Class of Coffee Purchasers Rejected

Let's continue on our recent focus on some interesting class action decisions. A federal court recently rejected a proposed class of coffee product purchasers.  See McManus v. Sturm Foods Inc., No. 3:11-cv-00565 (S.D. Ill., 8/26/13).

Plaintiffs claimed that defendants violated the consumer protection statutes and unjust enrichment laws of the eight states with regard to their Grove Square Coffee single serving coffee product.  Per the amended complaint, defendants allegedly misrepresented and omitted the true nature of Grove Square Coffee products by indicating the product contained fresh ground coffee and a filter rather than “instant” or “soluble” coffee.

In considering a motion for class certification, the court looked to the implicit, foundational prerequisites. A court must first ensure that the class is sufficiently “defined.” Jamie S. v. Milwaukee Public Schools, 688 F.3d. 481, 493 (7th Cir. 2012) (“a class must be sufficiently definite"). The class should be “ascertainable,” which it is if the court can  determine membership with objective criteria. A class is, on the other hand, overbroad if it sweeps in a great number of members who “for some reason could not have been harmed by the defendant’s allegedly unlawful conduct.” Messner, 669 F.3d 802 at 824; Kohen v. Pacific Inv. Management Co. LLC, 571 F.3d 672, 677 ( 7th Cir. 2009) (“a class should not be certified if it is apparent that it contains a great many persons who have suffered no injury at the hands of the defendant.”); Oshana v. Coca-Cola Co., 472 F.3d 506, 514 (7th Cir. 2006) (denying class certification when “[c]ountless members of Oshana’s putative class could not show any damage, let alone damage proximately caused by the alleged deception.”). A class is overbroad if it sweeps in many members who could not have been harmed at all: This distinction is critical for class certification purposes. If a proposed class consists largely (or entirely, for that matter) of members who are ultimately shown to have suffered no harm, that may not mean that the class was improperly certified but only that the class failed to meet its burden of proof on the merits. If, however, a class is defined so broadly as to include a great number of members who for some reason could not have been harmed by the defendant’s allegedly unlawful conduct, the class is defined too broadly to permit certification.  A class cannot, then, include numerous people who have no claim at all, observed the court.

The court here found that under any of the relevant the state consumer protection laws requiring causation or actual reliance, the plaintiffs’ class definitions were overbroad. The class definition included all individuals who purchased a Grove Square Coffee product. This definition necessarily includes purchasers who knew, or who were indifferent to the product’s alleged insoluble coffee content. For those purchasers, plaintiffs cannot prove causation, reliance, or actual injury from defendants’ alleged misrepresentation. For this reason, plaintiffs’ claims under Alabama, New York, New Jersey, North Carolina, Illinois, and South Carolina were overbroad and improper for class certification.

Turning to the remaining states, the court engaged in a specific analysis of the state law.  For example, to the extent a state requires plaintiffs to prove an actual loss, but would allow a class-wide presumption of actual loss if the defendant’s alleged misrepresentations were material and made to the entire class, the definition still ran into problems,  In California, said the court, an inference of reliance may be established on a class wide basis with a showing of materiality.  Materiality is objective and exists if a reasonable person would attach importance to the misrepresentation’s existence or nonexistence in determining his choice of action in the transaction in question. However, the inference of reliance is only appropriate if all purported class members were exposed to the alleged misleading advertising. Plaintiffs’ proposed class definition here included individuals who were not exposed to
defendants’ alleged misrepresentation; therefore a court could not presume reliance. In 2011, Sturm Foods allegedly changed its label to include the word “instant.” Class members that were exposed to the packaging after this date (nearly 4 million dollars of gross sales; a vast majority of the overall sales during the class period) were not exposed to what plaintiffs claim was defendants’ primary deception. 

Moreover, the record indicates that extensive sales occurred online, and the class as defined by plaintiffs included these online purchasers. Consumers who purchased the product online without ever seeing the packaging or product placement could not have been exposed to the alleged misrepresentation prior to purchase.

Plaintiffs’ amended complaint thus did not contain sufficient evidence of sales such that any presumption of exposure was appropriate. Materiality cannot be presumed and plaintiffs cannot adequately allege actual injury for the California class.

Overall, the class potentially included a great many individuals who bought Grove Square Coffee products because of, or in spite of, knowing that it contained instant coffee;  thus, the class included a great number of individuals who could not prove causation or an ascertainable loss, as required in various states. These individuals suffered no lost value or incurred no out of pocket expenses as a result of the alleged misrepresentation. Since this class definition potentially swept in a great number of individuals that could not show harm resulting from defendant’s conduct, the class definition was fatally overbroad.

