Another All Natural Class Shot Down

A federal court rejected a proposed class of  New York consumers challenging the “all natural” labeling of four Crisco oils that allegedly contained genetically modified ingredients.   See Ault v. J.M. Smucker Co., No.13-03409 (S.D.N.Y., 8/6/15).

On May 21, 2013, Plaintiff Adrianna Ault filed a complaint alleging that Defendant violated N.Y. Gen. Bus. Law ("GBL") §§ 349 and 350, and breached an express warranty by labeling certain Crisco cooking oils as "All Natural." Plaintiffs proposed class included: consumers who purchased one or more of the following products in New York: Crisco Pure Vegetable Oil and/or Crisco Pure Com Oil between February 15,2 009 and June 1, 2014; and/or Crisco Pure Canola Oil and/or Crisco Natural Blend Oil between June 1, 2010 and June 1, 2014.

According to Plaintiff, the "All Natural" label was deceptive for two reasons. First, Defendant allegedly purchased from third parties the crude soy, canola, and corn oils from which it
manufactures its cooking oils. Some of such crude oils were allegedly derived from GMO crops, and Defendant allegedly did not differentiate between GMO and non-GMO crops when purchasing crude oils.  Second, Plaintiff argued that the "All Natural" label was misleading because the Natural
Label Oils were "heavily processed" using chemicals: after Defendant purchases source oils from its suppliers, it allegedly refined the oils using a multi-step process,  Plaintiff argued that, as a result, the Natural Label Oils are chemically altered and highly processed, and cannot be considered "natural."

Plaintiffs moved for class certification.  Defendant responded that class certification is improper because the term "natural" is not susceptible to a uniform meaning. The Food and Drug Administration has declined to adopt a definition of "natural," Consumers define "natural" in diverse ways. Defendant pointed to a survey conducted by its expert, which determined that 55% of respondents could not define or did not even know what "All Natural" cooking oil meant.

Defendant argued that class certification must also fail because consumers bought the Natural Label Oils for many reasons unrelated to whether the products were "natural." According to the  Survey, respondents' most common considerations in deciding whether to purchase cooking oil were price and brand awareness.  Only 1.6% of respondents indicated that whether an oil was "natural" factored into their purchasing decision. Under the New York General Business Law, the plaintiff must demonstrate that she "sustained injury as a result" of defendant's action, and the plaintiff must show that she suffered a loss "because of' the defendant's "deceptive act." Rodriguez v. It 's Just Lunch, Int 'l, 300 F.R.D. 125, 147 (S.D.N.Y. 2014). Defendant argued this element highlighted individual issues among the class members.

The court noted that class action law recognizes an "implied requirement of ascertainability." In re Initial Pub. Offering Sec. Litig., 471 F.3d 24, 30 (2d Cir. 2006). A class is ascertainable if it is "readily identifiable, such that the court can determine who is in the class and, thus, bound by the ruling." Charrons v. Pinnacle Group NY LLC, 269 F.R.D. 221, 229 (S.D.N.Y.2010). The class must be "defined by objective criteria that are administratively feasible," and identifying class members should not "require a mini-hearing on the merits of each case." Id.

Here, it was undisputed that many potential class members will not have retained records of their
cooking oil purchases.  Plaintiffs argued that some class members could be identified by retailer records.  But, the court concluded, this fell well short of establishing ascertainability. While the criteria may be objective, Plaintiff had not shown that it was "administratively feasible." See Charrons, 269 F.R.D. at 229. The mere assertion that "records exist to identify many class members" does not suffice. Defendant sold to retailers and distributors, not to consumers, and therefore has no records regarding the ultimate purchasers of the Natural Label Oils. Plaintiffs' information did not relate exclusively to New York retailers, and there was no evidence concerning what percentage of sales this data represents, nor whether such data would identify more than a small percentage of class members.

As many plaintiffs do, the argument was made that self-identification was also a feasible method for determining class membership; however, there was no proof of  how such self-identification would be authenticated. Most courts reject such an approach, especially when there were a variety of related products only some of which fall within the class definition. Often, putative class members are unlikely to remember accurately every purchase during the class period, and soliciting  declarations from putative class members regarding their history of purchases would invite them to speculate, or worse. Here, defendant was selling nine different brands of cooking oil, only four of which ever bore the challenged label. Permitting potential class members to self-identify would require them to specifically recall each variety of Crisco cooking oil they purchased during the class period. Adding to the confusion, the "All Natural" label appeared on the four brands at different times, and the proposed class period was defined differently for the Vegetable and Corn Oils  than the Canola and Natural Blend Oils.  Based on the class definition, therefore, an individual who purchased Crisco Corn Oil in 2009 would be a member of the class, but one who purchased Canola Oil that same year would not. "Who could possibly recall that level of detail six years (or more) later?"  Indeed, the named Plaintiff herself could not recall the number of bottles of Crisco cooking oil  she had purchased during the class period.

The court turned next to commonality and predominance. Commonality requires plaintiffs' claims to "depend upon a common contention" that is  "capable of class-wide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). The determining factor is not whether common questions exist, but rather "the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation." !d. The predominance requirement "is a more demanding criterion than the commonality inquiry under Rule 23(a)." Moore v. PaineWebber, Inc. , 306 F.3d 1247, 1252 (2d Cir. 2002). Class-wide issues predominate if "resolution of some of the legal or factual questions ... can be achieved through generalized proof," and are "more substantial than the issues subject only to individualized proof." Id.  Although individualized damages determinations alone traditionally did not preclude certification under Rule 23(b )(3), the fact that "damages may have to be ascertained on an individual basis" is a factor that courts "must consider in deciding whether issues susceptible to generalized proof outweigh individual issues." Roach v. T.L. Cannon Corp., 778 F.3d 401, 408-09 (2d Cir. 2015). A plaintiffs damages model "must be consistent with its liability case," and  must "measure only those damages attributable to that theory." Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1433 (2013). 

Here, plaintiff asserts that the injury to Plaintiff and class members was subject to common
proof' because the inclusion of the "All Natural" label had the effect of increasing the price of
the cooking oils for everyone.  Yet, Plaintiff offered no evidence that a price premium actually existed for cooking oils labeled "All Natural," nor had she proposed a reliable method for determining the existence or amount of any such price premium.  This plaintiffs proposed a survey to identify the allege price premium.  But such a methodology is not "consistent with [Plaintiffs] liability case," see Comcast Corp., 133 S. Ct. at 1433, because it made no attempt to calculate the amount that consumers actually overpaid due to the "All Natural" label. Rather than analyzing actual pricing and sale data for the Natural Label Oils, plaintiffs' expert merely proposed to ask some unspecified subsection of Crisco customers what they would pay for a hypothetical Crisco product. Moreover, this analysis further compounded the problems with the ascertainability of the class, by designating potential class members- many of whom may be unidentifiable--as the very individuals who will determine the amount of damages to which they are entitled.

Accordingly, Plaintiffs motion for class certification under Rule 23(b)(3) was denied.


Proposed Class Action Stayed Pending FDA Guidance

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

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

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

House Committee Recommends Class Action Reform

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

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

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


Court of Appeals Affirms Rejection of Unascertainable Class

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

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

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

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

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

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

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

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

Class Rejected Again Under Ascertainability Doctrine

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

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

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

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

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

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

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

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

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

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


Amicus Brief Applies Comcast in Ninth Circuit Appeal

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

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

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

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

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

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

Chocolate Class Action Dismissed

A California federal court recently rejected a putative consumer class action alleging the defendant somehow misled customers about antioxidants in its chocolate and cocoa products.  See  Leon Khasin v. The Hershey Co., No. 5:12-cv-01862 (N.D. Calif. 3/31/15).

Plaintiff was a California consumer who, since 2008, allegedly purchased more than $25.00 of Defendant’s products, including Special Dark Chocolate, Milk Chocolate, Special Dark Kisses, Special Dark Cocoa, Natural Unsweetened Cocoa, and Sugar Free Coolmint IceBreaker Mints. Plaintiff originally made a host of claims about the marketing of these various products, but in motion practice the Court trimmed most of the claims in the suit, preserving only lead plaintiff's claim under California’s Unfair Competition Law that the statement “natural source of flavanol antioxidants” on some of the Hershey products was allegedly  "false and misleading."  

Hershey moved for summary judgment. First, Hershey argued that, to prevail on his UCL claim, plaintiff had to prove he was deceived by Hershey’s “natural source of flavanol antioxidants” statements. Second, Hershey contended that there was no evidence of class-wide deception because reasonable consumers would likely not have been misled by Hershey’s statements. Third, Hershey claimed that there was no evidence that plaintiff suffered injury as a result of being deceived by Hershey’s statements. The Court agreed there was insufficient evidence that the “natural source of flavanol antioxidants” statement on the challenged Hershey products was likely to mislead reasonable consumers and that the label statements were therefore unlawful on that basis. 

The Court noted as background that the FDA has yet to promulgate a regulation defining the word “natural” as it pertains to packaged food. See Food Labeling: Nutrient Content Claims, General Principles, Petitions, Definition of Terms; Definitions of Nutrient Content Claims for the Fat, Fatty Acid, and Cholesterol Content of Food (“FDA Policy Statement”), 58 Fed. Reg. 2303, 2407 (Jan. 6, 1993) (explaining that “FDA is not undertaking rulemaking to establish a definition for ‘natural’ at this time.”). Instead, the FDA opted to “maintain its current policy . . . not to restrict the use of the term ‘natural’ except for added color, synthetic substances, and flavors as provided in [21 C.F.R.] § 101.22.” Id. “Additionally,” the FDA stated that “the agency will maintain its policy regarding the use of ‘natural,’ as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.” Id. 

Against that regulatory backdrop, plaintiff argued that the labels on the challenged Hershey products were (1) unlawful and (2) misleading. The Court noted that the UCL claim was governed by the “reasonable consumer standard,” which requires evidence that “members of the public are likely to be deceived” by the business practice or advertising at issue. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). Thus, to survive summary judgment, a plaintiff “must produce evidence showing ‘a likelihood of confounding an appreciable number of reasonably prudent purchasers exercising ordinary care.’ ” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1026 (9th Cir. 2008) (quoting Brockey v. Moore, 107 Cal. App. 4th 86, 99 (2003)). Put differently, plaintiff had to show “it is probable that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 507 (2003).  Although surveys and expert testimony regarding consumer expectations are not required, “a few isolated examples of actual deception are insufficient” in the Ninth Circuit. Clemens, 534 F.3d at 1026. Moreover, under California law, a plaintiff cannot “obtain relief by arguing how consumers could react; [he] must show how consumers actually do react.” Zeltiq Aesthetics, Inc. v. BTL Indus., Inc., 13-cv-05473-JCS, 2014 U.S. Dist. LEXIS 40402, at *33 (N.D. Cal. Mar. 25, 2014).

Here, plaintiff testified that he was misled by Hershey’s “natural source of flavanol antioxidants” label. According to Khasin, he believed at the time of purchase that flavanol antioxidants made them a “better choice” than other products. He produced evidence he said showed that flavanol antioxidants are not known to provide health benefits. Hershey maintained that its product labeling was not false and did not mislead consumers because its products in fact retain flavanol antioxidants that are naturally found in the cocoa bean. There was evidence that plaintiff also understood that Hershey’s products are candy, not health foods. 

Here, Khasin’s evidence was insufficient to create a genuine dispute of material fact.  While plaintiff argued that he was “mislead” by the label “natural source of flavanol antioxidants” and the “implicit representation[s]” that the FDA has established a Recommended Daily Intake (“RDI”) or Recommended Daily Value (“RDV”) for flavanol antioxidants, his solitary testimony, without more, was not enough to survive summary judgment. “[A] few isolated examples of actual deception are insufficient” to survive summary judgment.” Clemens, 534 F.3d at 1026; see also Ries v. Arizona Beverages USA, No. 10-CV-00139, 2013 WL 1287416, at *7 (N.D. Cal. Mar. 28, 2013) (granting summary judgment where defendants’ owner testified that some consumers of AriZona Iced Tea “were confused by the term a hundred percent natural” because such testimony, without more, “does not demonstrate that it is probable that a significant portion of the consuming public could be confused by the ‘all natural’ labeling of defendants’ products.”). Thus, absent additional evidence in addition to his own testimony, plaintiff did not meet his burden on the question of deception.

Moreover, even if the Court were to accept this testimony as evidence of deception, the facts in the record spoke to the contrary. Plaintiff in fact had testified in his deposition that Hershey’s products are candy, not health foods. And he didn't know what an RDI was.  In any event, plaintiff had to provide other extrinsic evidence in addition to his allegations to prove whether a reasonable consumer was likely to be misled. See Rice v. Fox Broad. Co., 330 F.3d 1170, 1181-2, n. 8 (9th Cir. 2003); but he produced no extrinsic evidence to suggest that a reasonable consumer would have expected or assumed that any particular level of flavanol antioxidants would be found in the alleged Hershey products. There was insufficient evidence presented such that the Court could find that a reasonable consumer would be misled by Hershey’s statements.

Further, “not every regulatory violation amounts to an act of consumer fraud.” See Mason v. Coca-Cola Co., 774 F. Supp. 2d 699, 705 n.4 (D.N.J. 2011).  Plaintiff''s showing of FDA letters regarding the characterizing level or amounts of nutrients was not relevant to showing that consumers are likely to be misled by Hershey’s statements.

Third, Khasin did not meet the burden of showing he suffered injury as a result of purchasing and relying on Hershey’s statements. Plaintiff was required to prove that he “lost money or property,” as a result of Hershey’s deceptive labeling to “demonstrate some form of economic injury.” Kwikset, 51 Cal. 4th at 322-23. Khasin proffered no evidence to show economic injury, but rather claimed that his purchases were “legally worthless” because they are inaccurate representations of what he thought he was purchasing. Alternately, he claimed that he paid a “price premium” because Hershey products with the statement, “natural source of flavanol antioxidants,” were objectively worth less than what he paid.  But the plaintiff's evidence did not include a model to determine how to calculate this presumed “price premium.”  Hershey produced historical sales data and a consumer survey indicating that there was no price change attributable to the labeling phrase, “natural source of flavanol antioxidants.” Therefore, plaintiff had not met his burden of showing that he suffered economic injury through loss of money or property, as a result of Hershey’s alleged deceptive labeling.

Therefore, the Court granted the defense motion.


Medical Monitoring Class Action Rejected at Pleading Stage

A federal court recently rejected a proposed medical monitoring class action brought by alleged Pepsi drinkers.  The case reminds readers of the importance of the causation element of medical monitoring claims, even though plaintiffs don't need to allege traditional personal injury.  See Riva v. Pepsico, Inc., No. C-14-2929 EMC, 2015 WL 993350 (N.D. Cal.,  3/4/15).

Plaintiffs alleged that two of defendant's beverages contained levels of a chemical, 4–MeI, that caused them to experience an “increased risk of cancer,” specifically bronchioloalveolar cancer.  Plaintiffs sought  medical monitoring as a remedy; specifically, seeking an order requiring Pepsi to establish a “fund from which those individual class members can seek monetary recovery for the costs of actual or anticipated medical monitoring expenses incurred by them.”  Plaintiffs alleged that outcomes in bronchioloalveolar cancer show a clinically significant benefit from early evaluation, detection, and diagnosis. 

California is one of the few states that recognizes a claim for medical monitoring. “In the context of a toxic exposure action, a claim for medical monitoring seeks to recover the cost of future periodic medical examinations intended to facilitate early detection and treatment of disease caused by a plaintiff’s exposure to toxic substances.” Potter v. Firestone Tire & Rubber Co., 6 Cal.4th 965, 1004–05, 25 Cal.Rptr.2d 550, 863 P.2d 795 (1993). In Potter, the California Supreme Court identified five factors in determining the reasonableness and necessity of monitoring:
(1) the significance and extent of the plaintiff’s exposure to chemicals;
(2) the toxicity of the chemicals;
(3) the relative increase in the chance of onset of disease in the exposed plaintiff as a result of the exposure, when compared to
(a) the plaintiff’s chances of developing the disease had he or she not been exposed, and
(b) the chances of the members of the public at large of developing the disease;
(4) the seriousness of the disease for which the plaintiff is at risk; and
(5) the clinical value of early detection and diagnosis.

Based on such factors, the trier of fact decides, “on the basis of competent medical testimony, whether and to what extent the particular plaintiff’s exposure to toxic chemicals in a given situation justifies future periodic medical monitoring.” Id.

Defendant attacked the medical monitoring claim under Rule 12(b)(6), particularly as to the Potter factors related to whether medical monitoring is reasonable and necessary.  Accordingly, the Court examined the allegations related to these critical Potter factors: plaintiff’s exposure to chemicals; the toxicity of the chemicals; and the relative increase in the chance of onset of disease in the exposed plaintiff as a result of the exposure, when compared to (a) the plaintiff’s chances of developing the disease had he or she not been exposed, and (b) the chances of the members of the public at large of developing the disease.

To demonstrate the proximate causation element of the claim, a plaintiff seeking medical monitoring must. among other things, show the significance of her exposure to the toxic chemical. Potter, 6 Cal.4th at 1009, 25 Cal.Rptr.2d 550, 863 P.2d 795; see also Abuan v. Gen. Elec. Co., 3 F.3d 329, 335 (9th Cir.1993) (applying comparable Guam law on medical monitoring). The California Supreme Court has explained, “[e]vidence of exposure alone cannot support a finding that medical monitoring is ... necessary.” Lockheed Martin Corp., 29 Cal.4th at 1108–09, 131 Cal.Rptr.2d 1, 63 P.3d 913. A plaintiff must demonstrate sufficient severity of exposure (its significance and extent) and that “the need for future monitoring is a reasonably certain consequence of [the] toxic exposure” Id. at 1109, 131 Cal.Rptr.2d 1, 63 P.3d 913 (citation omitted).

In this case, Plaintiffs alleged that the chemical had been found to cause lung tumors in laboratory animals -- at a daily dose thousands of times higher than the amount in soda.  Plaintiffs sought to represent a class of all persons who purchased Diet Pepsi or Pepsi One within a four-year period, regardless of consumption amount. What was missing was any allegation of what the significance of this unspecified exposure to the chemical may be; they did not allege what threshold level of exposure allegedly created the increased risk.

Thus, there was insufficient information about the significance and extent of exposure of the class to make the necessary ultimate showing that “the need for future monitoring is a reasonably certain consequence of [the] toxic exposure” Lockheed Martin Corp., 29 Cal.4th at 1109, 131 Cal.Rptr.2d 1, 63 P.3d 913. They simply failed to demonstrate a credible risk of bronchioloalveolar cancer resulting from the human consumption of cola products at the levels alleged by the named plaintiffs. In fact, if anything, the specific scientific finding incorporated into the Complalnt from the mice study was that the amounts of 4–MeI ingested in cola products “may not be significant.”

The Court also found that Plaintiffs had not sufficiently pled their injury or shown the toxicity of 4–MeI. It was not enough thatt 4–MeI is on the Proposition 65 list of known carcinogens, that a toxicologist has stated that there is “no safe level of 4–MeI,” and that advocacy groups have called for the FDA to ban 4–MeI.  The full picture was that “caramel coloring” (the manufacturing of which allegedly produces 4–MEI as a byproduct) is “generally recognized as safe” when used in accordance with good manufacturing practice and as a food color additive. Under the FDCA, the inclusion of “caramel color” as a “color additive” means that the FDA has determined that caramel coloring has not been found “to induce cancer when ingested by man or animal.” 21 U.S.C. § 379e(b)(5)(B).

So while Plaintiffs adequately pled that 4–MeI is toxic and is, generally speaking, a carcinogen—i.e., that 4–MeI is capable of causing cancer, they had not adequately pled their specific theory of injury—an increased risk for bronchioloalveolar cancer sufficient to warrant medical monitoring—“above the speculative level.” Twombly, 550 U.S. at 555. Plaintiffs are not mice, and there was nothing in the Complaint, or the studies incorporated by reference, to suggest that 4–MeI causes this specific form of lung cancer in humans. The same mouse study found no increased cancer in rats and discussed a “species difference” identified in previous studies in terms of how various species absorb, distribute, metabolize, and excrete this very chemical. So this study did not lead to a plausible inference that these Plaintiffs are at increased risk of the specific lung cancer for which they request screening. 

In short, the  Plaintiffs failed to plead factual content to show they had been injured due to a “significant” increase in their risk of lung cancer sufficient to justify medical testing in the absence of any symptoms or present injury. See Potter, 6 Cal.4th at 1008–09, 25 Cal.Rptr.2d 550, 863 P.2d 795. The only factual content supporting the allegation of increased risk of lung cancer came from scientific studies, which had no demonstrable bearing on cancer toxicity for humans at the consumption levels alleged in the case at bar.

A plaintiff seeking medical monitoring must show a need for “specific monitoring beyond that which an individual should pursue as a matter of general good sense and foresight.” Potter, 6 Cal.4th at 1009, 25 Cal.Rptr.2d 550, 863 P.2d 795. In this case, Plaintiffs sought CT scans of their lungs and molecular screening for lung cancer. Lung scans are not needed to remedy injury absent a credible showing that 4–MeI causes this lung cancer in humans.

The Court took the Prop 65 argument head on.  Proposition 65 is broad; its listing embraces “ substances listed as human or animal carcinogens. In other words, “the Proposition 65 list includes chemicals that are known to cause cancer in animals, even though it has not been definitively established that the chemicals will cause cancer in humans.” Baxter Healthcare, 120 Cal.App.4th at 352, 15 Cal.Rptr.3d 430. Furthermore, listing under Proposition 65 only requires one excess case of cancer in an exposed population of 100,000, assuming lifetime exposure at the level in question. Because the burden on a defendant to fund medical screening for thousands, potentially millions, of people is so substantial, the Potter factors serve a critical gatekeeping function, regulating a potential flood of costly litigation; Potter requires a higher level of proof of health risk than that required for inclusion of a substance on the Proposition 65 list.

Finally, the Court addressed the increased risk above background, and other possible sources of exposure.  There can be many possible “causes,” indeed, an infinite number of circumstances which can produce an injury or disease. A possible cause only becomes “probable” when, in the absence of other reasonable causal explanations, it becomes more likely than not that the injury was a result of its action. This is the outer limit of inference upon which an issue may be submitted to the jury. As a result, under California personal injury law the mere possibility of causing cancer alone is insufficient to establish a prima facie case.

The Court said that this concept of causation inheres in the Potter test for the reasonableness of medical monitoring; the trier of fact considers, among other factors, “the relative increase in the chance of onset of disease in the exposed plaintiff as a result of the exposure, when compared to (a) the plaintiff’s chances of developing the disease had he or she not been exposed, and (b) the chances of the members of the public at large of developing the disease.” Potter, 6 Cal.4th at 1009, 25 Cal.Rptr.2d 550, 863 P.2d 795. Consistent with this approach, the Ninth Circuit has affirmed a grant of summary judgment where plaintiffs seeking medical monitoring failed to introduce facts regarding the “quantitative (or even qualitative) increased risk to individuals.” Abuan, 3 F.3d at 335.

The Complaint admitted that there are many sources of consumption of 4–MeI, including “baked goods, confectionary, extruded breakfast cereals, instantaneous soups, and dark beers” as well as “soy sauce and coffee.” The many alternative sources of 4–MeI was problematic to the establishment of any causation between the Pepsi products at issue and the Plaintiffs’ alleged consumption of 4–MeI “at or above certain threshold levels” (whatever those threshold levels, if any, may be). The many sources of 4–MeI prevented these Plaintiffs from satisfying the third Potter factor.

Where the pleadings reveal so many commonly consumed foods with similar levels of a chemicaI, it is implausible to conclude that any alleged increased risk of cancer is “more likely than not” caused by drinking/using one product, said the Court.  As a result, the Plaintiffs’ claims were dismissed. See Twombly, 550 U.S. at 557 (“something beyond the mere possibility of loss causation must be alleged”).



MDL Defendant Moves for Coordination with State Court Proceedings

General Motors recently moved in Pennsylvania state court to to have discovery in an ignition defect lawsuit coordinated with the discovery in the 150+ cases in a federal multi-district litigation. In re General Motors LLC Ignition Switch Litigation, MDL No. 2543 (JPML June 9, 2014).

In many mass torts, plaintiffs have tactical options about choice of forum, including state vs. federal court.  Defendants have limited ability to impact these choices, including through removal to federal court of appropriate cases, and enforcement of venue rules and the forum non conveniens doctrine. It is not unusual for a federal MDL to be operating in parallel to a number of suits progressing in state courts, raising the same essential issues.

Such a posture raises a number of challenges regarding judicial administration, economy of judicial resources, efficiency for the parties, cost, and consistency (such as on protective orders).  While there is no mechanism for mandatory coordination of state and federal cases in this context, voluntary coordination is often utilized to reduce costs, delay, and the duplication of efforts. E.g., Dunlavey v. Takeda Pharm. Am., Inc., 2012 U.S. Dist. Lexis 120897 (W.D. La. Aug. 23, 2012). Many commentators encourage such coordination and cooperation.  E.g., Manual for Complex Litigation §§20.31, 22.4 (4th ed. 2004); The Judicial Panel on Multidistrict Litigation & The Federal Judicial Center, Ten Steps to Better Case Management: A Guide for Multidistrict Litigation Transferee Judges (2009); See the Multi-jurisdiction Litigation Guide.  

The defense motion here does a nice job of explaining why such coordination is essential and wise in the context of a product liability dispute. The MDL court had entered a Joint Coordination Order to prevent duplication of discovery, avoid undue burden on the courts and parties, save costs, and conserve judicial resources.  Some 13 state courts already adopted a similar order to govern the overlapping issues. 

Such coordination does not prevent a plaintiff from seeking necessary case-specific discovery, either through consent or through a motion. But more than 4 million pages of documents have already been produced in this MDL and it makes no sense to ignore that fact and have state court plaintiffs start discovery afresh. And it is impractical and unfair to expect a defendant to produce key company witnesses for deposition hundreds of time for every individual case, as opposed to allowing state court plaintiffs, through the coordination Orders, to meaningfully participate in the master MDL deposition of the key witnesses. 

Plaintiffs oppose the motion.



Snack Bar Class Action Dismissed

An Illinois federal judge recently dismissed a proposed class action alleging the defendant somehow misled consumers about sugar in its snack bars despite the ingredient label.  See Rochelle Ibarrola v. Kind LLC, No. 3:13-cv-50377, 2015 WL 1188498 (N.D. Ill. 3/12/15).

Plaintiff brought a putative class action against a maker of food products, alleging she purchased its Vanilla Blueberry Clusters with Flax Seeds (“Vanilla Blueberry Clusters”)—on two occasions in 2013. Citing the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill. Comp. Stat. 505/1 et seq., she alleged that the packaging of Vanilla Blueberry Clusters was deceptive in that it claimed that the product contained “no refined sugars.” Specifically, she asserted that evaporated cane juice and molasses, identified on the products’ ingredient lists, are refined sugars. She proposed both a statewide and nationwide class of individuals who purchased any of defendant's four identified Healthy Grains products.

Defendant moved to dismiss, and the Court agreed that plaintiff had not plausibly alleged that a reasonable consumer would be deceived by the statements in light of the label information (and the express warranty claim was dismissed because she did not notify Kind of the alleged breach of warranty as required by Illinois law.)

To prevail on her ICFA claim, plaintiff had to allege and ultimately prove: (1) a deceptive act or practice by Kind, (2) that the deceptive act or practice occurred in the course of conduct involving trade or commerce, (3) that Kind intended that plaintiff rely on the deception, and (4) that the deception caused her actual damages. Oshana v. Coca–Cola Co., 472 F.3d 506, 513 (7th  Cir. 2006). In addition to these elements, common law fraud requires plaintiffs to allege that the plaintiff actually relied on the contested statement and that the defendant acted with scienter. Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir.1997).

Ibarrola claimed, somewhat obliquely, that she understood “no refined sugars” to mean that the Vanilla Blueberry Clusters contained only “naturally occurring” sugars that had not been refined at all.  But, said the Court, this is not plausible. The Court noted it must view the allegedly misleading statement in light of the information available to plaintiff at the time of her purchase.  Plaintiff stated that she read the entire product label before purchasing the Vanilla Blueberry Clusters. In doing so, she learned that the product contained evaporated cane juice and molasses—sweeteners that she alleged are at least partially refined.  That is, because she admitted reading the entire product label she thus saw that the product contained evaporated cane juice, and must have recognized that at least one of the sweeteners in the Vanilla Blueberry Clusters was derived from sugar cane. Thus, taken at her word, plaintiff alleged that she thought that Vanilla Blueberry Clusters contained sugar cane in its natural state, not having gone through any process to refine it.  But sugar cane in its natural state is a grass that contains jointed stalks resembling bamboo. The stalks are made up of fibrous flesh surrounded by bark!

Given this reality, no reasonable consumer would think—as plaintiff alleged that she did—that the sugar contained in the products was still in its natural, completely unrefined state.  Even though a reasonable consumer may not understand everything that happens to sugar cane before its derivative can be added as an ingredient, a reasonable consumer would know that all sugar cane-derived sweeteners suitable for human consumption must be at least partially refined. Reasonable consumers do not believe that they are eating straight sugar cane in Vanilla Blueberry Clusters or any other food product because sugar cane in its natural, unprocessed state is indigestible. That is, a reasonable consumer would recognize that, at the least, impurities or unwanted material must be removed from sugar cane before it can be used as an ingredient in Vanilla Blueberry Clusters, and thus, that all sugar cane-derived sweeteners require some form of  “refining,” as the dictionary defines the term.

Thus, the Court found that the only reasonable conclusion after reading the entire Vanilla Blueberry Clusters label is that defendant used the word “refined” as a term of art to distinguish only partially refined sugars like evaporated cane juice and molasses from fully refined sugars like table sugar.


Courts have dismissed other complaints premised on such logical inconsistencies. E.g., Rooney v. Cumberland Packaging Corp.,  No. 12–CV–0033–H DHB, 2012 WL 1512106, at *4 (S.D.Cal. Apr. 16, 2012). See also Kane v. Chobani, Inc., No. 12–CV–02425–LHK, 2013 WL 5289253, at *6 (N.D.Cal. Sept. 19, 2013).

Here, because plaintiff already had an opportunity to amend, the dismissal was with prejudice.


Tea Class Action Dumped Overboard

A federal court rejected a putative class action against tea maker Twinings North America, Inc. over antioxidant labeling.  See Craig v. Twinings N. Am., Inc., No. 5:14-CV-05214 (W.D. Ark., 2/5/15).

Craig allegedly purchased Twinings Irish Breakfast Tea and other varieties, and then alleged that defendant had misbranded its products.  Craig contended that Twinings mislabeled its tea as a “natural source of antioxidants” in order to charge a premium for the products. Plaintiff alleged that the “teas do not meet the minimum nutrient level threshold to make such a claim which is 10% or more of the Reference Daily Intake (‘RDI’) or the Daily Reference Value (‘DRV’) of a nutrient with a recognized RDI per reference amount customarily consumed.”  According to Craig, tea that has been labeled this way cannot be legally sold or possessed, and misbranded food has no economic value. She further contended that had she known that the misbranded teas were illegal to sell or possess, she would not have purchased the teas. Craig brought  five claims, based upon violations of the Arkansas Food, Drug, and Cosmetic Act (“AFDCA”), Ark. Code Ann. § 20-56-201, et seq.: (1)
violations of the Arkansas Deceptive Trade Practices Act (“ADTPA”), Ark. Code Ann. § 4-88-101, et seq.; (2) unjust enrichment; (3) breach of implied warranty of merchantability;  (4) breach of express warranty; and (5) negligence.

Twining moved to dismiss, arguing Craig's Complaint was preempted by the FDCA as amended by
the Nutrition Labeling and Education Act (“NLEA”). The Supreme Court has long recognized that state laws that conflict with federal law are “without effect.” Maryland v. Louisiana, 451 U.S. 725, 746 (1981).  That is, Congress has the power to preempt state laws. Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152–53 (1982). Federal preemption occurs when: (1) Congress enacts a statute that explicitly preempts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field.” See generally In re Aurora Dairy Corp. Organic Milk Mktg. & Sales Practices Litig., 621 F. 3d 781, 791-94 (8th Cir. 2010). In the instant case, only express preemption was at issue.

The FDCA grants the FDA the responsibility to protect public health by ensuring that “foods are safe, wholesome, sanitary, and properly labeled.” 21 U.S.C. § 393(b)(2). There is no private right of action under the FDCA. 21 U.S.C. § 337(a). In 1990 Congress passed the NLEA, amending the FDCA, to specifically address labeling requirements for certain food and beverage products. Pub. L. No. 101–535, 104 Stat. 2353 (1990). The NLEA provides for national uniform nutrition labeling and expressly preempts state law that is inconsistent with its requirements. 21 U.S.C. § 343–1(a).

Twinings argued that Craig was making an end-run around the private action bar by indirectly bringing a claim to obtain redress for an alleged violation of the FDA labeling regulations. While the NLEA expressly preempts state labeling laws that cover certain described foods, 21 U.S.C. § 343–1, it does not preempt requirements imposed by state law that effectively parallel the NLEA. See, e.g., N. Y. State Rest. Ass'n, 556 F.3d 114, 123 (2nd Cir. 2009); In re Simply Orange Juice Mktg. & Sales Practices Litig., 2013 WL 781785, at *3 (W.D. Mo. Mar. 1, 2013); Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 365, 370 (N.D. Cal. 2010). The purpose of the NLEA is not to preclude all state regulation of nutritional labeling, but to prevent states from adopting inconsistent requirements with respect to the labeling of nutrients. Astiana v. Ben & Jerry's Homemade, Inc., 2011 WL 2111796, at *9 (N.D. Cal. May 26, 2011); Pub. L. No. 101–535, 104 Stat. 2353, 2364 (1990). Thus, the preemption issue here was whether the label violations on which Craig based her claim impose a requirement pursuant to state law that differs from the FDCA. 

Craig’s claims were ostensibly based on the AFDCA, which impliedly adopts the federal provisions as its own. See e.g. Ark. Code Ann. 20-56-209(7) (declaring food to be “misbranded” if it falls
short of standards prescribed by the FDCA). Craig contended that any labeling violation of
the AFDCA is also a violation of the ADTPA and drives her remaining state law claims.

A claim that expressly or implicitly characterizes the level of a nutrient of the type required to be in nutrition labeling may not be made on the label or in labeling of foods unless the claim is made in accordance with federal regulation. 21 C.F.R. § 101.13(b).  The labels attached to the Complaint attest that the tea is a “natural source of antioxidants,” but did not characterize the level of the antioxidants, and thus were not nutrient-content claims as defined in the regs.  “Natural” does not modify the word “source” to indicate the level of the ingredient.. The generic phrase “natural source of antioxidants” did not appear to the court to be either an express or implied nutrient-content claim. Express claims are those that make a direct statement about the level (or range) of a nutrient in the food, and implied nutrient-content claims are those that describe a food or an ingredient in a manner that suggests that a nutrient is absent or present in a certain amount (e.g., “high in oat bran”).  Here, the challenged statement did not fall under either category, as it did not make an
explicit claim or statement regarding antioxidants.

Further, tea and coffee are exempt from certain labeling requirements if they contain insignificant amounts of all of the nutrients and food components required to be included in the declaration of nutrition information.  Antioxidants are not listed in the nutrients required to be on the label.

The court concluded that Craig’s suit could not continue, as the very crux of her argument was that the term “natural source of antioxidants” is a misbranding of Twinings’ teas, and is therefore illegal.
Even if Twinings’ labels contain nutrient-content claims, the product labels do not violate the FDA’s labeling requirements because they do not characterize the level of antioxidants.  Because Craig’s allegations did not violate the FDCA, any related state law claims arising from the same facts were preempted. If allowed to proceed, the state law claims would impose liability inconsistent with the FDCA.

Turning to Craig’s false representation claim, the Court observed that while Craig alleged that “natural source of antioxidants” is a false representation affirmatively made to her by Twinings, and she relied on this representation in making the decision to purchase the teas, Craig has not suffered actual damages as contemplated by the statute.  Craig’s alleged damages were based solely upon Twinings’ alleged violation of the FDA’s general nutrient content labeling regulations. In the instant case, Craig paid for tea and received tea. The Court could not find, therefore, that this product was “not at all what defendant represented.”


MDL Court Rejects Plaintiffs' New Causation Experts

The MDL judge in the Denture Cream Products coordinated litigation has rejected all of plaintiffs' general causation experts. See In re Denture Cream Prods. Liab. Litig., No. 09-2051-MD-Altonaga (S.D. Fla. Jan.. 28, 2015).

Over three and a half years ago, in Chapman. v. Procter & Gamble Distributing LLC, Case No. 9:09-
CV-80625, the MDL court had granted Procter & Gamble’s motion to exclude the opinions of Plaintiffs’ general causation experts. See In re Denture Cream Prods. Liab. Litig., 795 F. Supp. 2d 1345 (S.D. Fla. 2011) . Since Chapman, Plaintiffs claimed to have obtained new evidence in support of their argument that products like Fixodent can cause copper deficiency myeloneuropathy (“CDM”), including clinical, epidemiological, background risk of disease, and dose-response relationship. Defendants filed an omnibus Daubert Motion challenging the reliability and significance of Plaintiffs’ alleged new general causation evidence and opinions — in particular a Fixodent Blockade Study and "Dr. Lautenbach’s cohort study."  The motion argued the previously identified analytical gaps in Plaintiffs’ chain of general causation still remained. In particular, Defendants contended that Plaintiffs still could not establish any of the following, that: (1) someone can ingest enough zinc from Fixodent to place the body in a negative copper balance; (2) a prolonged negative copper balance from denture cream use can lead to a copper deficiency; (3) a dose-response relationship exists between Fixodent and copper deficiency, much less myeloneuropathy; (4) Fixodent users face a greater risk of developing myeloneuropathy than the general population; or (5) a physiological mechanism explains how a copper deficiency can lead to a myeloneuropathy.

The alleged decades’ worth of underlying scientific literature” Plaintiffs relied on to prove general causation — most of which was presented in Chapman — pertained to excess zinc and copper deficiency, or copper deficiency and neurological disorders; it is not specific to the zinc compound in Fixodent. Particularly in light of the millions of consumers who have regularly used Fixodent for
decades without complaint, see Chapman, 766 F.3d at 1304 , the Court concluded first that Plaintiffs had not demonstrated the medical community generally recognizes the zinc compound in Fixodent as a known toxin, and thus the Court undertook an extensive Daubert analysis on the general question of whether Fixodent can cause CDM, in light of the allegedly new evidence. The Court examined Plaintiffs’ new evidence in support of proving general causation, including epidemiological studies, dose-response analysis, and the background risk in particular.

The opinion is quite lengthy, and worth a close read for readers with Daubert issues in toxic tort cases.  A few highlights:  Plaintiffs sought to rely on a recently conducted study supposedly showing the short term effects of zinc in the body.  But the Court could not "turn a blind eye to the myriad, serious methodological flaws in the Fixodent Blockade Study," which did not go just to the weight of the evidence. While some of these flaws, on their own, might not have been serious enough to justify exclusion of the Fixodent Blockade Study; taken together, the Court found this Fixodent Blockade Study was not “good science,” and was not admissible.   Consequently, Plaintiffs still had no evidence of the zinc in Fixodent’s ability to inhibit copper absorption at the relevant site of action — the intestines.

Plaintiffs relied on the opinions of a Dr. Grainger, on dose-response and relying on in vitro studies. Defendants argued Dr. Grainger’s opinions were unreliable because Dr. Grainger did not offer any explanation of how zinc dissociation properties observed in in vitro release designs would transfer to a live human, and did not consider factors that might allow him to make such an extrapolation. The court agreed that Dr. Grainger’s opinions were unreliable. The in vitro dissociation studies were the foundation for all of Dr. Grainger’s conclusions. The portion of his report dedicated to these studies was completely devoid of any pertinent details or analysis. His comments regarding “various in vitro release designs”  lacked support citations, and lacked any discussion about the study designs or methodology, and any details about the individual study results. See Ballard v. Keen Transp., Inc., No. 4:10-cv-54, 2011 WL 474814, at *4 (S.D. Ga. Feb. 3, 2011) (expert’s failure to cite any specific chapter, page, or line on which he based his conclusions “makes it appear that he is not being as careful in his litigation consulting as he is in his ordinary professional work.”).  Dr. Grainger’s failure to explain the relevancy of the in vitro studies to humans or to account for factors needed to make a proper extrapolation was notable given his critique of studies the defendants had relied on.  Accordingly, the court concluded, "In short, Plaintiffs are not much better off than they were at the time of Chapman."

The MDL court also noted that epidemiology is “generally considered to be the best evidence of causation in toxic tort cases.” Kilpatrick, 613 F.3d at 1337 n.8.  Epidemiology is the field of public health and medicine that studies the incidence, distribution, and etiology of disease in human populations. . . . Epidemiologic evidence identifies agents that are associated with an increased risk of disease in groups of individuals, quantifies the amount of excess disease that is associated with an agent, and provides a profile of the type of individual who is likely to contract a disease after being exposed to an agent. Epidemiology focuses on the question of general causation (i.e., is the agent capable of causing disease?) Green, REFERENCE MANUAL ON SCIENTIFIC EVIDENCE 3d ed., at 551–52.  There are two classes of epidemiological evidence: analytical and descriptive. See In re Denture Cream Prods. Liab. Litig., 795 F. Supp. 2d at 1353–54.  Analytical evidence consists of randomized controlled trials, case control studies, and cohort studies, while descriptive evidence consists of case studies and case series. 

Plaintiffs claimed they now had analytical epidemiological evidence to support their theory of general causation — Dr. Lautenbach’s cohort study.  However, Dr. Lautenbach’s cohort study did not account for the lack of information pertaining to the subjects’ denture cream usage, and it was based on the assumption this information was appropriately taken into account by the underlying treating physicians.  Dr. Lautenbach also assumed the treating physicians took into account the amount of denture cream use, claiming it was obviously a volume high enough to trigger that as a designation for physicians.  The court concluded that the extent of Dr. Lautenbach’s reliance was a
complete delegation of his responsibilities as an epidemiologist to assess the subjects’ exposure. The study had severe limitations as a reliable foundation for building a cohort study to formally assess the association between zinc-containing denture cream and CDM. At its core, the basis for Dr. Lautenbach’s cohort study was merely a summary of a collection of case reports, with severely inadequate information about denture cream usage. The layers of unsupportable estimations and
approximations, added to this already shaky foundation, confirmed the Court’s finding that Dr.
Lautenbach’s cohort study was unreliable evidence of general causation.

While plaintiffs had presented "a superficially appealing hypothesis that prolonged use of very large amounts of Fixodent may cause copper deficiency," the law requires more than a general theme to support causation, said the court.  Without Dr. Lautenbach’s cohort study, Plaintiffs continued to have no analytical epidemiological evidence on which to base their inference of causation. In addition to the absence of any analytical epidemiological studies, the absence of data on the background risk of CDM also remained a substantial weakness in Plaintiffs’ experts’ causal reasoning. When analyzing an expert’s methodology in toxic tort cases, the court should pay careful attention to the expert’s testimony about the dose-response relationship. The dose-response  relationship is a relationship in which a change in amount, intensity, or duration of exposure to an agent is associated with a change — either an increase or decrease — in risk of disease. For most types of dose-response relationships following chronic (repeated) exposure, thresholds exist, such that there is some dose below which even repeated, long-term exposure would not cause an effect in any individual.  See generally CASARETT AND DOULL’S TOXICOLOGY: THE BASIC SCIENCE OF POISONS Chs. 1, 4 (McGraw Hill 6th ed.2001).  Often low dose exposures — even for many years — will have no consequence at all, since the body is often able to completely detoxify low doses before they do any damage.  Even Plaintiffs conceded that Fixodent “is safe when used in moderate amounts.” 

So, the Court again found Plaintiffs had not presented sufficient proof of general causation using the indispensable primary methodologies identified by the Eleventh Circuit.


Expert Panel Confirms Safety of BPA Use

We have posted before about the BPA "controversy" egged on by lawyers seeking their next mass tort.  Now comes yet another report on BPA, from the European Food Safety Authority, confirming that the current uses of BPA, including food related uses, pose no significant health risks to consumers of any age.

BPA is a chemical compound used in the manufacture of polycarbonate plastic food contact materials such as re-usable plastic tableware and can coatings (mainly as protective linings). Another widespread application of BPA is in thermal paper commonly used for till/cash register receipts.

EFSA’s expert Panel on Food Contact Materials, Enzymes, Flavourings and Processing Aids (CEF) decided that the publication of a variety of new scientific research on BPA in recent years meant a full re-evaluation of the chemical was timely.

EFSA’s experts estimated the exposure to BPA from dietary and non-dietary sources, and assessed the human health risks posed by exposure to BPA. The resulting risk assessment was just published in the CEF Panel’s “Scientific Opinion on the risks to public health related to the presence of bisphenol A (BPA) in foodstuffs”.

Exposure was assessed for various groups of the human population in three different ways: (1) external (by diet, drinking water, inhalation, and dermal contact to cosmetics and thermal paper); (2) internal exposure to total BPA (absorbed dose of BPA, sum of conjugated and unconjugated BPA); and (3) aggregated (from diet, dust, cosmetics and thermal paper).   BPA toxicity was evaluated by a weight of evidence approach. The CEF Panel established a temporary Tolerable Daily Intake (t-TDI) of 4 μg/kg bw per day. By comparing this t-TDI with the exposure estimates, the CEF Panel concluded that there is no health concern for any age group from dietary exposure or from aggregated exposure. The opinion echoes a similar pronouncement last year by the Food and Drug Administration. 

Expert Engineering Testimony Improperly Admitted

A case from last week reminds us of the importance of appellate review of expert witness admissibility decisions, and the potential impact of junk science on a jury. See Hyundai Motor Co. v. Duncan, No. 140216 (Va. 1/8/15).

Defendant appealed from a judgment entered on a jury verdict in favor of plaintiffs, and argued that the trial court erred in admitting the opinion testimony of the plaintiffs' designated expert witness. The expert testified that the location of the side airbag sensor in the 2008 Hyundai Tiburon being driven by plaintiff in a single-vehicle accident rendered the Tiburon unreasonably dangerous. The state supreme court agreed and reversed the judgment of the circuit court.

Plaintiffs alleged a design defect. and to support their claim, they designated one Geoffrey Mahon, a mechanical engineer, as an expert in airbag design. Mahon expressed the opinion (just a few details) that if the defendant had located the sensor for the side airbag system on the B-pillar of the vehicle (the pillar where the front door closes), approximately 4 to 6 inches from the floor, instead of on the cross-member underneath the driver's seat, the side airbag would have deployed in this accident. Therefore, according to Mahon, the location of the side airbag sensor on the cross-member allegedly rendered the 2008 Tiburon unreasonably dangerous,

Prior to trial, Hyundai moved to exclude Mahon's opinions as having an insufficient foundation because the witness did not conduct any analysis to determine whether the side airbag truly would have deployed if the sensor had been located where Mahon proposed. When deposed, Mahon had testified that in reaching his opinion, he relied upon a computer-aided engineering study conducted by Hyundai which had analyzed 14 potential locations for the side airbag sensor, but he did not adopt any of the 14 locations analyzed by Hyundai for his placement of the side airbag sensor. He admitted he would have to run more tests to verify his location.  And while Mahon believed the best location for the sensor was at the B-pillar, he testified he did no such testing of his own to determine if the side airbag would have actually deployed in the accident had the sensor been placed at any other location. He was nonetheless permitted to express his opinions at trial, over Hyundai's objections.

The court noted that Mahon's initial impression of the airbag system was that “the airbag should have gone off,” but upon further investigation, he concluded that the system was acting as designed -- a design he said was defective. At trial, Mahon agreed that the 2008 Tiburon, with the existing side airbag system, complied with the federal regulatory standard specifically related to side impact protection. He further acknowledged that the 2008 Tiburon “did reasonably well” when Hyundai conducted 22 crash tests in which it ran the vehicle into different types of barriers, at different speeds and angles. As noted, in Mahon's view, the 2008 Tiburon was nevertheless defectively designed and unreasonably dangerous because the sensor for the side airbag system was not located on the B-pillar. 

Consistent with his deposition testimony, Mahon testified at trial that he did not perform an analysis to determine whether the side airbag in the vehicle would actually have deployed if the sensor was in a different location. Mahon conceded that he had no real data demonstrating the real-world performance of a sensor located on the B-pillar that certain distance from the floor. He further agreed that because the airbag system must work quickly, that is the sensor system must decide within 15 milliseconds of a crash event whether an airbag is required and then inflate the airbag in 15 to 50 milliseconds, the location of the sensor is important to the overall crash sensing system such that inches, and even increments smaller than inches, really matter in the determination of the location of the sensor.

The state Supreme Court noted that expert opinion must be premised upon assumptions that have a sufficient factual basis and take into account all relevant variables. Expert testimony founded upon assumptions that have no basis in fact is not merely subject to refutation by cross-examination or by counter-experts; it is inadmissible. Failure of the trial court to strike such testimony upon a motion timely made is error subject to reversal on appeal. Furthermore, expert testimony is inadmissible if the expert fails to consider all the variables that bear upon the inferences to be deduced from the facts observed. See CNH America LLC v. Smith, 281 Va. 60, 67, 704 S.E.2d 372, 375 (2011).

In short, concluded the court, Mahon's opinion that the 2008 Tiburon was unreasonably dangerous was without sufficient evidentiary support because it was premised upon his mere assumption that the side airbag would have deployed here if the sensor was at his proposed location—an assumption that clearly lacked a sufficient factual basis and disregarded the variables he himself acknowledged as bearing upon the sensor location determination. Although experts may extrapolate opinions from existing data, a trial court should not admit expert opinion which is connected to existing data only by the ipse dixit of the expert. General Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997) (decided under the version of Fed.R.Evid. 702 which the General Assembly adopted, verbatim, in current Va. Code § 8.01–401.3(A)). The expert's opinion that the vehicle was unreasonably dangerous was based on his ipse dixit assumption that the side airbag would have deployed in the crash if the sensor had been located on the B-pillar. But the “analytical gap” between the data Mahon relied upon from Hyundai's location study and the opinion he proffered at trail was simply too great. Therefore, Mahon's opinion was inadmissible, and the trial court abused its discretion in admitting it.

The plaintiffs relied upon Mahon's opinion that the 2008 Tiburon was unreasonably dangerous to satisfy their burden of proving that Hyundai breached its implied warranty of merchantability. Because Mahon's opinion supplied the only support for the claim that the vehicle was unreasonably dangerous, the inadmissibility of Mahon's opinion was as a matter of law fatal to the claim and entitled Hyundai to judgment as a matter of law.


Design Defect Claim Rejected for Lack of Cost Estimate on Alternative Design

A federal court in Texas recently rejected design defect claims in a product liability case when plaintiff failed to offer a required cost estimate for the proposed alternative design. See Flynn, et al v. American Honda Motor Co. Inc., et al, No. 4:11-cv-3908 (S.D. Tex. 2015).

Plaintiff was involved in a fatal a collision with a Chevrolet truck. Ms. Flynn’s airbags deployed but, as alleged in the complaint, supposedly only after a delay.  Her parents brought this suit to recover damages resulting from the allegedly defective airbag system.  In the three years since this suit was filed, the parties had engaged in extensive discovery, including investigations by and depositions of numerous expert witnesses. Honda moved for summary judgment on Plaintiffs’ claims of a design defect under theories of strict liability, breach of warranty, and negligence.

Under Federal Rule of Civil Procedure 56, summary judgment is warranted if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). Importantly, “the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material.” Willis v. Roche Biomed. Lab., 61 F.3d 313, 315 (5th Cir.1995). Material facts are those whose resolution “might affect the outcome of the suit under the governing law.” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Id. A court may consider any evidence in the record, “including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed. R. Civ. P. 56(c)(1)(A). “However, neither conclusory allegations nor hearsay, unsubstantiated assertions, or unsupported speculation will suffice to create or negate a genuine issue of fact.” Neal v. City of Hempstead, Tex., No. 4:12-CV-1733, 2014 WL 3907770, at *1 (S.D. Tex. Aug. 11, 2014).

Texas products liability law recognizes three kinds of product defects that will give rise to an actionable claim: manufacturing defects, design defects, and marketing defects. Temple EasTex, Inc. v. Old Orchard Creek Partners, Ltd., 848 S.W.2d 724, 732 (Tex. App. 1992), writ denied, (Sept. 29, 1993). Liability for personal injuries caused by a product's defective design can be imposed under several underlying legal theories, among them negligence, breach of warranty, and strict products liability. The requisite proof for recovery on a design defect claim was prescribed by statute in 1993 and made the same for any legal theory asserted.” Hyundai Motor Co. v. Rodriguez ex rel. Rodriguez, 995 S.W.2d 661, 664 (Tex. 1999). To prevail on his design defect claim, a plaintiff must prove that “(1) the product was defectively designed so as to render it unreasonably dangerous; (2) a safer alternative design
existed; and (3) the defect was a producing cause of the injury for which the plaintiff seeks
recovery.” Casey v. Toyota Motor Eng'g & Mfg. N. Am., Inc., 770 F.3d 322, 330 (5th Cir. 2014).

Texas law defines “safer alternate design” as a product design other than the one actually used, that in reasonable probability:

(1) would have prevented or significantly reduced the risk of the plaintiff's personal injury, property damage, or death without substantially impairing the product's utility; and
(2) was economically and technologically feasible at the time the product left the control of the manufacturer or seller by the application of existing or reasonably achievable scientific knowledge.
TEX. CIV. PRAC. & REM. CODE § 82.005(b). See also Casey, 770 F.3d at 331; Hodges v. Mack
Trucks, Inc., 474 F.3d 188, 196 (5th Cir. 2006).

Honda argued that summary judgment was appropriate because plaintiffs did not present such evidence of a safer alternative design -- instead offering an algorithm that was a generalized concept for a design, which is insufficient under Texas law. Honda used one algorithm and Plaintiffs proposed that a different one – an algorithm patented by Plaintiffs’ expert – should have been used instead. The question of whether an algorithm and its alleged fit to a particular vehicle can constitute a safer alternative design was, the court said, one it need not consider here because, in an event, of Plaintiffs’ failure to provide evidence of economic feasibility. By definition, a safer alternative design must be reasonably probable to be economically feasible at the time the product left control of the manufacturer. See TEX. CIV. PRAC. & REM. CODE § 82.005(b)(2). “To establish economic feasibility, the plaintiff must introduce proof of the ‘cost of incorporating [the] technology.’” Casey, 770 F.3d at 334 (citing Honda of Am. Mfg., Inc. v. Norman, 104 S.W.3d 600, 607 (Tex.Ct.App.2003)). “To prove economic feasibility where the product is not yet in use, courts generally require a party to present evidence of either an estimate or range of the cost of the alternative design.” Casey, 770 F.3d at 335 (citing Brochtrup v. Mercury Marine, 426 Fed.Appx. 335, 339 (5th Cir.2011) (concluding that testimony from builder of alternative design that building cost was $400 was sufficient evidence of economic feasibility to avoid judgment as a matter of law); A.O. Smith Corp. v. Settlement Inv. Mgmt., No. 2–04–270–CV, 2006 WL 176815, at *3–4 (Tex. Ct. App. Jan. 26, 2006) (concluding that detailed testimony about how proposed alternative design would add between $5 and $200 per unit was some evidence of economic feasibility). 

In this case, Plaintiffs presented no evidence of either an estimate or a range of the cost of implementing their expert's alternative algorithm. Specifically, the expert report and deposition transcript offered no such calculation, and thus the court found summary judgment appropriate for Honda on Plaintiff’s design defect claim.



New Year's Fitness Resolution- Drop the Fitness Tracker Class Action

Surveys show that getting fit is one of the top 5 New Year's resolutions.  So perhaps timely that a federal court recently dismissed a proposed nationwide class concerning fitness-tracker wristbands. See Frenzel v. Aliphcom, No. 14-cv-03587-WHO (N.D. Cal., 12/29/14). While there also was discussion in the opinion of the motion to dismiss various counts of the complaint under California law, let's focus on the class allegations.

Defendant markets and sells a fitness-tracker wristband that contains an accelerometer designed to track the user's daily movements and sleep patterns. Users can connect, or "sync," their device to a mobile application that helps them set personal exercise and diet goals, monitor their progress, and collaborate with other users. The product box states: "Battery life up to 10 days."   It is available in major retail stores across the country and online. Defendant has distributed three generations of the device.

Frenzel alleged that each generation has been plagued with power problems, including significant delay in charging, syncing problems, flashing lights indicating low charge, extremely short battery life, and failure to charge at all. Even with later generations, plaintiff alleged, consumers continued to complain about the device's performance, and multiple articles appeared online describing the ongoing power problems. 

Frenzel resides in Kansas City, Missouri and is a Missouri citizen. In November 2012, Frenzel purchased a second generation device, and before purchasing the device, Frenzel  allegedly reviewed defendant's marketing materials and representations, including that the battery is expected to last for 10 days when fully charged.  Within a few months, Frenzel's device allegedly stopped maintaining its charge. Frenzel contacted defendant and was issued a replacement second generation version.  The replacement also allegedly experienced power problems as well. On the basis of these allegations, Frenzel sought to represent a national class defined as all persons who purchased any of the three generations for personal use, excluding those who purchased the product for resale.

Defendant moved to dismiss.  A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible when it allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. In considering whether the complaint is sufficient to state a claim, the court need not accept as true allegations that contradict matters properly subject to judicial notice. In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). Nor is the court required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. Id. It is within the district court's purview to reject, as implausible, allegations that are too speculative to warrant further factual development.  See Dahlia v. Rodriguez, 735 F.3d 1060, 1076 (9th Cir. 2013). 

A threshold issue was choice of law. Defendant contended that under Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), Frenzel's claims should be governed by the law of the state in which he purchased his device (which Frenzel conceded was not California). Defendant argued that plaintiff's claims under California law (the CLRA, UCL, and FAL) must therefore be dismissed. Also, defendant made the separate argument that under Mazza, Frenzel cannot maintain a national class action that would apply California law to nonresident class members who purchased their devices in other states. 

In Mazza, a putative class sued Honda for violations of the CLRA, UCL, and FAL. Honda was headquartered in California, and the alleged misrepresentations emanated from California, but the transaction that caused the alleged injury (i.e., the lease or purchase of a Honda automobile), had occurred in other states for the majority of class members. The Ninth Circuit reversed the district court's certification of a national class after concluding that, under California's choice of law rules, each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place. The Ninth Circuit found that there were material differences between the consumer protection regimes of California and a number of other states, and that each state's interest in deciding for itself how to balance the range of products and prices offered to consumers with the legal protections afforded to them outweighed California's attenuated interest in applying its law to residents of foreign states. Id. at 590-94.

Importantly, since Mazza, a number of courts have dismissed CLRA, UCL, and/or FAL claims asserted by named plaintiffs (or on behalf of unnamed class members) who did not purchase the defendant's product in California. See, e.g., Frezza v. Google Inc., No. 12-cv-00237-RMW, 2013 WL 1736788, at *5-6 (N.D. Cal. Apr. 22, 2013); Granfield v. NVIDIA Corp., No. 11-cv-05403-JW, 2012 WL 2847575, at *3 (N.D. Cal. July 11, 2012); Littlehale v. Hain Celestial Grp., Inc., No. 11-cv-06342-PJH, 2012 WL 5458400, at *1-2 (N.D. Cal. July 2, 2012).

Notwithstanding the argument that discovery might be needed to make a choice of law decision, the court here found that in the circumstances of this case, it was not appropriate to delay until class certification to consider the choice of law issue. First, although Mazza was decided at class certification, the principle articulated in Mazza applies generally and is instructive even when addressing a motion to dismiss.  In factually analogous cases, Mazza  was not only relevant but controlling, even at the pleading phase.  Second, while choice of law analysis is often a fact-specific inquiry, this does not necessarily mean that it can never be conducted on a motion to dismiss. There are cases in which further development of the factual record is not reasonably likely to materially impact the choice of law determination. In such cases, there is no benefit to deferring the choice of law analysis until class certification.

The court pointed out  that in Werdebaugh v. Blue Diamond Growers, the court applied the governmental interest test to CLRA, UCL, and FAL claims asserted on behalf of a national class, 2013 WL 5487236, at *15-16, at the class certification but with only minimal fact-specific analysis. That court concluded that a national class could not be certified in light of Mazza. 2014 WL 2191901, at *18-21. Likewise, in Brazil v. Dole Food Co., Inc., the court deferred until class certification to consider whether California state-law claims could be asserted on behalf of nonresident class members, but then held that Mazza precluded certification of a national class. 2014 WL 2466559, at *12-14. As in Blue Diamond, the court was able to reach this conclusion with minimal fact-specific analysis. See id. The court concluded that here it was highly unlikely that discovery would uncover information relevant to whether Frenzel could maintain a national class action asserting claims under California law.

