Lone Pine Issue Moving to State Supreme Court

Readers know we have posted before about the important case management tool known as the "Lone PIne" order. These “Lone Pine” orders take their name from a 1986 New Jersey Superior Court case involving toxic tort claims; they refer to case management orders that require the plaintiffs to make a showing regarding causation, injury, and/or damages to demonstrate, typically at an early stage, some minimal level of evidentiary support for the key components of their claims which will be in dispute.

A Colorado trial court had dismissed a claim, relying on a Lone Pine order, 2012 WL 1932470, that arose from the drilling and completing of three natural gas wells in Silt, Colorado.   The central issue was whether defendants caused plaintiffs’ alleged injuries, which plaintiffs vaguely described as “health injuries” from exposure to air and water contaminated by defendants with “hazardous gases, chemicals and industrial wastes." Plaintiffs also alleged that defendants had caused loss of use and enjoyment of their property, diminution in value of property, loss of quality of life, and other damages.  The court required plaintiffs, before opening full two-way discovery, to make a prima facie showing of exposure and causation.  The court further determined that the prima facie showing requirement should not prejudice plaintiffs because they needed a good faith basis for their complaint, and ultimately they would need to come forward with this data and expert opinion on exposure and causation in order to establish their claims anyway.

Plaintiffs were given 105 days to comply with the CMO. After that time, all plaintiff's expert could opine was that “sufficient environmental and health information exists to merit further substantive discovery.” Significantly, the expert offered no opinion as to whether exposure was a contributing factor to plaintiffs’ alleged injuries or illness. And the requested march towards further discovery
without some adequate proof of causation of injury is precisely what the CMO was meant to
curtail. The expert suggested, at best, a very weak circumstantial causal connection between the Wells and plaintiffs’ injuries. 

The expert did not opine on whether any and each of the substances present in the air and water samples (taken after plaintiffs had moved out of the area) can cause the type(s) of disease or illness that plaintiffs claimed (general causation). Finally, and perhaps most significantly,the expert did not even attempt to draw a conclusion that plaintiffs’ alleged injuries or illnesses were in fact caused by such exposure (specific causation).

The Colorado Court of Appeals ruled in 2013 that the state civil procedure rules did not allow trial courts to require plaintiffs to present prima facie evidence supporting their claims after initial disclosures, but before other discovery commenced.  This view was outside the mainstream of cases discussing the broad discretion necessarily given trial courts to manage their dockets and administer discovery. 

The state supreme court has now agreed to review the decision.  See Antero Res. Corp. v. Strudley,, No. 2013SC576 (Colo. cert. granted 4/7/14).  The review will focus on two issues. First, whether the trial court is barred under the state rules from entering a modified case management order requiring plaintiffs to produce limited evidence essential to their claims after initial disclosures but before further discovery.  The second issue is whether the district court in this case acted within its discretion in entering and enforcing such an order.

It will be interesting to see if Colorado moves back into the mainstream in allowing these sensible case management tools.

Industry Comments on Draft FDA Guidance

Several leading drug manufacturers have worked to shed light on serious issues with the social media guidance issued earlier this year by the U.S. Food and Drug Administration.

Readers may recall the draft guidance was intended to describe FDA’s current thinking about how manufacturers and distributors can fulfill regulatory requirements for postmarketing submissions
of interactive promotional media for their FDA-approved products.  A number of industry members have submitted formal comments

PhRMA and its member companies highlighted two fundamental concerns with the Draft Guidance. First, the Draft Guidance assumes that a biopharmaceutical manufacturer can be held accountable for content written by third-parties on third-party web sites if the company merely somehow "influences" the third-party. This premise is overbroad and is inconsistent with the FDCA. Put simply, third-party statements not caused or controlled by a manufacturer do not fall within the statutory or regulatory scope of FDA‘s authority to regulate promotional labeling or advertising. Second, the Draft Guidance erroneously assumes that all manufacturer statements about prescription medicines on social media constitute promotional labeling or advertising. This expansive interpretation of labeling and advertising adopted in the Draft Guidance could chill truthful and non-misleading communication protected by the First Amendment. Thus, it is critical that FDA address these fundamental issues in the Final Guidance.

