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

We have posted before about the interesting Human Tissue litigation.  The multidistrict litigation consolidated hundreds of cases filed either by plaintiffs who received allografts — transplants from cadavers — harvested by defendants allegedly without obtaining proper consent and following appropriate regulations, or by those plaintiffs who allegedly had allografts improperly taken from deceased relatives. The MDL court last week denied the latter plaintiffs' motion for class certification. In re: Human Tissue Products Liability Litigation, No. 06-135/MDL 1763 (D.N.J.).

According to the named representative plaintiffs, each of the class members had a deceased family member whose body went to one of the defendant funeral homes; plaintiffs claim that the funeral homes, after taking possession of the bodies, allowed another defendant to extract bones and tissue from the decedents. Following this, the harvested tissue then allegedly was given to other defendants, tissue banks. The purported class consisted of “all next of kin relatives of decedents whose bodies were desecrated by [defendants] for the harvesting and sale of human body parts."

Two parts of the opinion will be of the most interest to readers.  First, under the Rule 23(a) prerequisites, the court found that the typicality element was not established because of the highly individualized nature of the claims in this action.  Plaintiffs asserted emotional distress claims against the funeral homes that handled the donor decedents' remains and the tissue processors who allegedly received the harvested tissue. The Third Circuit has stated that class certification is inappropriate in mass tort claims, generally, because they often present questions of individualized issues of liability. In re Life USA Holding Inc., 242 F.3d 136, 145 (3d Cir. 2001). This observation is particularly true where the tort claims alleged are premised on emotional distress. The factual circumstances underlying each of the individual claims – including but not limited to plaintiffs' relationships with the decedents and the injuries allegedly suffered – were sufficiently personal and specific as to prevent any finding of similarity with regard to their claims.  

Also, plaintiffs were bringing contractual claims against the funeral home defendants, which again hinged on different factual circumstances that also might give rise to different defenses. There was no allegation that the individual contracts made with the funeral homes concerning final arrangements for the donor decedents were identical; in fact, since they were drafted and negotiated by different funeral home representatives and family members, they likely contained different representations, again subject to different defenses. For example, the meetings between funeral home personnel and the decedents' family members involved representations regarding the specific services requested and potential tissue donation. "These are all very personalized discussions," said the court.  All in all, the court found sufficient factual differences among the contracts negotiated with the different funeral homes to preclude a finding of typicality. See In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 598 (3d Cir. 2009)(“Ensuring that absent class members will be fairly protected required the claims and defenses of the representative to be sufficiently similar not just in terms of their legal form, but also in terms of their factual basis and support.”); see also In re Life USA Holding, Inc., 242 F.3d at 144-46 (vacating class certification in part because plaintiffs' claims of deceptive insurance sales practices arose from individual and non-standardized presentations by numerous independent agents).

It is significant that the court put some teeth into the 23(a) element. While the court acknowledged that factual differences will not automatically render a claim atypical if the claim arises from the same event or practice or course of conduct that gives rise to the claims of the class members, and if it is based on the same legal theory, here plaintiffs failed to demonstrate, other than through a bald assertion, that any practice or course of conduct existed among the funeral homes or among the tissue processors.

The same differences undermined a showing of predominance and superiority under Rule 23(b)(3), which provides for certification when the court finds 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.

The individual factual circumstances, including contractual arrangements, personal relationships with the decedents, injuries suffered, etc. precluded a 23(b)(3) class.  The superiority inquiry compels a court to balance, in terms of fairness and efficiency, the merits of a class action device against those of alternative available methods of adjudication.  Here, the multitude of individualized issues presented in plaintiffs' claims would entail complicated mini-trials within the class action itself.  The claims presented by plaintiffs and their unique factual underpinnings would require such extensive individual consideration that it would be neither more fair nor more efficient to proceed with this matter as a class action.  Class rejected.

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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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We have posted on the climate change litigation, including inexplicable decisions such as the putative class action alleging that -- follow the chain -- dozens of oil and chemical companies emitted greenhouse gasses which contributed to an impact on the atmosphere which contributed to a rise in temperature of some parts of the ocean which contributed to making Hurricane Katrina stronger which contributed to additional damages to plaintiffs' property. Such decisions represent a clear and dangerous trend within certain courts to usurp Congress, warp the traditional nuisance doctrine, and plunge the federal courts into what are essentially political questions.
 

Now comes the welcome news that the Fifth Circuit has ordered en banc rehearing of the case. Comer et al. v. Murphy Oil USA et al., No. 07-60756 (5th Cir.). The court issued an order last week granting the defendants' petition for a rehearing en banc, vacating the panel decision from last Fall. The Fifth Circuit panel had ruled that private property owners under Mississippi law may have standing to bring climate change-related nuisance and trespass claims for both property and punitive damages.

The defendants will re-brief the issues by the end of this month, and oral argument appears to be set for the end of May.

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A federal court has dismissed a class action that accused Bayer Corp. of misrepresenting the cancer-preventing nature of its men's vitamin products. Johns v. Bayer Corp. et al., (S.D. Cal. Feb. 9, 2010).

Readers of MassTortDefense know how a government investigation or advocacy group's criticism of a product can spawn products liability and other class action litigation.  But can plaintiffs walk too closely in the footsteps of the government?

Plaintiff David Johns filed a putative class action alleging that defendants misrepresented on product packaging, commercial advertisements, their website, and in other marketing materials, that one of the product line's key ingredients, selenium, has the ability to reduce the risk of prostate cancer in men. Plaintiff alleges that, despite emerging evidence, selenium does not in fact prevent or reduce the risk of prostate cancer. Plaintiff alleged he purchased one bottle of Men’s Health in July 2009 for approximately $8.  He alleges he read the information regarding selenium on the product packaging and relied on those statements in making his purchasing decision.

Plaintiff then brought a proposed class action on behalf of all persons in the United States or, alternatively, all California residents, who since 2005 purchased the men's health vitamin products. Plaintiff alleged claims for: (1) violation of California’s Unfair Competition Law, California Business & Professions Code § 17200 (“UCL”), (2) violation of the Consumers Legal Remedies Act, California Civil Code § 1750 (“CLRA”), and (3) unjust enrichment.

Defendants moved to strike key aspects of the complaint because the allegations seemingly were simply borrowed from the language of an FTC investigation of the vitamin product line. Defendants argued that these allegations violated plaintiff’s duty under Rule 11 to conduct a reasonable factual investigation into the allegations to be made in a complaint. Attorneys have a duty to make a reasonable inquiry into whether the factual contentions made in a complaint have evidentiary support. Fed. R. Civ. Pro. 11(b).

That FTC lawsuit resulted in a settlement and consent decree; there was no adjudication on the merits and no admission of wrongdoing or fault on the part of Bayer.  Thus, quotes from the government pleadings were, at best, a repetition of mere allegations, including of a special interest advocacy group that had complained to the government.  The federal court thus struck these allegations. See also In re Connectics, 542 F. Supp. 2d 996, 1005-06 (N.D. Cal. 2008).  Because the court granted defendants’ motion to strike the various paragraphs of the complaint, there were no factual allegations remaining to support the claim that defendants’ advertising was deceptive. Accordingly, the motion to dismiss was granted without prejudice.

The court went on to address several issues "as guidance if Plaintiff chooses to file an amended
complaint."  The court noted that in two recent opinions, the Supreme Court had clarified the  standard of review for Rule 12(b)(6) motions. See Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). To survive a motion to dismiss under this standard, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 570).  For example, the court pointed out a standing issue: plaintiff did not allege that he saw any advertisements for one of the products in the line, Men’s 50+, nor that he read the packaging on the product, nor that he even considered purchasing the product. Plaintiff cannot expand the scope of his claims to include a product he did not purchase or advertisements relating to a product that he did not rely upon. The statutory standing requirements of the UCL and CLRA are narrowly prescribed and do not permit such generalized allegations.

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The U.S. Food and Drug Administration announced this week that it will set new safeguards for medical imaging to reduce the amount of radiation to which patients may be exposed through increasingly common radiation-based diagnostic procedures.

Like all medical procedures, computed tomography (CT), fluoroscopy, and nuclear medicine imaging exams present both benefits and risks. These types of imaging procedures have led to improvements in the diagnosis and treatment of numerous medical conditions. At the same time, these types of exams expose patients to ionizing radiation, which may elevate a person’s lifetime risk of developing cancer.

Through the Initiative to Reduce Unnecessary Radiation Exposure from Medical Imaging, FDA is advocating the universal adoption of two principles of radiation protection: appropriate justification for ordering each procedure, and careful optimization of the radiation dose used during each procedure. In other words, each patient should get the right imaging exam, at the right time, with the right radiation dose.

According to a March 2009 report by the National Council on Radiation Protection and Measurements (NCRP), the U.S. population’s total exposure to ionizing radiation has nearly doubled over the past two decades. This rise is largely attributable to increased exposure from CT, nuclear medicine, and interventional fluoroscopy. NCRP estimates that 67 million CT scans, 18 million nuclear medicine procedures, and 17 million interventional fluoroscopy procedures, and 18 million nuclear medicine procedures were performed in the U.S. in 2006.

Concerns have been raised about the risks associated with patients’ exposure to radiation from medical imaging. Because ionizing radiation can cause damage to DNA, exposure can increase a person’s lifetime risk of developing cancer. Although the risk to an individual from a single exam may not itself be large, millions of exams are performed each year, making radiation exposure from medical imaging an important public health issue. Some experts have estimated recently that t approximately 29,000 future cancers could be related to CT scans performed in the U.S. in 2007. While estimates vary, most responsible public health officials agree that care should be taken to weigh the medical necessity of a given level of radiation exposure against the risks.

Against this backdrop, plaintiff lawyers continue to seek medical monitoring in the form of CT and other scans for millions of proposed class members around the country.  Plaintiffs' theory is that exposure to an alleged toxic substance has put the class at an increased risk of developing disease in the future, and thus they need medical monitoring to early detect the disease.  Most jurisdictions have not recognized this claim, but in those that do, defendants will want to pay close attention to the elements of the claim that require a plaintiff to prove that the testing is reasonably medically necessary or part of the standard of care.  The reason that treating physicians and public health agencies do NOT recommend monitoring in the form of CT scans for healthy, asymptomatic folks may increasingly include this issue of potential over-exposure.  While jurors may come to the court room with the pre-load that monitoring is great because early detection saves lives, the reality is that in many contexts, monitoring may do more harm than good.