Thus, under California's choice of law rules, Frenzel's claims (both individual and class) had to be dismissed. Frenzel's individual claims were dismissed because he had not identified the state in which he purchased his device, but admitted it was not California. Defendant had the burden to demonstrate the material differences in the relevant law of California and the other state or states with regard to the particular claims and facts of the case, and a plaintiff may not preclude a defendant from making it by obfuscating the state in which he purchased his product. As to Frenzel's class claims, the court found that defendant adequately demonstrated that this was a case, like Mazza, where "each class member's consumer protection claim[s] should be governed by the consumer protection laws of the jurisdiction in which the transaction took place." 666 F.3d at 594. The CLRA, UCL, and FAL claims on behalf of the putative class were subject to dismissal for this reason as well.

Plaintiff sought to rely on a choice of law provision allegedly in the terms and conditions of sale of the product, although he never pleaded such terms in his complaint.  Moreover, the plain language of the terms limited their application to on-line purchases, and plaintiff alleged he purchased his in a store. Also, the allegations of defect did not claim that the product violated the terms and conditions. See Nikolin v. Samsung Electronics Am., Inc., No. 10-cv-01456, 2010 WL 4116997, at *4 (D.N.J. Oct. 18, 2010); see also, In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 903 F. Supp. 2d 942, 964-65 (S.D. Cal. 2012) (rejecting argument that plaintiffs' CLRA, UCL, and FAL claims were governed by the choice of law provision in defendants' terms of service contract, where "[b]y its own terms, . . . the provision dictates only that California law applies to the construction and interpretation of the contract, and thus the provision does not apply to plaintiffs' non-contractual claims asserted under California's consumer protection statutes").

Complaint dismissed with leave to try to amend. 

Another Artificial All Natural Class Action Rejected

We have posted before about the plaintiffs' bar ongoing war on innocuous product labels, especially the popular "natural" claims --seeking to take advantage of consumer protection acts designed for situations in which buyers actually suffer measurable damages.

A recent skirmish in this war involves plaintiff's claims that certain cooking oils were not "all natural." Introduced in 1911, the oils are primarily utilized for baking, frying, marinades, and dressings. Defendant produced nine varieties of oil, all bearing the Crisco name -- four of which were at issue here. Plaintiff proposed a class action, alleging that defendant engaged in false, unfair, deceptive and/or misleading trade practices by misrepresenting to consumers that Crisco oils are "All Natural," when they are, in fact, made allegedly in part from genetically modified plants.  Plaintiff averred that she was damaged by overpaying for a nonexistent product attribute--"All Natural."  

The federal court rejected this proposed class of consumers who allegedly purchased these natural cooking oils. See Randolph v. J.M. Smucker Co., 2014 WL 7330430 (S.D. Fla., 12/23/14).  Our review will focus on ascertainability and predominance.  

The burden of proof to establish the propriety of class certification rests with the advocate of the class. Rutstein v. Avis Rent-A-Car Sys., Inc., 211 F.3d 1228, 1233 (11th Cir. 2000). In order for an action to fall under Rule 23, a party must affirmatively demonstrate his compliance with the Rule. Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (quoting Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011)). It is not sufficient that a party simply plead conformity with the requirements of the Rule; instead, “a party must not only be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, typicality of claims or defenses, and adequacy of representation, as required by Rule 23(a) . . . [t]he party must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b).” Id.  Conclusory statements are insufficient to meet the burden of proof on a motion for class certification). In fact, the Supreme Court has indicated that only after rigorous analysis may certification be granted. See Comcast, 133 S. Ct. at 1432. The trial court can and should consider the merits of the case to the degree necessary to determine whether the requirements of Rule 23 will be satisfied.  Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181, 1197 (11th Cir. 2003); see also Comcast, 133 S. Ct. at 1432 (“Repeatedly, we have emphasized that it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question . . . .”).

Before establishing the explicit requirements of Rule 23(a), a plaintiff must first establish that the proposed class is “adequately defined and clearly ascertainable.  This threshold issue of “ascertainability” relates in part to whether the putative class can be identified: an identifiable class exists if its members can be ascertained by reference to objective criteria. Bussey v. Macon Cnty. Greyhound Park, Inc., 562 F. App’x 782, 787 (11th Cir. 2014).  These “objective criteria” should be “administratively feasible,” meaning that the identification of class members should be “a manageable process that does not require much, if any, individual inquiries.” Id.  The district court must be satisfied that this requirement can be met even before delving into the rigorous analysis of the explicit Rule 23 elements.  If a plaintiff fails to demonstrate that the putative class is clearly ascertainable, then class certification is properly denied. See Walewski v. Zenimax Media, Inc., 502 F. App’x 857, 861 (11th Cir. 2012).   

Defendant contended that plaintiff had not offered a feasible mechanism for determining the purchasers of the Crisco oils containing the offending “All Natural” label. Second, even assuming that plaintiff could identify the oil purchasers, the court would have to make individualized inquiries, specifically, whether the term “All Natural” was a factor in the individual’s purchasing decisions, and how each individual defines the term “natural.” The court was not persuaded by the argument concerning the ability of class members to self-identify as purchasers, mistakenly believing that in challenging administrative feasibility defendant was seeking to require a class-action plaintiff to present proof that the identification of class members would be "next to flawless."  Nevertheless, the court agreed that the facts and circumstances of the instant case presented plaintiffs with substantial difficulties. During the relevant time period, at least nine different Crisco oils frequented retail establishments, but only four of these oils contained the challenged statement. Moreover, the challenged statement was not placed on all four oils uniformly throughout the class period.  Based on these facts, the likelihood that an individual would recall not only which specific kind of oil, but also, when that oil was purchased, complicated identification of the putative class.

This fact pattern reminded the court of Jones v. ConAgra Foods, Inc., No. C 12-01633 CRB, 2014 WL 2702726 (N.D. Cal. June 13, 2014). In Jones, the plaintiff sought to certify a class of  all persons in the state of California who purchased a certain canned tomato product bearing the label statement  "100% Natural" or "Free of artificial ingredients & preservatives" but which contained certain ingredients. Similar to the case at bar, the plaintiff in Jones argued that the class could be ascertained by reference to objective criteria, namely, whether the consumer claimed he purchased one of the products at issue during the class period.  In finding the class to be unascertainable, the Northern District of California recognized that there were literally dozens of varieties with different can sizes, ingredients, and labeling over time and some such cans included the challenged language, while others included no such language at all. Thus, the court identified this as a “subjective memory problem,” and found that “the variation in defendant's products and labels makes self-identification infeasible.” Id; see also Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 5794873, at *15 (N.D. Cal. Nov. 6, 2014).

After an extensive review of the record here, the court was inclined to agree that the class was similarly not ascertainable. The fact that putative class members were highly unlikely to retain proof of purchase for such a low price consumer item might be alone insufficient to defeat certification. However, taking the aforementioned variations in Crisco products in conjunction with the fact that the challenged product is a low-priced consumer item, of which the normal consumer likely does not retain significant memory about, the likelihood of a potential class member being able to accurately identify themselves as a purchaser of the allegedly deceptive product, was "slim." Not only would the individual need to recall purchasing Crisco oil, but also the specific variety purchased, and the specific date on which it was purchased beyond simply within the period between “May 2009 [and] the present.” Furthermore, the nature of the product at issue made it less likely for a consumer to recall a specific purchase. Crisco oil is intended to be an additive ingredient to a final product, rather than a final product directly consumed by the user. This fact made it less likely that the consumer would recall the specific purchase of the cooking oil during a specific time frame.

In fact, the named plaintiff’s own testimony reflected this point, failing to recall the number of times Crisco oils were purchased, when they were purchased, and what variations were purchased. Under the facts and record presented, self-identification through affidavit was not administratively feasible.

The Rule 23(b)(3) claim required that common issues predominate, and under the applicable act, FDUTPA, the labels at issue must have been “likely to mislead the consumer acting reasonably in the circumstances,” that is, a probability, not simply a mere possibility, of deception. Millennium Commc’ns & Fulfillment, Inc. v. Office of Attorney Gen., Dep’t of Legal Affairs, State of Fla., 761 So. 2d 1256, 1263 (Fla. 3d DCA 2000).  So the issue here was whether the challenged misrepresentation was likely to deceive a consumer acting reasonably in the same circumstances. However, like the hurdles presented when attempting resolve the issue of ascertainability, plaintiff had not demonstrated that an objectively reasonable consumer would agree with her individual interpretation of “all natural.” Plaintiff’s own evidence supported the assertion that the use of GMOs is a widely disputed issue; the fact is that there is a lack of consensus on the use of such products. See also Krzykwa, 946 F. Supp. 2d at 1374-75 (noting that the FDA has “repeatedly declined to adopt formal rule-making that would define the term ‘natural’”).  

Finally, predominance also requires that damages resulting from the injury be measurable on a class-wide basis through use of a “common methodology.” Comcast, 133 S. Ct. at 1430. A model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3). The Supreme Court has instructed lower courts to conduct a “rigorous analysis” to determine whether the purported damages model fits the liability case. Id. at 1433. Actual damages for a claim brought under FDUTPA is the difference in the market value of the product or service in the condition which it was delivered and its market value in the condition in which it should have been delivered.  Contrary to plaintiff’s contention, more is required than simply demonstrating the existence of a viable damages model.

That is, plaintiff’s theory of liability rested on the fact that defendant’s product contained a “price premium” by virtue of the “All Natural” label.  But plaintiff had not demonstrated that the proposed damages model would be capable of measuring damages on a class-wide basis and tying those damages to the specific issue of liability, that is, the “All Natural” label. Other than the "bald, unsupported assertion" that this method would work, plaintiff presented no hard-and-fast evidence that the alleged premium was capable of measurement.  Nor had plaintiff demonstrated that the model could isolate a premium received by the inclusion of the alleged misrepresentation. See Werdebaugh, 2014 WL 7148923, at *14 (“Plaintiff has failed to show that his proposed damages stemmed from the defendant’s actions that created the legal liability.”  Accordingly, plaintiff had failed to present sufficient evidence of a viable damages model capable of estimating damages on a class-wide basis as is required by Comcast.

Appeals Court Upholds Successor Liability Reform

A Pennsylvania appeals court issued has upheld an important statutory reform, a law limiting the liability of Pennsylvania-based businesses that have merged with companies facing a risk of asbestos liability. See James Markovsky, et al. v. Crown Cork & Seal Co., et al., No. 2755 EDA 2013 (Pa. Super. 12/22/14).

A 2001 law imposed a limitation on successor asbestos-related liabilities, such that the cumulative
successor asbestos-related liabilities of a domestic business corporation which was incorporated in the Commonwealth prior to May 1, 2001, shall be limited to the fair market value of the total assets of the transferor determined as of the time of the merger or consolidation, and such corporation shall have no responsibility for successor asbestos-related liabilities in excess of such limitation.

Defendant was alleged to be liable based on successor liability, and obtained summary judgment based on the statutory cap, and plaintiff appealed, arguing that the act was unconstitutional, inter alia, because the legislation containing the relevant Section 1929.1 supposedly violated Sections 1 (original purpose) and 3 (single subject) of the Pennsylvania Constitution. 

The court noted that It is well-settled that a statute may be deemed per se unconstitutional if, under the classification, the class consists of one member and is closed to future membership. See Pa. Tpk. Comm'n v. Commonwealth, 899 A.2d 1085, 1098 (Pa. 2006); accord Harrisburg Sch. Dist. v. Hickok, 761 A.2d 1132, 1136 (Pa. 2000) (“[A] classification is per se unconstitutional when the class consists of one member and it is impossible or highly unlikely that another can join the class.”). Here, Section 1929.1 was not per se constitutionally infirm because it does not contain an apparent class consisting of one member that is closed or substantially closed to future membership.  Moreover, based on the record, Appellant had not offered any relevant evidence suggesting that Section 1929.1 is limited to the defendant and that no other company could avail itself of the benefits of the law.  The Appellant carries a heavy burden of proof for purposes of challenging the constitutionality of the act. The statute’s legislative history reflected that its sponsors used the defendant as an example of the statute’s purpose, all the while emphasizing the potential benefit to other similarly situated corporations throughout the Commonwealth.  More importantly, Appellant did not show it is impossible or highly unlikely for other corporations to enjoy the statute’s protection.

The panel also rejected arguments that the law ran afoul of the equal protection provision of the U.S. Constitution by subjecting out-of-state corporations to disparate treatment.

Thus, the trial court did not err as a matter of law in granting the motion for summary judgment. 

A common sense decision, as the legislature clearly saw important policy benefits in terms of merger activity and protection of local employers.

Class Action on Smoke Detectors Dismissed: All Smoke No Fire

A California federal court recently rejected rejected a proposed class action in which plaintiffs alleged smoke alarms were defective in that the product’s packaging allegedly omitted safety information.  See Bird v. First Alert Inc. et al., No. 4:14-cv-03585 (N.D. Cal. ).

The defendant sells two types of smoke detectors — ionization, which the opinion said are better at catching fast-flaming fires, and photoelectric, which are reportedly more sensitive to smoldering fires. The basis of plaintiff's complaint is that the defendant failed to adequately disclose the
dangers of using ionization smoke alarms – specifically, that ionization smoke alarms do
not alert occupants of smoldering-type fires as effectively as photoelectric smoke alarms.  However, the ionization alarm, which Bird purchased, explains these differences clearly on its packaging and recommended the use of both types of alarms for “maximum protection." 

Defendant moved to dismiss. The allegations in the complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).  A motion to dismiss should be granted if the complaint does not proffer enough facts to state a claim for relief that is plausible on its face. See id. at 558-59. W]here the well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct, the complaint has alleged – but it has not shown – that the pleader is entitled to relief.  Although the court generally may not consider material outside the pleadings when resolving a motion to dismiss for failure to state a claim, the court may consider matters that are properly the subject of judicial notice. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Additionally, the court may consider exhibits attached to the complaint, see Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989),

Plaintiff obviously had a high hurdle to overcome to state a claim here, given that the product packaging explains that the two types of smoke alarms respond differently to different types of fires, and recommends that consumers utilize both types. Nevertheless, plaintiff contended that the disclosures on the packaging did not constitute a "warning" and did not amount to a "sufficient disclosure" of the extent of the "safety defect" inherent in the ionization smoke detectors, because they allegedly failed to state that the ionization smoke detectors might not safely alert consumers in time to escape the deadly effects of smoldering fires.

The court recognized that even a nondisclosure claim sounding in fraud must still be pled with particularity. Kearns, 567 F.3d at 1126-27; see also Marolda v. Symantec Corp., 672 F.Supp. 2d 992, 1002 (N.D. Cal. 2009). Specifically, the plaintiff must set forth an explanation as to why the omission complained of  made the warning or label false and misleading in order to state a claim under Rule 9(b). Bias v. Wells Fargo & Co., 942 F.Supp. 2d 915, 935 (N.D. Cal. 2013). Thus, plaintiff must describe the content of the omission and where the omitted information should or could have been revealed, as well as provide representative samples of advertisements, offers, or other representations that plaintiff relied on to make her purchase and that failed to include the allegedly omitted information. See Eisen v. Porsche Cars North Am., Inc.,, 2012 WL 841019 at *3 (citing
Marolda, 672 F.Supp. 2d at 1002). While the complaint alleged that the "packaging" on plaintiff's ionization smoke detector did not contain any warning, instructions, or other information disclosing,
describing, or warning about the smoke detector's inability to adequately, effectively, and
safely detect, warn, alert, and protect occupants from smoldering-type fires,  in fact the packaging did disclose information regarding the performance of ionization alarms in smoldering fires.

Yet, the complaint alleged no facts regarding these disclosures – in particular, when plaintiff looked
at the packaging (if ever), whether she reviewed the disclosures on the packaging (if at all),
or why she disregarded the clear recommendation that she use both ionization and photoelectric alarms. Nor did the complaint allege any facts showing that the disclosures were inadequate.

Motion to dismiss granted without prejudice.

Seventh Circuit Rejects Another Class Settlement

The Seventh Circuit is one of the appeals courts that tends to examine very closely proposed class action settlements.  In a recent case, the court rejected a proposed settlement, finding the distribution to members of a class challenging dietary supplement labeling didn't justify the attorneys' fee award. See Pearson v. NBTY Inc., No. 14-1198 (7th Cir. 11/19/14).

Judge Posner opined for the panel about several class action settlement issues.  Defendants manufactured vitamins and nutritional supplements, including glucosamine pills, which are dietary supplements designed to help people with joint disorders, such as osteoarthritis. Several class action suits were filed in federal district courts across the country alleging violation of several states’ consumer protection laws by making allegedly false claims for glucosamine’s efficacy.  The district court had jurisdiction of this case under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2).

About eight months after the plaintiffs filed this suit in federal district court in Illinois, class counsel in all the cases negotiated a nationwide settlement and submitted it to that court for approval. Judge Posner noted it is typical in class action cases of this sort—cases in which class counsel want to maximize the settlement and the defendants don’t want to settle except for “global” peace—for the class counsel to negotiate a single nationwide settlement and agree to submit it for approval to just one of the district courts in which the multiple actions had been filed.

Here, the district judge approved the settlement, though with significant modifications. As approved, the settlement required payment of $1.93 million in fees to class counsel, plus an additional $179,676 in attorney expenses (attorneys' fees cover billable time and overhead expenses such as office space); $1.5 million in class notice and administration costs, $1.13 million to the Orthopedic Research and Education Foundation, $865,284 to the 30,245 class members who submitted claims, and $30,000 to the six named plaintiffs ($5,000 apiece) as compensation for their role as the class representatives. There had been a stipulation that defendants wouldn’t challenge any attorney fee requests by class counsel up to the agreed amount. Such a stipulation is sometimes called a “clear-sailing” agreement.

Approval of the proposed settlement involved an assessment of the value of the settlement to the class. The district judge valued the settlement at the maximum potential payment that class members could receive, which came to $20.2 million. That valuation, which played a critical role in the judge’s decision as to how much to award class counsel in attorneys’ fees, comprised $14.2 million for class members (based on the contrary-to-fact assumption that every one of the 4.7 million class members who had received postcard rather than publication notice of the class action would file a $3 claim), $1.5 million for the cost of notice to the class, and the fees to class counsel.  The $20.2 million figure had "barely any connection to the settlement’s value to the class," said Judge Posner.  Notice and fees, which together account for $6 million of the $20.2 million, are costs, not benefits. The attorneys’ fees are of course not paid to the class members; and as stated in Redman v. RadioShack Corp., 768 F.3d 622, 630 (7th Cir. 2014), “administrative costs should not have been included in calculating the division of the spoils between class counsel and class members. Those costs are part of the settlement but not part of the value received from the settlement by the members of the class. The costs therefore shed no light on the fairness of the division of the settlement pie between class counsel and class members.”

The $14.2 million “benefit” to the class members was a fiction too, said the panel, since only 30,245 claims were filed, yielding total compensation for the class members of less than $1 million.  Because the amount of the attorneys’ fees that the judge wanted to award class counsel—$1.93 million—was only 9.6 percent of $20.2 million, he thought the amount reasonable. But Judge Posner explained that was not relevant;  the ratio that is relevant is the ratio of the fee to the fee plus what the class members received. Basing the award of attorneys’ fees on this ratio, which shows how the aggregate value of the settlement is being split between class counsel and the class, gives class counsel an incentive to design the claims process in such a way as will maximize the settlement benefits actually received by the class. Here, said the court, the class received a "meager" $865,284. This means the attorneys’ fees represented not 9.6 percent of the aggregate value but an "outlandish" 69 percent.

Although appellate review of approval of class action settlements is limited, Williams v. Rohm & Haas Pension Plan, 658 F.3d 629, 634 (7th Cir. 2011), it is far from pro forma, because the district judge as “a fiduciary of the class, who is subject therefore to the high duty of care that the law requires of fiduciaries.” Reynolds v. Beneficial National Bank, 288 F.3d 277, 280 (7th Cir. 2002).

Judge Posner also took issue with the claim forms.  As experienced class action lawyers, class counsel in the present case must have known, said the panel, that the notice and claim forms, and the very modest monetary award that the average claimant would receive, were bound to discourage filings. The postcard sent to each of 4.7 million class members informed the recipient that to file a claim he must click on a website or call a toll-free phone number. A long and detailed process was not enticing for a $3 reward.

The panel also rejected the $1.13 million cy pres award in this case. A cy pres award is supposed to be limited to money that can’t feasibly be awarded to the intended beneficiaries, here consisting of the class members. Notice costing $1.5 million reached 4.7 million class members. Granted, doubling the expenditure would not have doubled the number of class members notified. But there could have been more notice, or the claims process could have been simplified to generate more returns.  The Orthopedic Research and Education Foundation was entitled to receive money intended to compensate victims of consumer fraud only if it was infeasible to provide that compensation to the class—which had not been demonstrated.

An economically rational defendant will be indifferent to the allocation of dollars between class members and class counsel. Caring only about his total liability, the defendant will not agree to class benefits so generous that when added to a reasonable attorneys’ fee award for class counsel they will render the total cost of settlement unacceptable to the defendant.  Judges have learned that class action settlements are often quite different from settlements of other types of cases, which indeed are bargained exchanges between the opposing litigants. Class counsel rarely have clients to whom they are responsive. The named plaintiffs in a class action, though supposed to be the representatives of the class, are typically chosen by class counsel; the other class members are not parties and have no control over class counsel. The result is an acute conflict of interest between class counsel, whose pecuniary interest is in their fees, and class members, whose pecuniary interest is in the award to the class. Defendants, said Judge Posner, are interested only in the total costs of the settlement to them, and not in the division of the costs between attorneys’ fees and payment to class members.   See Eubank v. Pella Corp., 753 F.3d 718, 720 (7th Cir. 2014).

The panel concluded that the district judge made significant modifications in the settlement, but not enough. The settlement, a "selfish deal" between class counsel and the defendant, dis-served the class. Only one-fourth of one percent of the class members would receive even modest compensation, and for these "meager benefits," the court said, class counsel should not receive almost $2 million.  



Mouthwash Class Action Washed Out

A federal judge earlier this month granted defendant's motion to dismiss a putative class action lawsuit accusing it of using misleading labeling on its market mouthwash.  See Suzanna Bowling v. Johnson & Johnson et al., No. 1:14-cv-03727 (S.D.N.Y., 11/4/14).

The issue here was preemption.  Plaintiff Bowling filed this action on behalf of herself and others similarly situated, alleging that the defendant violated (1) numerous state statutes, as well as (2) the Magnuson-Moss Warranty Act ("MMWA"), when it sold Listerine Total Care ("LTC"), a line of
mouthwashes. Defendant moved to dismiss on the grounds that the state law claims were preempted by the Food Drug and Cosmetics Act ("FDCA"). (Put the MMWA issue aside for today.)

Plaintiffs alleged that purported claims that the mouthwash can help with tooth enamel issues were false. But FDA had trod on this ground in "monographs" that set out labeling regulations for over-the-counter ("OTC") dental hygiene products.  First, in 1980, the FDA published a proposed
monograph ("1980 Monograph"), which found, inter alia, that "[t]he deposition of fluoride in dental enamel has been shown to increase resistance to enamel solubility and therefore dental decay" - or in plain English, flouride is good for preserving enamel. Second, in 1995, the FDA published a final monograph ("1995 Monograph"), which permits manufacturers of OTC drugs containing sodium
fluoride (such as LTC) to market the product as "aid[ing] the prevention of dental .. . decay,"'  along with "other truthful and nonmisleading statements [further] describing [this] use."  In other words, pursuant to the 1995 Monograph, manufacturers of OTC drugs containing sodium fluoride are allowed (1) to represent that such drugs prevent tooth decay and (2) to provide further labeling to explain how decay is prevented.  Furthermore, on multiple occasions, the FDA has sent letters to manufacturers of OTC drugs containing sodium fluoride to clarify the parameters of the Monographs.  In each of these letters, the FDA has objected to certain labeling practices - for example, certain representation that sodium fluoride "fights plaque"- but it has expressed no concern about the label "Restores Enamel."

Defendant moved to dismiss. In the context of OTC drugs, the FDCA expressly preempts state law labeling requirements that are "different from," "addition[ al] to," or "otherwise not identical with" federal labeling requirements. Under this standard, said the court, preemption is certainly appropriate when a state law prohibits labeling that is permitted under federal law. But it is also appropriate when a state law prohibits labeling that is not prohibited under federal law. The standard, in other words, is not only whether a state law actively undermines federal law. It is whether state law diverges from federal law at all.

That means, found the court, that plaintiffs would need to plead facts suggesting that the FDA has
affirmatively prohibited the challenged label language. Otherwise, plaintiffs' state law causes of action would be, in effect, imposing a labeling requirement that is "not identical with" labeling requirements under federal law. "Plaintiffs cannot meet this burden." If the FDA had prohibited the
"Restores Enamel" kind of label, there would obviously have been a regulation saying so. But there was no such regulation. As it stands, observed the court, the FDA has issued a monograph directly on point but declined to indicate either in the monograph itself or in advisory interpretations of the monograph that a phrase like "Restores Enamel" is misleading. If successful, this litigation would thus do exactly what Congress sought to forbid: using state law causes of action to bootstrap labeling requirements that are "not identical with" federal regulation.

Motion granted, 

Federal Court Decertifies "Natural" Damages Class Action- Naturally

A federal court last week ordered decertification of a damages class action challenging “all natural” fruit labels, due to deficiencies with the the plaintiffs' damages model. See Brazil v. Dole Packaged Foods, LLC,  No. 12-1831 (N.D. Cal., 11/6/14).

Our loyal readers know we have posted on Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), and its potential impact on proposed damages class actions. Here, plaintiff alleged that 10 products, three he purchased and seven that were "similar", had labels that were false and misleading, especially with regard to their use of the term "natural," because all ten products contain ascorbic acid (commonly known as Vitamin C) and citric acid, both allegedly synthetic ingredients.

The court granted in part and denied in part the plaintiff's Motion for Class Certification on May 30, 2014. With respect to the damages class, Brazil's damages expert, Dr. Oral Capps, had advanced three models for measuring the alleged price premium attributable to Dole's use of the "All Natural" label statements. Of those three, the Court originally accepted only the model based on econometric or regression analysis. The Court concluded that the Regression Model, as originally presented to the Court at the time, provided a means of showing damages on a class-wide basis through common proof, thus satisfying the Rule 23(b)(3) requirement that common issues predominate over individual ones.  In reaching this conclusion, the Court rejected Dole's argument that class certification should be denied because Dr. Capps had not yet run his full regressions.

On August 21, 2014, Dole filed a Motion to Decertify.  Readers know that the standard used by the courts in reviewing a motion to decertify is the same as the standard when it considered plaintiffs' certification motions. E.g,, Ries v. Ariz. Beverages USA LLC, 2013 WL 1287416 , at *3 (N.D. Cal. Mar. 28, 2013).  On a motion for decertification, the burden remains on the plaintiffs to demonstrate that the requirements of Rules 23(a) and (b) are met.. Id . (quoting Marlo v. United Parcel Serv., Inc., 639 F.3d 942 , 947 (9th Cir. 2011)); see also Negrete v. Allianz Life Ins. Co. of N. Am., 287 F.R.D. 590 , 598 n.1 (C.D. Cal. 2012).

In its Motion to Decertify, Dole made two chief contentions. First, Dole argued that the damages class certified under Rule 23(b)(3) should be decertified because Dr. Capps' Regression Model was fundamentally flawed, rendering it incapable of measuring only those damages attributable to Dole's alleged misbranding. Second, Dole contends that the damages class, as well as the injunction class certified under Rule 23(b)(2) , should be decertified because neither is ascertainable.  Let's focus on the former. 

To satisfy the Rule 23(b)(3) predominance requirement, plaintiff needed to present a damages model that was consistent with his liability case. Comcast, 133 S. Ct. at 1433. More specifically, the regression model purporting to serve as evidence of damages in this class action must measure only those damages attributable to Dole's alleged conduct. Specifically, the type of damages that Brazil's model sought to prove was restitution, a remedy whose purpose is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest. Kor. Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134 , 1149 , 131 Cal. Rptr. 2d 29, 63 P.3d 937 (2003). The UCL, FAL, and CLRA - statutes relied on by plaintiff -- authorize California trial courts to grant restitution to private litigants. See Colgan v. Leatherman Tool Grp., Inc., 135 Cal. App. 4th 663 , 694, 38 Cal. Rptr. 3d 36 (2006). The proper measure of restitution in a mislabeling case, said the court, is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received. Restitution is then determined by taking the difference between the market price actually paid by consumers and the true market price that reflects the impact of the unlawful, unfair, or fraudulent business practices. See Werdebaugh v. Blue Diamond Growers, 2014 WL 2191901 , at *22 (N.D. Cal. May 23, 2014). Accordingly, Brazil had to present a damages methodology that can accurately determine the price premium attributable to Dole's use of the "All Natural Fruit" label statements.

Right out of the box, plaintiff had trouble with the methodology, which originally compared data on identical Dole products: the product before the label statement was introduced, and the same product after its label included the alleged misrepresentation.  But as it turned out, discovery revealed that the labels for nine of the ten products in the certified class did not actually change during the class period. So Dr. Capps had to change his methodology as a result, going to a type of regression methodology known as "hedonic price analysis" or "hedonic regression."  

Then, Dole identified six flaws with the new method [the "Model"]: (1) the Court approved a "sales" regression but Dr. Capps performed a "price" regression; (2) the Model confused "brand" and "label"; (3) the Model improperly used retail-level data; (4) the Model did not control for other variables; (5) the Model had data errors; and (6) the Model failed under Comcast. The Court relied on the latter three arguments to find that Dr. Capps' Model did not sufficiently isolate the price impact of Dole's use of the "All Natural Fruit" labeling statements, and therefore failed under Comcast to adequately tie damages to Dole's supposed misconduct.

Plaintiffs had represented that the Model could control for all other factors that may affect the price of Dole's fruit cups, such as Dole's advertising expenditures, the prices of competing and complementary products, the disposable income of consumers, and population.  But the court agreed with Dole, for example, that Brazil failed to show how the Model controlled for other variables affecting price. With respect to advertising, Dr. Capps admitted that he did not control for this variable -- i.e., whether any price premium on the challenged products was due to Dole's "All Natural Fruit" labeling claim rather than to its advertising expenditures. Moreover, many of Dr. Capps' assumptions about the competing products upon which his model relies were either wrong or untested. For example, it was not shown that Del Monte, Dole's chief competitor, actually made the "All Natural" labeling claim on its products. This methodology cannot survive Comcast, said the court. The whole stated objective of Dr. Capps' model was to isolate the price premium supposedly attributable to Dole's "All Natural Fruit" label claim. So if the model was unsure whether the non-Dole products actually made an "All Natural" labeling claim, then how could a court know whether the price premium the model generates is based on Dole's labeling claim rather than on some other factor? "Put simply, it cannot."   

The Model also overlooked differences in how the products are packaged. Consumers might be willing to pay a premium for fruit products packaged in a certain way. Many of the challenged products, such as the "Pineapple Tidbits," come in "four packs," or four, 4-oz. cups packaged together. But Dr. Capps' model treated a "four pack" as equal to a 16-oz can. There is no control for packaging convenience in the model, even though consumers might well pay a premium for the convenience of four individual fruit cups.

Thus, plaintiff had not met his burden to show that the model he proposed was capable of controlling for all other factors and isolating the price premium, if any, attributable to Dole's "All Natural Fruit" label only. As such, Comcast required the court to find that the Rule 23(b)(3) predominance requirement had not been satisfied.

Damages class decertified.

 (Court rejects ascertainability challenges to injunctive relief class. More on that another day.)


Federal Court Grants Defense Motion to Deny Class Certification

A federal court earlier this month denied class certification in a case involving allegedly defective Sonicare Diamond Clean and Healthy White powered toothbrushes.  Coe v. Philips Oral Healthcare, Inc., No. C13-518MJP (W.D. Wash., 10/10/14).  Readers should note this was another example of a putative class defendant taking the initiative and moving preemptively to strike class allegations.

Plaintiffs sought a certification of a nationwide class of toothbrush purchasers under the Washington Consumer Protection Act-- something having to do with the attachment of the metal shaft of the device affecting the brush strokes per minute.  Defendant moved to deny class certification. We have posted about this tactic before.  Fed.R.Civ. P. 23 does not preclude affirmative motions to deny class certification. In Vinole v. Countrywide Home Loans, Inc.,571 F.3d 935 (9th Cir. 2009), the Ninth Circuit affirmed the right of defendants to bring preemptive motions, provided that plaintiffs are not procedurally prejudiced by the timing of the motion. Id. at 994.

Resolution of the class certification issue, said the court, turned primarily on the choice-of-law analysis, which determines whether Washington law or the laws of putative class members' home states should apply. If Washington law applied, common questions were more likely to predominate for a nationwide class, and a class action may seem more efficient and desirable. On the other hand, if the consumer protection laws of the consumers' home states apply, variations in the laws will overwhelm common questions, precluding certification. The next inquiry then was whether sufficient discovery had taken place to allow for the choice-of-law analysis. The court concluded it had.

Defendant showed that an actual conflict exists between the Washington Consumer Protection Act ("WCPA") and the consumer protection laws of other states.  Because a conflict exists, the court applied Washington's most significant relationship test in order to determine which law to apply. In adopting the approach of the Second Restatement of Law on Conflict of Laws (1971), Washington has rejected the rule of lex loci delicti (the law of the place where the wrong took place).  Instead, Washington's test requires courts to determine which state has the "most significant relationship" to the cause of action.  If the relevant contacts to the cause of action are balanced, the court considers the interests and public policies of potentially concerned states and the manner and extent of such policies as they relate to the transaction. 

Washington, observed the court, has a significant relationship to alleged deceptive trade practices by a Washington corporation. Washington has a strong interest in promoting a fair and honest business environment in the state, and in preventing its corporations from engaging in unfair or deceptive trade practices in Washington or elsewhere. Conversely, said the court, the putative class members' home states have significant relationships to allegedly deceptive trade practices resulting in injuries to their citizens within their borders. The Toothbrushes were sold and purchased, and representations of their quality made and relied on, entirely outside of Washington. No Plaintiff resides in Washington. While Plaintiffs contend Philips Oral Healthcare spent considerable time and resources analyzing the problem and attempting to fix it at their Washington facilities, thus increasing Washington's relationship to the action, the crux of Plaintiffs' action involves the marketing and sale of the Toothbrushes, which took place in other states.

Furthermore, the Ninth Circuit recently recognized the strong interest of each state in determining the optimum level of consumer protection balanced against a more favorable business environment, and to calibrate its consumer protection laws to reflect their chosen balance. Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012). Washington has formally adopted § 148 of the Restatement in the fraud and misrepresentation context. FutureSelect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc., 180 Wn.2d 954, 331 P.3d 29, 36 (2014). Section 148 of the Restatement and its comments make clear that the alleged misrepresentation to consumers and the consumers' pecuniary injuries, both of which occurred in consumers' home states and not in Washington, should be considered the most significant contacts in this particular case. Restatement (Second) of Law on Conflict of Laws § 148 cmts. i, j (1971).

Thus, the court agreed with defendant that consumers' home states had the most significant relationship to their causes of action. Therefore, the consumer protection laws of those states, and not WCPA, would apply. Material differences between the various consumer protection laws prevent Plaintiffs from demonstrating Rule 23(b)(3) predominance and manageability for a nationwide class. Accordingly, the Court granted defendant's motion to deny certification of a nationwide class under WCPA.


Federal Court Denies Class Certification in "Smart Meter" Case

A Florida federal court recently denied class certification in a case alleging negligence against Honeywell  over its installation of smart electric meters at the homes of Florida Power & Light customers. See Cortes, et al. v. Honeywell Building Solutions SES Corporation, et al., No. 1:14-cv-20429 (S.D. Fla., Sept. 25. 2014). 

Plaintiffs alleged the meters were defective, damaging the connections and allegedly causing electrical arcing, which resulted in more extensive damage to items like pools and air conditioners. 
They sought certification of a class defined as “All Florida Power & Light customers in Florida who had a Smart Meter installed at their property after September, 2009 and who have suffered or will suffer unreimbursed economic loss arising from the defendant’s improper installation of the Smart Meter."

The court noted that, although the trial court should not determine the merits of the plaintiffs’ claim at the class certification stage, the trial court can and should consider the merits of the case to the degree necessary to determine whether the requirements of Rule 23 will be satisfied. Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 1188 n.15 (11th Cir. 2003).  Indeed, sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question; certification is proper only if the trial court is satisfied, after a rigorous analysis, that the
prerequisites of Rule 23 have been satisfied. Frequently that rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped.

Before analyzing the Rule 23(a) requirements, a court must determine whether the class definition is adequate. O’Neill v. The Home Depot U.S.A., Inc., 243 F.R.D. 469, 477 (S.D. Fla. 2006); see also Bussey v. Macon Cnty. Greyhound Park, Inc., 562 F. App’x 782, 787 (11th Cir. 2014).  A vague
class definition portends significant manageability problems for the court.  O’Neill, 243 F.R.D.
at 477. “An identifiable class exists if its members can be ascertained by reference to objective criteria."   The analysis of the objective criteria also should be administratively feasible, said the court. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual inquiry.  Bussey, 562 F. App’x at 787.

Defendants argued that membership in the proposed class required a determination whether the
Smart Meter was improperly installed; whether the customer had unreimbursed economic loss;
and whether the loss was caused by the improper installation. The court agreed that the proposed class definition impermissibly required a finding of liability and causation at the class certification stage. For the court to determine membership, it would also need to determine the validity of putative class members’ claims and defenses to those claims. The focus on individuals’ experiences — merely to determine membership in the class — would typically require the putative class members to self-report electrical problems started occurring after the Smart Meters were installed. As such, “the only evidence likely to be offered in many instances will be the putative class member’s uncorroborated claim that he or she” observed electrical problems after the Smart Meter installation. Perez v. Metabolife Int’l, Inc., 218 F.R.D. 262, 269 (S.D. Fla. 2003). This self-interested reporting, often unverifiable but for the Plaintiffs’ own testimony, implicates defendants’ due process rights, and “individualized mini-trials would be required even on the limited issue of class membership.” Id.  The repeated use of these procedures would result in inefficient resolution of the claims, defeating one of the central purposes of the class action tool. See McGuire v. Int’l Paper Co.,
1994 WL 261360, at *5 (S.D. Miss. Feb. 18, 1994).

The court also found the definition of the class impermissibly vague in its inclusion of “customers . . . who have suffered or will suffer unreimbursed economic loss . . . .”  Plaintiffs were requesting a class to be certified of individuals who, at any point in the future, may suffer economic losses as a result of the Smart Meter installations. Apart from the considerations of causation, this proposed subset of class membership was presently impossible to determine.

The court also questioned the showing of numerosity ( a somewhat rare gem for the class action defense reader). Plaintiffs made reference to 603 FPL customer inquiries involving alleged property damage related to Smart Meter installation, but they failed to indicate whether any of these 603 inquiries involve “unreimbursed economic loss,” a requirement contained in the proposed class definition. Plaintiffs then tried to point to evidence of a subset of customers who sought repairs following installation. But nothing in plaintiffs’ factual showing indicated these customers’ problems were caused by the Smart Meter installation — as opposed to any number of other factors — or, again, involved unreimbursed economic loss, two prerequisites to membership in the proposed class. Thus, said the court, these assertions did not come close to showing the number of plaintiffs is large enough to satisfy the numerosity requirement. See Hugh’s Concrete & Masonry Co. v. Southeast Pers. Leasing, Inc., No. 8:12-CV-2631-T-17AEP, 2014 WL 794317, at *2 (M.D. Fla. Feb. 26, 2014) (“[T]he Court cannot find Plaintiff’s bases for numerosity go beyond mere speculation, bare allegations, or unsupported conclusions. Thus, Plaintiff fails the numerosity requirement.”).

Turning to predominance under Rule 23(b)(3), under the law of the Eleventh Circuit, the combination of significant individualized questions going to liability and the need for individualized assessments of damages precludes Rule 23(b)(3) certification. In re Conagra Peanut Butter Products Liab. Litig., 251 F.R.D. 689, 698 (N.D. Ga. 2008).  As is typical, plaintiffs pointed to alleged common issues of defendant's conduct, such as training of employees on installation. While defendants may well have employed similar methods of training employees to install the Smart Meters, those actions were but one component of the tort inquiry. Plaintiffs also would need to prove a breach of duty, if any, was the proximate cause of the damages. The proximate cause determinations would predominate over the determination of the common issue of defendants’ alleged conduct, due to the numerous potential causes of meter can damage. The mere fact that installers were negligent in installations does not mean that negligence caused any damages. Even assuming negligence could be proven, plaintiffs “would still have the bulk of
their cases to prove,” namely injury in fact and causation. Neenan v. Carnival Corp., 199 F.R.D.
372, 376 (S.D. Fla. 2001); see also In re Agent Orange’ Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 165 (2d Cir. 1987) (“The relevant question, therefore, is not whether Agent Orange has the capacity to cause harm, . . . but whether it did cause harm and to whom. That determination is highly individualistic [] and depends upon the characteristics of individual plaintiffs (e.g. state of health, lifestyle) and the nature of their exposure . . . .”).  The fact-finder would still need to make specific determinations of proximate causation for additional plaintiffs, which would predominate over a class-wide determination of negligence.

Certification denied.


Seventh Circuit Rejects Coupon Settlement Terms

The Seventh Circuit has rejected the award of attorneys' fees award for a settlement that would provide the class coupons as a remedy for allegedly printing credit card expiration dates on sales receipts. See Redman v. Radioshack Corp., No. 14-1470 (7th Cir., 9/19/14).

Judge Posner wrote for the panel.  The court had consolidated appeals in two class actions brought under the Fair and Accurate Credit Transactions Act (“FACTA”), 15 U.S.C. § 1681c(g). The Act prohibits putting "the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.”  The goal is security: a thief can of course guess at the expiration date—the date is unlikely to be more than a few years in the future and there are only 12 months in a year; so if he guesses 60 times he’s very likely to hit the jackpot. But if he guesses wrong the first few times that he places a bogus order, the card issuer typically will get suspicious and refuse to authorize his next order.  Additional reasons for requiring deletion of the expiration date include that expiration dates combined with the last four or five digits of an account number can be used to bolster the credibility of a criminal who is making pretext calls to a card holder in order to learn other personal confidential financial information.

If a violation of the statute is willful, a consumer whose receipt contains as a result of the violation data that should have been deleted, but who sustains no harm because no one stole his identity as a result of the violation, is nevertheless entitled to “statutory damages,” as distinct from compensatory or punitive damages, of between $100 and $1000. 15 U.S.C. § 1681n(a)(1)(A). (Statutory damages are in effect bounties—means of inducing private persons to enforce a
regulatory law.)  Let's put aside the court's discussion of willfulness, and focus on the class issues.

The named plaintiffs (realistically, class counsel) agreed with RadioShack on terms of settlement. The essential term was that each class member who responded positively to the notice of the proposed settlement would receive a $10 coupon that it could use at any RadioShack store. The class member could use it to buy an item costing $10 or less (but he would receive no change if the item cost less than $10), or as part payment for an item costing more. He could stack up to three coupons (if he had them) and thus obtain a $30 item, or a $30 credit against a more expensive item. He could also sell his coupon or coupons, but the coupons had to be used within six months of receipt because they would expire at the end of that period. With regard to three‐coupon stacking, the only way a member of the class could obtain more than a single coupon would be to buy one or more coupons from another class member, because the settlement allows only one coupon per
customer no matter how many of his or her RadioShack purchases involved the alleged erroneous receipts. Although the class was assumed to contain 16 million members, notice of the proposed settlement was sent to fewer than 5 million. Of those potential class members who received notice of the proposed settlement, some 83,000 —a little more than one half of one percent of the entire class, assuming the entire class really did consist of 16 million different consumers— submitted claims for the coupon in response.

The court of appeals had lots of problems with the trial court's handling of the proposed settlement, and offered a number of important observations on coupon settlements in particular.

The magistrate judge’s statement that “the fact that the vast majority of class members—over 99.99%—have not objected to the proposed settlement or opted out suggests that the class generally approves of its terms and structure” was "naive, as was her basing confidence in the fairness of the settlement on its having been based on “arms‐length negotiations by experienced counsel.” The fact that the vast majority of the recipients of notice did not submit claims hardly shows “acceptance” of the proposed settlement: rather, said Judge Posner,  it may show oversight, indifference, rejection, or transaction costs. The bother of submitting a claim, receiving and safeguarding the coupon, and remembering to have it with you when shopping may exceed the value of a $10 coupon to many class members. And “arm’s‐length negotiations” are inconsistent with the existence of a conflict of interest on the part of one of the negotiators— class counsel—that may warp the outcome of the negotiations. The magistrate judge’s further reference to “the considerable portion of class members who have filed claims” questionably treated one‐half of one percent as being a “considerable portion.”

Another controversial term of the proposed settlement was that RadioShack would pay class counsel $1 million  in attorneys’ fees, plus pay various administrative costs including the cost of notice. The agreed upon attorneys’ fees, plus the $830,000 worth of coupons at face value, plus the administrative costs, added up to about $4.1 million. Class counsel argued that since the attorneys’
fees were only about 25 percent of the total amount of the settlement, they were reasonable. The district court, agreeing, approved the settlement, precipitating this appeal by two groups of class members who objected to the settlement in the district court.

On appeal, the 7th Circuit noted that he law quite rightly requires more than a judicial rubber stamp when the lawsuit that the parties have agreed to settle is a class action. The reason is the "built‐in conflict of interest" in class action suits. The defendant typically is interested only in the bottom line: how much the settlement will cost it. And class counsel, as rational “economic man,” presumably is interested primarily in the size of the attorneys’ fees provided for in the settlement, for those are the only money that class counsel, as distinct from the members of the class, get to keep. The optimal settlement from the joint standpoint of class counsel and defendant, assuming they are self‐interested, is therefore a sum of money moderate in amount but weighted in favor of attorneys’ fees
for class counsel. The named plaintiff often is the nominee of class counsel, and in any event he is dependent on class counsel’s good will to receive the modest extra compensation ($5,000 in this case) that named plaintiffs typically receive. 

Critically the judge must assess the value of the settlement to the class and the reasonableness of the agreed‐upon attorneys’ fees for class counsel, bearing in mind that the higher the fees the less compensation will be received by the class members. When there are objecting class members, the judge’s task is eased because he or she has the benefit of an adversary process: objectors versus settlors (that is, versus class counsel and the defendant).

Here, the trial judge accepted the settlors’ contention that the defendant’s entire expenditures should be aggregated in determining the size of the settlement; it was this aggregation that reduced the award of attorneys’ fees to class counsel to a "respectable‐seeming" 25 percent. But the roughly $2.2 million in administrative costs should not have been included in calculating the division of the spoils between class counsel and class members. Those costs, said the panel, are part of the settlement but not part of the value received from the settlement by the members of the class. The costs therefore shed no light on the fairness of the division of the settlement pie between class counsel and class members. Of course, without administration and therefore administrative costs, notably the costs of notice to the class, the class would get nothing. But also without those costs class counsel would get nothing, because the class, not having learned of the proposed settlement (or in all likelihood of the existence of a class action), would have derived no benefit from class counsel’s activity.

Therefore, said the court, the ratio that is relevant to assessing the reasonableness of the attorneys’ fee that the parties agreed to is the ratio of (1) the fee to (2) the fee plus what the class members received. At most they received $830,000. That translates into a ratio of attorneys’ fees to the sum of those fees plus the face value of the coupons of 1 to 1.83, which equates to a contingent fee of 55% ($1,000,000 ÷ ($1,000,000 + $830,000)). Computed in "a responsible fashion by substituting actual for face value," the ratio would have been even higher because 83,000 $10 coupons are not worth $830,000 to the recipients. Anyone who buys an item at RadioShack that costs less than $10 will lose part of the value of the coupon because he won’t be entitled to change. Anyone who stacks three coupons to buy an item that costs $25 will lose $5. Anyone who fails to use the coupon within six months of receiving it will lose its entire value. (Six‐month coupons are not unusual, but redemption periods usually are longer. See, e.g., In re Mexico Money Transfer Litigation (Western Union & Valuta), 164 F. Supp. 2d 1002, 1010–11 (N.D. Ill. 2000) (35 months); Henry v. Sears Roebuck & Co., 1999 WL 33496080, at *10 (N.D. Ill. 1999) (nearly three years).) 

The court found it significant that no attempt was made by the magistrate judge or the parties to the proposed settlement to estimate the actual value of the nominal $830,000 worth of coupons. Couponing is an important retail marketing method, and Judge Posner postulated that it would have been possible to obtain expert testimony (including neutral expert testimony by the court’s appointing an expert, as authorized by Fed. R. Evid. 706), or responsible published materials, on consumer response to coupons. And likewise it should have been possible to estimate the value of
couponing to sellers—a marketing device that in some circumstances must be more valuable than cutting price, as otherwise no retailer would go to the expense of buying and distributing coupons.

The court re-emphasized that in determining the reasonableness of the attorneys’ fee agreed to in a proposed settlement, the central consideration is what class counsel achieved for the members of the class rather than how much effort class counsel invested in the litigation. The court noted that in so doing it was not  taking sides in a controversy over the interpretation of the coupon provisions
of the Class Action Fairness Act, which states in part that If a proposed settlement in a class action provides for a recovery of coupons to a class member, the portion of any attorney’s fee award to class counsel that is attributable to the award of the coupons shall be based on the value
to class members of the coupons that are redeemed. Judge Posner thinks "this is a badly drafted statute." To begin with, read literally, the statutory phrase “value to class members of the coupons
that are redeemed” would prevent class counsel from being paid in full until the settlement had been fully implemented. For until then one wouldn’t know how many coupons had been redeemed. An alternative interpretation of “value … of the coupons that are redeemed” would be the face value of the coupons received by class members who responded positively to notice of the class action. In this case that would be 83,000 of the millions of class members who received notice, though not all 83,000 will actually use the coupon.

Perhaps there is no need for a rigid rule—a final choice, for all cases, among the possibilities suggested. In some cases the optimal solution may be part payment to class members and
class counsel up front with final payment when the settlement is wound up. That might be appropriate in a case such as this, said the court. What was inappropriate, however, was an attempt to determine the ultimate value of the settlement before the redemption period ended without even an estimate by a qualified expert of what that ultimate value was likely to prove to be.

Some had called this  an “all‐coupon” case (only benefit was a coupon), but class counsel call it a “zero‐coupon” case. They argued that a coupon that can be used to buy an entire product, and not just to provide a discount, is a voucher, not a coupon. “Voucher” was indeed the term used in the settlement agreement, because the parties didn’t want to subject themselves to the coupon  provisions of the Class Action Fairness Act. But the idea that a coupon is not a coupon if it can ever be used to buy an entire product didn't make any sense to Judge Posner, certainly in terms of the
Act. Why would it make a difference, so far as the suspicion of coupon settlements that animates the Act’s coupon provisions is concerned, that the proposed $10 coupon could be used either to reduce by $10 the cash price of an item priced at more than $10, or to buy the entire item if its price were
$10 or less? Coupons usually are discounts, but if the face value of a coupon exceeds the price of an item sold by the issuer of the coupon, the customer often is permitted to use the coupon to buy the item—and sometimes he’ll be refunded the difference between that face value and the price of the item.

This case illustrated, said the panel, why Congress was concerned that class members can be shortchanged in coupon settlements whether a coupon is used to obtain a discount off the full
price of an item or to obtain the entire item; class counsel’s proposed distinction between discount coupons and vouchers also would impose a heavy administrative burden in distinguishing
coupons used for discounts on more expensive items (“coupons” in class counsel’s narrow sense of coupon) and the identical coupons used to pay the full prices of cheaper items (“vouchers” in class counsel’s lexicon and not “coupons” at all).  Assessing the reasonableness of attorneys’ fees based on a coupon’s nominal face value instead of its true economic value was no less troublesome when the coupon may be exchanged for a full product.

The difficulty of valuing a coupon settlement exposed for the court another defect in the proposed settlement: placing the fee award to class counsel and the compensation to the class members in separate compartments. The $1 million attorneys’ fee is guaranteed, while the benefit of the settlement to the members of the class depends on the value of the coupons, which may well turn out to be much less than $830,000. This guaranty is the equivalent of a contingent‐fee contract that entitles the plaintiff’s lawyer to the first $50,000 of the judgment or settlement plus one‐third of any amount above $50,000—so if the judgment or settlement were for $100,000 the attorneys’ fee would be $66,667, leaving only a third of the combined value (to plaintiff and lawyer) of the
settlement to the plaintiff. Another questionable feature of the settlement for the appeals court was the inclusion of a “clear‐sailing clause”—a clause in which the defendant agreed not to contest class counsel’s request for attorneys’ fees. Because it’s in the defendant’s interest to contest that request in order to reduce the overall cost of the settlement, the defendant won’t agree to a clear‐sailing clause without compensation—namely a reduction in the part of the settlement that goes to the class members, as that is the only reduction class counsel are likely to consider. The existence
of such clauses thus illustrates the danger, said the court, of collusion in class actions between class counsel and the defendant, to the detriment of the class members.

The panel was also bothered by the fact that class counsel did not file the attorneys’ fee motion until after the deadline set by the court for objections to the settlement had expired. That violated Rule 23(h). See In re Mercury Interactive Corp. Securities Litigation, 618 F.3d 988, 993–95 (9th Cir. 2010); see also Committee Notes on the 2003 Amendments to Rule 23. From reading the proposed settlement the objectors knew that class counsel were likely to ask for $1 million in attorneys’ fees, but they were handicapped in objecting because the details of class counsel’s hours and expenses were submitted later, with the fee motion, and so they did not have all the information they needed to justify their objections. 

So, coupon settlement and fee rejected.

FDA Issues Further Nanotechnology Guidance

Late last month, the U.S. Food and Drug Administration issued one draft and three final guidance documents related to the use of nanotechnology in regulated products.

One final guidance addresses the agency’s overall approach for all products that it regulates, while the two additional final guidances and the new draft guidance provide specific guidance for the areas of foods, cosmetics and food for animals, respectively.

Readers may know from our earlier posts (and here and here) that nanotechnology is an emerging technology that allows scientists to create, explore and manipulate materials on a scale measured in nanometers—particles so small that they cannot be seen with a regular microscope. The technology has a broad range of potential applications, such as improving the packaging of food and altering the look and feel of cosmetics.

The three final guidance documents reflect the FDA’s current thinking on these issues after taking into account public comment received on the corresponding draft guidance documents previously issued (draft agency guidance in 2011; and draft cosmetics and foods guidances in 2012).

The FDA  continues to favor an approach to consider the specific characteristics of individual products. All four guidance documents encourage manufacturers to consult with the agency before taking their products to market. Consultations with the FDA early in the product development process may help to facilitate a mutual understanding about specific scientific and regulatory issues relevant to the nanotechnology product, and help address questions related to safety, effectiveness, public health impact and/or regulatory status of the product.

The guidance documents are:

Final Guidance for Industry: Considering Whether an FDA-Regulated Product Involves the Application of Nanotechnology

This guidance outlines overarching considerations for all FDA-regulated products, identifying points to consider when determining whether a product involves the use of nanotechnology. It is intended to help industry and others identify when they should consider potential implications for regulatory status, safety, effectiveness or public health impact that may arise with the application of nanotechnology in FDA-regulated products.

Final Guidance for Industry: Safety of Nanomaterials in Cosmetics

This guidance describes the FDA’s current thinking on the safety assessment of nanomaterials when used in cosmetic products and encourages manufacturers to consult with the FDA on test methods and data needed to support the substantiation of a product’s safety.

Final Guidance for Industry: Assessing the Effects of Significant Manufacturing Process Changes, Including Emerging Technologies, on the Safety and Regulatory Status of Food Ingredients and Food Contact Substances, Including Food Ingredients that are Color Additives

This guidance alerts manufacturers to the potential impact of any significant manufacturing process change, including changes involving nanotechnology, on the safety and regulatory status of food substances. This guidance also describes considerations for determining whether a significant manufacturing process change for a food substance already in the market affects the identity, safety, or regulatory status of the food substance, potentially warranting a regulatory submission to the FDA.

Draft Guidance for Industry: Use of Nanomaterials in Food for Animals

This draft guidance addresses issues related to the use of nanotechnology in food ingredients intended for use in food for animals. Public comments on this draft guidance are requested by September 10, 2014.

The FDA said it will continue to pursue ongoing scientific research and regulatory efforts and will consider new studies and data, as they become available, to determine any future actions. 

Texas Supreme Court Offers Causation Guidance in Mesothelioma Cases

The Texas Supreme Court ruled that a defendant will not have to pay a $12 million verdict in an asbestos case because there was inadequate proof the company’s products actually caused the alleged injury. See Bostic, et al. v. Georgia-Pacific Corp., No. 10-0775 (Texas 7/11/14).

In Borg-Warner Corp. v. Flores, 232 S.W.3d 765 (Tex. 2007), the court had discussed the standards imposed by Texas law for establishing causation in asbestos-disease cases. Flores had concerned a plaintiff suffering from asbestosis. This case involved mesothelioma, and the court held that the standard of substantial factor causation recognized in Flores also applied to mesothelioma cases.  The court did not impose a strict but-for causation standard, but held that the plaintiffs had failed to offer legally sufficient evidence of causation, and accordingly it affirmed the lower court's judgment.

Under section 431 of the Restatement Second of Torts, the Texas court had held that to establish causation in fact the plaintiff must prove that the defendant’s product was a substantial factor in causing the disease, and that mere proof that the plaintiff was exposed to “some” respirable fibers traceable to the defendant was insufficient. The word substantial is used to denote the fact that the defendant’s conduct has such an effect in producing the harm as to lead reasonable persons to regard it as a cause, using that word in the sense of responsibility.  Proof of mere frequency, regularity, and proximity of potential exposure to asbestos (sufficient in some states) is in Texas
necessary but not sufficient, as it provides none of the quantitative information necessary to support causation under Texas law.  While the plaintiff was not required to establish causation with “mathematical precision,” the court clearly required defendant-specific evidence relating to the approximate dose to which the plaintiff was exposed, coupled with evidence that the dose was a substantial factor in causing the asbestos-related disease.

In rejecting a standard that “some” exposure would suffice, the court recognized that most chemically induced adverse health effects clearly demonstrate thresholds; so, there must be reasonable evidence that the exposure was of sufficient magnitude to exceed the threshold before a likelihood of causation can be inferred. Plaintiffs urged that the standards established in Flores were not applicable in a mesothelioma case because relatively smaller quantities of asbestos can result in mesothelioma.  The court concluded that the Flores framework for reviewing the legal sufficiency of causation evidence lent itself to both types of cases. Even in mesothelioma cases proof of “some exposure” or “any exposure” alone will not suffice to establish causation. While the experts in this case testified that smaller amounts of asbestos exposure can result in mesothelioma, that fact alone does not merit a different analysis. With both asbestosis and  mesothelioma, the likelihood of contracting the disease increases with the dose. 

The court noted that If any exposure at all were sufficient to cause mesothelioma, everyone would suffer from it or at least be at serious risk of contracting the disease. Everyone is exposed to asbestos in the ambient air; it is plentiful in the environment, especially if you’re a typical urban dweller.  Plaintiff's expert confirmed that we all have some asbestos in our lungs, but that background levels are sufficiently low that they do not cause disease; instead, multiples of fibers many times over were required to cause mesothelioma.

More fundamentally, if the court were to adopt a less demanding standard for mesothelioma cases
and accept that any exposure to asbestos is sufficient to establish liability, the result essentially
would be not just strict liability but absolute liability against any company whose asbestos-containing product crossed paths with the plaintiff throughout his entire lifetime. However, exposure does not always result in disease. The court said it had never embraced the concept of industry-wide liability on grounds that proof of causation might be difficult. 

If an “any exposure” theory of liability was accepted for mesothelioma cases because science
has so far been unable to establish the precise dose below which the risk of disease disappears, the same theory would arguably apply to all carcinogens. The any exposure theory effectively accepts that a failure of science to determine the maximum safe dose of a toxin necessarily means that every exposure, regardless of amount, is a substantial factor in causing the plaintiff’s illness. This approach negates the plaintiff’s burden to prove causation by a preponderance of the evidence.