WLF echoed the latter concern. noting serious problems with the Draft Guidance at Section IV (entitled, "Factors Considered in Determining Postmarket Submission Requirements for Interactive Promotional Media"). The Draft Guidance's basic premise seems to be that everything a manufacturer posts on-line: (1) qualifies as "promotional" material; (2) falls within FDA's statutory purview; and (3) is not protected from FDA regulation by the First Amendment. Those premises are 
demonstrably incorrect. Accordingly, agency policy in this area ought to begin with guidance
regarding where FDA draws the line between speech that it is and is not permitted to regulate.
The Draft Guidance brushes aside such concerns and seems to indicate that FDA intends to regulate everything that a manufacturer says regarding its products on social media sites.

It will be interesting to see how the FDA reacts to these valid comments.

 

Comcast Requirement of Class-wide Damages Dooms Class

A California federal court has denied class certification to a putative class of consumers who bought food products marketed as healthy, which allegedly were not because they contained hydrogenated oils and corn syrup. See Lucina Caldera, et al. v. The J.M. Smucker Co., No. 2:12-cv-04936 (C.D. Cal.).

On June 6, 2012, Plaintiff filed a consumer class action on behalf of individuals who purchased Defendant’s Uncrustables and Crisco Original and Butter Flavor Shortening products. Plaintiff alleged that the packaging of these products misled consumers into believing that they were healthful, when allegedly they were not because they contain trans fat and high fructose corn syrup. Based on these allegations, Plaintiff asserted the usual claims: (1) violation of Cal. Bus. &
Prof. Code §§ 17200, et seq. (“UCL”), unlawful prong; (2) violation of the UCL, fraudulent prong; (3)
violation of the UCL, unfair prong; (4) violation of California False Advertising Law (“FAL”), Cal.
Bus. & Prof. Code §§ 17500, et seq.; (5) violation of California Consumer Legal Remedies Act
(“CLRA”), Cal. Civ. Code §§ 1750, et seq.; (6) breach of express warranty under California law; and (7) breach of implied warranty of merchantability under California law.

The court denied with prejudice the Plaintiff’s attempt to certify the proposed classes.

Under Rule 23(b)(3), a plaintiff must show that “the questions of law or fact common to class
members predominate over any questions affecting only individual members,” and that “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”
Predominance “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997). It focuses on the
relationship between the common and individual issues, requiring that the common issues be
qualitatively substantial in relation to the issues peculiar to individual class members. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. 1998). The post-Dukes predominance inquiry
requires the court to consider whether other issues unique to individual class members are likely to render adjudication by representation impractical. See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2556 (2011).  Defendant here argued that Plaintiff failed to satisfy the predominance requirement because she had not identified any method of proving damages on a classwide basis, and thus determining damages would involve individualized inquiries that predominate over common questions.

The predominance requirement is satisfied only if Plaintiff is able to show that class damages stemmed from the defendant’s actions that created the legal liability. Leyva v. Medline Industries, Inc., 716 F.3d 510, 514 (9th Cir. 2013); see Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1435 (2013).  As the Supreme Court reemphasized in Comcast, in order for Rule 23(b)(3)’s predominance requirement to be satisfied, a plaintiff must bring forth a measurement that can be applied classwide and that ties the plaintiff’s legal theory to the impact of the defendant’s allegedly illegal conduct. Thus, after Comcast, the question is whether a plaintiff has met its burden of establishing that damages can be proven on a classwide basis. See In re Diamond Foods, Inc., Sec. Litig., 2013 WL 1891382, at *252 (N.D. Cal. May 6, 2013).

Here, the court concluded, the Plaintiff failed to meet this burden.  Plaintiff did not offer any method of proving damages on a classwide basis. Plaintiff merely stated that damages could be proven on a classwide basis based on Defendant’s California sales data. However, this is not a case where class members would necessarily be entitled to a full refund of their purchase price. Accordingly, defendant’s sales data alone would not provide sufficient information to measure classwide damages. The class sought restitution, Restitution based on a full refund would only be appropriate if not a single class member received any benefit from the products. See In re POM Wonderful LLC, 2014 WL 1225184, at *3 & n.2 (C.D. Cal. Mar. 25, 2014). Plaintiff failed to offer any evidence, let alone expert testimony, that damages could be calculated based on the difference between the market price and true value of the products.