Was there any way to cure the deficiency? It must be administratively feasible for the court to determine whether a particular individual is a member of the proposed class. Clay v. American Tobacco Co., 188 F.R.D. 483, 490 (S.D. Ill. 1999). And the administrative burden of using subjective membership criteria obviates the judicial efficiency that is the fundamental motive for class actions. See Milwaukee Public Schools, 668 F.3d 481, 496 (7th Cir. 2012) (denying class certification for indefiniteness when “identifying disabled students who might be eligible for special-education services is a complex, highly individualized task, and cannot be reduced to the application of a set of simple, objective criteria.”); Simer v. Rios, 661 F.2d 655, 669 (7th Cir. 1981) (noting that determining whether potential class members “knew of the existence of the regulation and were
discouraged from applying for [state heating] assistance . . . would be a burden on the court and require a large expenditure of valuable court time.”); Alliance, 565 F.2d at 978 (“In those cases in which class certification has been denied on account of indefiniteness, the primary defect in the class definition has been that membership in the class was contingent on the state of mind of the prospective class members.”).

Here, the only way to avoid over-inclusiveness would have been to impose criteria limiting class
membership to individuals properly captured by the underlying claim. However, any such criteria would necessarily be subjective. Limiting class membership to individuals that were actually exposed to the deceptive packaging or advertisement would be largely subjective and thus improper. See In re Yasmin, 2012 WL 865041, at *16. This court saw no way to limit class membership without an impermissible plaintiff-by-plaintiff subjective inquiry. Plaintiff’s proposed class was inadequate.

Another useful recent decision as courts place proper focus on the implicit requirements of Rule 23 and the no-longer-pro-forma issues of class definition.

Class certification denied.

Seventh Circuit Affirms Ruling Despite Comcast

The Seventh Circuit reaffirmed class certification yesterday in a case involving front loading washers, despite the U.S. Supreme Court's remand of the matter in light of Comcast Corp. v. Behrend. See Butler v. Sears, Roebuck & Co., No. 11-8029 (7th Cir. 8/22/13). 

Readers will recall that earlier this year, the Supreme Court vacated and remanded the Seventh Circuit’s decision in Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012) for further consideration in light of Comcast  Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Seventh Circuit had certified two class actions of washer consumers despite multiple significant differences among class members, including admitted variations in laundry habits; differences in remedial efforts; variation in service performed on the machines. And despite the fact that a reported 97% of the class had never complained of a problem or suffered the alleged defect..

On remand, the court of appeals affirmed its earlier ruling that the predominance requirement was satisfied; the court reasoned it supposedly "would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages.”  If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification, the court concluded.

The Seventh Circuit in essence found that Rule 23(c)(4) permits a class action limited to determining liability on a class-wide basis, with separate hearings to determine the damages of individual class members or groups of class members.

Of course, the Supreme Court did not require that all class members' damages be identical -- a straw man from the court of appeals -- but clearly disapproved of the traditional approach that damages were not part of the predominance requirement.  And the court of appeals' explicit reference to settlement as an equally valid and available mechanism for resolving individual damages issues fundamentally illustrates the error of its opinion.  A class action cannot be certified under Rule 23, under the Rules Enabling Act, or basic notions of due process, on the basis that settlement may resolve predominating individual issues.  That is the essence of blackmail class action settlements. A class has to be certified on the premise that it will not settle, that it will go trial, and that handling all of the individual issues can properly and efficiently take place in a trial.  The Seventh Circuit's approach to the Rule 23(c)(4) issue certification is also a dangerous “end-run” around Rule 23(b)(3) and the predominance requirement. Nor can this approach be reconciled with Comcast or Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011).

This case, along with Glazer v. Whirlpool Corp., 2013 WL 3746205 (6th Cir. July 18, 2013), are likely headed back to the Supreme Court.  In the meantime, defendants will need to focus the courts on issues of manageability and trial plan, and make clear they intend to try each and every mini-trial, exercising their full due process rights, if the courts actually certify these types of cases.

Third Circuit Issues Opinion on Ascertainability

We have posted before about the potential importance of the implicit requirement under Rule 23 that a class be ascertainable under the definition proposed by plaintiffs.  Earlier this week, the Third Circuit vacated class certification of a class of WeightSmart supplements purchasers on the basis of ascertainability.  See Carrera v. Bayer Corp., No. 12-2621 (3d Cir. 8/21/13).


