Supreme Court Offers Some Guidance on Standing

The Supreme Court has decided a case involving injury-in-fact and standing issues that may have significant impacts on class actions.  See Spokeo Inc. v. Robins, No. 13-1339 (U.S. 5/16/16).

Spokeo, Inc. operated a “people search engine,” which searches a wide spectrum of databases to gather and provide personal information about individuals to a variety of users, including employers wanting to evaluate prospective employees. After respondent/plaintiff Robins discovered that his Spokeo-generated profile allegedly contained inaccurate information, he filed a federal class action complaint against Spokeo, alleging that the company willfully failed to comply with the Fair Credit Reporting Act’s requirements.

The District Court dismissed Robins’ complaint, holding that he had not properly pleaded injury in fact as required by Article III. The Ninth Circuit reversed. Based on Robins’ allegation that “Spokeo violated
his statutory rights” and the fact that Robins’ “personal interests in the handling of his credit information are individualized,” the appeals court ruled that Robins had adequately alleged an injury in fact.

The Supreme Court ruled that the Ninth Circuit failed to consider both aspects of the injury-in-fact requirement, so its Article III standing analysis was incomplete. A plaintiff invoking federal jurisdiction bears the burden of establishing the “irreducible constitutional minimum” of standing by demonstrating (1) an injury in fact, (2) fairly traceable to the challenged conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife, 504 U. S. 555, 560–561. Particularly relevant here, the injury-in-fact requirement requires a plaintiff to show that he or she suffered “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Id. at 560. 

The Ninth Circuit’s injury-in-fact analysis neglected the independent “concreteness” requirement. Both observations it had made about the statutory claim concerned only “particularization,” i.e., the requirement that an injury “affect the plaintiff in a personal and individual way,” Id.at 560, n. 1.  But an injury in fact must be both concrete and particularized. Concreteness is quite different from particularization and requires an injury to be “de facto,” that is, to actually exist.  

The Ninth Circuit also failed to address whether the alleged procedural violations entail a degree of risk sufficient to meet the concreteness requirement. A “concrete” injury need not always be a physical or “tangible” injury. See, e.g., Pleasant Grove City v. Summum, 555 U.S. 460. To determine whether an intangible harm constitutes injury in fact, both history and the judgment of Congress are instructive. Congress is well positioned to identify intangible harms that meet minimum Article III requirements, but a plaintiff does not automatically satisfy the injury-in-fact requirement whenever a statute grants a right and purports to authorize a suit to vindicate it. Article III standing requires a concrete injury even in the context of a statutory violation.  So, the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact; in such a case, a plaintiff need not allege any additional harm beyond the one identified by Congress, see Federal Election Comm’n v. Akins,
524 U. S. 11, 20–25. But in some circumstances a mere alleged violation of a federal statute will not be sufficient. Plaintiffs cannot automatically satisfy the demands of Article III by alleging a bare procedural violation. In addition, not all substantive inaccuracies cause harm or present any material risk of harm.

The Court remanded for consideration of these issues (which means the case may come back up).

The ruling that a mere allegation of a statutory violation by itself and mere procedural violations of a statute do not necessarily create standing will likely impact numerous class actions.  Lead plaintiffs will not be able to assert mere statutory violations as a means to show standing with respect to each absent putative class member.  Often, there will need to be an individualized inquiry as to each class member on issues surrounding the concreteness of each injury, the degree of risk posed by each violation to each class member, such as the nature and level of information the defendant allegedly got wrong. Many plaintiff lawyers, in order to maximize damages, seek to draw their class so broadly as to almost certainly include many individuals who have only a technical claim. The need for individual inquiry will loom large in the predominance analysis. Absent a proper standing analysis, the economy will continue to see huge payouts in no-injury lawsuits, a wealth transfer that overcompensates for non-existent injuries and over-deters insubstantial or technical regulatory violations.  

Ninth Circuit Refuses to Revive Water Class Action

The Ninth Circuit this week declined to revive a proposed class action in Washington federal court accusing defendant of mis-labeling a water drink containing caffeine.  See Harold Maple v. Costco Wholesale Corporation, No. 13-36089, 14-35038 and 14-35059, 2016 WL 2621345 (9th Cir. 5/9/16).

 

This was a putative class action arising from allegedly unfair or deceptive statements found on the label of a product known as VitaRain Tropical Mango Vitamin Enhanced Water Beverage (“VitaRain”) bottled by Niagara Bottling and sold by Costco. The putative class was defined as all Washington residents who purchased the VitaRain product over the four years preceding the filing of the lawsuit.
Plaintiff's First Amended Complaint asserted claims for violations of the Washington Consumer Protection Act (“CPA”), RCW 19.86.010 et seq.; misrepresentation; and negligence. Plaintiff specifically alleged that the VitaRain beverage (1) lacked a front-facing disclosure that the beverage contains caffeine; (2) failed to disclose the relative amount of caffeine in the beverage; and (3) falsely claimed that the beverage was a “natural tonic” and that it contained “natural caffeine.”

Thus this case falls within the ongoing trend of litigation challenging anything and everything a product maker says on a label, no matter how innocent or general.

The district court dismissed the complaint, and plaintiff Harold Maple appealed. The 9th Circuit affirmed that the district court correctly held that the complaint failed to state a claim. As a matter of law, the name of the beverage is not “likely to mislead a reasonable consumer.” Panag v. Farmers Ins. Co. of Wash., 204 P.3d 885, 894–95 (Wash.2009). Here, the term “Vita” could mean many things,not necessarily vitamins, and rain could not be an actual ingredient, and the label contained no misleading statements.  To the extent that Plaintiff's claim challenged the labeling of the type of “caffeine” or “tonic” as “natural” or “all natural” and the failure to describe the caffeine and other ingredients as “unnatural,” the claim failed because Plaintiff did not allege that he read those parts of the label. Accordingly, he could not establish causation. See, e.g., Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 170 P.3d 10, 22 (Wash.2007) (“A plaintiff must establish that, but for the defendant's unfair or deceptive practice, the plaintiff would not have suffered an injury.”).

The district court also correctly held that dismissal without leave to amend was proper. On appeal, Plaintiff argued that amendment could save the complaint because he could somehow allege a subclass of plaintiffs who did read the relevant parts of the label. But because Plaintiff's own individual claim failed, dismissal without leave to amend was correct.  Here's the useful point - the potential existence of other classes of which Plaintiff is not a member is irrelevant. Sanford v. MemberWorks, Inc., 625 F.3d 550, 560–61 (9th Cir.2010); Boyle v. Madigan, 492 F.2d 1180, 1182 (9th Cir.1974) (citing O'Shea v. Littleton, 414 U.S. 488, 494 (1974)).

The only error was dismissing without prejudice, which the panel corrected.

 

 

First Circuit Affirms Exclusion of Specific Causation Opinion

The First Circuit recently affirmed the exclusion of plaintiff's expert in a toxic tort claim, leading to summary judgment. See Milward v. Rust-Oleum Corp., No. 13-2132, 2016 WL 1622620 (1st Cir. 4/25/16).

Plaintiff Milward worked as a pipefitter and refrigerator technician for over thirty years. During the course of his employment, Milward was exposed to varying levels of benzene from paints and other products manufactured by (among others) Rust–Oleum Corporation. In 2004, he was diagnosed with Acute Promyelocytic Leukemia (“APL”). Three years later, Milward and his spouse sued Rust–Oleum.

