Drug Class Action Rejected Again

Class certification was denied -- again -- in litigation brought by plaintiffs who allege a drug maker misstated the likelihood of withdrawal symptoms in use of a prescription medication.  See Saavedra v. Eli Lilly & Co., No. 12-09366 (C.D. Calif., 7/21/15).

Plaintiffs originally moved to certify four classes under the state consumer fraud acts of Missouri, New York, Massachusetts and California. The court rejected those proposed classes, noting plaintiffs' "unusual" theory of injury and damages. Plaintiffs did not allege they suffered the alleged withdrawal effects, or that they were injured by being overcharged.  They asserted instead that they were harmed because they received a product that had less value than the class expected it to have.  They got a product with less utility, defined as the benefit consumers believe they will get by using the product.  This flawed model looked only to the demand side of the market because it focused on a refund tied to consumers out of pocket costs; yet, the prescription drug market is quintessentially inefficient and the relationship between price and value is "severed."  In turn, causation and injury could not be shown on a class-wide basis, and common issues did not predominate. 

Plaintiffs tried again, with a proposal to certify New York and Massachusetts classes. This effort, too, raised serious issue of predominance. Plaintiffs claimed to seek only the minimum statutory damages provided under the laws of the two states,  Thus, they sought to avoid the problems of their original damages model.  But plaintiffs still had to show that each class member was injured as a result of defendant's alleged misleading act -- that the act caused the loss.  Plaintiffs could only show that harm by alleging the acts caused them to pay the wrong price, too much, a price premium, for the drug;  this is either a variant on the rejected fraud-on-the-market theory or a theory that calls for a subjective individual inquiry into what each class member got and paid for.  Because the prescription drug market is not efficient (for example, it is complicated by the role of insurance and co-payments), plaintiffs cannot rely on price to show injury in this way.  Pricing affected different class members to varying degrees because of different health insurance and the different terms of benefits that can accompany it. Even if, under the new theory, plaintiffs did not need to quantify the subjective injury each felt to quantify damages, that didn't change the fact that plaintiffs would need to show that same thing to establish causation and fact of injury.  This could not be done on a class-wide basis.

Here, the class period spanned a decade and included class members who paid different prices for the drug and had different insurance. Different class members would have been affected to different degrees.  And use of a defendant's internal marketing or pricing documents wouldn't bridge the gap: the suggestion that a lower level of withdrawal symptoms might lead some consumers to pay more for a drug does not prove that a premium was actually charged, that the price charged was in excess of the drug's true value, or that prices negotiated with third-party payers were directly and fully passed on to the class.

So, again, the attempted showing of predominance failed.

 

Exclusion of Causation Expert Upheld

The Seventh Circuit recently held that a lower court was correct to preclude a proposed causation expert from testifying for the plaintiffs in a suit relating to a plaintiff''s alleged exposure to chlorine gas at an Indiana amusement park.  See  Kent Higgins, et al. v. Koch Development Corp., No. 14-2207 (7th Cir. 7/20/15).

At the park, plaintiff allegedly inhaled an unspecified amount of chemical fumes that lingered in the air near malfunctioning equipment.  Complaining of chest tightness, burning eyes, shortness of breath, and nausea, Higgins visited the emergency room later that day, where he was diagnosed with “mild chemical exposure” and discharged with instructions to follow up with his primary
care physician. More than a year later he was diagnosed with reactive airways dysfunction syndrome (“RADS”) and chronic asthma. 

This treater, Dr. Haacke, was offered as an expert, and when challenged, plaintiff's argument appeared to be that she was qualified merely because she was a board certified pulmonologist. Although a doctor may have “experience diagnosing and treating asthma … that does not make him qualified to ‘assess its genesis.’” Cunningham v. Masterwear, Inc., 2007 WL 1164832, at *10 (S.D. Ind. Apr. 19, 2007). Plaintiff offered no evidence that Dr. Haacke had ever treated another
patient for chlorine gas exposure or had any training in toxicology. Nor could plaintiff establish that Dr. Haacke employed a reliable methodology in forming her causation opinion (even assuming she was qualified to do so). The expert essentially diagnosed Higgins after listening to his own description of his symptoms and the events at the park—some fourteen months after the fact—and after looking at the results (though not the underlying data) of the pulmonary function study conducted by another doctor the year before.