Because CT, fluoroscopy, and nuclear medicine require the use of radiation, some level of radiation exposure is inherent in these types of procedures. Only when these procedures are conducted appropriately do the medical benefits they can provide generally outweigh the risks.  In the medical monitoring context, patients may be exposed to radiation without sufficient clinical need or benefit. Unnecessary radiation exposure, and thus cancer risk, results from the performance of a particular medical imaging procedure when it is not medically justified given a patient’s signs and symptoms, or when an alternative might be preferable given a patient’s lifetime history of radiation exposure.  That kind of needed individual assessment is one of the reasons why class-wide determination of medical monitoring is a bad idea. While plaintiffs trumpet the new technology, reports suggest that the radiation dose associated with one CT abdomen scan is the same as the dose from about 400 chest X-rays.

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A recurring theme at MassTortDefense has been the risks associated with the plaintiffs' bar growing creativity in the use of state consumer fraud acts to substitute for traditional product liability claims.  In particular, plaintiffs assert that class actions pursuant to state unfair or deceptive trade practices acts ought to be more easily certifiable than traditional personal injury class actions. A recent case in this area is notable not only for its actual holding rejecting a nationwide class, but also for the philosophy expressed by the court on these kinds of proposed class actions. Schnall v. AT&T Wireless Inc., 2010 WL 185943 (Wash. Jan. 21, 2009).

Customers of AT&T Wireless Services filed a nationwide class action alleging the company misled consumers when it billed them for a charge that was not included in advertised monthly rates and was allegedly not described clearly in billing statements. An immediate issue loomed concerning choice of law, which can have a dramatic impact on several aspects of the certification process, including the elements of commonality, predominance, and manageability.  The parties initially disputed whether the choice of law clauses in the customers' contracts were enforceable. The choice of law clauses in this case required customers to litigate asserted violations of their contract in the respective jurisdiction where they signed the contract. (Such jurisdiction is often based on the customer's area code.)  The court concluded that AT&T should not  be forced to face the "enormous cost and complexity presented by a nationwide class action" when they conscionably included choice of law provisions in their customers' contracts and the choice of forum is, in any event, dictated by the consumer.

The choice of law clauses, along with the interpretation of the contract terms, the differences in the materials and information each potential class member received, and the availability of differing affirmative defenses created a predominance of individual issues over common ones.  But even where courts find that a nationwide, state law governed class otherwise meets Rule 23(a) and 23(b)(3) criteria, the court opined that “the choice-of-law inquiry will ordinarily make or break certification.”  This is because if the laws of 50 jurisdictions apply to plaintiffs' claims, the variations in the laws of the states may swamp any common issues and defeat predominance. (citing Castano, Georgine, and In re American Medical System.)

Of particular interest, the court found that the state of Washington has no interest in seeing contracts executed by AT&T representatives in other states with citizens of those states examined and adjudicated in Washington courts. Certified as a nationwide class action, this case would have presented an unwarranted and unnecessary burden on the state judicial system, all at a large cost to state taxpayers. See R.J. Reynolds Tobacco Co. v. Engle, 672 So.2d 39, 41 (Fla.Dist.Ct.App.1996) (“No doubt a tremendous number of retired judges, special masters, and general masters would have to be appointed by the court in order to complete this herculean task within a reasonable period of time--all at a staggering cost to the taxpayers.”)(of course, even the state-wide Engle class was a disastrous mistake by the Florida courts). The court concluded that there is no sound reason to force Washington trial courts to entertain the contract claims of citizens from around the nation. Their state courts are equally as prepared, if not better situated to apply the contract laws of their own states.

That conclusion was bolstered by the observation that nothing in Washington law indicates that Consumer Protection Act claims by nonresidents for acts occurring outside of Washington can even be entertained under the statute. Because the laws of each state are designed to regulate and protect the interest of that state's own residents and citizens, each state has a measurable, and usually predominant, interest in having its own substantive laws apply.  While it is true that Washington has a strong interest in regulating any behavior by Washington businesses which contravenes the CPA, the CPA indicates the legislature's intent to limit its application to deceptive acts that affect the citizens and residents of Washington. To state a CPA claim, a person must show that the unfair or deceptive act affected the people of the state of Washington. This geographic and jurisdictional limitation originates in the CPA's history as a tool used by the State attorney general to protect the citizens of Washington. (as is the situation with many such state statutes.)

The court remanded the case for consideration of a state-wide class claim, but note the better view that where, as here, the plaintiffs allege that their damages were caused by deceptive, misleading, or fraudulent statements or conduct, as a practical matter it is not possible that the damages could be caused by a violation of the Act without proof of reliance on the statements or conduct alleged to violate the statutes. Cf. Group Health Plan, Inc. v. Philip Morris, Inc., 621 N.W.2d 2, 13 (Minn.2001); Hageman v. Twin City Chrysler-Plymouth Inc., 681 F.Supp. 303, 308 (M.D.N.C.1988) (“To prove actual causation, a plaintiff must prove that he or she detrimentally relied on the defendant's deceptive statement or misrepresentation.”); Feitler v. Animation Celection, Inc., 170 Or.App. 702, 13 P.3d 1044, 1047 (2000) (holding causal element of misrepresentation claim requires reliance by the consumer); cf. Siemer v. Assocs. First Capital Corp., 2001 WL 35948712, at *4 (D.Ariz. Mar.30, 2001) (“The injury element of the [state consumer protection statute] claim occurs when the consumer relies on the misrepresentations.”); see generally S. Scheuerman, The Consumer Fraud Class Action: Reining in Abuse by Requiring Plaintiffs to Allege Reliance as an Essential Element, 43 Harv. J. on Leg. 1 (2006).
 

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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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A federal judge has granted defendant's summary judgment motion in a putative consumer class action over contact lens solution. Degelmann, et al. v. Advanced Medical Optics Inc., No.07-0317 (N.D. Calif. 1/4/10).

Defendant, in 2007, issued a recall notice for their contact lens solution product, following an announcement by the U.S. Centers for Disease Control and Prevention that a small number of users of the contact lens solution might have developed a rare, but potentially serious, corneal infection, due to contamination.  The CDC report indicated that the epidemiological evidence showed that the product may be less effective than other solutions in disinfecting against the particular contamination. [Epidemiology, sometimes termed the "science of long division" or the "science of making the obvious obscure" is crucial to most toxic tort claims.]

Plaintiff brought a proposed nationwide class action under California Business & Professions Code § 17200 (Unfair Competition Law) and  § 17500 (False Advertising Law), and alleged that defendant AMO made false statements concerning its contact lens solution, and concealed certain known risks of using the solution. Plaintiffs did not allege that they suffered any physical injury from their use of the product.  Rather, the focus of the complaint was on AMO’s allegedly false representation that the product was a “disinfecting solution” or was a solution that “disinfects.”

AMO argued that the name plaintiffs had suffered no legally cognizable injury, and therefore lack both Article III standing and statutory standing under the UCL/FAL, among other summary judgment theories.  The court found that plaintiffs lack Article III standing, and granted the motion (without reaching the other issues).

The Constitution limits the federal judicial power to designated “cases” and “controversies.” U.S. Const., Art. III, § 2. Standing is an “essential and unchanging part of the case-or-controversy requirement of Article III.”  Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Article III standing requires a plaintiff to show an “injury in fact,” a causal connection between the injury and the conduct complained of, and a likelihood that the injury will be redressed by a favorable decision. Id. at 560-61; see also Sprint Communications Co., L.P. v. APCC Services, Inc., 128 S.Ct. 2531, 2535 (2008). In order to establish standing, plaintiffs must show that they have suffered actual loss, damage, or injury, or are threatened with impairment of their own interests. The “injury in fact” requirement must involve an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.  Lujan, 504 U.S. at 559-60

The court found that named plaintiffs could not show injury in fact because they  never contracted the infection at issue, and were never harmed by their use of the product. Because they stopped using the solution long before the recall, they could not allege that the recall caused them to discard unused solution, which is a typical "economic" harm argument plaintiffs try to make.  Moreover, they could not claim to have lost the money they spent purchasing the product in the first place, as they would have bought another, comparably priced, contact lens solution if they had not bought this one.  As plaintiffs sustained no damage and no injury, and made no showing of any sufficient  threatened injury that was likely to occur, they did not have standing under Article III.  Motion granted.

Defendants will want to not overlook the standing argument , especially when confronted with the concocted class claims of plaintiffs who were never really injured, and seek to recover for alleged bad conduct without showing any causal link between the conduct and an injury suffered.
 

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Recent developments in the Digitek MDL.  The presiding judge in the federal Digitek multidistrict litigation has selected five bellwether cases to be tried.  Readers of MassTortDefense know that an increasingly common case management technique in consolidated or coordinated litigation is the use of bellwether trials, with the hope that early verdicts will impact the resolution of cases down the line.  Judge Goodwin issued Pretrial Order (PTO) No. 47, which assigned the following five cases for trial, in this order:

 • David Kelch, et al. v. Actavis Totowa, LLC, et al., 2:08-cv-01282

 • William J. Young, et al. v. Actavis Totowa, LLC, et al., 2:09-cv-00498

 • Jacquelyn K. Fox, et al. v. Actavis Totowa, LLC, et al., 2:09-cv-00389

 • Karen Sheahan, et al. v. Actavis Group, et al., 2:08-cv-01051

 • Scottie Vega, et al. v. Actavis Group hf., et al., 2:09-cv-00768

Readers may recall that the federal Digitek product liability cases, alleging that Actavis Totowa LLC, Actavis Inc. and Actavis Elizabeth LLC released Digitek tablets containing more than the appropriate dosage to the public in 2008, were transferred to an MDL  last August. The plaintiffs allege that the tablets can cause digitalis toxicity in patients with renal failure. This condition can cause nausea, vomiting, dizziness, low blood pressure, cardiac instability, bradycardia and death.

The MDL court also recently ordered the plaintiffs to file their class certification motion and brief in support of their "economic loss" class by Jan. 20, 2010.  Defendants’ response brief shall be filed and served thirty days after the filing of such class certification motion and accompanying brief, said the order.