To succeed against Rust–Oleum, the Milwards had the burden of establishing, through expert testimony, general and specific causation. In other words, they needed to show that exposure to benzene can cause APL (general causation), and that exposure to benzene was, in fact, a substantial factor in the development of Brian's APL (specific causation). The district court bifurcated the proceedings; it planned first to address the admissibility of expert testimony on general causation, and then to consider the specific causation issue.  

The issue on this appeal was specific causation. The Milwards retained occupational medicine physician Dr. Sheila Butler to serve as their expert witness, and the admissibility of her opinion testimony was at the heart of this appeal.  In her proposed testimony, Dr. Butler presented three theories.  First, she testified that although benzene is naturally occurring, there is no safe level of benzene exposure. This was her predominant theory, and she consistently reiterated her hypothesis. She emphasized that she reached this conclusion by examining “the biology, the pathophysiology, what the substance does to the person and the disease process.” And, she noted, she was able to do so without relying on any of the relevant epidemiological studies. Given this no-safe level theory, Dr. Butler maintained that Milward's exposure was likely the cause of his APL. The district court rejected this hypothesis because it could not be properly tested with any known rate of error. The Milwards did not meaningfully challenge the district court's conclusion on appeal.

Second, Dr. Butler rather cursorily concluded that even beyond the no-safe level hypothesis, certain epidemiological studies have established that an individual's “relative risk” of developing APL increases when exposed to specified amounts of benzene. She then compared Milward's exposure levels to those that had been found to be dangerous in that research. Since Milward's alleged exposure was higher than the amounts found to be hazardous, Dr. Butler reasoned that benzene exposure was likely the cause of his APL. Notably, she did not explain why she chose the studies on which she relied, nor did she address any study with contrary findings. In fact, during Dr. Butler's deposition, defendant's counsel asked her a number of questions about her ability and willingness to engage with the relevant epidemiological research. For instance, counsel asked, “Are you aware of any studies which find that there is no relationship between benzene exposure and APL,” to which she answered “Yes ... the literature has support for both.” Counsel then asked, “Do you intend in this case to weigh the different epidemiological studies and offer an opinion as to which ones we should rely on and which ones we should discount,” to which she replied, “No.”


Finally, Dr. Butler engaged in a so-called “differential diagnosis” to conclude that benzene exposure likely caused Milward's APL. Through this method (essentially a process of elimination) Dr. Butler “ruled out” some of the more common factors associated with APL, among them obesity and smoking. She then determined that since benzene exposure was a potential cause, she could also “rule out” an idiopathic diagnosis (or, a diagnosis without a known cause). Thus, since benzene exposure was the only significant potential cause remaining, she concluded that it was likely the culprit.

The court of appeals noted that it is NOT true that scientific studies must present diametrically opposing conclusions to be in tension with one another. Here, a number of studies were identified that showed a correlation between APL and benzene exposure at a specific level, while other studies do not show that correlation. In order to establish specific causation by the relative risk method, Dr. Butler was required to choose a study, or studies, to serve as a baseline to which she could then compare this case. There can be no serious question that choosing a study that showed a correlation above a specific level, rather than one that did not exhibit any such correlation, yields a vastly different comparison. The district court did not clearly err in finding that the studies were sufficiently distinct from one another such that utilizing one, rather than another, would necessarily lead to different testimony.  Generally, where an expert's medical opinion is grounded exclusively on scientific literature, a district court acts within its discretion to require the expert to explain why she relied on the studies that she did and, similarly, why she disregarded other, incompatible research. See, e.g., Kuhn v. Wyeth, Inc., 686 F.3d 618, 623–24 & 633 (8th Cir.2012) (permitting testimony where the expert witness relied on methodologically reliable studies and provided an explanation for why those studies were chosen); Norris v. Baxter Healthcare Corp., 397 F.3d 878, 886 (10th Cir.2005) (noting in the context of a general causation finding that the expert witness's inability to address contrary views made the opinion unreliable).

It is self-evident that, when an expert engages in a relative risk analysis in the manner that Dr. Butler did here, the district court is on firm ground in requiring such an explanation, since the validity of the approach depends on the reliability of the studies chosen. See 3 Mod. Sci. Evidence § 23:27 (2014–2015 Ed.) (discussing the use of the relative risk approach in establishing specific causation).  So, the district court reasonably ruled that there needed to be some indication of why Dr. Butler utilized the studies that she did. Indeed, her complete unwillingness to engage with the conflicting studies (irrespective of whether she was able to or not) made it impossible for the district court to ensure that her opinion was actually based on scientifically reliable evidence and, correspondingly, that it comported with Rule 702.

On the third issue, while a “differential diagnosis” can be a “reliable method of medical diagnosis: in some contexts, see Granfield v. CSX Transp., Inc., 597 F.3d 474, 486 (1st Cir.2010), an expert must still show that the steps taken as part of that analysis—the “ruling out” and the “ruling in” of causes—were accomplished utilizing scientifically valid methods. See Ruggiero v. Warner–Lambert Co., 424 F.3d 249, 254 (2d Cir.2005).  Since Dr. Butler was only able to “rule out” an idiopathic APL because she had “ruled in” benzene as a cause, the validity of her differential diagnosis turns on the reliability of that latter conclusion. See Ruggiero, 424 F.3d at 254 (noting that an expert must use reliable scientific methods to “rule in” causes); see also Best v. Lowe's Home Ctrs., Inc., 563 F.3d 171, 179 (6th Cir.2009); Glastetter v. Novartis Pharm. Corp., 252 F.3d 986, 989 (8th Cir.2001). Indeed, the reliability of that decision was particularly critical here given the extensive number of APL cases that are idiopathic. Under such circumstances, eliminating a number of potential causes—without properly and explicitly “ruling in” a cause—is simply “of little assistance.” Restatement (Third) of Torts; Phys. & Emot. Harm § 28, cmt. c(4)(2010).  

Dr. Butler “ruled in” benzene exposure solely by relying on her two other theories. But, both of these theories were unreliable. Given that the record did not contain a scientifically reliable basis to “rule in” benzene, Dr. Butler needed some other method to “rule out” an idiopathic diagnosis. She did not provide one. As such, the district court acted within its discretion to conclude that the extraordinary number of idiopathic APL cases, coupled with the lack of a reliable means to rule out an idiopathic diagnosis here, muted Dr. Butler's ability to reliably apply this methodology.

Once the district court excluded Dr. Butler's testimony, it then correctly granted Rust–Oleum's motion for summary judgment. As is well-established under Massachusetts law, “expert testimony is required to establish medical causation.” Reckis v. Johnson & Johnson, 28 N.E.3d 445, 461 (Mass.2015).

 

Lack of Expert Doomed Product Liability Claim

Part of Tim Allen's character, Tim the Tool Man, included teaching the fictional Tool Time tv audience how to fix things at home, preferably with larger, louder, power tools.  Often something would go wrong, and there would be a hole, a leak, or a fire instead of a job well done.  That same spirit infuses the recent federal court decision that only an expert with specialized knowledge can explain to jurors how a toilet seat should be attached to a bowl. See Wells v. Wal-Mart Stores, Inc., No. 15-69, 2016 WL 1453912 (E.D. Ky., 4/13/16).