The record was silent on whether Dr. Haacke considered other possible causes of Higgins’s
ailments and, if so, how and why she ruled them out. That is problematic, because plaintiff argued the doctor was employing “differential diagnosis."  A "differential diagnosis” actually refers to a method of diagnosing an ailment, not determining its cause. See Myers, 629 F.3d at 644. Some courts have recognized a form of  "differential etiology,” as a causation‚Äźdetermining methodology. Even then, to be validly conducted, an expert must systematically “rule in” and “rule out” potential causes in arriving at her ultimate conclusion. There was no showing that this was done.

The experts Ļ work is admissible only to the extent it is reasoned, uses the methods of the discipline, and is founded on data.  Lang v. Kohl’s Food Stores, Inc., 217 F.3d 919, 924 (7th Cir. 2000). Accordingly, it was within the district court’s discretion to deem Dr. Haacke unqualified to
proffer this expert testimony.

 

 

 

Proposed Class Action Stayed Pending FDA Guidance

A California recently indicated he would stay a putative class action raising allegations  about labeling of “evaporated cane juice” pending a decision from the U.S. Food and Drug Administration on sweetener labeling.  See Jennifer Shaouli v. Reed’s Inc., No.BC534738 (Sup. Ct. Los Angeles, Cal.).  The 2014 complaint can be found at 2014 WL 533701, and alleges various juice products, including defendant's  Hibiscus Ginger Grapefruit, Cranberry Ginger, Lemon Ginger Raspberry, Pomegranate Ginger, Coconut Water Lime, Passion Mango Ginger, and Cabernet Grape, were labeled misleadingly because they allegedly list “organic evaporated cane juice” as an ingredient. 

The Food and Drug Administration reopened the comment period on its draft guidance for industry on declaring "evaporated cane juice" as an ingredient on food labels. The agency originally published the draft guidance in October of 2009 and accepted comments through early December of that year. FDA reopened the comment period to obtain additional data and information to better understand the basic nature and characterizing properties of the ingredient, the methods of producing it, and the differences between this ingredient and other sweeteners.

The FDA is still mulling the new comments. And the court wisely decided it made little sense to proceed with the proposed class action until hearing from the FDA. Among the issues FDA is considering is whether the name “evaporated cane juice” adequately conveys the basic nature of the food and its characterizing properties or ingredients. 

Local Fracking Ban Struck Down

We typically focus on state court class actions when they reach the appellate level, but wanted to note an interesting decision at the trial court level.  An Ohio court has rejected a proposed class action by a group seeking to ban hydraulic fracturing in their community.  See Mothers Against Drilling in Our Neighborhood v. Ohio, No. CV-14-836899 (Ohio Ct. Com. Pl., 7/1/15).

Last December, community activists filed the class action against the state, the governor, and some fracking defendants, with the far-reaching argument that the portion of state law (Ohio Rev. Code § 1509) that gives the state Department of Natural Resources exclusive authority to permit, locate, space and regulate oil and gas wells, somehow violates plaintiffs' state constitutional right to local self-governance.  Plaintiffs' community had voted in favor of a city ordinance that bans fracking within the boundaries of their city.

The court granted defendants' motion for summary judgment, relying in large measure on a recent Ohio Supreme Court ruling in State v. Beck Energy Corp., Ohio, No. 2013-465, 2015 WL 687475 (Ohio, 2/17/15).  The ban on fracking was an invalid exercise of the city's home rule authority as it was preempted by Ohio Rev.C. 1509 as a matter of law.  In Beck, the state supreme court had noted that Chapter 1509 regulates oil and gas wells and production operations in Ohio. While it preserves certain limited powers for local governments, it gives the state government “sole and exclusive authority” to regulate the permitting, location, and spacing of oil and gas wells and production operations within the state.The supreme court held that the Home Rule Amendment to the Ohio Constitution did not grant to a city the power to enforce its own permitting scheme atop the state system. 

More background on this local regulation debate can be found at Knight & Gullman, The Power Of State Interest: Preemption Of Local Fracking Ordinances In Home-Rule Cities, 28 Tul. Envtl. L.J. 297 (Summer, 2015).

