Mass Tort Defense : Mass Tort Defense Lawyer & Attorney : Sean P. Wajert : Dechert Law Firm : Products Liability, Class Actions, Pharmaceutical Litigation

A federal court has denied class certification in a proposed consumer fraud class action arising from the sale of microwave popcorn with artificial butter flavoring. See Courtney Fine v. Conagra Foods, Inc., No. CV 10-01848 SJO (C.D. Calif., Aug. 27, 2010).

The facts: Diacetyl is a naturally occurring chemical in butter, and was also used in artificial butter flavors for decades. In 2007 defendant Conagra, maker of microwave popcorn, issued a press release to the public stating it was no longer adding the compound diacetyl, which has been associated with lung injury in factory workers exposed to high doses, to its butter-flavored microwave popcorn products. Since the announcement, defendant "reformulated" all butter-flavored varieties of Orville Redenbacher's and Act II microwave popcorn in response, it said, to consumer uncertainty regarding the ingredients of the microwave popcorn. Conagra also redesigned the packaging for these products to display the words "No Added Diacetyl."

Plaintiff alleged that she understood the advertising claim to be there was no diacetyl in the new popcorn, as opposed to no added diacetyl, and alleged she relied on defendant's claims that there was "no diacetyl" in the popcorn products when making the purchases. Plaintiff asserted, however, that diacetyl is still present in the products (as part of natural butter). Plaintiff further asserted that had she known the representation regarding the diacetyl was false, she would not have made the purchases.

Plaintiff alleged causes of action for: (1) false and misleading representation of material facts, constituting unfair competition within the meaning of California Business & Professions Code §§ 17200, et seq. ("UCL"); and (2) false advertising in violation of Business & Professions Code §§ 17500, et seq. ("FAL"). She further alleged that she suffered a monetary loss as a result of defendant's alleged actions, which were in violation of the Consumer Legal Remedies Act ("CLRA"), Cal. Civ. Code §§ 1750, et seq.

Last March, Conagra removed the case from state court to federal (Judge Otero). Then they filed a Motion to Dismiss based on various grounds, including that: (1) Plaintiff does not allege a cognizable injury resulting from defendant's products and therefore lacks standing; (2) Plaintiff fails to state a claim under the UCL, FAL, and CLRA as a matter of law under Rule 12(b)(6). The gist of the final argument was that plaintiff "received exactly what she paid for."  But, the court was persuaded that plaintiff adequately asserted that she did not get what she paid for, as she was under the impression that defendant's popcorn products were free of diacetyl. That is, she asserted that Conagra’s placement of "No Diacetyl Added" on the packaging is a material misrepresentation, and that reasonable consumers could (somehow) have taken the label to mean that diacetyl did not exist in the product at all.

Plaintiffs then moved for certification of a class consisting of all persons residing in the state of California who purchased Orville Redenbacher's brand Light Butter, Movie Theater Butter Light microwave popcorn, and/or ACT II brand 94% Fat Free Butter, Light Butter, and Butter Lover's microwave popcorn for personal use and not for resale since September 1, 2007. Plaintiff sought certification under Rule 23(b)(3) and 23(b)(2), but argued her "primary goal is to obtain injunctive relief by way of an order enjoining Defendant from its continued practice of making misleading advertising and label claims about its butter flavored microwave popcorn products."

The court denied the motion for class certification on three related grounds. The first problem was that in the court's prior Order Denying Defendant's Motion to Dismiss (6/29/10), the court had ruled that plaintiff established standing for herself because she alleged that she incurred injury as a result of defendant's allegedly improper conduct. That is, plaintiff's spending money on defendant's popcorn in reliance of defendant's placing "No Added Diacetyl" on the packaging.

In the class Motion, plaintiff sought to certify a class that includes "all persons residing in the State of California who purchased [Defendant's] popcorn for personal use and not for resale since September 1, 2007."  Named plaintiff made no mention of the proposed class being comprised only of members who made the purchase as a result of defendant's allegedly false statements, which would be necessary in order to establish standing for the rest of the class.  The court noted that other courts have held that class definitions should be tailored to exclude putative class members who lack standing; each class member need not submit evidence of personal standing but, nonetheless, a class must be defined in such a way that anyone within it would have standing. Burdick v. Union Sec. Ins. Co., 2009 WL 4798873, at *4 (C.D. Cal. 2009).

Accordingly, class certification was improper here, given that plaintiff's proposed class included many people who may not have relied on defendant's alleged misrepresentations when making their purchasing decisions.

Second, a related problem was the Rule 23(a) requirement that plaintiff’s claims be typical of the class claims. The court agreed with Conagra that plaintiff failed to adduce facts suggesting that other class members have been injured by the same course of conduct that she asserts injured her. There could be no serious question, said the court, that the vast majority of putative class members here never read (let alone considered) the defendant's statement at issue, do not know what diacetyl is, and did not base their popcorn purchases on diacetyl-related issues. Plaintiff purchased popcorn, she said, because of defendant's allegedly misleading statements regarding diacetyl. Plaintiff's injury was established due to her alleged reliance on defendant's statements. But plaintiff sought to certify a class that would likely include people with varying rationales behind their purchases – many who purchased popcorn based on factors like flavor or brand. Plaintiff thus failed to establish that she could be a typical representative of the class, whose members were buying for all sorts of reasons unrelated to diacetyl.

