lisk determined that this prohibition was a procedural rule that only applies in Alabama state courts. Because Federal Rule of Civil Procedure 23 had no similar prohibition, the Court held that an ADTPA class action could proceed in federal court.

The Alabama business community responded by supporting SB 270. Sponsored by Senator Phil Williams, SB 270 clarified the language of the ADTPA by stating that the class action prohibit is “a substantive limitation” and that “allowing a consumer or other person to bring a class action or other representative action for a violation of this chapter would abridge, enlarge, or modify the substantive rights created by [the ADTPA].” By using this language, SB 270 directly refutes the Eleventh Circuit’s claim that the class action prohibition is merely procedural. On May 12, 2016, Governor Bentley signed Senate Bill 270 into law as Act No. 2016-407.

In light of this change to the ADTPA, a federal court should no longer be able to ignore Alabama’s class action prohibition, thereby blunting the impact of Lisk. Greg Cook and Steven Corhern of Balch worked with the Business Council of Alabama on this legislation.