House Committee Recommends Class Action Reform

The House Judiciary Committee recently approved a proposed bill that would modify class certification standards under Fed. R. Civ. P. 23.  H.R. 1927, the 2015 Fairness in Class Action Litigation Act, is another attempt to force courts to require that the party seeking to maintain a class action affirmatively demonstrate through admissible evidentiary proof that each proposed class member suffered an injury of the same type and extent as the injury of the named class representatives.  The bill defines "injury" as the alleged impact of the defendant's actions on the plaintiff's body or property.

The committee voted 15-10 to approve an amendment, introduced by Committee Chairman Robert W. Goodlatte (R-Va.), to exempt plaintiffs seeking only declaratory or injunctive relief, as a means to carve out most civil rights plaintiffs, from the bill's proposed requirement. The amended bill would apply only to proposed classes seeking monetary relief for personal injury or economic loss.  The Committee then voted 15-10 to send H.R. 1927 to the full House for consideration.

This type of bill is generally is aimed at the so-called no injury class actions in which not all of the class members are injured, sometimes even most of the class is not injured -- for example purchasers of a consumer product with an alleged design defect that has not manifested itself in most of the units.  Such classes create issues for defendants, plaintiffs, and the courts. The bill's sponsors argue that when classes are certified that include members who do not have the same type and scope of injury as the class representatives, those members siphon off limited compensatory resources. Classes including uninjured parties can also artificially inflate the size of the class to command a larger settlement value.  

 

Court of Appeals Affirms Rejection of Unascertainable Class

The 11th Circuit earlier this month upheld a district court's rejection of a proposed class action, relying on the ascertainability doctrine. See Karhu v. Vital Pharm., Inc., No. 14-11648, 2015 WL 3560722 (11th Cir. June 9, 2015).

Defendant marketed a dietary supplement called VPX Meltdown Fat Incinerator (“Meltdown”), which it allegedly advertised for fat loss. Plaintiffs brought a proposed class-action suit, alleging that it does not aid fat loss.  Plaintiffs moved to certify a class of nationwide Meltdown purchasers, as well as a subclass of New York purchasers.  The district court denied Karhu's motion, holding that the proposed classes satisfied neither Rule 23's implicit ascertainability requirement, nor the requirements listed in either Rule 23(b)(2) or (3). Plaintiffs appealed, and the court of appeals affirmed without reaching the district court's Rule 23(b)(3) analysis.

Rule 23 implicitly requires that the proposed class is adequately defined and clearly ascertainable. A class is not ascertainable unless the class definition contains objective criteria that allow for class members to be identified in an administratively feasible way. Bussey v. Macon Cnty. Greyhound Park, Inc., 562 F. App'x. 782, 787 (11th Cir.2014). Identifying class members is administratively feasible when it is a “manageable process that does not require much, if any, individual inquiry.” Id. 


Invoking these rules, the district court denied Karhu's motion for class certification, holding that Karhu had failed to establish that his proposed classes were ascertainable. Specifically plaintiffs had failed to propose a realistic method of identifying the individuals who purchased Meltdown. The product was sold primarily to “distributors and retailers,” such that defendant's records could not be used to determine the identities of most class members.The product's low cost meant most class members would not retain their proof of purchase.  The district court also rejected an affidavit-based method. Without verification (discovery), the defendant would be deprived of its due process rights to challenge the claims of each putative class member. On the other hand, allowing defendant to contest each affidavit would require a series of mini-trials to determine class membership, which would not be administratively feasible. 

Plaintiffs appealed.  And as noted the 11th Circuit affirmed.  A plaintiff seeking certification bears the burden of establishing the requirements of Rule 23, including ascertainability.  In order to establish ascertainability, the plaintiff must propose an administratively feasible method by which class members can be identified. See Stalley v. ADS Alliance Data Syst., Inc., 296 F.R.D. 670, 679–80 (M.D.Fla.2013); Hill v. T–Mobile, USA, Inc., No. 2:09–cv–1827–VEM, 2011 WL 10958888, at *10–11 (N.D.Ala. May 16, 2011); see also Carrera v. Bayer Corp., 727 F.3d 300, 306–07 (3d Cir.2013) (“A plaintiff may not merely propose a method of ascertaining a class without any evidentiary support that the method will be successful.”).  A plaintiff cannot establish ascertainability simply by asserting that class members can be identified using the defendant's records; the plaintiff must also establish that the records are in fact useful for identification purposes, and that identification will be administratively feasible. Similarly, a plaintiff cannot satisfy the ascertainability requirement by proposing that class members self-identify (such as through affidavits) without first establishing that self-identification is administratively feasible and not otherwise problematic. See Fisher v. Ciba Specialty Chems. Corp., 238 F.R .D. 273, 301–02 (S.D.Ala.2006); Perez v. Metabolife Int'l, Inc., 218 F.R.D. 262, 269 (S.D.Fla.2003) (holding ascertainability not established when “the only evidence likely to be offered in many instances will be the putative class member's uncorroborated claim that he or she used the product”).