 

Plaintiff claimed that he was injured when a defective toilet seat he purchased at WalMart Stores, Inc. broke. Wells alleges that Wal-Mart designed and manufactured the defective toilet seat, and that it failed to adequately warn him of the risk associated with using it.  Wal-Mart  moved for summary judgment, arguing that there was no genuine issue of material fact in this case because Wells failed to disclose an expert witness by the required deadline.

Kentucky law recognizes the main three theories of product liability: defective design, defective manufacture, and failure to warn. KRS § 411.300-.350. All of these theories of recovery require the plaintiff to prove the presence of a defect in the product. Prather v. Abbott Labs., 960 F. Supp. 2d 700, 706 (W.D. Ky. 2013). And if Wells could not prove an essential element of his case—here the presence of a defect—at trial, defendant would be entitled to summary judgment.

Expert witnesses are "generally necessary" in a Kentucky products liability case to prove the presence of a defect. Honaker v. Innova, Inc., No. CIV.A. 1:04-CV-132-M, 2007 U.S. Dist. LEXIS 30225 , [2007 BL 9643], 2007 WL 1217744 , at *2 (W.D. Ky. Apr. 23, 2007). This is because evidence that induces mere "surmise or speculation" is not sufficient to establish that a defect exists. Midwestern V. W. Corp. v. Ringley[*2] , 503 S.W.2d 745 , 747 (Ky. 1973). Instead, Kentucky law requires a party to produce an expert witness when a subject is of the type which "requires scientific or specialized knowledge and which cannot be determined intelligently from testimony on the basis of ordinary knowledge gained in the ordinary affairs of life . . . ." Com., Dept. of Highways v. Robbins, 421 S.W.2d 820 , 824 (Ky. 1967). 

Thus, the question presented here was whether an ordinary person is familiar enough with the principles of toilet seat engineering to know whether a toilet seat is defective. How should one attach a toilet seat to a toilet bowl? Is a plastic bolt sufficient to do the job? Or is a metal bolt the way to go? How should the bolt be designed? How long? The court decided that an ordinary person does not know the answers to these questions. Instead, specialized, expert knowledge was required to answer them correctly.  As Wells's own theory of the defect illustrated, understanding how and why the plastic bolt was defective requires extensive technical knowledge: a person must understand the components of the toilet seat, how these components were put together, and whether a plastic bolt was sufficiently strong to attach these components to one another. A person must also understand the engineering intricacies of bolts and screws, including how to design and/or manufacture them to maximize their structural integrity, and how deep the Phillips head of such a component should be.

Without expert testimony, Wells would merely be asking the jury to "speculat[e], suppos[e], or surmise" that there was a defect in the toilet seat. Greene v. B.F. Goodrich Avionics Sys., Inc., 409 F.3d 784 , 793 (6th Cir. 2005). Such guesswork is impermissible under Kentucky law.

While Tim always called for "more power," this job required more expertise.

 

Court of Appeals Affirms Summary Judgment in Home Products Case

The 8th Circuit recently affirmed the grant of summary judgment to the defendant in a proposed class action brought by an Iowa homeowner suing over allegedly defective house trim.  See Brown v. La.-Pac. Corp., No. 15-1830, 2016 WL 1425824 (8th Cir. 4/12/16).

In 2003, Brown purchased a lot and hired a contractor, who in turn selected defendant's  TrimBoard as the product to be installed on Brown's new home. The TrimBoard installed on Brown's home came with a ten-year limited warranty, covering delamination, checking, splitting, cracking and chipping of the basic substrate for a period of ten years from the date of installation under normal conditions of use and exposure, providing the trim is properly stored, installed, maintained, and protected as specified in defendant's Application Instructions.

Plaintiff never viewed informational or advertising literature for TrimBoard, never spoke to any representative of defendant about the TrimBoard product, and did not see a copy of the limited warranty prior to the product's installation on his home.

In August 2004, Brown moved into his new home. Sometime in 2010, plaintiff allegedly noticed damage to certain pieces of the installed TrimBoard. Ultimately, defendant offered Brown $197.67 in compensation for the damaged TrimBoard, which Brown rejected. In January 2011, Brown hired a local contractor to replace various pieces of TrimBoard on his house, at a total cost of $1,700.00, inclusive of labor and materials. 

Brown subsequently filed this putative class action, alleging claims for negligence, fraudulent misrepresentation, breach of warranty, and unfair or deceptive practices, and requesting declaratory relief and money damages. After some rounds of motion practice, the claims were dismissed. On appeal, Brown argued that the district court erred in granting summary judgment  on his claims for fraudulent misrepresentation, unfair or deceptive practices, and breach of warranty.

The court of appeals began with the fraudulent misrepresentation claim. For Brown to prevail on his fraudulent-misrepresentation claim under Iowa law, he needed to prove the following elements:

(1) defendant made a representation to the plaintiff, (2) the representation was false, (3) the representation was material, (4) the defendant knew the representation was false, (5) the defendant intended to deceive the plaintiff, (6) the plaintiff acted in reliance on the truth of the representation and was justified in relying on the representation, (7) the representation was a proximate cause of plaintiff's damages, and (8) the amount of damages.  Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001).

The court focused on justifiable reliance. Brown contended that LP's alleged misrepresentations were passed through a third party—his contractor—and then communicated to Brown and relied upon by him. Iowa law provides that "persons who fraudulently misrepresent the truth can be held liable to third parties if they have a 'reason to expect' their misrepresentation will be communicated to third parties." Clark v. McDaniel, 546 N.W.2d 590 , 593 (Iowa 1996) (quoting Restatement (Second) [*4] of Torts § 533 (1977)); see also United States v. Hawley, 619 F.3d 886 , 897 (8th Cir. 2010) ("The [Iowa Supreme] Court [in Clark] expressly adopted section 533 of the Restatement (Second) of Torts (1977) . . . .").  An objective standard applies to whether one has "reason to expect" reliance by another: "'The maker of the misrepresentation must have information that would lead a reasonable man to conclude that there is an especial likelihood that it will reach those persons and will influence their conduct.'" Id. (quoting Restatement (Second) of Torts § 533 cmt. d (1977)). "[T]he fact that the maker has an advantage to gain, even though it is in some other transaction, by furnishing the misrepresentation for repetition to the third person is of great significance in determining whether he has reason to expect that the original recipient should so repeat it." Restatement (Second) of Torts § 533 cmt. e (1977) (emphasis added).

Here, however, the court found that Brown presented insufficient evidence that his contractor ever received a relevant communication from LP. The contractor failed to identify "which advertisements he viewed, when he viewed them, or which statements from the advertisement he read and relied upon in advising [Brown] of the suitability of the product."  In fact, it appeared that the contractor was provided with copies of ads at the time of his sworn affidavit and he could only affirm that the advertisements were consistent with materials he recalled possibly viewing some nine to ten years ago. So the record left open the distinct possibility that the contractor had heard of TrimBoard from another source.

The court turned next to the unfair and deceptive trade practices act claim. The Iowa Private Right Act provides that any "consumer who suffers an ascertainable loss of money or property as the result of a prohibited practice or act in violation of this chapter may bring an action at law to recover actual damages." Iowa Code Ann. § 714H.5(1)(including material misrepresentations). Brown argued that the materiality of LP's alleged misrepresentations created an inference of causation that satisfied factual causation between LP's alleged unfair or deceptive trade practice and Brown's damages. But the act requires that plaintiff "suffer[ed] an ascertainable loss of money or property as the result of a prohibited practice." Iowa Code Ann. § 714H.5(1). And Brown failed to establish such causation as a matter of law. To show causation, Brown needed to prove that, but-for LP's purported misrepresentation, he would not have elected to purchase TrimBoard and install it on his home. And to satisfy this requirement, he needed to show that his contractor received a material representation that LP made. As noted, Brown failed to satisfy this showing. Because Brown produced no evidence that the contractor was the recipient of any representation made by LP, Brown "failed to generate a genuine issue of material fact with respect to causation."