Further, said the court, there are cases where a plaintiff’s exposure to asbestos can be tied to a defendant, but that exposure is minuscule as compared to the exposure resulting from other sources. Proof of any exposure at all from a defendant should not end the inquiry and result in automatic liability. The Restatement Third of Torts provides that when an actor’s negligent conduct constitutes only a trivial contribution to a causal set that is a factual cause of harm, the harm is not within the scope of the actor’s liability.

The any exposure theory is also illogical in mesothelioma cases, where a small exposure can
result in disease, because it posits that any exposure from a defendant above background levels
could impose liability, while the background level of asbestos should be ignored. But the expert
testimony in this case was undisputed that the background level varies considerably from location
to location. The court could not see how the theory can, as a matter of logic, exclude higher than normal background levels as the cause of the plaintiff’s disease, but accept that any exposure from an individual defendant, no matter how small, should be accepted as a cause in fact of the disease. Under plaintiffs'  any exposure theory a background dose of 20 does not cause cancer, but a defendant’s dose of 2 plus a background dose of 5 somehow does.

Expanding on the notion of substantial factor, the court noted that in the Havner decision it had enunciated principles in toxic tort cases that (1) expert testimony of causation must be scientifically reliable, (2) the plaintiff must establish the elements of his claim by a preponderance of the evidence, and (3) where direct evidence of causation is lacking, scientifically reliable evidence in the form of epidemiological studies showing that the defendant’s product more than doubled the plaintiff’s risk of injury appropriately corresponds to the legal standard of proof by a preponderance of the evidence. These principles, said the court, should apply to asbestos cases. As to the
availability of scientific studies, asbestos-related disease has been researched for many decades and the population of potentially affected persons numbers in the millions. A more than doubling of the risk must be shown through reliable expert testimony that is based on epidemiological studies or similarly reliable scientific testimony. 

Multiple-exposure cases raise the issues of how the finder of fact should consider exposure
from sources other than the defendant, what proof might be required as to those other sources, and who has the burden of proof regarding those other sources. These are difficult questions, said the court, but a plaintiff should be required to establish more than a doubling of the risk attributable to the defendant’s product;  the court did not require a plaintiff to track down every possible source of asbestos exposure and disprove that those other exposures caused the disease. In multiple-exposure cases few if any plaintiffs could ever establish which particular fibers from which particular defendant caused the disease.  However, when evidence is introduced of exposure from other defendants or other sources, mere proof of more than a doubling of the risk may not suffice to establish substantial factor causation. Suppose, hypothesized the court, a plaintiff shows that his exposure to a particular defendant’s product more than doubled his chances of contracting a disease, but the evidence at trial also established that another source of the substance increased the chances by a factor of 10,000. In this circumstance, a trier of fact or a court reviewing the sufficiency of the evidence should be allowed to conclude that the defendant’s product was not a substantial factor in causing the disease.


Class Complaint Dismissed WITH Prejudice

The Second Circuit recently affirmed a trial court decision dismissing a proposed class action challenging the marketing of certain cosmetic products.  See DiMuro v. Clinique Labs, LLC, No. 13-4551 (2d Cir. 7/10/14) (unpublished).

Plaintiffs filed a putative class action complaint asserting claims under the Connecticut, New Jersey, and Illinois consumer fraud statutes, along with claims for breach of express warranty, breach of implied warranty, and unjust enrichment, arising from defendants’ marketing of seven different cosmetic products sold under the “Repairwear” product line. But while plaintiffs’ consolidated class action complaint asserted claims arising out of the marketing of seven different products, the named plaintiffs only alleged to have purchased and used three of the seven products.

Plaintiffs argued that they nevertheless had class standing to bring claims for Repairwear products that they did not buy-- a commonly attempted but seldom successful tactic.  Here, each of the seven different products have different ingredients, and defendant allegedly made different advertising claims for each product. Unique evidence would therefore be required to prove that the 35-some advertising statements for each of the seven different products were false and misleading. As a result, the court could not conclude that claims brought by a purchaser of one product would raise a set of concerns nearly identical to that of a purchaser of another Repairwear product. Accordingly, plaintiffs lacked standing to bring claims for the four products that they did not purchase.

The court also affirmed the dismissal of plaintiffs’ consumer fraud claims because plaintiffs failed to plead them with the requisite particularity under Fed. R. Civ. P. 9(b).  Rule 9(b) requires that a complaint specify the statements that the plaintiff contends were fraudulent, identify the speaker, state where and when the statements were made, and explain why the statements were fraudulent.  E.g., Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993). One of the cardinal purposes of Rule 9(b) is to “provid[e] a defendant fair notice of plaintiff’s claim, to enable preparation of [a] defense.” See DiVittorio v. Equidyne Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir. 1987). Plaintiffs’ consolidated complaint was wholly conclusory and lacked the particularity required to ensure that defendant received fair notice of the claims.

Specifically, plaintiffs’ "group-pleading" as to the products and the advertisements at issue was
inconsistent with Rule 9(b)’s particularity requirement in that the complaint failed to specify which
of the alleged statements were fraudulent and with regard to what product.  It simply alleged that the products, collectively, cannot work. Given that the seven different products have different ingredients, different intended uses, and that defendant made different advertising claims for each one, this was wholly insufficient to satisfy Rule 9(b). Plaintiffs failed to address the different product ingredients, different intended uses, and different claims.

The complaint also failed to allege that any of the named plaintiffs even used the product, let alone used the product as directed. Similarly, the named plaintiffs did not allege what results they received from their use of the product. They only alleged that they received “no value,” “did not receive what they bargained for,” or “did not get what they paid for.” Since they did not allege which particular advertising claims each of the named plaintiffs relied on when purchasing the product, the conclusion that they did not receive what they bargained for had no ascertainable meaning. 

Plaintiffs’ claims for breach of express warranty and breach of implied warranty also relied on
allegations that the products did not perform as advertised. These allegations were wholly conclusory, and did not provide a sufficient factual basis to establish a plausible breach of any specifically identified express or implied warranty.

Pretty standard stuff, really, but let's turn to the most useful aspect of the analysis.  The complaint was dismissed with prejudice.  Leave to amend is given when justice so requires.  But what too often happens is that plaintiffs file a conclusory, fishing expedition of a complaint; the defendant expends considerable cost to point out the many deficiencies of the pleading; the court dismisses appropriately dismisses the complaint, and plaintiffs use the opinion as their model to draft an amended pleading-- often repeating the process several times, until they finally get a minimally acceptable pleading that bears little resemblance to their original complaint.  Here, the court recognized that plaintiffs are “not entitled to an advisory opinion from the Court informing them of the deficiencies in the complaint and then an opportunity to cure those deficiencies.” Bellikoff v. Eaton Vance Corp., 481 F.3d 110, 118 (2d Cir. 2007). Moreover, a plaintiff need not be given leave to amend if the plaintiff fails to specify either to the district court or to the court of appeals how amendment would cure the pleading deficiencies in its complaint. The district court’s decision to deny plaintiffs leave to amend their complaint was not an abuse of discretion. First, the plaintiffs failed to provide any detail as to what facts they would or could) plead to cure their pleading deficiencies. Second -- and this is very commonly the case --  much if not all of the information necessary for a properly pled complaint was and had always been in the possession of the plaintiffs. For example, which particular representations they relied upon, if and how they had used the products, what the results were.   Useful discussion of why leave should NOT be granted in these consumer fraud cases.

Class Certification Denied on Ascertainability Grounds

A federal court in New Jersey last week rejected a class certification effort by plaintiffs complaining about the marketing of Skinnygirl Margaritas. See Stewart v. Beam Global Spirits & Wine, Inc., No. 1:11-cv-05149 (D.N.J., 6/27/14).

Plaintiffs essentially allege that despite being marketed and sold as an "all natural" product and a "healthy alternative to other commercial Margarita products" defendants' low-calorie, pre-mixed alcoholic beverage product known as "Skinnygirl Margarita" allegedly did not live up to these claims. Plaintiffs purportedly purchased Skinnygirl Margarita based on these alleged representations by defendants in magazine advertisements and on the product packaging.

Plaintiffs moved for class certification, and the issue quickly became ascertainability. In recent years, the Third Circuit, like many courts, has increasingly emphasized the importance of ascertainability of a class with respect to classes certified under Rule 23(b)(3). See, e.g., Carrera v. Bayer Corp., 727 F.3d 300, 305-08(3d Cir. 2013); Hayes v. Wal-Mart Stores, Inc.,725 F.3d 349, 354-56 (3d Cir. 2013); Marcus v. BMW of N. Am., LLC,687 F.3d 583, 592-94 (3d Cir. 2012).  In Marcus, the Third Circuit recognized that "an essential prerequisite of a class action, at least with respect to actions [brought] under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria." Marcus, 687 F.3d at 592-93; see also Hayes, 725 F.3d at 355 ("As 'an essential prerequisite' to class certification, . . . plaintiff must show by a preponderance of the evidence that the class is ascertainable.") (citations omitted); Carrera, 727 F.3d at 306 ("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.") (citations omitted).

Several important objectives are served by virtue of the ascertainability requirement for Rule 23(b)(3) class actions: (1) the requirement eliminates serious administrative burdens that are incongruous with the efficiencies expected in a class action by insisting on the easy identification of class members; (2) the requirement protects absent class members by facilitating the best notice practicable' under Rule 23(c)(2); and (3) the requirement protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable. Marcus, 687 F.3d at 593; see also Hayes,725 F.3d at 355. 

Ascertainability thus consists of at least two important elements -- the class must be defined with reference to objective criteria, and there must be a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition.  See Hayes, 725 F.3d at 355. Ascertainability necessitates an inquiry into whether the defendants' records can ascertain class members, and if not, whether there is a reliable, administratively feasible alternative.  The Third Circuit has made clear that where class members are impossible to identify without extensive and individualized fact-finding or mini-trials, then a class action is inappropriate. Marcus, 687 F.3d at 593.

When considering a plaintiff's proposed mechanism for ascertaining the class, the courts have cautioned against approving a method that would amount to no more than ascertaining by potential class members' "say so" -- by, for example, having potential class members submit affidavits that promise they meet the class definition. Without further indicia of reliability, permitting such a method would essentially force defendants to accept as true absent persons' declarations that they are members of the class, raising serious due process implications.   

Defendants argued that the proposed class members cannot be identified from sales records; they pointed out that the named plaintiffs themselves had no objective evidence, or even consistent testimony, regarding their own alleged purchases. Some defendants were several steps removed from the actual retail purchases, and as a result, never had any record of which consumers bought the product. Absent proper records, it would be impossible to determine class membership without significant inquiry, resulting in a mini-hearing on the merits of each case.  

Plaintiffs proposed a mechanism for ascertaining the Classes which required that putative class members submit affidavits or attestations regarding their membership in the Classes. And defendants responded that they cannot be required to simply accept the self-serving say so of proposed class members; they must be permitted to exercise its due-process right individually to probe each putative class member's statements regarding their claimed purchase. Defendants had a due process right to challenge not only the named plaintiffs' claims that they purchased Skinnygirl Margarita, but also the claims of absent class members. That means individualized fact-finding and mini-trials as to every single absent class member's claim, which in turn means that class treatment is per se inappropriate.

So, plaintiffs' only suggested method for ascertaining the putative class members rested entirely on the submission of affidavits by individuals who claim that they purchased Skinnygirl Margarita; those affidavits would actually  need to include: (1) dates of purchases of Skinnygirl Margarita; (2) locations and retail establishments where purchases were made; (3) frequency of purchases; (4) quantity of purchases; (5) cost of purchases, etc. These types of information would be vital to determining whether each putative member fits within the class definitions in this case.

Moreover, even assuming that the affidavits sought all that information, obtaining this information by way of affidavits did not appear to be an effective method for ascertaining the Classes. Without any independently verifiable proof of purchase through receipts, retail records, or otherwise, putative class members would likely not accurately remember every Skinnygirl Margarita purchase they made during the class period, let alone where these purchases were made and the prices they paid each time. The submission of affidavits supplying such information would be very likely to invite speculation, or worse, not to mention that this process would result in an extremely burdensome task for the Court or a claims administrator even attempting to verify class members' claims. See Weiner v. Snapple Beverage Corp., 2010 WL 3119452, at *13 (S.D. N.Y. Aug. 5, 2010). Such a method cannot fairly be construed as an administratively feasible one which utilizes objective criteria.

Defendants have a right to cross-examine the plaintiffs on their alleged purchases, and cannot be forced to accept as true absent persons' declarations that they are members of the class, without further indicia of reliability.  Despite plaintiffs' attempt to argue otherwise, the rulings in cases like Marcus, Hayes, and Carrera make clear that relying on affidavits of putative class members as the primary method of ascertaining the members of the class is not a prudent course of action for a district court and is generally insufficient to meet the requirements of Rule 23. Such affidavits essentially amount to nothing more than reliance on the subjective "say so" of the putative members that they meet the class definition and are entitled to relief, and practically ignores the need for a class definition based on objective criteria. 

Class certification denied.


Yet Another Artificial "Natural" Class Action Shot Down in the Food Court

A federal court has found numerous issues precluding class certification of three proposed class actions challenging the labels of defendant's food products.  See Jones  v. ConAgra Foods, Inc., No. 12-01633 (N.D. Cal. 6/13/14).

This was a putative consumer class action about allegedly deceptive and misleading labels on three types of food products. The court acknowledged that the Northern District has seen a flood of such cases in recent years.  Plaintiffs have challenged, with limited degrees of success, marketing claims on everything from iced tea to nutrition bars. Plaintiffs here moved to certify three separate classes under Federal Rule of Civil Procedure 23(b)(2) and 23(b)(3)–one for each type of food product at issue. The complaint, as is typical, alleged (1) unlawful, unfair, and fraudulent business acts and practices in violation of California Business and Professions Code section 17200 (“UCL”), (2) misleading, deceptive, and untrue advertising in violation of California Business and Professions Code section 17500 (“FAL”), (3) violations of the Consumers Legal Remedies Act (“CLRA”), and (4) restitution based on unjust enrichment.  Also, as typical, the claims centered on marketing about "natural" - "100% Natural" and a "natural source" of antioxidants. 

Lengthy and comprehensive opinion. Let's focus on just some of the key arguments. Although there is no explicit ascertainability requirement in Rule 23, courts have routinely required plaintiffs to demonstrate ascertainability as part of Rule 23(a). See, e.g., Astiana v. Ben & Jerry’s Homemade, Inc., 2014 WL 60097, at *1 (N.D. Cal. Jan. 7, 2014) (“apart from the explicit requirements of Rule 23, the party seeking class certification must also demonstrate that an identifiable and ascertainable class exists.”). A class is not ascertainable unless membership can be established by means of objective, verifiable criteria. See Xavier v. Philip Morris USA, Inc., 787 F. Supp. 2d 1075, 1088-90 (N.D. Cal. 2011).  Without an objective, reliable way to ascertain class membership, the class quickly would become unmanageable, and the preclusive effect of final judgment would be easy to evade.  Id. at 1089.  While there are a few outliers, multiple courts have concluded that the ascertainability requirement cannot be met in the context of low-cost consumer purchases that customers would have no reliable way of remembering. See, e.g., In re POM Wonderful LLC, 2014 WL 1225184, at *6 (C.D. Cal. Mar. 25, 2014) (unascertainable because “[f]ew, if any, consumers are likely to have retained receipts during the class period” and “there is no way to reliably determine who purchased Defendant’s [juice] products or when they did so.”); Red v. Kraft Foods, Inc., 2012 WL 8019257, at *5 (C.D. Cal. Apr. 12, 2012) (finding unascertainable a proposed class of purchasers of various cracker and cookie products marketed as healthy despite including partially hydrogenated vegetable oil and other unhealthy ingredients); Hodes v. Van’s Int’l Foods, 2009 WL 2424214, at *4 (C.D. Cal. July 23, 2009).

Even assuming that all proposed class members would be honest, the court found it hard to imagine that they would be able to remember which particular products they purchased from 2008 to the present, and whether those products bore the challenged label statements. As defendant pointed out with the Hunt's class, there were “literally dozens of varieties with different can sizes, ingredients, and labeling over time” and “some Hunt’s cans included the challenged language, while others included no such language at all.”  The court also noted a concern that the defendant would be forced to accept class members estimates without the benefit of cross-examination; this was not a case in which the consumers were likely to have retained receipts or where the defendant would have access to a master list of consumers.

Second, there was a standing issue. California courts require plaintiffs who are seeking injunctive relief under these claims -- a change in defendant's sales practices -- to express an intent to purchase the products in the future. See, e.g., Rahman v. Mott’s LLP, 2014 WL 325241, at *10 (N.D. Cal. Jan. 29, 2014) (“to establish standing [for injunctive relief], plaintiff must allege that he intends to purchase the products at issue in the future”); Jou v. Kimberly-Clark Inc., No. 13-3075, 2013 WL 6491158, at *4 (N.D. Cal. Dec. 10, 2013) (“[b]ecause Plaintiffs fail to identify any allegation in their
Complaint that suggests that they maintain an interest in purchasing the diapers or wipes, or
both, in the future, Plaintiffs have not sufficiently alleged standing to pursue injunctive relief").

Here, plaintiffs could point to no evidence that the class reps intended to buy the specific products again. Some still had leftover product and had not used them at all since the litigation was filed. Without any evidence that plaintiffs planned to buy such products in the future, they did not have standing to bring an injunctive class. 

Turning to the damages classes, the court found additional problems. Here, there was a lack of cohesion among the class members, both because consumers were exposed to label statements that varied by can size, variety, and time period (and the challenged ingredients also differed), but more importantly because even if the challenged statements were facially uniform, consumers’
understanding of those representations would not be. Plaintiff's' expert did not explain how the challenged statements, together or alone, were a factor in any consumer’s purchasing decisions. She did not survey any customers to assess whether the challenged statements were in fact material to their purchases, as opposed to, or in addition to, price, promotions, retail positioning, taste, texture, or brand recognition. The expert acknowledged in her deposition that some
customers have never noted the “natural claim,” some have never looked at the ingredients list, some would buy a product regardless of whether the product says “natural,” and some do not care about labeling statements.

This rather startling admission might have something to do with the fact that there is no single, controlling definition of the word “natural.” See Pelayo v. Nestle USA, Inc., 2013 WL 5764644, at *4-5 (C.D. Cal. 2013) (discussing lack of a common understanding of the term “all natural” that is shared by reasonable consumers). It is undisputed that the FDA has not defined the word “natural.” See Lockwood v. ConAgra Foods, Inc., 597 F. Supp. 2d 1028, 1034 (N.D. Cal. 2009). Moreover, it was not clear that the challenged ingredients here are not “natural.”

Here, there are numerous reasons why a customer might buy the products, such as Hunt’s tomatoes, and there was a lack of evidence demonstrating the impact of the challenged label statements. Accordingly, Plaintiffs lacked common proof of materiality.

Multiple courts have refused to certify classes where such individual purchasing inquiries predominated, and the court was not convinced that the common questions would predominate over the individual questions. Who purchased what, when during the relevant class period, which kind of products they purchased, how many they purchased, and whether the kinds they purchased contained the alleged false nutritional information. Whether this is viewed as a predominance question, an ascertainability question, or a manageability question, it was clear that the defendant had no way to determine who the purchasers of its products are, i.e., the identity of class members. And thus it was true that individualized purchasing inquiries will be required to determine how many and which kind of products each class member bought.

Finally, In Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1433-34 (2013), the Supreme Court
held that in order to satisfy the predominance inquiry, plaintiff must also present a model that
(1) identifies damages that stem from the defendant’s alleged wrongdoing and (2) is
“susceptible of measurement across the entire class.” 133 S.Ct. at 1433-34. “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, 268 F.R.D. at 379.  Here plaintiffs' first theory called for return of the purchase price. That method did not account for the value class members received from the products, and so it was incorrect. The products were not
“economically worthless.”  In the alternative, plaintiffs proposed calculating damages via a benefit-of-the-bargain analysis.  But their expert failed to identify a comparator product in order to calculate the alleged percentage of overpayment.  

For a variety of good reasons, certification denied.

Class Certification Reversed in Unfair Trade Practices Case

A Florida appeals court recently decertified a class action with an unusual theory: a car maker who allegedly used headlights that can be too easily stolen in its luxury vehicles. See Porsche Cars v. Peter Diamond, et al., No. 3D12-2829 3d DCA Fla. 6/12/14).  One wonders why and how theft of auto parts is not the responsibility of the thief, but perhaps we digress. 

This case focuses on Porsche’s High Intensity Discharge Headlights. The Headlights are an upscale amenity in the luxury car market.  The intense blue-white light given by the Headlights is closer to natural daylight than the yellowish light of regular headlights. The Headlights provide better nighttime visibility than older types of headlights. Since model year 2000, the Headlights have been offered as standard or optional equipment across the Porsche vehicle line. The Headlights were mounted on modules that were slid into a plastic tray in the fender and clamped in place. This mounting made the Headlights less expensive to install and repair. Plaintiffs alleged it made them "easier" to steal. 

In this proposed class action, the class representatives asserted unfair trade practices and unjust enrichment claims. They alleged the defendant distributed a product highly susceptible to theft without taking any remedial steps. Specifically, the defendant allegedly failed to “notify owners of the flaw and potential risk of theft so they could take their own precautions,” to “offer replacement lights at reduced costs,” and to “work with law enforcement agencies to assist in the prevention of the theft of their headlights.”  This, the representatives members allege, violated the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”).  There was an unjust enrichment claim, and the plaintiffs also alleged that the defendant distributor could have redesigned the vehicles in
various ways, even though a car distributor does not design or manufacture vehicles.

The opinion did not reach the issue of whether such a factual theory of damages is viable (it would have been nice to see a blow struck for common sense). But the decision focused on the legal issues raised by the class action. The trial court certified the case as a rule 1.220(b)(3) class action. In a (b)(3) class action, common issues must predominate over individual issues. Fla. R. Civ. P. 1.220(b)(3). Common issues predominate when, considering both the rights and duties of the class members, the proof offered by the class representatives will necessarily prove or disprove the cases of the absent class members.  The class representative’s case must not merely raise a common question, but that proof of the class representative’s case must also answer the question.

FDUTPA declares unlawful unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.  The term “unfair” is
not defined in FDUTPA. Here, the trial judge defined unfair trade practice as one that “offends established policy” and “is immoral, unethical, oppressive, unscrupulous or substantially injurious to customers.” This definition derives from a 1964 Federal Trade Commission policy statement. In 1980, however, the Federal Trade Commission updated its definition of unfair trade practice. The new definition established a three-pronged test for “unfairness,” which requires that the injury to the consumer:
(1) must be substantial;
(2) must not be outweighed by any countervailing benefits to consumers or competition that the practice produces; and
(3) must be an injury that consumers themselves could not reasonably have avoided.

The court held that Florida law adopted the definition of unfairness contained in the 1980 Policy Statement. The state legislature provided that violations of FDUTPA include violations of the standards of unfairness and deception set forth and interpreted by the Federal Trade Commission or the federal courts. The Florida Legislature amended FDUTPA in 1983, 2001, 2006, and 2013, for the specific purpose of adding to Florida Law the latest interpretations by the Federal Trade Commission or federal courts that occurred since the last statutory amendment.  In light of this history, the 1980 Policy Statement is clearly one of the “standards of unfairness” interpreted by the Federal Trade Commission and federal courts. 

The trial court erroneously adopted the premise that the distributor’s actions could be found to be an unfair trade practice regardless of whether class members knew and could have avoided the risk of the Headlight thefts. From this premise, it reasoned “an individual class member’s pre-purchase knowledge of the potential risk of theft was not relevant to the Plaintiff’s FDUTPA claim.” Since the premise was wrong, so was the conclusion.  The individual class member’s knowledge of the risk of Headlight theft bears on whether the practice was unfair because it impacts whether the consumer could reasonably avoid the risk. Given the nature of the claim in this case—that the Headlights functioned great as headlights but were too susceptible to theft—an individual class members knowledge of the risk of  theft goes to the heart of his or her claim.

To prove an unfair trade practice, the class must prove that the injury caused by the allegedly unfair trade practice could not have been reasonably avoided by the consumers.  The idea behind the reasonably avoidable inquiry is that free and informed consumer choice is the first and best
regulator of the marketplace: consumers may act to avoid injury before it occurs if they have reason to anticipate the impending harm and the means to avoid it, or they may seek to mitigate the damage afterward if they are aware of potential avenues toward that end.  A jury might well find that a consumer who knew the Headlights were targeted by thieves had avenues available to reasonably avoid the risk. This is particularly true where, as here, the alleged problem of theft was greater in some geographic locations than others. How about consumers park in only safe areas, install alarm systems extending to the mounting module, or, if these options were not acceptable, decline to purchase or lease a Porsche with the Headlights? Given the theory of this case, the knowledge of some class members that the Headlights were prone to theft could not be ignored.

Similarly, the determination of unjust enrichment would turn on individual facts. A court would be hard pressed to conclude that a distributor was unjustly enriched when class members with the sophistication and knowledge of the product continued to seek out the Headlights even when they knew of the thefts.

The court concluded that when the individual knowledge and experience of the consumer is an
important element of the cause of action and its defense, there can be no class-wide proof that injury was not reasonably avoidable.

Class certification reversed and remanded. 

Motion to Strike Class Allegations Granted

Mercedes-Benz USA LLC made a successful preemptive strike against class certification in a proposed class action suit over alleged suspension problems in GL model Mercedes vehicles. See Becnel v. Mercedes-Benz USA, LLC, No. 2:14-cv-00003 (E.D. La., 6/3/14).


This matter arose from Plaintiff's claims for negligence, strict product liability, breach of implied warranty, fraud, and violations of the Louisiana Unfair Trade Practice Act,and the Magnuson-Moss Warranty Act. Plaintiff's claims arise from his purchase of a 2008 Mercedes-Benz GL320 from Mercedes-Benz of New Orleans.  Plaintiff brought the vehicle to the Dealer for service several times. Each time that Becnel tendered the vehicle to the Dealer, the Airmatic Suspension System allegedly was cited as the problem and was repaired. Plaintiff alleged that MBUSA knew that the Suspension System was defective but concealed that fact from current, future, and past owners and/or lessors of GL model vehicles. Plaintiff filed a class action complaint on January 2, 2014 against MBUSA on behalf of "[a]ll current and past owners or people who leased Mercedes-Benz USA, LLC GL model of vehicles since 2007."

Defendant moved to strike the class allegations. The standard applied to the motion to strike is essentially identical to the standard applied in class certification motions. See Grant,2010 WL 3303853; see also Markey v. Louisiana Citizens Fair Plan, 2008 WL 5427708 (E.D. La. Dec. 30, 2008)(Vance, J.) ; Truxillo v.Johnson & Johnson, et al., 2007 WL 4365439 *1 (E.D. La. Dec. 12, 2007)(Barbier, J.) (noting that the issues raised in a motion for judgment on the pleadings regarding class allegations overlap with the issues raised in a motion to certify the class.)

Defendant advanced several arguments in support of its motion to strike.   For example, MBUSA contended that due process barred the Court from applying Louisiana law to all the claims of absent class members from other states, and that the application of every other applicable state's laws would be unmanageable. Plaintiff suggested that this argument was premature. He argued that despite the potential for uncommon issues of law, it cannot be denied that there were some common issues of fact. Even if the Court would have to engage in a conflicts analysis to determine if the various state laws were incompatible, that only means that class certification may be improper further along in litigation, but was not improper now.

The court focused on the predominance and manageability challenges that were presented by the proposed class. The Court said it could not accept Plaintiff's assertion that he "cannot foresee any manageability problems." Based on the pleadings alone, the Court pointed to several issues: it was reasonable to assume that this matter will require the application of laws from fifty-one different jurisdictions, as it was readily apparent that at least one person from every state and the District of Columbia will be found to have purchased or leased a 2007 GL Class Mercedes. The Court anticipated serious manageability issues in applying these differing laws to Plaintiff's numerous state law causes of action, including claims for: negligence; products liability based on manufacturing defects, design defects, warning defects, and breach of express warranty; redhibition; fraudulent concealment; and unfair trade practices.

Additionally, Plaintiff, and presumably other class members, faced serious prescription.statute of limitations issues that would ultimately hinge on their ability to show that the discovery doctrine tolled the prescriptive period. The use of the discovery doctrine would necessarily involve the task of determining at what time it became unreasonable for each class member to ignore the problems with the vehicles at issue. See Chevron USA, Inc. v. Aker Mar., Inc., 604 F.3d 888, 893-94(5th Cir. 2010) (noting that in such cases, "the prescriptive period [does] not begin to run until [a plaintiff has] a reasonable basis to pursue a claim against a specific defendant.") The same issue would present itself with regard to the fraud claims, in that the Court would have to determine the element of reliance for each and every class member. See Castano, 84 F.3d at 745 ("fraud class action cannot be certified when individual reliance will be an issue.")

These serious manageability problems far outweighed any benefit that a class action would create, said the court. Plaintiff conclusorily pointed to the usual presumed benefits highlighted in class certification motions, but did not propose any concrete strategy for achieving these goals. In light of the manageability issues. The Court said it could not imagine that that the many issues that would require individual treatment for each class member would not outweigh or at least balance out any benefit conferred by class treatment.

Motion to strike granted.


Beer Claims Rejected Under Twombly

A federal court in Ohio recently dismissed claims alleging that a brewer deliberately overstated the alcohol content of its beers.  See In Re: Anheuser-Busch Beer Labeling Marketing and Sales Practices Litigation, MDL No. 2448 (N.D. Ohio 6/2/14).  

Plaintiffs alleged that the defendant routinely and intentionally added extra water to its finished product to produce malt beverages that “consistently have significantly lower alcohol content than the percentages displayed on its labels.” (Amended Complaint ¶ 17) This practice allegedly results in consumers receiving “watered down beer containing less alcohol than is stated on the labels of Anheuser-Busch’s products.” Readers are probably very familiar with this company and may know that it employs five separate quality control checks to give its consumers the taste and consistent quality they expect. (Your humble blogger is a huge fan of their holiday commercials.) Speaking of water, Anheuser-Busch reduced total water use at its breweries by 37 percent in the last four years.

The Federal Alcohol Administration Act (“FAAA”), 27 U.S.C. §§ 201, et seq., enacted in 1935, governs the manufacture and sale of alcohol nationwide. The FAAA empowers the federal government to adopt regulations that ensure manufacturers “provide the consumer with adequate information as to the identity and quality of the products, [and] the alcoholic content thereof.” 27 U.S.C. § 205(f). In pursuit of this goal, several regulations have been promulgated that specifically address the labeling of malt beverage products. In particular, 27 C.F.R. § 7.71(c)(1) provides that for malt beverages containing 0.5 percent or more alcohol by volume, a tolerance of 0.3 percent (.003) will be permitted, either above or below the stated percentage of alcohol. In addition to the federal statutes and regulations, some state and local governments have enacted laws addressing the manufacturing and sale of alcoholic products, including malt beverages. Often the state and local governments adopt or refer to the federal regulations established under the FAAA in their own statutes and regulations, and it was undisputed that each state at issue in this litigation had adopted the federal regulation.

It was crucial that there was no allegation in the Complaint that the alleged mislabeling of alcohol content in Anheuser-Busch’s products has ever exceeded the tolerance amount of 0.3%. Further, Plaintiffs made very clear in their arguments and statements to the court that they had not alleged, and they had no reason to believe, that Anheuser-Busch has ever included a statement of alcohol content on its labels that varied by more than 0.3 percent from the actual alcohol content of the products in question.

Defendants moved to dismiss.  In order to survive a motion to dismiss, a complaint must provide the grounds of the entitlement to relief, which requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action. See Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007). That is, factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if
doubtful in fact). Accordingly, the claims set forth in a complaint must be plausible, rather than just conceivable. See Twombly, 127 S. Ct. at 1974. Conclusory allegations, or legal conclusions asserted in lieu of factual allegations are not sufficient. Bishop v. Lucent Tech, Inc., 520 F.3d 516, 519 (6th Cir. 2008).

The court here noted that there may be circumstances in which vagueness or ambiguity in the legislative language compels a court to look beyond the words employed to discern the meaning of a statute or regulation. However, neither vagueness nor ambiguity exists in the present case. On its face, 27 C.F.R. § 7.71(c)(1) is clear, specific, and unambiguous: “For malt beverages containing 0.5 percent or more alcohol by volume, a tolerance of 0.3 percent will be permitted, either above or
below the stated percentage of alcohol.” 27 C.F.R. § 7.71(c)(1). There was no dispute that the products at issue were malt beverages containing 0.5 percent or more alcohol by volume and that the stated percentage of alcohol on the labels of these products is within 0.3 percent of the actual percentage of alcohol in the product. 

Despite this seemingly straightforward match between the regulation and the agreed upon facts in this case, Plaintiffs presented an argument in an attempt to modify or, in their words, “clarify” the plain and unambiguous language set forth in the regulation.  For example, the meaning of "tolerance."  The court reasoned that the words of a statute or regulation are to be taken in their natural and ordinary significance and import; and if technical words are used, they are to be taken in a technical sense. The word “tolerance” is undefined in the regulation. When terms are undefined, the everyday understanding and regular usage of the term should instruct the court’s interpretation. Common sense, non-technical interpretations are the default. Cty. of Oakland v. Fed. Housing Finance Authority, 2013 WL 2149964, *3-4 (6th Cir 2013). The ordinary meaning of the word “tolerance” is the allowable amount of variation in any specified quantity.  In its ordinary usage, a “tolerance” is not limited or nullified by the alleged intent, motivation, or cause behind a variation or deviation. Thus, if given its ordinary meaning, there could be no dispute that the tolerance established was to be afforded without regard to the alleged cause or hypothetical intent behind any deviation of 0.3 percent or less between the alcohol content listed on the labels and the actual alcohol content within the regulated products.

The court thus rejected plaintiffs unsupportable view that the word “tolerance” should not be afforded its ordinary meaning, but should be considered to be a term of art that allows only “unintentional deviations” from the goal of absolute accuracy. Plaintiffs offered no legal or industry specific authority for this proposition. None of their cited sources had any connection to the regulation of alcoholic beverages, or other food and beverage labeling; none are sanctioned by the FAAA.   Thus, there was no legal or other relevant authority that would support giving the word
“tolerance” anything other than its ordinary meaning.

Since the leeway afforded by the CFR section is provided without regard to the supposed cause of any deviation or variation, and without regard to the alleged intention behind any statement of alcohol content within the defined tolerance range, the motion to dismiss was granted, with prejudice.

Federal Court Dismisses Cane Juice Class Under Primary Jurisdiction Doctrine

A California federal court took a second look and decided to dismiss a proposed class action related to the ingredient “evaporated cane juice” in guacamole products. See  Swearingen et al. v. Yucatan Foods LP, No. 3:13-cv-03544 (N.D. Cal. 2014).

I am told that guacamole actually dates back to at least the 16th century, and was first made by the Aztecs in Mexico.  The 21st century issue relates to Plaintiffs in this putative class action claiming that use of the term “evaporated cane juice” in the product was unlawful in light of federal food labeling laws and regulations -- and therefore violative of California’s Sherman and Unfair Competition Laws.

Defendants moved to dismiss based on the doctrine of primary jurisdiction.  The primary jurisdiction doctrine applies when there is: (1) [a] need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration. See Clark v. Time Warner, 523 F.3d 1110, 1115 (9th Cir. 2008). The doctrine of primary jurisdiction is not designed to secure expert advice from agencies every time a court is presented with an issue conceivably within the agency’s ambit. It is to be used if a claim requires resolution of an issue of first impression, or of a particularly complicated issue that Congress has committed to a regulatory agency.

Here, the court originally denied the motion, in light of the fact that the FDA had not yet finalized a draft guidance issued more than four years ago, and that it continued to issue warning letters consistent with that earlier position.  However, on March 5, 2014, the FDA issued a notice in the Federal Register reopening the comment period for the draft guidance first issued on October 7, 2009, relative to the use of the term “evaporated cane juice.” That notice stated: “We have not reached a final decision on the common or usual name for this ingredient and are reopening the comment period to request further comments, data, and information about the basic nature and characterizing properties of the ingredient sometimes declared as ‘‘evaporated cane juice,’ how this ingredient is produced, and how it compares with other sweeteners.” In light of this notice, Yucatan moved for reconsideration of the court’s prior order.

Plaintiffs argued in response to the motion that the FDA is not engaged in formal rulemaking, and that even final guidance would not be binding on either the agency or manufacturers. See 21 C.F.R. § 10.115 (“Guidance documents do not establish legally enforceable rights or responsibilities. They do not legally bind the public or FDA.”).  But the notice did indicate that the FDA is actively engaged with the very issue presented in this litigation, one which has prompted a flurry of litigation in the federal courts.  The court noted that the question of evaporated cane juice labeling presents a host of technical issues uniquely within the agency’s expertise. For example, the FDA has specifically solicited comment on the basic nature and characterizing properties of the ingredient in question, and the difference between this ingredient and other sweeteners made from sugar cane.  Deferring to the FDA for resolution of these issues would enhance decision-making and efficiency by allowing the court to take advantage of administrative expertise.

A court presented with an issue to which agency deference is due under the primary jurisdiction doctrine has the discretion either to stay the case or to dismiss it without prejudice. Normally, if the court concludes that the dispute which forms the basis of the action is within the agency’s primary jurisdiction, the case should be dismissed so that the parties may pursue their administrative remedies. Syntek Semiconductor Co. v. Microchip Tech., Inc., 307 F.3d 775, 782 (9th Cir. 2002). Here, concluded the court, it was not necessary in this case for the court to maintain jurisdiction. Plaintiffs in this case sought primarily injunctive relief on behalf of a putative class for various products purchased throughout a four-year period preceding this litigation. Should some amount of time elapse before the FDA issued final guidance on this issue, no particular disadvantage inured to the plaintiffs. 


Long-lasting Lipstick Class Kissed Off

A federal court has rejected a proposed class of plaintiffs who alleged that they purchased deceptively labeled lipstick and foundation, in part because of an inability to show class-wide damages. See Algarin v. Maybelline, LLC,  No. 12-03000 (S.D. Cal., 5/12/14).

Maybelline manufactures, markets, sells, and distributes SuperStay 24HR Lipcolor, a line of lipcolors, and SuperStay 24HR Makeup, a line of skin foundations, Plaintiffs alleged these products were marketed to provide "all day comfort,” that withstands “heat, sweat, and humidity,” but allegedly do not. Plaintiffs alleged they paid a price premium because of the company's claims. On behalf of a proposed California class of consumers who bought the SuperStay products, they asserted claims under the California Unfair Competition Law and Consumers Legal Remedies Act.

In assessing the motion for class certification, the court found that there were issues with the proposed class definition. Plaintiffs defined the class as: “[a]ll California consumers who purchased SuperStay 24HR Lipcolor and/or SuperStay 24HR Makeup for personal use."  Given the number of differences between the two products, including but not limited to, pricing differences, claims differences, labeling differences, and ultimately merits differences, the Court questioned whether creating sub-classes would be needed. Beyond that, though not explicitly stated in Rule 23, courts have held that the class must be adequately defined and clearly ascertainable before a class action may proceed. See Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 365, 376 (N.D. Cal. 2010) .  A class is sufficiently defined and ascertainable if, among other things, it is administratively feasible for the court to determine whether a particular individual is a member. See O’Connor v. Boeing N. American, Inc., 184 F.R.D. 311, 319 (C.D. Cal. 1998).   It must be administratively feasible to determine whether a particular person is a class member as an identifiable class exists if its members can be ascertained by reference to objective criteria, but not if membership is contingent on a prospective member’s state of mind. While here the class definition seemed ascertainable in the sense that class membership might be determined based on an objective criterion -- whether members purchased either the SuperStay lipcolor of the SuperStay makeup --  Plaintiffs failed to provide a reliable method of determining who the actual members of the class were. So it was not ascertainable in the sense that members could actually ever be determined. Plaintiffs failed to show how it was “administratively feasibile" to determine whether a particular person was a class member. The court correctly noted that this inquiry overlaps with the “manageability” prong of Rule 23(b)(3).

Specifically, Maybelline argued that purchasers were unlikely to have documentary proof of purchase of products like these years later, and Maybelline does not maintain a purchaser list or other identifying method. In such a situation, the Court and the parties would necessarily rely on class members to self-identify. There are a number of cases that stand for the proposition that where a court has no way to verify if a purchaser is actually a class member, class certification may be improper. See e.g., Red, 2012 WL 8019257, at *4;  Hodes v. Int’l Foods, 2009 WL 2424214, at
*4 (C.D. Cal. July 23, 2009). Here, the relevant purchase was not a memorable “big ticket” item, but rather small-ticket items that cost around $10.00; it was extremely unlikely the average purchaser would even remember she purchased the specific SuperStay products versus a competitor product.

The court also observed that expert evidence shows that materiality and reliance varied from consumer to consumer, such that these elements were not an issue subject to common proof. Under the claims alleged, a representation is considered material if it induced the consumer to alter his position to his detriment. If the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action. Maybelline introduced evidence of who the reasonable consumer in the target audience was and what drives her in making purchasing decisions. With cosmetics such as the ones at issue here, customers can readily discern how well they work and whether they lived up to the claimed representations. Accordingly, repeat purchasers can not be considered injured in the manner proposed by Plaintiffs. A repeat purchase indicates satisfaction. The evidence suggested that duration was not the only motivating factor in making the purchases; actual duration expectations varied widely among purchasers; and very few consumers actually read the package the way plaintiffs' counsel did and thus could have been “injured” in the manner alleged by Plaintiffs.

This undermined both the commonality and the typicality prerequisites. Based upon the evidence presented, the named Plaintiffs’ reliance on the alleged misrepresentations was not typical of other class members.

Under Rule 23(b)(2), the court concluded that the injunctive relief requested by the plaintiffs wasn't appropriate for the class as a whole. Class members who bought the cosmetics and used them became well aware of the realities of the products, and wouldn't benefit from the relief sought.

Under Rule 23(b)(3), the Plaintiffs sought individual monetized relief that would require an assessment of each class member's claim based on purchase history.  Given the number of individual purchasing inquiries, as well as the evidence showing materiality and reliance varied from consumer to consumer, it was evident that common issues did not predominate.  As is standard, Plaintiffs proposed the “price premium” method of determining class-wide damages, contending  that their damage theory was “simple."  It was not obvious to the Court, however, that the alleged 24 hour/no transfer claim commanded the alleged premium of $1.00-$3.00. Indeed, that was pure speculation on the part of Plaintiffs. Pricing could have been equally impacted by a higher quality of ingredients, the selection of colors offered, or the unique costs Maybelline expended in the research and development of these products. Plaintiffs’ method of using comparable products from other sellers is inconsistent with the law. To establish that any difference in price was attributed  to the alleged misrepresentation, the Court needed to compare a product, exactly the same but without the challenged marketing claim. Such a task was nearly impossible as no two products are completely identical.

Moreover, Maybelline did not sell retail and does not set retail prices. Establishing a higher price for a comparable product would be difficult where prices in the retail market differ and are affected by the nature and location of the outlet in which they are sold and/or the use of promotions and coupons. The Court could not simply assume that all retailers throughout California purchase and sell the products at one price. 

Finally, the existence of an economic injury was also not a common question as many purchasers were satisfied with the products. Economic injury is not a common question when many purchasers find the class products were worth the amount paid and fully satisfied.

Class motion denied.

Fail Safe Class Rejected in TCPA Case

This year marks the 50th Anniversary of the taut Cold War thriller "Fail-Safe", starring Henry Fonda and Walter Matthau. (If I recall, there is no music in the entire B&W film.) In honor of the film, we post about a modern day fail-safe issue, less dramatic of course.

A crucial implicit requirement for class certification is that the plaintiff propose a workable, ascertainable class definition. One sub-set of this issue is the highly improper "fail-safe" class in which absent class members can use an imprecise class definition to affirm their membership when the class wins, but assert they were never members of the class when the defendant wins. A recent federal case sees the court striking class allegations that fall under this impermissible “fail safe” class rubric. See Sauter v. CVS Pharmacy, Inc., No. 2:13-cv-846 (S.D. Ohio, 5/7/14).

The Plaintiff brought a putative class action against the Defendant for alleged violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227. Plaintiff alleged that the class received phone calls from CVS, which utilized an automatic telephone dialing system (ATDS) to call, without the Plaintiffs' consent.  The call allegedly provided general information about a prescription refill and the location of his local CVS pharmacy.  (actually sounds kind of useful, but we digress)

Defendant made a Motion to Strike Plaintiff's Class Allegations. Most courts recognize that a motion to strike class action allegations may properly be filed before plaintiffs have filed a motion for class certification. See, e.g., Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 945 (6th Cir. 2011); Bearden v. Honeywell Intern., Inc., No. 3:09-01035, [2010 BL 63279], 2010 WL 1223936, at *9 (M.D. Tenn. Mar. 24, 2010).  A court may strike class action allegations before a motion for class certification where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met. See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982) ("Sometimes the issues are plain enough from the pleadings"). 

The big issue here was whether the complaint proposed a fail-safe class.   A class definition is impermissible where it is a class that cannot be defined until the case is resolved on its merits. See Randleman v. Fidelity Nat'l Title Ins. Co., 646 F.3d 347, 352 (6th Cir. 2011). A fail-safe class is defined to in essence include only those who are entitled to relief.  Such a class is prohibited because it would allow putative class members to seek a remedy but not be bound by an adverse judgment — either those class members win or, by virtue of losing, they are not in the class and are not bound.

The various subclasses here included those who received calls and did not provide prior express written consent, and those who received calls who had expressly revoked their consent for such calls.  Thus, each of the Plaintiff's proposed classes was defined to include only those individuals who did not expressly consent to the receipt of the defendant's phone calls made with the use of an ATDS. Because the TCPA prohibits calls to cellular telephones using ATDSs unless prior express consent has been given, defining the class to include anyone who received such a call without prior express consent meant that only those potential members who would prevail on this liability issue would be members of the class.  In other words, the proposed classes consisted solely of persons who could establish that defendant violated the TCPA. Thus, if the Plaintiff successfully demonstrated that the Defendant made calls using an ATDS without the class members' prior express consent, then the class members would win, said the court. However, if the Plaintiffs were unsuccessful in meeting their burden of proof, the class did not even not exist and the apparent class members (folks who got a call) would not be bound by the judgment in favor of the Defendant. This was the very definition of a prohibited fail-safe class.

So, motion granted; class allegations struck.


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 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.


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.

Wisconsin Senate Passes Asbestos Trust Disclosure Bill

 The Wisconsin Senate recently passed a bill that would require plaintiffs in asbestos lawsuits to notify defendants of their various asbestos trust claims.  This comes in response to about the lack of transparency that allows plaintiffs to double dip from trusts and solvent defendants.

The bill passed on a mostly party line vote, and returns the issue to the state Assembly, which approved a similar measure last year.  Several states have  passed or considered similar legislation. Under the bill, plaintiffs would divulge all of their claims against asbestos trusts and any related documents, including those related to the settlement of the claim. The proposed legislation would also allow the trust documents to be admitted as evidence in asbestos personal injury claims. If a trust determined a plaintiff's claim against the trust was valid, a later jury could find that the plaintiff was exposed to the other asbestos product and that the other exposure may have been a substantial factor in causing the plaintiff's alleged asbestos-related injury in the suit.

Full text here.


Appeals Court Affirms Summary Judgment for Cart Manufacturer

The Second Circuit affirmed the grant of summary judgment for a golf cart maker who challenged plaintiff's expert opinion in a design defect suit by a teenager injured in a 2007 golf cart accident. See Valente v. Textron, Inc., No. 13-1456 (2d Cir., 3/10/14).

Plaintiffs appealed from an award of summary judgment in favor of defendants on Valente’s strict liability and negligence design defect claims for damages allegedly sustained when Valente was operating a golf car manufactured by defendants. Valente contended that the district court erred in precluding the testimony of his expert (K. Seluga) after a hearing pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).

Specifically, the district court excluded Seluga’s testimony that yaw instability—resulting from a design defect in the use of a two-wheel rear braking system as opposed to a four-wheel braking system—was responsible for Valente’s accident. In fact, the court of appeals concluded, the district court’s thoughtful and thorough explanation for excluding Seluga’s testimony convincingly demonstrated that it acted well within its discretion.

There is no dispute that the coefficient of friction term in the relevant calculations was the determining factor in the expert's opinion that yaw instability was responsible for Valente’s accident. But the coefficient of friction used by Seluga, based on flat surface testing, was approximately 40% lower than the coefficient measured by Seluga and defendants' expert on the actual path of the accident, as well as that used by the expert in a published peer reviewed article on the topic.


Even assuming the reliability of the coefficient, Seluga testified that his simulation would predict a
rollover due to yaw instability somewhere between 25% and 50% of the time.  The purpose for which Valente sought to offer Seluga’s testimony, however, was not that under certain circumstances there was a 25% chance that the accident could have occurred as a result of the defect in the golf car, but rather that the design defect actually caused the accident “to a reasonable degree of engineering certainty.” Where, as here, data is simply inadequate to support the conclusions reached, Daubert and Rule 702 mandate the exclusion of that unreliable opinion


With Seluga’s testimony properly excluded, the record was devoid of any evidence supporting Valente’s theory that the golf car had a design defect or that such a design defect likely caused his accident.



Certification Rejected in Dietary Supplement Claim

The important issues of ascertainability and choice of law led a federal court to deny class certification in litigation relating to the dietary supplement VPX Meltdown Fat Incinerator.  See Karhu v. Vital Pharm., Inc., No. 13-60768 (S.D. Fla., 3/3/14).

Plaintiff filed a class complaint against Vital Pharmaceuticals Inc.  to recover damages based upon VPX's alleged false advertisements, and to enjoin any further alleged misrepresentations. He sought to bring the suit on behalf of all persons in the United States who have purchased Meltdown for purposes other than resale since April 4, 2008. The claims included:  (1) breach of express warranty under the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301, et seq.; (2) breach of
express warranty; (3) unjust enrichment; and (4) violation of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), Fla. Stat. § 501.201, et seq.

The court concluded that the case would be unmanageable as a class action. First, the court saw no practical method of verifying membership in the proposed Class of Meltdown purchasers. No central record of Meltdown customers existed, and it was unlikely that each Meltdown purchaser since 2008 has retained a proof of purchase. Second, the claims of the Nationwide Class would implicate the laws of multiple states. The varied requirements of the states' laws would require different proof on each claim depending on the locations of the class members. These legal permutations would render an eventual trial unwieldy, and would overshadow the common factual questions that otherwise allegedly united the class members' claims.

Regarding ascertainability, a plaintiff seeking class certification must first craft a class definition clear enough to allow the court to understand whether a particular individual is a member of the class, and that membership is ascertainable. A class is ascertainable only if the court can determine whether a given person is a class member through administratively feasible methods. See In re Checking Account Overdraft Litig., 286 F.R.D. 645, 650–51 & n.7 (S.D. Fla. 2012). Here, plaintiff failed to propose a realistic method of identifying the individuals who purchased Meltdown. The courts have come to recognize that purchasers are less likely to retain receipts or other records of minor purchases, and thus cannot rely on those proofs to ascertain the identities of class members. See Red v. Kraft Foods, Inc., 2012 U.S. Dist. LEXIS 186948, at *14–19 (C.D. Cal. Apr. 12, 2012).

Nor could the court trust individuals to identify themselves as class members through the submission of affidavits. Accepting affidavits of Meltdown purchases without verification would deprive VPX of its due process rights to challenge the claims of each putative class member.  On the other hand, having VPX contest each affidavit would require a series of mini-trials and defeat the purpose of class-action treatment. Using affidavits to determine class membership would also invite fraudulent submissions and could dilute the recovery of genuine class members, said the court.

Regarding predominance, the court noted that the MMWA does not define a stand-alone federal cause of action for breach of express written warranty, but instead borrows state law causes of action for breach of both written and implied warranties. Under choice of law analysis, the law governing each class member's warranty claim is the law of the state where he or she purchased the Meltdown. The court noted that state law varied on issues such as privity and reliance. In short, varied state laws would govern the MMWA claims of class members across the country, imposing different legal requirements and overshadowing the allegedly common factual bases of the claims. Moreover, some of these laws would require individualized proof inappropriate for class treatment. In light of the differences among applicable laws and the potential need for individualized proof, the court found that individualized legal and factual issues predominate over the common aspects of the proposed class MMWA claims, rendering class certification inappropriate under Rule 23(b)(3).

Class certification denied.

Class Certification Denied in Baby Seat Case

A California federal court declined to certify a class of consumers accusing a manufacturer of designing a baby seat that is allegedly prone to having unhealthy mold. See Butler v. Mattel Inc. et al., No. 2:13-cv-00306 (C.D. Calif.).

Plaintiffs move to certify a nationwide class of individuals who “acquired” a Fisher-Price Rock ‘N Play Sleeper (Sleeper) prior to January 8, 2013.  The court's analysis focused on predominance. The predominance inquiry under Rule 23(b) tests whether proposed classes are
sufficiently cohesive to warrant adjudication by representation. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997) (citation omitted). The thrust of plaintiffs’ case was that the Sleeper is defective because it has a “dangerous propensity” to grow mold. From that proposition, plaintiffs raised several claims for product defects and misrepresentations about the quality of the Sleeper.

The court concluded that plaintiffs’ bid to have the case handled on a class basis failed because they could not establish that any actual defect was common to the entire class. There was ample evidence in the record that the vast majority of the proposed class did not experience mold growth on the Sleeper to a degree that they saw fit to complain to defendant or to the Consumer Product Safety Commission.

The Sleeper was only alleged to have a “propensity” for mold growth – which the court saw as an issue separate and apart from the issue of an actual reaction by the consumer to whatever mold may be present. There was no evidence that every Sleeper developed notable levels of mold and ample evidence that most of them did not. Based on the record before the court, it appeared that the vast majority of the proposed class, for whatever reason, was in no way affected by the alleged increased propensity of the Sleeper to grow mold.  It was not clear whether any child suffered a reaction or injury. There was merely a limited “recall” by which defendants provided additional care instructions for cleaning any mold that may occur.

This meant that many of the proposed class members likely do not have standing to raise the class claims, and whether or not a particular class member has standing was an individual issue that was not amenable to class treatment. Only class members who actually experienced mold or who could show that their particular circumstances made it likely that they would actually experience a mold issue would likely have standing, said the court.

The dispositive issue of standing thus was not common to all class members and must be
addressed on an individual basis. The overarching importance of this question predominated over any common questions that may exist as it was impossible to award class wide relief without consideration of standing.

Class certification denied.

Federal Court Rejects Copycat Class Action

 A California federal court declined to certify a putative class of consumers in a suit accusing defendant of marketing defective dryers. See  Martin Murray v. Sears Roebuck and Co. et al., No. 4:09-cv-05744 (N.D. Cal.).

In 2009, Murray filed a putative class action on behalf of all California consumers who purchased the same Kenmore-brand dryer that he allegedly did. In his complaint, he alleged that Sears and Electrolux, the dryer’s manufacturer, had marketed the dryer to consumers by promoting its “stainless steel” drum without disclosing that the drum’s front -- the portion of the drum that allegedly rusted -- was actually made of a mild steel, which is allegedly more susceptible to corrosion and chipping. Based on this alleged omission, Murray asserted claims against defendants for unjust enrichment, breach of contract, and violations of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL). Defendants removed the action to federal court under the Class Action Fairness Act.

The original complaint was a "copycat" of allegations in a class action in the 7th Circuit, the infamous Thorogood matter. After amendment, the court concluded that the new allegations were sufficiently different from those in Thorogood, such that plaintiff was not collaterally estopped from
asserting his claims on a class-wide basis.

Plaintiffs sought certification under Rule 23 subsections (b)(2) and (b)(3). Rule 23(b)(2) applies where the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole.  Rule 23(b)(3) permits certification where common questions of
law and fact predominate over any questions affecting only individual members, and class resolution is superior to other available methods for the fair and efficient adjudication of the
controversy. In deciding the class issue, the court must conduct a rigorous analysis, which may require it to probe behind the pleadings before coming to rest on the certification question. Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011).  Frequently that rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim. "That cannot be helped.” Dukes, 131 S. Ct. at  2551.

The court's analysis focused on the commonality and typicality requirements of Rule 23(a). The court concluded that Murray failed to present any evidence that defendants represented on a class-wide basis that the dryer’s drum front was made of stainless steel (rather than mild steel) and that this feature would prevent its user’s clothes from developing rust stains or tears. None of the sales managers testified that Sears marketed the drums as preventing rust stains or tearing. One
product manager testified that she believed the stainless steel was marketed as an aesthetic feature. A third Sears employee simply referred Murray to Sears’s marketing team when asked about the company’s advertising practices. None of this testimony supported Murray’s claim that California consumers, as a class, were likely to be confused by Sears’s marketing claims.

While some of Sears’s promotional materials stated that the Kenmore-brand dryers feature an “exclusive, all stainless-steel drum that provides lasting durability,” this, said the court, hardly qualified as a material misrepresentation.  And Murray’s account of his personal experience at a single Sears store did not suggest that Sears made any representation about the Kenmore-brand dryers on a class-wide basis. Nor did it suggest that Sears ever made such a representation about the Frigidaire-brand dryers nor that Electrolux ever made similar  representations about either brand of dryers. If anything, his individual isolated (and uncorroborated) incident of allegedly deceptive marketing suggests that Murray’s claims, were highly “idiosyncratic” and, thus, not amenable to class-wide proof.  In addition, Murray’s failure to identify any other class  member whose clothes were stained by rust only reaffirmed that his claimed injury here was unique. He also had not offered any evidence to suggest that other California consumers’ clothes were ever damaged by Kenmore or Frigidaire dryers. 

Accordingly, because he had not identified any common questions of fact or law that pertain to every class member, Murray failed to meet the commonality prerequisite.

Rule 23(a)(3) requires that the claims or defenses of the representative parties be typical of the claims or defenses of the class. Murray failed to satisfy the typicality requirement here for the same reasons he failed to satisfy the commonality requirement: specifically, he had not presented evidence of any class-wide misrepresentations or class-wide injury. As explained above, the only evidence here that defendants ever specifically represented that their dryers’ stainless steel drums protect clothes from rust stains came from Murray’s own isolated experience at one Sears store. Murray did not present any evidence to suggest that either defendant ever made the same
representations to other California consumers. Nor did he present any evidence to suggest that other California consumers suffered the same problems,

Also, he testified that the loose drum was most likely what caused his clothes to become exposed to the rust in the first place because the rust had only developed on the exterior portion of the drum front -- a part of the dryer that would not normally come into contact with any clothes. This admission -- that other problems with Murray’s dryer may have contributed to the rust stains he experienced -- left the named plaintiff vulnerable to fact-based defenses that could not be raised against other class members.  Similarly, because Murray purchased his dryer in September 2001, and did not file until November 2009, the potential statute of limitations issue made his claim not typical (as well as affecting adequacy). 

State Mass Tort Court Rejects General Causation Experts

A Pennsylvania state court excluded plaintiffs' expert testimony offered in coordinated cases alleging a denture adhesive caused personal injuries.  See  In re: Denture Adhesive Cream Litigation, No. 090604534 (Phila, Ct. Common Pleas)(J.New).

In 2009 the court had created the mass tort docket for these product cases. Defendants include manufacturers and retailers. Defendants moved to exclude under the Frye test the plaintiffs' four main general causation experts, who opined that the product's zinc conduct led to neurological complications; the court heard live testimony and oral argument. 

The court had considered some of the issues before, excluding the general causation opinions because they were based on inadequate data, including with regard to how much zinc is absorbed in the body.  Plaintiffs then submitted supplemental information which they alleged filled in the various analytical gaps. One item involved a publish Scottish study of 22 patients to which one of the experts applied a further analysis he termed a "cohort study", and another was a study by one of the experts of 24 subjects using denture products over a 30 day period.

The court concluded that the opinions involved "novel" science because the alleged link between zinc and neuropathy is reported in literature only in the past few years.  In analyzing the new data, the court stressed that the issue was not just the alleged link between zinc exposures and neuropathy, but the ability of a specific product to cause specific injuries. Not all zinc-containing dental creams are equal, said the court.

 The so-called cohort study did not describe the actual exposure dose of each subject. It didn't describe the type of adhesive used, the frequency it was used, or the duration between use and symptoms. Thus it is based on a method that is not generally accepted. Furthermore, it was not published and subject to peer review.