Last year the Third Circuit had decided Marcus v. BMW of North America, LLC, in which it held “[i]f class members are impossible to identify without extensive and individualized fact-finding or mini-trials, then a class action is inappropriate.” 687 F.3d 583, 593 (3d Cir. 2012). The court explained that if class members cannot be ascertained from a defendant's records, there must be a reliable, administratively feasible alternative; the court cautioned against approving a method that would amount to no more than ascertaining by potential class members' say so. Id. at 594. A plaintiff does not satisfy the ascertainability requirement if individualized fact-finding or mini-trials will be required to prove class membership. Id. at 593. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual factual inquiry.

The court of appeals explained that the ascertainability requirement serves several important objectives. First, it eliminates serious administrative burdens that are incongruous with the efficiencies expected in a class action by insisting on the easy identification of class members. Second, it protects absent class members by facilitating the best notice practicable under Rule 23(c)(2) in a Rule 23(b)(3) action. Third, it protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable. If a class cannot be ascertained in an economical and administratively feasible manner, any significant benefits of a class action are lost.

Accordingly, a trial court should ensure that class members can be identified without extensive and individualized fact-finding or mini-trials, a determination which must be made at the class certification stage.  Class ascertainability is an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3). Marcus, 687 F.3d at 592-93. There is „no reason to doubt that the “rigorous analysis” requirement for trial courts considering class certification applies with equal force to all Rule 23 requirements. Accordingly, said the court, a plaintiff must show, by a preponderance of the evidence, that the class is currently and readily ascertainable based on objective criteria, and a trial court must undertake a rigorous analysis of the evidence to determine if the standard is met.

Of great interest to our readers is the court of appeal's analysis of the due process implications of ascertainability. In this case, the ascertainability question was whether each class member purchased WeightSmart in Florida. If this were an individual claim, a plaintiff would have to prove at trial that he purchased WeightSmart. A defendant in a class action has a due process right to raise individual challenges and defenses to claims, and a class action cannot be certified in a way that eviscerates this right or masks individual issues. See McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 231-32 (2d Cir. 2008) (rejecting a “fluid recovery” method of determining individual damages, in which aggregate damages would be based on estimates of the number of defrauded class members and their average loss), abrogated on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008); see also Dukes, 131 S. Ct. at 2561 (rejecting a method of class certification in which a sample set of class members would be used to extrapolate average damages). A defendant has a similar, if not the same, due process right to challenge the proof used to demonstrate class membership as it does to challenge the other elements of a plaintiff's claim. To force a defendant to accept as true the absent class members' declarations that they are members of the class, without further indicia of reliability, would have serious due process implications.  Ascertainability thus helps provide a measure of due process by requiring that a defendant be able to test the reliability of the evidence submitted to prove class membership.


Here, Carrera advanced two ways to ascertain the class: first, by retailer records of online sales and sales made with store loyalty or rewards cards; second, by affidavits of class members, attesting they purchased WeightSmart and stating the amount they purchased (despite the fact that in named plaintiff's own deposition testimony, he failed to remember when he purchased WeightSmart and confused it with WeightSmart Advanced and other generic or similar products, none of which are part of this litigation). The Third Circuit concluded this evidence did not satisfy the ascertainability requirement.  There was no evidence that a single purchaser of WeightSmart could be identified using records of customer membership cards or records of online sales. There was no evidence that retailers even have records for the relevant period.  As to the second, this argument failed because it did not address a core concern of ascertainability: that a defendant must be able to challenge class membership. 

Another key feature for our readers relates to plaintiff's claim that because he was proceeding under a state consumer fraud act (Florida's FDUTPA) which allegedly did not require individual proof of reliance, the total amount of damages that defendant would pay (the total sales in the state in the class period) did not change -- only which class member got what amount. Under Carrera's view, if fraudulent or inaccurate claims were paid out, the only harm was to other class members. But ascertainability protects absent class members as well as defendants, said the court, so Carrera's focus on defendant alone was misplaced. It would be unfair to absent class members if there was a significant likelihood their recovery will be diluted by fraudulent or inaccurate claims. In this case, there was the possibility that Carrera's proposed method for ascertaining the class via affidavits would dilute the recovery of true class members.  The defendant still had an interest in ensuring it pays only legitimate claims. If fraudulent or inaccurate claims materially reduce true class members' relief, these class members could argue the named plaintiff did not adequately represent them because he proceeded with the understanding that absent members may get less than full relief. When class members are not adequately represented by the named plaintiff, they potentially are not bound by the judgment.

Thus, the case could be an important precedent for defendants, especially those facing class actions asserting fraud allegations about products for which detailed, accurate receipts likely no longer exist.

Case remanded for further limited discovery on the issue, given the timing of Marcus.