The court also entered amended PTO #48 (Joint Hearing to Address Challenges to Scientific and Technical Evidence). In the spirit of cooperation and collegiality evident since the inception of this MDL, said the court, several distinguished state judicial officers presiding over certain consolidated Digitek actions have graciously agreed to conduct a joint hearing to address the scientific and technical issues presented in this litigation for resolution pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and its federal and state progeny. Those issues are best addressed, said the MDL court,  through coordinated proceedings, albeit with each presiding judicial officer giving separate and individualized attention, and disposition, to the evidence and arguments as they relate to his or her assigned consolidated civil actions. The court recognized that each state may have its own standards and procedures for expert testimony designed to ensure the reliability and relevance of evidence based upon scientific, technical and other specialized knowledge.  That joint hearing is scheduled for October, 2010.

This is just the latest step in efforts for such coordination. Pretrial Order (PTO) No. 11 concerned state and federal coordination. It ordered lead and liaison counsel for the plaintiffs and defense to endeavor to coordinate activities between the federal and state litigation. It also ordered the creation of a joint document depository for use by parties in the federal-state litigation. The Order provided a mechanism for cross-noticing depositions. The next status conference is scheduled for Thursday, February 11, 2010 at 9:00 a.m.
 

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A quick update on the Chinese Drywall MDL.  With the recent filing of an omnibus complaint, approximately 3,000 plaintiffs are now involved in the product liability litigation over Chinese-made drywall, against approximately 600 defendants. In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No, 2047 (E.D. La.).  Plaintiffs allege generally that sulfur levels in the Chinese-made products are abnormally high, causing problems with air conditioning systems, appliances, internal wiring and other electrical systems, as well as personal injuries.  

The drywall imported from China could have been used throughout the United States in as many as an estimated 300,000 recently built or renovated homes. The U.S. Consumer Product Safety Commission reported on studies linking Chinese drywall installed in homes to elevated levels of hydrogen sulfide and the potential corrosion of metals.

Recently, the MDL court appointed Michael K. Rozen of Feinberg Rozen, LLP as a Special Master in this proceeding under Federal Rule of Civil Procedure 53. Pursuant to the order of the Court, Special Master Rozen shall carry out those tasks he deems appropriate to fully explore opportunities for an ultimate resolution between the various parties. 

At the December status conference, the court explored issues relating to the various profile forms: Plaintiff Profile Form, a Defendant Manufacturers’ Profile Form, a Contractor/Installer Profile Form, a Builder Defendant Profile Form and a Defendant Distributor Profile Form, and the Importer/Exporter/Broker Profile Form. And how to handle a party's failure to complete the required form. Another agenda item was prioritizing the many pending motions. The parties addressed some discovery disputes, including ESI.

An important issue also discussed was the the Court's general plan to establish initial  “bellwether” trials. The Court has further advised the parties that any such trials will be limited to property damage only. The parties have been discussing the protocol and procedure for selecting bellwether trial candidates. The Plaintiff Steering Committee has suggested a sufficient representative sample of cases be selected with regard to geography, concentration of properties, distinctive facts and certain legal issues. The defendants suggest that the selection of bellwether plaintiffs must be limited to the plaintiffs that have submitted profile forms where personal injuries are not claimed. A list of these plaintiff properties has been made available to the PSC and the Court. The parties were directed to continue to discuss the selection of bellwether trials.

It is already clear that the drywall litigation will be complicated. Homeowners are suing builders, installers, distributors and manufacturers. There are multiple levels of insurance litigation, as in some states plaintiffs may also bring direct actions against the insurers for any of those categories of defendants; some homeowners are also in dispute with their carriers as to coverage. Several defendants have sued their carriers. In some cases, insurance companies have already filed declaratory judgment actions on these issues. Moreover, there are cross-claims among categories of defendants, as builders are suing distributors, manufacturers, and their insurers.

As noted here before , a major issue is product identification, i.e., the identification of the maker and seller of the drywall in each plaintiff's building. Plaintiffs in the MDL have already identified 28 foreign labels that they allege may be involved.  Class action motions remain pending, among the difficult case management issues.  Indeed, some of the cases may end up being resolved as part of bankruptcy proceedings.

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A federal court in Illinois recently denied remand of approximately 100 cases involving Trasylol, an anti-bleeding drug, citing the Class Action Fairness Act. Gilmore v. Bayer Corp., 2009 WL 4789406(N.D. Ill., 12/10/09). (Federal Trasylol litigation was consolidated in 2008 in the Southern District of Florida. In re Trasylol Prods. Liab. Litig., No. 08-MD-1928 (S.D. Fla.). The plaintiffs typically assert that the product causes heart and kidney complications, and that the defendants allegedly failed to warn of the risks.)

The suit was originally filed in state court. The defendants removed the case, but Judge G. Patrick Murphy remanded it for lack of federal jurisdiction. Additional plaintiffs were added in October, followed by a second removal motion. The defendants asserted diversity of citizenship under CAFA. The plaintiffs again sought remand.

The Southern District of Illinois ruled that the removing defendants asserted correctly that this case was a removable “mass action” within the meaning of CAFA. Among the actions covered by CAFA is a “mass action,” defined by the statute as “any civil action ... in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact,” and in which there is minimal diversity of citizenship (at least one plaintiff is not a citizen of the same state as at least one defendant) and the plaintiffs each seek a recovery exceeding $75,000, exclusive of interest and costs. 28 U.S .C. § 1332(d)(11)(B)(i).

The court concluded that an independent review “discloses plainly that the removal of this case is proper under the CAFA.”  The operative complaint asserted claims on behalf of one hundred persons, the minimum number of plaintiffs required for the exercise of jurisdiction pursuant to CAFA's “mass action” provisions.  Further, this case obviously presented questions of law and fact common to the claims of all one hundred plaintiffs, said the court. Common questions of fact and law included, for example, what information Bayer, Bayer LLC, and Bayer Healthcare possessed concerning the alleged harmful effects of Trasylol, what information they elected to disclose to physicians and patients about those harmful effects, and what information they were required by law to disclose about those effects, according to the court.

With respect to the requirement of minimal diversity of citizenship, this jurisdictional prerequisite was satisfied in this case as plaintiff Thomas Gilmore is a citizen of Washington and Bayer is incorporated under Indiana law and has its principal place of business in Pennsylvania.

Finally, with respect to the jurisdictional amount in controversy under the CAFA's “mass action” provisions, the Court noted that in other cases involving allegations of personal injuries allegedly caused by the drug similar to the allegations contained in the operative complaint in this case that the plaintiffs' claims individually exceeded $75,000.

Our readers know that Congress enacted CAFA to allow more interstate class actions to be heard in federal court, and to address class action abuse.  "Mass actions" were recognized as class actions in disguise, and included in CAFA the provision to prevent the statute's objectives from being undermined by these "close substitutes that escape the statute's application." The courts increasingly offer a common sense reading of CAFA  that thwarts any attempt by plaintiffs' counsel to avoid federal court through the class-action substitute.

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A federal court last week denied class certification in a case arising from alleged damage to boats allegedly caused by ethanol blended gasoline. Kelecseny v. Chevron U.S.A., Inc., et al., No. 08-61294-CIV-ALTONAGA/Brown (S.D. Fla. Nov. 25 2009).

Recent federal and state legislation requires that ethanol usage be expanded and that gasoline contain 9 to10% ethanol by December 31, 2010. Plaintiff sued several defendant gasoline manufacturers who have produced and/or marketed the ethanol blended gasoline (E10) used by the proposed class members for use in boats and watercraft in Florida allegedly without adequate warnings to consumers. The plaintiff asserted that E10 can cause difficulty starting the engine or rough engine operation, engine overheating, engine fires,  corrosion of aluminum tanks, degradation of fiberglass tanks and resins, and other damages.

The court noted the evidence that some defendants have, in other countries, posted warning signs that E10 may not be suitable for use in boats. Numerous articles have appeared in boating magazines, some boat manufacturers provide E10 warnings in their owners’ manuals, and many marine mechanics are aware that E10 may cause problems in certain types of boats.

The class sought relief against all defendants under a “market share” theory of negligence, based on Conley v. Boyle Drug Co., 570 So. 2d 275, 286 (Fla. 1990), alleging that because of the general methods for the use and distribution of gasoline used to fuel boats, plaintiffs did not know the identity of each of the named defendants that sold the ethanol blended gasoline that they purchased for use in their boats.

Our review focuses on the damages class, defined as owners of boats in the state of Florida whose fuel tanks are composed of polyester of vinyl ester resin fiberglass fuel tanks. The court noted first that even to determine whether certain individuals may be in the class, a detailed individual inquiry would be required. Because it would be impossible to definitively identify class members prior to individualized fact-finding and litigation, the proposed class fails to satisfy the most basic requirements for a class action under Rule 23, ascertainability.

Turning to the Rule 23(a) factors, while it is possible that the proposed class could satisfy the numerosity requirement, plaintiff had not made a clear showing that the number of actual class members will be so high that joinder of all members is impracticable. Plaintiff argued that his starting number (680) was so large that defense attempts to carve certain boats out of the total number would never work to defeat numerosity. However, courts have made it abundantly clear that the burden to satisfy numerosity is on the plaintiff seeking to certify a class, and a plaintiff is not permitted to make a purely speculative showing that numerosity has been met.

Next, although typicality “does not require identical claims or defenses,” a factual difference in the representative’s claims will render those claims atypical if the factual position of the class representative “markedly differs from that of other members of the class.” Named plaintiff’s damages claims and the defenses to those claims differed markedly from those of other potential class members, said the court. The uncontroverted expert testimony at the certification stage established that the type of fiberglass tanks at issue are found in relatively large boats that are not suitable to be transported or carried by trailer.  Owners whose boats are equipped with fiberglass fuel tanks, therefore, are most likely to purchase their fuel at marinas, where their boats are kept or to which they travel on water for fueling. In contrast, plaintiff purchased fuel for his boat at numerous gas stations by use of a fuel caddy that he carried in his pick-up truck. Expert witnesses and the parties agree that this behavior was atypical. This difference in behavior between named plaintiff and other potential class members “jeopardizes Plaintiff’s ability to sue Defendants collectively under a market share theory.”

Importantly, the court noted that plaintiff cited no case in which market share liability has been applied in a class action, “and there appears to be good reason why no such case exists.” It is simply untenable to apply market share liability [in those few states that recognize it], with its requirement of the narrowest possible geographic market, to a class action consisting of members whose activities cover an entire state.  The requirement of a narrowly tailored geographic market is particularly important in market share liability cases because only with a narrow geographic market may a defendant avail itself of the defenses afforded by the market share theory.