Third, because the court found that plaintiff was not a typical representative, the court also held that plaintiff was not an adequate representative under Rule 23(a)(4).

What is refreshing about this short opinion is the recognition that Rule 23(a) matters too.  Often we see courts giver very cursory analysis of the (a) elements and/or emphasize that regardless of the initial prerequisites the issues of predominance, manageability and superiority dictate the certification result.  While the fact that class members undoubtedly bought microwave popcorn for many reasons would impact predominance of individual issues, it also does in fact suggest that the class representative's claims were not typical of the the class, as defined.

(NB. Your humble blogger is involved in the diacetyl litigation, but not this case.)

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Earlier this month a trial court in New York denied class certification purchaser of Snapple beverages who complained that drinks labeled “All Natural” are somehow misleading because they contain high fructose corn syrup.  See Weiner v. Snapple Beverage Corp., (S.D.N.Y. 8/3/10).

Off and on, we have commented on the growing and alarming trend for plaintiffs lawyers to concoct consumer fraud class action claims against products, even when consumers were not injured and got basically what they paid for, because of some alleged ambiguity in the label or old-fashioned puffing.

Snapple Beverage Corporation was founded in New York’s Greenwich Village in 1972. Snapple began selling and marketing its teas and juice drinks in the late 1980s. In marketing its beverages, Snapple focused on, among other things, flavor, innovation, and humor. Snapple became known for its quirky personality and funny advertising, as well as its colorful product labels and beverage names. For instance, Snapple’s television advertisements featured, among other things, Snapple bottles dressed in wigs and hats, singing in a Backstreet-esque “boy-band,” running with the bulls (hamsters with cardboard horns) in Spain, and performing synchronized swimming.

When Snapple entered the beverages market in the late 1980s, it avoided putting preservatives, which were then commonly found in some similar beverages, in its teas and juice drinks. Snapple was able to do so by using a “hot-fill” process, which uses high-temperature heat pasteurization to preserve products immediately before bottling. Snapple also used 16-ounce glass bottles instead of aluminum cans or plastic. Hence the term on their label "All Natural."

From their inception, Snapple’s beverages were sweetened with high fructose corn syrup.  HFCS is made from corn ( a natural product last time we checked), and its primary constituents are glucose and fructose, the sugars that comprise table sugar and honey (which also sound pretty natural). It is undisputed that Snapple disclosed the inclusion of HFCS in the ingredient list that appears on the label of every bottle of Snapple that was labeled “All Natural.”

But plaintiffs alleged that they paid a price premium for Snapple beverages as a result of the “All Natural” labeling, and that Snapple’s “All Natural” labeling was misleading because Snapple had HFCS.  They brought a class action on behalf of all people who purchased Snapple in New York.  The FDA is reportedly looking at whether high fructose corn syrup may be considered a natural ingredient, but the court didn't need that guidance to dispose of this bogus class claim.

The court focused on the Rule 23(b)(3) predominance inquiry which tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. The predominance requirement is met only if the plaintiff can establish 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.  The issues in turn are determined by the causes of action and defenses to them.  Plaintiffs' main claim was for alleged deceptive acts or practices in the conduct of any business, trade or commerce under N.Y. Gen. Bus. L. § 349. Generally, claims under § 349 are available to an individual consumer who falls victim to misrepresentations made by a seller of consumer goods through false or misleading advertising.

New York's § 349 does not require proof of actual reliance. But the plaintiff must show that the defendant’s material deceptive act caused the injury. In addition, a plaintiff must prove actual injury to recover under the statute.  The court noted that proof of actual injury in this case is bound up in proof of damages, or by how much plaintiffs have been harmed. Only by showing that plaintiffs in fact paid more for Snapple beverages as a result of Snapple’s “All Natural” labeling could plaintiffs establish the requisite elements of causation and actual injury under § 349.

The court concluded that plaintiffs had not proposed a suitable methodology for establishing the critical elements of causation and injury on a class-wide basis. Without a reliable methodology, plaintiffs had not shown that they could prove at trial using common evidence that putative class members in fact paid a premium for the beverage. Because individualized inquiries as to causation, injury, and damages for each of the millions of putative class members would  predominate over any issues of law or fact common to the class, plaintiffs’ § 349 claim could not be certified under Rule 23(b)(3).