As evidenced by named Plaintiff’s own deposition testimony, class members undeniably received some benefit from the products. Awarding class members a full refund would not account for these benefits conferred upon class members. Accordingly, classwide damages could not accurately be measured based on Defendant’s sales data alone. (Plaintiff’s Motion to certify the injunctive relief
classes also was denied without prejudice.)

 

Lack of Confidence Not An Answer to CAFA Removal

Readers are used to litigants using favorable law to their benefit; this case involves a plaintiff trying to use unfavorable law to his benefit.  The court concluded that a proposed class of joint pain supplement purchasers could not escape the reach of the Class Action Fairness Act by asserting their case could never be certified in federal court. See Hoffman v. Nutraceutical Corp., No. 13-3482 (3rd Cir. unpublished decision 4/10/14).

Hoffman filed suit against Nutraceutical in the Superior Court of New Jersey, Bergen County. The action concerned a Nutraceutical supplement, which was marketed to help to stem the progression of osteoarthritis and reduce related joint pain. Hoffman, who bought a $20 bottle of the supplement, alleges that Nutraceutical falsely represented that the supplement was "of the highest quality," when in fact the "product was polluted and contaminated by significant concentrations of lead." Hoffman proposed a class consisting of all nationwide purchasers for the six year period preceding the filing of this suit. 

The Complaint asserted violations of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-2, as well as claims for common-law fraud, breach of contract, and common-law breach of warranty.   Neutraceutical removed the case to federal court under CAFA. The District of New Jersey denied Hoffman's motion for remand, and Hoffman appealed.

 

With certain exceptions not relevant here, CAFA grants federal courts original jurisdiction over actions in which: (1) the matter constitutes a "class action"; (2) "the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs"; (3) CAFA's minimal diversity requirements are met; and (4) there are at least 100 members of the putative class. 28 U.S.C. § 1332(d)(2), (d)(5)(B). Hoffman's challenge to the District Court's jurisdiction was premised entirely on the proposition that the amount in controversy of his suit  could not exceed $5 million.

 

Where, as here, the plaintiff does not specifically aver that the amount in controversy falls below CAFA's $5 million threshold, the case must be remanded to state court if it is "a legal certainty" that CAFA's amount in controversy requirement cannot be met. Frederico v. Home Depot, 507 F.3d 188, 197 (3d Cir. 2007). Hoffman argued, as both the sole class representative and the sole attorney for the class, that the purported class could not possibly be certified under established Third Circuit law. Thus, he reasoned, the amount in controversy of the action — as least while the case remained in federal court — was equivalent to the value of Hoffman's individual claim, rather than the aggregate value of the class members' claims, which would easily exceed $5 million. In other words, because it was supposedly a "legal certainty" that the class would not be certified, it follows that it was a "legal certainty" that the amount in controversy requirement cannot be met.

But CAFA mandates that federal courts calculate the amount in controversy of a putative class action before determining whether the class may be certified under Rule 23. A putative class action satisfies CAFA's amount in controversy requirement where (1) the action was filed under Rule 23 or a similar state statute or rule and (2) the aggregated claims of the proposed class members amount to more than $5 million. See Standard Fire Ins. Co. v. Knowles, 133 S. Ct. 1345, 1348 (2013).  Thus, a putative class action's prospects for certification are irrelevant to whether federal courts have subject matter jurisdiction over that action in the first instance.

Hoffman could not demonstrate to a legal certainty that the claims of the purported class — i.e., the "nationwide purchasers" of the supplement "for the six year period preceding the filing of this suit," — were worth $5 million or less. Accordingly, this action satisfied CAFA's amount in controversy requirement, and the District Court properly concluded that it had subject matter jurisdiction over Hoffman's suit.
 

TCPA Class Rejected on Defendant's Motion

Readers may know that there is a fair amount of litigation alleging violation of the Telephone Consumer Protection Act. What's interesting about this proposed TCPA class action, Ryan v. Jersey Mike's Franchise Sys., No. 3:13-cv-01427-BEN-JLB (3/28/14), is that the decision comes on defendants' motion to deny class certification, an aggressive and perhaps seldom used preemptive motion. 

A court is required to determine whether or not to certify the action as a class action at an early "practicable time." Fed. R. Civ. P. 23(c)(l)(A). Rule 23 is not a mere pleading standard, and a party seeking class certification must affirmatively demonstrate his or her compliance with the Rule.  Wal-MartStores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). It may be necessary for a court to probe behind the pleadings before coming to rest on the certification question. In making the class certification determination, a court is required to engage in "rigorous analysis." Id. That analysis frequently entails "some overlap with the merits of the plaintiffs underlying claim." Id.