 

D.C. Circuit Applies Comcast Guidance to Class Certification

Readers will recall our posts about Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), and the majority's ruing that Rule 23 requires proof that damages and injury are amenable to class treatment, and not overrun with individual issues, before a class properly can be certified.

A district court considering class certification must look at how damages will be tried and managed if a class is certified. Is it a mere mathematical exercise, or are there factual issues that vary by class members? And the district court must conduct a rigorous analysis of the class plaintiff's proposed method for computing damages allegedly on a class-wide basis (which often will require a Daubert analysis in many cases).

While it is unusual for a dissenting justice to read the dissent from the bench, in this case two justices did so. One wonders whether that emphasis on the intensity of the dissent is inconsistent with the content of the dissent, which tried to argue that the decision could be limited to its facts, nothing big happened here, nothing to look at, keep moving...  The plaintiffs’ bar has been desperate to convince the lower courts to adopt the dissenting view, but with limited success as district courts continue to rely on Comcast to deny class certification. E.g., Torres v. Nutrisystem Inc., 2013 U.S. Dist. LEXIS 66444 (C.D. Cal. Apr. 8, 2013).

Earlier this month the D.C. Circuit relied on the precedent in In re: Rail Freight Fuel Surcharge Antitrust Litigation – MDL No. 1869, No. 12-7085, 2013 U.S. App. LEXIS 16500 (D.C. Cir. Aug. 9, 2013), to confirm that plaintiffs must have a way to establish class-wide proof of damages and injury.

In In re: Rail Freight Fuel Surcharge, plaintiffs allegedly shipped products via rail and were required to pay rate-based fuel surcharges by several major freight railroads. The heyday of the rate-based fuel surcharge did not last. Eventually, the Surface Transportation Board (STB) put an end to the practice with respect to common carrier traffic within its regulatory authority. But plaintiffs alleged collusion and price fixing among the defendants in the meantime.  The district court granted class certification.

The plaintiffs’ case for certification hinged on two regression models prepared by their expert. The first of these, the “common factor model,” attempted to isolate the common determinants of the prices shippers paid to the defendants. The expert also constructed a “damages model,” which sought to quantify, in percentage terms, the overcharge due to conspiratorial conduct at various intervals over the class period.

On appeal, after a discussion on interlocutory appeal standards, the D. C. Circuit held that meeting the predominance requirement demanded more than common evidence the defendants colluded to raise fuel surcharge rates. The plaintiffs must also show that they can prove, through common evidence, that all class members were in fact injured by the alleged conspiracy.  On the damages prong, defendants argued that the expert's model purported to quantify the injury in fact to all class members attributable to the defendants’ collusive conduct. But the same methodology also detected injury where none could exist.  In Comcast, the Court held that indisputably the role of the district court is scrutinize such evidence before granting certification, even when doing so “requires inquiry into the merits of the claim.” 133 S. Ct. at 1433. If the proposed damages model cannot withstand this scrutiny then, that is not just a merits issue. Here, the expert's model was essential to the plaintiffs’ claim that they could offer common evidence of class-wide injury. See Fuel Surcharge II, 287 F.R.D. at 66. No damages model, no predominance, no class certification.

Moreover, the court of appeals noted that it is not enough to submit a questionable model whose unsubstantiated claims cannot be completely refuted through a priori analysis. Otherwise, “at the class-certification stage any method of measurement is acceptable so long as it can be applied class-wide, no matter how arbitrary the measurements may be.” Comcast, 133 S. Ct. at 1433.

Before Comcast v. Behrend, the case law was far more accommodating to class certification under Rule 23(b)(3), said the court of appeals. It is now clear, however, that Rule 23 not only authorizes a hard look at the soundness of statistical models that purport to show predominance—the rule commands it.  Mindful that the district court neither considered the damages model’s flaw in its certification decision nor had the benefit  of Comcast’s guidance, the court decided to vacate class certification and remand the case to the district court to afford it an opportunity to consider these issues in the first instance..

The case is useful beyond the antitrust world in its recognition that Comcast did make a difference in how lower courts are to treat the issue of predominance with respect to an analysis of injury and damages. Certification of a class without class-wide proof of both injury and damages is subject to reversal on the prong of predominance.

Recognition for Colleagues

If readers will permit a little bragging, I am excited to note that 44 Shook, Hardy & Bacon attorneys nationwide have been selected by their peers for inclusion in the 2014 edition of The Best Lawyers in America®.