Finally, Brown argued that the limited warranty failed of its essential purpose by inadequately compensating him for the costs to repair the direct and consequential damages to his home. The Iowa Supreme Court has elaborated on the meaning of "essential purpose," stating:  A remedy's essential purpose "is to give to a buyer what the seller promised him." Hartzell v. Justus Co., Inc., 693 F.2d 770 , 774 (8th Cir. 1982). The focus of analysis "is not whether the remedy compensates for all damage that occurred, but that the buyer is provided with the product as seller promised." Brunsman v. DeKalb Swine Breeders, Inc., 952 F. Supp. 628 , 635 (N.D. Iowa 1996); Nelson v. DeKalb Swine Breeders, Inc., 952 F. Supp. 622 , 628 (N.D. Iowa 1996).

Where repair or replacement can give the buyer what is bargained for, a limitation of remedies does not fail of its essential purpose. Badgett Constr. & Dev. Co. v. Kan-Build, Inc., 102 F. Supp. 2d 1098 , 1105 (S.D. Iowa 2000). In other circumstances, however, repair or replacement is not sufficient, and then a court may find the remedy failed of its essential purpose. See Select Pork, Inc. v. Babcock Swine, Inc., 640 F.2d 147 , 150 (8th Cir. 1981). "The issue of whether a limited remedy fails of its essential purpose is separate and distinct from whether a limited remedy is unconscionable." Baptist Mem'l Hosp. [*9] v. Argo Constr. Corp., 308 S.W.3d 337 , 345 (Tenn. Ct. App. 2009). Here, Brown essentially argued that the warranty fails of its essential purpose because the defect was latent and could not have been discovered. But numerous jurisdictions have held that a latent defect does not cause an exclusive contractual remedy to fail of its essential purpose. See Arkwright-Boston Mfrs. Mut. Ins. Co. v. Westinghouse Elec. Corp., 844 F.2d 1174 , 1179-80 (5th Cir. 1988); Wis. Power & Light Co. v. Westinghouse Elec. Corp., 830 F.2d 1405 , 1412-13 (7th Cir. 1987); Boston Helicopter Charter, Inc. v. Agusta Aviation Corp., 767 F. Supp. 363 , 374 (D. Mass. 1991); Hart Eng'g Co. v. FMC Corp., 593 F. Supp. 1471 , 1479 (D.R.I. 1984); Regents of the Univ. of Colo. ex rel . Univ. of Colo. at Boulder v. Harbert Constr. Co., 51 P.3d 1037 , 1041 (Colo. Ct. App. 2001 ); Clark v. Int'l Harvester Co., 99 Idaho 326 , 581 P.2d 784 , 802-03 (Idaho 1978)). The court of appeals concluded that the Iowa Supreme Court would follow this majority rule.  The court also noted that there is no evidence—and Brown made no allegation—that the purported defects in the TrimBoard were not remedial and could not be repaired or replaced.  So, the mere fact that the Limited Warranty does not compensate a buyer for the entirety of his damages does not mean it has failed of its essential purpose.

Court of Appeals Rejects Washer Class Action

The 11th Circuit recently ruled that class certification had been improperly granted to owners of front-loading washing machines that allegedly were susceptible to mold build-up. See Brown v. Electrolux Home Prods. Inc., No. 15-11455, 2016 WL 1085517 (11th Cir. 3/21/16).

Across the country, consumers have filed class actions against the manufacturers of front-loading washing machines. Front-loaders are considered an improvement over traditional top-loading machines because they use less water and energy. But the initial models allegedly had a problem: the rubber seal on the front door of the machine retains water, which allows mildew to grow.  In this case, consumers from California and Texas filed a class action against Electrolux Home Products, the manufacturer of Frigidaire front-loading washing machines. After the district court certified two statewide classes, see Terrill v. Electrolux Home Prods., Inc., 295 F.R.D. 671 (S.D. Ga. 2013), Electrolux filed this interlocutory appeal. The 11th Circuit vacated the certification as the district court abused its discretion in determining the predominance requirement of Federal Rule of Civil Procedure 23(b)(3).

The district court certified two statewide classes: California Class: All persons and entities who purchased, other than for resale, after March 5, 2004, and while in the State of California, a Frigidaire front-loading washing machine with a convoluted bellow. And Texas Class: All persons and entities who purchased, other than for resale, after March 5, 2004, and while in the State of Texas, a Frigidaire front-loading washing machine with a convoluted bellow.  

The district court recognized that it must conduct a "rigorous analysis" to determine whether a class action satisfies Rule 23 . See Vega v. T-Mobile USA, Inc., 564 F.3d 1256 , 1266 (11th Cir. 2009). And it correctly explained that "[a] party seeking class certification must affirmatively demonstrate his compliance with the Rule."  Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).  The district court concluded that the questions of law or fact common to class members predominate over any questions affecting only individual members, Fed. R. Civ. P. 23(b)(3). With respect to the consumer claims, the district court somehow concluded that every element was susceptible to class-wide proof. For example, the district court concluded that each class member presumably relied on the fact that defendant provided Washing Machines suited for cleaning and freshening clothing.  The district court then explained that the class members could show their reliance on defendant's alleged failure to disclose the Washing Machines' alleged design defect and the inevitable consequences of that defect through the same class-wide proof that they purchased machines to clean and freshen their clothes rather than to soil and odorize them.  As for the warranty claims, the district court rejected Electrolux's argument that the questions whether the class members gave Electrolux pre-suit notice of the defect, whether the class members gave Electrolux an opportunity to cure the defect, and whether the defect manifested during the warranty period would require individual proof. Instead, it concluded that the questions whether pre-suit notice, an opportunity to cure, and manifestation of the defect are required under California and Texas law are "common questions" that weigh in favor of class certification.

The court of appeals noted first that the district court misstated the law when it said that it "resolves doubts related to class certification in favor of certifying the class."  Indeed, the party seeking class certification has the burden of proof. Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181 , 1187 (11th Cir. 2003). And the entire point of a burden of proof is that, if doubts remain about whether the standard is satisfied, "the party with the burden of proof loses." Simmons v. Blodgett, 110 F.3d 39 , 42 (9th Cir. 1997). All else being equal, the presumption is against class certification because class actions are an exception to our constitutional tradition of individual litigation. See Comcast Corp. v. Behrend, 133 S. Ct. 1426 , 1432 (2013); Hansberry v. Lee, 311 U.S. 32 , 40-41 (1940). A district court that has doubts about whether "the requirements of Rule 23 have been met should refuse certification until they have been met." Fed. R. Civ. P. 23 advisory committee's note to 2003 amendment; accord In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 , 321 (3d Cir. 2008); Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 725 F.3d 1213, 1218 (10th Cir. 2013).