Several courts have approved the use of preemptive motions to deny class certification before a plaintiff has filed a motion to certify a class. E.g., Vinole v. Countrywide Home Loans, 571 F.3d 935, 941 (9th Cir. 2009). Such motions may be appropriately granted before discovery has been completed, as district courts have broad discretion to control the class certification process and have the discretion to determine whether discovery will be permitted. A party seeking class certification is not always entitled to discovery on the class certification issue.  See Doninger v. Pac Nw. Bell, Inc., 564 F.2d 1304, 1313 (9th Cir. 1977). A motion for class certification can be properly denied without discovery where plaintiffs cannot make a prima facie showing of Rule 23's prerequisites or where discovery measures are not likely to produce persuasive information substantiating class action allegations. 

Plaintiff here alleged that defendants transmitted unauthorized bulk spam text messages to the cellular phones of unwilling customers in order to promote their shop. Plaintiff alleged that these text message were aggravating and required consumers to pay their cell phone providers to not receive the spam messages. Plaintiff claimed that defendants assembled lists of consumer cell phone numbers, "without any authorization" to use the numbers.  Plaintiff alleged that the defendants then sent massive amounts of spam commercial text message advertisements, using auto-dialers or robo-callers.  Plaintiff further alleged that the texts were sent to mobile phone users with whom the defendants had "no prior business relationship."

The court described that the defendant store had a customer loyalty program known as the "Shore Points" in which it issued customers loyalty cards that they could use to earn and redeem "loyalty points" for free products. Each card had a unique bar code number and was linked in a database to a telephone number provided by the customer when the card is issued. Defendants claimed the only numbers in their records were numbers provided by their customers. Defendants explained that messages are only sent to members of the loyalty program who gave their cell phone numbers to the stores.  Plaintiff admits that he was given a loyalty card on one of his visits to the store, and he got a test message advertising the store, and offered free chips and a drink with the purchase of any sub.

Readers know that the typicality requirement is to assure that the interest of the named representative aligns with interests of the class.  E.g.,  Hanon v. Dataproducts Corp., 976F.2d 497, 508 (9th Cir. 1992). In determining whether the typicality requirement is satisfied, a court determines whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.

Here, plaintiff said he did not remember ever giving a phone number,  but was "not 100% sure. I suppose it's possible." He argued that not remembering interactions with fast food attendants made him a "more typical consumer, not less typical."

On defendants' motion, the court concluded that class certification was inappropriate in this case; plaintiff was fatally inconsistent and uncertain about critical issues relating to the possible consent to receive text messages. These consent issues were critical to any theory of recovery, including the TCPA. While plaintiff stated under oath in his deposition that he did not provide his phone number, it was clear he did not remember his conversation with the cashier. His inconsistency and uncertainty rendered class action treatment inappropriate.  Plaintiff could not represent a class of individuals who did not give out their phone numbers because he was unsure whether he did not give the defendants his phone number.

While it was quite possible that most people would not remember such details, that did not make plaintiff an appropriate representative of a class to assert the rights of others.  Discovery would not allow him to resolve the uncertainty regarding his own experience. An inability to remember key details may be typical, but the typicality requirement of a class action lawsuit demands more.  Plaintiff's conflicting accounts of critical facts that would determine what kinds of claims he could bring meant that the necessary alignment of interests is impossible. Motion granted, no class.

 

Lack of Standing Dooms Beef Class Action

Article III's requirement that a plaintiff have standing to bring the claim applies to proposed class actions, and doomed class plaintiffs who were alleging that certain beef products were not kosher as marketed. See Wallace v. Conagra Foods, Inc., No. 13-1485 (8th Cir. 4/4/14).

Melvin Wallace and several other consumers claimed that some Hebrew National beef products were not “100% kosher.” Defendant removed to federal court, invoking the Class Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1453, then moved to dismiss contending the consumers lacked Article III standing and that the district court lacked jurisdiction to address religious questions
underlying the consumers’ claims. The district court decided the First Amendment prohibited the courts from adjudicating the consumers’ legal claims and, they appealed.