On the Rule 23(b) factors, plaintiff’s argument disregarded the many individualized inquiries that would be required in the proposed class action and which clearly outweighed the asserted common issues. As to each individual plaintiff, a fact finder would have to determine where that particular plaintiff purchased fuel, and what, if any, warnings were in place at that station at that time or at different times. Also, plaintiffs had to show that defendants’ failure to warn of the dangers of E10 was the proximate cause of the damage to the boats. This requisite showing raised two issues of individualized inquiry. First, each proposed class member must demonstrate that had warnings of the danger of E10 existed, he or she would have heeded those warnings and not used E10 in his or her boat. Non-ethanol blended fuel is more difficult to find than E10 and is generally more expensive than E10. It is conceivable that some boat owners, even if warned that E10 might damage their fuel tanks, would opt for the convenience and lower cost of E10, and assume the risk of damage. Indeed, plaintiff himself apparently continued to use E10 in his boat despite his knowledge of the risks.

The proximate cause requirement also mandates an individualized inquiry into whether each proposed class member had personal knowledge that E10 could damage fiberglass fuel tanks. As noted above, some information was available from other sources that E10 may not be appropriate.

Finally, the court noted something that is extremely important to readers of MassTortDefense, and which some courts ignore: fact issues can be created by defenses and by a defendant’s response to plaintiff’s claims. If those fact issues are individual, that is every bit as important to the class certification decision as individual issues raised by plaintiff’s own affirmative proof. While plaintiff’s experts asserted that no individual examination of fiberglass fuel tanks was necessary, defendants’ experts disagreed. Thus, inspection of the fuel tank of each proposed class member was a reasonable request to determine whether any existing damage was actually caused by E10.

Similarly, defendants have the right to assert the comparative fault defense, and its assertion would involve individual inquiries concerning each proposed class member’s knowledge and behavior. Inquiry would be necessary as to whether each boat owner received an owner’s manual that warned against the use of E10; whether any had ever been told by a mechanic not to use E10; whether any had ever seen a warning sign at a marina or researched E10 on the internet; and whether, despite personal knowledge, the boat owner nonetheless chose to fuel the boat with E10 based on convenience and cost savings.

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The court overseeing the MDL concerning panacryl sutures declined last week to certify a proposed national class action. In re Panacryl Sutures Products Liability Cases, 2009 WL 3874347 (E.D.N.C. 11/13/09).

Panacryl Sutures are synthetic, braided, un-dyed, absorbable surgical sutures, designed to remain in the body for 24-36 months after surgery to provide wound support. Various plaintiffs alleged that Panacryl Sutures were defective in that they allegedly caused a high rate of foreign body reactions when used as directed. Plaintiffs alleged also that defendants failed to provide adequate warning of the dangers associated with the devices. Plaintiffs eventually filed a Motion to Certify a National Class Action.

The court first addressed the difficult choice of law issue -- a central, overarching issue in a proposed national class.  The court analyzed the choice of law factors -- interests of interstate comity, the interests underlying the field of tort law, the interests of the parties, the interests of judicial administration, and the competing interests of the various states, and concluded that under New Jersey's choice of law rules it should apply the substantive laws of each class member's home jurisdiction to his or her claims.  Again, a not unusual result, and is one which directly impacts the class certification elements.

Turning to the Rule 23(a) requirements, the court first focused on Rule 23(a)(3), commonly referred to as the “typicality” requirement, which states that the claims and defenses of the class representatives must be typical of the claims of the other class members.  Here, because plaintiffs had not shown that the prospective class representatives' claims can encompass or would take into account the varying substantive laws governing every class member, this element was not met.

Similarly, although the named plaintiffs interests are in some ways similar to the interests of class, the “adequate representation requirement overlaps with the typicality requirement because in the absence of typical claims, the class representative has no incentive to pursue the claims of the other class members.” In re American Med. Sys., 75 F.3d 1069, 1083 (6th Cir., 1996). Plaintiffs here did not meet their burden of showing that the claims of the prospective class representatives would take into account the variations in state law. The court found that therefore the prospective class representatives here did not satisfy Rule 23(a)(4).

Turning to Rule 23(b), the court observed that in class actions governed by the laws of several states, variations in state law will often overwhelm any common issues. See Ward v. Dixie Nat'l. Life Ins. Co., 257 F. App'x 620, 628-29 (4th Cir. 2007), cert denied, 128 S.Ct. 82 (2008), Castano v. Am. Tobacco, 84 F.3d 741 (5th Cir.1996).  To have any shot here, plaintiffs must provide an “extensive analysis” of the laws of the interested jurisdictions showing that variations among the applicable state laws do not pose “insuperable obstacles” to class certification. Walsh v. Ford Motor Co., 807 F.2d 1000, 1017 (D.C.Cir.1986); Gariety v. Grant Thornton, LLP, 368 F.3d 356, 370 (4th Cir.2004). Plaintiffs did not carry this burden.

Moreover, courts have generally founds that common questions of fact do not predominate in medical products liability cases. See In re American Med. Sys., 75 F.3d at 1074 (decertifying class of users of penile implants because “complications ... may be due to a variety of factors, including surgical error, improper use of the device, anatomical incompatibility, infection, device malfunction, or psychological problems.”); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180 (9th Cir.2001) (affirming denial of class certification in an action involving allegedly defective pacemakers). Here, plaintiffs alleged a variety of complications from the product, each of which has potential other causes. And Panacryl Sutures were used in a variety of surgical procedures which require different skills and techniques on the part of the surgeon and present different risks of post-surgical complications. These individual facts would have to be weighed against the alleged defects of Panacryl Sutures in light of the normal background rate of the various post-surgical complications identified by plaintiffs.  So no predominance of common issues.

This in turn led the court to conclude that the difficulties in managing the class proposed here would undermine the theoretical efficiencies that might be obtained through class certification.

Perhaps most importantly to readers of MassTortDefense, plaintiffs' last-ditch effort turned to the "issue class." But, noted the court, Rule 23(c)(4) may not be used to manufacture predominance for the purposes of Rule 23(b)(3). See Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir.1996) (“A district court cannot manufacture predominance through the nimble use of subdivision (c)(4).”); Peoples v. Wendover Funding, Inc., 179 F.R.D. 492, 501 n.4 (D.Md.1998) (“Rule 23(c)(4) does not permit a federal district court to certify a class under Rule 23(b)(3) by splitting a class action to create predominance.”). Plaintiffs' proposed issues trial plan did not eliminate the necessity of applying the laws of several jurisdictions or the individualized inquiry into whether Panacryl Sutures caused each plaintiff's injuries. And even under plaintiffs' proposed c4 trial plan, the difficulty of applying the laws of several states to the issues of liability and general causation would remain.  Lots of reasons to deny class certification.

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A federal court has granted defendant CSX Transportation, Inc.’s Motion for Summary Judgment in a medical monitoring case arising from a train accident. See Mann v. CSX Transportation, et al., NO. 1:07-cv-3512 (N.D. Ohio Nov. 10, 2009).

The case arises from the derailment of 31 rail cars, nine of which contained hazardous materials, and the subsequent fire that burned for around sixty hours. Ohio emergency personnel oversaw an
evacuation of a one half mile radius. The next day, plaintiffs filed a putative class action complaint in state court, which was removed to the Northern District of Ohio. Plaintiffs’ complaint, under
theories of strict liability and negligence, primarily sought the establishment of a judicially administered medical monitoring program.

After discovery had been completed, defendant filed its motion for summary judgment. The court began by noting that Ohio law recognizes medical monitoring as a form of remedy for an underlying tort. See Wilson v. Brush Wellman, 817 N.E.2d 59, 63 (Ohio 2004). (Readers will note some states consider it a separate cause of action.) Therefore, medical monitoring is only granted if a plaintiff is able to prove all the elements of the underlying tort and the elements of medical monitoring. On the first part, in order to avoid summary judgment, plaintiffs thus must make a showing of a genuine issue of material fact as to the elements of a negligence claim under Ohio law: (1) defendant had a duty to plaintiffs, (2) defendant breached that duty, and (3) plaintiffs suffered damages directly and proximately caused by defendant’s breach. See, e.g., Menifee v. Ohio Welding Products, 15 Ohio St. 3d 75, 77 (Ohio 1984).

The first two issues were not contested for purposes of the motion. On injury and causation, the court noted the overlap with typical medical monitoring requirements, such that to meet this aspect of their negligence claim plaintiffs must demonstrate a genuine issue of material fact that: (1) the chemicals (dioxins) released into the air by the fire are known causes of human disease; and (2) that the plaintiffs were exposed to the dioxins in an amount sufficient to cause a significantly increased risk of disease such that a reasonable physician would order medical monitoring.

Plaintiff experts relied on classifications of the chemicals as carcinogens as their only evidence that dioxins cause the various endpoint diseases for which they seek medical monitoring.  Plaintiffs’ experts also failed to provide an independent assessment of the causal link between dioxins and disease.  Instead they "parroted" the conclusions of other experts and cited to EPA, IARC and NTP documents labeling dioxins as known carcinogens. This was an insufficient showing, said the court.

But even if plaintiffs could demonstrate a causal relationship between dioxins and cancer, plaintiffs had failed to establish that they were exposed to dioxins in an amount warranting a reasonable physician to order medical monitoring. See Day v. NLO, 851 F.Supp.869, 881 (S.D. Ohio 1994).

Plaintiffs’ theory was that they were at an increased risk of disease because they lived for eighteen months with alleged contamination from the fire inside and around their homes. However, none of the named plaintiffs presented evidence that a physician has examined them or their medical records and opined that they are at an increased risk of disease. Similarly, plaintiffs’ experts had not conducted any measurement of dioxin inside or outside of the homes of five of the seven named plaintiffs. At least three of the seven had not even lived in their air dispersion modeling expert's "impact zone" long enough to qualify for his proposed medical monitoring program. Even for those that did, mere residence in the so-called impact zone is insufficient evidence of sufficient contamination and increased risk because it ignores any individual variables, including other sources, and most notably, at what level each of the named plaintiffs was actually exposed to dioxins. The Sixth Circuit has stated “generalized proofs will not suffice to prove individual damages.”  Sterling v. Velsicol Chem. Corp., 855 F.2d 1188, 1200 (6th Cir. 1988).