The experts alleged that zinc in the denture adhesive had blocked the users' bodies from being able to absorb copper, causing copper deficiency myeloneuropathy.  The second study, at best, linked product use to a short-term reduction in copper.  It did not say anything about severe copper deficiency or allegedly resultant neurological symptoms.  The court found it to be a "blatant, litigation driven attempt to remediate" the deficiencies in the prior expert testimony.

In sum, even with the "new" data, plaintiffs had failed to provide a sound and generally accepted methodology linking the product to the alleged injury.  Expert opinions excluded.

Supreme Court Issues General Jurisdiction Opinion

The U.S. Supreme Court rued last week that defendant DaimlerChrysler Corp. could not be sued in in California over an Argentine subsidiary’s alleged tortious conduct under the theory of general jurisdiction.  See Daimler AG v. Barbara Bauman et al., No. 11-965 (U.S. 1/14/14).

Plaintiffs were twenty-two residents of Argentina who filed suit in California Federal District Court, naming as a defendant DaimlerChrysler Aktiengesellschaft (Daimler),a German public stock company that is the predecessor to the petitioner, Daimler AG.  Their complaint alleged that Mercedes-Benz Argentina (MB Argentina), an Argentinian subsidiary of Daimler, engaged in various illegal conduct respecting unions from 1976 to 1983 in Argentina. Personal jurisdiction over Daimler was predicated on the California contacts of Mercedes-Benz USA, LLC (MBUSA), yet another Daimler subsidiary, one incorporated in Delaware with its principal place of business in New Jersey.  (MBUSA distributes Daimler-manufactured vehicles to independent dealerships throughout the United States, including California.)  

Daimler moved to dismiss the action for want of personal jurisdiction. Opposing that motion, plaintiffs argued that jurisdiction over Daimler could be founded on the California contacts of MBUSA. The District Court granted Daimler’s motion to dismiss. Reversing the District Court’s judgment, the Ninth Circuit held that MBUSA, which it assumed to fall within the California courts’ all-purpose jurisdiction, was Daimler’s “agent” for jurisdictional purposes, so that Daimler, too, should generally be answerable to suit in that State. Daimler moved for cert.

The Supreme Court held that Daimler was not amenable to suit in California for injuries allegedly caused by conduct of MB Argentina that took place entirely outside the United States.

California’s long-arm statute allows the exercise of personal jurisdiction to the full extent permissible under the U. S. Constitution. Thus, the inquiry here became whether the Ninth Circuit’s holding comported with the limits imposed by federal due process. International Shoe distinguished exercises of specific, case-based jurisdiction from a category known as “general jurisdiction,” exercisable when a foreign corporation’s continuous corporate operations within a state are so substantial and of such a nature as to justify suit against it even on causes of action arising from dealings entirely distinct from those activities. Since International Shoe, specific jurisdiction has become the centerpiece of modern jurisdiction theory. The Supreme Court’s general jurisdiction opinions, in contrast, have been few.

The Court said that even assuming, for purposes of this decision, that MBUSA qualifies as at home in California, Daimler’s affiliations with California were not sufficient to subject it to the general jurisdiction of that State’s courts. Whatever role "agency" theory might play in the context of general jurisdiction, the Court of Appeals’ analysis in this case could not be sustained. The Ninth Circuit’s agency determination rested primarily on its observation that MBUSA’s services were “important” to Daimler, as gauged by Daimler’s hypothetical readiness to perform those services itself if MBUSA did not exist. But if  mere “importance” in this sense were sufficient to justify jurisdictional attribution, observed the Court, foreign corporations would be amenable to suit on any or all claims wherever they have an in-state subsidiary or affiliate, an outcome that would sweep beyond even the sprawling view of general jurisdiction the Court has rejected in cases like Goodyear.  

Even assuming that MBUSA was at home in California and that MBUSA’s contacts were imputable to Daimler, there would still be no basis to subject Daimler to general jurisdiction in California, said the Court. The paradigm all-purpose forums for general jurisdiction are a corporation’s place of incorporation and principal place of business.  Plaintiffs’ reasoning, however, would reach well beyond these exemplar bases to approve the exercise of general jurisdiction in every State in which a corporation engages in a substantial, continuous, and systematic course of business. The Court felt that the words “continuous and systematic,” were misread by plaintiffs and the Court of Appeals; they were used in International Shoe to describe situations in which the exercise of specific jurisdiction would be appropriate. See 326 U. S., at 317. With respect to all-purpose jurisdiction, International Shoe spoke instead of  instances in which the continuous corporate operations within a state were so substantial and of such a nature as to justify suit on causes of action arising from dealings entirely distinct from those activities.  Id., at 318. Accordingly, the proper inquiry, the Court explained, was whether a foreign corporation’s affiliations with the State are so continuous and systematic as to render it essentially at home in the forum State.

Neither Daimler nor MBUSA was incorporated in California, nor did either entity have its principal place of business there. If Daimler’s California activities sufficed to allow adjudication of this Argentina-rooted case in California, the same global reach would presumably be available in every other State in which MBUSA’s sales were sizable. No decision of the Supreme Court ever sanctioned a view of general jurisdiction so grasping. The Ninth Circuit, therefore, had no warrant to conclude that Daimler, even with MBUSA’s contacts attributed to it, was at home in California, and hence subject to suit there on claims by foreign plaintiffs having nothing to do with anything that occurred or had its principal impact in California.

The Court referred to the "transnational context" of the dispute, essentially making the point that U.S. courts are not suppose to be widely open to cases being brought against foreign companies when the underlying facts of the case have essentially nothing to do with the U.S.  The Supreme Court now has confirmed that general jurisdiction is typically limited to a jurisdiction companies can expect to be sued in, essentially where they are at home.


Ice Cream Class Action Melts

Happy New Year to all our readers. Let's start 2014 with a delicious class action decision, a Late night snack for our readers.

A California court recently rejected a proposed statewide class in a suit accusing Ben & Jerry's Homemade Inc. of falsely advertising ice cream products as “all-natural.”  See Astiana v. Ben & Jerry’s Homemade Inc., No. 4:10-cv-04387 (N.D. Cal., 1/7/14).  Yes, we are starting off the year right where we left off, another all natural complaint.

Readers probably know that with a $5 correspondence course from Penn State in making ice cream, two regular guys named Ben and Jerry opened their first ice cream scoop shop in Burlington, Vermont, in 1978. 

Here, plaintiffs claimed that both the packaging and the advertising for the Ben & Jerry's ice cream products were deceptive and misleading to the extent that the cocoa in some of them was allegedly alkalized with a "synthetic" agent. Plaintiff filed the complaint in this action in 2010, alleging six causes of action – "unlawful business practices" in violation of Business & Professions Code § 17200; "unfair business practices" in violation of § 17200; "fraudulent business practices" in violation of § 17200; false advertising, in violation of Business & Professions Code § 17500; restitution based on quasi-contract/unjust enrichment; and common law fraud.  Everything but the ...pretty typical in these kinds of label attacks.

The parties originally reached a tentative settlement, which fell apart because of cy pres problems and S'mores issues regarding settlement distribution procedures.

Eventually, plaintiffs moved for class certification. Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Federal Rule of Civil Procedure 23. Mazza v. American Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012). The party seeking class certification must affirmatively demonstrate that the class meets the requirements of Rule 23. See Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011); see also Gen'l Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 156 (1982).  As a threshold matter, and apart from the explicit requirements of Rule 23, the party seeking class certification must also demonstrate that an identifiable and ascertainable class exists. Mazur v. eBay Inc., 257 F.R.D. 563, 567 (N.D. Cal. 2009).

The court here found that the motion must be denied, for two primary reasons – plaintiff had not established that the class was ascertainable, and she had not established that common issues predominated over individual issues.

While there is no explicit requirement concerning the class definition in Rule 23, courts have held that the class must be adequately defined and clearly ascertainable before a class action may proceed. See Xavier v. Philip Morris USA Inc., 787 F.Supp. 2d 1075, 1089 (N.D. Cal. 2011); Schwartz v. Upper Deck Co., 183 F.R.D. 672, 679-80 (S.D. Cal. 1999). A class definition need not be Berry, berry extraordinary, but should be precise, objective and presently ascertainable. See Rodriguez v. Gates, 2002 WL 1162675 at *8 (C.D. Cal. May 30, 2002). That is, the class definition must be sufficiently definite so that it is administratively feasible to determine whether a particular person is a class member. See Xavier, 787 F.Supp. 2d at 1089.

Defendant contended that because cocoa can be alkalized using one of several alkalis – some of which are "natural" and some of which are allegedly "non-natural" (i.e., "synthetic") – it would be necessary to determine which class members bought an ice cream containing alkalized cocoa processed with a synthetic ingredient.  However, there was no way to identify which class members bought which type of ice cream, particularly given that Ben & Jerry's is a wholesale manufacturer that does not maintain records identifying the ultimate customers or their purchases. What a cluster it would be.

The district court agreed with the defendant that the class was not sufficiently ascertainable. The class was defined as persons who bought Ben & Jerry's labeled "all natural" which contained alkalized cocoa processed with a synthetic ingredient. However, plaintiffs provided no evidence as to which ice cream contained the allegedly "synthetic ingredient" (assuming that alkali can even be considered an "ingredient"). More importantly, plaintiffs had not shown that a means exists for identifying the alkali in every class member's ice cream purchases. The packaging labels said only "processed with alkali," because that is all the FDA required.

A second basis for rejecting the class was the predominance requirement. This inquiry requires the weighing of the common questions in the case against the individualized questions, and the predominance analysis under Rule 23(b)(3) can be more stringent than the commonality requirement of Rule 23(a)(2).  Rule 23(b)(3) focuses on the relationship between the common and individual issues. The inquiry is rigorous as it tests whether proposed class is sufficiently cohesive to warrant adjudication by representation. See AmChem Prods., 521 U.S. at 623-24. 

Defendant asserted that reliance, materiality, and causation were all inherently individual; for example, its experts established that consumer choice is affected by many different factors, and plaintiff had no evidence to show that "all natural" has any uniform meaning or that it would have any major impact on a consumer's decision to purchase (or not to purchase) a particular brand of ice cream. Defendant also contended that the likelihood of confusion from the label must be "probable," not just "possible," and that studies showed that at most 3% of consumers who saw "all natural" on the packaging expected that the alkali used to process the cocoa was "natural."

Defendant similarly argued that the only way to test materiality and reliance would be to determine how much each consumer would have de-valued the ice cream products given the alleged presence of the "synthetic" alkalizing agent. However, this also could not be done on a class-wide basis, because consumer choice is affected by myriad factors. 

Most importantly, the damages claim was Half-baked, as the evidence showed that no one paid a premium for the "all natural" Ben & Jerry's ice cream, as Ben & Jerry's charges its wholesale customers the same price regardless of flavor and regardless of the contents of the label. When Ben & Jerry's changed its label and removed the "all natural" label from some ice cream packages, the prices did not decrease (neither the wholesale nor the retail prices);  so there was no support for plaintiff's speculation that "all natural" ice creams command a premium.

The Court agreed. Whichever way one approached it, plaintiff had not met her burden of showing that there was a class-wide method of awarding relief that was consistent with her theory of deceptive and fraudulent business practices, false advertising, or common law fraud (or the alternative theory of restitution based on quasi-contract). Plaintiff had not offered any expert testimony demonstrating that the market price of Ben & Jerry's ice cream with the "all natural" designation was higher than the market price of Ben & Jerry's without the "all natural" designation. More importantly, plaintiff had not offered sufficient expert testimony demonstrating a gap between the market price of Ben & Jerry's "all natural" ice cream and the price it purportedly should have sold for if it had not been labeled "all natural" – or evidence demonstrating that consumers would be willing to pay a premium for "all natural" ice cream that was made with cocoa alkalized with a "natural" alkali, and did in fact pay such a premium.

Under Comcast, the plaintiff is required to provide evidentiary proof showing a class-wide method of awarding relief that is consistent with plaintiff's theory of liability. See 133 S.Ct. at 1432. Here, however, plaintiff provided no such damages evidence, and the failure to offer a damages model that was capable of measurement across the entire class for purposes of Rule 23(b)(3) barred her effort to obtain certification of the class. 

Federal Court Rejects Consumer Class Action

 A California court recently rejected the class certification motion by a Chipotle Mexican Grill Inc. customer alleging the chain falsely advertised its meat as humanely raised and free of antibiotics and hormones. See Alan Hernandez v. Chipotle Mexican Grill Inc. et al., No. 2:12-cv-05543 (C.D. Cal. 2013). While the case was initially broader, plaintiff’s allegations came to center on the
representations allegedly made in Chipotle’s in-store menu signboards and Chipotle’s paper menus.

The court concluded that the proposed class action failed to satisfy the requirements of Rule 23(b)(3). Class certification under Rule 23(b)(3) is proper, inter alia, only when common questions present a significant portion of the case and can be resolved for all members of the class in a single adjudication. The predominance inquiry under Rule 23(b) tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997).  Rule 23(b)(3) also requires the court to find that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

Here, the court found that common questions did not predominate over individual issues, and the class action device was not a fair and efficient way to provide a fair opportunity for class members to obtain relief, or for Chipotle to defend itself against claims. Many key issues could only be handled individually. Most fundamentally, the questions of when a class member ate at Chipotle,
the exact location where he or she ate, and which meat (if any) he or she ate are all not subject to class treatment.  Here, the dispute concerned a very low price transaction that neither the class members nor Chipotle maintained any specific record of, or could be expected to recall. 

More importantly, the alleged misconduct took place only with regard to certain products at varying locations within limited time frames. That was critical, because certain stores were allegedly serving certain conventional meats only at certain times because of shortages. Therefore, a class member would need to know with some certainty – and Chipotle should be allowed some mechanism for confirming or contesting that certainty – the date, location, and particular meat purchased. That kind of certainty in a class action that  encompasses purchases more than five years ago and, said the court, was not practical. Credit card records could provide some evidence of class members’ purchases, but credit card records would not provide the critical detail of which meat was purchased in any given transaction. 

Further, the important question of whether a class member saw a point-of-purchase sign when a particular purchase was made cannot be handled on a class-wide basis. For each purchase when naturally raised meat was allegedly not being served, the court observed there were at least four possibilities: (1) the sign was there and the class member saw it, (2) the sign was there and the class member did not see it due to Chipotle’s conduct, (3) the sign was there and the class member did not see it due to the class member’s negligence, and (4) the sign was not there. Many of the individual issues regarding liability were also reasons why the class action mechanism was not fair and efficient in this case.

In a burst of realism, the court was "confident" that very few people in a class would be able to provide the necessary information. People will either (1) lie, (2) attempt to present the facts but be unable to do so accurately, or, most likely, (3) not know.  This would even impact a theoretical future settlement.  Money would be given out basically at random to people who may or may not actually be entitled to restitution. This is unfair both to legitimate class members and to Chipotle.

The decision is the latest instance of an emerging trend in consumer class action cases: a recognition of the often insurmountable task of reliably identifying disparate members of a proposed class where few, if any members, have documentary proof of their purchases.  Here, it is treated as part of the predominance inquiry, and in other cases as part of ascertainability.


Court Rejects Settlement Because of Cy Pres Issues

A federal court recently rejected a proposed settlement of an economic loss class action because of the details of its cy pres component.  See In re Hydroxycut Mktg & Sales Practices Litig. (Dremak v. Iovate Health Scis. Grp.),  No. 09-cv-1088 (S.D. Cal. 11/19/13).

The “Settlement Class” was defined as including those persons who purchased various Hydroxycut  Products between May 9, 2006 and May 1, 2009, inclusive.The settlement relief consists of a $10 million Cash Component and a $10 million Product Component. Settlement Class Members who opted to receive cash were to receive $25 for each Hydroxycut Product they purchased.  In lieu of cash, Settlement Class Members could elect to receive a Product Bundle for
each purchase of a Hydroxycut Product. Any amount remaining in the Cash Component after payment of Notice and Claim Administration Expenses, and Eligible Cash Claims would constitute the “Residual Settlement Amount.”  If any funds remained after six years from the Effective Date of the deal, the remainder was to be paid out pursuant to the cy pres doctrine to certain types of organizations (such as ones promoting community-based solutions for common and preventable diseases like cancer, heart disease, diabetes, obesity, and asthma).

The cy pres doctrine allows a court to distribute unclaimed or non-distributable portions of a class action settlement fund to indirectly benefit the entire class. See Six Mexican Workers v. Ariz.Citrus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990). When employing the cy pres doctrine, unclaimed funds should be put to their next best use, e.g., for “the aggregate, indirect, prospective benefit of
the class.” Nachshin v. AOL, LLC, 663 F.3d 1034, 1038 (9th Cir. 2011). The Ninth Circuit has held that cy pres distribution must be “guided by (1) the objectives of the underlying statute(s); and (2) the interests of the silent class members.” Six Mexican Workers, 904 F.2d at 1307. A cy pres distribution is an abuse of discretion if there is “no reasonable certainty” that any class member
would benefit from it. Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012).  A court should not find that a settlement is fair, adequate, and reasonable unless the cy pres remedy accounts for the nature of the plaintiffs’ lawsuit, the objectives of the underlying statutes, and the interests of the absent class members.

Generally, a district court can approve a class action settlement if the court finds that the settlement is “fair, reasonable, and adequate.” Fed. R. Civ. P. 23(e). When the settlement is reached before formal class certification, settlement requires a higher standard of fairness and a more probing inquiry than may normally be required under Rule 23(e).

Here, the court concluded that the cy pres remedy did not satisfy the standards for cy pres relief set forth by the Ninth Circuit. and denied the motion for final approval of the settlement.  The court found that the proposed cy pres distribution in this proposed settlement did not benefit the class. At the hearing, defendant's counsel explained that under a separate master settlement agreement governing the personal injury cases in the multi-district litigation, personal injury claimants are to be paid out of a $14 million settlement fund. And cy pres distributions for personal injury claimants in this action reduce the amount that Iovate must pay into the personal injury fund, yet, said the court, providing no additional benefit to the personal injury claimants and no benefit at all to the class members who suffered no personal injury.

The court rejected the argument that causing a benefit in the form of "facilitating settlement" in this action or the separate personal injury actions is the type of “indirect benefit” that cy pres remedies are meant to provide. The focus, said the court, should be on whether the funds themselves are being used for the benefit of the class.

The cy pres remedy was also problematic, said the court, because it allowed for a disproportionate distribution of settlement funds to personal injury claimants. In doing so, the cy pres remedy fails to take into account the interests of the majority of absent class members who did not suffer any personal injury, and the nature of this action, which mostly concerned alleged unfair competition, consumer protection, and product warranty claims, not personal injury liability.

Because of the expenses and claims, it appeared that more than half the settlement might be used for cy pres distribution to the personal injury claimants. The court expressed concern that so little of the sizeable settlement fund directly benefitted the class. Under the terms of the settlement, most of the fund could be channeled into cy pres distribution.  The American Law Institute’s Principles of the Law of Aggregate Litigation provide that where a settlement involves individual distributions to class members and there are funds remaining after the distributions, the settlement should
presumptively provide first for further distributions to participating class members unless the amounts involved are too small to make individual distributions economically viable or other specific reasons exist that would make such further distributions impossible or unfair. See ALI Principles § 3.07(b) (2010).

Thus, the court found that the cy pres distribution was not guided by the interests of the class
members.  It appeared to the court that the cy pres relief was being used as a vehicle to help settle the personal injury cases, not to provide an indirect prospective benefit to the entire class.  The court also contrasted that class counsel was seeking $5 million in fees based in part on a percentage of the total fund.


Energy Drink Case Subject to Primary Jurisdiction

We have posted before about the important doctrine of primary jurisdiction.  Last week, a defendant obtained dismissal of a proposed class action over its energy drinks under this theory. See Fisher v. Monster Beverage Corp., No. 12-2188 (C.D. Cal. 11/12/13).

Plaintiffs sued individually and as putative class representatives for  allegedly "unfair and deceptive business and trade practices on behalf of anyone who purchased for personal consumption any of the Monster-branded energy drinks sold under the Monster Rehab® brand name and the original Monster Energy®."  Plaintiffs alleged various misrepresentations on the labels of the Original Monster and Rehab Varieties cans, including language that the drink "quenches thirst, hydrates like a sports drink, and brings you back after a hard day's night", that it would "RE-FRESH, RE-HYDRATE, REVIVE," and is "the ideal combo of the right ingredients in the right proportion to deliver the big bad buzz that only Monster can."  Plaintiffs alleged these statements were  misrepresentations because the cans do not hydrate like a sports drink, and allegedly cause dehydration; because "it is not the ideal combo of the right ingredients in the right proportion" and because the statement omits the potential health risks associated with such drinks.  Plaintiffs also alleged claims related to Monster's advertising "strategy."  Plaintiffs alleged that Monster specifically "targets" youth despite the caffeine levels in Monster Drinks.

The court tackled a number of challenges, including standing, preemption (some claims were preempted by the Nutrition Labeling and Education Act), and the absence of particularity in many of the fraud allegations.  But our focus here is on primary jurisdiction.  The primary jurisdiction doctrine allows courts to stay proceedings or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency; it is most often invoked if a claim involves an issue of first impression or a particularly complicated issue Congress has committed to a regulatory agency.  The courts traditionally weigh four factors in deciding whether to apply the primary jurisdiction doctrine: (1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.  The court determines that an otherwise cognizable claim implicates technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch.

Defendants argued that the FDA has jurisdiction over issues involving food safety and labeling, and the FDA has specialized expertise in the "technical and policy" questions involved here; the FDA has commenced a science-based evaluation of the safety of caffeine-containing food products, including energy drinks. They also argued that the FDA has primary jurisdiction because the agency has special competence over the matters involving the alleged inadequate warnings and failure to warn issues in this case.  The court agreed that the matters at issue here have been placed by Congress within the jurisdiction of the FDA pursuant to statute and regulations that require the FDA's expertise. The FDA has regulatory authority over food labeling. The FDCA establishes a uniform federal scheme of food regulation to ensure that food is labeled in a manner that does not mislead consumers. Second, plaintiffs' claims ultimately involve "technical and policy claims" about the effects of caffeine and whether Monster should be allowed to advertise and label their products in a way that appeals to a younger demographic. Plaintiffs cited to studies examining the effects of "energy drinks" in general, demonstrating that issues raised in the complaint may affect an entire industry. 

Third, the FDA has taken an interest in investigating and resolving whether energy drinks, including Monster, contain proper levels of caffeine. The FDA's interest in regulating the safety of caffeine weighed in favor of exercising the primary jurisdiction doctrine.  Thus, the Court found that plaintiffs' claims were covered under the Primary  Jurisdiction Doctrine.  



Homeowner Class Decertified Under Statute of Repose

A federal court last week decertified a class of North Carolina homeowners who alleged breach of warranty against the manufacturer of window trim in a short, interesting decision.  See Hart v. Louisiana-Pacific Corp., No. 2:08-cv-00047 (E.D.N.C., 8/30/13).

Trimboard was a product allegedly sold for use on the exterior of homes. Plaintiffs alleged it was defective in design and manufacture because it allegedly would absorb water, warp, and bulge. The court had certified a homeowner class in July, 2011.

Then in July, 2013, the North Carolina Court of Appeals issued an opinion in Christie v. Hartley Const., Inc., 745 S.E.2d 60 (N.C. App. 2013), clarifying the state's statute of repose.  Per the appeals court, the statute bars claims for damages not filed within the repose period, even in the context of an alleged an express warranty that includes a longer term than the repose peiriod.

Defendants moved for decertification, contending that the recent decision of the Court of Appeals meant that the named plaintiffs' claims were barred by the applicable statute of repose under North Carolina law. "Summary judgment is proper if the pleadings or proof show without contradiction that the statute of repose has expired." Bryant v. Don Galloway Homes, Inc., 147 N.C. App. 655, 657 (2001).

It was undisputed that this suit was filed beyond the six-year statute of repose applicable to the claims of the named plaintiffs. Since any action for damages brought outside of the statute of repose is barred, summary judgment was therefore appropriate as to the claims of the named plaintiffs.

That of course raised issues of adequacy of representation, and more importantly, predominance. The task of  determining which absent plaintiffs would be permitted to bring an action for damages would
necessarily require an individualized determination of factors such as "the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement." N.C. Gen. Stat. § 1-50(a)(5), under the statute. The necessity for such a determination did in fact destroy "typicality, ... predominance, [and] otherwise foreclose class certification." Gunnells v. Healthplan Services, Inc., 348 F.3d 417,427-28 (4th Cir. 2003).

Accordingly, pursuant to Rule 23(c)(1)(3) of the Federal Rules of Civil Procedure and in light of the Court's broad discretion to certify or decertify a class action, Ward v. Dixie Nat. Life Inc. Co., 595 F.3d 164, 179 (4th Cir. 2010), the class certified by the court's July, 2011 order was decertified. 


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).


Class Certification Denied in Minivan Case

A federal court last week denied class certification in a case alleging that vehicle axles were allegedly prone to cracking.   See Martin v. Ford Motor Co., No. 2:10-cv-02203 (E.D. Pa., 7/2/13).

Plaintiff filed suit against Ford on behalf of himself and others similarly situated claiming breach of express and implied warranties, unjust enrichment, and violations of state consumer protection laws. The claim related to alleged issues with the rear axle installed on 1998½ -2003 Ford Windstars.  Plaintiff moved to certify four classes of Windstar owners: an express warranty class, an implied warranty class, a consumer protection act class, and an unjust enrichment class.  Each included owners from several different states. Plaintiff moved to certify these four classes pursuant to Federal Rule of Civil Procedure 23(b)(2) and (b)(3), seeking injunctive relief and monetary damages on behalf of class members.

The court denied class certification in a lengthy and comprehensive opinion.  For our post, let's focus on the b(3) claim and the predominance element. Failure to satisfy the predominance requirement has doomed many an automotive defect cases. Federal courts have recognized that suits alleging defects involving motor vehicles often involve complicated issues of individual causation that predominate over common questions regarding the existence of a defect.

When a proposed class includes members from different states, there may be a choice of law problem that relates to predominance (as well as superiority and manageability). Several of the states in the express warranty class contain material differences in their legal definition of a breach of express warranty claim. Some of the group, but not all, required that a buyer show reliance on a statement or representation made by the seller as condition for recovery on a breach of express warranty claim. These differences undermine any finding of predominance. 

The court also found that a breach could not be proven without also inquiring into each individual class member’s Windstar experience, since the vast majority of Class members —approximately 83.2% — had not experienced any problems with their rear axles seven to twelve years after their vehicles were manufactured. In deciding whether Ford breached the express warranty that Windstars were “free from defects in material and workmanship,” a trier-of-fact could not solely look at evidence of Ford’s knowledge of the rear axle issues from 1997 through 2003, but must also consider how each axle performed through 2010. For example, a class member might own a 1998 Ford Windstar with 160,000 miles, which has been driven daily for twelve years without a problem. A second class member may have used his 2000 Windstar to travel constantly for business, putting 200,000 miles on the vehicle. A third class member may have only 50,000 miles on a 2003 Windstar because the class member drives the vehicle only on weekends. A fourth class member may have been forced to replace his original axle after only three months of use -- but because of a serious rear-end collision. None of these class members suffered an axle fracture. Were not these vehicles of different ages, with different mileage, in different conditions, which have been driven without a problem “free from defects”? These matters cannot be addressed by a trier-of-fact without consideration of the individual factual scenarios, said the court.

Even assuming breach could be proven on a class-wide basis, the calculation of damages for express warranty class members would be impossible without individualized inquiries into each claim.  The court cited to the Supreme Court's recent decision in Comcast Corp. v. Behrend that a model purporting to serve as evidence of damages in a class action must measure only those damages attributable to the theory of the case. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3). 133 S. Ct. 1426, 1433 (2013). Here, plaintiffs' damages model was based on injury to the resale price of a used Windstar; but that price would be based on a multitude of factors, of which the allegedly defective rear axle is but one. See, e.g., Carpenter v. BMW of N. Am., Inc., 1999 WL 415390, at *4 (E.D. Pa. June 21, 1999) (value of a vehicle is dependent on a "whole host of individualized factors including age, mileage, repair and maintenance history and accidents or damage.’”); see also Chin v. Chrysler Corp., 182 F.R.D. 448, 463 (D.N.J. 1998)). The need to take into account this multitude of factors creates a proximate cause issue, and required individual proof. Good to see the lower courts applying this important Supreme Court guidance.

Similarly, proving breach of implied warranty, that the Ford Windstars were not “fit for the ordinary purposes for which such goods are used,” was a question of fact with multiple relevant factors raising individual issues. Facts relevant to this inquiry would include not only the allegedly common testing and
monitoring of the axle but, as stated above in discussing the express warranty class, the experience of each individual Class member with the Ford Windstar.  And even if breach could be proven by using only common facts, the calculation of damages for the implied warranty class would face the exact same obstacle; again, approximately 83.2% of Windstar owners have not experienced any problems with
their rear axles. Plaintiff claimed that these Class members suffered damages through a reduction
in the resale value of their vehicles after a safety recall was initiated. Even assuming the recall did affect the market price for used Windstars, plaintiff had not provided a method to calculate the decrease in value on a class-wide basis.

Next the consumer protection claim required plaintiffs to prove each class member suffered a cognizable injury. To determine whether a class member suffered an “ascertainable loss,” and whether that loss was “as a result of” Ford’s alleged concealment or omission of information regarding the Windstar’s rear axle, would require the trier-of-fact to consider facts unique to each individual class member.  That is, plaintiff would encounter the same insurmountable obstacles in his attempt to prove a class-wide “ascertainable loss” suffered “as a result of” Ford’s conduct as he would encounter attempting to prove class-wide damages for the express and implied warranty classes.  Simply put, for a class member whose rear axle has not fractured — which was the vast majority of class members — proving a used Windstar suffered a loss in value because of Ford’s safety recall requires an inquiry into the age, mileage, and overall condition of the vehicle. This individual fact-gathering process would be essential to a consumer protection claim, and therefore fatal to the predominance requirement for class certification under Rule 23(b)(3).

Finally, the first element of an unjust enrichment claim — whether a class member conferred a benefit on Ford — again required an inquiry into each class member’s experience with the Windstar. Moreover, another element — whether it would be unjust for Ford to retain money provided by class members in view of the allegedly defective rear axle — was also incapable of proof without reference to individual facts. Ford’s actions could only be considered unjust if money was retained after selling a defective product. To prove a defect required the trier-of-fact to consider Ford’s conduct alongside each class member’s experience with the Windstar. The vast majority of class members have had no problems with their rear axles. The trier-of-fact would therefore have to consider whether Ford’s retention of the full purchase price of a 1998 Windstar, for example, was "unjust" in a situation where the Windstar has been driven by a class member for twelve years without incident.

Certification denied.

Class Certification Denied in Auto Case

A federal court has declined to certify a proposed class of Ford Focus drivers who allege a suspension defect in their cars. Daniel v. Ford Motor Co., No. 2:11-02890 (E.D. Cal. 6/17/13).

Plaintiffs generally alleged that the 2005 to 2011 Ford Focus vehicles had a rear suspension “alignment/geometry defect” which leads to premature tire wear, which in turn leads to safety hazards such as decreased control in handling, steering, and stability. Plaintiffs sought to certify a class consisting of “[a]ll individuals who purchased or leased any 2005 through 2011 Ford Focus vehicle in
California and who currently reside in the United States.”

Before certifying a class, the trial court recognized it must conduct a “rigorous analysis” to determine whether the party seeking certification has met the prerequisites of Rule 23. See Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir.2012) (quoting Zinser v. Accufix Res. Inst., Inc., 253 F.3d 1180, 1186, amended by 273 F.3d 1266 (9th Cir. 2001)).

After motion practice, plaintiffs were left with warranty claims. Predominance was the key issue, and let's focus on the causation element -- the need for plaintiffs to show that the breach of warranty caused their alleged injury.

The court noted that when a warranty requires that a claimant show that something like tire wear (a condition caused by many things) is caused by a defect in the vehicles, the claims for breach of that warranty do not easily satisfy the Rule 23(b)(3) predominance test.  A determination whether the defective  alignment caused a given class member’s tires to wear prematurely would require proof specific to that individual class member.  Tires deteriorate at different rates depending on where and how they are driven; so, whether a set of tires wore out prematurely, and as a result of the alleged alignment defect, are individual causation/injury issues that make class-wide adjudication inappropriate.  

While named plaintiff presented evidence that her rear tires experienced the type of tire wear allegedly associated with the alleged suspension defect, even her experts admitted that driving habits, failure to properly maintain the vehicle, and other actions by a vehicle’s owner can cause or contribute to premature tire wear.  Resolving whether the alleged suspension defect caused the tire wear in the named class representative's vehicle would not resolve the same question for other class members who might have experienced different types of tire wear caused by different factors.

Therefore, concluded the court, whether the alleged suspension defect caused the proposed class members’ injuries was not a common question. Given the centrality of the causation issue, individual questions would predominate over questions allegedly common to the class; the court denied plaintiffs’ motion for class certification under Rule 23(b)(3).


Another Plaintiff Fails to Obtain Class Certification for Claims About Products Not Actually Purchased

We've posted before about the curious phenomenon of plaintiffs suing about the labeling on a product they never even purchased.  Recently class certification was denied in yet another case alleging false labeling on a product the named plaintiff did not buy  See Major v. Ocean Spray Cranberries Inc., No. 12-03067 (N.D. Cal., 6/10/13). We flag this case for our readers, because of the court's emphasis on the Rule 23(a) element of typicality instead of the equally applicable notion of standing.

Plaintiff alleged that she purchased several of defendant’s products in California. Her Complaint stated that Plaintiff purchased various “Ocean Spray juices and drinks” that were allegedly improperly labeled "No Sugar Added," or were bearing improper nutrient content claims, or had misrepresentations that the products were free from artificial colors, flavors or preservatives.  She alleged the usual causes of action, including violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq. (counts 1–3); violation of the False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq., (counts 4–5); violation of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq. (count 6); restitution based on unjust enrichment or quasi-contract (count 7); and breach of warranty (8).

She sought certification of a class of similar purchasers. Rule 23(a)(3) requires that a named plaintiff’s claims be typical of those that would be advanced by the proposed class. Fed. R. Civ. P. 23(a)(3). The test for Rule 23(a) typicality in the Ninth Circuit is 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. See Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010); Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523, 539 (N.D. Cal. 2012).

In the context of cases involving several products at issue —like this one— district courts have held that the typicality requirement has not been met where the named plaintiff purchased a different product than that purchased by unnamed, absent class, plaintiffs. Wiener, 255 F.R.D. at 666; see also Gonzalez v. Proctor & Gamble Co., 247 F.R.D. 616 (S.D. Cal. 2007); Lewis Tree Serv., Inc. v. Lucent Techs. Inc., 211 F.R.D. 228 (S.D.N.Y.2002); Kaczmarek v. Int’l Bus. Machs. Corp., 186 F.R.D. 307, 313 (S.D.N.Y. 1999).

With that standard in mind, here the court found that plaintiff, the proposed class representative, had not met her burden of showing that her claims are typical of those of the proposed class members pursuant to Rule 23(a)(3).  The primary reason behind the court’s determination that the typicality requirement had not been met is that plaintiff’s proposed classes were so broad and indefinite that they encompassed products that she herself did not purchase. See Wiener, 255 F.R.D. at 666. In her deposition, plaintiff asserted that she purchased five of the defendants’ products. But the putative class definitions that plaintiff wanted the court to certify would have included a whole host of other products that plaintiff had nothing to do with. For example, the putative class would include any of defendant’s products “represented to contain no artificial colors, flavors or preservatives but which contained artificial colors, flavors or preservatives.”  The putative class also included entire lines of products; as an example, any product from the “Sparkling” line of products. However, in both of these examples, plaintiff failed to make an allegation that she purchased all of such products, all the products in these product lines. As such, the claims of the unnamed plaintiffs who purchased products plaintiff herself did not buy were not fairly encompassed by the named plaintiff’s claims.

The second basis of the finding that plaintiff's claims failed to meet the Rule 23(a) typicality requirement is the fact that the labels and nutrition claims on each of the products at issue was unique to that product itself. For example, plaintiff based her mislabeling causes of action with regard to the Diet Sparkling Pomegranate Blueberry drink product, in part, on the claims made on the specific label of this specific drink product -- language that included specific claims about blueberries, applicable only to drinks containing blueberries. The evidence needed to prove plaintiff’s claim that the Diet Sparkling Pomegranate Blueberry drink contained false or misleading labeling was not probative of the claims of unnamed class members who purchased products within the “Sparkling” line that did not contain blueberries. 

Certification denied.


Supreme Court Remands Two Class Actions in Light of Comcast

Earlier this week I spoke at a CLE seminar on the topic of class actions, and part of my focus was the recent Supreme Court decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).  Since that decision, the Court has granted cert, vacated, and remanded for reconsideration two class action cases involving allegations of defects in washing machines:  Whirlpool Corp. v. Glazer, No. 12-322 (U.S. 4/1/13); Sears, Roebuck & Co. v. Butler, No. 12-1067 (U.S. June 3, 2013).

In Glazer, the lower court had certified a class of purchasers of washing machines despite 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. 678 F.3d 409 (6th Cir. 2012).

In Butler, the lower court had granted certification of two classes of more than 100,000 members in six states who purchased 20 different models of machines; again many never had the problem alleged.

So where does Comcast, ostensibly an antitrust case, fit here?  The Court reaffirmed that a class action is an exception to the rule of individual adjudication. And to get there, Rule 23 is not merely a pleading standard. Just as Dukes made clear that a rigorous analysis of the Rule 23(a) prerequisites, such as commonality, is required, the same principles apply to Rule 23(b) elements, such as predominance. And a court cannot refuse to consider class certification arguments just because those arguments also might be relevant to the merits of plaintiffs' claims.

In Glazer the district court made noises about some of the defense arguments on certification going to the merits, and the Sixth Circuit had about two sentences on predominance -- suggesting the absence of the rigorous analysis required.

In Butler, 702 F.3d 359 (7th Cir. 2012), the Seventh Circuit suggested predominance was met because it would be more efficient to resolve the question whether the machines were defective in a single class trial; predominance is a question of efficiency.  That would seem to run afoul of Rule 23, which incorporates efficiency in the notion of superiority, but not as a definition of or synonym for predominance. Indeed the Advisory Committee notes suggest that efficiencies flow only when predominance is present. Prior Court opinions instruct that predominance implies a notion of cohesion.  And the Butler court's treatment of the need for individual damages trials seems flatly inconsistent with the Comcast Court's statements on the need for proof on a class-wide basis.

 Two to keep an eye on.



Another Un-natural "Natural" Claim Dismissed

We have posted before about the disturbing trend of plaintiffs parsing food labels to find something to complain about -- not that the product is unhealthy or harmful or doesn't taste good -- but a "gotcha" game raised to the level of a consumer fraud act violation or a breach of warranty class action.  So we like to note when common sense prevails in this arena.  A federal court recently held that a food manufacturer cannot be in breach of an express warranty for using the term "natural" on its label when that same label discloses the identity and presence of any ingredients the plaintiffs claim were not "natural."   See Chin v. General Mills Inc., No. 12-02150 (D.Minn. 6/3/13).

General Mills produces, markets, and sells a line of Nature Valley products, including “Protein Chewy Bars,” “Chewy Trail Mix Granola Bars,” “Yogurt Chewy Granola Bars,” “Sweet & Salty Nut Granola Bars,” and “Granola Thins.” By all accounts these are excellent products that taste great and offer nutritious ingredients. Plaintiffs were consumers who allegedly purchased one or more of the Nature Valley products. The plaintiffs alleged the products were deceptively labeled as “100 percent Natural” because they contained fructose corn syrup and high maltose corn syrup.  Plaintiffs alleged they relied on the representations, and would not have purchased the products or paid as much if they had known of the actual ingredients. Plaintiffs sought a national class, and sub-classes for New York and New Jersey.

The first problem was that plaintiffs sought relief for alleged representations made on bars that they never purchased; plaintiffs lacked Article III standing for these products and plaintiffs could not represent a class of consumers who purchased products that the named plaintiffs did not purchase. The named plaintiffs in a class action may not rely on injuries that the putative class may have suffered, but instead, said the court, must allege that they personally have been injured. Lewis v. Casey, 518 U.S. 343, 357 (1996); Thunander v. Uponor, Inc., 887 F. Supp. 2d 850, 863 (D. Minn. 2012).

The express warranty claim failed because the term “100% Natural” on a label cannot be viewed in isolation and must be read in the context of the entire package, including the ingredient panel. The specific terms included in the ingredient list must inform the more general term “Natural.” The specific terms determine the scope of the express warranty that was allegedly made to the plaintiffs. And here, a defendant cannot be in breach of an express warranty by including in the product an ingredient that it expressly informed consumers was included.  It is typical of plaintiffs in these cases to elevate one word or phrase in a label, while ignoring all the other information provided the consumer.

Finally, the fraud based claims were dismissed for failure to satisfy the heightened pleading requirements of Rule 9(b). Plaintiffs failed to plead how they were deceived by the “100% Natural” statement. Plaintiffs did not allege with any specificity what they believed “100% Natural” to mean.

Motion to dismiss granted.



House Committee Approves Asbestos Bill

Quick note for our readers who follow asbestos mass tort issues:  the House Judiciary Committee decided in a 17–14 party-line vote this week to reject  various proposed amendments to the Furthering Asbestos Claim Transparency Act of 2013 (H.R. 982).  The FACT Act would require the various asbestos settlement trusts to make public disclosures detailing the claims to the trust and to provide certain information about claims on request (but not confidential medical records).  The amendments were proposed by Democrats opposing the bill.

The Full Committee Markup of H.R. 982 is here.  Hearing information regarding the 3/13 hearing on the bill is here

Passage of the Fact Act would allow defendants to properly assess a plaintiff’s complete exposure history. As it stands, plaintiffs often hide behind trust confidentiality to make solvent defendants believe that their products were far more responsible for the plaintiff’s disease than the true picture.  As asbestos liabilities force more and more companies to file for bankruptcy, legislators need to preserve assets for appropriate claimants; the secrecy and abuse associated with the trusts undermines this as well.


Prop 65 Reforms Proposed

Our readers know how Prop 65 has created numerous issues for product sellers and created much litigation mischief in the hands of overzealous plaintiffs. Interesting that earlier this week, California Gov. Jerry Brown (D) said he now advocates reforms to California's law to frivolous lawsuits that do nothing to protect consumers.

The administration, through the California Environmental Protection Agency, wants to work closely with the state Legislature to revamp Proposition 65 by ending frivolous “shake-down” lawsuits. 

Voters approved Proposition 65 in 1986. The measure requires the Governor to annually publish a list of chemicals allegedly "known to the state to cause cancer or reproductive toxicity." If a business in California sells a product containing such chemicals listed by the state in excess of certain levels, the business must provide warnings to users or in the workplace.

The Governor wants reforms to:
• Cap or limit attorney’s fees in Proposition 65 cases.
• Require stronger demonstration by plaintiffs that they have information to support claims before litigation begins.
• Require greater disclosure of plaintiff’s information.
• Set limits on the amount of money in an enforcement case that can go into settlement funds in lieu of penalties.

The administration is worried about "lawyers who bring nuisance lawsuits to extract settlements from businesses with little or no benefit to the public or the environment." Since 2008, nearly 2,000 complaints have been filed by so-called “citizen enforcers.” Goofy suits include litigation against banks for failing to prevent second-hand smoke near their ATM machines.

The devil is always in the details, so it will be important to keep an eye on this.


Summary Judgment for Defendant in Heater Case

A federal court granted defendant summary judgment in a products case alleging that a  propane heater that exploded was responsible for plaintiff's husband's death.  See Ayala v. Gabriel Building Supply, No. 2:12-cv-00577 (E.D. La., 4/26/13).

Plaintiff filed a wrongful death and survival action in state court. Defendants removed the matter and the federal court dismissed plaintiff's claims for negligence, strict liability, and manufacture of an ultra hazardous project, holding that plaintiff's theories of recovery are limited to the Louisiana Products and Liability Act ("LPLA").  Under Louisiana law, the LPLA provides the exclusive remedy against manufacturers in a products liability action. Demahy v. Schwarz Pharma, Inc., 702 F.3d 177, 182 (5th Cir. 2012). To maintain a successful action under the LPLA, a plaintiff must prove: "(1) that the defendant is a manufacturer of the product; (2) that the claimant's damage was proximately caused by a characteristic of the product; (3) that this characteristic made the product 'unreasonably dangerous'; and (4) that the claimant's damage arose from a reasonably anticipated use of the product . . . . " Stahl v. Novartis Pharms. Corp., 283 F.3d 254, 261 (5th Cir. 2002). 

Defendants then moved for summary judgment on the basis that the subject heater was not "unreasonably dangerous" under the LPLA. A product can be "unreasonably dangerous" in four ways: (i) in construction or composition; (ii) in design; (iii) for failure to provide an adequate warning; and (iv) for failure to conform to an express warranty.

One of plaintiff's claims was design defect.  A product is unreasonably dangerous in design if, at the time the product left the manufacturer's control:
(1) There existed an alternative design for the product that was capable of preventing the claimant's damage; and
(2) The likelihood that the product's design would cause the claimant's damage and the gravity of that damage outweighed the burden on the manufacturer of adopting such alternative design and the adverse effect, if any, of such alternative design on the utility of the product La. Rev. Stat. § 9:2800.56.

Plaintiff failed to present any credible evidence that an alternative design existed that could have prevented plaintiff's injuries. And there was no evidence regarding the burden of adopting the design and
any adverse effect on the utility of the heater. Given the foregoing, plaintiff could not prove that the
subject heater was unreasonably dangerous in design.

To prevail under the manufacturing defect (construction or composition theory), Louisiana courts require the plaintiff to (i) set forth the manufacturer's specifications for the product and (ii) demonstrate how
the product materially deviated from those standards so as to render it unreasonably dangerous. Roman v. W. Mfg, Inc., 691 F.3d 686, 698 (5th Cir. 2012). Plaintiff's expert opined that the most probable cause of the fire and the injuries was a propane leak in the subject heater. However, since all non‐ferrous components of the subject heater melted in the fire, he based his opinion on an examination of another heater.  He conceded that there was no evidence to suggest the subject heater itself was defective. In fact, the expert admitted that he could not conclusively rule out other potential sources of a propane leak, such as a faulty propane tank or plaintiff's failure to properly secure the fitting.  That didn't meet the burden.

To maintain a failure‐to‐warn claim, a plaintiff must demonstrate that the product possessed a characteristic that may cause damage and the manufacturer failed to use reasonable care to provide an adequate warning of such characteristic and its danger to users of the product. Stahl, 283 F.3d at 261. In all cases, however, a manufacture is liable for inadequate warning only if such defect was a proximate cause of the plaintiff's injury. Peart v. Dorel Juvenile Grp., Inc., No. 09–7463, 2011 WL 1336563, at *3 (E.D. La. Apr. 7, 2011).  In addition to proving causation in fact, a plaintiff must also demonstrate that the inadequate warning was the most probable cause of his injury. See Wheat v. Pfizer, Inc., 31 F.3d 340, 342 (5th Cir. 1994). Here, Plaintiff failed to meet this burden of establishing causation. Indeed, Plaintiff's expert failed to adequately support a defect, as above, and offered nothing credible to establish a causal connection between the alleged failure to provide an adequate warning and plaintiff's injury.



Consumer Fraud Claims Denied; Class Decertified

A federal court ruled recently for defendant in a proposed class action about the labeling of an iced tea product. See Ries v. Arizona Beverages USA LLC, No. 10-01139 (N.D. Cal., 3/28/13).

We have posted before about plaintiffs' efforts to manufacture consumer fraud class actions out of any aspect of a product label or marketing. Here, plaintiffs brought a class action challenge defendants’ advertising, marketing, selling, and distribution of AriZona Iced Tea beverages labeled “All Natural,” “100% Natural,” and “Natural” because they allegedly contained high fructose corn syrup (HFCS) and citric acid. Problem turns out, plaintiffs could muster no proof the marketing was false.

The Complaint set forth six California state law claims for relief: under the False Advertising Law (FAL) for (1) misleading and deceptive advertising, and (2) untrue advertising; under the Unfair Competition Law (UCL), for (3) unlawful, (4) unfair, and (5) fraudulent business practices; and (6) under the Consumers Legal Remedies Act (CLRA), for injunctive and declarative relief.

The defendants filed a motion for summary judgment and plaintiffs filed a motion for class certification. The court initially certified the class under Rule 23(b)(2) for purposes of injunctive and declaratory relief only. At the close of discovery, defendants made a renewed motion for summary judgment, reviving their argument that the named plaintiffs could not support their claims, and had failed to meet their evidentiary burden of showing that defendants’ beverage labeling practices were unfair or misleading. Defendants further moved for decertification of the class.

The court noted that factual predicate for each of plaintiffs’ claims was that the beverages were falsely labeled as “all natural” despite allegedly containing HFCS and citric acid. So plaintiffs had to show that HFCS and citric acid are indeed not natural; and also that accordingly they were entitled to restitution. In their opposition to the motion for summary judgment, plaintiffs did not offer any credible evidence that HFCS is artificial and thus rendered the beverage not natural.  But plaintiffs had no credible evidence, relying primarily on the fact the ingredients were allegedly patented.  But they cited no legal authority supporting their contention that if the process to produce an ingredient is patented, that fact, in and of itself, automatically renders it artificial and no natural. This was, the court observed, merely an extension of their rhetoric that HFCS is artificial because it “cannot be grown in a garden or field, it cannot be plucked from a tree, and it cannot be found in the oceans or seas of this planet.”  The deposition testimony they cited, even when read in the light most favorable to plaintiffs, did not satisfy their evidentiary burden. It certainly did not demonstrate that it is probable that a significant portion of the consuming public could be confused by the “all natural” labeling of defendants’ products. Rather than showing that defendants were attempting to engage in unfair competition by capitalizing on any such confusion, the testimony indicated that everything in the beverages is natural, and that defendants even included labels specifying that they contain all natural tea without preservatives, artificial color, and artificial flavor to clarify that to theoretically confused customers.

On the restitution issue, the court noted there must be evidence that supports the amount of restitution necessary to restore to the plaintiff, meaning the difference between what the plaintiff paid and the value of what the plaintiff received.  Plaintiffs had no such evidence to support their prayer for restitution and disgorgement. Plaintiffs offered not a scintilla of evidence from which a finder of fact could determine the amount of restitution or disgorgement to which plaintiffs might be entitled if this case were to proceed to trial. This failure alone provided an independent and sufficient basis to grant defendants summary judgment.  

The court also found that plaintiffs' failures undermined the finding of adequacy of representation under Rule 23(a)(4). The class was therefore decertified. One wonders why it was certified in the first place.

The class was decertified, the motion for summary judgment was granted, and a motion to exclude expert opinion testimony was denied as moot.

No Purchase, No Standing

Earlier this month a federal court reaffirmed that a named class representative in a proposed consumer class action against Ghirardelli Chocolate Co. lacked standing to assert claims about products he never bought. See Miller v. Ghirardelli Chocolate Co., No. 12-04936 (N.D. Cal. 4/5/13). We have posted before about plaintiffs overreaching in consumer fraud class actions. If a tree falls and no one is there, does it make a sound? If you never bought and used a product, how can you bring a “consumer” claim?

Plaintiff Scott Miller allegedly bought a package of “Ghirardelli® Chocolate Premium Baking Chips –Classic White” and then, on behalf of himself and other consumers, sued the Ghirardelli
Chocolate Company, complaining that defendant somehow deceived customers into thinking that this and four other products contained “artificial” or “imitation” ingredients, in violation of United States Food and Drug Administration (“FDA”) and state regulations.

Readers may know that Ghirardelli is one of America’s longest continuously operating chocolate manufacturers (more than 150 years) and that it is one of very few American manufacturers that make chocolate starting from the cocoa bean through to finished products. Ghirardelli accepts
only the highest-quality beans, rejecting as many as 30% of the beans that are offered it. Ghirardelli roasts the cocoa beans in-house to ensure the company’s signature flavor profile is consistently maintained in all chocolate products.

Miller filed suit in San Francisco County Superior Court, and Ghirardelli removed to federal
court and moved to dismiss the complaint. The court initially agreed that Miller lacked standing for products he had not purchased. At oral argument, however, plaintiff argued that the branding on the label meant that – under the FDA regulations and standards – the alleged harm was identical across product lines, and that established standing as to products he never used. Miller filed an amended complaint and Ghirardelli again moved to dismiss.

Hard as it may be to believe, there are a few cases that suggest that a plaintiff who does not purchase a product nonetheless may have standing if the products and alleged misrepresentations were substantially similar. E.g., Astiana v. Dreyer’s Grand Ice Cream, Inc., No. C-11-2910 EMC, 2012 WL 2990766, at *11 (N.D. Cal. July 20, 2012). But certainly where the alleged misrepresentations or accused products are dissimilar, courts tend to dismiss claims to the extent they are based on products not purchased. E.g., Larsen v. Trader Joe’s Co., No. 11-cv-5188-SI (Docket No. 41) (N.D. Cal. June 14, 2012), the court found that the plaintiffs lacked standing to bring claims based on products they did not purchase (wide range of Trader Joe’s products (cookies, apple juice, cinnamon rolls,biscuits, ricotta cheese, and crescent rolls). See also Stephenson v. Neutrogena, No. C-12-0426 PJH, 2012 U.S. Dist. LEXIS 1005099, at *1 (N.D. Cal. Jul. 27, 2012) (plaintiff brought suit over six Neutrogena Naturals products but had only purchased the purifying facial cleanser).

Even under the Astiana approach, here the products were too different: they look different; they have different uses (baking chips, drink powders, and wafers); they have different labels and different representations on packaging, and they are marketed and sold differently in that, for example, some are sold alongside each other, and some are sold in commercial markets and others in consumer markets. The logo, which plaintiff put so much emphasis on, was relatively unimportant considering the varying products, packaging and representations, and markets. Logos cannot be dispositive of what a product is and that a consumer determines what a product or characterizing flavor is by reviewing the label. Finally, the identity of the commodity here under FDA regulations was “white chocolate,” not “chocolate” as in the logo. That in turn means that a determination of standing required an examination of the entire label, and again, the five products and the alleged misrepresentations were not sufficiently similar.

Class Denied in Credit Card Claim

A federal court in California last week denied certification of  a proposed class of Nike store customers. Gormley v. Nike Inc., No. C-11-893-SI, (N.D. Cal., 1/28/13).  The issue, interestingly, was typicality.

Plaintiffs in these consolidated cases brought putative class actions on behalf of themselves
and a class of consumers, alleging that defendants violated the Song-Beverly Credit Card Act of 1971, by requesting and recording the ZIP codes of credit card customers through Nike’s “Information Capture Policy.”  Plaintiffs alleged that Nike implemented and maintained a policy whereby its cashiers were trained to follow the “EPOC manual” under which cashiers were prompted with a pop-up box on their screen to enter the customer’s ZIP code. The screen on the sales register that allowed the cashier to input a customer’s ZIP code did not appear until after the credit card was authorized and the receipt was printing. If a customer declined to provide a ZIP
code, Nike’s cashiers entered any alphanumeric combination.  In support of class certification, plaintiffs submitted evidence that, during the class period, Nike’s ZIP code request policy was allegedly implemented at every Nike retail store in California, and ZIP codes were requested and recorded during approximately 561,179 transactions.

The plaintiffs sought to represent a class of all those consumers who Nike requested a ZIP code from in conjunction with a credit card transaction in a retail store in California from February 24, 2010, to February 24, 2011.  Defendants raised a number of arguments against class certification, including noting that the proposed class definition appeared to be "fail-safe."  But the issue that the court focused on was typicality. Rule 23(a)(3) requires the named plaintiffs to show that their claims are typical of those of the class. To satisfy this requirement, the named plaintiffs must be members of the class and must possess the same interest and suffer the same injury as the class members. Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982). The typicality requirement may be satisfied when each class member’s claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant’s liability. Rodriguez v. Hayes, 591 F.3d 1105, 1124 (9th Cir. 2010).

Although in the past many courts have found the typicality requirement is not stringent, the court here followed the recent trend, and held that plaintiffs had not demonstrated that they were typical of the class they seek to represent. The consolidated complaint challenged Nike’s “Information Capture Policy,” and yet all of the named plaintiffs testified that their experiences were not fully consistent with that policy. For example, some testified that cashiers asked them for their ZIP codes before providing them with their receipts and merchandise. However, under the Nike policy that is the subject of this lawsuit, cashiers were prompted to request ZIP codes after giving customers their receipts and merchandise.   The court read the governing statute as prohibiting merchants from requesting personal identification information as a condition precedent to accepting payment by a credit card,  Thus, as the legality of Nike’s policy depends on whether a consumer would perceive the store’s request for a ZIP code as a condition of the use of a credit card, the timing of that request is clearly relevant.

Accordingly, the Court found that the named plaintiffs were not typical of the class they seek to
represent, and denied class certification on this ground.

Class Claim Against Crock-Pot Seems a Crock

There was an era in television that featured lots of made-for-TV "sporting events," like Battle of the Network Stars, that were popular with some viewers, but not really sports.  That is the world of consumer fraud class actions today, popular with some lawyers but very little deception of consumers going on.

A federal court last month dismissed proposed consumer class action claims against the  manufacturer of the Crock-Pot.  See Rice v. Sunbeam Products Inc., No. CV 12-7923-CAS (C.D. Cal., 1/07/13).

Plaintiff alleged that the Crock-Pot, a slow-cooking kitchen device sold on-line by the manufacturer direct to consumers and through various retailers of household goods, posed an unreasonable risk of burns, fires, and other related injuries to consumers when used as intended, asserting claims under the state Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750, et seq. (“CLRA”);  the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq. (“UCL”); the California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq. (“FAL”); and various common law claims.

The device's accompanying Owner’s Manual recommended cooking times between one hour and nine hours using one of the device’s three temperature settings. After purchase, with the device slow cooking plaintiff’s meal, she allegedly reached across her counter to grab an item next to the Crock-Pot. As she was doing so, she allegedly suffered a burn on her wrist due to the high temperature of the stainless steel exterior of the Crock-Pot. Plaintiff alleged that the placement of the heating components in the device created high temperatures on the exposed stainless steel part of the Crock-Pot, which in turn created an unreasonable risk of harm to consumers. Plaintiff brought this putative class action suit on behalf of herself and all other persons who purchased a Crock-Pot during the last four years from defendant’s website or an authorized retail store located in the State of California. Defendant moved to dismiss. 

Although only part of the Court's analysis, let me point out what is wrong with these kinds of all too common claims: the Owner’s Manual mentioned six times that the device becomes hot during cooking and the Owner’s Guide instructs the user to place the Crock-Pot at least six inches from other items and surfaces while in use because it gets hot.  But the class was surprised that it might burn them?

The CLRA prohibits a variety of “unfair or deceptive acts” in the sale of goods or services to a consumer. Cal. Civ. Code § 1770(a). This includes the use of “deceptive representations” in connection with the sale of goods or “representing that goods. . . have characteristics, ingredients, uses, [or] benefits. . . which they do not have. . . .” Id. § 1770(a)(4), (5). California courts have interpreted the CLRA to also proscribe fraudulent omissions in limited circumstances: “the omission must be contrary to a representation actually made by the defendant, or an omission of a fact the defendant was obliged to disclose.” Daugherty v. Am. Honda Motor Co., Inc., 144 Cal. App. 4th 824, 835 (2006). Relevant here, a duty to disclose arises where the defendant “had exclusive knowledge of material facts not known to the plaintiff” or “actively conceals a material fact from the plaintiff.” In re Toyota Motor Corp. Unintended Acceleration Mktg., Sales Practices, & Products Liab. Litig., 754 F. Supp. 2d 1145, 1172–73 (C.D. Cal. 2010); see also Ehrlich v. BMW of N. Am., LLC, 801 F. Supp. 2d 908, 916 (C.D. Cal. 2010) .

Here, defendant allegedly failed to disclose that the exposed stainless steel base of the Crock-Pot allegedly reaches dangerously hot temperatures, higher than comparable home kitchen appliances.  Plaintiff alleged that despite the fact that defendant advertised the Crock-Pot for “household use only,” the external surface of the device reaches temperatures that are appropriate only for commercial kitchens.  Defendant argued that the representation that it is for “household use only” would not deceive a reasonable consumer into believing that the base of the device would not reach temperatures that could cause burns during normal use. The Crock-Pot becomes hot regardless of whether or not a consumer supervises it. Defendant further argued that because
it made no representations about the surface temperature of the Crock-Pot, such that plaintiff cannot state a claim on the basis of an omission “contrary” to a claim actually made by defendant. In support of this contention, defendant noted the six times in the Owner’s Manual where it  disclosed that the device becomes hot during cooking.