In support of their contention that causation and injury were susceptible to generalized proof on a class-wide basis, plaintiffs relied on the expert report of Dr. Alan Goedde, an economist.  In his report, Goedde proposed two “approaches” for determining the purported price premium attributable to Snapple’s “All Natural” labeling: (1) a “yardstick” approach, which would use “class-wide economic data and standard economic methodologies” to “compare the price of products labeled ‘All Natural’ to similar products which do not have ‘All Natural’ labeling;” and (2) an “inherent value”  approach, which would analyze unspecified “studies and market research” to gather “data that can be used to determine the increased value, standing alone, that a product realizes due to the perception of that product being natural.”

The court found Goedde’s testimony unreliable. The witness did not demonstrate in adequate detail how his proposed “approaches” would be used to develop an empirical algorithm to determine, on a class-wide basis, whether there was a price premium as a result of Snapple’s “All Natural” labeling and, if so, how such a premium could be quantified. For example, he did not identify the products to which Snapple should be compared. He did not explain how his approach would isolate the impact of the “All Natural” labeling from the other factors that purportedly affect the price of Snapple and its competitors. He failed to take into account that there was no uniform price for Snapple beverages during the class period, and thus did not explain how his approach would account for the various prices that putative class members actually paid in determining injury
on a class-wide basis.

Goedde relied on two internal Snapple marketing strategy documents to support his alternate hypothesis that Snapple’s “All Natural” label allowed it to command a premium in the marketplace. Yet he did not review the deposition transcripts of Snapple’s witnesses or any of the other  documents produced by Snapple, which would have provided critical context for these documents.

The court accurately spotlighted the common plaintiff tactic in these kinds of cases: the failure to
invest sufficient time and effort to develop a reliable methodology to support an expert opinion at the class certification stage.  Although the court thought plaintiffs correct in arguing that Goedde need not “implement” or fully “test” his methodology at the class certification stage, an expert must still provide sufficient detail about the proposed methodology to permit a court to determine whether the methodology is suitable to the task at hand.

Without Goedde’s testimony, plaintiffs offered no evidence that a suitable methodology is available to prove the elements of causation and actual injury on a class-wide basis. Individualized inquiries would therefore be required in order to determine whether class members in fact paid a premium for Snapple beverages, and whether any such premium was attributable to the “All Natural” labeling. This would require, among other things, an examination of each of the millions of class members’ Snapple purchases, which the evidence showed were made in different locations, at different times, and for different prices, over the nearly eight-year class period.

One further issue of note is class definition.  The court found that plaintiffs failed to show how the potentially millions of putative class members could be ascertained using objective criteria that were administratively feasible. Plaintiffs - typically  - suggested that after certification, the court could require simply that class members produce a receipt, offer a product label, or even sign a declaration to confirm that the individual had purchased a Snapple beverage within the class period. The court labeled this suggestion "unrealistic." Plaintiffs offered no basis to assume that putative class members retained a receipt, bottle label, or any other concrete documentation of their purchases of Snapple beverages bearing the “All Natural” description.  Indeed, putative class members were unlikely to remember accurately every Snapple purchase during the class period, much less whether it was an “All Natural” or diet beverage, whether it was purchased as a single bottle or part of a six-pack or case, whether they used a coupon, or what price they paid. Soliciting declarations from putative class members regarding their history of Snapple purchases would invite them "to speculate, or worse."

However beloved Snapple may be, said the court,  there is no evidence to suggest that its consumers treat it like a fine wine and remove and save its labels.

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The Consumer Product Safety Commission last week announced the results of testing performed by the Lawrence Berkeley National Laboratory on allegedly defective drywall samples.  Among the findings, most of the drywall that has allegedly caused personal injury and corroded electrical components in various homes throughout the U.S. was indeed manufactured in China;  specifically,  the most reactive sulfur-emitting drywall samples were all produced in China, according to the CPSC.  The worst-testing samples of the Chinese drywall showed emission rates of hydrogen sulfide 100 times greater than non-Chinese drywall samples.

CPSC released the names of the 10 worst-performing samples, including those of Knauf Plasterboard (Tianjin) Co. Ltd. for drywall manufactured in 2005, Taian Taishan Plasterboard Co. Ltd. for drywall manufactured in 2006, Shandong Taihe Dongxin Co. for drywall manufactured in 2005, Beijing New Building Materials for drywall manufactured in 2009.  Drywall samples manufactured in the United States in the same period contained low or no detectable emissions of hydrogen sulfide, according to the agency. 

At the U.S.-China Strategic and Economic Dialogue meetings in Beijing May 24-25, U.S. officials reportedly pressed the Chinese government to facilitate a meeting between CPSC and the Chinese drywall companies whose products were used in U.S. homes, and which exhibit the emissions identified during the testing procedures. The Strategic and Economic Dialogue represents the highest-level bilateral forum to discuss a broad range of issues between the two nations.

Federal cases concerning the drywall products are coordinated in multidistrict litigation pending in the U.S. District Court for the Eastern District of Louisiana. More than 7,000 plaintiffs have claimed that Chinese-made drywall in their homes emits sulfide gases that corrode electrical wiring and/or cause personal injury such as nasal damage and other respiratory problems.  In the first trial, the court ordered Taishan Gypsum to pay $2.6 million to seven plaintiffs last April. In the second trial, the court ordered Knauf Plasterboard to pay a plaintiff family $164,000.  In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No. 2047 (E.D. La.).