Again, even if plaintiffs had presented sufficient evidence of the amount of named plaintiffs’ dioxin exposure, plaintiffs did not demonstrate that a reasonable physician would order medical monitoring based on this exposure. Plaintiffs attempted to rely upon the EPA soil cleanup level after the accident as a basis for justifying medical monitoring. The court found two fatal defects in using this EPA soil cleanup level. First, demonstrating why regulatory guidelines are often not useful in the tort litigation context, see Rowe v. E.I. DuPont de Nemours & Co., 2008 WL 5412912 (D.N.J. Dec. 23, 2008); Redland Soccer Club, Inc. v. Dep’t of the Army, 55 F.3d 827 (3d Cir. 1995), the EPA soil cleanup level represented a threshold for the cleanup of contaminated soil, not a danger point
above which individuals would require medical monitoring. And even if government regulations were relevant to showing increased risk, a conservative soil cleanup level should not be used in place of a medically based risk assessment or evidence of the actual dose level at which dioxin truly causes cancer – the danger point critical to a medical monitoring determination.  Second, the EPA’s threshold soil cleanup level represents an increase in the risk of developing cancer from the baseline level for the general population of one in a million. Thus, even assuming there were a million members in this class who had been exposed to this level of dioxin over their entire lives, and assuming causation, only one of them would develop cancer because of the exposure. Plaintiffs thus sought to commence medical monitoring based on this one-in-a-million risk, but this risk and indeed risks higher, have been found insignificant as a matter of law.  Medical monitoring typically requires a significantly increased risk. Plaintiffs' expert opinion to the contrary was a legal conclusion, and thus it did not create a genuine issue of material fact.

In sum, the court concluded that the plaintiffs had not presented a genuine issue of material fact that the circumstances would warrant a reasonable physician to order medical monitoring. Medical monitoring in Ohio is a form of relief which should only be granted "with prudence."  Interestingly, the court concluded that plaintiffs’ proposed program would likely be extremely expensive, said the court, and inconvenience thousands of people for many years in the future. (Note to readers, the potential down-sides of medical monitoring must be explored in each case.) Plaintiffs had not presented enough evidence for a reasonable jury to conclude that such a burdensome program is warranted.

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In the BPA MDL, Judge Ortrie D. Smith granted in part and denied in part defendants’ motions to dismiss various claims. In re: Bispehnol-A Polycarbonate Plastic Products Liability Litigation, MDL No. 1967 (W.D. Mo.).

Readers of MassTortDefense will recall that last year the Judicial Panel on Multidistrict Litigation centralized fourteen cases; since then, the Panel has continued to transfer cases from around the country, so now about thirty-eight cases have been transferred. In addition, approximately ten cases have been filed in the MDL District and have become part of the consolidation. Defendants roughly fall into two categories: the Bottle Defendants and the Formula Defendants. Generally, the Bottle Defendants make baby bottles, sippy cups and similar products for infants and toddlers, and/or sport bottles. The Formula Defendants sell infant formula packaged in metal cans.

Most of the complaints assert, on behalf of consumers, various causes of action including: (1) violation of state consumer protection laws, (2) breach of express warranty, (3) breach of the implied warranties of merchantability and fitness for a particular purpose, (4) intentional misrepresentation, (5) negligent misrepresentation, and (6) unjust enrichment.

In one Order the court began by addressing the motions to dismiss claims for fraud, misrepresentation and breach of express warranties. The MDL court had previously, mindful of Rule 9, required plaintiffs to identify defendants’ alleged statements that form the basis for their claims of fraud, misrepresentation, and breach of express warranties. Plaintiffs’ continued failure to do so was, said the court, now fatal to these claims. Likely because they were unable to comply, and perhaps because they recognized what compliance would do to their already slim chances for class certification (because of the individual issues that a response would highlight), plaintiffs responded to the aforementioned requirement by saying that they had not identified any advertisements or other media because the allegations are not based on any particular representations. A misrepresentation claim not based on any misrepresentation. Rather, plaintiffs’ allegations are based on defendants’ supposed “overall course of conduct” in marketing and selling the products at issue. Taken as a whole, defendants’ alleged “overall course of conduct” somehow deceptively conveyed the impression or message that the products at issue are safe and healthy for use by infants and children.

By disclaiming reference to any particular fraudulent act, plaintiffs had disclaimed one of the essential elements of a fraud or misrepresentation claim. All states require proof of reliance and causation. For a statement to be relied upon and thus cause a purchaser’s injury, the statement must have been heard by the purchaser. Plaintiffs’ theory – that the placement of a product in a stream of commerce alone somehow conveys a sufficient representation about the product’s safety that can serve as grounds for fraud liability – is a rule that has not been demonstrated to exist in any of the fifty states.

Allowing the mere sale of products to convey an affirmative representation regarding safety would eviscerate the law of warranty and be contrary to the rationale supporting the limited circumstances in which actions constitute representations, noted the court.  Plaintiffs’ failure to identify any expressions made by defendants to them about their products precludes any claim that an express warranty was made, let alone violated. Given the absence of any “affirmation of fact or promise,” (see UCC Article 2-313), plaintiffs cannot allege an express warranty was made. The Supreme Court’s decision in Iqbal requires a plaintiff to identify the basis for, if not the content of, the alleged warranty. And, in a related issue, plaintiffs’ were thus unable to allege how the supposed, non-existent, warranties became “part of the basis of the bargain.”  A representation cannot be part of the “bargain” if the other party to the bargain did not know the representation was made! Merely alleging a representation became part of the bargain does not satisfy Iqbal. If one party (here, the buyer) is not aware of the statement, that party cannot claim the statement became a part of the parties’ bargain.

The court declined to dismiss the claims for fraudulent omissions, based on what it called a “common-sense” view of Rule 9 under which it was unnecessary to require plaintiffs to specifically identify who failed to disclose information and each occasion upon which they failed to disclose it. Rule 9 is satisfied, said the court, with respect to a claim of fraudulent omissions if the omitted information is identified and “how or when” the concealment occurred.

The claim for breach of implied warranty of fitness for a particular purpose was dismissed because while the ordinary purpose for baby bottles can be described as to allow babies and toddlers to drink liquids, a plaintiff cannot rely on this ordinary purpose to support a claim that there was a warranty of fitness for a particular purpose; they must point to some other purpose that is not “ordinary” in order to support their claim.

The court put off ruling on the claims for breach of the implied warranty of merchantability because defendants’ arguments (including lack of privity, untimeliness, and failure to provide notice), seemed premised on the unique characteristics of various states’ laws. Thus, they seemed more amenable to analysis at the time of any class certification decision, which will inevitably raise choice of law issues. A similar deferral was applied to dismissal of all unjust enrichment claims. Many of defendants’ arguments seemed to depend on unique aspects of various states’ laws, found the court.

Defendants also made a strong argument that the claims, at bottom, were improper “no injury” claims. The court agreed as to the category of plaintiffs who disposed of or used up the products before learning about BPA. They received all the benefits they desired and were unaffected by defendants’ alleged concealment. Importantly, the court recognized that while they may contend they would not have purchased the goods had they known more about BPA, these plaintiffs received 100% use (and benefit) from the products and have no quantifiable damages. In this instance, plaintiffs’ position “leads to absurd results.”  These buyers obtained the full anticipated benefit of the bargain. While they may not have paid the asking price, had they allegedly known, offset against this is the fact that they received the full benefits paid for – leaving them with no damages. Plaintiffs here may allege they would not have purchased those products had they supposedly known the true facts, but, again, they obtained full use of those products before learning the truth: the formula was consumed or the children grew to an age where they did not use bottles and sippy cups, so they were discarded. These consumers thus obtained full value from their purchase and have not suffered any damage. These plaintiffs are relegated to the unjust enrichment claim.

The court distinguished, however, those plaintiffs who learned about BPA’s presence and potential effects and either still have the goods or subsequently replaced or disposed of them. Defendants’ argument does not apply to this category, found the court.

That left before the court only plaintiffs’ claims that defendants made fraudulent omissions, violated various state consumer protection statutes, breached the implied warranty of merchantability, and that defendants were unjustly enriched. With these remaining claims pending, the court, in a second order, granted in part defendants’ motion to dismiss on the basis of preemption and denied their motion to dismiss on the ground of primary jurisdiction.

Defendants’ preemption and primary jurisdiction arguments were generally alike in that they both contend their use of BPA should only be subject to regulation by the FDA. Indeed, FDA has issued regulations prescribing the conditions for “safe” use of resinous and polymeric coatings, allowing the coatings to be formulated from “optional substances” that may include “[e]poxy resins” containing BPA. Thus, BPA’s presence in some resinous and polymeric coatings and in polycarbonate resins is subject to regulation by the FDA. It is also a fair reading of FDA’s regulations authorizing BPA’s use that the FDA thinks that food additives containing BPA could be used safely without labeling requirements.

The doctrine of primary jurisdiction applies when enforcement of a claim that is originally cognizable in the courts requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body. The FDA clearly has specialized expertise and experience to determine whether BPA is “safe.” However, said the court, the ultimate issues in these cases, as alleged by plaintiffs, are whether defendants failed to disclose material facts to plaintiffs and thus, for example, whether defendants breached the implied warranty of merchantability through the sale of products containing BPA. FDA’s decision that BPA is “safe” is not determinative of any of those issues, said the court. This conclusion seemed to give insufficient attention, in our view, to the argument that plaintiffs have predicated their claims on proof that BPA is allegedly unsafe: the undisclosed facts are not material unless BPA is not safe. The products are not unmerchantable unless BPA is unsafe, Since plaintiffs base their claims on such evidence, the claims seemed to fall within the primary jurisdiction of the FDA.  The MDL court did not agree.

Turning to the preemption issue, the court first rejected the claim of implied preemption. While noting that FDA has approved BPA use in food additives and noting the agency’s decision not to require labeling, the court concluded that the FDA’s approval of BPA as safe without labeling requirements establishes only a regulatory minimum; nothing in these regulations either required or prohibited defendants from providing the disclosures sought. The court cited Wyeth v. Levine for the proposition that that there is no preemption when federal law did not prevent the drug manufacturer from strengthening its drug label as necessary to comply with the standard to be imposed by state law.