The district court also misstated the law when it said that it "accepts the allegations in the complaint as true." and "draws all inferences and presents all evidence in the light most favorable to Plaintiffs." The party seeking class certification has a burden of proof, not a burden of pleading. See Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 , 2412 (2014). He "'must affirmatively demonstrate his compliance' with Rule 23 " by proving that the requirements are "in fact" satisfied. Comcast, 133 S. Ct. at 1432 (quoting Wal-Mart, 131 S. Ct. at 2551 ). And the district court must conduct a "rigorous analysis" to determine whether the movant carried his burden, which "will frequently entail 'overlap with the merits of the plaintiff's underlying claim.'" Id . (quoting Wal-Mart, 131 S. Ct. at 2551 ). Of course, the district court can consider the merits to the extent "they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 , 1195  (2013). And if a question of fact or law is relevant to that determination, then the district court has a duty to actually decide it and not accept it as true or construe it in anyone's favor. See Comcast, 133 S. Ct. at 1432-33 ; Szabo v. Bridgeport Machs., Inc., 249 F.3d 672 , 675-76 (7th Cir. 2001); Gariety v. Grant Thornton, LLP, 368 F.3d 356, 365-66 (4th Cir. 2004). The district court erred when it stated the opposite.
 

Ultimately, the district court abused its discretion when it decided that the questions of law or fact common to class members predominate over any questions affecting only individual members, Fed. R. Civ. P. 23(b)(3). To determine whether the requirement of predominance is satisfied, a district court must first identify the parties' claims and defenses and their elements. The district court should then classify these issues as common questions or individual questions by predicting how the parties will prove them at trial. Common questions are ones where "the same evidence will suffice for each member," and individual questions are ones where the evidence will "vary] from member to member." Blades v. Monsanto Co., 400 F.3d 562 , 566 (8th Cir. 2005).  After identifying the common and individual questions, the district court should determine whether the common questions predominate over the individual ones. Many courts  have adopted the following rule of thumb: if common issues truly predominate over individualized issues in a lawsuit, then the addition or subtraction of any of the plaintiffs to or from the class should not have a substantial effect on the substance or quantity of evidence offered. If, on the other hand, the addition of more plaintiffs leaves the quantum of evidence introduced by the plaintiffs as a whole undisturbed, then common issues are likely to predominate.

But predominance requires a qualitative assessment too; it is not bean counting, and the relative importance of the common versus individual questions also matters. Predominance can only be determined after considering what value the resolution of the class-wide issue will have in each class member's underlying cause of action.  District courts should assess predominance with its overarching purpose in mind—namely, ensuring that "a class action would achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Amchem Prods., Inc. v. Windsor, 521 U.S. 591 , 615 (1997).

Electrolux argued that the district court misapplied California and Texas law when it concluded that the plaintiffs could prove causation on a class-wide basis. Electrolux argued that causation requires individual proof. Under California law, one who was not exposed to the alleged misrepresentations and therefore could not possibly have lost money or property as a result of the unfair competition is not entitled to restitution. Pfizer Inc. v. Superior Court, 182 Cal. App. 4th 622 , 105 Cal. Rptr. 3d 795 , 803 (Cal. Ct. App. 2010); accord Am. Honda Motor Co. v. Superior Court, 199 Cal. App. 4th 1367 , 132 Cal. Rptr. 3d 91 , 101 (Cal. Ct. App. 2011); Kaldenbach v. Mut. of Omaha Life Ins. Co., 178 Cal. App. 4th 830 , 100 Cal. Rptr. 3d 637 , 652 (Cal. Ct. App. 2009). The district court rejected Electrolux's argument because it concluded that the class members were exposed to uniform business practices.
The district court misunderstood the plaintiffs' complaint. Brown alleged that Electrolux engaged in unfair competition by omitting essential information in its advertisements. The only advertisements that Brown identified were on Frigidaire's website, but he made no effort to prove that any member of the California Class visited the website before purchasing a washing machine. Brown in fact admitted that he never saw any advertisements from Frigidaire. Because the class members were not exposed to a uniform misrepresentation, the claim under the California Unfair Competition Law is unsuitable for class treatment. See Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880 , 883 (5th Cir. 1973); Mazza v. Am. Honda Motor Co., 666 F.3d 581 , 595 (9th Cir. 2012).

The Texas Deceptive Trade Practices—Consumer Protection Act prohibits "[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce." Tex. Bus. & Com. Code Ann. § 17.46(a) . To recover under the Act, a plaintiff must prove that he "relied on" the defendant's conduct to his detriment. Id.§ 17.50(a)(1) (B). This reliance element requires that the plaintiff "actually did rely" on the defendant's statement or omission, not that the defendant "wanted purchasers to rely on its advertisements and other representations." Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675 , 694 (Tex. 2002).  It appears that no Texas court has ever certified a class action under the Texas Deceptive Trade Practices—Consumer Protection Act, see Tex. S. Rentals, Inc. v. Gomez, 267 S.W.3d 228 , 237 (Tex. App. 2008). That a plaintiff could prove reliance on a class-wide basis is "a near-impossibility," according to the Texas Court of Appeals. Id . (quoting Fid. & Guar. Life Ins. Co. v. Pina, 165 S.W.3d 416 , 423 (Tex. App. 2005)).  The district court certified a class anyway, and it erred.  The court cannot presume that the class members relied on any uniform misrepresentation. The court could have no inkling whether the class members saw any advertisements from Frigidaire, much less uniform advertisements, before they purchased their washing machines. This means that their claim under the Texas Deceptive Trade Practices-Consumer Protection Act cannot proceed as a class action. See Wal-Mart, 131 S. Ct. at 2552 n.6; Sandwich Chef of Tex, Inc. v. Reliance Nat. Indem. Ins. Co., 319 F.3d 205, 219 (5th Cir. 2003); In re Clorox Consumer Litig., 301 F.R.D. 436, 446 (N.D. Cal. 2014).

Electrolux next argued that the district court prematurely certified the warranty claims because it did not first resolve several questions of state law that were relevant to predominance. That is, the district court could not determine predominance without first deciding whether California and Texas law require pre-suit notice, an opportunity to cure, and manifestation of the defect. The court of appeals agreed. A district court must decide all questions of fact and law that bear on the propriety of class certification. For example, a question of state law bears on predominance if, answered one way, an element or defense will require individual proof but, answered another way, the element or defense can be proved on a class-wide basis. Because each requirement of Rule 23 must be met, a district court errs as a matter of law when it fails to resolve a genuine legal or factual dispute relevant to determining the requirements.  

The questions of state law that Electrolux asked the district court to resolve—whether the plaintiffs must prove pre-suit notice, an opportunity to cure, and manifestation of the defect—bear on predominance. If California and Texas law do not excuse pre-suit notice and an opportunity to cure when the defendant had prior knowledge of the design defect, as the district court speculated, then each class member will need to prove that he gave Electrolux pre-suit notice and an opportunity to cure. This showing could require individual proof.  And if California and Texas law require the defect to manifest, then each class member will need to prove that his washing machine actually grew mildew during the warranty period. This showing could also require individual proof. See Gen. Motors Corp. v. Garza, 179 S.W.3d 76 , 82-84 (Tex. App. 2005). Because the answers to these preliminary questions of California and Texas law could affect whether Rule 23(b)(3) is satisfied, the district court had a duty to resolve them.What matters to class certification is not the raising of common 'questions'—even in droves—but, rather the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation. Wal-Mart, 131 S. Ct. at 2551.  Answering the questions whether California and Texas law require pre-suit notice, an opportunity to cure, and manifestation of the defect would not resolve issues that are "central to the validity" of the plaintiffs' warranty claims. Because the district court punted these questions instead of answering them, it abused its discretion.