The group includes my partners Walt Cofer (Product Liability Litigation – Defendants); Michelle Fujimoto (Product Liability – Defendants); Bill Geraghty (Product Liability Litigation – Defendants; and Tammy Webb (Product Liability Litigation – Defendants); as well as your humble blogger for Mass Tort Litigation/Class Actions – Defendants and the category of Product Liability Litigation – Defendants.

In addition six SHB partners in Kansas City have been named Best Lawyers® 2014 “Lawyers of the Year.”  That list includes Rob Adams for Personal Injury Litigation – Defendants.

Of course, all these kinds of honors stem from the valued clients who give us an opportunity to work on some of their most challenging matters.

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Consumer Fraud Class Claim Dismissed in Beverage Case

Readers have seen our warning about the trend in food and beverage claims attacking virtually every aspect of the product's label as a supposed consumer fraud act violation. A federal court earlier this month dismissed just such a proposed class action challenging the labeling on VitaRain Tropical Mango Vitamin Enhanced Water Beverage.  See Maple v. Costco Wholesale Corp., No. 12-5166 (E.D. Wash., 8/1/13).

Plaintiffs alleged in their amended complaint that one defendant manufactured and bottled a product known as VitaRain Vitamin Enhanced Water Beverage. VitaRain came in four flavors: Tropical Mango, Raspberry Green Tea, Kiwi Strawberry, and Dragonfruit. The product was marketed and distributed by another defendant and sold at Costco warehouses throughout the
country. Plaintiffs alleged that the VitaRain Tropical Mango drink in particular was marketed as a natural product but in fact contained “unnatural” ingredients, including large amounts of “synthetic caffeine.” Specifically, plaintiffs alleged that the VitaRain Tropical Mango drink (1) lacked a front-facing disclosure that the beverage contained caffeine; (2) failed to disclose the relative amount of caffeine in the beverage; and (3) falsely claimed that the beverage is a “natural tonic” and
contains “natural caffeine.” Plaintiffs further alleged they “reasonably believed that they [had] purchased a Drink similar to vitamin water.” 

On behalf of a putative class consisting of all Washington residents who purchased the product over the four years preceding the filing of the lawsuit, the named plaintiff asserted claims for (1) violations of the Washington Consumer Protection Act; (2) misrepresentation; and (3) negligence.

Defendant Costco moved to dismiss the amended complaint, contending, inter alia, that some
of plaintiff’s claims were preempted by federal law; and that parts of the amended complaint failed to meet the pleading standards of Rules 8 and 9(b) of the Federal Rules of Civil Procedure.

To withstand dismissal, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Naked assertion[s],” “labels and conclusions,” or “formulaic recitation[s] of the elements of a cause of action will not do.” Id. at 555, 557.  A claim has facial plausibility only "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

First an interesting civil procedure issue. Ordinarily, when the district court considers matters outside the pleadings it must convert a motion to dismiss brought under Civil Rule 12(b)(6) into a Civil Rule 56 motion for summary judgment. Fed. R. Civ. P. 12(d). However, a court may consider certain materials without converting the motion to dismiss into a motion for summary judgment. See, e.g., United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Such materials include documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice.  A document may be incorporated by reference into a complaint where the
plaintiff refers extensively to the document or the document forms the basis of plaintiff’s claim. In such cases, the defendant may offer that document and the district court may treat the document as part of the complaint for the purposes of a motion to dismiss. Here, the court concluded that judicial notice of the product label was appropriate and that it could consider the labeling without converting Costco’s motion to dismiss into one for summary judgment.

Defendants argued that plaintiff’s claims were expressly preempted by the Federal Food Drug and Cosmetics Act (“FDCA”), as amended by the National Labeling and Education Act (“NLEA”), 21 U.S.C. § 301 et seq. The FDCA “comprehensively regulates food and beverage labeling.” Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1175 (9th Cir. 2012).  And specifically, they govern whether and how a label must disclose the presence of caffeine.  Here, the Amended Complaint sought "to create and impose”  two new requirements which would directly conflict with federal law: (1) a requirement that caffeinated beverages disclose the fact that they contain caffeine on the front label; and (2) a requirement that labels state the “relative amount” of caffeine by providing a “daily value” amount.  By virtue of imposing these new and conflicting requirements, defendants contended, plaintiff’s claims were preempted.  The court agreed; defendants showed that these food labeling requirements are expressly covered by the regulations. Federal law preempts any state law that would impose additional requirements on how food labels present nutrition information.  See Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011).  Specifically, the court held that federal law preempts plaintiff’s claims that (1) defendants were required to disclose that the drink contained caffeine on the front label of the drink and (2) that defendants were required to state the “relative amount” of caffeine in the drink. Therefore Costco’s motion to dismiss was granted as to these claims.