The potential problems with self-identification-based ascertainment are intertwined. On the one hand, allowing class members to self-identify without affording defendants the opportunity to challenge class membership provides inadequate procedural protection to defendants and implicates their due process rights. Perez, 218 F.R.D. at 269; see also Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 594 (3d Cir.2012).  On the other hand, protecting defendants' due process rights by allowing them to challenge each claimant's class membership can be administratively infeasible, because it requires a series of mini-trials just to evaluate the threshold issue of which persons are class members.  

In light of these standards, the district court's ascertainability holding was not an abuse of discretion. Karhu's proposal to identify class members using  “sales data” was incomplete, insofar as Karhu did not explain how the data would aid class-member identification. Nor was any other potential identification procedure obviously workable: the sales data identified mostly third-party retailers, not putative class members. The district court likewise acted within its discretion when it rejected identification via affidavit. Plaintiffs had not established how the potential problems with such a method would be avoided.

Worth noting for our readers is the court of appeals'  explanation of how ascertainability differs from manageability. Ascertainability addresses whether class members can be identified at all, at least in any administratively feasible (ok, manageable) way. But the manageability concern at the heart of the ascertainability requirement is prior to, and hence more fundamental than, the manageability concern addressed in Rule 23b3.  

PhRMA Responds to FDA Letter in First Amendment Dispute

The Pharmaceutical Research and Manufacturers of America last week submitted an amicus brief relating to the FDA's response to a drug company's suit challenging limits on truthful communications about off-label uses of a drug. See Amarin Pharma, Inc. v. FDA,  No. 15-cv-03588 (S.D.N.Y)(amicus brief filed 6/11/15).

Readers will recall that the case involves FDA interpretations that potentially make a drug manufacturer criminally and civilly liable for providing truthful and non-misleading scientific and medical information to well-trained health care professionals regarding unapproved uses of FDA-approved drugs or data that are not contained in the FDA approved labeling for such medicines. (Our friends over at the Drug and Device Law Blog have covered this issue extensively.)

PhRMA said in the amicus brief filed June 11th in the U.S. District Court for the Southern District of New York that FDA's recent maneuver -- a regulatory letter to the plaintiff, Amarin Pharma  --did not “cure the constitutional defects in FDA's content-based restrictions on protected speech.” In the letter, the FDA said it now all of a sudden doesn't object to many of the "off-label statements" the company might consider making about its cholesterol treatment drug.  So, the agency wouldn't necessarily consider the dissemination of some of that information to be false or misleading.

Because doctors routinely lawfully prescribe FDA-approved drugs for unapproved uses, informed patient care relies upon doctors having access to accurate, comprehensive, and current information about such uses. Biopharmaceutical manufacturers are an important source of this knowledge, said the brief. Amarin has a First Amendment right to provide such truthful and non-misleading  information. Doctors have a First Amendment right to receive it. And patients have a strong health-related interest in an affirmation of those rights. 

FDA’s recent made-for-litigation “regulatory letter” to Amarin does not cure the constitutional defects in FDA’s content-based restrictions on protected speech. The brief argued that instead FDA exacerbates and reinforces them in a footnote which reiterates in broad strokes the Agency’s 
longstanding position that the FDCA and FDA’s implementing regulations prohibit manufacturers from speaking to healthcare professionals about unapproved uses. Beyond that, the letter purports to be an exercise of enforcement discretion, relies on “draft” guidance documents that FDA itself contends do not bind the Agency, and contains significant caveats that preserve the Government’s option to pursue criminal and civil enforcement based on manufacturers’ protected speech.

For example, “under these circumstances,” FDA stated in the letter, it does not intend to object to the proposed communications “if made in the manner and to the extent described below.” FDA thus seeks to create a one-off discretionary exception, applicable to this case and nowhere else -- precisely the type of case-by-case determination regarding the legality of speech that the First Amendment forbids. Moreover, the letter relies exclusively on guidance documents that FDA itself contends are non-binding. Even if they would be deemed binding, many of the guidance documents cited in FDA’s letter remain in “draft” form.  PhRMA and others have submitted comments to FDA objecting to many aspects of these draft guidance documents, because, among other things, they continue to censor and burden protected speech based on both its content and the identity of the speaker.