Finally, on damages, even if individual issues regarding damages do not always defeat predominance in and of themselves, individual damages defeat predominance if computing them will be so complex, fact-specific, and difficult that the burden on the court system would be simply intolerable. Klay, 382 F.3d at 1260.  Furthermore, individual damages defeat predominance when they are accompanied by "significant individualized questions going to liability." Id. (citing Sikes v. Teleline, Inc., 281 F.3d 1350 , 1366 (11th Cir. 2002). The court of appeals left it to the district court on remand to decide whether the latter rule was satisfied here.
 

Federal Court Rejects Tea Class Action

A federal court in California has rejected a proposed class action in a case challenging claims on tea labels. See Alex Khasin et al. v. R.C. Bigelow Inc., No. 4:12-cv-02204 (N.D. Calif. 3/29/16),

Plaintiff Khasin sought certification of a class of all persons in California who purchased for household use one or more of several green tea products manufactured and sold by Bigelow since May 2, 2008 (a companion case covered black tea products).  

Plaintiff alleged that the front of the Green Tea Products’ packaging bore the statement, “Healthy Antioxidants,” and the back panel included the statement, “Mother Nature gave us a wonderful gift when she packed powerful antioxidants into green tea." He claimed these food labeling practices were unlawful because they were deceptive and misleading to consumers. Khasin allegedly purchased three of the Green Tea Products: Green Tea, Green Tea with Lemon, and Green Tea Naturally Decaffeinated. He allegedly read and “reasonably relied” on “the antioxidant, nutrient content and health labeling claims including the ‘healthy antioxidants,’ and ‘packed with powerful antioxidants’ claims and based and justified the decision to purchase [Bigelow’s] products in substantial part on [Bigelow’s] package labeling including the antioxidant, nutrient content and health labeling claims.” Had they not been misbranded, he would not have bought the products, or paid a “premium” for them.

Plaintiff sought class certification under Rule 23 (b)(3). At class certification, plaintiff must present a likely method for determining class damages, though it is not necessary to show that his method will work with certainty at this time. Chavez v. Blue Sky Nat. Beverage Co., 268 F.R.D. 365, 379 (N.D. Cal. 2010).  Khasin offerred three damages models: (i) a restitution calculation; (ii) statutory damages; and (iii) a nominal alternative. None, said the court, had any merit.

Khasin’s restitution calculation essentially amounted to damages totaling the full retail price of the tea. Plaintiff purportedly based his calculation on a formulation that the proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received, not the full purchase price or all profits. See Brazil v. Dole Packaged Foods, LLC, No. 12-cv-01831-LHK, 2014 WL 5794873, at *5 (N.D. Cal. Nov. 6, 2014) (finding that “[t]he proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received”); Ivie v. Kraft Foods Glob., Inc., No. 12-cv-02554-RMW, 2015 WL 183910, at *2 (N.D. Cal. Jan. 14, 2015) (concluding that “restitutionary damages [in a mislabeling case should] be the price premium attributable to the offending labels, and no more”).  Khasin contended that the “product as labeled” is the retail purchase price. And that because the product is legally worthless, the “product as received” has a value of $0.  

But this “full refund” method of calculating restitution has been repeatedly rejected by the courts. See, e.g., See Jones v. ConAgra Foods, Inc., No. 12-cv-01633-CRB, 2014 WL 2702726, at *23 (N.D. Cal. June 13, 2014) (rejecting the “legally worthless” damages model); Werdebaugh v. Blue Diamond Growers, No. 12-cv-2724-LHK, 2014 WL 2191901, at *22 (N.D. Cal. May 23, 2014) (“[F]ull refund model is deficient because it is based on the assumption that consumers receive no benefit whatsoever from purchasing the accused products.”); Lanovaz v. Twinings N. Am., Inc., No. 12-cv-02646-RMW, 2014 WL 1652338, at *6 (N.D. Cal. Apr. 24, 2014) (rejecting the “full refund” model as an appropriate measure of restitution). Attributing a value of $0 to the Green Tea Products assumes that every consumer had gained no benefit in the form of enjoyment, nutrition, caffeine intake, or hydration from consuming the teas. This is implausible.  In order to comply with Rule 23(b)(3) requirements, the damages calculation must contemplate “the production of evidence that attaches a dollar value to the consumer impact or advantage caused by the unlawful business practices.” Lanovaz, 2014 WL 1652338, at *6 (internal quotation marks and citations omitted). Accordingly, Khasin needed to present a damages model that can likely determine the price premium attributable only to Bigelow’s use of the allegedly misleading claim. The proposed methodology did not do so. 


Alternatively, plaintiff sought statutory damages under the California Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750, et seq., and/or nominal damages. Mot. at 18. Under the CLRA, any consumer who suffers damage may bring an action to recover, among other things, “[a]ctual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000).” Cal. Civ. Code § 1780(a)(1). That language sets the minimum for a total award of damages in a class action at $1,000 but does not provide for an automatic award. A plaintiff must still prove “actual damages” in order to be entitled to the $1,000 minimum award. Therefore relief under the CLRA is specifically limited to those who suffer damage, making causation a necessary element of proof. Here, Khasin failed to provide a viable theory for calculating damages under the CLRA that would be tied to his theory of liability. Plaintiff also sought nominal damages, but could not cite a single case demonstrating that nominal damages are available under his causes of action.

Alternatively, plaintiff sought Rule 23 (b)(2) certification to enjoin the defendant from continuing to mislabel the subject products. However, plaintiff had not demonstrated standing to seek injunctive relief. First, Khasin did not plausibly allege an intent to purchase Bigelow products in the future. In a class action, “[u]nless the named plaintiffs are themselves entitled to seek injunctive relief, they may not represent a class seeking that relief.” Hodgers-Durgin v. De La Vina, 199 F.3d 1037, 1045 (9th Cir. 1999). Khasin testified that he has not purchased any of the Green Tea Products since the commencement of this lawsuit.  A plaintiff may not manufacture standing for injunctive relief simply by expressing an intent to purchase the challenged product in the future. See Rahman, 2014 WL 5282106, at *6. Other courts considering these “conditional” declarations have found them unavailing. See In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 980 (C.D. Cal. 2015) (noting that “[ot]her courts have questioned whether this type of statement demonstrates there is a real and immediate threat of future injury.”). Pursuant to Article III’s standing requirements, a plaintiff must present a “sufficient likelihood” that he will be injured. City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). The alleged injury cannot be “conjectural” or “hypothetical.” Id. at 102.

Second, said the court, standing for injunctive relief in this case requires more than simply declaring an intent to purchase the Green Tea Products in the future. Even if Khasin were to satisfactorily demonstrate a future intent to purchase the products, he had not established a likelihood of suffering the same harm he alleged. See Morgan v. Wallaby Yogurt Co., Inc., No. 13-cv-00296-WHO, 2014 WL 1017879, at *6 (N.D. Cal. Mar. 13, 2014) (“Plaintiffs must be must be threatened by the same alleged harm in order to seek injunctive relief, even if on behalf of a class of consumers.”). Plaintiffs who were previously allegedly misled by deceptive food labels and now claim to be better informed, lack standing for injunctive relief because there is no danger that they will be misled in the future by that conduct. See Ham v. Hain Celestial Grp., Inc., No. 14-cv-02044-WHO, 2014 WL 4965959, at *6 (N.D. Cal. Oct. 3, 2014) (“Because [plaintiff] is now aware that [defendant’s] products [are mislabeled], she cannot allege that she would be fraudulently induced to purchase the products in the future.”).
This, concluded the court, plaintiff lacked standing to pursue injunctive relief and failed to satisfy the requirements of Rule 23(b)(2).