However, the Formula Defendants also raised express preemption; they asserted that the FDA regulations exempt Formula Defendants from having to disclose the presence of BPA in their products. Express preemption exists when a federal law explicitly prohibits state regulation in a particular field. With respect to food labeling, federal law generally prohibits states from establishing any differing requirements for the labeling of food. Thus, plaintiffs’ claims are expressly preempted because they would impose disclosure requirements concerning BPA, the exact opposite of the exemption. Now, here is the interesting twist: plaintiffs asserted that Congress also provided an exception to express preemption under the law for “any requirement respecting a statement in the labeling of food that provides for a warning concerning the safety of the food or component of the food.”  But, the court noted, plaintiffs cannot have it both ways.  If their claims are based on warnings about the safety of food, then their claims would have been subject to dismissal under the primary jurisdiction doctrine because the determination whether BPA is “safe” is solely the province of the FDA, and the FDA has concluded that the use of BPA in epoxy liners is “safe” so long as the manufacturer abides by the FDA’s prescribed conditions. See 21 C.F.R. § 175.300 (2009).  If the claims against the Formula Defendants are not subject to primary jurisdiction, as plaintiffs argued, then they are subject to express preemption analysis.

It may seem clear to readers of MassTortDefense that even with respect to those claims the court concluded should not be dismissed on the pleadings, the court's analysis highlights several issues that may make it difficult for the plaintiffs to proceed as a viable class action. 

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The  California appeals court has affirmed a trial court's decision to deny plaintiff's motion for class certification in a case involving high definition (HD) television services. See Cohen v. DIRECTV, Inc., No. B204986, 2009 WL 3069116 (Cal. Ct. App. 2d Dist. 10/28/09).

A subscriber to services delivered by a satellite television company filed a proposed class action complaint alleging the company had disseminated false advertising to induce him and other subscribers to purchase more expensive HD services.  The complaint alleged that DIRECTV switched its HDTV channels to a lower resolution, reducing the quality of the television images it transmits to its subscribers.

Importantly, the complaint did not allege that DIRECTV breached its subscribers' contracts for satellite television services by allegedly transmitting a lower resolution television image than it was contract-bound to deliver. Instead, plaintiff alleged a species of fraud in the inducement, alleging that subscribers to DIRECTV's HD services purchased those services in reliance on the company's supposedly false advertising. In that vein, Cohen alleged that he and the other putative class members subscribed to the HD service package based upon DIRECTV's national advertising and marketing.  Thus, plaintiff  asserted two causes of action: (1) violation of the Consumer Legal Remedies Act or “CLRA” (see Civ. Code, § 1750 et seq.), and (2) violation of the Unfair Competition Law or “UCL” (see Bus. & Prof. Code, § 17200).

Plaintiff requested the trial court to certify a class defined as follows:  “Residents of the United States of America who subscribed to DIRECTV's High Definition Programming Package.”  The motion to certify the class was supported in significant part with evidence seeking to show DIRECTV's print advertising and promotional materials for its HD Package; DIRECTV's opposition to the motion for class certification was supported in large part by a number of declarations from subscribers to the company's HD Package, each of whom explained that their individual decisions to buy the upgraded service had not been precipitated by any printed advertising or other promotional materials disseminated by DIRECTV.

California's Code of Civil Procedure section 382 authorizes a representative plaintiff to pursue a class action “when the question [in the action] is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .” A plaintiff moving for class certification must establish the existence of (1) an “ascertainable” class and (2) a “commonality” of interests among the members of the class. E.g., Lockheed Martin Corp. v. Superior Court, 29 Cal.4th 1096, 1103-1104 (2003).

The appeals court, first, disagreed with trial court which had found the proffered defined class not ascertainable. The defined class of all HD Package subscribers was sufficiently precise, with objective characteristics and transactional parameters which could be determined by DIRECTV's own account records.

However, the class did fail on the issues surrounding commonality.  In this proposed national class, subscribers' legal rights would vary from one state to another state, and subscribers outside of California may well not be protected by the CLRA and UCL.

Beyond legal issues, the record supported the trial court's finding that common issues of fact do not predominate in the proposed class because the class would clearly include subscribers who never saw DIRECTV advertisements or representations of any kind before deciding to purchase the company's HD services.  The proposed class would include subscribers who only saw and/or relied upon advertisements that contained no mention of technical terms regarding bandwidth or pixels, and also subscribers who purchased DIRECTV HD primarily based on word of mouth or because they saw DIRECTV's HD in a store or at a friend's or family member's home.

Interestingly, the court of appeals distinguished the state's supreme court's recent decision in In re Tobacco II Cases,  46 Cal.4th 298 (2009).  The opinion suggests that Tobacco II held that, for purposes of standing in context of the class certification issue in a “false advertising” case involving the UCL, the absent class members need not be assessed for the element of reliance. Or, in other words, class certification may not automatically be defeated on the ground of lack of standing upon a showing that class members did not all rely on common false advertising. The court of appeals found that Tobacco II essentially ruled that, for purposes of standing, as long as a named plaintiff is able to establish that he or she relied on a defendant's false advertising, a absent class members may also be deemed to have standing, regardless of whether any of those class members have in any way relied upon the defendant's allegedly improper conduct.

MassTortDefense readers will likely find that notion ridiculous, particularly when the courts typically do not enforce the ostensible requirement that named plaintiffs should be typical and adequate class representatives.  In the contextual setting presented by the present case, however, Tobacco II was seen to be irrelevant because the issue of “standing” simply is not the same thing as the issue of “commonality.” Standing, generally speaking, is a matter addressed to the trial court's jurisdiction because a plaintiff who lacks standing cannot state a valid cause of action. Commonality, on the other hand, in the context of the class certification issue, is a matter addressed to the practicalities and utilities of litigating a class action in the trial court. The court saw nothing in the language in Tobacco II which suggests that the state supreme court intended California trial courts to dispatch with an examination of commonality when addressing a motion for class certification.

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In the Chinese Drywall  MDL, certain plaintiffs recently moved for leave to amend their Class Action Complaint to expand the class definition as to defendant Taishan Gypsum, from a Virginia state-wide class to a national class of all persons allegedly impacted by defective drywall made by that defendant. Plaintiffs assert that there will be no undue delay nor prejudice to defendants from the change; the amendment does not alter the proposed sub-classes as to other defendants who are the builders and installation contractors who allegedly installed the product. The amendment would also include new assertion of a violation of the consumer fraud acts of the various states. In re: Chinese-Manufactured Drywall Products Liability Litigation, No. 09-md-02047 (E.D. La.).

An Omnibus [Proposed] Class Action Complaint is to be filed in the MDL on or before December 9, 2009 by the plaintiffs against another defendant, Knauf Plasterboard (Tianjin) Co., Ltd (“KPT”) and other defendants who were involved in the manufacture, sale, importation, brokerage, distribution, construction and installation of homes containing KPT drywall, and any others who were involved in the stream of commerce for the KPT drywall. In order to assist in the consolidation and efficient handling of claims by affected homeowners, defendant KPT has apparently agreed to accept service of process for homeowner plaintiffs who are to be named in an Omnibus Amended Complaint, and waive its right to demand service of process through the Hague Convention. (We have posted about the issues related to suits against foreign defendants before.) However, to be eligible for inclusion in this Omnibus [Proposed] Class Action Complaint and the service waiver, homeowners must provide, by no later than December 2, 2009, sufficient indicia that the homes in question contain KPT drywall (e.g., photographs, samples, visual inspections or reports identifying KPT markings on drywall in the home), and must also submit by December 14, 2009, a fully completed and executed Plaintiff Profile Form, in accordance with PTO #11. The complaint will not be amended to include additional named plaintiffs after it is filed, the court has indicated.

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The Supreme Court heard oral argument earlier this week in Shady Grove Orthopedic Assocs. v. Allstate Ins. Co. (No. 08-1008), a case which considers whether a state law (here, New York's) prohibiting class actions for certain statutory damages claims can preclude class certification in a federal court diversity action. (The Second Circuit's decision is at 549 F.3d 137 (2d Cir. 2008).)

The case takes your humble blogger back to Civil Procedure class in law school and Prof. Steve Burbank who was, and is, a leading authority on the Rules Enabling Act, because the case potentially implicates the Act's command that the Federal Rules of Civil Procedure "shall not abridge, enlarge or modify any substantive right."  28 U.S.C. 2072(b). But for readers of MassTortDefense, the import is the ability of state legislatures to restrict the availability of class actions in federal court.

Plaintiff brought a case pursuant to a New York insurance law that provides for interest penalties on claims that are paid late. However, New York Civil Practice Law and Rules §901(b), prohibits plaintiffs from recovering state statutory penalties in class actions unless class proceedings are authorized in the statute (which they were not). The District Court found Section 901(b) applied, which meant the case could not proceed as a class action in federal court.

Civil procedure mavens will note that the case depends in part on whether the state law at issue is substantive or procedural. Plaintiff, Shady Grove, argued that the law is procedural and thus cannot displace the federal rules; class action Rule 23 would trump any contrary procedural state statute or rule. Shady Grove argued that Section 901(b) does not create a substantive right not to face a class action, but rather provides a mere procedural entitlement not to be subject to a class action seeking certain forms of relief in the New York state courts. Justice Ginsburg, at oral argument, however, wondered why the ban was not akin to a restriction on remedies, such as a ceiling on the amount of damages that could be recovered under  state law (and was thus substantive).

Allstate took the view that the statute is substantive, that while Rule 23 sets forth the criteria governing class action certification in federal court, it does not address the initial question of whether a claim is eligible for class certification. Applying Rule 23 would overrule substantive policy decisions that certain claims are categorically ineligible for class certification, and that would venture beyond the bounds of the Rules Enabling Act. Their defense brief included a list of various federal and state laws that represent substantive policy choices curbing class action remedies or ruling out class action claims in specific contexts. At argument, Shady Grove conceded that at least some of them would be invalid under plaintiff's theory.

Allstate also raised the specter of forum shopping: plaintiffs would be drawn to federal court, thwarting a state's efforts to limit liability for those claims. The Second Circuit agreed that the New York law barred the plaintiff from bringing its claim against Allstate as a class action under Federal Rule of Civil Procedure 23.  And at oral argument, Allstate asserted that New York State made the substantive policy decision that class actions seeking monetary penalties for misconduct defined by this state law would unduly magnify those penalties, and thus barred lawsuits combining such claims, forcing plaintiffs to sue for them one at a time. Justice Sotomayer seemed skeptical, wondering if under Allstate's theory, states could pass a law stating that no cause of action under state law can be brought as a class action, ever.