Cases are also pending in state court, and a state trial court in Miami recently certified a class in this litigation. Harrell v. South Kendall Construction Corp. et al., No. 09-008401 (11th Judicial Circuit, Fla.). Following a hearing last Thursday, Judge Farina granted class certification, the first Chinese drywall case to be certified. The class consists of approximately 150 claimants who were purchasers of homes in three subdivisions of the Keys Gate community there. The class alleged that those homes were built using Chinese drywall. Defendants are home builder Kendall Construction Corp., Palm Isles Holdings LLC, broker Keys Gates Realty Inc, and supplier Banner Supply Co.

The court found that a predominating common issue in each class member's case is whether the drywall installed in his or her house was defective. The trial court found that the alleged defect, the potential to emit sulfur gases that can cause damage, is inherent in the physical characteristics of the product and thus has a uniform nature. With one supplier and one builder allegedly involved, the court distinguished the case from other product defect cases in which individual issues are typically found to predominate.

The opinion noted that differences among proof of damages has typically not defeated class certification. The court stressed that if individual class member homeowners were to file their own separate actions, the court would be confronted with a multiplicity of lawsuits that would unnecessarily burden the court system and create the risk of inconsistent rulings and contradictory judgments.

While the court was clearly influenced by the belief that the issues surrounding the allegedly defective product were "unaffected by outside variables," like the way the product was used, its analysis of predominance is quite questionable.  For example, it concluded that a common issue was whether the defective drywall damaged the homes of the putative class members, and thus that the issue of injury (whether the drywall damaged all the homes) could be proved with class-wide evidence.  The fact is that enough of the drywall was imported to damage more than 50,000 homes; yet only a small percentage of that has been observed. Thus, it may be that any number of factors may be impacting the damage drywall is or is not causing in a particular house. Moreover, it is far too simplistic to talk about the injury or "damage" being caused, when there are hotly debated issues about whether there is injury to, or the need for remediation of, non-problem drywall, insulation, flex duct, molding, encapsulated wiring, counter tops, and a whole host of house components. Similar issues will relate to the causation of corrosion of a home’s electrical wiring or AC system.  

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A federal court recently certified a class of Minnesota building owners in litigation over issues with plumbing systems. See In re: Zurn Pex Plumbing Products Liability Litigation, MDL No. 08-1958, 2010 WL 1839278 (D.Minn. 5/6/10).

The issue for our readers is not so much what happened, but what should have happened but did not.  I recently posted about the7th Circuit decision in American Honda Motor Co., Inc. v. Allen, 2010 WL 1332781 (7th Cir., April 7, 2010), mandating that trial courts rule on the admissibility of expert testimony at the certification stage of litigation when the testimony is critical to certification.  That is the only approach that makes any sense. Otherwise, the court risks certifying a class -- and engaging the parties in  the massive discovery and notice process that accompanies it  -- based on testimony that fails the Daubert test, is unreliable, and eventually inadmissible under the Federal Rules.  Here, the court refused to exclude the testimony of two plaintiff experts at the certification stage.  The court noted that the 8th Circuit had not yet adopted the approach of the 7th Circuit. 

Historically, potable water plumbing systems used copper pipes. In the 1990's, some companies designed plumbing systems using polybutylene plastic. After a wave of litigation involving allegedly failed polybutylene plumbing systems, defendant Zurn designed a cross-linked polyethylene plumbing system, commonly referred to as “pex,” as an alternative to polybutylene systems and copper plumbing systems. Plaintiffs were individuals who owned a home with a Zurn pex plumbing system. in several lawsuits, plaintiffs alleged that defective fittings used in the pex system caused their plumbing systems to leak resulting in damage to their properties. Plaintiffs also alleged that Zurn failed to adequately test the brass crimp fittings in their anticipated environments before marketing its product. In 2008, the Judicial Panel on Multi-District Litigation determined that the pex plumbing cases met the MDL test, and that centralization of the cases in Minnesota was appropriate.

Plaintiffs moved for certification of a class of all persons and entities that own a structure located within the State of Minnesota that contains a Zurn Pex plumbing system with brass crimp fittings.  Defendants, in turn, moved to exclude portions of the testimony of plaintiffs' experts, Dr. Wallace Blischke and Dr. Roger Staehle.  

Dr. Blischke, a statistician, performed an analysis of Zurn's warranty claims data and estimated that millions of Zurn's brass fittings will fail within the twenty-five year warranty period; he concluded that the fittings have a mean time to failure of 40 years.  Defendants offered evidence that the 40 years was based on unsupported assumption, not data.  The court admitted that as merits discovery unfolded and more information becomes available, Dr. Blischke's 40 year estimate for the mean time to failure "may or may not be admissible," but it would consider the expert testimony in support of class certification anyway and "has given such testimony proper weight."