The Court concluded that plaintiff failed to state an actionable claim under the CLRA under either a representation or omission-based theory. Most problematically, plaintiff failed to allege with the requisite particularity several of the representations she and other consumers reasonably relied on in making their purchasing decisions. Moreover, even putting to one side the pleading deficiencies, the Court was unconvinced that plaintiff was pleading actionable representations—a plaintiff must allege a plausible interpretation of a representation that defendant actually made to state a claim under the CLRA, based on the perspective of a reasonable consumer in the marketplace. Here, plaintiff did not plausibly allege that a reasonable consumer would be deceived by any of the alleged representations. The Court was unable to discern how a reasonable consumer would understand a statement regarding “all day cooking” to be a representation regarding the temperature of the exterior of the Crock-Pot. Second, plaintiff’s argument with respect to the alleged “safe for household use” representation was also unconvincing. Plaintiff failed to explain how an instruction regarding the use of a cooking device in the home is deceptive to a reasonable consumer with respect to the temperature that this cooking device allegedly reaches while cooking. In fact, the Owner’s Guide instructs the user to place the Crock-Pot at least six inches from other items and surfaces while in use, among other cautionary statements. For these reasons, the Court concluded that plaintiff failed to adequately plead a misrepresentation under the CLRA.

Plaintiff alleged that defendant violated the UCL by (1) failing to disclose the unreasonably hot surface temperatures the Crock-Pot attains during cooking; (2) failing to provide warnings on the device itself; (3) misrepresenting the Crock-Pot’s safety for household use; and (4) continuing
to market the device after receiving notice of the purported defect. However, plaintiff failed to adequately allege that defendant had knowledge of a defect that needed to be remedied.  In addition, plaintiff offered no factual support for her allegation that defendant’s conduct causes harm to consumers that “greatly outweighs any benefits” associated with the sale of its Crock-Pot in the marketplace. Plaintiff’s conclusory allegation failed to state a claim based upon alleged unfair conduct.  Accordingly, the Court granted defendant’s motion to dismiss plaintiff’s UCL claim.

To plead a claim under the FAL, a plaintiff must allege that a defendant publicly disseminated advertising that false or misleading, and which the defendant knew or reasonably should have known was untrue or misleading. Cal. Bus. & Prof. Code § 17500. As with the CLRA, the perspective of a reasonable consumer is the standard by which an advertisement is measured. See Paduano v. Am. Honda Motor Co., Inc., 169 Cal. App. 4th 1453, 1497–98 (2009). The Court found that the alleged representations that plaintiff purported to rely on in support of its FAL  claim were not actionable nor pleaded with sufficient particularity. As noted, plaintiff failed to adequately allege defendant’s knowledge of the purported defect. Courts that have considered the
issue have required that a plaintiff allege in far greater factual detail the basis for a claim that defendant had knowledge of a defect or the falsity of its statements. Vaguely alleging awareness of customer complaints, without any factual detail, does not suffice to demonstrate that defendant should have known about the falsity of its alleged representations.  Accordingly, the Court granted defendant’s motion to dismiss plaintiff’s claim under the FAL.

Finally, the warranty claims were dismissed because the plaintiff failed to avail herself of the remedy provided for in the warranty, the return of the allegedly defective Crock-Pot.   Moreover, her warranty allegations rested on the alleged representations that the Crock-Pot was “safe and fit for household use,“ which were insufficient to create an express warranty under California law. 


Consumer Fraud Class Claim Over Dietary Supplements Dismissed

A federal court in Illinois recently ruled that a plaintiff in a putative class action failed to state a claim in his suit challenging the marketing of two dietary supplements. See Padilla v. Costco Wholesale Corp., No. 11-C-7686 (N.D. Ill.,  1/16/13).

Plaintiff  alleged a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/2. He alleged that defendant distributed and marketed the Kirkland Signature™ line of dietary supplements in stores and on-line. These products included  Glucosamine with MSM products, and the Glucosamine/Chondroitin line of products.  Plaintiff asserted he purchased a bottle of Glucosamine with MSM.  And he alleged that that there was no competent and reliable scientific evidence that taking glucosamine either with chondroitin sulfate, or with MSM, results in the body metabolizing it into something that builds or nourishes cartilage or provides joint mobility or joint cushioning.  He asserted that clinical studies have found that glucosamine, chondroitin sulfate, and MSM are not effective.  Thus, he was allegedly deceived by defendant's representations regarding the products, and he would not have purchased Glucosamine with MSM had he known the truth.

Defendant moved to dismiss the (latest) complaint..  The court noted that a complaint must allege enough facts to state a claim to relief that is plausible on its face to survive a motion to dismiss. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007).  For a claim to have facial plausibility, a plaintiff must plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Typically, the amount of factual allegations required to state a plausible claim for relief depends on the complexity of the legal theory alleged. See Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008).

The court concluded the Padilla failed to state an ICFA claim as to Glucosamine Chondroitin because Padilla did not actually purchase Glucosamine Chondroitin. Plaintiff proposed to pursue claims on behalf of himself and putative class members who purchased either Glucosamine with MSM and/or Glucosamine with Chondroitin.  To bring an ICFA claim, a plaintiff must either allege it was a consumer of the defendant or allege a close nexus with Illinois consumers. Padilla purchased a bottle of Glucosamine with MSM, according to the complaint, but never alleged he purchased of the Glucosamine/Chondroitin. Because Padilla did not purchase Glucosamine Chondroitin, Padilla had not sustained any actual damage from alleged representations about it.

As to Padilla’s ICFA claim based on Glucosamine with MSM, the clinical studies cited by plaintiff were insufficient to state a claim that the product representations were false or misleading. Although Padilla cited to clinical studies supposedly showing the dietary supplements were ineffective for the treatment of osteoarthritis, he failed to make a connection between the studies and the actual representations on the label.  The Glucosamine with MSM product label did not claim to be effective for the treatment of osteoarthritis. Thus, clinical studies regarding the ineffectiveness of glucosamine or chondroitin in the treatment of osteoarthritis did not have any bearing on the truthfulness of the actual representations made.  

The court thus dismissed with prejudice the claims over the Glucosamine/Chondroitin supplement, and the MSM claim were dismissed with leave to amend. 


State Supreme Court Clarifies Causation Standard in Asbestos Case

The unique and overwhelming features of the grandfather of all mass torts, asbestos, has created bad law in many jurisdictions, procedurally and substantively.  One important example is the issue of causation, and the questions that arise from an injury possibly associated with multiple  exposures to multiple products over many years.  Last year, we posted about a Pennsylvania decision that rejected the plaintiff position that an expert can opine that any level of exposure to a toxic substance is a substantial contributing factor to a disease that is governed by a dose-response relationship.

Recently, the Virginia Supreme Court adopted a new “multiple sufficient causes” analysis as the standard for Virginia mesothelioma cases involving multiple asbestos exposures. See Ford Motor Co. v. Boomer, No. 120283 (Va. 1/10/13).

Plaintiff was diagnosed with mesothelioma, a malignant cancer of the pleura of the lungs.  He asserted that his job duties required that he observe vehicle inspections wherein mechanics used compressed air to blow out brake debris (dust) to allow for a visual inspection of the vehicle's  brakes. He testified that he observed vehicle inspections in approximately 70 garages a month, for five to six hours a day, ten days each month. He testified that his rotations included supervising inspections at a Ford dealership. He said he also specifically remembered Oldsmobile dealers on his rotation. Plaintiff could not identify the type of brake linings being inspected, but presented some circumstantial evidence as to the likely manufacturer of the brake linings being Bendix.

Plaintiff's experts opined that the exposure to dust from Bendix brakes and brakes in Ford cars were both substantial contributing factors in his mesothelioma. And they opined that the current medical evidence suggests that there is no safe level of chrysotile asbestos exposure above background levels in the ambient air. However, plaintiff also testified that he worked as a pipefitter at the Norfolk Naval Shipyard in the early 1940s. His own work and the work of those immediately around him involved packing sand into pipes so that the pipes could be bent to fit the ships. Defense experts opined that his profile was more consistent with a person who had exposure to amosite asbestos at a shipyard sixty years ago than a person exposed to chrysotile brake products.

The jury found in favor of the plaintiff; the trial court denied Bendix' and Ford's motions to strike the expert testimony and their motions to set aside the verdict or for a new trial. Bendix and Ford timely appealed, including on the issue that the court had instructed the jury to determine whether Ford's or Bendix' negligence was a "substantial contributing factor" to plaintiff's mesothelioma. Defendants challenged the use of the substantial contributing factor language as contrary to prevailing Virginia law as to causation.

The court reviewed the traditional Virginia law of causation, which in most instances requires proof that but for the defendant's actions the plaintiff would not have been injured.The 'but for' test is a useful rule of exclusion in all but one situation, said the court: where two causes concur to bring about an event and either alone would have been sufficient to bring about an identical result.  Thus, state law has long provided a means of holding a defendant liable if his or her negligence is one of multiple concurrent causes which proximately caused an injury, when any of the multiple causes would have each have been a sufficient cause.

Causation in a mesothelioma case, however, observed the court, presents a challenge beyond even that standard concurring negligence instruction. Mesothelioma is virtually a signature disease: it was uncontroverted at trial that in most situations the cause of mesothelioma is exposure to asbestos at some point during an individual's lifetime. The long latency period of the disease, however, makes it exceedingly difficult to pinpoint when the harmful asbestos exposure occurred and, in the presence of multiple exposures, equally difficult to distinguish the causative exposures. Further complicating the issue, said the court, although numerous individuals were exposed to varying levels of asbestos during its widespread industrial use before safety measures became standard, not all persons so exposed developed mesothelioma.  It is not currently known why some are more susceptible than others to developing mesothelioma, or why even comparatively lower levels of exposure may cause mesothelioma in some individuals while others exposed to higher dosages never develop the disease. Thus, in the context of a lifetime of various potential asbestos exposures, designating particular exposures as causative presents courts with a unique  challenge.

Certainly, said the court, if the traditional but-for definition of proximate cause was invoked, the injured party would virtually never be able to recover for damages arising from mesothelioma in the context of multiple exposures, because injured parties would face the difficult if not impossible task of proving that any one single source of exposure, in light of other exposures, was the sole but-for cause of the disease. The lower court thus used a "substantial factor" test.  In the last several decades, with the rise of asbestos-based lawsuits, the "substantial contributing factor" instruction has become prominent in some other jurisdictions. See, e.g., Lohrmann v. Pittsburgh Corning Corp., 782 F.2d 1156, 1162-63 (4th Cir. 1986) (upholding Maryland's substantial contributing factor standard in an asbestosis case); Rutherford v. Owens-Illinois, Inc., 941 P.2d 1203, 1219 (Cal. 1997).

Here, the court rejected the “substantial contributing factor” analysis used by these several other jurisdictions.  The Court did not believe that substantial contributing factor has a single, common-sense meaning, and concluded that a reasonable juror could be confused as to the quantum of evidence required to prove causation in the face of both a substantial contributing factor and a proximate cause instruction. In sum, some jurors might construe the term to lower the threshold of proof required for causation while others might interpret it to mean the opposite. The court also agreed with the explicit rejection of substantial contributing factor language in the recent Restatement (Third) of Torts: Liability for Physical and Emotional Harm (2010).  The substantial-factor rubric, says the commentary, tends to obscure, rather than to assist, explanation and clarification of the basis of causation decisions. The latest Restatement provides a rule for finding each of two acts that are elements of sufficient competing causal sets to be factual causes without employing the substantial-factor language of the prior Torts Restatements. There is no question of degree in the new version.  It holds that if multiple acts occur, each of which alone would have been a factual cause of the physical harm at the same time in the absence of the other act(s), each can be regarded as a factual cause of the harm.

The court found this model, as explicated in the comments, quite consistent with its prior rulings regarding concurring causation. A defendant whose tortious act was fully capable of causing the plaintiff's harm should not escape liability merely because of the fortuity of another sufficient cause. So the but-for standard is a helpful method for identifying causes, but it is not the exclusive means for determining a factual cause. Multiple sufficient causes may also be factual causes.  The acts themselves do not have to be concurrent, so long as they are operating and sufficient to cause the harm contemporaneously. As to mesothelioma, said the court, the "harm" occurs not at the time of exposure but at the time when competent medical evidence indicates that the cancer first exists and  thus causes injury. 

 The court said that the separate comment under Restatement § 27, entitled "Toxic substances and disease," should not be applied here.  That approach allows for a finding of causation when multiple exposures combine to reach the threshold necessary to cause a disease, allowing parties who were responsible for some portion of that threshold to be held liable. While it may be the case that this dose-related approach to causation is indeed appropriate for some cancers or diseases, the court did not find it to be necessarily appropriate for mesothelioma from asbestos.

Based on this rule, plaintiff must show that it is more likely than not that his alleged exposure to dust from defendant's brakes occurred prior to the development of cancer and was sufficient to cause his mesothelioma. Given that this approach differs from that taken in the circuit court, the court did not find it appropriate to rule on the sufficiency of the evidence at trial at this time, and instead remanded. On remand, the experts must opine as to what level of exposure is sufficient to cause mesothelioma, and whether the levels of exposure at issue in this case were sufficient.

Another "Natural" Food Claim Falls to Common Sense

A  federal district court recently dismissed a putative class action alleging the defendant food company mislabeled its Florida's Natural products as 100% orange juice despite the alleged addition of compounds to mask the taste caused by pasteurization. See Veal v. Citrus World Inc., No. 2:12-cv-00801 (N.D. Ala. 1/8/13).

The plaintiff asserted that because the label did not mention that flavoring and aroma are added, consumers desirous of 100% pure and fresh squeezed orange juice had been deceived into purchasing Florida’s Natural.  The plaintiff did not aver that he personally ever consumed Florida’s Natural orange juice or that he suffered any ill health effects from consumption of the same, but rather alleged only that he purchased it, repeatedly, over the six years preceding the first complaint.  The essence of his claim concerned the question of how much processing is permissible in a product labeled as “fresh” “100%” or “pure.”

Despite plaintiff’s numerous allegations as to the general conduct of the orange juice industry, the court found the plaintiff had failed to state an actual, concrete injury. He stated he did not know store-bought orange juice was not fresh squeezed, but nowhere alleged any harm from its purchase or consumption. He did not even claim that upon learning packaged orange juice was not truly “fresh”, he had to resort to squeezing his own oranges. In other words, despite plaintiff’s protestations that he did not receive the product he believed he was purchasing, he made no allegation that he had stopped purchasing what he considered to be an inferior product in favor of
purchasing what he actually sought, which is apparently unpasteurized fresh squeezed orange juice.

In an attempt to save his claim and demonstrate an injury worthy of finding standing, the plaintiff argued that he did not receive the “benefit of the bargain” of what he believed he was actually purchasing. He professed to compare the cost of defendant’s orange juice to an orange juice concentrate, and alleged the difference between them is proof of his loss. This theory did not rise to the level of a “concrete and particularized” injury as opposed to a “conjectural or hypothetical” one. Plaintiff did not allege what the “higher value charged” was or what the orange juice supposedly “would have been worth” if it was “as warranted.” He did not show what products he actually bought, when he bought them, or where he bought them, much less what he paid.

From a legal standpoint, many courts have held that “benefit of the bargain” theories of injury like plaintiff’s, where a plaintiff claims to have paid more for a product than the plaintiff would have paid had the plaintiff been fully informed (or that the plaintiff would not have purchased the product at all), do not confer standing. See In re Fruit Juice Products Marketing and Sales Practices
Litigation, 831 F.Supp.2d 507 (D. Mass. 2011); see also Birdsong v. Apple, Inc., 590 F.3d 955, 961-62 (9th Cir. 2009) (noting potential for hearing loss from improper iPod use was not sufficient to state an injury for standing); cf. Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319-21 (5th Cir. 2002); McKinnis v. Kellogg USA, 2007 WL 4766060, *4 (C.D.Cal.2007); Sugawara v. Pepsico, Inc., 2009 WL 1439115 (E.D.Cal.2009). Young v. Johnson & Johnson, 2012 WL 1372286 (D.N.J.2012).

The plaintiff also complained that even though the FDA does require that defendant label its product as “pasteurized orange juice,” all of defendant’s other alleged representations were voluntary, and thus not within the protection of the FDA. Because the court found the plaintiff lacked standing to pursue his claims, the court did not have to rely on the impact of the extensive FDA regulations governing orange juice,  Nevertheless, the court noted, defendant labeled its orange juice in accordance with FDA regulations. The plaintiff could not dispute that the defendant’s product is “squeezed from our Florida oranges” or “100% orange juice.” Rather, his focus was that the squeezing and pasteurization is performed on a massive scale, and that the pasteurization process destroyed the flavor, causing ingredients already present in orange juice to be replaced in the marketed juice.

However, said the court, the fact that the plaintiff may have believed defendant hired individuals to hand squeeze fresh oranges one by one into juice cartons, then boxed up and delivered the same all over the country does not translate into a concrete injury to plaintiff upon his learning that beliefs about commercially grown and produced orange juice were incorrect.  By its very definition under FDA guidelines, pasteurized orange juice is orange juice (1) that has been processed and treated with heat, (2) in which the “pulp and orange oil may [have] been adjusted in accordance with good manufacturing practice,” and (3) which may have been “adjusted” by the addition of concentrated orange juice ingredients or sweeteners. Clearly, the defendant was selling pasteurized orange juice while labeling it “pasteurized orange juice.” Although the plaintiff objected to such labeling, in the light most favorable to the plaintiff, he purchased a product labeled as pasteurized orange juice and then complained that it was pasteurized.

 No standing, complaint dismissed with no leave to amend yet again.

Class Denied for Failure to Show Common Injury

A federal court recently denied class certification in the MDL coordinating claims over an alleged defect in hybrid vehicles’ braking systems.  See IN RE: TOYOTA MOTOR CORP. HYBRID BRAKE MARKETING, SALES PRACTICES and PRODUCTS LIABILITY LITIGATION, No.: SAML 10-2172-CJC (C.D. Cal., 1/09/13). The basis of the ruling, that a substantial majority of class members never suffered an actual injury caused by the defect, will be of interest to our readers.

Plaintiffs alleged that a defect in the anti-lock brake system of their vehicles causes the ABS to improperly engage when it is not needed, resulting in increased stopping time and distance.  In February 2010, Toyota voluntarily recalled the vehicles and offered to install a software update to remedy the braking defect. Toyota asserted the software update accomplished its intended purpose, and remedied the defect, but plaintiffs claimed that the braking defect was not cured.

Plaintiffs brought five separate class actions in February 2010, later consolidated into an MDL, alleging Toyota had fraudulently induced them to purchase their hybrids by concealing the alleged defect in the braking system. Plaintiffs then moved to certify a class based on Federal Rule of Civil Procedure 23(b)(3), consisting of individuals who purchased or leased the Class Vehicles in California or Texas prior to February 8, 2010. Toyota opposed certification of any class, contending, among other things, that Plaintiffs cannot satisfy the predominance requirement of Rule 23(b)(3).
The court concluded Toyota was correct.

Although there were serious questions as to whether plaintiffs could satisfy the commonality, typicality, and adequacy requirements of Rule 23(a), the court concluded it need not  address those questions because plaintiffs clearly could not satisfy the predominance requirement of Rule 23(b)(3). It is beyond dispute that the critical issue involved in this case was whether there was a manifest defect in the ABS that caused an actual injury to each member of the proposed class. Unless plaintiffs could demonstrate such a manifest defect resulting in actual injury, they could not succeed on any of their five product liability claims. The resolution of this crucial issue, however, could not be accomplished through common or generalized proof as is required to maintain a class action. It must be done by an individualized and particularized inquiry for each member of the proposed class.

Most problematic for plaintiffs, said the court, was that they sought to certify a class in which the
substantial majority of class members never suffered an actual injury that was caused by a manifest defect in the ABS. Toyota presented substantial evidence that the updated software installed in the Class Vehicles as part of the national recall rectified any actual or perceived problem with the braking performance of the ABS. Plaintiffs presented no evidence to contradict Toyota’s evidence in this regard.  Indeed, plaintiffs did not even retain an expert to render an opinion on the safety and performance of the ABS postrecall. Plaintiffs instead argued that they suffered an actual injury because they would not have paid that same purchase price for each of their vehicles had they known of the problem with the ABS. Plaintiffs’ benefit-of-the-bargain argument was insufficient as a matter of law. Merely offering a creative damages theory does not establish the actual injury that is required to prevail on their product liability claims. And in this case, the class reps and, apparently, the majority of the purported class they seek to represent, received exactly what they paid for — that is a vehicle with a safe and operable ABS. After the updated software was installed in their vehicles, the class reps admitted they had no problem with
the braking performance of their vehicles. They were able to apply their brakes and stop their vehicles without incident. They never sold their vehicles. They never incurred any expense as a result of any problem with the ABS in their vehicles. Simply stated, the majority of the class members suffered no actual injury, let alone a common one resulting from the same manifest defect.

Moreover, since the number of members of the proposed class that allegedly suffered an injury was tiny, the proposal to certify a class of thousands of owners of the Class Vehicles, then determine which few suffered an actual injury that resulted from a manifest defect in the ABS, would render the class action device nothing more than a façade for conducting a small number of highly individualized, fact-intensive cases. In re Cannon Cameras, 237 F.R.D. 357, 360 (S.D.N.Y. 2006). Such a class action is certainly not a superior, fair, and efficient method for resolving the parties’ controversy.

No Duty on Manufacturer to Design A Product that Cannot be Misused

Duty, foreseeability, and causation.  A recent decision by the Fourth Circuit involves these important tort concepts. See Durkee v. Geologic Solutions Inc., No. 12-1360 (4th Cir., 1/3/13).  Plaintiffs injured in a motor vehicle accident sued, trying to hold the maker of an in-vehicle texting system liable for their harm.

The product liability claims arose from a motor vehicle accident in North Carolina in which a fully loaded tractor-trailer ran into vehicles that were slowed or stopped in front. Appellants alleged that the truck driver became distracted by the presence of a texting system located in the cab of his truck. The texting system had been manufactured by defendant and appellants contended that the defendant owed them a legal duty of care because injuries to the traveling public were reasonably foreseeable based on the texting system’s design.  Specifically they pointed to the facts that the system (1) required the driver to divert his eyes from the road to view an incoming text from the dispatcher, and (2) permitted the receipt of texts while the vehicle was moving.

The district court granted the motions to dismiss, concluding that the accident was caused by the driver’s inattention, not the texting device itself, and that manufacturers are not required to design a product incapable of distracting a driver.

On appeal, appellants challenge the district court’s conclusion that defendant owed them no duty of care. The court of appeals concluded that the district court properly dismissed appellants’ claims, relying on the state tort law, see Kientz v. Carlton, 96 S.E.2d 14, 18 (N.C. 1957), holding that the duty owed by product manufacturer does not require him to guard against hazards apparent to the casual observer or to protect against injuries resulting from the user’s own patently careless and improvident conduct.

The district court correctly concluded that the accident was caused by the driver's inattention, not the texting device itself. "Misuse” in the sense of improper or careless use of the system by the driver, rather than a use that was unintended by the manufacturer. The fact that injuries to the traveling public were reasonably foreseeable based on the system's design does not create a duty.

Score one for personal responsibility.  

Foreign Manufacturer Liability Act Unlikely to Pass Soon

We have posted before about efforts to pass legislation that would impact the ability of U.S. consumers to sue foreign manufacturers.

As the end of the year approaches, it appears that the latest version, the Foreign Manufacturers Legal Accountability Act (FMLAA) of 2011, will not be approved. Senate Bill 1946 and House of Representatives Bill 3646 are among the latest attempts to impact suits against foreign product makers.  Both would require foreign manufacturers importing products into the U.S. to establish a registered agent to accept service of process. And the registration of the agent would constitute consent to the personal jurisdiction in the U.S.  

Earlier versions of the legislation gained support in the wake of issues relating to products from China and, especially, the Chinese drywall litigation. Supporters of the legislation included some domestic industries, such as textiles. They also garnered opposition from foreign governments, some U.S. manufacturer groups, and non-U.S. manufacturers in the European Union and the Confederation of Indian Industry, and others. Even supporters noted that the bills did not directly address another related issue, the enforcement of U.S. judgments overseas. 


Toy Class Rejected on Commonality Grounds

Christmas ought to be the toy season, after all Suzy wants a dolly and Johnny wants a truck. But the plaintiff bar wants it to be season of toy litigation.  Fortunately, a California court recently refused to certify a proposed class of consumers who sued alleging that venerable Tinkertoys were falsely advertised.  See O'Brien v. Hasbro Inc., No. BC438958 (Superior Court, County of Los Angeles, CA).

Plaintiffs' claim was that the packaging implied that the items pictured could be built with the parts contained in the package.  The court's reasoning in rejecting the the claim under California's Unfair Competition Law was interesting.  The court focused on the commonality issue, and whether the  plaintiffs could show through common proof that the entire class had been confused by the "Classic Tinkertoy Construction Set" packaging.

The evidence was that less than 100 consumers had ever complained to Hasbro about the issue. The court noted recent appellate decisions in which classes had been decertified when only a tiny percentage of the class actually had reported the alleged problem.

Even if traditional reliance is not an element of a claim, there is still going to be a requirement of injury.  If a class member is not deceived, then he or she has been injured.  And the fact that a tiny percentage of consumers claim to have been confused does not mean that plaintiffs can show on a common basis that all class members were deceived.

An interesting one to watch if it goes on appeal.

Amicus Weighs In On Daubert Issue in Court of Appeals

The Product Liability Advisory Council weighed in as amicus earlier this month, asking the Eleventh Circuit to reverse a district court ruling that had allowed unreliable expert testimony in a case involving Jet Skis. See Megan Sands v. Kawasaki Motors Corp. U.S.A. et al., No.12-14667 (11th Cir.).

The PLAC brief  is part of the litigation arising from a complaint originally filed in Florida in 2007 by Georgia college student Megan Sands, who was riding as a passenger on a Kawasaki 2003 Ultra 150 Jet Ski in the Bahamas when she was thrown backward from her seat into the water.  She alleged this caused her to suffer severe, extensive and permanent damage to her lower extremities. Sands alleged that the device was defective because it did not have either a raised seat back or a “sissy bar” to prevent passengers from falling backward, or a kill switch that would allow an ejected passenger to cut off the engine.The case went to trial, resulting in a favorable verdict for Kawasaki on strict liability and negligent failure to warn claims but a finding in favor of Sands on design defect claims. Defendant appealed.

The amicus brief focused on the trial court's gate-keeping obligations under the Daubert standard, and the testimony of plaintiff's expert Burleson concerning an alternative seat design for the jet ski. PLAC argued that he presented no testing or engineering analysis to show that the alternative design would have improved the overall safety and utility of the product. Instead, his opinion rested
solely on an unsupported, conclusory statement in his report, which was precisely the kind of "analytical leap" and ipse dixit condemned in prior cases.  Kawasaki did not challenge the
admissibility of Burleson's assertion that his seat back concept, if used, might have eliminated or reduced the risk of injury to this plaintiff. Rather, as Kawasaki had argued below, Burleson had not tested whether a seatback would pose other dangers of equal or greater magnitude to the danger it would supposedly address.

The trial court appeared to describe the issue merely as whether "adequate testing" was conducted, but the testing evidence was not responsive to the specific objection that Kawasaki had raised. Neither the Plaintiff nor the trial court, said PLAC, ever identified any test or other engineering data supporting Burleson's conclusory assertion about the overall safety of the alternative design.

PLAC also focused on the trial court's statement that it was "unable to say that Mr. Burleson's testimony regarding a fixed seatback is unreliable," which sounded like the court switched the burden to show unreliability to Kawasaki. The absence of an admission by Burleson that the
alternative design would introduce a risk of other hazards should not have permitted the jury to
conclude that the alternative design was reasonable. Substantive tort law places the burden on the plaintiff to establish that the proposed alternative design would have greater overall safety than the existing design, and procedural law  imposes the burden on the proponent of expert testimony to establish its reliability. PLAC argued that a trial court does not have discretion to switch the burden under Rule 702 from the proponent of expert evidence to the opponent of such evidence. 

One to keep an eye on.


Supreme Court Hears Arguments in Comcast

We alerted readers before about the Supreme Court consideration of the role of Daubert at the class certification stage.   See Comcast Corp. v. Behrend, U.S., No. 11-864 (cert. granted 6/25/12). The Court had indicated it was interested in the question "whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a classwide basis." Readers will recall that in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011) the Supreme Court in dicta referenced the question. Justice Scalia observed that the district court had "concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings," but the majority replied that "we doubt that is so." 131 S. Ct. at 2554. Thus, Dukes strongly suggested that it was appropriate for defendants to make the expert challenge at the class certification stage, and important for the court to resolve the issue then.

The justices heard arguments from both sides November 5th.  The district court in Comcast originally certified a class; following the court of appeals' decision in Hydrogen Peroxide, 552 F.3d 305, the district court granted in part Comcast‘s motion to reconsider its certification decision. After further briefing, plaintiffs got the case re-certified after convincing the district court that they could show that they had an expert methodology to prove damages on a classwide basis. On the current appeal, the Third Circuit agreed that the lower court had applied the "rigorous analysis," adding that at the class certification stage, "we are precluded from addressing any merits inquiry unnecessary to making a Rule 23 determination.” The Petitioners argued that the Third Circuit affirmed the certification order after expressly declining to consider several “merits” issues necessary to determine whether, as required by Rule 23(b)(3), common questions predominate over individual ones. The focus on damages, which some have viewed as narrowing the issue presented, still is a question that arises not just in antitrust cases, but also in mass torts, which are front and center for our readers.

Plaintiffs seemed to get more questions from the bench than did defendant, especially about any problem with allowing potentially inadmissible evidence to form the basis for the crucial class certification decision. 

Comcast emphasized flaws in the expert's damages model, including that the damage model was not linked to the class theory certified by the lower court, that the alleged monopolization of the Philadelphia area through clustering deterred competitors, or “overbuilders,” from competing. The district court should not have relied on it to certify the class. Plaintiffs argued waiver, that the company failed to bring up Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 469 (1993), until it was too late. That focus led Justice Kagan to note, “I am still in search of a legal question that anybody disagrees about here.” Justice Elena Kagan observed it seemed the parties apparently agreed that if the Daubert question was not waived, the lower court should have held a hearing on the admissibility of the expert opinions. Comcast emphasized it had argued to the trial court that this model did not work, ought to be precluded, and was not a valid methodology.

Plaintiffs argued that allowing district courts to defer admissibility determinations under Daubert  until after the class certification stage is consistent with the broad discretion given judges on evidentiary issues.  But that failed to address the pressure that class certification puts on defendants to settle, a point that was not a focus of the arguments. Plaintiffs also seemed to be arguing for a standard in which the district court has to decide simply that it is more likely than not that the damages model/expert opinion will be admissible at trial, and will meet the standard that’s required to get to a verdict.  But Justice Sotomayor asked "can a district court ever say that it’s persuaded by unreliable or not probative evidence.” Justice Alito similarly asked how could this expert "report be probative if it did not satisfy Daubert?”

Comcast argued that the trial court needed to conduct more than a limited Daubert hearing, agreeing with what defendant called the holding of the Seventh Circuit in American Honda that the question at the class cert hearing is not solely one of whether the evidence would be admissible, but also  -- keeping in mind that the focus of the class certification hearing is to decide whether the case should be tried as a class --  whether it is a methodology that sufficiently fits the facts and is reliably based on a scientific method so that plaintiffs will be capable of proving, class-wide, this issue at trial.

Justice Scalia asked about a hybrid approach where the court would focus at the class stage on reliability, and leave other Daubert inquiries (like fit)  for trial. But a focus of Justice Ginsburg's questions right out of the box was whether any finding of reliability was necessary on damages. She noted that in discrimination law contexts, courts may, if the liability questions can be adjudicated on a class basis, have the damages question adjudicated individually.  Of course, that view of class actions seems to slight the manageability requirement in a (b)(3) context, and invites truncated procedures that violate a defendant's due process rights.

One to watch for sure.


"Doe" Wins Challenge to CPSC Database

Readers may recall we have posted before about an unnamed company that had filed a suit, under seal, to challenge aspects of the Consumer Product Safety Commission's new public database. The federal district court found for the company earlier this week, ruling that the agency's attempt to publish an incident report on the database about the company's product was arbitrary and capricious, and an abuse of discretion. See Company Doe v. Tenenbaum, No. 8:11-cv-02958 (D. Md.10/9/12).

The Consumer Product Safety Improvement Act of 2008 mandated the creation of a consumer product safety information database, and from the beginning, there was controversy about the absence of an adequate process for addressing false and inaccurate reports that will scare consumers, harm business, and generate no additional safety gains; the need to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports; the importance of not putting the governmental imprimatur on voluntary data that has not been verified; and the absence of a sufficient time period allocated for manufacturers to evaluate and respond to any proposed report.

Much of the opinion is redacted, but the suit related to material inaccuracies with respect to a report of alleged injury that found its way into the database. The company protested inclusion of the report, and presented evidence regarding the alleged injury and alleged risk of harm. The CPSC apparently redacted the report twice in an attempt to make it not materially inaccurate. Plaintiff then sued, saying the issues had not been fixed, and later used results of the CPSC's ongoing investigation of the product to renew its objections.  Eventually, the CPSC rejected the company's final objection to the many-times redacted report.

The court cannot substitute its judgment for the agency's but can overturn arbitrary and capricious agency actions.  The court found that the publication decision was an abuse of discretion, because it violated the requirement that the harm "relate to" the use of the product, and would violate the prohibition of publication of materially inaccurate information.  Related to was correlated with associated with or connected with, and the CPSC initial agreements to redact much of the report as inaccurate undercut the later argument that a sufficient "relation to" had been demonstrated to let the final version be published. And mere speculation about a causal link was not sufficient evidence of an actual connection. Similarly a theoretical possibility or mere mathematical possibility was not proof of a sufficient relationship.

On the second prong, the court attempted to put itself in the shoes of the average consumer, and to use inferential reasoning to conclude the report was materially inaccurate and misleading. Interestingly, the court found that the CPSC standard disclaimer that it does not guarantee the accuracy of outside submitted reports, this was "boilerplate" that would not be of interest to the average consumer.

Finally, the court rejected the CPSC's "doomsday" arguments about the impact of the case on the database. The regulations expressly permit a challenge to materially misleading reports, and the court referenced a 2011 GAO report on the evealuation of reports, so a finding that a report is indeed inaccurate would not bring the "apocalypse."  Nonetheless, the ruling appears to represent a clear victory for consumer product manufacturers who are worried about inaccurate consumer complaints.  The decision does not strike at the idea of the database itself as much as it may encourage the CPSC to take a closer look at any reports that a manufacturer challenges as materially inaccurate or misleading.

Panel Rejects MDL Status for Brass Plumbing Claims

We have posted before about the MDL process and the importance of the initial decision by the Panel on ordering coordination. Last week the Judicial Panel on Multidistrict Litigation declined to consolidate the suits by plaintiffs alleging injuries over brass plumbing fittings.See In re Uponor Inc., F1960 Plumbing Fittings Products Liability Litigation, MDL No. 2393 (JPML 9/27/12).

We like to flag for readers, for any insights they may offer, the less common decisions rejecting MDL status, see also here and here.

The plaintiffs alleged in this litigation that high-zinc-content brass components on the plumbing fittings failed, due to corrosion that caused the loss of zinc. This resulted, they said, in various forms of property damage, including the loss of integrity of the components, leaks, loss of water pressure, and other problems.This litigation currently consists of nineteen actions pending in
seven districts, but the Panel was notified of four additional, potentially related actions.

All involved homeowners supported plaintiff’s motion. The Uponor/Wirsbo defendants also supported the motion but  other responding defendants, which are various plumbing and supply defendants,  builders, or installers, opposed the motion and, alternatively, suggested a different transferee forum.

The Panel rejected the motion, noting that "several practical considerations" make the request to centralize unworkable. Most fundamentally, this request rested on a factual assumption – that F1960 fittings are involved in every action – that required the Panel to make a determination not apparent on the face of most complaints. Very few complaints actually mentioned the F1960
standard. Instead, plaintiffs typically framed their complaints as broadly involving high zinc yellow brass fittings and other attendant components. The exceedingly general language that the homeowners employed in most actions to describe the defective components at issue
made it impossible in most cases to transfer “F1960 claims” and then separate and remand, other product claims.

But even assuming that the court could separate and remand the non-F1960 claims, the proposed transfer would still double the forums in which numerous local defendants would have to litigate, or [in an important practical observation]  at a minimum, monitor. Centralization might thus force many local defendants – builders, plumbers, suppliers – to prosecute their indemnity claims against the manufacturer in the MDL, while still having to defend claims that they supplied, built homes with, or installed defective plumbing components elsewhere.

Fragmentation of this litigation, said the Panel, also would increase the risk that the involved
courts will rule inconsistently on identical issues of state law, such as issues of compliance with Nevada’s unique state pre-litigation statute regarding construction defects. The potential inefficiencies and inconvenience associated with centralizing this litigation, separating out F1960 claims etc.,  outweigh any possible benefits of, or added efficiencies to, resolving common claims regarding the F1960 fittings.

"Centralization is not a cure-all for every group of complicated cases."  The actions here were in
distinct procedural postures, and most of the advanced actions seem to be progressing well in the District of Nevada.

Thus, moving parties failed to convince the Panel that Section 1407 transfer of F1960 claims will benefit the parties and witnesses, or that centralization will produce sufficient clarity or efficiency in this already complicated litigation to outweigh the added inconvenience, confusion and cost that would be imposed on numerous parties.


Local Product Warning Ordinance Violates First Amendment

When we touch on Constitutional issues, most often we are posting about due process concerns raised by procedural shortcuts, proposed for administrative or efficiency reasons, at the potential expense of a defendant's rights.  Today we get to actually write about a First Amendment issue, as the Ninth Circuit recently blocked San Francisco’s attempt to implement its local cellphone radiation warning ordinance because it violates the First Amendment. See CTIA – The Wireless Association v. City and County of San Francisco, Calif., No. 11-17773 (9th Cir.).  It is a wonderful reminder about this freedom, which separates our nation from much of the world. 

San Fransisco passed an ordinance imposing warning language standards on cell phone retailers, specifically requiring cell phone sellers to make certain disclosures to consumers about radio-frequency energy emissions from cell phones. S.F. Ordinance 156-11 was originally set to take effect in October 2011, but CTIA – The Wireless Association filed suit challenging the constitutionality of the law. CTIA contended the San Francisco law conflicted with the FCC's safety standards and violated rights of free speech by forcing retailers to communicate alarmist messages about cellphone radiation. 

The district court enjoined enforcement of part of the ordinance, and both sides appealed.  The Ninth Circuit panel affirmed the injunction and noted two problems with the ordinance. First, under the standard established in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1986), any governmentally compelled disclosures to consumers must be “purely factual and uncontroversial.” Id. at 651. The law here required cellphone retailers to provide every customer with an informational "fact sheet" about the possible health risks of radio-frequency energy emissions from cellphones.  That fact sheet contained more than just facts. It also contained San Francisco’s recommendations as to what consumers should do if they want to reduce exposure to radio-frequency energy emissions. This language could be interpreted by consumers as expressing San Francisco’s opinion that using cell phones is dangerous. The FCC, however, has established limits of radio-frequency energy exposure, within which it has concluded using cell phones is safe. See, e.g., Guidelines for Evaluating the Envt’l Effects of Radio-frequency Radiation, 11 F.C.C.R. 15123, 15184 (1996).  Even the findings made by the San Francisco Board of Supervisors on which the challenged ordinance was predicated acknowledged that there "is a debate in the scientific community about the health effects of cell phones,” and the district court observed that “San Francisco concedes that there is no evidence of cancer caused by cell phones.” The court of appeals could not say on the basis of this record that the fact sheet was both “purely factual and uncontroversial.” Zauderer, 471 U.S. at 651.

The ordinance also required retailers to prominently display an informational poster in their stores, and to paste an informational sticker on all display literature for cellphones warning about the possible health risks of radio-frequency energy emissions from cellphones. The district court enjoined the original ordinance compelling distribution of these broader materials.  Since the ordinance sought to compel statements that are even more misleading and controversial than the  fact sheet, the original injunction must be affirmed, said the appeals court.

"Go" Power Defeats Proposed Class Action

We have posted several times on the disturbing trend of plaintiffs seeking to turn virtually every advertising claim, label statement, or good old fashioned "puffing" about a product into an expensive consumer fraud class action. It is with great interest that we note for the loyal readers of MassTortDefense those putative class actions in which the courts require plaintiffs to fully meet all the underlying elements of the claim, and apply some common sense to those elements.

Recently, a New Jersey federal court dismissed a putative class action that alleged that the manufacturer overstated a cereal's ability to help lower cholesterol. Myers et al. v. General Mills Inc., No. 3:09-cv-02413 (D.N.J.).

Plaintiffs were consumers of Cheerios who resided in California, New Jersey, and New York, seeking to sue on behalf of all similarly situated individuals in the United States. Plaintiffs alleged General Mills deceived customers by marketing, advertising and promoting Cheerios as having the ability to prevent, mitigate, or treat high cholesterol. According to plaintiffs, defendant advertised that Cheerios could help lower a person’s cholesterol by 4% in six weeks when part of a healthy breakfast.  (We fondly remember the simple days of  "Big G, Little O. Get "Go" power with Cheerios!")

Defendant moved for summary judgment, alleging that plaintiffs did not suffer any concrete or particularized injury and thus did not have standing to sue. See Koronthaly v. L’Oreal USA, Inc., 374 Fed. Appx. 257 (2010). To prove constitutional standing, a plaintiff must demonstrate (1) an injury-in-fact that is actual or imminent and concrete and particularized, not conjectural or hypothetical, (2) that is fairly traceable to the defendant’s challenged conduct, and (3) is likely to be redressed by a favorable judicial decision. Summers v. Earth Island Inst., 129 S.Ct. 1142, 1149 (2009). 

Plaintiffs sought a full refund for all boxes of Cheerios that plaintiffs purchased during the relevant time-frame, on the typical theory that plaintiffs “would not have purchased Cheerios” but for defendant’s alleged deceptive practices. That assertion, however, did not comport with the testimony of the plaintiffs themselves.  Generally, the out-of-pocket theory applies only when the seller's misrepresentations render the product essentially worthless. Plaintiffs admitted they purchased their Cheerios for crunchiness, taste, convenience, as well as to help lower their cholesterol. Moreover, Ms. Theodore, like many mothers, selected Cheerios due to its healthy, simple ingredients for her children. The contention that these plaintiffs would not have purchased Cheerios but for defendant’s alleged misrepresentation was also contradicted by the testimony that Mr. Myers, Ms. Acevedo and Ms. Theodore still eat or purchase Cheerios today, and for various reasons including the ingredients (Theodore), and the taste (Myers and Acevedo) and convenience.  As such, plaintiffs failed to adequately show that they were entitled to full purchase price refunds, especially when they ate the Cheerios after learning of the alleged issues, and are still eating them today for other reasons.

Plaintiffs alternatively sought the difference between what plaintiffs paid for Cheerios and the price that plaintiffs supposedly would have paid for Cheerios, if defendant had not engaged in the alleged misrepresentation; readers will recognize this as the other typical injury theory, the so-called benefit of the bargain approach. This theory of relief was equally flawed, said the court. Plaintiffs purchased a food product, and got the exact product with the exact ingredients listed on the label.  At most, plaintiffs simply claimed that their expectations of the cereal were disappointed. Dissatisfaction with a product, however, is not a quantifiable loss that can be remedied under the CFActs. Even a technical alleged violation of FDA food labeling regulations would not show that plaintiffs purchased boxes of Cheerios that did not contain the ingredients listed on the Cheerios boxes. And, again, several plaintiffs consumed all of the Cheerios purchased for various other reasons such as convenience and crunchiness. Plaintiffs therefore failed to adequately allege that they suffered “benefit of the bargain” damages.

The court granted summary judgment, including on the class allegations, which clearly failed on typicality and commonality. 

State Supreme Court Affirms Exclusion of Experts' Inferential Opinions

Follow our train of thought: we have posted about the misuse of the differential diagnosis concept, as plaintiff experts morph it from an accepted tool for deciding what is wrong with a patient to a method for explaining why and how the patient suffered his injury/illness.  Now, three computer experts sought to opine that a software flaw prevented a health monitor alarm from sounding, claiming their methodology was just "like a medical differential diagnosis"!  Fortunately, the South Carolina Supreme Court rejected that attempt last week.  See Graves v. CAS Medical Systems Inc., No. 27168 (S.C., 8/29/12).

Their doctor ordered that the plaintiffs use a monitor manufactured by CAS to track their infant child's breathing and heart rates as a precaution. The monitor was designed to sound an alarm, if the subject were to experience an apneic, bradycardia, or tachycardia event. Once the breathing or heart rate returns to normal, the alarm stops. Each machine also keeps a log of any events, which is the term for when the alarm sounds, and records the pertinent data and vital signs. As an additional safety measure, CAS installed not only a back-up alarm, but also a feature that records whether the alarm sounded. This system operates primarily through an independent and separate microphone specifically designed to listen for the alarm. If it hears the alarm, it then makes a notation in the monitor's internal log. If it does not hear the alarm, then it records "Front alarm not heard," and the monitor will sound the backup alarm. A microphone listens for this back-up alarm as well and records whether it was heard. If the back-up alarm fails, all the lights on the front of the monitor flash.

Tragically, the child died from Sudden Infant Death Syndrome (SIDS), which essentially means that no attributable cause of death exists. Plaintiffs claimed the monitor's alarm never sounded that night. Additionally, they testified that all the lights on the front of the monitor were on, although they were solid and not flashing. Another family member who was asleep downstairs also allegedly could not recall hearing the alarm go off.  Plaintiffs further testified the machine was not turned off until the next day, when the monitor was removed for testing.

Plaintiffs filed a strict liability design defect claim against CAS, contending the monitor's software design caused the alarm to fail.  Their claim revolved around what is known as "spaghetti code," which is when computer code is unstructured and can result from the overuse of "goto" or "unconditional branch" statements, which causes a signal working its way through the code to jump around instead of following a linear path.  This in turn caused the signal to be pushed off course and never reach its destination.

To support this theory, the Graves designated three software experts to testify regarding the alarm's alleged failure. In arriving at their conclusions that a software defect caused the alarm to fail, none of the experts did much actual testing of the software. Instead, they used a "reasoning to the best inference" analysis, which was "similar to a differential diagnosis" in the medical field. In this case, three potential causes were identified: hardware error, complaint error, and software error. Complaint error means that the monitor was misused or the alarm did sound and the Graves failed to hear it.  All the experts were able to dismiss hardware error as a cause because the machine was tested and shown to be functioning properly. Thus, the question became whether complaint error or a software error occurred.

The experts excluded complaint error because the machine was hooked up properly, and they did not believe anyone would sleep through the alarm. In other words, because the Graves claimed the alarm did not wake them, that means it must not have gone off. After being confronted with the fact that the monitor listens for the alarm and separately records whether it was sounded, the experts opined that it must be "certain" the internal logs showing the alarm actually did sound were not reliable "in light of the undisputed testimony that the alarm did not function." That left software error as the most likely cause of the alleged failure, they opined.

Defendant moved to have all these experts excluded, arguing none of them met the reliability factors for scientific testimony set forth in State v. Council, 335 S.C. 1, 515 S.E.2d 508 (1999). CAS also moved for summary judgment, contending that without this expert testimony plaintiffs had no evidence of a design defect. The trial court agreed that their opinions were unreliable both as scientific evidence and as nonscientific evidence and thus were inadmissible. Having excluded the opinions of all the Graves' experts, the lower court granted CAS's motion for summary judgment.

The state Supreme Court noted that this was its first opportunity to assess the reliability of an opinion rendered using the "reasoning to the best inference" methodology, so looked for guidance to the analysis of the United States Court of Appeals for the Tenth Circuit, which had already done so. In Bitler v. A.O. Smith Corp., 400 F.3d 1227 (10th Cir. 2004), the court held that "[e]xperts must provide objective reasons for eliminating alternative causes" when engaging in this analysis. Id. at 1237. Furthermore, "an inference to the best explanation for the cause of an accident must eliminate other possible sources as highly improbable, and must demonstrate that the cause identified is highly probable." Id. at 1238. Although the expert need not categorically exclude all alternate causes, that does not relieve the expert of his burden to prove the alternate cause is at least highly improbable based on an objective analysis. See id. at 1237–38 & n.6. The court found this objectivity requirement consistent with the quality control element of State v. Council.

Here, there was evidence that the alarm worked properly and the plaintiffs failed to hear it. In addition to the monitor's recordation of hearing the alarm sound, the family pediatrician testified he believed plaintiffs slept through it, the court noted. The doctor was aware of just how exhausted the parents were. Although the alarm is loud, if one is tired enough, he testified that it is possible to sleep through it. His opinion was bolstered by the fact that the machine seems to have worked just as it was supposed to and recorded the breathing issues perfectly. The log also seems to show the alarm managed to stimulate the baby into breathing normally at times.

This evidence does not mean that is exactly what happened.  But there was enough that an expert needed to take it into account.. Instead, the experts simply assumed the alarm did not sound and provided no reason for discounting the evidence to the contrary other than the assertion of the persons alleging a failure. Thus, they did not objectively discount the evidence of complaint error as required. See Clark v. Takata Corp., 192 F.3d 750, 757 (7th Cir. 1999) ("Simply put, an expert does not assist the trier of fact in determining whether a product failed if he starts his analysis based upon the assumption that the product failed (the very question that he was called upon to resolve), and thus, the court's refusal to accept and give credence to [the expert's] opinion was proper.").

The trial court did not abuse its discretion in excluding the opinions, and summary judgment was warranted. 

Court of Appeals Reverses Daubert Decision

A tip of the hat to our DRI colleague Mike Weston for alerting us to an interesting 10th Circuit opinion from a couple weeks ago, Hoffman v. Ford Motor Co., 2012 WL 3518997 (10th Cir. Aug. 16, 2012).

Plaintiff was injured in a rollover car accident, and sued the car manufacturer alleging that a defect in the seat belt buckle caused it to release during the accident and allow her to be ejected from the vehicle.  In support of this theory, plaintiff presented the opinion of Dr. Good, a mechanical engineer, who theorized that the buckle most probably inertially unlatched during the accident due to an alleged design defect.  He ran a series of tests on buckles allegedly similar to the one in the accident, but ran into issues when he needed to make a comparison of the data from his lab tests to data from crash rollover tests to determine if the situation measured in the lab could actually occur in the real world.  Specifically, there was an absence of available data from relevant rollover crash tests (which present dynamic, multi-dimensional forces working on the component), and so he compared his results to data from planar crash data -- ones focused on only the horizontal plane (for example, a frontal car crash).

Ford moved to exclude the opinions as unreliable under Daubert, but the district court  (without a hearing) denied the motion, concluding Ford had failed to prove that the differences between the lab test results and the real world rollover accidents were significant.  Defendant appealed. (Note, whether she was even wearing her seat belt at all was hotly contested at trial. For purposes of the Daubert issue, the court assumed she was.) 

The court of appeals concluded that in permitting the testimony, the district court had not been "a sufficiently exacting gatekeeper; Daubert requires more precision."  Plaintiff failed to present a sufficient scientific connection between the accelerations and forces the expert found necessary to unlatch the buckles in the lab, and the acceleration and forces that would have occurred in the actual accident on the street. 

Specifically, the court of appeals held that the trial court should NOT have chastised the defendant for failing to show how the deficiency mattered, the failure to use rollover crash data. And the trial court should not have deemed it "unfair" for Ford to criticize the plaintiff because of the limited amount of rollover crash data available to the expert.  The state of the science is what it is.  And Ford did more than point out a deficiency in the method; it also explained why the deficiency rendered the testing and comparison suspect.  More importantly for our readers, "it was not Ford's burden to show Good's inertial unlatch opinion was unreliable and irrelevant.  Rather, it was plaintiff's burden to show reliability and relevancy."

It was undisputed engineering science that once a component is tested, the results must be applied to the whole vehicle setting; the lab results must be compared to data from the real world. Merely showing that similar buckles can be made to unlatch under certain lab conditions is irrelevant to whether the buckle at issue unlatched in the accident absent proof that the lab conditions were present and can be adequately and accurately related to the actual rollover-type accident.  Plaintiff's expert failed to explain adequately how the acceleration and forces present in the planar crash tests were similar enough to those present in a rollover accident. Nowhere did he show how his comparison was scientifically valid. Thus, his opinion was based on mere speculation, or on the assumption, that the levels of forces he found necessary to unlatch buckles in the lab were substantially similar to those that occurred in the subject accident.

Absent such evidence, plaintiff could not meet her burden.  Since plaintiff had a full and fair opportunity to present the case, and made no attempt to add or substitute other evidence, the court of appeals remanded with instruction for the district court to enter judgment as a matter of law for defendant.



Denial of Class Certification Affirmed in Cellphone Case

The Eleventh Circuit last week upheld a trial court’s refusal to certify a class action accusing the defendant of improperly reactivating lost or stolen cellphones.  See Robinson et al v. T-Mobile USA Inc., No. 12-10170 (11th Cir. 2012).

MassTortDefense has often wondered why the issue of damages seems to get insufficient weight in the class certification decision. Would a class be satisfied with proving its case except damages? Would an award of zero damages to a class be devastating to a defendant? Shouldn't it matter that each plaintiff get a fair an accurate amount of damages to compensate for the alleged conduct of defendant? Doesn't a defendant have a right to dispute claimed damages regarding each class member? Here, the trial court determined that plaintiffs failed to offer a viable method for how proposed damages were to be calculated, and plaintiffs paid too little attention to this issue on appeal as well.

The plaintiffs filed a proposed class action against T-Mobile asserting state-law claims of conversion, trespass to chattels, and unjust enrichment. They alleged that: (1) they had reported to T-Mobile that their cell phones had been lost or stolen; (2) an unknown person brought their lost or stolen phones to T-Mobile; and (3) T-Mobile unlawfully reactivated the phones without the plaintiffs’ permission.

The district court denied the plaintiffs’ motion for class certification on five grounds. The first ground was that the plaintiffs had not satisfied their preliminary burden of establishing that their
proposed class was clearly ascertainable. Before a district court may grant a motion for class certification, a plaintiff seeking to represent a proposed class must establish that the proposed class is “adequately defined and clearly ascertainable.” DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970)1; cf. John v. Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007) (“The existence of an ascertainable class of persons to be represented by the proposed class representative is an implied prerequisite of Federal Rule of Civil Procedure 23.”).  Here, the court reasoned, in part, that the plaintiffs had “made no effort to separate out those putative class members who may very well be barred from pursuing class claims due to the existence of valid arbitration agreements or class action waivers that potentially prohibit such litigation.”

The second ground on which the district court denied class certification was that the plaintiffs had not satisfied the Rule 23(a)(1) numerosity requirement. The court reasoned that the plaintiffs had offered no evidence showing numerosity, nor made any “effort to account for those putative class members who waived their right to pursue relief against T-Mobile on a class-wide basis or who are bound by their agreement to arbitrate disputes with T-Mobile.”

The third ground the district court stated for denying class certification was that the plaintiffs had failed to satisfy the predominance requirement in Rule 23(b)(3) because there were “significant state-wide variations in the law” of conversion and in the law regarding other issues, such as the enforceability of class-action waivers.

The fourth ground the court stated for denying class certification was that  the plaintiffs had failed to establish superiority under Rule 23(b)(3). The court based that determination, in part, on the plaintiffs’ failure “to suggest how to manage the rather thorny issue of putative class members whose rights to litigate their conversion claims as part of a class proceeding in this forum may have been cutoff by either a class action waiver provision, an agreement to arbitrate, or both.”

The fifth reason was that “damage-related concerns evidence a predomination of individualized inquiries and render the proposed class unfit for certification under Rule [23](b)(3).” The district court explained what those damage-related concerns were. Here, plaintiffs contended that “in this era of Ebay and other public online sites selling used phones by the millions, determining a particular model phone’s value is a relatively simple matter of online research.” However, they certainly offered no concrete proposal or methodology about how to effectively and accurately manage such online research on a nationwide basis. For example, when conducting online research, would 2011 be the year to use for establishing the value for a used phone of a certain model or would the year in which the phone was misplaced or stolen be the more appropriate time frame? Plaintiffs also ignored how individualized issues relating to the age of the phone, what contents or applications were previously on the phone, and whether the original owner was a heavy or light user of the phone, might affect the value of the used phone.  Additionally, plaintiffs did not address whether loss of use of the phone should be compensable and, if so, suggest how it might be reduced to a formula-type calculation.  

The district court’s determination that the plaintiffs had not established the predominance of common issues under Rule 23(b)(3) because of individual damage-related issues was an alternative, independent ruling -- and one that prevailed on appeal. Class certification would have been denied for that reason regardless of the variations instate law relating to conversion and regardless of the enforceability of class-action waivers.

Then on appeal, plaintiffs failed to adequately challenge in their opening brief the district court’s  independent, alternative ruling that damage-related concerns evidence a predomination of individualized inquiries and render the proposed class unfit for certification under Rule [23](b)(3). The plaintiffs’ opening brief failed to clearly argue the predominance issue involving variation in damages. They also failed to raise it in their reply brief after T-Mobile had argued in its answer brief that one of the reasons the court of appeals should affirm the denial of class certification was
that variation in damages destroyed the predominance of common issues, as the district court had ruled.  By failing to challenge in their brief the district court’s ruling, the plaintiffs had abandoned any contention that the court erred in denying class certification on that ground.

Decision affirmed.

Court of Appeals Vacates Class Certification in Tire Case

Last week, the Third Circuit reversed a trial court's certification of a class of consumer who alleged their vehicles were equipped with allegedly defective run-flat tires. Marcus v. BMW of North America LLC, Nos. 11-1192, 11-1193 (3d Cir.,  8/7/12).

As their name suggests, run-flat tires  can “run” while “flat.” Even if an RFT suffers a total and abrupt loss of air pressure from a puncture or other road damage, the vehicle it is on remains operable.  Plaintiff alleged he experienced four “flat” tires during his three-year lease of a BMW equipped with this tire technology.  In each case, the RFT worked as intended. That is, even though the tire lost air pressure, Marcus was able to drive his car to a BMW dealer to have the tire replaced. He nonetheless sued BMW and the tire maker Bridgestone, asserting consumer fraud, breach of warranty, and breach of contract claims. in part because the tires needed to be replaced rather than repaired.  The District Court certified plaintiff’s suit under Federal Rule of Civil Procedure 23(b)(3) as an opt-out class action brought on behalf of all purchasers and lessees of certain model-year BMWs equipped with Bridgestone RFTs sold or leased in New Jersey with tires that “have gone flat and been replaced.” Defendants appealed.

The requirements set out in Rule 23 are not mere pleading rules. The party seeking certification bears the burden of establishing each element of Rule 23 by a preponderance of the evidence. The Third Circuit has repeatedly emphasized that actual, not presumed, conformance with Rule 23 requirements is essential. Newton v. Merril Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 167 (3d Cir. 2001) (quoting Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160 (1982)).  To determine whether there is actual conformance with Rule 23, a district court must conduct a “rigorous analysis” of the evidence and arguments put forth. When doing so, the court cannot be bashful. It must resolve all factual or legal disputes relevant to class certification, even if they overlap with the merits — including disputes touching on elements of the cause of action.

The term "game-changer" is often misused and overused as a buzz word in the business world by those who want sound trendy, but the Third Circuit here correctly recognized that, as a practical matter, the certification decision is "typically a game-changer, often the whole ballgame," for the parties and counsel. That is, denying or granting class certification is often the defining moment in class actions. 

The Third Circuit first addressed the issue of numerosity.  When a plaintiff attempts to certify both a nationwide class and a state-specific subclass, as plaintiff did here, evidence that is sufficient to establish numerosity with respect to the nationwide class is not necessarily sufficient to establish numerosity with respect to the state-specific subclass. See Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1266-68 (11th Cir. 2009) (plaintiff could not simply rely on the nationwide presence of T-Mobile to satisfy the numerosity requirement without Florida-specific evidence).  The District Court found that the New Jersey class met the numerosity requirement because “it is common sense" that there will probably be at least 40 class members in New Jersey. The court of appeals noted that this may be a bet worth making, but it cannot support a finding of numerosity sufficient for Rule 23(a)(1);  a district court must make a factual determination, based on the preponderance of the evidence, that Rule 23’s requirements have been met. Mere speculation is insufficient.