The Partnership for New York City Inc. joined with the U.S. Chamber of Commerce and some other  groups to support Allstate, while Public Justice, a Washington-based liberal pro-plaintiff interest law firm, filed an amicus brief in support of Shady Grove. The plaintiff amicus argued that the controlling doctrine is not Erie, but the decision in Hanna v. Plumer, which, they argued, requires that a valid federal procedural rule must be applied by a federal court in a case involving citizens of different states regardless of contrary state law.

For readers of MassTortDefense, who recognize the overwhelming trend in federal courts not to certify personal injury product liability class actions, there is the countervailing concern that states could choose to expand the availability of class actions, and whether the Supreme Court might adopt an approach that would later force federal courts to certify actions that would seem uncertifiable under Rule 23. And much of the questioning by the Court related to one "slippery slope" or another.

One final thought: given the Court’s recent emphasis on federalism and state’s rights (underlying, in part, recent questionable preemption decisions), a respect for state legislative prerogatives could favor Allstate here.  Indeed, at oral argument Allstate counsel argued that if a state has created a legal claim, it is only appropriate that it be allowed to define its terms and limits. And Justice Ginsburg remarked that this Court has been sensitive to state limitations.

 

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Part two of our update on recent climate change litigation.  In our last post, we discussed the well reasoned decision in Native Village of Kivalina v. ExxonMobil Corp., 2009 WL 3326113 (N.D.Cal. 9/30/09).  We contrasted it with the somewhat startling (2-judge) Second Circuit panel decision in Connecticut v. American Electric Power Co., allowing a group of states and land trusts to proceed with a so-called global warming tort suit.

In another noteworthy recent case, the Fifth Circuit recently held that a group of property owners in Mississippi can proceed with global warming-related claims. See Comer v. Murphy Oil Co., 2009 WL 3321493 (5th Cir. 10/16/09).  A proposed class of thousands of property owners alleged that damage to their Mississippi coastal properties from Hurricane Katrina would not have been as serious had not defendants' climate change conduct intensified the storm. Along with the Second Circuit decision, this opinion represents a clear and dangerous trend within the court of appeals to usurp Congress, warp the traditional nuisance doctrine, and plunge the federal courts into what are essentially political questions.

In Comer, the district court correctly held that tort suits against electric power companies and other alleged large greenhouse gas emitters should not proceed in federal court because climate change, and tort claims based on alleged climate change, is fraught with national political and policy considerations.  The Fifth Circuit reversed, asserting that until Congress, the executive branch, or a federal agency acts more directly on global warming, Mississippi common law tort rules questions posed by the case are justiciable because there is no commitment of those issues exclusively to the political branches of the federal government.  Thus, plaintiffs had demonstrated standing for public and private nuisance, trespass, and negligence claims; the claims were justiciable and did not present a political question. 

The Fifth Circuit in some ways went  further than the Second Circuit, ruling in essence that climate change-related claims are not limited to injunctions being brought by governmental entities or even quasi-public groups like nonprofit land trusts. The Fifth Circuit ruled that private property owners under Mississippi law also may have standing to bring climate change-related nuisance and trespass claims for both property and punitive damages. That holding may propel additional climate change litigation -- if the ruling stands following likely rehearing motions.

The causation allegation here was arguably even more attenuated than the long, convoluted causation chain in other global warming cases; plaintiffs asserted that defendants' greenhouse gases didn't cause but contributed to global warming, which made the waters in the Gulf of Mexico warmer, which didn't create but then made Hurricane Katrina more intense, which then caused their alleged property damage to be worse.  That stands as perhaps the most attenuated, least supportable, causal link in tort history -- the absence of proximate cause as a matter of law.  The concurrence noted this issue, and would have affirmed a dismissal on this basis.  With class certification, expert discovery, Daubert, and summary judgment hurdles to be crossed, it is clear that this causation issue will not soon disappear.

Ironically, the rash of global warming opinions in cases that had been argued long ago may reflect a recognition of the new administration and a changing emissions policy... in turn, reflecting the political nature of the issues. All readers ought to have profound reservations about the notion, inherent in all private climate change litigation, that the tort system is capable of adjudicating rights and responsibilities on the subject of global warming.

The decisions potentially present business interests with difficult choices: proposed regulations from the administration may be onerous and not grounded in good science; but absent federal action, defendants may risk public nuisance liability in the courts on issues that juries cannot begin to handle well.  

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The Judicial Panel on Multidistrict Litigation has decided to consolidate multiple federal cases arising from the Zicam product line.  IN RE: ZICAM COLD REMEDY MARKETING AND SALES PRACTICES LITIGATION, MDL No. 2096.  Plaintiffs moved, pursuant to 28 U.S.C. § 1407, for coordinated or consolidated pretrial proceedings of multiple proposed class actions.  By the time the Panel issued its Order, there were 40 related actions pending in 26 federal districts.

Many of the pending cases were consumer fraud class actions against Matrixx Initiatives, Inc., and its subsidiaries Zicam, LLC, and Zicam Swab, LLC.  Plaintiffs opposed centralization of any actions alleging personal injury claims. But the Panel found that both kinds of actions involved sufficient common questions of fact, and that centralization of the actions under Section 1407 would serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation. The actions share factual questions regarding, inter alia, the marketing and sale of three Zicam nasal cold remedy products, and alleged injuries sustained by the use and/or purchase of those products, particularly whether the products cause anosmia (the loss of sense of smell). Centralization under Section 1407, the court found, would eliminate duplicative discovery, prevent inconsistent pretrial rulings (particularly with respect to class certification), and conserve the resources of the parties, their counsel and the judiciary.

The Panel declined to separate purported consumer class actions from other actions alleging personal injury. Centralization of all actions in this docket would, said the court, allow a single judge to structure pretrial proceedings to accommodate all parties’ discovery needs while ensuring that the common parties and witnesses are not subjected to discovery demands that duplicate activity that will or has occurred in other actions.

The court chose the District of Arizona as the appropriate transferee forum. The defendants are based within the District of Arizona, and relevant documents and witnesses are likely found there, observed the Panel. In addition, centralization in the District of Arizona will allow for coordination of the federal actions with related litigation pending in Arizona state court.

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A federal court has dismissed a putative class action alleging that Sears Roebuck & Co. and Whirlpool Corp. engaged in unfair business practices and misleadingly marketed thousands of supposedly defective washing machines. Tietsworth et al. v. Sears, Roebuck & Co. et al., No. 09-cv-288 (N.D. Calif.)(dismissal without prejudice).

Plaintiffs alleged that  Whirlpool manufactured top-loading Kenmore Elite Oasis automatic washing machines, and Sears marketed, advertised, distributed, warranted, and offered repair services for the machines. Plaintiffs alleged that thousands of the machines contained a defect that causes them to stop in mid-cycle and display a variety of error codes.  Plaintiffs claimed that these electrical control system problems began within the first year after they purchased their washers. Plaintiffs alleged that virtually everything the defendants said about the machines in marketing was false because all such statements related directly to the functioning and performance of the Machine’s Electronic Control Board and, in turn, the Electronic Control Board controls the laundry cycles, the water levels and spin speed.

Defendants moved to dismiss. A complaint may be dismissed for failure to state a claim upon which relief may be granted if a plaintiff fails to proffer enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Allegations of material fact must be taken as true and construed in the light most favorable to the non-moving party, but the court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences. Here, although their claims arose under state law, plaintiffs' allegations were subject to the pleading requirements of the Federal Rules. Accordingly, the claims alleging fraud were subject to the heightened pleading requirements of Fed. R. Civ. P. 9(b). See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-04 (9th Cir. 2003) (if “the claim is said to be “grounded in fraud” or to “sound in fraud,” [then] the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b).”)

The principal element of fraudulent concealment at issue here was whether plaintiffs pled with sufficient particularity that defendants had a duty of disclosure with respect to the allegedly defective Electronic Control Boards. Plaintiffs argue that defendants had such a duty because they allegedly made "partial disclosures" about the Machines,and  were in a “superior
position" to know the truth.  These arguments were not persuasive to the court. There was no allegation at all, let alone an allegation with Rule 9 specificity, that defendants made any representations directly about the allegedly defective Electronic Control Boards. Nor could plaintiffs establish a duty by pleading, in purely conclusory fashion, that defendants were in a “superior position to know the truth;"  plaintiffs’ general allegations of “exclusive knowledge as the
manufacturer” and active concealment of a defect, if accepted, would mean that any unsatisfied customer could make a similar claim every time any product malfunctioned.

The district court then confirmed that Rule 9(b)’s heightened pleading standards apply to claims for violations of this state consumer act (CLRA ) and unfair competition act (UCL),  where such claims are based on a fraudulent course of conduct.  It was clear that the claims were entirely dependent upon allegations that defendants made misrepresentations, failed to disclose material facts, and concealed known information regarding the allegedly defective Electronic Control Boards.  So such claims failed for the same reasons.

Next, plaintiffs claimed that defendants  violated California’s Business and Professions Code by making misleading representations in informational placards on the floor models of the machines and in owners’ manuals. However, the court held that statements that the machines are “designed and manufactured for years of dependable operation” and that the machines “save you time by allowing you to do fewer, larger loads” are not statements about specific or absolute characteristics of a product, and properly are considered non-actionable puffery. See Anunziato v. eMachines Inc., 402 F. Supp. 2d 1133, 1139 (C.D. Cal. 2005) (holding that the representations concerning the “outstanding quality, reliability, and performance” of a product were non-actionable puffery”).

Regarding the unfair business act claim, an act or practice is unfair if the consumer injury is substantial, is not outweighed by any countervailing benefit to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided. Plaintiffs failed to plead adequately the second and third elements of their claim.  Plaintiffs failed to allege that they could not reasonably have avoided their claimed injuries, for example by purchasing an extended warranty. To the extent that plaintiffs based their claim on defendants’ alleged failure to disclose a
known defect in the machines, a mere failure to disclose a latent defect does not constitute a
fraudulent business practice.