Next, defendants contended that plaintiff had also failed to adequately plead causation, an element of the remaining consumer fraud-based allegations. Specifically, defendants argued that plaintiff had not alleged that he even read the complained-of labels before purchasing the VitaRain drink. The court noted that while the amended complaint contained detailed allegations about what was, and what was not, on the label of the VitaRain Tropical Mango drink he allegedly purchased, nowhere did he state that he actually read the label, or that his purchasing decision was driven by the alleged deceptive statements on the label.  Broad conclusory statements on causation. such as that class members have suffered "as a result of" purchasing the energy Drink, were insufficient, especially in light of Plaintiff’s failure to allege that he even read the allegedly deceptive labels prior to purchasing the drink.

Finally, on the misrepresentation claims, defendants suggested that plaintiff could not prove the reliance elements of his fraudulent misrepresentation and negligent misrepresentation claims because he had not alleged that he saw the alleged misrepresentations prior to purchasing
the drink. The court dismissed plaintiff’s misrepresentation claim for the same reason that the CPA claim was dismissed: Plaintiff failed to adequately plead reliance because he had not alleged that he based his purchasing decision on the complained-of labels or that he even read the labels
prior to purchasing the drink.  The court refused to credit the naked assertion that he would not have purchased the drink had the label not contained such statements in light of the missing averments.

Claims dismissed (with leave to amend).

 

Summary Judgment Granted on Product Identification

Sometimes simpler is better.  In product liability litigation nothing is more basic, perhaps, than proof the plaintiff used defendant's product.  Last week, a federal judge granted summary judgment against two plaintiffs' making claims in multi-district litigation over injuries allegedly related to the painkillers Darvocet and Darvon. See In Re: Darvocet, Darvon and Propoxyphene Products Liability Litigation, No. 2:11-md-02226 (E.D. Ky.). The issue was this basic cause in fact element.

Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

Defendant argued that it was entitled to summary judgment because neither plaintiff demonstrated the ingestion of a propoxyphene product manufactured, sold, or distributed by the defendant. In their Amended Complaint, both plaintiffs allege that they ingested propoxyphene products manufactured by Lilly. It is indeed a general principle of products liability law in Texas and Georgia (the applicable rules under choice of law in an MDL) that a plaintiff must allege sufficient facts to allow the reasonable inference that the injury-causing product was sold, manufactured, or distributed by the defendant. Plaintiffs could not dispute that they failed to establish the ingestion of a Lilly  product.

Instead, Lilly presented evidence demonstrating that plaintiffs represented that they intended to pursue only claims that relate to generic drugs; that is, they would seek to hold Lilly liable for
the injuries allegedly arising out of their taking of generic drugs made by someone else.

Such arguments were already rejected by the Court in this MDL.  The Court had previously found unpersuasive the plaintiffs’ argument that a brand-name manufacturer may be held liable under a misrepresentation theory of liability to a plaintiff who ingested generic propoxyphene. The prevailing rule regarding misrepresentation claims against brand-name manufacturers has its origins, noted the Court, in Foster v. American Home Products Corp., 29 F.3d 165 (4th Cir. 1994), which rejected “the contention that a name brand manufacturer’s statements regarding its drug can serve as the basis for liability for injuries caused by another manufacturer’s drug.” Id. at 170.

The majority of courts that have addressed similar claims have followed the Fourth Circuit’s lead. Notably, federal district courts in Texas have repeatedly found that “the Texas Supreme Court would conclude that a brand-name manufacturer does not owe a duty to warn users of the risks related to another manufacturer’s product.” Finnicum v. Wyeth, Inc., 708 F. Supp. 2d 616, 621 (E.D. Tex. 2010); see also Burke v. Wyeth, Inc., No. G-09-82, 2009 WL 3698480, at *2-3 (S.D. Tex. Oct. 29,
2009).  And, similarly, there can be no recovery under Georgia law, “[u]nless the manufacturer’s defective product can be shown to be the proximate cause of the injuries . . .” Hoffman v. AC&S, Inc., 548 S.E.2d 379, 382 (Ga. Ct. App. 2001) (“To survive summary judgment, [the plaintiff] clearly
needed to present evidence that she was exposed to defendants’ products.”).

Defendant thus sufficiently established that there was no genuine dispute concerning the only
material fact that determined the viability of these plaintiffs’ misrepresentation claims: the identity
of the propoxyphene product ingested.  Therefore, the plaintiffs’ claims failed as a matter of law.