The brief points out that FDA’s letter is not the first instance of a discretionary modification of ostensibly nonbinding guidance infringing on First Amendment rights. When manufacturers have
challenged FDA’s approach to speech about unapproved uses in Court, FDA has previously made ad hoc statements backing off of certain of those policies as a matter of enforcement discretion and with carefully vague caveats. FDA should not be permitted, argued the amicus, to avoid judicial scrutiny of its published regulations restricting protected speech on the basis of such non-final and potentially nonbinding “guidance” and such revocable assertions of enforcement discretion. 

Certainly one to watch.

Class Rejected Again Under Ascertainability Doctrine

We have posted before about the important doctrine of ascertainability, implicit in Rule 23's requirements.  And last year we posted about a federal court in New Jersey rejecting a class certification effort by plaintiffs complaining about the marketing of Skinnygirl Margaritas.

Following the Third Circuit decision clarifying one aspect of the ascertainability doctrine, in Byrd v. Aaron's Inc., 784 F.3d 154 (3d Cir. 2015), as amended (Apr. 28, 2015), plaintiffs tried a second time to show that class membership could be adequately determined.  See Bello v. Beam Global Spirits & Wine, Inc., No. CIV. 11-5149 NLH/KMW, 2015 WL 3613723 (D.N.J. June 9, 2015). The District Court again rejected the claim.

Many courts and commentators have recognized that an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria.  If class members are impossible to identify without extensive and individualized fact-finding or mini-trials, then a class action is inappropriate.  The Third Circuit has explained that the ascertainability requirement serves several important objectives. First, at the commencement of a class action, ascertainability and a clear class definition allow potential class members to identify themselves for purposes of opting out of a class. Second, it ensures that a defendant's rights are protected by the class action mechanism. Third, it ensures that the parties can identify class members in a manner consistent with the efficiencies of a class action. If a class cannot be ascertained in an economical and administratively feasible manner, significant benefits of a class action are lost.

The method of determining whether someone is in the class must be administratively feasible. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual factual inquiry. To satisfy ascertainability as it relates to proof of class membership, the plaintiff must demonstrate his purported method for ascertaining class members is reliable and administratively feasible, and permits a defendant to challenge the evidence used to prove class membership. The Third Circuit has also held that a plaintiff does not meet his burden of showing by a preponderance of the evidence that there is a reliable and administratively feasible method for ascertaining the class when the only proof of class membership is the say-so of putative class members or if ascertaining the class requires extensive and individualized fact-finding.

Plaintiffs cited the clarification in Byrd as an avenue to submit the Declaration of an expert which purported to detail a claim submission process to identify class members in this matter. According to the Declaration, the screening method would involve three levels of claims validation to reduce the likelihood that individuals who submit fraudulent claims would be included in the class. One level included a supposed review by “sophisticated and state-of-the-art data matching technologies that identify patterns of duplication.” Plaintiffs also contended that the damages in this case would not be determined from claimants' proofs of purchase, but rather from Defendants' total sales.  Defendants responded that nothing had changed since the Court's prior denial of class certification, and that the expert's method had only been used in the context of settled class actions, and not in ascertaining class membership in litigated disputes. The Defendants expressed concern that potential class members would not accurately recall the details of their alleged purchases, such as the date of purchase, and the proposed process would do little to weed out fraudulent or inaccurate claims; in the end the individualized fact-finding as to each affidavit submitted that would be necessary to assess claim validity. 

The Court was not convinced that the putative classes in this case were ascertainable. The Third Circuit's concern that membership in the class cannot be ascertained other than the “say so” of proposed class members remained applicable here. Plaintiffs had not proposed an objective way of identifying class members, suggesting only the submission of claim forms by putative class members without any verifiable records or documents to corroborate the claims. The named plaintiffs in this case had already demonstrated difficulty remembering the details of their purchases,which implicated the defendant's ability to challenge class membership. A process requiring reliance on affidavits of putative class members as the primary method of ascertaining the members of the class “leaves Defendants without a suitable and fair method for challenging these individuals' purported membership in the class.”