Dr. Staehle then conducted a round of testing known as the U-bend test of brass specimens from Zurn's fittings. Defendants offered evidence that the reliability of Dr. Staehle's U-bend testing was undermined by his use of an artificially inflated level of strain, and they challenged the correctness of Dr. Staehle's calculation of the strain. The court concluded that "at this point" it would not exclude the testimony, which could be the subject of cross examination.

The certification battleground was 23(b)(3) predominance.  Defendants stressed that there were lots of possible causes of the failure of any particular plumbing system, and thus individual issues predominated.  Plaintiffs -- and here we see where the denial of a Daubert inquiry has its pernicious effect -- responded that the brass crimp fittings used in the pex plumbing system suffer from an inherent design and manufacturing defect, and that the parts were substantially certain to fail within the 25 year express warranty provided by Zurn and/or the useful life of the fittings.  And this was a set of predominating common issues, they said.  But they only get there through the testimony of the experts, not only on the merits, but on the presentation that the defects and useful life were demonstrable on a common basis through expert testimony about testing and time-to-failure.  So, for example, in certifying a warranty class for those plaintiffs whose systems had not yet failed, the court readily acknowledged being influenced by the fact that plaintiffs "allege, and intend to prove by expert testimony, that Zurn's brass crimp fittings suffer from a uniform, inherent design and manufacturing defect...."

Similarly, with regard to a class relying on a negligence cause of action, the court concluded that if plaintiffs can prove that the crimp fittings suffer from a uniform, inherent design and manufacturing defect, and that the defect is the only cause of failure in the majority of the cases, then proximate cause will not involve predominately individual determinations, and resolution of that issue would be common the class. For class certification purposes, the court was "convinced that Plaintiffs have adduced sufficient evidence to support their theory of the case."  But, of course, that evidence was arguably inadmissible expert testimony.

Since proof of reliance will likely vary among class members, and since defendants are entitled to present individualized defenses to reliance under Minnesota law, plaintiffs failed to show that the reliance component of their consumer protection claims could be proven by common evidence. Accordingly, class certification as to plaintiffs' consumer protection claims was denied.

But imagine how easy it can be to show "predominance" of common issues when your proof is unreliable, inadmissible, unscientific, expert testimony that just doesn't get screened.  Why should the gatekeeper role not impact entrance to the expensive, protracted world of a class action as much as to trial?

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The Seventh Circuit issued a very interesting opinion on the interplay of class certification and Daubert issues. American Honda Motor Co., Inc. v. Allen, 2010 WL 1332781 (7th Cir., April 7, 2010).  Specifically, the defendant asked the court to resolve whether the district court  must conclusively rule on the admissibility of an expert opinion prior to class certification when that opinion is essential to the certification decision. Since this is the type of question that Rule 23(f) was designed to address, the court of appeals took the appeal -- and agreed with Honda. 

Plaintiffs were purchasers of Honda's Gold Wing GL1800 motorcycle; they alleged that the motorcycle has a design defect that prevents the adequate dampening of “wobble,” that is, side-to-side oscillation of the front steering assembly. Plaintiffs moved for class certification pursuant to Rule 23(b)(3). To demonstrate the predominance of common issues, they relied heavily on a report prepared by a motorcycle engineering expert, who opined about a "reasonable wobble decay" standard. Honda moved to strike the report pursuant to Daubert, arguing that this wobble decay standard was unreliable because it was not supported by empirical testing, was not developed through a recognized standard-setting procedure, was not generally accepted in the relevant scientific, technical, or professional community, and was not the product of independent research.

The district court said that it had "definite reservations" about the reliability of the expert's wobble decay standard. Nevertheless, the court declined to exclude the report in its entirety "at this early stage of the proceedings.”  The trial court denied Honda's motion to exclude “without prejudice,”  and granted plaintiffs' motion for class certification.

The 7th Circuit has already noted that a district judge may not duck hard questions by observing that each side has some support. Tough questions must be faced and squarely decided, if necessary by holding evidentiary hearings and choosing between competing perspectives. But the court had not yet specifically addressed whether a district court must resolve a Daubert challenge prior to ruling on class certification if the testimony challenged is integral to the plaintiffs' satisfaction of Rule 23' s requirements.  Here, it did hold that when an expert's report or testimony is critical to class certification, as it was in this case, a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class if the situation warrants. If the challenge is to an individual's qualifications, a court must make that determination by comparing the area in which the witness has superior knowledge, skill, experience, or education with the subject matter of the witness's testimony. The court must also resolve any challenge to the reliability of information provided by an expert if that information is relevant to establishing any of the Rule 23 requirements for class certification.

Here, while the trial court began to ask the right questions, it never finished. The court's effective statement of admissibility left open the questions of what portions of the expert's testimony it may have decided (or will decide) to exclude, whether the expert reliably applied the standard to the facts of the case, and, ultimately, whether plaintiffs had actually satisfied Rule 23(b)(3)'s predominance requirement -- because they relied on the expert opinions. As a result, the district court never actually reached a conclusion about whether the expert report was reliable enough to support plaintiffs' class certification request.  This was not sufficient. Indeed, it was an abuse of discretion, according to the court of appeals.