Plaintiffs argued that their purchase and consumption of the Hebrew National brand products was not motivated by faith, but rather on the belief that kosher is the “New Organic,” a promise of food purity amid other products full of artificial ingredients. They claimed this led them to pay an unjustified premium for Hebrew National’s ostensibly kosher beef.

The court of appeals concluded that the consumers lacked traditional Article III standing to pursue this case, and instructed the district court to remand the case to state court.

Defendant argued that even if the consumers would have overpaid if the Hebrew National products they bought were not actually kosher, the consumers did not adequately allege that the products they each purchased were defective.   Here, the consumers’ allegations did not establish that all or even most Hebrew National products were not kosher, which means the particular packages of
processed beef they purchased may have been—and indeed more than likely were—prepared in accordance with minimum kosher standards.

The court noted that Article III requires “an injury [to] be concrete, particularized, and actual or  imminent.” Monsanto Co. v. Geertson Seed Farms, 130 S. Ct. 2743, 2752 (2010). An alleged injury cannot be “too speculative for Article III purposes.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 n.2 (1992). If there is no “actual” harm, then there must at least be an “imminent” harm. Id. As the Supreme Court emphasized just last year, “mere speculation” that injury did or might occur “cannot satisfy the requirement that any injury in fact must be fairly traceable to” the alleged source. Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1148 (2013).

 Here, the consumers’ allegations failed to show that any of the particular packages of Hebrew National beef they personally purchased contained non-kosher beef. The consumers frankly admitted that it was impossible for any reasonable consumer to detect whether purportedly kosher meat is non-kosher. The Supreme Court has made it clear that standing must be particularized, meaning the alleged injury must affect the plaintiff in a personal and individual way. In the context of defective products, it is not enough for a plaintiff to allege that a product line contains a defect or that a product is at risk for manifesting this defect; rather, the plaintiffs must allege that their product actually exhibited the alleged defect. See In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d
604, 616 (8th Cir. 2011).

Without any particularized reason to think the consumers’ own packages of Hebrew National beef actually exhibited the alleged non-kosher defect, the consumers lacked Article III standing to sue.  Even supposing some beef was improperly certified as kosher, the consumers gave the court no reason to think all the beef marked as kosher under the quota did not meet kosher standards. Which means, it was pure speculation to say the particular packages sold to the consumers were tainted by non-kosher beef.  Speculation and conjecture are not injuries cognizable under Article III. See, e.g., Clapper, 133 S. Ct. at 1148.  Because the consumers suffered no particularized and actual injury, Monsanto, 130 S. Ct. at 2752, the court of appeals was bound to conclude the consumers lacked traditional Article III standing.  CAFA did not extend federal jurisdiction to this case.

 

CAFA Removal Appeal to Watch

Here's one to watch.  The Supreme Court agreed earlier this week to consider whether defendants seeking removal of a proposed class suit to federal court under the Class Action Fairness Act must provide additional evidence supporting jurisdiction or just a short and plain statement of the grounds for removal. See Dart Cherokee Basin Operating Co., LLC v. Owens,  No. 13-719 (U.S., cert. granted 4/7/14).

The case came to the Court in an unusual posture. The Tenth Circuit denied defendant's petition for panel review, and the appeals court divided 4-4 on whether to hear the case en banc. Judge Hartz wrote a dissent, see 730 F.3d 1234 (10th Cir. 2013).

A defendant seeking removal of a case to federal court must file a notice of removal containing “a short and plain statement of the grounds for removal” and attach only the state court filings served on such defendant. 28 U.S.C. § 1446(a). Consistent with that statutory pleading requirement, the First, Fourth, Fifth, Seventh, Eighth, Ninth, and Eleventh Circuits require only that a notice of removal contain allegations of the jurisdictional facts supporting removal; those courts do not require the defendant to attach evidence supporting federal jurisdiction to the notice of removal. District courts in those Circuits may consider evidence supporting removal if it comes later in response to a motion to remand.

Here, the Tenth Circuit let stand an order remanding a class action to state court based upon the district court’s refusal to consider evidence establishing federal jurisdiction under CAFA because
that evidence was not attached to the original notice of removal. 

This case presents an important question of federal removal procedure and federal jurisdiction that potentially affects all litigants and district courts involved in a removal proceeding. More than 30,000 cases are removed to federal court each year.