Plaintiffs still had not offered a suitable method by which the Court could identify class members with any reliability. Defendants represented that they had no records to specifically identify the class members because they did not sell Skinnygirl Margarita directly to consumers. The Court found that the process proposed by the new expert did not demonstrate a reliable and administratively feasible mechanism for ascertaining class members.  It was unlikely that many, if any, class members had retained a receipt for their purchases of Skinnygirl Margarita approximately four to six years ago. (None of the three named plaintiffs has retained a receipt for their purchases.)  The proposed methodology also would not detect those instances in which multiple claimants file claims based on one receipt, or where a claimant has fabricated a receipt to support a fraudulent claim, or where a claimant happens to have a receipt but never actually purchased a bottle of Skinnygirl Margarita. Plaintiffs had not presented a mechanism to screen out these fraudulent types of claims, and as such had not demonstrated that their proposed methodology was reliable.

Plaintiffs' inability to remember the specifics of their purchases was not “beside the point,” for it highlighted a major flaw in Plaintiffs' proposed claim process. The specific details surrounding a claimant's purchase of Skinnygirl Margarita were necessary to validate a claim. The "Court is left to wonder how the named plaintiffs, or any claimant, can complete an affidavit attesting under oath to the details of their purchases when they cannot remember such specifics." Under the proposed method, it was unclear (1) whether a purchaser must recall the exact date of purchase versus a more general time frame; (2) an acceptable range of prices; and (3) whether all of the criteria must be accurately identified or, if not, the acceptable number of criteria that must be correctly identified for a claim to advance to the next level of review.

Plaintiffs further proposed cross-referencing claims with social media activity and e-mail communications as another means of providing reliability, but the Court rejected this argument. One inherent problem with Plaintiffs' suggested use of cross-checking social media and e-mail records is that such Facebook and e-mail records, at most, only identify some unknown, unspecified portion of the putative class and may very well include individuals who never bought the product and in fact are not members of the class.  Therefore, Plaintiffs' proposed reliance on affidavits alone, without any objective records to identify class members or a method to weed out unreliable affidavits, failed to satisfy the ascertainability requirement under the law of this Circuit.

Plaintiffs were unable to identify even one consumer class action in which the procedure identified in the expert declaration was used in a litigated class action, rather than one that was settled. Overall, the Court thus found that Plaintiffs had not met their burden of demonstrating the reliability of their model. Finally, the Court rejected Plaintiffs' argument that Defendants' due process rights were protected because the entire damages were purportedly objectively quantifiable and were not based on a claimant's proof of purchase. The ascertainability requirement not only seeks to protect a defendant's rights but is also aimed at protecting the rights of absent class members. As discussed above, there is a possibility that the proposed method for ascertaining the class would result in the submission of fraudulent claims. The recovery of true class members could therefore be diluted by these fraudulent claims. Thus, Plaintiffs' focus only on Defendants in addressing ascertainability of the class was misplaced.  

 

Amicus Brief Applies Comcast in Ninth Circuit Appeal

The U.S. Chamber of Commerce recently weighed in with an amicus brief in an interesting class action appeal in the Ninth Circuit.  See Brazil v. Dole Packaged Foods LLC, No. 14-17480 (9th Cir., brief filed 6/3/15).  The issue in the case, which we posted on before, centered on whether a proposed class plaintiff had shown a reliable model for establishing class-wide damages.  

Readers will recall that under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), a class action should not be certified under Fed. R. Civ. P. 23(b) unless the proposed plaintiffs can present a damages model that isolates the harm attributable to the alleged misconduct.   We have posted about this important requirement before.

In this case, plaintiff pleaded two relevant class claims alleging misrepresentation: a claim under California Business and Professions Code section 17200 (the Unfair Competition Law, hereinafter “UCL”) and one claim under the common law for unjust enrichment. He contended the proposed class should be entitled to restitution for the UCL claim and to disgorgement of defendant's profits under the unjust enrichment claim.

The district court rejected both claims, granting summary judgment, correctly (per the brief) determining that plaintiff failed to meet the Comcast requirement for his UCL claim because his “damages model” did not isolate the price premium he alleged the class paid (what the class might be entitled to as restitution) as the result of the alleged mislabeling (the theory of liability). Because this damages model failed, the court dismissed the UCL claim for insufficient evidence. The district court then further found that the same damages analysis applied to the unjust enrichment claim, making the unjust enrichment claim duplicative of the UCL claim and dooming it on the merits for the same reason. 