The court went on to examine the record, which revealed to it that exclusion was the inescapable result when the Daubert analysis is carried to its conclusion. The expert originally developed the standard for use in a lawsuit in which he testified as an expert against Honda; despite its publication in one journal, there is no indication that this wobble decay standard had been generally accepted, or indeed, accepted by anyone other than this author. The expert never conducted any rider confidence studies to determine when motorcycle riders perceive wobble, or performed any tests to determine the minimal wobble amplitude at which riders detect oscillation.  He did test a single, used 2006 GL1800, ridden by a single test rider, but then extrapolated his conclusions to the entire fleet of GL1800s produced from 2001 to 2008 -- arguably too small a sample size from which reliable extrapolations can be made. 

The court therefore granted Honda's petition for leave to appeal, vacated the district court's denial of Honda's motion to strike and its order certifying a class, and remanded for proceedings consistent with this opinion.

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An up and down class action proceeding involving Listerine has taken a new turn. Pfizer Inc. v. Superior Court of Los Angeles County, No.B188106 (Cal. App. 3/2/10).

Plaintiffs brought a proposed class action on behalf of California consumers who allegedly purchased Listerine on the claim that the mouthwash prevented plaque and gingivitis as effectively as dental floss, relying on the state's Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.) and the False Advertising Law (FAL) (§ 17500 et seq.).  The trial court certified a California class consisting of all individuals who purchased Listerine between June, 2004 and January, 2005.  The appeals court initially ruled in 2006 that the trial court’s certification was overbroad, relying on Proposition 64 which amended standing requirements in such actions and requires proof that the proposed class suffered injury.  Following the decertification order, however, the California Supreme Court ordered the appeals court to revisit the issue in light of its intervening decision in In re: Tobacco II, 46 Cal.4th 298 (2009). 

Upon remand, the court of appeals vacated the prior opinion, received supplemental briefs from the
parties and amici curiae, and reconsidered. Upon reflection, the appeals court concluded that the circumstances of the case still did not warrant class certification.

The court noted that the causation requirement for purposes of establishing standing under the UCL, and in particular the meaning of the phrase "as a result of" in section 17204, holds that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions. Those same principles, the state supreme court had said Tobacco II in an amazingly result-driven fashion, do not require the class representative to plead or prove with an "unrealistic degree of specificity" that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign. But Tobacco II does not stand for the proposition that a consumer who was never exposed to an alleged false or misleading advertising or promotional campaign is entitled to restitution.

The certified class, consisting of all purchasers of Listerine in California, was overbroad because it presumed there was a class-wide injury. However, the record reflected that of 34 different Listerine mouthwash bottles on sale, 19 never included any label that made any statement comparing Listerine mouthwash to floss. Further, even as to those flavors and sizes of Listerine mouthwash bottles to which defendant did affix the labels which were at issue, not every bottle shipped between in the class period bore such a label. Also, although Pfizer allegedly ran four different television commercials with the “as effective as floss” campaign, the commercials did not run continuously and there is no evidence that a majority of Listerine consumers viewed any of those commercials. Thus, many, perhaps the majority of, class members who purchased Listerine during the pertinent period did so not because of any exposure to any allegedly deceptive conduct, but rather, because they were brand-loyal customers or for other reasons. As to such consumers, there is absolutely no likelihood they were deceived by the alleged false or misleading advertising or promotional campaign. Such persons cannot meet the standard of having money restored to them because it “may have been acquired by means of” the unfair practice.

Finally, plaintiff testified he did not make his purchase based on any of the four television commercials or other ads, and that he bought Listerine due to the bottle’s red label (which differed from the other labels), which he recalled said “as effective as floss.”  Because the various commercials and labels contained different language, with some even expressly advising consumers to continue flossing, his testimony as to his reaction to the Listerine label is not probative of his, or absent class members’, reaction to different language contained in television commercials and other labels. Therefore, named plaintiff lacked standing to assert a UCL claim based on those television commercials or other labels.

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The Seventh Circuit recently issued a decision clarifying an issue under the Class Action Fairness Act:  when the federal court denies class certification in a case in federal court because of CAFA, does that divest the court of jurisdiction?  The court of appeals reversed an Illinois district court ruling that a failed class action lost jurisdiction, ruling that the lower court misinterpreted CAFA. Cunningham Charter Corp., et al. v. LearJet Inc., No 09-8042 (7th Cir., Jan. 22, 2010).

Cunningham sued Learjet in an Illinois state court asserting claims for breach of warranty and products liability on behalf of itself and all other buyers of Learjets who had received the same warranty from the manufacturer that Cunningham had received. The defendant removed the
case to federal district court under CAFA. Eventually, the district judge denied the motion on the ground that neither proposed class satisfied the criteria for certification set forth in Rule 23 of the Federal Rules of Civil Procedure. The judge then ruled that the denial of class certification
eliminated subject-matter jurisdiction under the Act, and so he remanded the case to the state court.