France Adopts Limited Class Action Rule

We have posted before about the potential spread of class action litigation to other countries.  Now comes word that French President François Hollande has signed into law France’s new Consumer Law, which includes a class action procedure for consumer protection and antitrust claims. The new French law elects the “opt-in” model and limits the role of class representation to certain nationally representative and  accredited consumer associations.

Some colleagues of mine at SHB do a more in-depth  analysis here.

 

State Supreme Court Rejects Fishing Expedition of Experts' Employer

The Texas Supreme Court rejected plaintiffs' attempt to engage in a "fishing expedition"  of the employer of two experts retained in a product liability dispute. See In re Ford Motor Co., No. 12-1000 (Tex., 3/28/14).

In this design-defect case, the plaintiff sought to discover alleged  potential bias of the defendant’s two testifying experts by seeking to depose a corporate representative of each expert’s employer. This suit arose from injuries plaintiff Saul Morales allegedly sustained after a Ford vehicle allegedly struck him. Morales had been in his own vehicle, fleeing police who suspected he was driving drunk, said the court. Eventually, Morales stopped his vehicle and continued his flight on foot. One of the police officers likewise left his 2004 Ford Crown Victoria Police Interceptor, then pursued and apprehended Morales. While the officer attempted to handcuff Morales, the officer’s vehicle allegedly began rolling backward toward the pair. The vehicle allegedly struck the plaintiff, injuring him. 

Morales sued Ford Motor Company, which designed and manufactured the police car, and the car’s seller, Ken Stoepel Ford, Inc. Morales alleged the vehicle had a design defect that allowed the officer unintentionally to place the gear-shift selector between park and reverse, which then caused the vehicle to go into an idle-powered reverse. To defend the lawsuit, Ford retained two expert witnesses: Erin Harley, of Exponent, Inc., and Hugh Mauldin, of Carr Engineering, Inc. After deposing both Harley and Mauldin, Morales sought corporate-representative depositions from Exponent and Carr Engineering on seventeen topics, arguing the additional depositions were necessary to prove each testifying expert’s bias in favor of Ford and other automobile manufacturers.

The courts have expressed concerns about allowing overly expansive discovery about testifying experts that can “permit witnesses to be subjected to harassment and might well discourage reputable experts” from participating in the litigation process. Ex parte Shepperd, 513 S.W.2d 813, 816 (Tex. 1974). The particular deposition notices in this case. said the court,  highlighted the danger of permitting such expansive discovery. In his deposition notices to Carr Engineering and Exponent, Morales sought detailed financial and business information for all cases the companies have handled for Ford or any other automobile manufacturer from 2000 to 2011. Such a "fishing expedition," said the court, seeking sensitive information covering twelve years, is just the type of overbroad discovery the rules are intended to prevent.

In any event, the most probative information regarding the bias of a testifying expert comes from
the expert herself. In this case, for example, Harley testified that 5% of the cases she handles
are for plaintiffs and that she has never testified against an automobile manufacturer. Similarly,
Mauldin testified that historically about 50% of Carr Engineering’s work is done for Ford.  That was all plaintiff was entitled to, and the lower court order was quashed.

 

 

 

Juice Class Decertified at Close of Discovery

A federal court recently decertified a class action filed on behalf of  juice buyers, recognizing the grave ascertainability problems in the case alleging that the beverage maker misleadingly advertised its drink's health benefits. See In re Pom Wonderful LLC Mktg. & Sales Practices Litig., No. 2:10-ml-2199-DDP-RZ (C.D. Cal. 3/25/14).

Back in 2012, the court had certified a damages class comprised of all persons who purchased a Pom Wonderful 100% juice product between October 2005 and September 2010. After the  completion of discovery, Pom moved to decertify the class, in light of the facts developed and in light of the U.S. Supreme Court's decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). On a motion for decertification, as at the certification stage, the burden to demonstrate that the requirements of Federal Rules of Civil Procedure 23(a) and (b) are met lies with the party advocating certification. E.g., Marlo v. United Parcel Serv. Inc., 639 F.3d 942, 947 (9th Cir. 2011).