 

Ninth Circuit Upholds Rejection of Lip Balm Class

The Ninth Circuit last week rejected a putative class action accusing a defendant of deceiving consumers about the quantity of product accessible in a lip balm tube.  See EBNER V. FRESH, INC., No. Case: 13-56644 (9th Cir. 03/17/2016).

Plaintiff alleged that cosmetics and skin care products manufacturer Fresh, Inc. deceived consumers about the quantity of lip balm in its Sugar Lip Treatment product line. Although Sugar’s label accurately indicates the net weight of included lip product, the tube design uses a screw mechanism that allegedly allows only most of the product to advance up the tube. A plastic stop device allegedly prevents the remaining portion from advancing past the tube opening. Each Sugar tube contains a weighted metallic bottom and is wrapped in oversized packaging. Plaintiff brought a putative consumer class action against Fresh, alleging that Fresh’s label, tube design, and packaging were deceptive and misleading. The complaint asserted four state-law causes of action: (1) violation of California’s False Advertising Law (“FAL”), (2) violation of the California Consumers Legal Remedies Act (“CLRA”),  (3) violation of California’s UnfairCompetition Law (“UCL”), (4) unjust enrichment. The district court granted Fresh’s Rule 12(b)(6) motion to dismiss Plaintiff’s First Amended Complaint with prejudice. And the Ninth Circuit affirmed on appeal.

The district court divided plaintiff’s claims into two categories: (1) claims based on Sugar’s labeling; and
(2) claims based on Sugar’s tube design and packaging. In dismissing the label-based claims, the district court relied, inter alia, on California’s safe harbor doctrine.  As for the design and packaging claims, the district court concluded that neither Sugar’s tube design nor packaging were deceptive or misleading to the reasonable consumer.

The UCL, CLRA, and FAL, under which plaintiff’s deceptive labeling claims were brought, all prohibit unlawful,unfair, or fraudulent business practices. In California, unfair competition claims are subject to the safe harbor doctrine, which precludes plaintiffs from bringing claims based on “actions the Legislature permits.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 542 (Cal. 1999). To fall within the safe harbor, the challenged conduct must be affirmatively permitted by statute – the doctrine does not immunize from liability conduct that is merely not unlawful. Plaintiff here alleged that, although the Sugar label accurately states the net weight of lip product in the tube, only 75% of that product is reasonably accessible. To the extent this challenged the Sugar label’s accurate net weight statement, this claim was barred by the safe harbor doctrine. Both federal and California law affirmatively require cosmetics manufacturers to include an accurate statement of the net weight of the cosmetic product. 21 C.F.R. § 701.13(g); Cal. Bus. & Prof. Code § 12603(b).  Because Fresh complied with federal and state law requiring a net weight statement on Sugar’s label, this conduct cannot form the basis of an unfair competition claim. 

Plaintiff’s other label claim was based on Fresh’s omission of any supplemental or clarifying statement about product accessibility. This omission, plaintiff argued, renders the existing net weight label deceptive and misleading. Although the panel concluded that neither the safe harbor doctrine nor FDCA preemption barred this supplemental statement claim, this label claim ultimately failed anyway because plaintiff could not  plausibly allege that the omission of supplemental disclosures about product weight rendered Sugar’s label “false or misleading” to the reasonable consumer. Plaintiff’s claims under the California consumer protection statutes are governed by the “reasonable
consumer” test. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). Under this standard, a plaintiff must “show that ‘members of the public are likely to be deceived.’” Id.; Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995). This requires more than a mere possibility that Sugar’s label “might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner.” Lavie v. Procter & Gamble Co., 129 Cal. Rptr. 2d 486, 495 (Ct. App. 2003). Rather, the reasonable consumer standard requires a probability “that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Id.

Plaintiff’s claim that the reasonable consumer would be deceived as to the amount of lip product in a tube of Sugar was found not plausible. It is undisputed that the Sugar label discloses the correct weight of included lip product. Dispenser tubes that use a screw mechanism to push up a solid bullet of lip product are commonplace in the market. The reasonable consumer understands the general mechanics of these dispenser tubes and further understands that some product may be left in the tube to anchor the bullet in place.  The complaint admitted that even after the plastic stop device prevents more product from advancing up the tube, the consumer can still see the surface of the remaining bullet. Although the consumer may not know precisely how much product remains, the consumer’s knowledge that some additional product lies below the tube’s opening is sufficient to dispel any deception; at that point, it is up to the consumer to decide whether it is worth the effort to extract any remaining product, such as with a finger or a small tool. A rational consumer could not simply assume that the tube contained no further product when he or she can plainly see there is remaining material. And so the Sugar tube is not false and deceptive merely because the remaining product quantity may be “‘unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons. . .’” that may purchase the product. Davis, 691 F.3d at 1162 (quoting Lavie, 129 Cal. Rptr. 2d at 494).

Because plaintiff had not alleged facts to state a plausible claim that the Sugar label is false, deceptive, or misleading, the district court did not err in dismissing the label-based claims. 

While packaging can sometimes form part of an FAL claim, the FAL claim ultimately failed because plaintiff had not alleged a plausible claim for relief. Sugar sells for approximately $22.50 to $25.00 a unit. When viewed in the proper context of the high-end cosmetics market, Sugar’s elaborate packaging and the weighty feel of the tube is commonplace and even expected by a significant portion of Fresh’s “targeted consumers.”  Because of the widespread nature of this practice, no reasonable consumer expects the weight or overall size of the packaging to reflect directly the quantity of usable product contained therein. Because the plaintiff could not plausibly allege that Sugar’s design and packaging is deceptive, the district court did not err in dismissing the packaging-based claims.

Finally, plaintiff claimed that the Sugar tube violated a prohibition on containers that contain non-functional slack fill. Cal. Bus. & Prof. Code § 12606(b). Slack fill is defined as “the difference between the actual capacity of a container and the volume of product contained therein.” Nonfunctional slack fill is the empty space in a package that is filled to substantially less than its capacity for reasons other than” one or more of the enumerated reasons listed in the statute. Here, the complaint was not about empty space but about product that wasn't automatically accessible.  This cannot constitute “slack fill”
because under the plain language of the statute, slack fill means the portion of the container without product, i.e., empty space. 

Dismissal affirmed.

FDA Settles Amarin First Amendment Challenge

Amarin Pharma and the FDA recently announced a widely expected settlement of First Amendment litigation over restrictions on the company's promotion of its Vascepa product.

Readers may recall that this was one of several recent challenges to the FDA's attempt to restrict off-label promotion of prescription products, even if that speech is truthful and not misleading. Several trends have combined to undercut this overreach by FDA. A pharmaceutical representative's promotion of an FDA-approved drug's off-label use is speech. And “speech in aid of pharmaceutical marketing ... is a form of expression protected by the Free Speech Clause of the First Amendment.”  Sorrell v. IMS Health, Inc., 131 S.Ct. 2653, 2659 (2011).  Then, in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012), the court vacated a conviction for conspiracy to sell a misbranded drug, recognizing that to criminalize the simple promotion of a drug's off-label use by pharmaceutical manufacturers would run afoul of the First Amendment.  Off-label drug usage is not unlawful, and the FDA's drug approval process generally contemplates that approved drugs will be used in off-label ways.  So, it does not follow that prohibiting the truthful promotion of off-label drug usage would directly further the government's stated goals of preserving the efficacy of FDA's drug approval process and reducing patient exposure to unsafe and ineffective drugs. This ruling was not limited to a subset of truthful promotional speech, such as statements responding to doctors’ queries or statements by non-sales personnel.
 