The Chamber took issue with plaintiff’s argument on appeal that the unjust enrichment claim provided a different measure of damages; both claims measure the same quantum of damages.  Thus, a mislabeling plaintiff’s claim for unjust enrichment cannot salvage a damages model for restitution that otherwise fails under Comcast.  In any event, the class cannot recover both the price premium it paid as a result of the allegedly misleading label and the profits Dole derived from the allegedly misleading label. That would amount to double recovery which is unavailable by law and would raise serious due process concerns for the businesses targeted in these mislabeling lawsuits. That same price premium can be recovered only once (at most) assuming that there is an appropriate model that passes muster under Comcast.  Although unjust enrichment starts from a different premise, the measure of recovery for unjust enrichment—at least in a food mislabeling case—is necessarily the same as the measure for restitution: the premium (if any) the business charged for the food as a result of the allegedly misleading claim on the label.

Plaintiff appeared to argue in his opening brief that the burden should shift to the defendant to provide a damages model for plaintiff’s unjust enrichment claim. This is contrary to the customary burden of proof for any plaintiff. Indeed, the authority cited by plaintiff all starts with the plaintiff producing evidence permitting at least a reasonable approximation of the amount of the wrongful gain.  Plaintiff simply cannot, argued the amicus, circumvent Comcast by pleading an unjust enrichment claim in an effort to shift to the defendant the burden of coming up with a damages model. And disgorging more profits from businesses than they made as a result of an allegedly
misleading statement on a label would raise those serious due process issues.

EPA Draft Report on Fracking

The U.S. Environmental Protection Agency recently issued a draft report on hydraulic fracturing, concluding that there is no evidence that fracking has “led to widespread, systemic impact on drinking water resources in the United States.”  We have posted about fracking issues before, and many predictions of fracking-related litigation have rested on assumptions rejected by the report.  

The 1000-page "Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources" synthesizes available scientific literature and data to assess the potential for hydraulic fracturing for oil and gas to change the quality or quantity of drinking water resources, and identifies factors affecting the frequency or severity of any potential changes. This report is to be used by federal, tribal, state, and local officials, industry, and the public to better understand and address any potential vulnerabilities of drinking water resources to hydraulic fracturing activities.

Congress requested the report in 2010, so no one can say EPA rushed the process.  While there are theoretical mechanisms by which fracking-related activities “have the potential to impact drinking water resources,” the number of actual, identified cases of impact was extremely small compared to the number of hydraulically fractured wells in operation. (Somewhere around 30,000 new wells are being drilled annually.)

 

This assessment relied on relevant scientific literature and data. Literature evaluated included
articles published in science and engineering journals, federal and state government reports, nongovernmental organization (NGO) reports, and industry publications. Data sources examined
included federal- and state-collected data sets, databases maintained by federal and state
government agencies, other publicly-available data and information, and data, including
confidential and non-confidential business information, submitted by industry to the EPA.

 

The report evaluated the various stages of the water cycle used in hydraulic fracturing activities, including water acquisition, chemical mixing at the well pad site, well injection of fracking fluids, the collection of hydraulic fracturing wastewater and wastewater treatment and disposal. The report also confirms the growing consensus that fugitive gas or fluid migration through fractures at depth (that is, the actual hydraulic fracturing process) cannot result in groundwater contamination.

Fracking technology has promised true energy independence, and provided an economic boom to many key aspects of the economy. Hydraulic fracturing supports more than 2 million U.S. jobs, has increased supplies of oil and natural gas, and has helped to put downward pressure on energy prices. It also has strengthened America’s energy security and geopolitical position.

The EPA does report various ways to mitigate some of the potential impacts of hydraulic fracturing activities, including with respect to well construction. The API responded that hydraulic fracturing is being done safely under the strong environmental stewardship of state regulators and industry best practices. From 2009 to 2013, while the EPA was conducting this study, state agencies finalized an estimated 82 groundwater-related rules for oil and gas production, including hundreds of discrete rule changes, according to the Ground Water Protection Council. Continuous safety improvements have been an ongoing part of hydraulic fracturing for 65 years, said API.  

The draft EPA report is open for comment, and peer review by the Science Advisory Board.