The second major issue was predominance. A plaintiff must demonstrate that the elements of the legal claim capable of proof at trial through evidence that is common to the class predominate over the issues that must be litigated through proof individual to its members. The court’s  obligation to consider all relevant evidence and arguments on a motion for class certification  extends to expert testimony on the common or individual nature of issues and proof, whether offered by a party seeking class certification or by a party opposing it. Expert opinion with respect to class certification, like any matter relevant to a Rule 23 requirement, calls for rigorous analysis. Weighing conflicting expert testimony at the certification stage is not only permissible, it may be integral to the rigorous analysis Rule 23 demands.  

Here, the District Court then found plaintiff could show, without resort to individual proofs, that the alleged common defect (RFTs go "flat" too easily) caused the class members’ damages. But that causation finding was an abuse of discretion.  Central to plaintiff's claim was what caused class members’ tires to go flat and need replacement. Causation was pivotal to each of Marcus’s claims. The District Court failed to analyze an undisputed, fundamental point: any tire can “go flat” for myriad reasons. Even “defective” tires can go flat for reasons completely unrelated to their defects. Critically, to determine why a particular class member’s Bridgestone RFT had “gone flat and been replaced” requires an individual examination of that class member’s tire. But these individual inquiries are incompatible with Rule 23(b)(3)’s predominance requirement.

For example, of the two tires plaintiff presented for inspection in his lawsuit, one went “flat” and was replaced because he ran over a jagged chunk of metal, and the other because he ran over a sharp object that tore and gouged the tire and damaged the sidewall. All the experts agreed that the two tires could not have been repaired and that any tire (run-flat or conventional, defective or not) would also have been damaged under the circumstances. Thus, even if Marcus could prove that Bridgestone RFTs suffer from common, class-wide defects, those defects did not cause the damage he suffered for these two tires: the need to replace them. In this sense, Marcus was no different than a class member who, seconds after buying his car, pulled off the dealership lot and ran over a bed of nails -- neither could claim a “defect” caused his tires to go flat and need replacement.

One other key aspect of the opinion for our readers: the court of appeals also raised an issue should plaintiffs attempt to get a different class certified on remand.  Many courts have recognized that an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria. See, e.g., John v. Nat. Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007).  If class members are impossible to identify without extensive and individualized fact-finding or “mini-trials,” then a class action is inappropriate. Some courts have held that where nothing in company databases shows or could show whether individuals should be included in the proposed class, the class definition fails. See Clavell v. Midland Funding LLC, No. 10-3593, 2011 WL 2462046, at *4 (E.D. Pa. June 21, 2011); Sadler v. Midland Credit Mgmt, Inc., No.06-C-5045, 2008 WL 2692274, at *5 (N.D. Ill. July 3, 2008); In re Wal-Mart Stores, Inc. Wage & Hour Litig., No. C 06-2069 SBA, 2008 WL 413749, at *8 (N.D. Cal. Feb. 13, 2008); Deitz v. Comcast Corp., No. C 06-06352 WHA, 2007 WL 2015440, at *8 (N.D. Cal. July 11, 2007).

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. See Manual for Complex Litigation, § 21.222 (4th ed. 2004). Third, it protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable. See Xavier v. Philip Morris USA, Inc., 787 F. Supp. 2d 1075, 1089 (N.D. Cal. 2011). Ascertainability is needed for properly enforcing the preclusive effect of final judgment. The class definition must be clear in its applicability so that it will be clear later whose rights are merged into the judgment; that is, who gets the benefit of any relief and who gets the burden of any loss. If the definition is not clear in its applicability, then satellite litigation will be invited over who was in the class in the first place.

If plaintiff attempts to certify a class on remand, the District Court would have to resolve the critical issue of whether the defendants’ records can ascertain class members and, if not, whether there is a reliable, administratively feasible alternative. The Third Circuit cautioned against approving a method that would amount to no more than ascertaining by potential class members’ say so. For example, simply having potential class members submit affidavits that their Bridgestone RFTs have gone flat and been replaced may not be “proper or just.”  Defendants would be able to cross-examine an individual plaintiff at trial about whether and why his tires “have gone flat and been replaced.” So, forcing defendants to simply accept as true absent persons’ declarations that they are members of the class, without further indicia of reliability, "would have serious due process implications."


CPSC Commissioners Testify At Hearing Regarding Database

Issues about the product complaint database set up by the U.S. Consumer Product Safety Commission bubbled over again last week.  We have posted on the topic before.

The CPSC-operated database allows consumers, government agencies, and others to submit reports of alleged injury or death allegedly caused by a product. Since the beginning of the database notion, there have been serious concerns about the accuracy and confidentiality of reports of alleged injury submitted and conveyed back to the public in the database. There has always been an apparent lack of attention to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that some plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.  Obviously, false or inaccurate information does not serve the interests of consumers. And CPSC allows reports by parties who are more likely to have an agenda that goes beyond merely advising CPSC of an incident. The possibility that someone might attempt to seed the database with inaccurate or misleading information to provide ostensible support for lawsuits is a real concern for many observers.

As we noted, an anonymous company sued the CPSC last Fall over an apparently false report in the database.

Last week, Commissioner Anne Northup testified before a Subcommittee on Commerce, Manufacturing, and Trade of the House Energy and Commerce Committee at a hearing on “Oversight of the Consumer Product Safety Commission.” She addressed generally the issues with CPSC regulatory approaches. Commissioner Nord also testified, and she has reported that many of the complaints on the database were filed by law firms.

Chairwoman Mary Bono Mack, R-Calif., noted that the public database remains a source of controversy. Manufacturers continue to express their concern that most of the complaints are not vetted by the CPSC before they are made public, "opening the door to all kinds of mischief, whether to fuel law suits or to try and ruin a competitor’s brand."

Video of the hearing here.

State Supreme Court Approves Exercise of Jursidiction - Again

Regular readers of MassTortDefense know that one issue we try to keep an eye on is the exercise of personal jurisdiction over foreign product sellers in the U.S. courts, particularly following the Supreme Court decisions in Nicastro and Goodyear.  Readers may recall from our earlier posts that Nicastro resulted in a plurality opinion which tracked Justice O'Connor's plurality opinion in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987), concurring in the notion that the foreign product manufacturer lacked sufficient minimum contacts to allow a New Jersey court to exercise jurisdiction over it, but concluding that because this case did not present the new and special issues arising from recent changes in commerce and communication, it was unnecessary to get into full analysis of the steam of commerce issue as it might be applied to 21st century marketing. Rather, the outcome of the case could be determined by the Court’s existing precedents, which have held that a single isolated sale, even if accompanied by the kind of sales effort indicated in the record in the case, is not sufficient.

Last Fall, we posted on an Oregon case involving an allegedly defective wheel chair, in which the state court had exercised jurisdiction over the foreign manufacturer. The case arose from a fire allegedly caused by a battery charger manufactured by CTE, a Taiwanese company; the battery charger was incorporated into a motorized wheelchair. Plaintiffs allege that the fire began in the chair, because of a defect in the charger. CTE sought dismissal on the grounds the state court lacked personal jurisdiction. The trial court denied the motion, and the Oregon Supreme Court denied defendant's petition for a writ of mandamus on the issue. But the Supreme Court granted review, vacated the Oregon opinion denying the manufacturer's challenge to jurisdiction, and remanded the case for further consideration in light of J. McIntyre Machinery, Ltd. v. Nicastro.

We mused: "On remand, it will be interesting to see what the state court does, given what many observers see as their recent resistant approach on directions from the high Court on remands."

We now have an answer, as the state court again held that the sale of the battery chargers in Oregon via an Ohio wheelchair manufacturer was sufficient to establish minimum contacts with Oregon, subjecting the foreign company to personal jurisdiction there.  See Willemsen v. Invacare Corp., No. SC S059201 (Ore., 7/19/12).

Plaintiffs relied on the specific jurisdiction branch of personal jurisdiction, which depends on an
affiliation between the forum and the underlying controversy, principally, activity or an occurrence that takes place in the forum State and is therefore subject to the State's regulation. In contrast to general, all-purpose jurisdiction, specific jurisdiction is confined to adjudication of  issues  deriving from, or connected with, the very controversy that establishes jurisdiction.

In this case, plaintiffs argued that the sale of Invacare wheelchairs and CTE battery chargers in Oregon provided sufficient minimum contacts with this state for Oregon courts to assert specific jurisdiction over CTE for injuries that its battery chargers allegedly caused there. One difficult issue in this case arose from the fact that CTE sold its battery chargers to Invacare in Ohio, not Oregon, and with the expectation that Invacare would sell its wheelchairs together with CTE's battery chargers nationwide, not just Oregon. Defendant contended that, because Invacare (and not CTE) is the one that targeted Oregon, CTE had not purposefully availed itself of the privilege of doing business in Oregon and, as a result, the Oregon courts may not assert jurisdiction over it. The argument was that the the mere fact that it may have expected that its battery chargers might end up in Oregon is not sufficient to give Oregon courts specific jurisdiction over it.

Defendant relied heavily on the Nicastro plurality's view that the mere fact that it was foreseeable that a defendant's products might be distributed in one or all of the 50 states was not enough; rather, the plurality would have required evidence that the out-of-state defendant had "targeted" the forum state in some way. But the Oregon court focused on Justice Breyer's concurring opinion in Nicastro, which it read to mean only that nationwide distribution of a foreign manufacturer's products is not sufficient to establish jurisdiction over the manufacturer when that effort results in only a single sale in the forum state. In this case, the record showed that, over a two-year period, Invacare sold 1,102 motorized wheelchairs with CTE battery chargers in Oregon. In the court's view, the sale of over 1,100 CTE battery chargers within Oregon over a two-year period showed a regular flow or regular course of sales in Oregon.

Defendant argued that these sales figures in Oregon were a miniscule fraction -- both in sheer numbers, as well as the proportion of end product sales in the forum -- of what a Supreme Court
majority would have found to be insufficient in Asahi. But the court concluded that the decision in Asahi "provides little assistance to CTE."

It would not be a surprise if this case found its way back to the US Supreme Court again.

Product Seller (Still) Has No Duty To Protect From Criminal's Use Of Product

Country music fans among our readers may recall the Garth Brooks' song "Longneck Bottle."  That tune, from his CD "Sevens," reached No. 1 on the country charts in 1997.  In it, the singer pleads for the long neck bottle to stay clear of his hand.  Today's post might be sub-titled, "longneck bottle stay clear of my face."  In Gann v. Anheuser-Busch Inc., No. 11-00017 (Tex. App. 7/26/12), a plaintiff asserted liability against the maker of a longneck glass beer bottle for injuries allegedly suffered when she was struck in the face by a bar patron wielding the bottle as a weapon.

While celebrating a friend’s birthday "at a bar known for its violence," according to the court, Gann was assaulted by a patron wielding a Budweiser “longneck” glass beer bottle. She sued for an alleged design defect in the bottle, with the typical strict liability and negligence counts.  The trial court granted summary judgment to defendants, and plaintiff appealed.

In a strict products liability action in which a claimant alleges a design defect, a Texas claimant must prove by a preponderance of the evidence that: (1) the defect renders the product “unreasonably dangerous;” (2) the defect was a producing cause of the personal injury, property damage, or death for which the claimant seeks recovery; and (3) there was a safer alternative design. TEX.CIV.PRAC.&REM.CODE ANN. § 82.005(a)(West 2011); Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 311 (Tex. 2009). To determine whether a product was defectively designed so as to render it unreasonably dangerous, the courts apply a risk-utility analysis that requires consideration of the following factors:
(1) the utility of the product to the user and to the public as a whole weighed against the gravity and likelihood of injury from its use;
(2) the availability of a substitute product which would meet the same need and not be unsafe or unreasonably expensive;
(3) the manufacturer’s ability to eliminate the unsafe character of the product without seriously impairing its usefulness or significantly increasing its costs;
(4) the user’s anticipated awareness of the dangers inherent in the product and their avoidability because of general public knowledge of the obvious condition of the product, or of the existence of suitable warnings or instructions; and
(5) the expectations of the ordinary consumer.

Defendant made an interesting threshold, no-duty, argument, that rings true to MassTortDefense. As a matter of law, Anheuser-Busch had no legal duty to design the longneck bottle against purposeful and criminal misuse because it satisfied its one and only legal duty: to design the bottle to ensure that the bottle was safe for its intended and ordinary use – storing beer.
In support of its argument, Anheuser-Busch cited to Venezia v. Miller Brewing Co., 626 F.2d 188 (1st Cir. 1980), a case we used when teaching products liability in law school. In Venezia, the federal appeals court applied Massachusetts law to hold that the plaintiff, who was injured by the broken shards of the beer bottle he deliberately threw against a pole, could not recover from Miller Brewing under a theory of negligent design, because the deliberate misuse of the beer bottle could not be characterized as an intended or ordinary use of the beer bottle. 626 F.2d at 189, 191-92.  The Texas court of appeals felt that it need not address this issue of duty however, given the other fatal flaws in plaintiff's case.

Specifically, plaintiff argued that beer bottles are used commonly in assaults in the local community, that the longneck portion of the bottle is merely cosmetic, and that Anheuser-Busch also can use stubby glass bottles and plastic bottles as suitable containers for beer. However, contrary to her assertion, Gann failed to produce evidence raising a genuine issue of fact that the risk of injury from the longneck bottle outweighed its utility, and therefore that the bottle was defectively designed so as to render it unreasonably dangerous. Specifically, plaintiff failed to adequately address: (1) whether manufacturing a stubby glass bottle or plastic bottle is sufficiently economically feasible; (2) whether eliminating the allegedly unsafe character of a longneck bottle significantly impaired its usefulness or significantly increased its costs; and (3) what the expectations of the ordinary consumer are with regard to this kind of bottle.

Turning to the negligence count, the threshold inquiry in a negligence case is duty. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). Generally, no person has a legal duty to protect another from the criminal acts of a third person. Timberwalk Apartments, Partners, Inc. v. Cain, 972 S.W.2d 749, 756 (Tex. 1998). (One exception to this rule may apply when a person controls the premises where the criminal acts occur.)   Whether a duty exists is a question of law for the court to decide from the facts surrounding the occurrence at issue. (Other courts may analyze this issue as one of causation, with the criminal act of the third-party breaking the chain of causation from defendant's alleged negligence to plaintiff's alleged injury.)

Plaintiff argued that because defendants did not contest that the use of longneck bottles as weapons in bars has happened, and thus was arguably foreseeable (cue "Friends in Low Places"?), the defendants then had a legal duty to protect her from being assaulted in such a situation. Even conceding that it is reasonably foreseeable that a longneck bottle might be used as a weapon, plaintiff failed to show why the general principle that no person has a legal duty to protect another from the criminal acts of a third person was inapplicable in this case. Mere foreseeability that a legal product might be used in a crime does not create a duty that overshadows the intervening criminal act. Summary judgment affirmed. 

Federal Court Rejects Truck Class Action Because Defendant Actually Has Right To Defend

A federal court recently rejected plaintiffs' class certification bid in a suit against Ford Motor Co. relating to diesel engines in some vehicles. Corder v. Ford Motor Co., No. 3:05-CV-00016 (W.D. Ky., 7/25/12).

Corder brought an action against Ford for allegedly violating the Kentucky Consumer Protection Act (“KCPA”). Corder alleged that the diesel engines installed in model year 2003 F-Series Super Duty Trucks and Excursions were "highly problematic."  Plaintiff then allegedly purchased a model year 2004 Ford F-250 Super Duty Truck with what he claimed was a “2003 engine” that did not have the improvements that were in the “2004 engine” According to plaintiff, non-disclosure of installation of the “2003 engine” in his model year 2004 truck was an unfair, false, misleading, or deceptive act within the meaning of the KCPA.

Ford noted that it makes running changes to its vehicles, including the engines, throughout the year. Purchasers of 2004 model year trucks built prior to October of 2003 received multiple slightly different engines, and all of those engines were improved over engines installed on most 2003 vehicles.

Following initial discovery, Ford moved for summary judgment. The trial court granted the motion, finding that Corder had not shown that Ford’s actions were false, misleading, or deceptive within the meaning of the KCPA, nor had Corder shown that he suffered an “ascertainable loss,” as is required to maintain a private action under the KCPA. The Sixth Circuit disagreed. Corder v. Ford Motor Co., 285 F. App’x 226 (6th Cir. 2008).  Upon remand, Corder filed a motion to certify a national class, but the district court found that a national class was not viable because the laws of each of the states in which the putative class members purchased their vehicles would have to be applied, which would lead to significant problems of individualized proof and manageability.

Plaintiff then amended, seeking to represent a class of only Kentucky residents. The court concluded that Rule 23(b)(3) was still not met. In order to meet the demand of Rule 23(b)(3) that common issues predominate, a plaintiff must show that the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole, predominate over those issues that are subject only to individualized proof. Beattie v. CenturyTel, Inc., 511 F.3d 554, 564 (6th Cir. 2007). The predominance requirement in Rule 23(b)(3) guards against certifying class actions that could overwhelm or confuse a jury or compromise a party’s defense. Thus,  certification is not appropriate unless it is determinable from the outset that the individual issues can be considered in a manageable, time-efficient, and fair manner.

For Ford to be liable for damages under the KCPA, plaintiff had to establish that: (1) the person purchased or leased a Ford vehicle in question primarily for personal, family, or household purposes; (2) the person suffered an ascertainable loss; and (3) the loss was a result of an unfair, false, misleading or deceptive act or practice.

In this case, the need to determine the primary purpose for each customer’s purchase required an individualized inquiry that would overwhelm any alleged common issues. The trucks
at issue were not the type of product about which it may be inferred that all, or even the vast majority, were purchased primarily for a personal, family, or household purpose.  Indeed there was evidence suggesting that a large number of the purchasers of the trucks at issue bought them primarily for commercial use. And the Ford Design Analysis Engineer stated that it was “designed for heavy-duty use, including commercial use, and was too large to fit in many home garages."  The court noted that the burden on a class certification motion belongs to the plaintiff, In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 678 F.3d 409, 416 (6th Cir. 2012), but Corder offered no evidence controverting the suggestion that numerous customers purchased their trucks either partially or wholly for commercial purposes. Litigation of that issue would  require individualized inquiries into numerous class members. Clearly, the question of why any particular customer purchased the pickup truck was not something that can be resolved on a classwide basis.

Moreover, this element was a subjective one by its terms, focusing on the reasons underlying a
particular person’s reasons for purchasing a truck. Indeed, the statute did not restrict claims
to those purchasers whose only purpose was personal, family, or household related, but required
only that such a purpose be the primary one. That a purchaser can have a commercial purpose for the purchase of a truck, so long as that is only a secondary purpose, made the individualized inquiries and their resolution by a jury all the more detailed and complicated.

So far, a solid but not particularly uncommon analysis.  What is especially worthwhile for readers of MassTortDefense is that  plaintiff, as is growing more common, suggested that the court could simply use questionnaires, claim forms, or “judicial notice” to resolve the primary use inquiry. But none of those suggestions allowed for Ford to do what Ford was entitled to do: litigate the issue before a jury with respect to each customer for whom the relevant facts and inferences to be drawn therefrom are disputed. The requirement that a person have purchased a product primarily for personal, family, or household use prior to a finding of liability under KRS § 367.220 is an explicit element of the statute. Ford, of course, had every right to demand a full litigation of that element of the cause of action, and for each putative class member no less. The Rules Enabling Act forbids interpreting the Federal Rules of Civil Procedure, including Rule 23, to “abridge, enlarge or modify any substantive right.” 28 U.S.C. § 2072(b). Accordingly, a court could not certify a class action under the premise that Ford would not be entitled to fully litigate that statutory element in front of a jury, at least for those class members where the facts and inferences to be drawn therefrom are disputed. See Wal-Mart v. Dukes, 131 S.Ct. at 2561 (“Because the Rules Enabling Act forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right,’ a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims”).

While plaintiff also argued that an “appropriate trial plan” would allow for resolution of the necessary individualized inquiries, he did not provide any detailed suggestion as to what sort of appropriate trial plan would allow for the resolution of the potentially numerous individualized inquiries without overwhelming the trial and the jury. Simply put, plaintiff could not meet his burden of showing that class certification was appropriate by making conclusory statements about questionnaires, judicial notice, or an appropriate trial plan.



EPA Releases Draft BPA Report

Last week, the EPA released a draft analysis of chemicals that may substitute for bisphenol A's use in thermal paper -- that's the material often used in sales receipts, supermarket labels, parking tickets, airline tickets, and similar items.

Readers may recall that in 2010, EPA released a chemical action plan that summarized hazard, exposure, and use information on bisphenol A (BPA) and identified various actions EPA was considering.  Part of that action plan was to help industries consider alternative chemicals and provide a basis for informed decision-making by developing an in-depth comparison of potential human health and environmental impacts of chemical alternatives. Representatives from industrial, academic, governmental, and non-governmental organizations worked with EPA to select and evaluate alternatives to BPA in thermal paper and develop this report.

By way of background, BPA (a topic we have posted on before) is a high production volume (HPV) chemical with a U.S. volume estimated at 2.4 billion pounds in 2007 and an estimated value of almost $2 billion. It is a monomer used in manufacturing most polycarbonate plastics, the majority of epoxy resins, and other chemical products such as flame retardants.  Approximately 94% of BPA is used as a monomer to make polycarbonate plastic and epoxy resins. Although most human exposure to BPA is believed to come from food and beverage packaging made from these materials, less than 5% of the BPA produced is used in food contact applications.  BPA-based materials are also used in automotive and other transportation equipment, optical media such as DVDs, electrical/electronics equipment, construction, linings inside drinking water pipes, thermal paper coatings, foundry casting, and elsewhere.  It has been an extraordinarily useful product.

The BPA in Thermal Paper Alternatives Assessment is an evaluation of potential hazards associated with thermal paper developers that are likely to be functional alternatives to BPA. Thermal paper systems include a developer and other components such as dyes and sensitizers. (EPA recognized that a change in the developer may require additional adjustments to the system.) This draft report summarizes the outcomes of the alternatives assessment, and aims to improve understanding of the potential environmental and human health impacts of BPA and alternative developers in thermal paper throughout their life cycles. Importantly, this draft report does not identify functional chemicals with no or even low concern for all human health and environmental hazard endpoints; all of the alternatives are associated with some trade-offs. For example, a chemical may have a lower concern for human health but a higher concern for aquatic toxicity. Finding and choosing substitutes is not always as easy as plaintiff attorneys and advocacy groups try to suggest.

Comments on EPA's draft alternatives assessment are due Oct. 1, 2012, at

State Supreme Court Adopts Consumer Expectation Test for Alleged Food Defects

Our readers know that for nearly 50 years, an ongoing issue in product liability law has been the definition of "defect" within the strict liability context. A subtext to this ongoing discussion has been the appropriate test to apply to food products.  Earlier this month,  the “reasonable consumer expectation” test was adopted for food claims by the Maine Supreme Judicial Court in a strict liability claim involving a boneless turkey product. See Pinkham v. Cargill Inc., No. 2012 ME 85 (Me., 7/03/12).

Plaintiff allegedly consumed a hot turkey sandwich during his break.  Defendant  allegedly manufactured the boneless turkey product in the sandwich.  In the middle of or immediately after eating the sandwich, Pinkham allegedly experienced severe and sudden pain in his upper abdominal area and thought that he might be suffering from a heart attack. His doctors later determined that in their opinion he most likely had an “esophageal tear or perforation.” Plaintiff sued, alleging that this was a result of bone in the boneless turkey.

Although 50 percent of all turkey consumed in 1970 was during the holidays, today that number is around 31 percent as more people enjoy turkey year-round. In 2010, U.S. consumption of turkey was 16.4 pounds per person.  And turkey is now a $16 billion annual industry, according to the National Turkey Federation.  Readers will recall that our own Ben Franklin proposed the turkey as the national bird, at least in a letter he wrote to his daughter Sarah on January 26, 1784.

Back to the litigation. Defendant moved for summary judgment. After considering the motion, the trial court granted the motion in favor of Cargill, noting that Maine had not yet established which test to use when evaluating a strict liability claim for an allegedly defective food product pursuant to Maine’s strict liability statute, 14 M.R.S. § 221. The court recognized that, prior to the enactment of the state's strict liability statute, courts used a test similar to the “foreign-natural” doctrine when addressing an injury caused by a food product in an implied warranty of merchantability case. E.g., Kobeckis v. Budzko, 225 A.2d 418, 423 (Me. 1967). Readers will recall that the “foreign-natural” doctrine provides that in general a food producer is not liable for anything found in the food product that naturally exists in the ingredients. E.g., Newton v. Standard Candy Co., 2008 U.S. Dist. LEXIS 21886, at *6 (D. Neb. Mar. 19, 2008).  The major alternative has been the “reasonable expectation” test: which provides that regardless of whether a substance in a food product is natural to an ingredient thereof, liability will lie for injuries caused by the substance where the consumer of the
product would not reasonably have expected to find the substance in the product. E.g., Jackson v. Nestle-Beich, Inc., 589 N.E.2d 547, 548 (Ill. 1992).

The trial court proposed to evaluate the summary judgment motion under both the traditional
“foreign-natural” doctrine and the more recent  “reasonable expectation” test. The lower court concluded that, because bone is naturally found in turkey, and because the average consumer would reasonably expect to find bone fragments up to two millimeters in size in processed “boneless” turkey product (which the doctor had), the contents of the food bolus discovered in plaintiff's esophagus did not demonstrate that the product was defective, as a matter of law.

The supreme court noted that the state's strict liability approach was rooted in the Second Restatement.  It observed that the Restatement comments define “[d]efective condition” in part as a product that is “in a condition not contemplated by the ultimate consumer.” Restatement (Second) of Torts § 402A cmt. g. The comments also define “[u]nreasonably dangerous”: “The article sold must be dangerous to an extent beyond that which would be contemplated by the ordinary
consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics.” Id. cmt. i.  Relying on these comments, the court moved to the reasonable expectations test.

Applying that standard, the supreme court ruled that plaintiff had provided sufficient evidence that an alleged defect in the boneless turkey product he consumed might have caused his surgery-requiring injury. There was a genuine issue of material fact as to whether the turkey product caused the injury. One doctor testified that he believed that the injury was a “perforation secondary to a foreign body.”  There was direct evidence of the presence of the smaller pieces of bone or cartilage.  While there was no direct evidence of a larger piece of bone, the court thought a jury could conclude that a larger piece of bone could have been present in the turkey product Pinkham consumed, but may have passed, undetected, from Pinkham’s throat.

Whether a consumer would reasonably expect to find a particular item in a food product is normally a question of fact that is left to a jury.  The court concluded that the trial court could not find as a matter of law that a food bolus containing one-to-two-millimeter bone fragments is not defective.  The question of whether a consumer would reasonably expect to find a turkey bone or a bone
fragment large and/or sharp enough to cause an esophageal perforation in a “boneless” turkey product "s one best left to the fact-finder" said the court.


Supreme Court to Review Issue of Daubert at Class Certification Stage

The U.S. Supreme Court agreed last week to hear argument in a case in which the lower courts wrestled with the issue whether, at the class certification stage, a district court must resolve Daubert issues. See Comcast Corp. v. Behrend, U.S., No. 11-864 (cert. granted 6/25/12). The Court indicated it was interested in the question "whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a classwide basis."

Readers will recall that in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011)  the Supreme Court in dicta referenced the question. Justice Scalia observed that the district court had "concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings," but the majority replied that "we doubt that is so." 131 S. Ct. at 2554. Thus, Dukes strongly suggested that it was appropriate for defendants to make the expert challenge at the class certification stage, and important for the court to resolve the issue then; the Comcast litigation may see the Court turn that persuasive dicta into binding precedent. 

Most district courts have been following the dicta. Historically, the Circuits have split.  The 8th and 9th Circuits call for an expert inquiry at this stage, and in American Honda, which we commented on here, the Seventh Circuit previously held that where an expert’s report or testimony is critical to class certification, a district court must conclusively rule on any challenge to the expert’s qualifications or submissions prior to ruling on the class certification motion. 600 F.3d at 815–16. Later, the Seventh Circuit reaffirmed its holding from American Honda, ruling that it was error for a district court to decline to rule on a Daubert motion at the class certification stage. Messner v. Northshore Univ. Healthsystem, 2012 U.S. App. LEXIS 731, *17 (7th Cir. Jan. 13, 2012).

The 3rd Circuit went in another direction. The district court in Comcast originally certified a class; following the court of appeals' decision in Hydrogen Peroxide, 552 F.3d 305, the district court granted in part Comcast‘s motion to reconsider its certification decision.  After further briefing, plaintiffs got the case re-certified after convincing the district court that they could show that they had an expert methodology to prove damages on a classwide basis. On the current appeal, the Third Circuit agreed that the lower court had applied the "rigorous analysis,"  adding that at the class certification stage, "we are precluded from addressing any merits inquiry unnecessary to making a Rule 23 determination.”  The Petitioners argued that the Third Circuit affirmed the certification order after expressly declining to consider several “merits” issues necessary to determine whether, as required by Rule 23(b)(3), common questions predominate over individual ones.

So the Comcast case may give the Supreme Court a chance to further explain what exactly a rigorous analysis should entail, especially with respect to alleged class-wide damages. The focus on damages, which some have viewed as narrowing the issue presented, still is a question that arises not just in antitrust cases, but also in mass torts, which are front and center for our readers. 


Amici Weigh in On Consumer Class Certification in 6th Circuit

Earlier this month, a number of prominent business groups, including the National Association of Manufacturers, weighed in supporting a petition for rehearing of a Sixth Circuit panel decision declining to vacate a class certification decision. See Gina Glazer et al. v. Whirlpool Corp., No. 10-4188 (6th Cir 2012). 

The case arises from the claims of a proposed class of consumers who alleged that their Whirlpool washing machines were defective. The Chamber of Commerce, NAM, the Business Roundtable, PLAC, DRI, and others submitted amicus briefs in support of rehearing, pointing out several issues with the class certification decision below, and as affirmed by the appellate panel. See 2012 US LEXIS 9002 (6th Cir., May 3, 2012).

For example, the amici pointed out that the class was certified despite the presence of individuals (perhaps 2/3 of the class) who have no Article III standing because they have not been injured.

The panel also failed to conduct or require the rigorous analysis required by the Supreme Court in Dukes, especially with regard to the predominance requirement. A specific issue related to the number of customers who had allegedly complained about the washers. In Dukes, the Supreme Court made clear that a district court may not simply rely on the plaintiffs’ allegations in ruling on class certification; rather, the court must consider, weigh and resolve disputed questions of fact.

The briefs also pointed out that the court ignored the important impact of potential affirmative defenses, such as misuse, on the predominance inquiry.

This is one worth keeping an eye on.

Find the amicus briefs here and here and here.


Court Again Dismisses Claim Against "Non-Conventional" Alcohol Beverage

We posted last year about the dismissal of a motorcycle passenger's claim against the maker of a caffeinated alcoholic drink, seeking to hold the company liable for her crash-related injuries.See Cook v. MillerCoors LLC, No. 11-1488 (M.D. Fla.).

The operator of the motorcycle in the accident was killed, and the plaintiff Cook, who was a passenger, was injured. Prior to the crash, the driver allegedly had consumed several alcoholic beverages containing caffeine and other stimulants, manufactured by the defendant. Cook argued that such beverages were “uniquely dangerous” because they appeal to younger drinkers and because the addition of caffeine allegedly enables one to drink more alcohol without feeling as intoxicated as one normally would. Thus, she contended, consumers of these beverages are more likely to “engage in dangerous behavior such as driving.” She asserted the driver did not appear impaired, even though toxicology reports from his autopsy revealed that his blood alcohol level was 0.10 at the time of the crash.

The district court found flaws with the duty, breach, and causation elements of the claim. The court found that Cook had not established a duty to warn because “the dangers inherent in alcohol consumption are well known to the public.”  Readers can readily see why the court was reluctant to make an exception to the rule for the so-called "unconventional" beverage. There are hundreds of alcohol-containing products that are arguably not "conventional" in one way or another, by taste, ingredients, color, manufacturing process, advertising... To shift responsibility from the person who over-consumes one of these and then drives impaired is to send the absolutely wrong policy message.

Courts have typically recognized no duty on the beverage maker, regardless of a plaintiff's attempt to differentiate either themselves or the product. See, e.g., Malek v. Miller Brewing Co., 749 S.W.2d 521 (Tex. App. 1988) (finding no duty to warn despite claim that advertising led plaintiff to believe that “Lite” beer was less intoxicating than other beer); Pemberton v. Am. Distilled Spirits Co., 664 S.W.2d 690 (Tenn. 1984); Greif v. Anheuser-Busch Cos., Inc., 114 F. Supp. 2d 100 (D. Conn. 2000)(particular, alleged tolerance of an individual consumer); MaGuire v. Pabst Brewing Co., 387 N.W.2d 565 (Iowa 1986).

Plaintiff attempted to re-plead her claim, again alleging that the addition of stimulants that mask the intoxicating effects of alcohol was a defect, but also focusing on the supposed risks this formulation posed to youth. The court again found the complaint lacking. Alcoholic beverages are not considered unreasonably dangerous as defined by the Restatement (Second) of Torts, because the dangers associated with alcohol are well known.  Cook asserted that the risks are not common knowledge to youthful drinkers having experience only with conventional alcoholic beverages. This court was not convinced that “the special risks posed to youth” made the drink unreasonably dangerous from the perspective of the general public.  More significantly, Cook’s argument overlooked an important point: the alleged “special risks” manifest themselves only if the consumer chooses to drink in excess. The case law recognizes that anyone who drinks alcohol may become impaired and yet may not be able to discern his or her impairment. That does not make alcoholic beverages unreasonably dangerous or absolve the drinker of responsibility.

Moreover, the youth-based allegations did not change Florida law on causation, under which voluntary drinking of alcohol is the proximate cause of such an injury, rather than the manufacture or sale of those intoxicating beverages to that person. As to the plaintiff's warning theory, persons engaging in the consumption of alcoholic beverages may not be able to ascertain precisely when the concentration of alcohol in their blood, breath, or urine reaches the proscribed level, so they should in the exercise of reasonable intelligence, understand what type of conduct places them in jeopardy of violating the law. The degree of intoxication to be expected from any particular brand (or formulation) of alcoholic beverage does not require a special duty to warn, or give rise to a fact question about the warnings here.

The court distinguished Cuevas v. United Brands Co., Inc., 2012 WL 760403 (S.D. Cal. Mar. 8, 2012), as an economic injury claim brought under various consumer protection statutes and warranty theories which focused on the sale of the product allegedly in violation of FDA rules rather than its consumption.


Consumer Fraud Claim on "All Natural" Beverage Rejected

One trend we are keeping an eye on here at MassTortDefense is plaintiffs' aggressive and excessive use of consumer fraud act claims, micro-analyzing every ad, turning traditional puffing into some kind of nefarious marketing scheme.  Class certification in such cases can trigger the need to think about "blackmail settlements."

So all victories are worth noting, and last week South Beach Beverage Co. Inc., maker of SoBe drinks, garnered dismissal of a California putative class action alleging false claims about their "0 Calories Lifewater" drinks. See Charles Hairston v. South Beach Beverage Co. Inc,. et al., No. 2:12-cv-01429 (C.D. Cal. 5/18/12).

SoBe manufactures a diverse range of beverages, including teas and enhanced waters, that are characterized by exotic flavor combinations and added vitamins. In his First Amended Complaint, plaintiff alleged that during the last three to four years, he regularly purchased SoBe 0 Calorie Lifewater beverages (“Lifewater”), which are no-calorie, vitamin-enhanced, flavored water drinks. Plaintiff raised three challenges to Lifewater’s labeling, which he claimed he “read and relied on.” First, plaintiff alleged that the “all natural” label was potentially deceptive because Lifewater contains “deceptively labeled ingredients” that are “synthetic or created via chemical processing.” Second, plaintiff alleged that Lifewater’s labels are potentially misleading because the names of various fruits are used to describe the different flavors of Lifewater even though Lifewater allegedly does not contain any actual fruit or fruit juice. Third, plaintiff alleged that the use of the common vitamin name (e.g., B12) on the product labels is misleading because the vitamins added to Lifewater are "synthetic" or created via chemical processing.

As is typical, plaintiffs alleged causes of action including for: (1) California Consumers Legal Remedies Act – California Civil Code §§ 1750, et seq. (“CLRA”); (2) California False Advertising Law – California Business & Professions Code §§ 17500, et seq. (“FAL”); (3) California Unfair Competition Law – California Business & Professions Code §§ 17200, et seq. (“UCL”).

Defendants argued first that the claims alleged related to the use of fruit names to describe the various flavors of Lifewater and their use of common vitamin names were preempted by the express preemption provisions in the Federal Food, Drug, and Cosmetic Act (“FDCA”) and by the specific labeling regulations promulgated by the Food and Drug Administration (“FDA”). The court concluded that plaintiff’s claims related to defendants’ use of the names of various fruits to describe the different flavors of Lifewater were indeed preempted. See, e.g., Dvora v.
General Mills, Inc., 2011 WL 1897349 (C.D. Cal. May 6, 2011) (holding that CLRA and UCL claims
were preempted where the plaintiff was challenging the use of the words “Blueberry Pomegranate”
in labeling a cereal not containing any blueberries or pomegranates because FDA regulations
explicitly permit manufacturers “to use the name and images of a fruit on a product’s packaging to
describe the characterizing flavor of the product even where the product does not contain any of
that fruit, or contains no fruit at all”); McKinnis v. General Mills, Inc., 2007 WL 4762172 (C.D. Cal.
Sept. 18, 2007) (holding that use of “Strawberry Kiwi” to designate the flavor of yogurt containing
no fruit ingredients was “permissible to demonstrate the ‘characterizing flavor’ of the product”).

The court also concluded that plaintiff’s claims related to defendants’ use of the common names
of vitamins were preempted. See, e.g., 21 C.F.R. § 101.9(c)(8)(v) (recognizing that “Vitamin C” and
“Ascorbic acid” are “synonym[s]” that may be used in the alternative in a product’s nutritional
information labeling); 21 C.F.R. § 101.9(k)(4) (stating that the FDA will consider a food
“misbranded” if its “label or labeling represents, suggests, or implies” that “a natural vitamin in food is superior to an added or synthetic vitamin”).

Significantly, the court concluded that plaintiff could not avoid preemption of these claims by arguing that his claim related solely to defendants’ “all natural” representations and that he included his fruit name and vitamin name claims only as support for his “all natural” claim. Such an argument would effectively allow a plaintiff to always avoid preemption of those claims, and would undermine the purpose of the federal labeling standards which includes avoiding
a patchwork of different state standards.  These claims were dismissed with prejudice.

Plaintiff also alleged that the “all natural” labeling on defendants’ products was potentially deceptive because the product contains “deceptively labeled ingredients” that are
“synthetic or created via chemical processing.” However, plaintiff could not state a claim under the
CLRA, FAL, or UCL regarding defendants’ allegedly deceptive “all natural” labeling because once
the preempted statements regarding fruit names and vitamin labeling were removed, plaintiff’s claim is based on a single out-of-context phrase found in one component of Lifewater’s label.

The court concluded that plaintiff’s selective interpretation of individual words or phrases from a product’s labeling could not support a CLRA, FAL, or UCL claim. See, e.g., Carrea v. Dreyer’s Grand Ice Cream, 2012 WL 1131526 (9th Cir. Apr. 5, 2012).  Lifewater’s label did not simply state that it is “all natural” without elaboration or explanation. Instead, the “all natural” language was immediately followed by additional statements, like “with vitamins” or “with B vitamins.”  Lifewater did not use the “all natural” language in a vacuum. Thus, it was impossible for plaintiff to allege how the “all natural” language would be deceptive without relying on the preempted statements regarding fruit names and vitamins.

In addition, the court concluded that no reasonable consumer would read the “all natural”
language as modifying the “with vitamins” language and somehow believe that the added vitamins are suppose to be “all natural vitamins.”  Moreover, to the extent there was any ambiguity, it was  clarified by the detailed information contained in the ingredient list, which explained the exact contents of Lifewater. In this case, the ingredient list was consistent with the front label statement of “all natural with vitamins.”

The court concluded that the challenge to the “all natural” language on Lifewater was not deceptive as a matter of law.


Sunscreen Label Rules Deadlines Extended by FDA

Next weekend marks the unofficial start of the summer season, and readers will be heading out to the lake or beach, picnics and barbecues.  All the while taking time to reflect on the brave men and women who gave their lives for our freedom serving in the United States armed forces.  (Memorial Day was originally known as Decoration Day, a day to put flowers and flags on the graves of fallen Civil War soldiers.)

Those summer activities may call for sunscreen. On that topic, we note that the FDA recently announced a six-month delay on implementing new labeling rules for sunscreen.  The rules call for additional testing regarding ultraviolet A and ultraviolet B ray protection, and restrict use of certain "waterproof," "sweat-proof" and "sunblock" claims, also regulating claims for ‘‘instant
protection’’ or protection immediately upon application, or claims for ‘‘all-day’’ protection or extended wear claims.

The new rules were set to go into effect June 18, but industry groups like the Personal Care Products Council and the Consumer Healthcare Products Association noted the need for more time. FDA agreed that allowing adequate time for the 2011 final rule requirements to be
fully implemented is in the interest of public health.  Complex label redesign issues and the required broad spectrum testing just is going to take more time.

For example, sunscreens that pass the FDA's new broad-spectrum test procedure can be labeled as "Broad Spectrum" on the front label. And such products will be extremely valuable to consumers concerned about skin cancer risks. If the timeline for implementation discourages manufacturers from conducting broad spectrum testing, and instead prompts them to apply the labeling that the final rule establishes for products that have not been established to offer broad spectrum  protection, a major public health goal of the rule will be undermined.

FDA still encouraged manufacturers to introduce individual products bearing the new labeling as it becomes available, even in advance of the revised compliance date, which ranges from December 2012 to December 2013 depending on the product.

Readers, enjoy your holiday weekend.


Tort Reform Continues in Arizona

As always at MassTortDefense we are happy to note tort reform victories.

Earlier this month Arizona Governor Brewer signed legislation limiting punitive damage awards in product liability defect suits in the state.

The bill, H.B. 2503, was passed by wide margins in both chambers of the state legislature earlier in the Spring.  It states that punitive damages generally cannot be awarded in a civil suit in Arizona when a product is designed, manufactured, packaged, labeled, sold, or represented in relevant and material respects in accordance with a federal agency's approval, clearance, or determination.

The legislation does not exempt punitive damages if the company that sells a product does so after a final order is given from a government agency to withdraw or recall the item from the market.

Supporters had indicated that the measure was important to discourage the practice of seeking punitive damages simply as a lever to force a defendant to settle, as insurance typically does not cover punitives. Businesses that manufacture products in compliance with all relevant health and safety standards should not be held liable for punitive damages in product liability cases. Laws like this one give clients the security to be innovative. When creating new products, businesses can be assured that by complying with mandated guidelines they will not be subject to unjust punitive sanctions. 


Federal Court Denies Certification of MP3 Class Action - Again

A New Jersey federal court last week declined to certify a proposed class in a suit over alleged defects in the Zune MP3 player's display screen. See Maloney, et al. v. Microsoft Corp., No. 3:09-cv-02047 (D.N.J. 2012).

Readers may recall we blogged about this case when the court denied certification of a nationwide class, in part because of choice of law issues. The court at that point reserved decision as to whether or not a New Jersey-wide class might be certified, subject to further briefing by the parties.  We said at that time: "clearly additional individual issues will predominate in that context as well."  Hope our college Madness pool predictions will be as accurate.

The new proposed class was NJ residents who purchased or owned a Microsoft Zune 30gb model and whose Zune liquid crystal display screen cracked without cracking or chipping of the outer screen that covers the LCD screen within their applicable warranty period (one-year, unless under an extended warranty) and who notified Microsoft orally or in writing about the cracked LCD but did not receive repair or replacement of their Zune from Microsoft.  That's a mouthful.

Defendant argued that plaintiffs had no unifying theory of causation capable of class-wide proof and that individual questions of fact would therefore predominate at trial.  Plaintiff, on the other hand, argued that causation could be established on a class-wide basis because class members‘ LCD screens fractured without external damage to the outer lens;  fractured in locations that were disproportionately clustered around four identified alleged internal design defects; and were 20 times more likely to crack without external damage than were LCD screens on the later-model Zune.

Our readers know that the burden is on the plaintiff to prove that the requirements of Rule 23 have been satisfied. Class certification is proper only if the trial court is satisfied, after a rigorous analysis, that the prerequisites‘ of Rule 23 are met. Predominance was the key element here, as issues common to the class must predominate over individual issues. If any key elements of a claim can be proven only by resort to individual treatment, class certification is inappropriate. Plaintiffs seeking class certification must demonstrate that each element of [the cause of action is capable of proof at trial through evidence that is common to the class rather than individual to its members.

Here, the court determined that plaintiffs' purported proofs failed to establish that any of the alleged design defects commonly caused class members‘ injuries because this evidence suffered from what the United States Supreme Court has termed a failure of inference. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2555 (2011).  Procedurally, any factual dispute concerning whether causation is capable of proof at trial through common evidence must be determined by the court. This often requires the weighing of conflicting expert testimony, and the court must then resolve expert disputes in order to determine whether the predominance requirement has been met. A court must engage in this analysis even if it overlaps with the merits.

The practical considerations underlying the presentation of a case at trial should be considered by the court in determining whether individual questions of fact would predominate.  In the context of proving the element of causation, numerous courts have held that individualized questions of fact prevent class certification where resort to case-by-case testimony would be necessary. In the context of consumer fraud, for example, class certification is inappropriate where oral representations are made to each class member and where plaintiffs must rely on this evidence to prove causation.

Here, the court noted that a jury must be able to independently weigh whether each alleged design defect actually existed and whether that specific defect was the cause of each class member‘s injury.  Plaintiff‘s proffered evidence was largely the plaintiff‘s lawyers‘ comparison effort.  Plaintiff‘s expert conducted no statistical analysis. It was thus impossible to tell from plaintiff‘s proffered evidence whether any of the numbers put forward were statistically significant.  Also, plaintiff had not put forth any evidence that a jury could rely upon in determining which alleged design defect led to which Zune failure or which grouping of Zune failures. As framed by the plaintiffs, the alleged LCD cracks resulted from a muddled mix of causes and effects. There was no indication that each purported cause led to a uniform result (e.g., an origination point in the same location), which would permit the jury to draw an inference of a specific design defect. Thus, there was no way to determine which of the purported causes or which grouping of these causes led to which individual LCD crack or group of LCD cracks.

Indeed, according to plaintiff‘s own expert, one of the most basic concepts of failure analysis is that the origin (position) of failure can be determined from the failure pattern on the fracture surface of an object. Plaintiffs also admitted that a number of the 30gb Zunes sampled by their expert fell outside the high-frequency areas identified in the expert report.  Just as statistical evidence of gender disparity at the regional or national level in Dukes could not establish gender disparity at the local level, plaintiffs' proof could not establish the design defects on a common basis.

Moreover, and this is an important point that some courts ignore, even if prima facie evidence of causation could be established on the basis of statistically significant recurrence of crack-origination points—something the plaintiffs had not established — the defendant must be given the opportunity to rebut such an inference; to defend against each of these alleged defects; to respond to that proof.  The only way in which the defendant could rebut plaintiff‘s proposed class-wide evidence would be through the presentation of individual evidence regarding the circumstances surrounding each cracked LCD screen. A lack of damage to the outer lens did not necessarily preclude evidence that other portions of the outer shell of the 30gb Zune were damaged by misuse.  Defendant would have to be given the opportunity to cross-examine each Zune owner to assure that there was no damage to the outer casing (as opposed to the outer lens covering the LCD screen) that resulted from misuse or abuse. This would result in hundreds of mini-trials.

Lastly, internal defendant communications did not establish causation as to each individual class member‘s injury. Generalized statements about an alleged design defect are merely that—general statements; they fail to show that all LCD cracks must have been the result of this alleged defect. Just as in Dukes, anecdotal evidence generally cannot serve as a basis for class certification.

Federal Court Denies Class Certification After Daubert Analysis

A  federal court late last month declined to certify three classes of consumers in litigation claiming that a defect in Harley-Davidson Motor Co. Inc.'s motorcycles caused severe wobbling and instability. See Steven C. Bruce, et al. v. Harley-Davidson Motor Co., Inc., et al., No. 2:09-cv-06588 (C.D. Cal.).

Plaintiffs were owners of Harley-Davidson motorcycles. According to plaintiffs, beginning in or before 2002, Harley-Davidson manufactured and sold touring motorcycles that had an alleged design defect in the form of an excessively flexible chassis. According to plaintiffs, the alleged defect caused “severe wobbling, weaving and/or instability,” especially occurring when riders made sweeping turns, and traveled at speeds above 55 miles per hour. Plaintiffs alleged that had they and other class members known of the defective nature of the vehicles, they would not have purchased or leased their motorcycles, or at least would have reduced the amount they were willing to pay for them. Hence, the classic alleged consumer fraud class action.

Plaintiffs moved for class certification, and relied on expert testimony to establish some of the Rule 23 elements.  Specifically, plaintiffs’ expert opined that a rider of a properly-designed
motorcycle should not experience a weave-mode instability event when riding within the
range of expected speeds.  He asserted that the class-purchased cycles shared a common design defect in the form of an “excessively flexible” chassis. The vehicles allegedly failed to “damp out,” or reduce, weave-mode oscillations to one half of their original amplitude within the time frame (a couple seconds) necessary to prevent them from becoming perceptible to the riders.

Defendants challenged the admissibility of that expert testimony under Daubert, contending that Rule 702 and Daubert apply with “full force” at the class certification stage. In support of this
position, Harley-Davidson relied primarily on Wal-Mart Stores, Inc., v. Dukes, 131 S. Ct. 2541 (2011), and Am. Honda Motor Co. v. Allen, 600 F.3d 813, 815–16 (7th Cir. 2010) (per curiam).  In Dukes, the Supreme Court noted that it doubted that Daubert did not apply at the certification stage of class-action proceedings. 131 S. Ct. at 2554. In American Honda, which we commented on here, the Seventh Circuit held that where an expert’s report or testimony is critical to class certification, a district court must conclusively rule on any challenge to the expert’s qualifications or submissions prior to ruling on the class certification motion. 600 F.3d at 815–16. Earlier this month, the Seventh Circuit reaffirmed its holding in American Honda, ruling that it was error for a district court to decline to rule on a Daubert motion at the class certification stage. Messner v. Northshore Univ. Healthsystem, 2012 U.S. App. LEXIS 731, *17 (7th Cir. Jan. 13, 2012).

Plaintiffs argued that a full Daubert inquiry into the reliability of expert opinions is not required or appropriate at the class certification stage. They cited In In re Zurn Pex Plumbing Prods. Liability Litig., 644 F.3d 604, 613 (8th Cir. 2011),which we criticized here, and in which the Eighth Circuit reasoned that an “exhaustive and conclusive Daubert inquiry before the completion of merits discovery” is not necessary due to the “inherently preliminary nature of pretrial evidentiary and
class certification rulings.”  See also Behrend v. Comcast Corp., 655 F. 3d 182, 204 n. 13 (3d Cir. 2011) (district court need not turn class certification into a "mini-trial”).

Here the district court found the approach adopted by the Eighth Circuit to be the appropriate application of Daubert at the class certification stage. Thus, a “tailored” or “focused” inquiry, to assess whether the experts’ opinions, based on their areas of expertise and the reliability of their analysis of the available evidence, should be considered in deciding the issues relating to class certification, said the court. Especially where discovery has been bifurcated into a class phase and a merits phase, an expert’s analysis may have to later adapt, as gaps in the available
evidence are filled in by merits discovery. Here, the court had granted defendants’ request for bifurcated discovery. Accordingly, the expert opinions would be assessed in light of the evidence currently available.

Even with a less than full inquiry, the court found that the proposed expert testimony must be excluded. In reaching this conclusion, the court decided the expert had not adequately
explained the scientific basis for his proposed standard, which also had not been accepted in
the field of motorcycle dynamics. While the evidence supported that the damping out of weave-mode oscillations may be an important factor for motorcycle stability, it did not establish that the expert's "rule" requiring the reduction of weave-mode oscillations to one half of their original amplitude within two seconds was scientifically valid.

The expert formed his opinions exclusively for the purposes of litigation and had not published his "rule" for peer review, providing further support for his exclusion.

Additionally, the court believed that he had not sufficiently accounted for other potential causes of the instability. He failed to consider and test for other possible causes including the use of non-specified tires and leaky shocks. See, e.g., Clausen v. M/V NEW CARISSA, 339 F. 3d 1049, 1058
(9th Cir. 2003) (“The expert must provide reasons for rejecting alternative hypotheses using scientific methods and procedures and elimination of those hypotheses must be founded on more than ‘subjective beliefs or unsupported speculation.’”).

Thus, plaintiffs failed to establish that common questions of law and fact predominated over individual inquiries. Once the opinions were excluded, plaintiffs failed to show that they had the ability to use common evidence by which they could demonstrate the defect. The fact that the chassis was the same for each vehicle ignored the failure to show how common evidence would ultimately be admissible to prove that they shared a common defect, and also was unavailing because it overlooked the Supreme Court’s admonition that a “rigorous analysis” will often “entail some overlap with the merits of the plaintiff’s underlying claim.” Dukes, 131 S. Ct. 2551.

Class Certification Denied in Baby Formula Case

A federal court last week denied class certification in a lawsuit over insect parts allegedly found in baby formula, recognizing that the claims raised multiple individual issues. Brandner v. Abbott Laboratories, et al., No. 2:10-cv-03242 (E.D. La. 1/23/12).

Plaintiff filed this suit in connection with Abbott’s September, 2010 recall of Similac brand infant formula because of the concern that insect parts may have been observed in a batch of finished product.  Brandner asserted that she purchased, and her child consumed, Similac that was
part of the product recall.  Plaintiff contended that during this period her child suffered alleged gastrointestinal problems, which symptoms required numerous visits to a physician, and that she allegedly experienced severe emotional distress upon learning she had fed her child infant formula containing beetles and beetle larvae.

Plaintiff's Rule 23 (b)(2) class allegations were dismissed, but plaintiff then sought monetary damages and moved to certify a class on her products liability and redhibition claims under
Federal Rule of Civil Procedure 23(b)(3). Defendant opposed this certification motion on the grounds that she failed to satisfy the commonality, typicality, and adequacy of representation requirements of Rule 23(a), as well as the predominance and superiority requirements of Rule 23(b)(3). The court's focus was on the predominance and superiority issues, and found no need to reach all the other questions.

Predominance of individual issues under the product liability claim-

Louisiana law requires a plaintiff to demonstrate that the product was unreasonably dangerous when it left the manufacturer’s control. Whether each class member actually purchased contaminated Similac was subject to individualized, not collective proof. Second, each putative class member would need to establish that Abbott’s actions were a proximate cause of his or her injury. Jefferson v. Lead Indus. Ass’n, Inc., 106 F.3d 1245, 1247 (5th Cir. 1997).  The plaintiff's cause of action here would require proof of medical causation, which has two components, general causation, which establishes that a substance has the capability of causing the injury or disorder in humans, and specific causation, which focuses upon whether the substance caused a particular injury to a particular individual. E.g., Ridgeway v. Pfizer, Inc.,, 2010 WL 1729187, at *2 (E.D. La. Apr. 27, 2010).  Even assuming general causation, proving specific causation would require a determination of an individual’s family and medical history; age; gender; diet; the timing of ingestion of the product; whether that individual suffered an injury, when the injury occurred, the type of injury suffered, and the number of occurrences of injury; and more. See In re Vioxx Prods. Liab. Litig., 239 F.R.D. 450, 459 (E.D. La. 2006)(citing In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 208 F.R.D. 625, 631-32 (W.D. Wash. 2002)).

This highly individualized inquiry led the court to conclude that issues common to the class did
not predominate.   Interestingly, the court went on to note that all plaintiffs who claimed emotional distress (an issue that plaintiff contended was common to the class) would have to establish not only the distress but also the attendant damages. The damages issue required a determination  whether plaintiffs sought medical treatment, psychiatric treatment, the degree to which plaintiffs manifested generalized fear, and the severity of plaintiffs’ emotional distress. See Howard v. Union Carbide Corp., 897 So.2d 768, 774 (La. App. 2005). Because the determination of whether each member suffered emotional distress turned on a highly individualized assessment, questions of fact regarding individual members predominated over common issues of fact.  While the individual nature of damages alone does not necessarily preclude class certification, class treatment may not be suitable where the calculation of damages is not susceptible to a mathematical or formulaic calculation. Establishing emotional damages would entail the exact type of “mini-trials” the courts have cautioned against. Indeed, the very nature of these damages, compensating plaintiffs for emotional and other intangible injuries, necessarily implicated the subjective differences of each plaintiff’s circumstances; they were an individual, not class-wide, remedy.  See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 417 (5th Cir. 1998). See also In re Katrina Canal Breaches Litig., 401 Fed. Appx. 884, 887 (5th Cir. 2010) (class certification not appropriate when individualized issues, such as the nature and extent of a class member’s damages, will predominate).


The court also found that plaintiff made no showing of how she would try these claims on a class-wide basis. She thus failed to demonstrate how she would overcome the manageability problems posed by claims that require such disparate proof. Accordingly, she had not satisfied the requirement that a class action be superior to other available methods of adjudicating the controversy.

Other claims-

Plaintiff's redhibition claims also could not be certified as a class because common issues did not predominate, and a class action was not a superior mechanism for trying these claims. Plaintiff argued, in essence, that defendant admitted defect in recalling lots of the product.  But the court found that the recall notice was far from an admission that every unit contained a
redhibitory defect. Indeed, the press release actually stated that there was only a “remote possibility” of contamination in the products subject to recall. Plaintiff could not show through common proof that each class member purchased a defective product.  Plaintiff's expert did not convince the court otherwise. The overall rate of contamination in tested samples was only 0.16%.  The expert admitted there was no scientific way to evaluate contamination in units that were recalled but not tested.  And even if the product was considered “adulterated” per the FDCA, a food product is adulterated, inter alia, if it has been prepared, packed, or held under insanitary
conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health. So a product can be “adulterated” under the FDCA without being contaminated or defective.

Class certification denied under (b)(3).

Court of Appeals Affirms Dismissal of FEMA Trailer Claims

The Fifth Circuit recently upheld the dismissal of putative class actions filed by Mississippi and Alabama residents against the federal government alleging trailers provided to Hurricane Katrina-impacted citizens contained hazardous levels of formaldehyde. See In re: FEMA Trailer Formaldehyde Products Liability Litigation (Mississippi Plaintiffs), No. 10-30921, and In re: FEMA Trailer Formaldehyde Products Liability Litigation (Alabama Plaintiffs), No. 10-30945 (5th Cir. 2012).

Plaintiffs-Appellants brought this Federal Tort Claims Act action against the United States for injuries allegedly related to their exposure to elevated levels of formaldehyde contained in the component materials of the Emergency Housing Units (“EHUs”) provided to them by the Federal Emergency Management Agency (“FEMA”) after Hurricanes Katrina and Rita. Readers will recall we have posted about various aspects of this litigation before. In October 2007, the United States Judicial Panel on Multidistrict Litigation created MDL No. 07-1873 (In re: FEMA Trailer Formaldehyde Products Liability Litigation), and assigned the complex litigation to the United States District Court for the Eastern District of Louisiana.

The key facts: After the hurricanes, FEMA activated its Individual and Household Assistance Program and, from September 2005 through May 1, 2009, the agency supplied disaster victims with EHUs, at no cost, to use as temporary shelter. The EHUs were taken from FEMA’s preexisting inventory, which had been purchased from public retailers as well as directly from manufacturers. The EHUs were small, portable, and usually placed at the disaster victims’ home sites. The trailers were installed by government contractors who placed the units on blocks or piers, anchored them to the ground using straps or bolts, and connected them to public sewer and water lines.

In March 2006, when FEMA began receiving formaldehyde-related complaints, it encouraged shelter occupants to ventilate their EHUs by opening the doors and windows. In June 2006, FEMA prepared an informational brochure informing EHU occupants of the potential risks of formaldehyde exposure, encouraging them to ventilate their units, and urging them to seek medical help if they developed health problems related to formaldehyde. In September 2006, FEMA began working with the Environmental Protection Agency to test the EHUs for formaldehyde, and also developed various new mitigation techniques.  In July 2007, FEMA distributed another informational brochure to EHU occupants, set up a hotline and a dedicated call center to field formaldehyde complaints from occupants, and continued to assist occupants in locating alternative housing. FEMA subsequently entered into an agreement with the CDC to conduct additional testing, the findings of which were compiled in a third informational brochure and distributed to EHU occupants in early 2008.