The 7th Circuit, per Judge Posner, disagreed.  the court offered some context, a textual explanation, and policy reasons. The general principle that jurisdiction once properly invoked is not lost by developments after a suit is filed, such as a change in the state of which a party is a citizen that destroys diversity. E.g., St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 293-95 (1938). That general principle was applicable to this case because no one suggests that a class action must be certified before it can be removed to federal court under the Act.  Cases should not be shunted between court systems; "itigation is not ping-pong."

Text: The Act defines class action as “any civil action filed under rule 23 of the Federal Rules of Civil
Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action.” § 1332(d)(1)(B). No requirement of certification.

Policy: If a state happened to have different criteria for certifying a class from those of Rule 23, the result of a remand because of the federal court’s refusal to certify the class could be that the case would continue as a class action in state court. That result would be contrary to the Act’s purpose of relaxing the requirement of complete diversity of citizenship so that class actions involving
incomplete diversity can be litigated in federal court.

In finding that federal jurisdiction under the Class Action Fairness Act does not depend on certification, the court joined Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n. 12 (11th Cir. 2009).

Judge Posner concluded, that  is the better interpretation." See Richardson, “Class Dismissed, Now What? Exploring the Exercise of CAFA Jurisdiction After the Denial of Class Certification,” 39
New Mex. L. Rev. 121, 135 (2009); Clermont, “Jurisdictional Fact,” 91 Cornell L. Rev. 973, 1015-17
(2006).

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The Alabama Supreme Court has recently reversed a lower court's certification of a class of third-party payers of health care services who complained about damages allegedly flowing from the recall of a drug from the market.  Wyeth, Inc. v. Blue Cross and Blue Shield of Alabama, 2010 WL 152123 (Ala. Jan. 15, 2010).

Defendant Wyeth voluntarily withdrew Duract from the market, notifying the public of its decision to do so through a press release.  As part of the process of withdrawing Duract from the market, Wyeth voluntarily instituted a customer refund program for customers who still had Duract capsules in their possession. The third-party payers sued Wyeth solely on a theory of unjust enrichment, alleging that their payment for the drug had conferred an inappropriate benefit on Wyeth in light of the withdrawal.

After a hearing on the class certification motion, the trial court entered an order certifying a nationwide class of TPPs who paid for the prescription drug Duract that was not used as of the date of its withdrawal from the market.  On appeal, the defendant argued that predominance of common issues had not been established, a requirement of Alabama Rule 23 analogous to FRCP 23 (b)(3).

As in many states, Alabama recognizes that unjust enrichment claims are particularly unsuitable for class treatment. Funliner of Alabama, L.L.C. v. Pickard, 873 So.2d 198, 211 (Ala.2003) (unjust enrichment claims based on allegations of mistake or fraud require an individualized inquiry into the state of mind of each plaintiff).  The trial court distinguished this body of law, finding that this particular enrichment claim was not based on fraud or mistake, but on the somehow different theory that “equity and good conscience” required the defendant to disgorge money that belongs to the plaintiff.

The court observed that Wyeth probably had the better of the argument on this, meaning that the trial court had fashioned on a distinction without a difference.  But the state high court did not need to resolve the unjust enrichment issue under Alabama law, because the plaintiffs sought a nationwide class. Regardless of what Alabama law was, there had been no adequate showing, either to the trial court or to the Supreme Court, that the laws of all (or even most of) the 49 other states would allow unjust enrichment claims to proceed on such a "good conscience" basis somehow distinct from a traditional claim. 

Even a cursory examination showed that variances exist in state common laws of unjust enrichment. The actual definition of unjust enrichment varies from state to state. Some states do not specify the misconduct necessary to proceed, while others require that the misconduct include dishonesty or fraud. See Clay v. American Tobacco Co., 188 F.R.D. 483, 501 (S.D.Ill.1999).

Accordingly, common issues could not predominate.  Certification was vacated.

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The California court of appeals has upheld class certification of claims that Hewlett Packard laptops were defective because an allegedly flawed component caused the screens to dim. Hewlett-Packard Co. v. Superior Court of Santa Clara County (Rutledge), 2008 WL 4368563 (Cal.App. 6 Dist. 9/26/08).

Plaintiffs alleged violations of the California Bus. & Prof. Code Section 17200, the unfair competition law; and the Consumer Legal Remedies Act, Civ. Code Section 1750; and also made claims for breach of express warranty. In August 2005, plaintiffs filed a motion for certification of a class consisting of all persons and entities who own or owned certain HP computers, listed by product number, “who contacted HP about a lack of visibility of the display screen.”  HP opposed the motion, contending plaintiffs had not shown either that common issues of fact and law predominated or that there was an ascertainable class. Specifically, HP presented evidence that of the approximately 118,514 class model computers sold under the Pavilion brand name, only approximately 4,716 were reported to need repairs due to display screen problems. And that the causes were individual.

