USA Trends and Developments Contributed by: Amir Nassihi, Michael Mallow, Rachel Straus and Christopher Wray, Shook, Hardy & Bacon LLP
What is the Overpayment Theory? The overpayment theory states that all purchas - ers suffer economic injury at the point of sale because they paid more than they would have if they had been fully informed of defects. This theory treats non-disclosure itself as a concrete injury. This is a uniform economic loss across the class, thereby avoiding individual inquiries into who actually experienced harm. Constitutional Challenges to Overpayment The overpayment theory faces significant con - stitutional hurdles under current Article III juris - prudence. The Supreme Court’s emphasis on concrete, particular harm creates tension with theories that attempt to establish injury based on speculative or hypothetical harms. As the Court noted in Clapper v Amnesty International USA, 568 U.S. 398, 409 (2013), “allegations of pos- sible future injury are not sufficient” for Article III standing. The overpayment theory essentially asks courts to presume economic harm based on undis - closed risks, even when the vast majority of class members received exactly what they bargained for: a functioning product that never showed the alleged defect. This presumption becomes particularly problematic when claimants cannot quantify the undisclosed risk or show that dis - closure would have actually affected purchase decisions. Additionally, the theory faces the causation challenge inherent in all standing analyses. To establish that non-disclosure caused economic harm, claimants must show that disclosure of the alleged defect would have reduced the prod - uct’s market value. This requires evidence about consumer behaviour, market dynamics and the actual risk profile of the alleged defect. This is
tutional demands with the practical difficulties of achieving perfect uniformity in class actions. In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619, 624–25 (D.C. Cir. 2019, “5% to 6% constitutes the outer limits of a de minimis num- ber” of uninjured class members) (cleaned up). In re Asacol Antitrust Litig., 907 F.3d 42, 47 (1st Cir. 2018) the de minimis amount was put at “around 10%” . The “great many” or “large portion” standard The Seventh and Eleventh Circuits adopt a more permissive stance, barring certification only if a substantial portion of the class lacks standing. For example, the Seventh Circuit in Kohen v Pacific Investment Management Co. 571 F.3d 672, 677 (7th Cir. 2009), suggests issues only arise when “a great many” class members are unharmed. Meanwhile the Eleventh Circuit in Cordoba v DIRECTV, 942 F.3d 1259, 1267-67 (11th Cir. 2019, requires defendants to show “large portion” lack of standing. The ninth circuit’s certification-first approach The Ninth Circuit takes the most lenient view, treating standing challenges as questions of merit which are not to be resolved at certifica - tion. This allows classes to be certified based on allegations alone, deferring standing issues until later. The overpayment theory and Article III standing Even if the Lab Corp Case had resolved the circuit split on absent class member standing at certification, controversy would still persist around the “overpayment” theory, particularly in defective product cases.
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