The federal government filed various motions to dismiss the claims against it, or in the alternative for summary judgment, based on the FTCA’s discretionary function exception.The district court denied the motions and held that the FTCA’s discretionary function exception might not apply to some or all of appellants’ claims, the determination of which would be driven by the facts of each individual case.  The district court then denied class certification and scheduled a series of bellwether trials in the MDL, but none of the FTCA claims brought by the bellwether plaintiffs against the Government advanced to the trial stage.

The Government then moved under Federal Rule 12(b)(1) to dismiss Appellants’ FTCA claims for lack of subject-matter jurisdiction on the grounds that no analogous private liability existed under the Mississippi and Alabama emergency statutes.  The district court granted the Government’s motion and dismissed appellants’ FTCA claims. Plaintiffs appealed to the Fifth Circuit.

 A plaintiff may only sue the United States if a federal statute explicitly provides for a waiver of sovereign immunity. The United States must consent to be sued, and that consent is a prerequisite to federal jurisdiction. Delta Commercial Fisheries Ass’n v. Gulf of Mex. Fishery Mgmt. Council, 364 F.3d 269, 273 (5th Cir. 2004). Waivers of sovereign immunity are narrowly construed in favor of the United States. In re Supreme Beef Processors, Inc., 468 F.3d 248, 253 (5th Cir. 2006). The FTCA is recognized as providing a waiver of sovereign immunity and provides the sole basis of recovery for tort claims against the United States. See 28 U.S.C. § 1346 and § 2671, et seq.; In re Supreme Beef Processors, 468 F.3d at 252 n.4. But the Act provides that the United States shall be liable in the same manner and to the same extent as a private individual under like circumstances. See
28 U.S.C. § 2674.

The "same manner" analysis is a mix of federal and state law. The FTCA requires the  Government's liability to be measured in accordance with the law of the state where the alleged act or omission occurred, so here the Appellants’ FTCA claims were limited by the relevant provisions set forth in Mississippi and Alabama tort law. See 28 U.S.C. § 1346(b)(1); Richards v. United States, 369 U.S. 1, 11-14 (1962); Cleveland ex rel. Cleveland v. United States, 457 F.3d 397, 403 (5th Cir. 2006). Whether a private person in “like circumstances” would be subject to liability is also a question of sovereign immunity and, thus, is ultimately a question of federal law. See United States v. Olson, 546 U.S. 43, 44 (2005). Because the federal government could never be exactly like a private actor, a court’s job in applying the standard is to find the most reasonable analogy. LaBarge v. Cnty. of Mariposa, 798 F.2d 364, 366-69 (9th Cir. 1986). Inherent differences between the government and a private person cannot be allowed to disrupt this analysis. The Fifth Circuit has consistently held that the government is entitled to raise any and all defenses that would potentially be available to a private citizen or entity under state law. Camacho v. Tex. Workforce Comm'n, 445 F.3d 407, 410 (5th Cir. 2006). Therefore, if a private person under “like circumstances” would be shielded from liability pursuant to a state statute, lower courts must decline to exercise subject matter jurisdiction in a case like this.

Because, here, the Mississippi and Alabama emergency statutes abrogate the tort liability of a private person who, (1) voluntarily, (2) without compensation, (3) allows his property or premises to be used as shelter during or in recovery from a natural disaster, the Government’s voluntary, cost-free provision of the EHUs to disaster victims, in connection with Hurricanes Katrina and Rita, was
also immunized conduct under the statute.  Despite plaintiffs' arguments, the Government’s provision of the government-owned EHUs, as implemented by FEMA, was voluntary because it was under no contractual or legal obligation, under any federal legislation, to provide the EHUs to disaster victims in response to the disasters. The Government did not receive compensation from the disaster victims in exchange for letting them use the EHUs. (The collection of taxes by the Government was not comparable to the traditional quid pro quo compensation contemplated by the statute.) In addition, the Government’s actions relating to the EHUs fell within the time frame contemplated by the statute as “during or in recovery from” a major disaster, since FEMA’s temporary emergency housing program ran from the hurricanes up to May, 2009.

Because Mississippi and Alabama emergency laws would protect those private individuals who shelter natural disaster victims from tort liability, the federal government's voluntary provision of the trailers was likewise immunized, the court concluded.

As an alternative, the appellants asked the Fifth Circuit to certify questions to the state supreme courts of Alabama and Mississippi regarding the meaning of the state emergency statutes, but the appeals court agreed with the district court that these questions did not warrant certification. Dismissals affirmed.

Court of Appeals Compels Arbitration, Not Class Litigation

The role of alternative dispute resolution mechanisms in alleged consumer product defect cases continues to be a hotly disputed issue.  Plaintiff lawyers prefer the class action device, with its ability to pressure blackmail settlements, while product makers continue to require in product literature that consumers go the quicker and cheaper route of ADR.

The Third Circuit held last week that a putative class of computer customers should arbitrate, not litigate, their product defect claims against Dell Inc., even though the arbitration forum originally named in the computer purchase "terms and conditions" was no longer available. See Raheel Ahmad Khan, et al. v. Dell Inc., No.10-3655 (3d Cir.).

This appeal involved a matter of first impression for this court– whether Section 5 of the Federal Arbitration Act (FAA) required the appointment of a substitute arbitrator when the arbitrator designated by the parties was unavailable.  The district court denied Dell's Motion to Compel Arbitration, based on the belief that the arbitration provision was rendered unenforceable because it provided for the parties to arbitrate exclusively before a forum that was unavailable when plaintiff commenced suit. The district court also refused to appoint a substitute arbitrator, finding that it could not compel the parties to submit to an arbitral forum to which they had not agreed.

Khan purchased a Dell computer through Dell's website; he alleged that his unit suffered from design defects, causing his computer to overheat and thereby destroy the computer's motherboard. Khan allegedly replaced the motherboard multiple times. Eventually, the  warranty expired. In 2009, Khan filed a putative consumer class action on behalf of himself and other similarly situated purchasers and lessees of the allegedly defectively designed computers.

But to complete the purchase, plaintiff had been required to click a box stating “I AGREE to Dell's Terms and Conditions of Sale.” Just beneath was a box requiring "BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (NAF)."  However, at the time the lawsuit was filed, the NAF had gotten out of the business of conducting consumer arbitrations pursuant to a Consent Judgment, which resolved litigation brought by the Attorney General of Minnesota.  Although Khan suggested that Dell must have chosen the NAF based on its alleged corporate-friendly disposition, the record did not show that Dell was aware of the practices challenged by the state AG at the time that it selected the NAF as the arbitral forum governing Khan's purchase, or that Dell selected the NAF for any improper reason.

The arbitration provision did not designate a replacement forum in the event that NAF was unavailable for any reason. But, the product Terms and Conditions did incorporate the Federal Arbitration Act.  The court of appeals noted that, because this was a question of arbitrability, it was governed by the FAA. Congress passed the FAA in response to widespread judicial hostility to arbitration agreements. The FAA reflects a liberal federal policy favoring arbitration. The federal courts have regularly noted that questions of arbitrability must be addressed with a healthy regard for this federal policy favoring arbitration.

The particular problem presented in this case – the unavailability of the NAF – was addressed in section 5 of the FAA, which provides a mechanism for substituting an arbitrator when the designated arbitrator is unavailable. In determining the applicability of Section 5 of the FAA when an arbitrator is unavailable, courts have focused on whether the designation of the arbitrator was “integral” to the arbitration provision or was merely an ancillary consideration. Only if the choice of forum is an integral part of the agreement to arbitrate, rather than an ancillary logistical concern, will the failure of the chosen forum preclude arbitration. In other words, a court will decline to appoint a substitute arbitrator, as provided in the FAA, only if the parties' choice of forum is so central to the arbitration agreement that the unavailability of that arbitrator brings the agreement essentially to an end. In this light, said the court, the parties must unambiguously express their intent not to arbitrate their disputes in the event that the designated forum became unavailable.

Plaintiff stressed that the NAF's rules were incorporated into the contract, and that these rules provide that all arbitrations must be conducted by the NAF or an entity having an agreement with it.  The court found this requirement ambiguous as to what should happen in the event that the NAF was unavailable. The NAF's rules provided that they shall be interpreted in a manner consistent with the FAA and that, if any portion of the NAF rules were found to be unenforceable, that portion shall be severed and the remainder of the rules shall continue to apply.  This suggested the possibility of substitutions.

The dissent argued that it was important why the NAF was not available to arbitrate. But, the terms and conditions clearly contained an agreement to resolve disputes through arbitration, rather than through litigation. And the reason the forum was not available was not dispositive.


Ninth Circuit Decertifies Consumer Fraud Class

The Ninth Circuit last week reversed the certification of a nationwide class raising consumer fraud claims against an auto maker. See Mazza, et al. v. American Honda Motor Co., No. 09-55376 (9th Circuit). 

Honda appealed the district court’s decision to certify a nationwide class of all consumers who purchased or leased Acura RL's equipped with a Collision Mitigation Braking System (“CMBS”). The plaintiffs alleged that certain advertisements misrepresented the characteristics of the CMBS and supposedly omitted material information on its limitations. The complaint stated four claims under California Law, specifically the California Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq., False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 et seq., the Consumer Legal Remedies Act (CLRA), Cal. Civil Code § 1750 et seq., and a claim for unjust enrichment.  Readers know those are the typical claims in a consumer fraud case in the popular forum of California.

The Ninth Circuit held that the district court erred because it erroneously concluded that California law could be applied to the entire nationwide class, and because it erroneously concluded that all consumers who purchased or leased the relevant Acura RL can be presumed to have relied on defendant’s advertisements, which allegedly were misleading and omitted material information.

In 2007, plaintiffs bought Acura RL's from authorized Acura dealerships, and the vehicles were equipped with the CMB System. In December 2007, they filed a class action complaint alleging
that Honda misrepresented and concealed material information in connection with the marketing and sale of Acura RL vehicles equipped with the CMBS. According to Plaintiffs, Honda did not warn consumers (1) that its CMB collision avoidance system’s three separate stages may "overlap,"  (2) that the system may not warn drivers in time to avoid an accident, and (3) that it allegedly shuts off in bad weather.

The district court certified a nationwide class of people in the United States who, between August 17, 2005 and the date of class certification, purchased or leased new or used Acura RL vehicles
equipped with the CMBS. The district court concluded that California law could be applied to all class members because Honda did not show how the differences in the laws of the various states were material, how other states might have an interest in applying their laws in this case, and how these interests were implicated in this litigation. It also held that class members were entitled to an
inference of reliance under California law.

Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23.  The party seeking class certification has the burden of affirmatively demonstrating that the class meets the requirements
of Federal Rule of Civil Procedure 23. And, under Rule 23(b)(3), a plaintiff must demonstrate the
superiority of maintaining a class action and show that the questions of law or fact common to class members predominate over any questions affecting only individual members.  Here, Honda contended that common issues of law did not predominate because California’s consumer protection statutes may not be applied to a nationwide class with members in 44 jurisdictions.
It further contended that common issues of fact did not predominate because the court  impermissibly relied on presumptions that all class members were exposed to the allegedly
misleading advertising, that they relied on misleading information in making their purchasing decision, and that they were damaged as a result.

First, choice of law. Under California’s choice of law rules, the class action proponent bears the initial burden to show that California has significant contact to the claims of each class member. Also, California law may only be used on a class-wide basis if the interests of other states are not found to outweigh California’s interest in having its law applied.  Honda argued that the district court misapplied the three-step governmental interest test.  The Ninth Circuit agreed. The district court abused its discretion in certifying a class under California law that contained class members
who purchased or leased their car in different jurisdictions with materially different consumer protection laws.  For example, some state consumer fraud laws have no scienter requirement, whereas many other states’ consumer protection statutes do require scienter. See, e.g., Colo.
Rev. Stat. 6-1-105(1)(e), (g), (u) (knowingly); N.J. Stat. Ann. § 56:8-2 (knowledge and intent for omissions); Debbs v. Chrysler Corp., 810 A.2d 137, 155 (Pa. Super. 2002) (knowledge
or reckless disregard).  Some states require named class plaintiffs to demonstrate reliance, while some other states’ consumer protection statutes do not.  These differences are "not trivial or wholly immaterial."  

The court of appeals reminds us that consumer protection laws are a creature of the state in which they are fashioned. They may impose or not impose liability depending on policy choices made by state legislatures. Each state has an interest in setting the appropriate level of liability for companies conducting business within its territory.  Maximizing consumer and business welfare, and achieving the correct balance for society, does not inexorably favor greater consumer protection; instead, setting a baseline of corporate liability for consumer harm requires balancing these competing interests.  Getting the optimal balance between protecting consumers and attracting foreign businesses, with resulting increase in commerce and jobs, is not so much a policy decision committed to a federal appellate court, or to particular district courts where a plaintiff may sue, as it is a decision properly to be made by the legislatures and courts of each state. More expansive consumer protection measures may mean more or greater commercial liability, which in turn may result in higher prices for consumers or a decrease in product availability.  Here, the district court did not adequately recognize that each foreign state has an interest in applying its law to transactions within its borders and that, if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce.

The court of appeals also found that the district court abused its discretion in finding that common issues of fact predominated, because the scale of the advertising campaign here did not support a presumption of reliance, even if one were legally available.  It was likely that many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the challenged system was very limited. And it was not dispositive that Honda’s advertisements were allegedly misleading because of the information they omitted, rather than the information they claimed.  For everyone in the class to have been exposed to the omissions, it was necessary for everyone in the class to have viewed the allegedly misleading advertising. Here the limited scope of that advertising makes it unreasonable to assume that all class members viewed it.
Honda’s product brochures and TV commercials fell short of the extensive and long-term fraudulent advertising campaign that might support a presumption in the eyes of some courts.  Even if Honda allegedly might have been more elaborate and diligent in disclosing the limitations of the CMB system, its advertising materials did not deny that limitations exist. A presumption of reliance does not arise when class members were exposed to quite disparate information from various representatives of the defendant.  California courts have not allowed a consumer who was never exposed to an alleged false or misleading advertising campaign to recover damages under California’s UCL.  

Another Federal Court Weighs In On Meaning of Nicastro

We have tried to keep an eye out for lower court cases interpreting the Supreme Court decision in J. McIntyre Machinery Ltd. v. Nicastro, as the lower courts parse through plurality, concurring and dissenting views on the exercise of personal jurisdiction over foreign defendants -- with mixed results.   Now comes another decision weighing in on what standard should be applied to the proposed  exercise of personal jurisdiction over nonresident defendants. Smith v. Teledyne Continental Motors Inc., No. 9:10-cv-02152 (D.S.C., 1/3/12).

In 2010, a vacationer was jogging on the beach at Hilton Head, South Carolina, when he was struck and killed -- by an airplane.  The plane, operated by Smith, was a single-engine aircraft
Smith had made from a kit. As he was flying the plane up the Atlantic coast about ten miles offshore, the propeller fell off the plane and into the sea. Smith attempted to make the Hilton Head airport, but came up short, crash landing on the beach and fatally striking the 38-year-old stockbroker who left behind his wife and two small children, according to the opinion.

The widow sued the pilot, the manufacturer of the airplane’s engine, the manufacturer of the airframe, a company which had serviced the plane prior to the crash; and the manufacturer of the propeller. Smith, the pilot, also sued the manufacturers. The cases were then consolidated, and eventually Teledyne, the engine maker, and a citizen of Delaware and Alabama, challenged personal jurisdiction in South Carolina.

The district court held that jurisdiction was proper.  This case did not involve the general jurisdiction that arises from pervasive contacts with a forum, but specific jurisdiction based on Teledynes' alleged contacts and purposeful availment of the forum.  And when one looks at the facts described, the conclusion may not come as a great surprise: Over the past ten years,
Teledyne sold at least 400 engines directly to South Carolina purchasers at a cost of about $40,000 apiece for a total revenue of approximately $1,600,000. Further, its engines were installed in approximately one-third of general aviation aircraft based in South Carolina. It maintained a continuous relationship with the owners of these engines through its warranty programs. Further, it advertised in South Carolina through aviation magazines. It maintained a distributor there until 2004. It directly sold parts for its engines in the forum state through interactive websites. Significantly, Teledyne maintained ongoing relationships with at least eleven “fixed base operators” --  stores/service centers located at South Carolina airports.  Teledyne had a contract with each FBO which required them to display Teledyne’s logos and actively promote the sale of its products. Teledyne maintained a continuing interactive Internet relationship with these FBOs, through which it provides them with technical support in repairing Teledyne products. Teledyne warranty work must be performed by these FBOs. Teledyne both buys and sells products over the Internet and through retailers to South Carolina residents. It admitted it had derived over $1 million in revenue from its sales to South Carolina residents over the past 10 years.  

This certainly was NOT the most narrow list of contacts we have seen litigated.  What was more intriguing about the opinion was the test the court adopted. The court concluded that the recent decision of the Supreme Court in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), and existing Fourth Circuit precedents were dispositive of the issue at bar.  The court observed that the decision was "somewhat difficult to interpret because no single opinion was adopted by a majority of the Justices. Rather, there are three opinions which must be synthesized."  But rather than, as some courts have done, looked for the grounds upon which the concurring justices agreed with the plurality, this court saw as the “common denominator of the Court’s
reasoning,” a "position approved by at least five Justices who support the judgment” -- the “stream-of-commerce plus” rubric previously enunciated in an opinion by Justice O’Connor in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 112 (1987). This view has come to be known as the “stream-of-commerce plus” test. Although it did not win the support of a majority of the Court in Asahi, or since, in the view of this court, it has now done so. 

In his concurring opinion, Justice Breyer rejected the notion that a non-resident defendant could be subjected to suit in a state based solely on foreseeability, agreeing with the plurality that personal jurisdiction required purposeful availment of a particular forum. He further explained that the standard of purposeful availment, the correct legal standard, may still require further explication in the context of modern global commerce, but that the facts of that case did not present an adequate vehicle for crafting any new rules. Although the concurrence and the plurality differed as to what might constitute “purposeful availment” in the context of national or global marketing, they both firmly embraced the continuing significance of individual state sovereignty and, on that basis, noted that specific jurisdiction must arise from a defendant’s deliberate connection with the forum state.  

Here, the court saw more overlap with the dissent. When the concurring Justices expressed the view that the case could be resolved by existing precedents, this meant Justice O’Connor’s opinion in Asahi, according to this district court.   

The court read the Fourth Circuit precedents as having already adopted this view and, therefore, the long-arm cases in the Fourth Circuit were not affected by Nicastro.

In applying this test, the court felt that plaintiffs had enumerated many significant contacts by which Teledyne targeted or purposefully directed commercial activities at South Carolina, as noted above.  Regarding whether the exercise of jurisdiction based on those minimum contacts would offend traditional notions of fair play and substantial justice, the court decided that the additional burden on the defendant was relatively slight as compared to the cost of litigating the matter in its home state because Teledyne had a national presence and organization. The interests of the forum state were extremely strong, in that South Carolina, located on a major coastal air corridor, had a compelling interest in protecting its citizens and visitors and their property from damage from falling airplanes.  

Motion denied, case to proceed in South Carolina.

Laptop Claims Were Mere Puffery

The Ninth Circuit late last month issued an interesting little opinion on the venerable and useful notion of puffing. Vitt v. Apple Computer Inc., No. 10-55941 (9th Cir., 12/21/11).

The crux of plaintiff's contention, building on his dissatisfaction that his iBook G4 allegedly failed shortly after his one year warranty had expired, was that the iBook G4 does not last “at least
a couple of years,” which he alleged was the minimum useful life a reasonable consumer expects from a laptop.  Vitt alleged that this was because one of the solder joints on the logic board of the iBook G4 degraded slightly each time the computer was turned on and off, eventually causing the joint to break and the computer allegedly to stop working -- shortly after Apple’s one year express warranty has expired. Vitt further alleged that Apple affirmatively misrepresented the durability, portability, and quality of the iBook G4, and did not disclose the alleged defect.

The district court held that Apple’s affirmative statements were non-actionable puffery, and that Apple had no duty to disclose the alleged defect , citing Daugherty v. American Honda Motor Co., 144 Cal. App. 4th 824 (2006).

The court of appeals affirmed, for substantially the reasons given by the district court. To be actionable as an affirmative misrepresentation, a statement must make a “specific and  measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact. Coastal Abstract Serv. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999). California courts have also held that "mere puffing" cannot support liability under
California consumer protection laws. Vitt challenged Apple’s advertising because it allegedly stated that the iBook G4 was “mobile,” “durable,” “portable,” “rugged,”  “reliable,” “high performance,” “high value,” an “affordable choice,” and an “ideal student laptop.” These statements are generalized, non-actionable puffery because they contain “inherently vague and generalized terms” and were “not factual representations that a given standard has been met.”   

Even when viewed in the advertising context, as Vitt urged, these statements did not claim or imply that the iBook G4’s useful life will extend for at least two years.  For example, to the extent that “durable” is a statement of fact, it may imply in context that the iBook G4 is resistant to problems occurring because of its being bumped or dropped, but not that it will last for a duration beyond its express warranty.

Vitt also contended that Apple had an affirmative duty to disclose the alleged defect. But a  consumer’s only reasonable expectation was that the computer would function properly for the duration of the limited warranty. There is no duty to disclose that a product may fail beyond its warranty period absent an affirmative misrepresentation or a safety risk.  Adopting Vitt’s theory would effectively extend Apple’s term warranty based on subjective consumer expectations. The court of appeals agreed with the district court that Apple was under no duty to disclose the alleged "defect" in its iBook G4s.  Claims dismissed.


Class Certification Denied in BPA Litigation

A Missouri federal court last week denied the class certification motion of consumers suing defendants in the multi-district litigation over the use of bisphenol-A in baby bottles and sippy cups. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 4:08-md-01967 (W.D. Mo.).

As we have posted before, the federal judge in the MDL involving BPA in baby bottles refused last Summer to certify three proposed multistate classes in this multidistrict litigation. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 08-1967 (W. D. Mo. July 7, 2011).   That decision offered an interesting discussion of choice of law, and of the notion of commonality after Dukes v. Walmart, and included an important reminder that while individual issues relating to damages do not automatically bar certification, they also are not to be ignored. E.g., In re St. Jude Medical, Inc., 522 F.3d 836, 840-41 (8th Cir. 2008) (individual issues related to appropriate remedy considered in evaluating predominance); Owner-Operator Independent Drivers Ass’n, Inc. v. New Prime, Inc., 339 F.3d 1001, 1012 (8th Cir. 2003), cert. denied, 541 U.S. 973 (2004) (individual issues related to damages predominated over common issues); see also In re Wilborn, 609 F.3d 748, 755 (5th Cir. 2010).

The court gave plaintiffs an opportunity to show that a class of Missouri-only consumers should be certified, and plaintiffs then moved for certification of three classes of Missouri consumers. Plaintiffs alleged three causes of action: violation of the Missouri Merchandising Practices Act (MMPA), breach of the implied warranty of merchantability, and unjust enrichment.

The court focused first on standing. A court may not certify a class if it contains members who lack
standing. In re Zurn Pex Plumbing Products Liability Litigation, 644 F.3d 604, 616 (8th Cir. 2011). Plaintiffs’ proposed classes here could not be certified because they included individuals who had not suffered an injury-in-fact.  Individuals who knew about BPA’s existence and the surrounding controversy before purchasing defendants’ products had no injury. There was a potential for the proposed classes to include a large number of such uninjured consumers. Plaintiffs admitted that parents often carefully research baby care product purchases, and defendants submitted proof that information regarding BPA was in the media (including popular press such as "20/20") as early as 1999.

The opinion also offers an instructive discussion of reliance. Plaintiffs argued the issue of knowledge goes only to consumers’ reliance on defendants’ alleged nondisclosure, and plaintiffs always contend reliance is not an element of their consumer fraud claims. The court explained that the hypothetical posed by the question of reliance – whether the plaintiff would have purchased the product if she/he had known – presupposes the consumer did not know the relevant information. Thus, the question of knowledge logically precedes the question of reliance.

Even consumers who were unaware of BPA when they purchased defendants’ products may not have suffered an injury. Consumers who fully used defendants’ baby bottles and other products without physical harm before learning about BPA suffered no injury, and could not assert a claim under consumer protection statutes or for breach of warranty. Plaintiffs asserted that none of the proposed class members received what they intended to obtain, because plaintiffs were not provided material information before making their purchases. But plaintiffs were bargaining for baby products at the time of transaction, not for a certain type of information. Those who fully used the products before learning about BPA would have received 100% use (and benefit) from the products.

In the Rule 23 analysis proper, the court also noted that plaintiffs’ proof of what defendants failed to disclose would not be common for all class members, at least with respect to the scientific debate concerning BPA. Class-wide evidence cannot be used to show what defendants knew or should have known because their knowledge and the available information about BPA changed during the
class period. Plaintiffs' proposed trial plan stated they intended to show defendants' alleged awareness and nondisclosure of various scientific studies from 1997 to at least 2006.

The court's observation on materiality is also worth noting. A material fact for state consumer fraud liability includes a fact which a reasonable consumer would likely consider to be important in making a purchasing decision.  Even if this is an objective inquiry, that does not mean it can always be proven with class-wide evidence. A 2006 study allegedly showing BPA's effect on the endocrine systems of snails, even if material, would not be probative of defendants' liability in 2002. Similarly, a reasonable consumer may be less likely to consider a scientific study from 1997 significant if that consumer learned that federal agencies over the years – the FDA in particular – considered that study, and nevertheless still concluded BPA could be safely used to make baby products.

Finally, the court considered superiority and manageability, with a key issue of concern how to determine who was in the class (some courts do this analysis under the ascertainability rubric). Identifying himself or herself as a purchaser would not prove a person is in the class. A plaintiff in a typical case is not allowed to establish an element of a defendant’s liability merely by completing an affidavit swearing the element is satisfied, and this should be no different for a class action.  Defendants would be entitled to cross-examine each and every alleged class member regarding his or her memory and story.

For all these reasons, class certification denied.

Coffee's On: Claims Dismissed in Single-Cup Brewing Class Litigation

A federal court last week dismissed the claims in a case accusing Green Mountain Coffee Roasters of misrepresenting the performance quality of its single-cup brewing systems. See Green v. Green Mountain Coffee Roasters Inc., et al., 2011 WL 6372617 (12/20/12 D.N.J.).

Your humble blogger is in the minority, not being a coffee drinker. Nearly 60% of adults drink coffee daily. The average American drinks 3.1 cups of coffee each day. This contributes to an $18 billion U.S. coffee market. One of the tremendous innovations (speaking from experience, having given these as holiday gifts) in the market is the single cup brewing machine for the home, allowing coffee lovers to make less than a full pot, and to choose from among hundreds of flavors and brands of coffee-related beverages.

Defendants are in the specialty coffee and coffee maker businesses. They manufacture single-cup brewers, accessories and coffee, tea, cocoa and other beverages in "K–Cup portion packs.” Plaintiff Green maintained that his machine failed to brew the programmed amounts of K–Cup coffee within a few weeks of use. Plaintiff asserted that the machines had defective components, including defective pumps. As a result, the machines allegedly failed and brewed less than the specified amount. Furthemore, this defect allegedly caused consumers to use additional K–Cups to brew a single beverage. 

Plaintiff maintained that defendants' actions were in violation of the New Jersey Consumer Fraud Act (“CFA”), N.J. Stat. Ann. § 56:8–1, et seq., and constituted a breach of implied warranty. 

Defendants moved to dismiss.  The court noted that threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice under Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).  If the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint should be dismissed for failing to show that the pleader is entitled to relief. A plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 

The motion challenged plaintiffs' standing. To have standing, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.  The injury-in-fact element is often determinative.

The injury must affect the plaintiff in a personal and individual way.  Here, Green alleged that he purchased and used the Keurig Platinum Brewing System (model series B70).  Nevertheless, he sought to represent all individuals in New Jersey who “purchased or received”  a variety of Keurig Brewing Systems. Plaintiff did not have standing to pursue a claim that products he neither purchased nor used did not work as advertised.

Regarding that model series B70, plaintiff contended in his complaint that, because of defective components, the coffee machines at issue brew a lesser amount of coffee than the companies represented, compromising the quality of the beverage. Consumers are then forced to use additional K-Cups, which are a portion pack for the systems, according to the complaint. Defendants maintained that even if their alleged conduct was unlawful, plaintiff had not sufficiently pled ascertainable loss.  In a misrepresentation case, a plaintiff generally may show ascertainable loss by either out-of-pocket loss or a demonstration of loss in value.  In this case, Green did not allege that he made a claim for warranty repair or replacement of his machine.  The warranty provided as part of the contract of sale is part of the benefit of the bargain between the parties. Any defects that arise and are addressed by warranty, at no cost to the consumer, do not provide the predicate loss that the CFA expressly requires for a private claim.  Because plaintiff had not availed himself of defendants' warranty, he could not allege that the warranty does not address the defect in his machine.

Furthermore, the court found unpersuasive plaintiff's argument that the warranty did not address the defects in the brewers because other consumers allegedly reported that their replaced or repaired brewers were equally defective.  Allegations regarding the experience of absent members of the putative class, in general, cannot fulfill the requirement of pleading injury with adequate specificity.

Similarly, plaintiff did not sufficiently plead loss in value.   Plaintiff broadly asserted that he suffered a loss because each brewer failed to perform its advertised purpose and caused purchasers to suffer a loss of value of the product. But Green failed to allege how much he paid for his brewer and how much other comparable brewers manufactured by competitors cost at the time of purchase. Furthermore, Green had not suffered a diminution in value because the defective brewer could have been repaired or replaced with a new brewer which would have had its own one-year warranty.

Regarding the implied warranty claim, the general purpose of the brewers is to brew beverages. Even if defendants may have advertised that the machines would brew a specific amount of beverage, that alone did not transform the “general” purpose.  Green did not allege that his machine would not brew coffee or that it was inoperable.  The complaint was also devoid of any allegation that plaintiff can no longer use his brewer. Therefore, Green had not sufficiently alleged that his brewer was unfit for its ordinary purpose of brewing beverages at the time of purchase.

Defendants also contended that the class allegations should be dismissed. Plaintiff argued that the Court should deny the motion because it was premature. Nevertheless, a court may strike class action allegations in those cases where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met.  Here, the court concluded that the plaintiff could not  meet the predominance requirement set forth in Fed.R.Civ.P. 23(b).

The complaint did not allege that all individuals in New Jersey who purchased the Keurig Brewing Systems had experienced the defect. Plaintiff acknowledged that there were members in the putative class who had not yet suffered the alleged pump failure. Consequently, the putative class included individuals who do not presently have a claim against defendants. Proving that defendants breached the implied warranty of merchantability would also require an individualized inquiry. Not every member of the putative class experienced a defect with the model series B70. Even if the purported defect had manifested in all of the brewers purchased within the class period, the court would have to make individual inquiries as to the cause and extent of the defect.  Motion granted. 


Fruit Juice MDL Court Dismisses Claims

The Massachusetts federal court overseeing multidistrict litigation against 11 beverage companies, including Coca-Cola Co. and Del Monte Corp., alleging that their fruit juices contained trace amounts of lead, dismissed the claims last week.  In re Fruit Juice Products Marketing and Sales Practices Litigation, No. 11-2231 (D. Mass., 12/21/11).

Plaintiffs alleged that the defendants misled them into believing that certain of their products were safe, whereas the products in fact contained lead and posed a health risk, especially to children.  The issue had caught the attention of the FDA, which concluded that while several of the products contained trace amounts of lead, in each case the level found would not pose an unacceptable risk to health.  (The FDA’s conclusion was based in part on a guidance report it issued in 2004. The agency concluded that many food products contain small amounts of lead because the substance is in the environment naturally and also released through many human activities.)

The majority of plaintiffs’ claims were for violations of the consumer protection laws of states in which defendants maintained their principal places of business. Plaintiffs also brought claims under the consumer protection laws of all states in which potential class members purchased the  products. Finally, the plaintiffs alleged breach of the implied warranties of merchantability and fitness for a particular purpose and for unjust enrichment.

Defendants moved to dismiss on several grounds, but the foundational argument that plaintiffs lacked standing was fatal to all of plaintiffs’ claims, and was in the eyes of the court so compelling that it was unnecessary for the court to reach the numerous satellite theories that defendants offered.

To establish Article III standing, a plaintiff must first demonstrate that he has suffered an injury in fact.  Whitmore v. Arkansas, 459 U.S. 149, 155 (1990). The injury must be concrete and the alleged harm actual or imminent, and not conjectural or hypothetical. Los Angeles v. Lyons, 461 U.S. 95, 101-02 (1983). If a plaintiff fails to allege sufficient facts to satisfy this requirement, the case must be dismissed.

In this case, plaintiffs did not allege a sufficient injury in fact. Plaintiffs offered two potential theories of injury in fact. First, they alleged that the lead in defendants’ products posed a health risk and that, by consuming these products, they placed themselves and their children at risk of future harm from lead poisoning. Second, plaintiffs alleged that they suffered economic injury when they purchased products that defendants advertised as safe, but that in fact contained allegedly dangerous amounts of lead. Both theories, according to the court, ran into the same problem -- plaintiffs
failed to allege any actual injury caused by their purchase and consumption of the products.

The claim of exposure to “potential adverse health effects” or “potential harm” was insufficient for Article III standing. A threatened future injury must be “certainly impending” to grant Article III
standing.  In product liability cases, courts have held that to establish standing based on a threat of future harm, plaintiffs must plead a credible, substantial threat to their health.  E.g., Herrington v. Johnson & Johnson Consumer Cos., Inc., 2010 WL 3448531, at *3 (N.D. Cal. Sept. 1, 2010); see also Public Citizen, Inc. v. Nat’l Highway Traffic Safety Admin., 489 F.3d 1279, 1293-96 (D.C. Cir. 2007); Sutton v. St. Jude Medical S.C., Inc.,419 F.3d 568, 570-75 (6th Cir. 2005).  But the complaint here contained no allegations that either plaintiffs or anyone else ever suffered any type of injury from consuming the products. The products were not recalled, and in fact, the FDA found that at least some of the specific products did NOT pose an unacceptable risk to human health.

Plaintiffs made no allegations as to the amount of lead actually in these products, did not claim that any particular amount in the products is dangerous, and did not allege that any specific amount had caused actual injuries to any plaintiff. The court also stressed that plaintiff did not allege that the levels of lead in the products violated any FDA standards. Under these circumstances, the allegations of risk of future harm to class members were insufficient to meet the “credible or substantial threat” standard. The claim of potential future injury was simply too hypothetical or conjectural to establish Article III  standing.

The court cited a series of cases involving lead in lipstick, which we have posted on, making clear that the type of speculative future injury here cannot form the basis of a lawsuit. See Koronthaly v. L’Oreal USA, Inc., 374 F. App’x 257(3d Cir. 2010), aff’g 2008 WL 2938045 (D.N.J. July 29, 2008); Frye v. L’Oreal USA, Inc., 583 F. Supp. 2d 954 (N.D. Ill. 2008).

Plaintiffs’ second theory of injury in fact was equally flawed. Plaintiffs alleged that defendants promised to provide products that were safe for consumption, but that plaintiffs received products that posed a health risk to them and their children. Consequently, the products were unsuitable for their intended purpose -- consumption -- and supposedly valueless. Because plaintiffs supposedly would not have purchased these products if they had known the products contained any lead, they suffered an economic injury -- the price of the product -- when they purchased the products.

But because plaintiffs were unable to show that any actual harm resulted from consumption of the fruit juice products, their allegation of “economic” injury lacked substance. The fact is that plaintiffs paid for fruit juice, and they received fruit juice, which they consumed without suffering harm. Again, the products were not recalled, did not cause any reported injuries, and did not violate any federal standards. The products thus had no diminished objective value due to the presence of the lead. These plaintiffs received the benefit of the bargain, as a matter of law, when they purchased these products and were able to consume them.

Other courts that have addressed similar “benefit of the bargain” standing arguments agree that plaintiffs who have not been injured by an allegedly defective product generally do not have standing to sue the product’s manufacturer. See, e.g., Rivera v. Wyeth-Ayerst Labs., 283
F.3d 315 (5th Cir. 2002).  Plaintiffs’ allegations only support the contention that the levels of lead in the products were unsatisfactory to them. This allegation was simply insufficient to support a claim for injury in fact. 



Fifth Circuit Given Opportunity to Clarify Impact of Nicastro

Another federal appeals court will have an opportunity to assess the reach of the U.S. Supreme Court's decision in J. McIntyre Machinery Ltd. v. Nicastro. In Ainsworth v. Cargotec USA Inc., No. 2:10-cv-00236 (S.D. Miss., 12/15/11), the district court certified for interlocutory appeal its opinion finding personal jurisdiction over a foreign defendant in a forklift case.

Readers will recall that Nicastro resulted in a 6-3 decision with a plurality opinion by Justice Anthony Kennedy. Justices Breyer and Alito concurring in the judgment; and Justices Ginsburg, Sotomayor and Kagan dissenting. Justice Kennedy addressed the stream of commerce notion, stating that no “stream-of-commerce” doctrine can displace that general rule of purposeful availment, even for products liability cases. He acknowledged that the standards for determining state jurisdiction over an absent party have been a bit unclear because of decades-old questions left open in Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102 (1987).  This imprecision arising from Asahi, for the most part, resulted from its statement of the relation between jurisdiction and the notion of placing a product in the “stream of commerce.” That concept, like other metaphors, has its "deficiencies as well as its utilities." A defendant’s placement of goods into commerce “with the expectation that they will be purchased by consumers within the forum State” may sometimes indicate purposeful availment. But that does not swallow the general rule of personal jurisdiction. The principal inquiry in cases of this sort is still whether the defendant’s activities manifest an intention to submit to the power of a sovereign. Justice Breyer, joined by Justice Alito, agreed in the result, but concluded that because this case did not present the new and special issues arising from recent changes in commerce and communication, it was unnecessary to get into full analysis of the steam of commerce issue as it might be applied to 21st century marketing.

Since then, lower courts have continued to grapple with the meaning of the decision, with most recognizing that merely depositing goods in the stream of commerce, with knowledge that some will end up in the forum state, is not enough to satisfy the minimum contacts standard for personal jurisdiction.

Here, plaintiffs were the survivors of a Mississippi resident who was struck and killed by a forklift designed and manufactured by defendant Moffett Engineering, an Irish corporation, with its principal place of business is in Dundalk, County Louth, Ireland. (This is a "wee county" steeped in myth and legend, named for a Celtic pagan god.)  Moffett has never maintained a physical presence in Mississippi. It does not own, possess, or use any property in Mississippi. It has never had any officers, employees, or agents stationed in Mississippi, and it has never sent any of its employees to Mississippi for business purposes. It has never directly shipped or sold any of its products to customers there, and it has never directly solicited business from any company located in Mississippi. Moffett sold all of its products to defendant Cargotec, which had the exclusive right to market and sell Moffett’s products pursuant to a contract which specifically defines the U.S. as Cargotec’s sales territory. Cargotec sells or markets Moffett products in all fifty states. Moffett does not attempt to limit the territory in which Cargotec sells its products. Further, Moffett does not communicate with the end-purchasers of its products in any fashion, and it is not aware of their identities or locations. Cargotec sold 203 of those forklifts to customers in Mississippi, about 1.55% of Moffett’s United States sales.

The district court previously denied Moffett’s Motion to Dismiss for lack of personal jurisdiction.
Ainsworth v. Cargotec USA, Inc., 2011 U.S. Dist. LEXIS 49665, at *21 (S.D. Miss. May 9, 2011). After that decision, the Supreme Court issued its opinion in J. McIntyre Machinery, Ltd. v. Robert Nicastro, 131 S. Ct. 2780 (2011). Moffett filed a Motion for Reconsideration, arguing that decision controlled this dispute.

The district court denied the motion again, and concluded that Justice Breyer’s Nicastro opinion was only applicable to cases presenting the same factual scenario as that case.

But the court did agree the decision involves a controlling question of law as to which there is substantial ground for difference of opinion (noting at least one decision employing the stricter analysis from Justice Kennedy’s plurality opinion, Keranos, LLC v. Analog Devices, Inc., 2011 U.S. Dist. LEXIS 102618, at *29-*30 (E.D. Tex. Sept. 12, 2011)).  Review would materially advance the litigation, concluded the court, certifying it to the Fifth Circuit.  A case to keep our eye on.



FDA to Issue BPA Decision in 2012

The FDA apparently will issue a final decision next Spring on an interest group's petition requesting a ban on the use of bisphenol A (BPA) in food packaging. This results from a settlement reached last week in Natural Resources Defense Council v. HHS, No. 11-cv-5801 (S.D.N.Y. 12/07/11).

FDA is agreeing to issue a final decision on or before March 31, 2012, settling a complaint by the NRDC that the agency unreasonably delayed a decision on its petition, which dates to 2008.  In reality, FDA continued to gather data on the issues, and has been looking at taking what it has called reasonable steps to reduce exposure to BPA in certain aspects of the food supply. For example, the American Chemistry Council has supported restricting the use of BPA in infant feeding bottles and spill-proof cups used by infants.

NRDC didn't want to wait for the science, taking the usual pro-plaintiff, anti-industry position that all gaps in knowledge should be filled in with worst-case scenarios. Studies employing standardized toxicity tests have in fact supported the safety of current low levels of human exposure to BPA. (FDA has been consulting with other agencies, including the National Institutes of Health (and National Toxicology Program), Environmental Protection Agency, Consumer Product Safety Commission, and the Centers for Disease Control and Prevention.)

And the interest group doesn't seem to care about the tremendous public health benefits that such products have provided. Any wide-spread ban of the product – or litigation accomplishing the same result -- may risk the public safety more than enhance it. Epoxy resins derived from bisphenol A are used to manufacture protective polymer coatings for the inner surface of metal food and beverage containers. This critical technology protects the contents of these containers from aggressive food products, thereby assuring a safe, wholesome, and nutritious food supply. Compared to other coating technologies, coatings derived from epoxy resins provide superior adhesion to the metal surface, greater durability, and higher resistance to the wide range of chemistries found in foods and beverages. These attributes are essential to protect the packed food from microbiological contamination, which is a significant food safety issue. 

Canning might be the single most important innovation in the preservation of food in history. More than 1500 food items are regularly packed in cans, making out-of-season foods globally accessible year-round. More than 90% of food and beverage cans use epoxy-based coatings because of their strength, adhesion, formability and resistance to chemical reactions in the food and drinks -- without affecting the taste or smell of the product. They protect the food from the container and from bacterial contamination. They give canned foods their long shelf-life.  Where is the cost-benefit analysis including these factors?


Proposed TV Class Action Dismissed Again

A California federal  court has again dismissed a proposed class action brought against Sony Corp. of America regarding allegedly defective televisions. Marchante, et al. v. Sony Corp. of America Inc., et al., No. 3:10-cv-00795 (S.D. Calif.).

Plaintiffs alleged that overheating caused the chassis and internal parts of nine different Sony rear-projection televisions to melt or burn during normal use. Plaintiffs, on behalf of  a proposed class of purchasers, claimed that Sony violated several consumer protection statutes (such as, typically the California Consumer Legal Remedies Act) and breached express and implied warranties by selling them the defective televisions. Earlier this year, the court dismissed without prejudice all of the claims, and plaintiffs filed an amended pleading.  Defendants again moved to dismiss.

The court reviewed the Twombly/Iqbal standards, and ruled that the plaintiffs had not fixed the pleading problems. Plaintiffs again alleged that Sony engaged in unfair business acts or practices by selling, promoting, and recalling the television models at issue. The court had previously dismissed plaintiffs’ unfair business act claim because plaintiffs failed to allege a substantial consumer injury; in the new complaint plaintiffs again failed to allege that the televisions exhibited any problems during the one-year limited warranty period. Every alleged problem surfaced several years after purchase. Any alleged failure to disclose thus related to a defect that arose years after the express warranty expired. And any failure to disclose therefore could not constitute substantial injury.  Although plaintiffs did amend their complaint to include allegations that the televisions failed to operate properly from the outset, plaintiffs’ amendments did not cure the deficiencies of the prior complaint.  The fact remained that the defects did not become apparent to the plaintiff-consumers until after the warranty expired. Thus, the complaint still fell short of alleging that the defects caused the televisions to malfunction within the warranty period, as is required to allege a substantial consumer injury under California's consumer statutes. 

As a general rule, manufacturers cannot be liable under the CLRA for failures to disclose a
defect that manifests itself after the warranty period has expired.  A possible exception exists, however, if the manufacturer fails to disclose information and the omission is contrary to a representation actually made by the defendant, or the omission pertains to a fact the defendant was otherwise obligated to disclose. Here, all of plaintiffs alleged CLRA violations pertained to Sony’s alleged failures to disclose; the question therefore was whether Sony carried any obligation to disclose the alleged defect. The court noted that under the CLRA, a manufacturer’s duty to disclose information related to a defect that manifests itself after the expiration of an express warranty is limited to issues related to product safety.  Moreover, in order to have a duty to disclose, the manufacturer must be aware of the defect at the time that plaintiffs purchased, since a manufacturer has no duty to disclose facts of which it was unaware. In dismissing the prior complaint, the court held that plaintiffs failed to invoke the safety exception because the complaint was devoid of allegations that anyone or any property —other than the television itself— was damaged by the allegedly defective televisions.  

Even assuming plaintiffs’ allegations that the televisions pose a safety risk were sufficient to invoke the safety exception (fire hazard?), plaintiffs failed to allege that Sony was aware of this safety hazard at the time plaintiffs purchased the televisions.  First, plaintiffs alleged that Sony had known about it since 2008 and "possibly even earlier.”   Plaintiffs bought their televisions in 2004, 2005, and 2006. So under plaintiffs’ own allegations, Sony may not have been aware of the alleged defect at the time plaintiffs made their purchases, or even within the respective one-year post-purchase warranty periods.  Second, all of plaintiffs' allegations regarding Sony’s knowledge of the alleged defect pertained to Sony’s knowledge that the defect caused excess heat that resulted in the deterioration of the television display, not that the defect posed any safety hazard. 

 The court thus dismissed the CLRA claims without prejudice. 

The court previously dismissed plaintiffs’ claim for breach of the express (limited warranty) because the alleged defects did not manifest until after the one-year warranty period expired. The general rule is that an express warranty does not cover repairs made after the applicable warranty period—here, one year after purchase—has elapsed.  None of the plaintiffs here sought repair or replacement of their televisions within the warranty period. None of the four named plaintiffs alleged that Sony either refused to repair any covered defects or refused to replace any televisions suffering from covered defects.

Plaintiffs’ implied warranty claims again failed because they were untimely. Subject to a sixty-day minimum and one-year maximum, implied warranties are equal in duration to corresponding express warranties under California law, said the court.  The implied warranty here was deemed to have a one-year duration to match that of the express warranty. And because Plaintiffs purchased the televisions in 2004, 2005, and 2006, the implied warranties would have expired by 2007, at the latest. But the amended complaint did not contain allegations that the televisions failed to function as warranted or that plaintiffs sought warranty coverage during the one-year period following their respective purchases. Thus, these claims were dismissed with prejudice.

Plaintiffs continue to try to shoe horn claims into the consumer fraud matrix, thinking they will have an easier road to class certification.  That makes the court's scrutiny of the pleadings even more crucial.


Appeals Court Rejects Personal Jurisdiction Over Foreign Manufacturer

As we have noted for reader, lower courts continue to work to interpret and apply the Supreme Court's decision in J. McIntyre Machinery Ltd. v. Nicastro.  Earlier this week, a California appeals court found that the lower court should not have exercised personal jurisdiction over a Canadian unit of Dow Chemical Co. See Dow Chemical Canada ULC v. The Superior Court of Los Angeles County, No. B222609 Cal. Ct. App. 2d Dist.) (unpubl.).

The court noted that this case presented a question left open in Asahi Metal Industry Co., Ltd. v.
Superior Court, 480 U.S. 102 (1987), but now resolved by J. McIntyre Machinery, Ltd. v. Nicastro, 131 S.Ct. 2780 (2011):  whether merely placing products into the stream of commerce in a foreign country (or another state), aware that some may or will be swept into the forum state, is enough to subject a defendant to personal jurisdiction—or whether due process requires that the defendant have engaged in additional conduct, directed at the forum, before it can be
found to have purposefully availed itself of the privilege of conducting activities within
the forum state.  The court concluded that  defendant Dow Chemical Canada ULC was not subject to jurisdiction because it did not  purposefully avail itself of the privilege of conducting activities within the forum state.

Plaintiffs were allegedly injured in an accident involving a 1996 Sea-Doo watercraft. This product liability action was subsequently brought against Dow Chemical Canada ULC (Dow), among others, based on an alleged defect in the fuel tank.  Dow appeared specially and moved to
quash service of the summons on the ground that it lacked the requisite minimum contacts with California to justify the state’s assertion of personal jurisdiction. Its principal place of business was Calgary, Alberta, Canada; it had never advertised any products in California. The gas tanks and gas filler tank necks that were the subject of this litigation were sold exclusively in Canada pursuant to purchase order agreements entered into in Canada. Plaintiff contended, however, that the court had specific jurisdiction because Dow allegedly knew that its gas tanks were being installed in products that would be sold in the United States, including California.

The trial court rejected Dow’s motion; the court of appeals denied Dow’s petition for writ of
mandate; the California Supreme Court denied Dow’s timely petition for discretionary
review. But the United States Supreme Court granted Dow’s petition for certiorari on June
28, 2011, ordered that the judgment be vacated and remanded the matter for further consideration in light of J. McIntyre Machinery, Ltd. v. Nicastro.

On remand, the court said it was facing the question whether merely depositing goods in the stream of commerce, with knowledge that some will end up in a finished product manufactured
by another and sold in the forum state, is enough to satisfy the minimum contacts standard for personal jurisdiction.  The Due Process Clause of the Fourteenth Amendment limits the power of a state court to exert personal jurisdiction over a nonresident defendant.  The  constitutional touchstone of the determination whether an exercise of personal jurisdiction comports with due process remains whether the defendant purposefully established “minimum contacts” in the forum state.

In Asahi, the United States Supreme Court split on the impact of placing a product into the stream of commerce, with a fractured set of opinions, expressing separate standards for deciding the issue, none of which received the support of a majority of the Court.  Under Justice O’Connor’s view, placement of a product into a stream of commerce with awareness that it may be carried into a forum state would not, by itself, be adequate for the exercise of jurisdiction over a defendant. A defendant’s awareness that the stream of commerce may or will sweep the product into the forum state does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum state.  But Justice Brennan expressed the position that a chain of distribution carrying a product into the forum could be adequate to permit the exercise of jurisdiction over foreign defendants, because the stream of commerce refers not to unpredictable currents or eddies, but to the regular and anticipated flow of products from manufacture to distribution to retail sale.

According to the California court on remand here, in J. McIntyre Machinery v. Nicastro, the Supreme Court resolved the question in Asahi left unresolved by the competing opinions. The stream of commerce, like other metaphors, has its deficiencies as well as its utility. It refers to the movement of goods from manufacturers through distributors to consumers, yet beyond that descriptive purpose its meaning is far from exact. The principal inquiry in cases of this sort, said the plurality, is whether the defendant’s activities manifest an intention to submit to the power of a
sovereign. In other words, the defendant must purposefully avail itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections
of its laws. The concurrence in Nicastro noted no evidence of a “regular course” of sales into the state, so there was no "something more," such as special state-related design, advertising, advice, marketing, or anything else.

Here, at no time did Dow engage in any activities in California that revealed an intent to invoke or benefit from the protection of its laws. Nor was there any evidence that the design of Dow’s product was in any way California-specific. It was not sufficient for jurisdiction in this case that the
defendant might have predicted or known that its products would reach California.  Defendant never undertook to ship its components to California; it supplied its gas tanks and filler necks exclusively in Canada. It matters not whether it knew or could have predicted that another party would sell the finished Sea-Doos incorporating the gas tanks in California. Dow did not advertise or market products in California; it never sold products in, or directly to customers in, California; it never maintained an office or other facility of any kind in California; it had never been qualified to do business in California; and  it had no agent for service of process in California.

Due process requires that Dow would have engaged in more than that, in additional conduct directed at the forum, before it could be found to have purposefully availed itself of the privilege of conducting activities within California. 


Class Action Complaint on 100% Natural Oil Dismissed

A federal court recently dismissed a proposed class action accusing a food company of misleadingly labeling cooking oils as 100% natural when they allegedly were made from genetically modified plants. Robert Briseno, et al. v. ConAgra Foods Inc., No. 2:11-cv-05379 (C.D. Calif.).

Quick research reveals that 88-94% of the nation’s crops of corn, soy and canola are grown from seeds that are the product of bioengineering.  There is no credible science that there are serious health issues with these products, and multiple peer reviewed studies on "GM" crops worldwide show farmers in underdeveloped countries have seen an increase in yield of about 29% from using them, along with decreased use of insecticide applications.

Plaintiff alleged that he regularly purchased Wesson Canola Oil, bearing labels that state the product is “100% Natural.” Plaintiff contended that contrary to these representations, ConAgra used plants grown from genetically modified organism seeds that have been engineered to allow for greater yield, and to be pest-resistant, to make Wesson-branded oils. He asserted that the genetically modified organisms are somehow not “100% natural,” and thus the labels and advertising are deceptive. Plaintiff filed a complaint seeking to represent a class of all persons in the United States who have purchased Wesson Oils from 2007 on. As is typical, he alleged
violation of California’s false advertising law (“FAL”), California’s unfair competition law (“UCL”), and California’s Consumer Legal Remedies Act (“CLRA”).

Defendant moved to dismiss. The first issue was preemption of the state law causes of action, based on FDA guidance regarding food labels. Federal preemption occurs, generally, when: (1) Congress enacts a statute that explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field. Specifically, ConAgra argued that Briseno’s claims were preempted because the FDA has repeatedly concluded that bioengineered foods are not meaningfully different from foods developed by traditional plant breeding, and thus that the fact that a food product is derived from bioengineered plants need not be reflected on a product’s label. Plaintiff responded that he was not arguing that ConAgra was required to state whether its products were made from genetically modified plants. Rather, he contended that the decision to label its products “100% Natural” was misleading.

Courts have split on food preemption issues. Compare Dvora v. General Mills, Inc., 2011 WL 1897349 (C.D. Cal. May 16, 2011)(cereal-yes); Turek v. General Mills, Inc., 754 F.Supp.2d 956 (N.D. Ill. 2010)(snack bars-yes); Yumul v. Smart Balance, Inc., 2011 WL 1045555 (C.D. Cal. Mar. 14, 2011)(yes), with Lockwood v. Conagra Foods, Inc., 597 F.Supp.2d 1028 (N.D. Cal. Feb. 3, 2009)(pasta-no); Wright v. General Mills, Inc., 2009 WL 3247148 (S.D. Cal. Sept. 30, 2009)(granola bars-no).

Here, the court found no preemption on most of the complaint. The bulk of the complaint, said the court, alleged that use of the phrase “100% Natural” is misleading, and did not contend that additional information must be added to Wesson Oil labels. Regulations requiring that each product list its ingredients by their “common or usual name,” together with the regulations requiring that vegetable oils be denominated “ oil,” were inapplicable since plaintiff’s central argument was not that ConAgra cannot use the common or usual names of canola oil, vegetable oil or corn oil.

The FDA has expressed that it has no basis for concluding that bioengineered foods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed by the new techniques present any different or greater safety concern than foods developed by traditional plant breeding. So, plaintiff, in essence, sought to create a distinction – between “natural” oils and those made from bioengineered plants when the FDA has determined that no such distinction exists. The court rejected this argument, refusing to read the FDA guidance as formal enough or clear enough on the issue.

Plaintiff did also seek an order requiring defendant to adopt and enforce a policy that requires appropriate disclosure of GM ingredients. Entering an order of this type would impose a
requirement that is not identical to federal law, and thus this particular prayer for such relief was preempted.

Rule 9(b) requires that in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. The pleading must identify the circumstances constituting fraud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are often sufficient, mere conclusory allegations of fraud are insufficient. Even if fraud is not a necessary element of a claim under the CLRA and UCL, when a plaintiff alleges fraudulent conduct then the claim can be said to be grounded in fraud or to sound in fraud.

Plaintiff alleged that he regularly purchased Wesson Canola Oil for his own and his family’s consumption. But his complaint contained no allegations as to whether he became aware of the
representation through advertising, or labeling, or otherwise. He provided no information about how often he was exposed to the allegedly misleading statement. He did not allege how
frequently he purchased the product and over what period of time, whether he relied on
statements on canola oil labels, on a website, in advertisements, or all of the above,
whether the statements remained the same throughout the class period, or, if they did not, on
which label(s), advertisement(s) or statement(s) he relied.

Thus, this complaint did not afford ConAgra adequate opportunity to respond. Consequently, defendant's motion to dismiss was granted (without prejudice).


Appeals Court Unhappy With Plaintiffs' Advocacy

Today we note an opinion that, in its opening words, is about "two appeals that raise concerns about appellate advocacy." Both are appeals from grants of forum non conveniens in multidistrict litigation. See Gonzalez-Servin et al. v. Ford Motor Co. et al., No. 11-1665; Kerman et al. v. Bayer Corp. et al., No. 08-2792 (7th Cir. 2011).

The Ford case was an appeal from an order to transfer a case from the U.S. District Court for the Southern District of Indiana to the courts of Mexico, and was one of many offshoots of litigation arising out of vehicular accidents allegedly caused by defects in Bridgestone/Firestone tires installed on Ford vehicles.  All these cases have been consolidated in an MDL.

The 7th Circuit found the lower court's careful and thorough analysis demonstrated that it was acting well within its discretion in deciding that the Mexican courts would be a more appropriate forum for the adjudication of this lawsuit by Mexican citizens arising from the death of another Mexican citizen in an accident in Mexico.

What seemed to bother the panel is that plaintiffs did not cite an FNC case seemingly on all fours with the appeal in their opening brief, though the district court’s decision in their case was issued in 2011—long after the prior case.  In their response the defendants cited the case repeatedly and asserted that its circumstances were “nearly identical” to those of the present case. Yet, in their reply brief the appellants still didn't mention it, let alone try to distinguish it, said the panel.

The second case involved litigation against manufacturers of blood products used by hemophiliacs, which turned out to be contaminated by HIV.  This particular suit was brought by Israeli citizens allegedly infected by the blood products in Israel. The defendants, invoking forum non conveniens, moved to transfer the case to Israel.  There were two prior appellate decisions on point, said the panel, including Chang v. Baxter Healthcare Corp., 599 F.3d 728 (7th Cir. 2010), which arose from the same multidistrict litigation.  The court said that these plaintiffs' short treatment of the prior cases "left much to be desired." 

Overall, said the court, the plaintiffs' "advocacy is unacceptable." The panel then invoked a well-known symbol: "The ostrich is a noble animal, but not a proper model for an appellate  advocate."  The “ostrich-like tactic of pretending that potentially dispositive authority against a litigant’s contention does not exist" is "pointless,” said the court.

The opinion closes with pictures of an ostrich burying his head in the sand, and of a man in a suit doing the same.  The reminder here is, when there is apparently dispositive precedent, an appellant may urge its overruling, or distinguish it, or reserve a challenge to it for a petition for certiorari, but may not ignore it. 


Choice of Law Defeats Another Proposed Nationwide Consumer Fraud Class

A federal court recently ruled that a suit over alleged defects in an MP3 player's display screen could not proceed as a nationwide class action. See Maloney et al. v. Microsoft Corp., No. 3:09-cv-02047 (D.N.J.).

This dispute arose out of the sale of portable MP3 players, the 30 gb model Zune. Plaintiffs alleged that the 30gb-model Zune was defective because of alleged cracks on the liquid crystal display (LCD) screen. (News flash: if you drop an electronic device, it may crack.)

Plaintiffs moved for class certification, pursuant to Fed. R. Civ. P. 23(b)(3), of a national class of purchasers. The court concluded that each state‘s common law and consumer protection laws would apply, and therefore a nation-wide class could not properly be certified.