In November, 2005, the court determined that the proposed class definition was flawed, but that it would consider a subsequent motion should plaintiffs cure the defect. On August 30, 2006, plaintiffs filed a supplemental memorandum in support of their motion for class certification. Plaintiffs re-defined their proposed class as “[a]ll persons or entities who own or owned one or more of the following HP Pavilion notebook models: [model numbers]; [a]nd the computer contained or contains [a certain specific] inverter, [part numbers].”  The crux of the plaintiffs' claim was that the HP notebook computers contained types of inverters that would likely fail and cause the screens to dim and darken at some time before the end of the notebooks' "useful life," according to the court.  Inverters regulate electricity flowing to the display screen.

At the November, 2006 hearing on the supplemental motion, the court asked the parties to provide briefing on the effect of Daugherty v. American Honda Motor Co., Inc., 144 Cal.App.4th 824, 51 Cal.Rptr.3d 118 (2006), a case involving express warranties that had just been decided in October, 2006.

Eventually, the trial court certified the class. In its order certifying the class, the court stated that it was not ruling on the effect of the principles set forth in the Daugherty case. Following the California Supreme Court's denial of the petition for review in Daugherty, HP filed a motion for decertification on February 27, 2007, requesting the trial court rule on the effect that Daugherty had on the class certification. The court denied the motion in March, 2007, saying it was premature, so HP filed a petition for peremptory writ of mandate with the appeals court, which stayed the matter.

In Daugherty, the California Court of Appeal, Second District, held there can be no claim for breach of express warranty or unfair competition law violations arising from proof that "the manufacturer knew at the time of the sale that the component part might fail at some point in the future." HP focused on its holding that an express warranty does not extend the claims of defect beyond the warranty period. HP asserted Daugherty's rationale specifically limits its potential liability for the allegations set forth by plaintiff, making the issues individual, rather than subject to common proof. Moreover, HP argued the trial court erred in refusing to apply the principals of Daugherty to the determination of class certification.

In Daugherty, the plaintiffs were owners of Honda automobiles with an allegedly defective engine. The plaintiffs alleged that Honda had actual notice that the engines were experiencing severe mechanical problems due to oil leaks, but failed to provide adequate notice of the defect to owners of affected models. The plaintiffs first discovered the defects in their cars after the express warranty term of three years or 36,000 miles. The plaintiffs contended that “because the language of Honda's express warranty did not state that the defect must be ‘found,’ ‘discovered’ or ‘manifest’ during the warranty period, the warranty covers any defect that ‘exists' during the warranty period, no matter when or whether a malfunction occurs.” But the Daugherty court held: “[w]e agree with the trial court that, as a matter of law, in giving its promise to repair or replace any part that was defective in material or workmanship and stating the car was covered for three years or 36,000 miles, Honda did not agree, and plaintiffs did not understand it to agree, to repair latent defects that lead to a malfunction after the term of the warranty.”

Thus, Daugherty holds that failure of a component part after the expiration of the express warranty does not support a claim for relief under an express warranty claim. Daugherty holds there can be no claim for breach of express warranty or UCL violations arising from proof that the manufacturer knew at the time of the sale that the component part might fail at some point in the future. This would seem to cover plaintiffs' claim that certain HP notebook computers contained types of inverters that HP knew would likely fail and cause the screens to dim and darken at some time after warranty but before the end of the notebook's “useful life.”

However, the court of appeals found that while Daugherty may have implications for the merits of the underlying HP action, and indeed may serve to bar claims by plaintiffs that occurred outside the warranty period, it does not affect a determination of class certification. Daugherty was distinguished from the present action because it related to a substantive question on demurrer rather than a procedural question as here on a motion for class certification.

The court felt that if it were to accept HP's argument regarding the application of Daugherty to the present action, it would be considering the merits of the underlying action. And the question of class certification “does not ask whether an action is legally or factually meritorious.”

The court of appeals seemed to miss the point. While a court generally should not determine the merits of a claim at the class certification stage, it is appropriate to consider the merits of the case to the degree necessary to determine whether the requirements of class action rule will be satisfied. It may be necessary to analyze the plaintiff's factual allegations, the record evidence pertinent to class issues, and the applicable law in order to understand and evaluate the propriety of the class device. A court should look past the pleadings in order to determine whether a plaintiff's case meets the technical requirements for class certification. A court does not probe the merits when it probes behind a plaintiff's allegations because it is necessary to determine whether, if the class were certified, the issues presented could fairly and efficiently be resolved with respect to all the absent class members, based on the proof offered on behalf of only the named plaintiffs. Some inquiry into the substance of the plaintiff's case may be necessary for identifying the issues in the case and determining whether the complaint meets the requirements of commonality, typicality, and adequacy of representation, and what California calls community of interest. Evidence relevant to the class issues is often intertwined with the merits.
 

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