The court noted that the Ninth Circuit has adopted a rather narrow reading of Comcast, which holds that, under rigorous analysis, “plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability.” Leyva v. Medline Indus., Inc., 716 F.3d 510, 514 (9th Cir. 2013). Thus, the court proceeded to examine plaintiffs’ damages models and the relationship of those models to the plaintiffs’ legal theories. Plaintiffs' expert advanced two damages models. The "Full Refund" model concluded that consumers spent $450 million on Pom’s 100% pomegranate juice and juice blends during the class period, and that class damages are 100% of the amount paid, or $450 million.  Defendant argued that the Full Refund model was invalid because it failed to account for any value consumers received. Even putting aside any potential health benefits, defendant argued, consumers still received value in the form of hydration, vitamins, and minerals.  The court agreed.  The California consumer acts authorize a trial court to grant restitution to private litigants asserting claims under those statutes. Colgan v. Leatherman Tool Group, Inc.,135 Cal.App.4th 663, 694 (2006). “The difference between what the plaintiff paid
and the value of what the plaintiff received is a proper measure of restitution.” In re Vioxx Class Cases, 180 Cal.App.4th 116, 131 (2009). “A party seeking restitution must generally return any
benefit that it has received.” Dunkin v. Boskey, 82 Cal.App.4th 171, 198 (2000).  Since the model did not account for this, it did not comport with Comcast.

The second or "Price Premium" model assumed that, absent the alleged misrepresentations, “demand for Pom would have been less and the Pom market price would have been lower.” The Price Premium model quantified alleged damages “by comparing the price of Pom with other refrigerated juices of the same size.”  This model yielded a damage calculation of “about $290 million.”  The parties agreed that the Price Premium model depended upon a “fraud on the market” theory. Plaintiffs essentially asserted (1) that a presumption of reliance dependent upon defendant’s alleged material misrepresentations establishes the existence of a fraud on the
entire juice market, (2) that because of that fraud on the market, every consumer who purchased defendant’s juices was similarly damaged, regardless of motivation or satisfaction, and (3) damages could therefore be measured on a class-wide basis. But, the court was not aware of any authority applying a fraud on the market theory to this type of consumer action. (It's a securities thing!)  Putting that issue aside, a plaintiff alleging a fraud on the market must show that the relevant market is efficient. See Smilovits v. First Solar, Inc., 295 F.R.D. 423, 429 (D. Ariz. 2013). This court was not persuaded that the market for defendant’s high-end refrigerated juice products operates efficiently.

Third, whether the entire class can be said to have relied upon the alleged  misrepresentations for liability purposes, this did not necessarily speak to the adequacy of a damages model. Plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability.  Plaintiff's expert made no attempt upon a sound methodology to explain how defendant’s alleged misrepresentations caused any amount of damages. Instead, the expert  simply observed that Pom’s juices were more expensive than certain other juices. Rather than
answer the critical question why that price difference existed, or to what extent it was a result of Pom’s alleged actions, the expert simply assumed that 100% of that price difference was attributable to the alleged misrepresentations. Rather than draw any link between Pom’s actions and the price difference between the juice average benchmark price and average Pom prices, the Price Premium model simply calculated what the price difference was. This damages “model” did not comport with Comcast’s requirement that class-wide damages be tied to a legal theory.

The other basis for the decision was ascertainability.  In situations where purported class members purchase an inexpensive product for a variety of reasons, and are unlikely to retain receipts or other transaction records, class actions may present such daunting administrative challenges that class treatment is not feasible.  See, e.g., In re Phenylpropanolamine Prods., 214 F.R.D. 614, 620 (W.D. Wash. 2003) (describing critical manageability problems concerning sales of a three dollar medication, despite possibility of fluid recovery); Sethavanish v. ZonePerfect Nutrition Co., 2014 WL 580696 at *5 (N.D. Cal. Feb. 13, 2014) (denying certification because proposed class of nutrition bar purchasers would not be ascertainable).  Here, plaintiffs acknowledged that, based on the volume of product sold, every adult in the United States is a potential class member. Realistically, the class included at least ten to fifteen million purchasers. These millions of consumers paid only a few dollars per bottle, and likely made their purchases for a variety of reasons, observed the court. Few, if any, consumers were likely to have retained receipts during the class period, which closed years before the filing of this action. This case therefore fell well toward the unascertainable end of the spectrum. Here, at the close of discovery and despite plaintiffs’ efforts, there was no way to reliably determine who purchased defendant’s products or when they did so.

Class decertified.