Attempts to structure and certify nation-wide classes involving plaintiffs in all fifty states often turn on whether the law of a single state or multiple states should be applied.  If all 50 states‘ laws apply to a class-action claim, the moving party must provide an extensive analysis of state law variances showing that class certification does not present insuperable obstacles. Plaintiffs bear this burden at the class certification stage, and rarely (we'd say never) can meet it.  Many courts have recognized that state implied warranty laws differ in significant and material ways. For example, states differ on: (1) application of the parole evidence rule; (2) burdens of proof; (3) statute of limitations; (4) whether plaintiffs must demonstrate reliance; (5) whether plaintiffs must provide notice of breach; (6) whether there must be privity of contract; (7) whether plaintiffs can recover for unmanifested defects; (8) whether merchantability may be presumed; and (9) whether warranty protections extend to used goods.

New Jersey courts have adopted the most significant relationship test of the Restatement (Second) of Conflicts of Law. Before applying the Restatement test, plaintiffs here contended that a choice-of-law clause contained in the limited warranty accompanying the product should apply to all of the claims. However, the court determined that the choice-of-law provision did not apply to any of plaintiffs‘ claims. First, the implied warranty claims asserted by the plaintiffs were not governed by the choice-of-law provision in the express warranty. As a plain reading of the text of the express warranty made clear, the choice-of-law provision applies only to the limited warranty, i.e., the express warranty.

To evade this plain reading of the express warranty, plaintiffs then attempted to shoehorn their implied warranty claims into the choice-of-law clause by conflating their implied warranty and Magnoson-Moss (MMWA) claims. Plaintiffs‘ argument was untenable because ultimately plaintiffs‘ MMWA claims rely on their implied-warranty claims, not violations of federal law. State warranty law lies at the base of all warranty claims under Magnuson-Moss. Plaintiffs wrongfully confused substantive MMWA violations and the right to recover under the MMWA.

Although federal substantive law—and not state law—prevents a seller from disclaiming implied warranties, plaintiffs‘ ultimate right to recover on their MMWA claims still depended on state law. When a defendant improperly disclaims an implied warranty, the MMWA provides a statutory remedy: such disclaimer would be void and plaintiffs would be able to proceed against defendant on breach of implied warranties claims, under state law.  Similarly, the choice-of-law provision contained in the limited warranty did not apply to plaintiffs‘ consumer-fraud claims.

Having determined that the choice-of-law provision in the limited warranty did not apply to any of the plaintiffs‘ claims, the court then applied  the choice-of-law rules of the State of New Jersey.  Considering all of the Restatement factors, the court concluded that the state with the most significant relationship to the implied warranty claims was each class member‘s home state.
First, the place of contracting occurred wherever each class member purchased their 30gb Zune, which was presumably in their home state. Second, there was no negotiation of the implied warranties. Third, the place of performance also occurred wherever each class member purchased their 30gb Zune. Fourth, the location of the subject matter of the implied warranties is wherever the Zune was physically located, also presumably in each class member‘s home state. Finally, the domicile of the plaintiffs varies between each class member. Weighing these considerations, the state with the most significant relationship to the implied warranty claims—and consequently, the MMWA claims— was each class members‘ home state.

Plaintiffs‘ consumer-fraud claims would also be governed by the laws of each class member‘s home state.  In this case, the place, or places, where the plaintiff acted in reliance upon the defendant‘s supposed representations; the place where the plaintiff received the alleged representations; the place where a tangible thing which is the subject of the transaction between the parties was situated at the time; and the place where the plaintiff is to render performance under a contract which he has been induced to enter by the alleged false representations of the defendant—all weighed in favor of applying the consumer fraud laws of each class member‘s home state.

In light of the court‘s determination that the laws of all 50 states apply to the claims, and because plaintiffs suggested no workable means by which to conduct a manageable trial—let alone the extensive analysis required of them—class certification was denied on a nation-wide basis. (The court reserved decision as to whether or not a New Jersey-wide class might be certified, subject to further briefing by the parties; clearly additional individual issues will predominate in that context as well, we predict at MassTortDefense.)


Two Summary Judgments for Ladder Defendants Affirmed

Ladders and scaffolds are two of the most valuable tools we know.  And as the season for decorating approaches, we know MassTortDefense will soon be utilizing some, with due care of course.

Two federal courts of appeal have separately affirmed the dismissal of claims about personal injuries caused by allegedly defective Louisville Ladder Inc. products, because plaintiffs failed to offer sufficient expert testimony.

In Raymond B. Bielskis v. Louisville Ladder Inc., No. 10-1194 (7th Cir.), the court considered the appeal of a claim resulting from an accident that occurred when a Louisville Ladder mini-scaffold allegedly collapsed while plaintiff on an acoustical ceiling project.  Following the accident that injured his hand and knee, Bielskis filed suit alleging the ladder company had been negligent in failing to properly test and inspect the threaded stud of the caster stem that allegedly caused the collapse and in failing to warn consumers of the alleged manufacturing defect.

The mini-scaffold is approximately four feet long with a hinged side that allows it to collapse for storage. The sides of the scaffold have rungs which are used to place planks where the user may stand. The entire unit is mobile: it has four wheels that may be locked while the user is working and unlocked when moving the unit. Plaintiff alleged that it had collapsed because the caster stem above one of the wheels had broken. Bielskis retained an expert (Mizen) to provide expert testimony at trial as to what caused the caster stem to break. He opined that the fracture was caused by excess tensile stress brought on by over-tightening the threaded stem. Mizen concluded that the brittle fracture could have been avoided by either attaching the wheel with a different
mechanism than the threaded stud or by not tightening the stud “beyond making it simply snug to the leg base.” Louisville Ladder also retained an expert who also concluded that the caster stem had sustained a brittle fracture. Unlike Mizen, however, he determined that the caster stem ultimately failed because it was too loose, not because it was too tight.

Louisville Ladder moved to bar Mizen’s testimony, arguing that it was insufficiently reliable under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). In particular, Louisville Ladder faulted Mizen for his failure to utilize any recognized scientific methodology to reach his conclusions. The district court granted Louisville Ladder’s motion, concluding that the methodology underlying
Mizen’s opinion was insufficiently reliable. The primary problem the court identified with Mizen’s opinion was his leap, without data or testing, from the accepted premise that a crack without plastic deformation is a brittle fracture to his ultimate conclusion that the caster was too tight. When questioned as to what scientific methodology he used to reach this conclusion, Mizen replied that he had relied on “basic engineering intelligence” and “solid engineering principles that any other engineer would use.”

After Louisville Ladder moved to exclude his testimony, Mizen supplemented his opinion with several articles that he claimed supported his conclusion. He located the articles by using the Internet search engine Google and typing in the phrase “brittle fracture.”

The court of appeals agreed the district court was within its discretion to conclude that Mizen’s methodology sounded more like the sort of talking off the cuff—without sufficient data or analysis—that courts have repeatedly rejected.

Mizen made no attempt to test his hypothesis. His theory was certainly capable of being tested. He did not take the time to measure the caster stem; he had no idea what alloy was used to construct the caster stem and made no effort to quantify its tensile strength or yield strength. In contrast, Louisville Ladder’s expert used digital calipers to measure the various components, created positive and negative replicas of the fracture surfaces so that the fractographic appearance of the surfaces could be examined in detail and then performed stress analysis calculations with the caster installed in two different configurations in order to assess the stresses present
at the stud site with different degrees of tightness.

Likewise, Mizen’s proposed design alternatives did not survive scrutiny.  When asked if those design alternatives had been tested, Mizen stated, “I don’t have to test it.” Likewise, he dismissed the question of whether any of his proposed design alternatives were used in the marketplace
on scaffolds or had been recommended or required by any industry-wide standards for climbing equipment.  Without more, there is no way to assure that Mizen’s proposed alternatives are “the product of reliable principles and methods.”

Absent expert testimony, summary judgment would follow, but plaintiffs argued res ipsa.  While plaintiff showed a scaffold could be expected not to break and collapse under the weight of a single individual working on it, he failed to prove that the scaffold was defective at the time it left Louisville Ladder’s control. The mini-scaffold was already assembled when Bielskis’s employer gave it to him.   Plaintiff did not present any evidence about who assembled the scaffold and whether it was assembled in conformity with the manufacturer’s warnings or specifications. Plaintiff's expert had neither reviewed the scaffold assembly instructions nor ascertained who had assembled the scaffold.

In Robert Cannioto et al. v. Louisville Ladder Inc., et al., No. 11-12885 (11th Cir.), the court concluded that the district court did not abuse its discretion in excluding the expert testimony
of the plaintiffs’ principal expert witness.  The court rejected plaintiffs "malfunction theory" under Cassisi v. Maytag Company, 396 So.2d 1140 (Fla. 1st DCA 1981).  There, the Florida appellate court held that a legal inference is created that a product was defective at the time of injury or the time of sale when it malfunctions during normal use. The district court correctly concluded that the Cassisi inference was not applicable to this case because the ladder in question still existed and had been inspected by the plaintiffs’ expert. The record also demonstrated that the plaintiff failed to subject the ladder to a normal operation. The ladder was set up at too steep an angle at the time of plaintiff's fall.  The court affirmed the grant of summary judgment in favor of the defendants.


Food Spread Class Action Certified: What Happened to Wal-mart?

A California federal judge recently denied certification of a nationwide class, but certified a statewide class of plaintiffs in a suit over allegedly misleading promotion of the hazelnut spread Nutella as part of a healthy breakfast for kids. Hohenberg et al. v. Ferrero USA Inc., No. 3:11-cv-00205 (S.D. Calif.).

This type of case falls squarely in the zone we have warned readers about: the aggressive and excessive use of consumer fraud act claims by plaintiff attorneys, and certification triggering the need to think about "blackmail settlements."

Plaintiffs brought a putative consumer class action lawsuit on behalf of people who purchased Ferrero’s Nutella spread after relying on allegedly deceptive and misleading labeling and advertisements. Specifically, Plaintiffs alleged that Ferrero misleadingly promoted its spread as healthy and beneficial to children when in fact it contains levels of fat and sugar inconsistent with that claim.  We have posted on this product before.

Typically, plaintiffs brought causes of action alleging (1) violations of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.; (2) violations of California’s False Advertising Law, (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq.; (3) violations of California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1770 et seq.; (4) breach of express warranty; and (5) breach of implied warranty of merchantability.

Plaintiffs moved for class certification. Defendant Ferrero argued that plaintiffs did not satisfy the commonality requirement as clarified by the United States Supreme Court in Wal-Mart, because they did not offer evidence of a common injury. Indeed, plaintiffs did not support their motion with expert declarations that, for example, all class members were misled by a common advertising campaign that had little to no variation.  But the court, relying in part on pre-Wal-Mart decisions, e.g., Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019-20 (9th Cir. 1998), stressed that commonality under Rule 23(a)(2) only requires there be some common issues of fact. To the extent that defendant interpreted the decision in Wal–Mart as requiring plaintiffs to prove common class-wide injury at the class certification stage, the court disagreed. Rather, all plaintiffs must show, said the court, is that the claims of the class depend upon a common contention of such a nature that it is capable of class-wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. While that clearly was part of Wal–Mart, the decision is best read as finding that commonality requires the plaintiff to demonstrate that the class members have suffered the same injury, which means more than merely that they have all suffered a violation of the same provision of law.  Nevertheless, in this case, the court found sufficient the claims made on behalf of the proposed class based on a common advertising campaign,

But then there was the predominance issue of Rule 23(b).  Defendant disputed that common issues predominate, arguing that proposed class members’ injuries would require individualized assessment. Notably, one named plaintiff did not regret buying Nutella despite the alleged marketing, and continued using the spread after she learned about its sugar content. Another named plaintiff testified that her family loved Nutella and was upset when she took it away. Clearly, this case involved class members’ individual expectations, dietary preferences, nutritional knowledge, and the availability or non-availability of substitutes in the market. The court conceded that plaintiffs’ dietary choices may prove relevant to the merits of their case, but felt that it need not "decide the merits" of the case at this stage. However, as we have posted before, the Ninth Circuit has noted that it is not correct to say a district court may consider the merits to the extent that they overlap with class certification issues; rather, a district court must consider the merits if they overlap with the Rule 23(a) requirements. 

The court did reject the proposed national class, because plaintiffs made no showing that non-California class members saw the advertising at issue in California, purchased Nutella in California, or that their claims arise out of conduct that occurred in California. The choice of law issue thus overwhelmed the alleged common issues. So the certified class included “all persons who, on or after Aug. 1, 2009, bought one or more Nutella products in the state of California” for personal use.  Wal-Mart needs to have more impact than this.

"Infected" Tissue Claim Not A Consumer Fraud Claim

Readers have seen my warnings about plaintiff attorneys trying to turn every marketing statement of opinion or puffing into a consumer fraud claim. Now comes a decision about a non-consumer product consumer fraud claim. A federal court recently decided that a plaintiff failed to plead a proper consumer fraud claim against a human tissue product supplier for allegedly providing infected material that was implanted into his body. See Wamsley v. Lifenet Transplant Services Inc., No. 10-00990 (S.D.W. Va., 11/10/11).

Plaintiff sued non-profit corporations who were suppliers and distributors of human tissue products, such as human tendons. Plaintiff alleged that he underwent surgery to repair a rupture to the Achilles tendon in his left ankle, a procedure that involved the implantation of a human tendon obtained from defendants. Plaintiff alleged the product was defective because it was “infected.”  Consequently, plaintiff alleged he had to undergo additional surgeries “to correct the damage caused by the defective tendon.

Plaintiff claimed that supplying an infected tendon constitutes an unfair method of competition and unfair or deceptive act or practice as defined by the West Virginia Consumer Credit Protection Act.  Defendants moved to dismiss the complaint on the grounds that plaintiff had failed to allege any action or inaction on the part of the defendants which would constitute unfair competition, unfair acts or practices, deceptive acts or practices, or fraudulent acts or practices. Plaintiff only formulaically recited the elements of a cause of action under the WVCCPA.   the court agreed and had plaintiff file an amended complaint which alleged defendants concealed from plaintiff, his doctors, and his hospital, that the tendon was infected.  He claimed the alleged concealment
that a tendon provided for human implantation is infected constitutes an unfair method of competition and unfair or deceptive act or practice.

Defendants then filed a motion to dismiss the amended complaint arguing that plaintiff’s
amended complaint fails to meet the pleading standards articulated in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Defendants further contended that plaintiff did not have a private cause of action under the WVCCPA because no causal connection exists between the alleged unlawful conduct and the alleged ascertainable loss: because a physician (a “learned intermediary”) made the decision as to what product to use to repair the ruptured Achilles tendon, plaintiff could not establish the necessary causal connection between the alleged unlawful practice by defendants and the alleged injury.

The court began by outlining the relevant legal standard, familiar to our readers. The
plausibility standard requires a plaintiff to demonstrate more than a sheer possibility that a
defendant has acted unlawfully;  it requires the plaintiff to articulate facts, when accepted as
true, to state a claim to relief that is plausible on its face. While a court must accept the material facts alleged in the complaint as true, bare legal conclusions are not entitled to the assumption of truth and are insufficient to state a claim.  Facts pled that are merely consistent with liability are not sufficient.

Moreover, the court noted in an elegant way, "fraud is a generous tort, encompassing affirmative misrepresentations and omissions alike, its boundaries limited only by the imaginations of crafty and unprincipled minds."  A claim that “sounds in fraud” must satisfy Rule 9(b)’s more rigorous pleading standards. Rule 9(b)’s heightened pleading standards advance several interests, including protecting defendants’ reputations from baseless accusations, eliminating unmeritorious suits that are brought only for their nuisance value, discouraging fishing expeditions brought in the dim hope of discovering a fraud, and providing defendants with detailed information in order to enable them to effectively defend against a claim.

Plaintiff’s sole relevant factual allegation concerning defendants’ alleged unlawful conduct was that the defendants concealed from plaintiff, his doctors, and his hospital, that the tendon was infected. But he offered not a single fact in support of his theory that defendants concealed from surgeons the fact that the human tissue they provided was “infected” or knew that the surgeons would implant the diseased tendon into a human body.  (Indeed, the serious nature of this allegation made it more at home in a criminal court than a consumer fraud action.) Such an unadorned, conclusory averment leashed to not a single supporting fact failed to meet the pleading standard. Moreover, Plaintiff’s allegation that defendants concealed a material fact sounds in fraud
and, thus, triggered rigorous pleading requirements under Fed.R.Civ.P. 9(b).  However, the court called this a  "shoot-and-ask-questions-later lawsuit"  because it offered no facts to support a good faith belief that defendants knowingly distributed diseased or “infected” human body parts to plaintiff’s health care providers. No names, places, dates, or times, and no concrete facts to support the alleged conduct. No narrative on what was medically deficient about the tendon implant except to state that it was “infected.” In sum, plaintiff’s theory of liability failed to cross the line between possibility and plausibility of entitlement to relief. 

Even if the amended complaint had been "the model of perfect pleading," it would still fail because it does not state a cognizable claim under the WVCCPA. Plaintiff cannot shoulder his burden of stating a claim upon which relief can be granted because, within the meaning of the WVCCPA, the provisioning of blood and human tissue by the non-profit defendants to the health care providers was not “trade or commerce”; the service provided by the defendants was not performed “in connection with the sale or advertisement of any goods or services”; plaintiff was not a “consumer”; and the parities had not entered into a “consumer transaction.”

The West Virginia Legislature, in accord with many other jurisdictions, expressed its intent
that suppliers of human blood and tissue products be held to different legal standards than those
businesses that manufacture, distribute, and sell conventional goods and services. Blood and tissue distributors are rendering a service— and not making a sale—when they provide human blood and tissue products according to the West Virginia Legislature, which intended to limit the liability of such distributors in contract warranty and strict liability tort claims, plainly distinguishing human body products from ordinary goods. The court thus applied the West Virginia high court's decision in White v. Wyeth, 705 S.E.2d 828, 837 (W. Va. 2010), which held prescription drugs aren't proper subjects of consumer protection claims; the court refused to allow a plaintiff to morph what is most naturally a product liability or breach of warranty action into a purported statutory consumer protection claim would permit an end-run around the state's blood shield statute.

Finally, the court noted that plaintiff was correct in observing that if his WVCCPA complaint was dismissed, plaintiff would be left with no adequate legal remedy. Defendants had explained that the WVCCPA claim was a products liability claim in disguise, brought only because the statute of limitations had run on plaintiff’s traditional tort remedies. Thus, any difficulty plaintiff might having pursuing more traditional causes of action was likely his own fault.  The legislature did not intend that WVCCPA serve as "a Plan B litigation backstop" for claims when a plaintiff had—but did not pursue—appropriate traditional causes of action.


California Publishes New Draft of Informal Green Chemistry Regulations

Yesterday the California Department of Toxic Substances Control (DTSC) convened a Green Ribbon Science Panel (GRSP) to continue work on the state's Green Chemistry initiative.

Readers may recall from previous posts that the GRSP was established with the passage of two "green chemistry laws" in 2008, and is charged with providing advice and serving as a resource to DTSC and the public regarding the California Green Chemistry Initiative. On the agenda for the meeting this week was input from the GRSP on the recently-posted “Safer Consumer Products Informal Draft Regulations”, which were published late last month.  An earlier draft of those regulations, released by the DTSC last November, drew strong commentary from both industry and environmental groups. According to DTSC, a wide range of stakeholders, including those from industry, environmental groups, scientists, and legislative leaders, raised "substantive and valid concerns" about the prior draft of the regulations. DTSC  eventually withdrew the draft regulations.

The latest draft regulations provide for a four-step process to identify safer consumer product alternatives: 1) create an immediate list of Chemicals of Concern (~3,000) based on the work already done by other organizations, and specify a process for DTSC to identify additional  chemicals as Chemicals of Concern (COCs); 2) require DTSC to evaluate and prioritize product/COC combinations to develop a list of “Priority Products” for which an alternatives assessment must be conducted; 3) require responsible entities (manufacturers, importers, and retailers) to notify DTSC when their product is listed as a Priority Product.  Manufacturers (or other responsible entities) must perform an "alternatives assessment" for the product and the Chemicals of Concern in the product to determine how best to limit potential exposures to, or the level of potential adverse public health and environmental impacts posed by, the Chemicals of Concern in the product; 4) require DTSC to identify and impose regulatory responses to effectively limit potential adverse public health and/or environmental impacts, if any, posed by the Priority Product/Chemical of Concern.

The draft regulations note that they would not apply to prescription drugs and devices; dental restorative materials; medical devices, and some other categories. But it is clear that they will impose significant new burdens on many product manufacturers, importers and sellers. The new regulations require risk assessments and life cycle analyses for prioritized products, which may lead to use limits for chemicals, reformulation requirements to eliminate targeted chemicals, or even a ban on sales of certain products in California.

And, of course, varying state regulations (in approach and content) frustrate the ability of those companies to design and market products in a global supply chain.

DTSC labels the new draft "informal," perhaps because they make substantial changes to the withdrawn set, which drew such intense scrutiny.   The initial list of “Chemicals of Concern” would be far broader than previously expected; the product prioritization criteria is revised, although it still appears likely to impact children's products, personal health, and other consumer products. But worker exposure has been added to the priority criteria as well. The regulations would also expand the list of hazards to include a wider range of hazard traits and environmental and toxicological testing endpoints. The previous exemption for unintentionally added chemicals would be eliminated, and, significantly, the “no exposure pathway” exemption would also be dropped.  

The regulations would require an alternatives assessment, conducted in two stages, with a report to DTSC regarding each stage. The first stage focuses on product criteria (function, performance, technical, and legal requirements), identification of alternatives to the COC, and screening of the alternatives.  The second stage would involve a detailed assessment of alternatives, focusing on exposure pathways and life cycle segments.

After evaluating the reports of the alternatives assessment, DTSC would then consider the appropriate regulatory response, which could involve a requirement of information disclosure, or more assessment, or limitation of certain uses, up to a ban.

The draft regulations would also require responsible entities to establish and pay for an end-of-life product stewardship program for any product that is to treated as a hazardous waste in California.

Materials for the meeting are here and here. On December 5, 2011, DTSC will hold a workshop on the informal draft regulations. The informal public comment period ends December 30, 2011.  DTSC apparently will then develop a formal new set of proposed regulations.   

Lower Courts Grapple With Meaning of Nicastro (Part II)

Last post we talked about a federal district court attempting to apply the Supreme Court's decision in J.McIntyre Machinery Ltd. v. Nicastro.  This time, a state court.

In Soria v. Chrysler Canada Inc., No. 2-10-1236 (App. Ct. Ill., 10/24/11), the court modified an earlier opinion to account for Nicastro. But it still concluded that a Canadian automobile assembler was properly subject to personal jurisdiction in Illinois, regardless of the new decision.

This suit arose out of a vehicle collision in which plaintiff alleged that she was a passenger in a 1998 Plymouth Voyager minivan assembled by Chrysler Canada in Windsor, Canada. Plaintiff alleged she suffered a severe eye injury after the door to a passenger airbag module fractured during airbag deployment, sending out plastic fragments. Plaintiff alleged that Chrysler
Canada was negligent in its manufacture, assembly, design, testing, inspection, and sale of the airbag module doors.

Regarding jurisdictional contacts, plaintiff alleged that Chrysler Canada knew that thousands of minivans and vehicles it manufactured were sold in the United States, including thousands in Illinois; about 85% of its production was exported to the United States in some years; it allegedly delivered its minivans and vehicles into the stream of commerce with the expectation that a certain percentage would be sold in Illinois; it did business in Illinois within the meaning of the Illinois long-arm statute; and it (along with Chrysler United States) designed, developed, assembled, manufactured, distributed, and transferred into the stream of commerce the Plymouth Voyager in which plaintiff was a passenger during the collision.

In contrast, Chrysler Canada argued that it was incorporated in Canada, had its principal place of
business in Canada, and never transacted business, entered into contracts, owned real estate,
maintained a corporate presence, telephone number, tax identification number, employees or agents in Illinois. Further, it contended that it did not ship, deliver, distribute, or sell the minivan in
Illinois. Finally, Chrysler asserted that its website was not directed to or interactive with Illinois

The trial court denied defendant's motion to dismiss.

The appellate court noted the defendant's argument that mere awareness that vehicles it assembled might be distributed by Chrysler United States to Illinois did not show sufficient minimum contacts. Plaintiff responded that Chrysler Canada had sufficient minimum contacts and was subject to specific personal jurisdiction in Illinois because it knew that the vehicles it assembled for Chrysler United States entered Illinois through the stream of commerce and because it intentionally served the United States market, including Illinois, by indirectly shipping its vehicles to the forum.

Chrysler urged that beyond its mere awareness that some of the vehicles it assembled “may”
be swept into Illinois through the stream of commerce, there were no purposeful contacts (and,
therefore, no sufficient minimum contacts) by Chrysler Canada directed at Illinois. Specifically,
Chrysler Canada contended that it did not engage in commercial activities or other purposeful
contacts in Illinois. Further, it did not receive vehicle orders from United States customers or
dealerships; did not sell (or have control over the distribution of) vehicles to United States
customers or dealerships; and did not ship vehicles to United States customers or dealerships.

The court reviewed the Supreme Court jurisprudence on personal jurisdiction, and in particular, the debate over the so-called "stream-of-commerce" theory of jurisdiction, which has commanded the approval of as many as 4 Justices at various times.  The court concluded that under either a broad or narrow version of the stream-of-commerce theory, the trial court correctly found that sufficient minimum contacts exist to exercise personal jurisdiction over Chrysler Canada.

Chrysler Canada was not only aware that its products are distributed in Illinois (thus, the court thought, satisfying the narrow stream-of-commerce theory), but it had also purposefully directed its activities toward Illinois.  While it is essential in each case that there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws, when a commercial actor’s efforts are purposefully directed toward residents of a state, the absence of physical contacts does not alone defeat personal jurisdiction there, concluded the court.

The court found persuasive that the United States market, including Illinois, was Chrysler Canada’s primary market. Deposition testimony reflected that Chrysler Canada is aware that 82%
of its production (albeit not all of which consists of Plymouth Voyager minivans) was distributed,
through an established distribution channel, within the United States. During the relevant period,
Chrysler Canada indirectly shipped products into the American market, including Illinois, through
Chrysler United States, its parent corporation. The court agreed with plaintiff’s assertion that Chrysler Canada continuously and intentionally served or targeted this market and was set up to manufacture vehicles for (and derived significant revenue from) the United States market, including Chrysler dealerships throughout Illinois.

Much of that analysis skipped over the very thorny issue of the distinction between efforts to target the US market, in general, but including the forum state, and those that target a specific state, the forum state.  Perhaps the court was influenced by the fact that Chrysler Canada conceded that, during 2008 and 2009, Chrysler United States ordered 28,000 vehicles of various makes and models, including minivans, for its independently-owned dealerships in Illinois. Also, unlike some product sellers, Chrysler Canada was specifically aware of the final destination of every product (i.e., vehicle) that it assembled. Thus, according to the court, Chrysler Canada had an expectation that its products would be purchased by Illinois consumers and, given the continuous nature of its assembly relationship with Chrysler United States, its contacts with Illinois were not random, fortuitous, or attenuated.


Lower Courts Grapple With Nicastro Meaning

We have posted before about the thorny and important issue of U.S. courts exercising personal jurisdiction over foreign product sellers.  Earlier this year, the Supreme Court decided two important personal jurisdiction cases, J.McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343, and Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76, the first high court opinions on this issue in two decades.  But because the former was a plurality decision, lower courts have continued to struggle.

In the past few weeks, two courts have confronted what type of conduct may subject a foreign product maker to personal jurisdiction.  The first today, and the second in a later post.

In Windsor v. Spinner Industry Co., No. 1:10-cv-00114 (D.Md., 10/20/11), plaintiffs alleged that the front wheel of their bicycle dislodged, causing him and his toddler son, Tyler, to be thrown to the ground. Defendant  Joy is a Taiwanese corporation that designs and manufactures bicycle components, including a mechanism called a “quick release skewer,” which is used to hold wheels in place. Plaintiffs alleged that their bicycle contained one of Joy’s quick release skewers and that a defect in the skewer contributed to the cause of their accident.

The parties agreed that Joy sells its products to distributors, manufacturers, and trading companies who then market them in every state in the U.S., but that Joy has no direct contacts with the forum state of Maryland. Plaintiffs contended that the nationwide marketing of Joy’s products by intermediaries created sufficient minimum contacts between Joy and Maryland to subject Joy to specific jurisdiction there. Joy moved to dismiss.

The district court noted that the Due Process Clause of the Fourteenth Amendment sets the outer boundaries of state judicial authority. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846, 2853 (2011). Consistent with due process, jurisdiction over non-resident defendants exists only to the extent that the defendants have certain minimum contacts with the state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.

Readers know that such contacts, if they exist, can give rise to one of two species of personal jurisdiction: general or specific. General jurisdiction exists where a non-resident maintains “continuous and systematic” contacts with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 416 (1984). Under these conditions, courts of the forum state may exercise jurisdiction over the defendant in any suit properly before them, even if the subject matter is completely unrelated to the defendant’s activities in the forum. Specific jurisdiction arises where a non-resident lacks continuous and systematic contacts with the forum, but has nonetheless purposefully availed itself of the privilege of conducting activities within the forum state. Hanson v. Denckla, 357 U.S. 235, 253 (1958). Under these latter circumstances, courts of the forum state may exercise jurisdiction over the defendant only with respect to claims that arise out of the defendant’s activities in the forum.

The issue presented in this case was the extent to which a state may exercise specific jurisdiction over a non-resident manufacturer whose only connection to the forum is that its products were sold there by third-party distributors. Although the idea that jurisdiction automatically travels with the chattels has long been rejected, some courts have at times endorsed a so-called “stream of commerce” doctrine, approving the assertion of personal jurisdiction over a corporation that delivers its products into the stream of commerce with the expectation that they will be purchased by consumers in the forum state.

The Supreme Court in  McIntyre addressed, but split, on how to handle these issues. The deciding votes were cast by Justices Breyer and Alito, who concurred in the judgment reversing the New Jersey Supreme Court. In his concurring opinion, Justice Breyer rejected the notion that a non-resident defendant could be subjected to suit in a state based solely on foreseeability, agreeing with the plurality that personal jurisdiction required purposeful availment of a particular forum. He further explained that the standard of purposeful availment,  the correct legal standard, may still require further explication in the context of modern global commerce, but that the facts of that case did not present an adequate vehicle for crafting any new rules. Although the concurrence and the plurality differed as to what might constitute “purposeful availment” in the context of national or global marketing, they both firmly embraced the continuing significance of individual state sovereignty and, on that basis, noted that specific jurisdiction must arise from a defendant’s deliberate connection with the forum state.

With that understanding, the facts alleged, even if proven, would be insufficient to demonstrate jurisdiction over Joy, said the court. First, although plaintiffs made much of the Internet marketing of Joy’s products, the web presence of Joy or its distributors in Maryland was immaterial because plaintiffs did not purchase their bicycle on the Internet. Further, plaintiffs offered no details about the particular chain of distribution that brought the allegedly defective skewer to the end seller.  At best, plaintiffs’ theory of jurisdiction amounted to no more than the “knew or should have known” standard that the Supreme Court explicitly rejected in McIntyre.

The court also rejected the plaintiffs' arguments that jurisdiction was proper because certain of the manufacturers and distributors to whom Joy sold its products not only market their products in Maryland, but maintain established channels of distribution there.  The argument was that where a foreign manufacturer sells its products to large national retail chains that have an established and ongoing presence in every state in the U.S., such a relationship evinces more than the mere foreseeability, but an actual intent to serve the forum market, and hence purposeful availment. But the court found this line of reasoning indistinguishable from the clearly rejected position  that jurisdiction lies in a forum when a defendant places its product in the stream of commerce with the expectation that it will be sold there. 

Beverage Maker Not Liable for Alleged Failure to Warn

The maker of  a drink containing alcohol and caffeine was not liable to a woman allegedly injured when the driver of the motorcycle on which she was a passenger crashed, after the driver consumed the beverage.  See Cook v. MillerCoors LLC, No. 11-1488 (M.D. Fla., 10/28/11).

The operator of the motorcycle in the accident was killed, and plaintiff Cook, who was a passenger, was injured.  Prior to the crash, the driver allegedly had consumed several “Sparks”
alcoholic beverages containing caffeine and other stimulants, manufactured by defendant.

Cook argued that alcoholic beverages such as Sparks containing stimulants are “uniquely dangerous” because they appeal to younger drinkers and because the addition of caffeine enables one to drink more alcohol without feeling as intoxicated as one normally would. Thus, she alleged, consumers of these beverages are more likely to “engage in dangerous behavior such as driving.”  She asserted the driver did not appear impaired, even though toxicology reports from his autopsy revealed that his blood alcohol level was 0.10 at the time of the crash.

Defendant responded that the risks associated with operating a motor vehicle while under the influence of alcohol are well known; therefore, it could not be held responsible for the operator's choice to consume Sparks then illegally operate his motorcycle. The addition of other ingredients to the beverage did not lessen his responsibility to refrain from operating his motorcycle after having consumed the alcohol, and his actions, not the manufacture of Sparks,
proximately caused Cook’s injuries.  The crux of the defense motion to dismiss thus was that there is no cause of action against a manufacturer of alcoholic beverages for injuries resulting from their consumption because the effects of alcohol consumption are well known. With a response from plaintiff that the legion of such holdings in courts everywhere apply to “conventional” alcoholic beverages, not to an alcoholic beverage mixed with stimulants which allegedly suppress the consumer’s subjective awareness of alcohol’s well-known effects.

Regarding the failure to warn theory, a plaintiff must establish the existence of a duty. A manufacturer’s duty to warn arises when there is a need to inform consumers of dangers of which they are unaware.  The effects of alcohol and the need to not drink and drive are universally known.  While plaintiff argued about the unconventionality of this product, plaintiff did not and could not allege that the driver was unaware that he was drinking alcohol. His alleged subjective awareness of the speed or impact of those effects did not alter the legal reasoning of precedent that holds that there is no duty to warn because of the universal recognition of all potential dangers associated with alcohol. 

Plaintiff also failed to adequately allege how the product was unreasonably dangerous for the design defect claim. The effects of alcohol are universally and objectively well known, irrespective of the operator's alleged subjective awareness of them. The defectiveness of a design is determined based on an objective standard, not from the viewpoint of any specific user, said the court.

Moreover, plaintiff's theories failed as to proximate cause. Plaintiff alleged that the manufacturer's negligence caused the driver to become intoxicated to the point of impairment,
causing the crash and Cook’s injuries. In Florida, however, voluntary drinking of alcohol is the proximate cause of an injury from an intoxicated driver, rather than the manufacture or sale of those intoxicating beverages to that person.  This doomed the negligence claim.

Readers can readily see why the court was reluctant to make an exception to the rule for the "unconventional" beverage.  There are hundreds of alcohol-containing products that are not "conventional" in one way or another, by taste, ingredients, color, manufacturing process, advertising... To shift responsibility from the person who over-consumes one of these and then drives impaired is to send the absolutely wrong policy message.

Courts have typically recognized no duty on the maker, regardless of plaintiff's attempt to differentiate either themselves or the product. See, e.g., Malek v. Miller Brewing Co., 749 S.W.2d 521 (Tex. App. 1988) (finding no duty to warn despite claim that advertising led plaintiff to believe that “Lite” beer was less intoxicating than other beer); Pemberton v. Am. Distilled Spirits Co., 664 S.W.2d 690 (Tenn. 1984); Greif v. Anheuser-Busch Cos., Inc., 114 F. Supp. 2d 100 (D. Conn. 2000)(particular, alleged tolerance of an individual consumer); MaGuire v. Pabst Brewing Co., 387 N.W.2d 565 (Iowa 1986).


Chew on This: Consumer Fraud Claim on Snack Bars Preempted

The Seventh Circuit ruled earlier this month that federal food labeling law expressly preempts state law claims seeking certain additional health-related disclosures on chewy bars. Turek v. General Mills Inc., No. 10-3267 (7th Cir. 10/17/11).

The bars have been around since at least the early 1980's, but have grown into a nearly $2 billion segment of the food industry.  Consumers love their portability, and relatively low calorie count.

Plaintiffs brought a diversity class action suit under the Illinois Consumer Fraud and Deceptive Business Practices Act, and the Illinois Uniform Deceptive Trade Practices Act, alleging that the label of certain "chewy bars" was misleading regarding fiber content.  Specifically, the complaint alleged that the principal fiber, by weight, in the bars was inulin extracted from chicory root. The complaint describes inulin so extracted as a processed, "non-natural” fiber which was not as beneficial to consumer health as other fiber.

Those state law claims ran smack into a provision of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 343-1(a)(5), added by the Nutrition Labeling and Education Act of 1990, which forbids states to impose “any requirement respecting any claim of the type described in section 343(r)(1)
[of the Food, Drug, and Cosmetic Act] . . . made in the label or labeling of food that is not identical to the requirement of section 343(r).”  A state thus can impose the identical requirement or requirements, and by doing so be enabled, because of the narrow scope of the preemption provision in the Nutrition Labeling and Education Act, to enforce a violation of the Act as a violation of state law. See also In re Pepsico, Inc. Bottled Water Marketing and Sales Practices Litigation, 588 F. Supp. 2d 527, 532 (S.D.N.Y. 2008); “Beverages: Bottled Water,” 60 Fed. Reg. 57076, 57120 (Final Rule, Nov. 13, 1995). This is important because the Food, Drug, and Cosmetic Act does not create a private right of action. Medtronic, Inc. v. Lohr, 518 U.S. 470, 487 (1996).

The question thus became what requirements the federal law imposes on the labeling of dietary fiber. Section 343(q)(1) of the Act contains a requirement that the “label or labeling” of food products intended for human consumption state “the amount of . . . dietary fiber . . . contained in each serving size or other unit of measure.” Other requirements for labeling claims relating to dietary fiber are set forth in implementing regulations.  

The labeling of the products challenged by the plaintiff was compliant with these regulations relating to health claims for dietary fiber. See, e.g., 21 C.F.R. § 101.76. All the FDA’s requirements relating to labeling dietary fiber are requirements to which any labeling disclosures required by a state must be identical.  But the disclaimers that the plaintiff wants added to the labeling of the defendants’ inulin-containing chewy bars were not identical to the labeling requirements imposed on such products by federal law, and so they were barred, held the court of appeals. The information required by federal law does not include disclosing that the fiber in the product includes inulin or that a product containing inulin allegedly produces fewer health benefits than a product that contains only product that contains only “natural” fiber, for example. 

Even if the disclaimers that the plaintiff wants added would be "consistent" with the requirements imposed, importantly, consistency is not the test. Identity is, said the court.

The Seventh Circuit thus affirmed dismissal of the case. But clarified, procedurally, that when a state law claim is expressly preempted under section 403A of the Federal Food, Drug, and Cosmetic Act,” a dismissal on the merits is the proper outcome, with prejudice like other merits judgments, not dismissal for want of federal jurisdiction, as the district court had ordered.

This is a victory for consumers when one considers why Congress did not want to allow states to impose disclosure requirements of their own on packaged food products, most of which are sold nationwide. Manufacturers might have to print 50 different labels, driving consumers who buy the food products crazy. A granola bar you buy in California ought to look just like the one you buy in Maine.


Company "Doe" Files Suit Challenging the CPSC Database

Multiple reports indicate that an unnamed company filed a suit last week, under seal, to challenge aspects of the Consumer Product Safety Commission's new public database.

Readers may recall that the Consumer Product Safety Improvement Act of 2008 mandated the creation of a consumer product safety information database, and from the beginning, there was controversy about the absence of an adequate process for addressing false and inaccurate reports that will scare consumers, harm business, and generate no additional safety gains; the need to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports; the importance of not putting the governmental imprimatur on voluntary data that has not been verified; and the absence of a sufficient time period allocated for manufacturers to evaluate and respond to any proposed report.

The suit was reportedly filed in federal court in Maryland, and relates to material inaccuracies with respect to a report of alleged injury that found its way into the database.  The suit apparently asks that the CPSC be enjoined from keeping the complaint about one of the company's products in the public database.

Almost anyone can file a “report of harm,” including consumers; government agencies; health care professionals; child service providers; and public safety entities. Consumers could include not just the purchaser of the product but their personal injury attorney, with their own agendas.

Manufacturers have only a limited opportunity to review and dispute information in incident reports before they are published on-line in the CPSC database. Manufacturers have limited control over what information can be removed or amended once posted. The two dissenting votes at the time the CPSC commissioners approved the database made an unsuccessful attempt to amend the final rule so as to give manufacturers more time to comment on or respond to the inaccuracy of postings before they are published to the database and to the public.

The database is accompanied by a weak disclaimer stipulating that CPSC has not verified the accuracy of any report. Observers continue to worry that the agency has not paid sufficient attention to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.

A recent U.S. Government Accountability Office report on the database found that of 1,800  published reports, manufacturers noted that 160, nearly 10%, had materially inaccurate information.


Substantial Cause Explored in Case of Multiple Exposures

The Sixth Circuit issues and interesting opinion last week, exploring plaintiff's burden to prove that exposure to defendant's product caused his injury in the context in which plaintiff was exposed to numerous other similar products. See Moeller v. Garlock Sealing Technologies LLC, No. 09-5670, (6th Cir., 9/28/11).

Plaintiff was a pipefitter who worked with asbestos-containing gaskets made by Garlock from about 1962 until about 1970. But from 1962 until about 1975, he also sustained significant exposure to asbestos insulation. He contracted mesothelioma and sued, alleging that his exposure to Garlock’s asbestos-containing gaskets was a substantial factor in causing his injuries.

At trial, plaintiff's expert testified that exposure to asbestos from Garlock gaskets, along with his other exposures, contributed to the mesothelioma. And one of the treating oncologists opined  that if plaintiff had worked for many years (as he did) scraping and grinding asbestos gaskets, and if plaintiff breathed those fibers, then that exposure would have caused his cancer. In rebuttal, Garlock presented evidence that plaintiff had sustained substantial exposure to asbestos insulation products for 13 years. It also presented evidence that whereas asbestos insulation was banned in the 1970s, leading asbestos safety authorities believed that gaskets, such as those sold by Garlock, posed “no health hazard,” and were sold lawfully in the United States. Garlock also suggested that the plaintiff had only installed Garlock gaskets (an activity that both parties agree did not create a risk of injury), and had not ever removed them (the activity that the plaintiff alleges caused the injuries).

The jury returned a verdict for plaintiff, and defendant appealed.

To prevail on a negligence claim, Kentucky law requires a plaintiff to prove that a defendant’s conduct was a substantial factor in bringing about the harm. Deutsch v. Shein, 597 S.W.2d 141, 144 (Ky. 1980). Causation requires a link between the specific defendant’s conduct and the plaintiff’s injuries. See Estes v. Gibson, 257 S.W.2d 604, 607 (Ky. 1953) . Substantial causation refers to the probable cause, as opposed to a possible cause. One measure of whether an action is a substantial factor is the number of other factors which contribute in producing the harm and the extent of the effect which they have in producing it.

The appeals court concluded that the plaintiff failed to prove that Garlock’s product was a substantial factor in bringing about the harm. The plaintiff presented various witnesses to support the claim that the mesothelioma was caused by his exposure to Garlock gaskets. But one expert never actually said that the exposure to Garlock gaskets was a substantial factor in causing the  cancer; the others testified that all types of asbestos can cause mesothelioma and that any asbestos exposure counts as a “contributing factor.”  That testimony does not establish that exposure to Garlock gaskets in and of itself was a substantial factor.

Moreover, the evidence presented was insufficient to allow a jury to infer that exposure to Garlock gaskets was a substantial cause of the cancer. Plaintiff here presented no evidence quantifying  exposure to asbestos from Garlock gaskets. There was testimony that he removed gaskets for several years, and that some of those gaskets were Garlock’s. But the plaintiff failed to establish how many Garlock gaskets he removed, or how frequently he removed—as opposed to installed—them. The record also shows that plaintiff regularly tore out asbestos insulation during the relevant years, and that his exposure to asbestos from insulation would have been thousands of times greater than his exposure from removing gaskets.

Thus, while his exposure to Garlock gaskets may have contributed to his mesothelioma, the record simply does not support an inference that it was a substantial cause of his mesothelioma. Given that the Plaintiff failed to quantify his exposure to asbestos from Garlock gaskets and that the Plaintiff concedes that he sustained massive exposure to asbestos from non-Garlock sources, there is simply insufficient evidence to infer that Garlock gaskets probably, as opposed to possibly, were a substantial cause of the injury.

The court summed it up: saying that exposure to Garlock gaskets was a substantial cause of plaintiff’s mesothelioma would be akin to saying that one who pours a bucket of water into the
ocean has substantially contributed to the ocean’s volume.


Expert May Be Needed on Design Defect, Even Under Consumer Expectations Test

Back when we taught Products Liability in law school, one of the topics that always got significant attention and discussion from the bright-eyed students was how to define "defect." The panoply of tests for defective or unreasonably dangerous products never failed to excite discussion, particularly the role of consumer expectations in product assessment.

That same topic is the focus of an interesting recent decision in the Seventh Circuit. See Show v. Ford Motor Co., Nos. 10-2428 and 10-2637 (7th Cir.,  9/19/11).

Plaintiffs were involved in a motor vehicle accident in a 1993 Ford Explorer;  they sued Ford, alleging design defect. In products liability cases in which the plaintiff alleges a design defect, Illinois (whose law supplied the substantive rules) permits the claim to be established in either
of two ways. First, the plaintiff may introduce evidence that the product failed to perform as safely as an ordinary consumer would  expect when used in an intended or reasonably foreseeable manner. This has come to be known as the consumer expectation test. Second, the plaintiff may introduce evidence that the product’s design proximately caused his injury, when the benefits of the challenged design do not outweigh the risk of danger inherent in such design. This test, which adds the balancing of risks and benefits to the alternative design and feasibility inquiries, has come to be known as the risk-utility or risk-benefit test.

Here, plaintiffs proceeded under the first prong, and offered no expert opinion. Ford moved for summary judgment in light of the absence of expert testimony. Plaintiffs conceded that testimony by an engineer or other design expert was essential when a claim rests on the risk-utility approach. But, they argued that jurors, as consumers, can find in their own experience all of the necessary opinions under the consumer expectation test. The district court sided with the defense, and plaintiffs appealed.

The court first discussed a very interesting preliminary question. The parties assumed, as did the lower court, that state law in this diversity case determined whether expert testimony was essential. The assumption rested on a belief that the quality of proof is part of the claim’s substantive elements, which in turn depend on state law under the Erie doctrine even when substantive doctrine is implemented through federal evidentiary rules.  However, there was a question whether Illinois treats the risk-utility and consumer expectations approaches as distinct substantive law doctrines, or merely as procedural aspects of the general question: is the product unreasonably dangerous. Perhaps the two tests are not theories of liability; they could be considered methods of proof by which a plaintiff may demonstrate that the element of unreasonable dangerousness is met.  If the consumer expectation test is not an independent theory of liability, perhaps federal rather than state law determines whether expert evidence is essential on it. Federal law often requires expert evidence about consumers' knowledge and behavior, because jurors are supposed to decide on the basis of the record rather than their own intuitions and assumptions. If federal courts require expert evidence, rather than relying solely on jurors' experience, in trademark and credit suits, for example, why not in product defect cases, asked the court?  But the court decided to bypass the question, in light of the parties' positions below. 

Turning to the consumer expectations issue, the court felt that plaintiffs’ argument that jurors should be able to rely on their own expectations as consumers reflected a belief that “expectations” are all that matters. Yet because the consumer expectations approach is just a means of getting at some of the issues that bear on the question whether a product is unreasonably dangerous, it is impossible to dispense with expert knowledge, concluded the panel.  The design defect is tied up in the issue of causation. Did the design decisions that went into the 1993 Ford Explorer even contribute to the rollover? Causation is a question about physics, and design options are the province of engineers. Jurors own cars, but people own lots of products without being able to explain (or even understand) the principles behind their construction and operation.  Unguided intuitions will not solve the equations. Without an expert’s assistance the decision would depend on speculation, which cannot establish causation—an issue on which plaintiffs bear both the burden of production and the risk of non-persuasion.

Because consumer expectations are just one factor in the inquiry whether a product is unreasonably dangerous, a jury unassisted by expert testimony would have to rely on speculation. The record here did not show whether 1993 Explorers were unduly (or unexpectedly) dangerous, because the record (absent an expert) lacked evidence about many issues, such as: (a) under what circumstances they roll over; (b) under what circumstances consumers expect them to do so whether it would be possible to reduce the rollover rate; and (d) whether a different and safer design would have averted this particular accident. All of these are subjects on which plaintiffs bear the burden of proof. There are other issues too, such as whether the precautions needed to curtail the rate of rollovers would be cost-justified.

The absence of expert evidence on these subjects was fatal to plaintiffs’ suit.


Don't Forget the Cocktail Sauce: Second Circuit Tosses Shrimp Tray Class Action

We have warned readers of MassTortDefense of the alarming trend of plaintiff lawyers seeking to attack every aspect of a product's packaging and labeling as somehow a case of consumer fraud -- often ignoring common sense in the process.

The latest example comes from a case rightly rejected by the Second Circuit last week. See Verzani v. Costco Wholesale Corp., No. 10-04868, 2011 WL 4359936  (2d Cir., Sept. 20, 2011).

Plaintiffs brought a putative class action against Costco Wholesale Corp. over the size of its "shrimp trays." (We love em, especially for football parties.) Plaintiffs claimed that the wholesaler misled customers by labeling its shrimp trays as 16 ounce trays when the shrimp part of the tray itself only weighed about 13 1/2 ounces. The other few ounces were allegedly made up of  the cocktail sauce and lemon wedges. (We pause and ask, how can you eat shrimp without those two accompaniments?)

The case had a somewhat lengthy procedural history, with issues of preliminary injunctions, choice of law, motions to dismiss, and jurisdiction, in play; the class issue was never reached. In relevant part, the trial court dismissed the claims in 2009, concluding that the plaintiffs' contention that a “reasonable consumer” would not assume that the net weight of the product included the cocktail sauce and other (useful and edible) elements was not well founded. The district court later denied the plaintiffs' motion to amend, 2010 WL 3911499 (S.D.N.Y.), noting that a reasonable consumer would not believe that the net weight disclosed on the label for the shrimp tray refers to only the shrimp. The label lists the ingredients in descending order based on their relative weight --shrimp, lemon wedges, leaf lettuce -- followed by a number of ingredients that comprise the cocktail sauce, such as, tomato paste, distilled vinegar, and horseradish; it clearly states “Net WT 160z (1.00 lb).”

Verzani's interpretation of “net weight” as including 16 ounces of shrimp alone was objectively unreasonable; a simple visual inspection of the tray, with its clear plastic top,  would reveal that shrimp is not the only edible item inside. In fact, the product's name alone, “Shrimp Tray with Cocktail Sauce,” suggested that a consumer (at a minimum) is purchasing shrimp and cocktail sauce. A reasonable consumer reading the tray's label would not pick out “shrimp” to the exclusion of all the information on the label (including the product's name and the listed ingredients) when assessing the net weight of the product.

Plaintiffs appealed, but in a summary order, the panel found that court had been right to throw out the case and deny the motion to file an amended complaint.

Class Certification Denied in Printer Litigation

A federal court recently denied class certification in a case brought on behalf of consumers accusing Epson America Inc. of misrepresenting how its NX series of printers functioned with ink cartridges. Christopher O’Shea et al. v. Epson America Inc. et al., No. 09-cv-08063 C.D. Cal.). Readers may recall our post that the court earlier dismissed many of the plaintiffs' claims on the basis that a manufacturer is not required under consumer protection laws to denigrate its own product and broadcast that its product may not perform as well as its competition.

In May 2009, plaintiff Rogers purchased a “Stylus NX 200” inkjet printer manufactured by defendants. Her decision to purchase this printer was allegedly based, in part, on a statement on the printer box that read: “Replace only the color you need with individual ink cartridges.”  Plaintiff allegedly understood this statement to mean that the printer would only require a black cartridge to print black text. In actuality, plaintiff alleged, the Epson NX 200 printer requires all cartridges to function. She subsequently filed suit against Epson claiming that Epson failed to disclose and affirmatively misrepresented the features of the printer.

Plaintiff  moved for class certification.  The interesting part of the court's analysis relates to the predominance issue under Rule 23(b)(3). Even though individualized questions of reliance and materiality were diminished under some of the plaintiff's theories because the consumer fraud claims are governed by the “reasonable consumer” test, which requires plaintiff to show that members of the public are likely to be deceived, Williams v. Gerber Products Co., 523 F.3d 934, 938 (9th Cir. 2008), the notions of reliance and injury still impacted class certification. Specifically, the court was not convinced that members of the putative class had standing to pursue their claims in federal court. To have standing under Article III, a plaintiff must present an injury that is concrete, particularized, and actual or imminent; fairly traceable to the defendant’s challenged action; and redressable by a favorable ruling.

In the context of Rule 23(b)(3), questions of Article III standing amount to an inquiry as to whether individual issues of injury-in-fact and causation predominate over common issues. While case law suggested that absent class members need not establish standing under the requirements of California’s consumer laws, there is a distinct requirement of Article III standing in federal court.  Statutory interpretations cannot permit a federal class action to proceed where class members lack Article III standing.  The requirement that all members of the class have Article III standing makes sense. If that were not the rule, a class could include members who could not themselves bring suit to recover, thus permitting a windfall to those class members and allowing Rule 23 to enlarge substantive rights.  The court therefore held that absent class members must satisfy the requirements of Article III.

Satisfaction of Article III’s requirements in turn raised individualized issues that defeated certification under Rule 23(b)(3) in this case. Article III requires some showing of injury and causation for a plaintiff to recover. Even if the alleged failure to disseminate truthful information about the product  would be subject to common proof, whether each class member was entitled to recover was not susceptible to proof on a class-wide basis because, to establish standing under Article III, each class member was required to show that they suffered some injury as a result of using or buying the product. Plaintiff therefore must show that all persons in the United States who purchased an Epson NX series printer during the class period suffered an injury which was caused by Epson’s alleged misrepresentation, and which was likely to be redressed by a decision in plaintiff’s favor. The record contained evidence indicating that the injury purportedly suffered by some members of the putative class could not fairly be traced to Epson’s allegedly deceptive representation.  Those individuals who purchased printers from certain third-party on-line sources, such as, were not exposed to the allegedly deceptive representation before they purchased their printers. Not all consumers who purchased an NX200 printer bought it at a retail store. Nor could standing be established by plaintiff’s (unsupported) assertion that the misrepresentation was on every box of the subclass, since some individuals purchased class printers without ever having been exposed to the allegedly deceptive representation. The fact that these individuals may have subsequently seen the misrepresentation when the package arrived in the mail was beside the point. There cannot be a causal connection between the consumer’s injury (the money spent on the printer) and Epson’s alleged misconduct (the purportedly deceptive advertising) because these consumers purchased the printers without ever seeing the purported misrepresentation.

Based on the foregoing, the court found that individualized issues of injury and causation permeated the class claims.The proposed class failed to satisfy Rule 23(b)(3)’s requirement that common issues predominate.



Reconsideration Denied in Rejected "All Natural" Class Action

Here is an update on an interesting case we posted on before. A federal court last week denied a motion for reconsideration of its ruling that denied class certification to a consumer alleging that Arizona Beverages deceptively marketed its drinks as “all natural.”  See Coyle v. Hornell Brewing Co. et al., No.1:08-cv-02797 (D.N.J. 8/30/11). 

Plaintiff alleged that she was misled by labels on bottles of Arizona brand beverages touting “All Natural” ingredients, and thereby induced into buying bottles of Arizona beverages that contained High Fructose Corn Syrup (“HFCS”), which she claimed is not “natural”. Plaintiff sought to certify, under Fed. R. Civ. P. 23(b)(2), a class of consumers who purchased similarly labeled Arizona beverages that contained HFCS, seeking only declaratory and injunctive relief.

During the course of discovery in this case, plaintiff produced a retainer agreement she signed in anticipation of this lawsuit. But, the agreement was signed on August 9, 2007, more than seven months before plaintiff alleged that she was first misled by defendants’ “all natural” labeling in her product purchase on March 30, 2008. Indeed, plaintiff repeated the 3/08 purchase date in her deposition. She later changed her story.

The court originally observed that it need not find plaintiff to have intentionally lied to hold that she did not meet the adequacy element of Rule 23(a)(4). The issue was not simply whether plaintiff in fact lied, but whether her inconsistent testimony made her vulnerable to a unique factual or legal defense not faced by other class members, thereby rendering her interests potentially too antagonistic to the interests of the other class members. And that is exactly the case; the court found that plaintiff’s factual inconsistencies raised sufficiently grave credibility problems as to prevent her from serving as an adequate class representative.

Plaintiff filed a reconsideration motion. The court did reconsider its finding as to the adequacy of plaintiff’s counsel as a result of plaintiff’s repeated pleadings and certified discovery responses including the March 30, 2008 allegation. This "serious error" did not necessarily disqualify counsel.

But the court re-affirmed its decision as to the adequacy of plaintiff as class representative. Plaintiff argued that any defenses that she would face as a result of the credibility problems identified by the court could not become the focus of the entire litigation.  But the controlling rule does not hold that the only defenses that will disqualify a proposed named plaintiff on adequacy grounds are those which could become the focus of the entire litigation.  Indeed, to deny certification, a court need not conclude that credibility problems would ultimately defeat the class representative’s claim; rather, the court may deny class treatment if that unique defense is even arguably present. 

In any event, the court disagreed with plaintiff’s contention that the unique credibility-related defenses could not become the focus of the litigation in this matter. The court noted that plaintiff would have real trouble surviving summary judgment on the issue of "ascertainable loss" with a record  showing no dispute of fact that plaintiff’s only qualifying purchase of defendants’ product took place after plaintiff herself had concluded that the product was not “all natural.”  Plaintiff’s entire action would be vulnerable to a motion for summary judgment on the issue of ascertainable loss, which would prevent plaintiff (and the class she would seek to represent) from pursuing even injunctive relief.

Determining whether this plaintiff made her purchase of defendants’ product on the date she repeatedly claimed, after she had retained a lawyer to file the suit, would become a major focus and quite probably a show-stopper for this class. Reconsideration denied.

Court Dismisses Consumer Fraud Claims Against iPad

A California federal court last week dismissed a putative class action accusing Apple Inc. of misleading consumers about the ability of its iPad to function outdoors without interruption. Jacob Baltazar et al. v. Apple Inc., No. 3:10-cv-03231 (N.D. Cal. 8/26/11).

We have posted before about the spate of consumer fraud class actions that look for any aspect of a functioning product that can be attacked as less than perfect, and turn it into a nationwide class action.  Here is a good case reminding readers that manufacturers do not warrant perfection, merely that the product will be reasonably fit for ordinary uses and reasonable expectations.

Plaintiffs alleged that Apple had represented that its iPad tablet computers function outdoors without interruption, when in fact the devices allegedly overheat and shut down when used in sunny conditions. Plaintiffs in this consumer class action asserted claims including breach of warranty and fraud.  Apple moved to dismiss plaintiffs’ second amended complaint for failure to state a claim upon which relief may be granted. The court agreed that the complaint failed to allege facts tending to show that Apple ever represented or claimed that the iPad would operate under such conditions, or that members of the putative class justifiably relied on such representations.

Each of the named plaintiffs alleged that he or she chose to purchase an iPad based at least in part on what they characterize as representations by Apple that the iPad could function outdoors as an e-reader and mobile Internet device. They relied, first, on a claim that Apple produced a television commercial showing depictions of the iPad being used outdoors, at least some of the time on sunny days, and posted on its website a video showing scenes of the iPad being used outdoors and in the sun. They also based their claims on a statement made on Apple’s website that reading the iPad is "just like reading a book.” Finally, they asserted that Apple represented expressly, both on the iPad’s packaging and on its website, that the iPad would function normally within a specified ambient temperature range.

While a complaint attacked by Rule 12(b)(6) motion to dismiss does not need overly detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007).

Regarding the ads, while plaintiffs observed correctly that a warranty can be created by statements in advertisements, see e.g., Thomas v. Olin Mathieson Chem. Corp., 255 Cal. App. 2d 806, 811 (1967), they did not point to any cases in which a court found that advertising images alone are sufficient to created an express warranty. On the other hand, courts have rejected warranty claims based on advertising images alone. Moreover, even if the advertisement could be construed as an express warranty, the warranty would be that the iPad would work in the exact situations depicted, not in other situations. Plaintiffs described seven brief scenes in a thirty-
second commercial depicting the iPad in use in “outdoor locations,” some of which uses
allegedly occurred on a “sunny day.” But several of the i