 

 

 

Rule 23's "Ascertainability" and "Numerosity" Prerequisites Again Prove Their Worth in Defeating Class Certification

Today a special treat for our readers: my partner Becky Schwartz has submitted a post as guest blogger.  Becky has defended numerous high profile class actions for tobacco, pharmaceutical, medical device, and alcoholic beverage manufacturers, and others. Her focus is a recent Third Circuit class action decision.  And she writes:

Good news for defendants facing threatened consumer class actions: the Third Circuit has once again confirmed that ascertainability and numerosity, two seemingly humble definition-related prerequisites of Fed. R. Civ. P. 23, can be sufficient to foil class certification. In a companion decision to last year’s Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012), last week the Third Circuit vacated a New Jersey district court’s order certifying a class against defendant Wal-Mart Stores, Inc. See Hayes v. Wal-Mart Stores, Inc., No. 12-2522, 2013 WL 3957757 (3rd Cir. Aug. 2, 2013). Plaintiff asserted claims for violation of the New Jersey Consumer Fraud Act, breach of contract and unjust enrichment in connection with the sale of extended warranty (service) plans for items sold at Wal-Mart’s wholly owned subsidiary, Sam’s Club. Plaintiff had allegedly purchased two “as is” items from Sam’s Club a clearance area, along with extended warranty service plans for each item. The express terms of the service plans sold, however, allegedly made them inapplicable to the “as is” items. The district court certified a class of persons who had purchased service plans to cover ineligible “as is” products sold at Sam’s Club, and Wal-Mart appealed the class certification on an interlocutory basis pursuant to Fed. R. Civ. P. 23(f).

Ascertainability and Numerosity Are Evidentiary Questions the Proponent of Certification Must Prove.

The district court’s certification of the Hayes class occurred before last year’s decision by the Third Circuit in Marcus, where the appellate court addressed Rule 23’s ascertainability, and numerosity requirements in significant detail. The Third Circuit here agreed to consider Wal-Mart’s appeal based on the company’s argument that Hayes had failed to establish by a preponderance of the evidence that the class was both ascertainable and sufficiently numerous under the class action rule. Specifically, Wal-Mart argued that the district court had erred by finding the Hayes class ascertainable without considering whether it was administratively feasible to determine class membership. And as to numerosity, Wal-Mart asserted that plaintiff had not adduced evidence sufficient to demonstrate that anyone (including himself) and thus that sufficient claimants could satisfy the proposed class definition.

Putative Class Members’ “Say So” Is Not Enough to Establish Class Membership.

Last year in Marcus, the Third Circuit held that to satisfy the implied Rule 23 prerequisite of ascertainability, a proposed class must be defined with reference to objective criteria, and an administratively feasible mechanism must exist for determining whether putative class members fall within the class definition. 687 F.3d at 593-94.  One key factor in assessing ascertainability is whether the defendant possesses records that could show whether individuals should be included in the class; if not, the class definition would be insufficient. Id. at 593.

In Hayes, the evidence reflected that Wal-Mart kept some records related to “as is” clearance items for sale, but lacked records that could definitively link the sale of extended service plans to ineligible “as is” clearance items. The Third Circuit confirmed that in such circumstances, a lack of evidence is the class proponent’s problem, not the defendant’s. “[T]he nature or thoroughness of a defendant’s record-keeping does not alter the plaintiff’s burden to fulfill Rule 23’s requirements,” particularly where there is no “statutory or regulatory authority obligating [defendant] to create and maintain a particular set of records.” Hayes, 2013 WL 3957757 at *4. “Rule 23’s requirements . . . cannot be relaxed or adjusted” simply because a defendants’ records prove to be no help to plaintiff. Id. Importantly, a dearth of evidence in defendant’s possession cannot be overcome by form affidavits provided by putative class members: a “petition for class certification will founder if the only proof of class membership is the say-so of putative class members or if ascertaining the class requires extensive individual fact-finding.” Id. at *5.

Mere Speculation Is Insufficient to Prove Rule 23(a) Numerosity.

The Third Circuit also made clear that precise proof is required to prove numerosity. Just as it had previously in Marcus, 687 F.3d at 596-97, the Third Circuit in Hayes considered whether and when “common sense” or “logic” could be substituted for such evidence. Sam’s Club had records reflecting 3,500 sales transactions that might have qualified purchasers for class membership, but no record evidence to establish which of those transactions actually did qualify purchasers for class membership. Proof of class membership would thus have required impermissible mini-trials for each putative class member. The district court nonetheless found the Rule 23(a)’s numerosity prerequisite met by reasoning that if even a mere hypothetical 5% of those potential class members actually qualified, the class would be sufficiently numerous under Rule 23. Hayes, 2013 WL 3957757 at *5.