In Amarin Pharma, Inc. v. FDA, No. 1:15-cv-03588 (S.D.N.Y. Aug. 7, 2015), the issues surrounded proposed statements by the company concerning its Vascepa®, an omega-3 fatty acid, approved in 2012 as an adjunct to diet to reduce triglyceride levels in adults with severe hypertriglyceridemia. The FDA had entered into an SPA (Special Protocol Assessment) with the company for an expanded use. Amarin believed it had satisfied all of FDA’s requirements to obtain approval of Vascepa® for persistently high triglycerides pursuant to the SPA.  But FDA warned that any effort by Amarin to market Vascepa® for the proposed supplemental use could constitute misbranding under FDCA.

The company sued, arguing that the threat of prosecution for misbranding has a chilling effect on commercial speech protected by the First Amendment. It sought an injunction prohibiting the FDA from bringing a misbranding action for Amarin’s truthful and non-misleading statements regarding Vascepa® directly to healthcare professionals—not in direct-to-consumer advertising.  Specifically the company wanted to affirm its right to disseminate study results; report supportive but not conclusive research shows that their product may reduce the risk of coronary heart disease; and distribute reprints of peer-reviewed scientific publications relevant to the reduction of the risk of coronary heart disease.  The company was willing to do this along with “contemporaneous disclosures” to ensure that the messages Amarin communicated to doctors concerning the use of Vascepa® in patients with persistently high triglycerides was not misleading.  The FDA did not agree, and attempted to distinguish Caronia as fact-bound, turning on the particular jury instructions given in that trial.

Judge Paul A. Engelmayer rejected FDA’s interpretation of Caronia: the FDA may not bring such an action based on truthful promotional speech alone, consistent with the First Amendment.  Misbranding is not analogous to speech crimes of jury tampering, blackmail, or insider trading. “Where the speech at issue consists of truthful and non-misleading speech promoting the off-label use of an FDA-approved drug, such speech, under Caronia, cannot be the act upon which an action for misbranding is based.”  

The court then evaluated and ruled on each of Amarin’s proposed off-label statements concerning Vascepa® along with FDA’s responses.  The “agreed-upon statements and disclosures” (e.g., statements concerning the results of the key study; statements, along with the proposed contemporaneous disclosures) were “based on current information, truthful and non-misleading.”
The “contested disclosures” such as “not-approved for” language were handled through a court-crafted, revised disclosure. The proposed cardiovascular disease claim, as revised during litigation, given its qualified phrasing and its acceptance elsewhere by the FDA, was found by the court to be presently truthful and non-misleading.

The court did mention some caveats: A manufacturer that leaves its sales force at liberty to communicate unscripted with doctors about off-label use of an approved drug invites a misbranding action if false or misleading (e.g., one-sided or incomplete) representations result. Caronia leaves the FDA free to act against such lapses. The dynamic nature of science and medicine is that knowledge is ever-advancing. A statement that is fair and balanced today may become incomplete or otherwise misleading in the future as new studies are done and new data is acquired. So, said the court, Amarin bears the responsibility, going forward, of assuring that its communications to doctors regarding off-label use of Vascepa® remain truthful and non-misleading.

Rather than appeal, the government worked towards a settlement.  Under its terms, the FDA agrees to be bound by the court's conclusion that Amarin may engage in truthful and nonmisleading speech promoting the off-label use of the drug.  The company committed t ensure that it stays current on evolving science and updates its promotional statements accordingly.  The settlement agreement also provides for a procedure by which the FDA will give advance review to as many as two promotional communications annually for off-label uses of Vascepa, along with a timetable and process for resolving any concerns that the FDA may have about those new communications.

 

A copy of the settlement here.

 

 

Defendant Seeks Review of Trial by Formula Decision

Defendant Google has filed a powerful cert petition, asking the U.S. Supreme Court to review a controversial Ninth Circuit decision reviving a putative class action. See Pulaski & Middleman LLC, et al. v. Google Inc., No. 15-1101 (U.S. petition filed 3/1/16).

 

This case presents the issue whether plaintiffs may use a formula that relies on a uniform measure of harm derived from the average experience of all class members as common proof of damages.

Google AdWords is an online advertising service. During the class period, AdWords allowed advertisers to place ads alongside Google search results or on other webpages that were part of Google’s advertising network. The ads generally were matched to Internet users based on the search queries the users entered on Google (or other search engines) or the subject-matter of the websites they viewed. The ads typically were short strings of text with hyperlinks that, when clicked, took the user to the advertiser’s website.  Advertisers paid Google each time an Internet user clicked on an advertisement link. Plaintiffs in this suit all purchased advertising services from Google AdWords. They alleged that Google misled them in violation of California law by showing their ads on two types of websites: “parked domains” and “error pages.”

 

 

The plaintiffs moved for class certification, and the district court denied this motion for a Rule 23(b)(3) class. The court found that while the issue whether Google’s alleged omissions were misleading to a reasonable AdWords customer could be seen as common, the individual nature of the restitutionary relief sought predominated. Plaintiffs’ theory rested on what AdWords customers would have paid but forthe alleged misstatements or omissions.  Yet, any effort to determine what advertisers would have paid requires a complex and highly individualized analysis of advertiser behavior for each particular ad that was placed.

A panel of the Ninth Circuit reversed, concluding that the predominance requirement was satisfied. In
reaching that conclusion, the court of appeals concluded  that any differences in calculating
the amount of restitution could not predominate. That is because, the court declared, damage calculations alone cannot defeat certification.  Applying that categorical rule, the court did not even consider whether, in the particular circumstances of this case, there were any individual issues of damages—much less whether those issues overwhelmed questions common to the class. 

The Ninth Circuit embraced a general, one-size-fits-all formula to resolve damages for the whole class, because it did “not turn on individual circumstances.”  But the Supreme Court has expressly disapproved just that “novel project” of computing class damages by a formula “without further individualized proceedings.” Wal-Mart, 131 S. Ct. at 2561. Wal-Mart’s holding on that point directly follows from the Rules Enabling Act, 28 U.S.C. § 2071,  which “forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right.’ ” Wal-Mart, 131 S. Ct. at 2561 (quoting 28 U.S.C. § 2072(b)). “Trial by Formula” forecloses individual defenses and sets damages for plaintiffs at amounts divorced from their particular circumstances, thereby giving plaintiffs greater substantive rights than they would have in individual proceedings. 

Consistent with the Rules Enabling Act, the Second, Fourth, Fifth, and Seventh Circuits have all
held that damages in class actions cannot be computed using an abstract analysis of averages. E.g., Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 343 (4th Cir. 1998). The Ninth
Circuit’s decision erroneously joins the minority viewof the Eighth and Tenth Circuits, contrary to WalMart’s instruction. 


In short, argues the petition, the Ninth Circuit’s decision conflicts with Comcast and Wal-Mart, and it creates and deepens divisions among the circuits regarding class certification standards. This is actually not the only case raising this issue with the Court.  One to watch.