Despite acknowledging that in some limited instances “circumstantial evidence” might permit the district court to make a factual finding by using “’common sense’ to forgo precise calculations and exact numbers,” the Third Circuit made clear that a district court cannot certify a class based on “improper speculation.” Id. at *6. And that, it found, is precisely what the district court had done: “the only conclusion that can be drawn from the evidence presented to the trial court is that the number of class members would equal-to-or-less than 3,500 and equal-to-or-greater than zero,” meaning that the court “can only speculate as to the number of class members.” Id. at *6. “[W]here a putative class is some subset of a larger pool, the trial court may not infer numerosity from the number in the larger pool alone.” Id. (citations omitted). Nor can a trial court take a “wait-and-see approach” to numerosity (or any other requirement of Rule 23). Id.

Key Takeaways.

Defense counsel working with clients facing class action allegations – particularly in the consumer fraud context where complete transactional histories and other class membership related records may not be available in defendants’ records – should recognize the potential power of Rule 23’s ascertainability and numerosity prerequisites to bar class certification.  

Keep the following in mind:
- Lack of available evidence to prove ascertainability and/or numerosity is plaintiff’s problem, not defendant’s;
- Class member affidavits alone (mere “say-so”) cannot be used to establish class membership; the result would be an impermissible compromise of defendants’ rights;
- Plaintiffs’ imperative to find evidence supportive of class certification could very well give rise to surprisingly aggressive and contentious discovery;
- Some trial courts may require reminders of the evolving standards applicable to these Rule 23 prerequisites, including burden of proof; and
- Defendants’ briefing and argument should focus on any gaps (when available) in the evidence supporting ascertainability and/or numerosity; courts must be dissuaded from employing speculation masquerading as “common sense” and “logic” to fill such gaps.

New Blog Worth a Look

My colleagues  Andrew Carpenter, Scott Kaiser and Gregory Wu at Shook Hardy have handled an amazing array of class actions.  To share some of that experience, they have launched the Missouri & Kansas Class Action Blog to provide up-to-date information about federal and state rulings in class action decisions arising in these particular jurisdictions.  And I am sure they will touch on MDLs, and other types of aggregate and complex litigation in state and federal courts. 

Definitely worth a look for all our readers who are interested in class action law.

Last Chance to List Top Blawgs

The ABA Journal is embarking on its annual quest to identify the top law blogs.  The criteria and form are here, if any of our wonderful readers are inclined to identify MassTortDefense as one that you read regularly and think other lawyers should know about. 

Friend-of-the-blawg briefs are due no later than Aug. 9, 2013, says the Journal.

Might I also suggest you think about the Point of Law blog?

FDA Proposes Two New Food Regulations for Imports

 The U.S. Food and Drug Administration proposed two new rules last week that would impact imported food, including by establishing a program to accredit third-party auditors to certify foreign food facilities.  The rules were called for by the Food Safety Modernization Act of 2011, which revised the regulatory system to deal with risks of food-borne illness. We have posted before about the litigation that can arise from such situations. 

 

Under the proposed rules, which follow on regulations proposed earlier this year, importers would be accountable for verifying that their foreign suppliers are implementing modern, prevention-oriented food safety practices, and achieving the same level of food safety as domestic growers and processors. The FDA is also proposing rules to strengthen the quality, objectivity, and transparency of foreign food safety audits on which many food companies and importers currently rely to help manage the safety of their global food supply chains.

Imported food comes into the United States from about 150 different countries and accounts for about 15 percent of the U.S. food supply, including about 50 percent of the fresh fruits and 20 percent of the fresh vegetables consumed by Americans.

Under the proposed regulations for Foreign Supplier Verification Programs (FSVP), U.S. importers would have a clearly defined responsibility to verify that their suppliers produce food to meet U.S. food safety requirements. In general, importers would be required to have a plan for imported food, including identifying hazards associated with each food that are reasonably likely to occur. Importers would be required to conduct activities that provide adequate assurances that these identified hazards are being adequately controlled.

The FSMA also directs the FDA to establish a program for the Accreditation of Third-Party Auditors for imported food. Under this proposed rule, the FDA would recognize accreditation bodies based on certain criteria such as competency and impartiality. The accreditation bodies, which could be foreign government agencies or private companies, would in turn accredit third-party auditors to audit and issue certifications for foreign food facilities and food, under certain circumstances.
Importers will not generally be required to obtain certifications, but certifications may be used by the FDA to determine whether to admit certain imported food that poses a safety risk into the United States.

The FSVP proposed rule and the third-party accreditation proposed rule are available for public comment for the next 120 days.