One other highlight.  Plaintiffs contended that defendants’ warranties were procedurally and substantively unconscionable because defendants limited the warranties and allegedly actively concealed a known defect. However, any such claim of oppression may be defeated if the
complaining party had reasonably available alternative sources of supply from which to obtain
the desired goods or services free of the terms claimed to be unconscionable.  Here, plaintiffs failed to allege facts demonstrating that there were no alternative manufacturers of washers, and thus failed to allege the absence of an “available alternative source of supply from which to obtain the desired goods or services free of the terms claimed to be unconscionable.”  Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App.3d 758, 768 (1989). Plaintiffs' emphasis that  any material alternative product or choice was curtailed or eliminated by the suggestions of Sears’ sales representatives that defendants’ machines were “the best” and superior to other washers, far from showing the absence of alternatives, merely highlighted the fact that alternatives apparently existed. 

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The federal court has dismissed a putative class action brought by a group of municipal benefit funds over a pharmaceutical company's alleged efforts to market drugs for uses that did not have regulatory approval. Central Regional Employees Benefit Fund, et al. v. Cephalon Inc., No. 09-cv-03418 (D.N.J. Oct. 15, 2009).

Plaintiffs commenced this putative class action against defendants alleging violations of the New Jersey Consumer Fraud Act (“NJCFA”), and for fraudulent concealment, and “illegal fraud.”  The plaintiffs defined their putative class as including “all governmental entities in the United States of
America who have been caused to expend monies" for certain drugs as a "result of the off label promotion by the defendants.”  They alleged that defendant Cephalon promoted drugs for uses other than those approved by the FDA, and that as part of its “off label” marketing efforts, Cephalon allegedly made false representations regarding the use and application of several in particular, Provigil, Gabitril, Actiq and Fentora.

The case, thus, falls in the growing body of cases by governmental third-party payors searching for a windfall in revenue by challenging the marketing practices of pharmaceutical companies over drugs that are effective, are safe, are prescribed by physicians, and are often affirmatively recommended by other branches of the entity bringing suit.  As many courts have held, off-label use is an accepted and necessary corollary of the FDA’s mission to regulate in this area without directly interfering with the practice of medicine. E.g., Southard v. Temple University Hospital, 566 Pa. 335, 340 781 A.2d 101, 104 (2001) (quoting Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341, 350 (2001)). Such use, necessary because medical practice inevitably runs ahead of the slower pace of governmental regulation, is generally accepted, widespread in the medical community, and often is essential to giving patients optimal medical care. Buckman, 531 U.S. at 351 & n.5 (citation omitted).  Thus, a physician, using his or her best medical judgment for the benefit of his patient, generally is free to use an approved product in a manner different from that for which the FDA has approved. Cabiroy v. Scipione, 767 A.2d 1078, 1082 (Pa. Super. 2001).

The FDA has accepted off-label use for decades:

• Accepted medical practice often includes drug use that is not reflected in approved drug labeling. . . . a physician may prescribe a drug for. . .patient populations that are not included in approved labeling. Such. . .‘unlabeled’ uses may be appropriate and rational in certain circumstances, and may, in fact, reflect approaches to drug therapy that have been extensively reported in medical literature. . . . Valid new uses for drugs already on the market are often first discovered through serendipitous observations and therapeutic innovations.

FDA, “Use of Approved Drugs for Unlabeled Indications,” 12 FDA Drug Bulletin 4, 5 (1982). 

It is clear that physicians may prescribe a drug off-label for an unapproved population without FDA knowledge or approval.  Blain v. Smithkline Beecham Corp., 240 F.R.D. 179, 182 (E.D. Pa. 2007). And courts are “not willing to accept that a plaintiff could somehow be injured by purchasing a drug that is as effective, or more effective, than alternative treatments simply because the drug is marketed off-label.”  In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, 2009 WL 2043604, at *10 (D.N.J. July 10, 2009). Absent some “adverse effects,” a “theory under which [plaintiffs] would be entitled to reimbursement for some or all of the purchase price of [a drug] whose benefits they clearly enjoyed. . . is patently absurd.”  Heindel v. Pfizer, Inc., 381 F. Supp.2d 364, 380 (D.N.J. 2004).  

Cephalon moved to dismiss the NJCFA and common law fraud claims, contending that the plaintiffs failed to plead specific acts of fraud to support the legal conclusions contained in the Complaint. The plaintiff’s factual allegations must be enough to raise a right to relief above the speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Also, the plaintiffs’ common law fraud claims were subject to the heightened pleading standards of Rule 9(b), which requires that in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Fed.R.Civ.P. 9(b).

Cephalon argued that the plaintiffs, as third-party payors of prescription medication benefits, are not “consumers” under the NJCFA. The court said that the nature of the transaction, not the identity of the purchaser, determines whether the NJCFA is applicable. J & R Ice Cream Corp. v. Cal. Smoothie Lic. Corp., 31 F.3d 1259, 1273 (3d Cir. 1994).  For a NJCFA plaintiff to be a consumer respecting the transaction in question, the business entity must be one who uses economic goods, and so diminishes or destroys their utilities. However, third-party payors essentially serve as middlemen or insurers, paying all or part of the cost of a beneficiary’s drugs in return for a stream of payments from the beneficiary.  Because third-party payors do not use or consume prescription medications themselves, they are not “consumers” within the meaning of the NJCFA, and that statute was therefore inapplicable to the circumstances alleged in the Complaint.

Next, the court found that the plaintiffs’ common law fraud claims failed to meet the pleading requirements of Twombly, Iqbal, and Rule 9(b). Count II of the Complaint, fraudulent concealment, referred merely to an unspecified “transaction and/or providing of the prescription drugs Provigil,
Gabitril, Actiq and Fentora.” The court was at a loss to discern to what transaction the plaintiffs were
referring, as the Complaint fails to identify or explain the who,what, where, why, and how of any “transaction.”  Mere allegations that Cephalon provided prescription drugs, without saying to whom or under what circumstances, wholly failed to state a claim for fraud. 

The plaintiffs attempted to rely on a reference in the Complaint to a proceeding in the Eastern District of Pennsylvania in 2003, brought pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq., wherein Cephalon was alleged to have engaged in “misbranding” of its products. However, referring to a plea agreement and civil settlement in another action does not satisfy the plaintiffs’ burden; it is well-established that off-label marketing of an approved drug is itself not inherently fraudulent. Merely alleging that Cephalon marketed the drugs at issue for off-label purposes did not state a claim for fraud.

The court thus also dismissed the claims for fraudulent concealment and illegal fraud, but without prejudice.
 

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The Sixth Circuit has approved a class action settlement in an interesting toxic tort case. Moulton v. U.S. Steel Corp., 2009 WL 2997921 (6th Cir., 9/22/09).

This class action was filed in 2004 by neighbors of a steel mill operated by defendant U.S. Steel, and alleged various claims arising from “metal-like dust and flakes” allegedly falling on plaintiffs' property. The district court in Michigan certified the class in 2006, and the parties eventually agreed on a settlement for $4.45 million in 2008.

As is not unheard of, some class members and at least one plaintiffs' lawyer objected to the settlement. They argued that the settlement agreement was not “fair, reasonable, and adequate” under Fed.R.Civ.P. 23(e)(2).  Specifically, they argued (1) that the agreement dis-serves the “public interest” due to the broad scope of the release, (2) that alleged “collusion” between Class Counsel and U.S. Steel tarnished the agreement and (3) that the agreement improperly prioritizes the distribution of the settlement proceeds. The district court rejected all such objections, and the court of appeals reviewed the district court's conclusions for abuse of discretion.

To determine whether a settlement agreement satisfies Rule 23's fairness standard,  courts consider:  (1) the risk of fraud or collusion;  (2) the complexity, expense and likely duration of the litigation;  (3) the amount of discovery engaged in by the parties;  (4) the likelihood of success on the merits;  (5) the opinions of class counsel and class representatives;  (6) the reaction of absent class members; and (7) the public interest. UAW v. Gen. Motors Corp., 497 F.3d 615, 631 (6th Cir.2007). 

On the issue of the scope of the release, the release of the continuing nuisance claims was held not unfair, because, contrary to the objections, it did not go“well beyond the claims plead in the complaint."  Since 2005, every version of the plaintiffs' complaint included a claim for “continuing private nuisance.”  As class members, the objectors are the last individuals in a position to claim lack of notice that this claim was on the table at the settlement talks. And the bar on future continuing nuisance claims applies only to claims arising out of conditions that existed prior to the settlement. It does not preclude future continuing nuisance claims based on emissions from new equipment installed after the date of settlement. Nor does it bar future claims based on old equipment, so long as the continuing nuisance is a “new” one.

Neither did the objectors make the case that the agreement was a product of collusion. See Williams v. Vukovich, 720 F.2d 909, 921 (6th Cir.1983). The duration and complexity of the litigation undermined the objectors' suspicions. The parties litigated for almost four years before reaching a settlement agreement. The court fielded numerous contested pretrial motions. Class Counsel pursued multiple avenues to gather evidence; and the agreement itself was a product of months of supervised negotiations, two facilitated mediations and a settlement conference with the court.

Third, there was the challenge to the $4.45 million settlement, which the agreement distributed as follows: $300 to each covered member of the class, limited to one award per household; $10,000 to the seven class representatives; and $1.335 million in attorney's fees (30%) and $622,279.86 in costs to class counsel. Any residual goes to local public schools. Because class counsel received 4,026 class-member claims, roughly $1.21 million will go to the claimants and roughly $1.28 million will go to the schools. The appeals court noted that the district court should have been more expansive in its explanation of the approval of the award as reasonable.  However, that claimants will in the aggregate receive less than Class Counsel does not automatically invalidate the agreement. That the public schools will receive $1.28 million in unclaimed funds does not reflect on the settlement's fairness.

Finally, a plaintiffs' lawyer purporting to represent multiple class members insisted that the court improperly shut him out of the case. In what the appeals court called a “sideshow” to the main case, the attorney reportedly contacted an unknown number of class members after the class certification advising them to opt out because those who opt out “always get a much higher settlement than … the general population.”  The 6th Circuit found that the district court also did not err by corralling the extent of this counsel's involvement in the case. Rule 23 gives the district court broad discretion in handling class actions, authorizing orders that impose conditions on the representative parties or on intervenors. Fed.R.Civ.P. 23(d)(1)(C).  In view of the questionable communications with litigants, unannounced solicitation of opt outs, and apparent guarantee to individuals who opted out, the district court appropriately exercised its discretion, said the Circuit.

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Two recent consumer fraud class actions offer contrasting lessons.  First, the federal court declined to certify a class of Ford Motor Co. truck owners who alleged the vehicles are prone to a shimmying problem. Lewis v. Ford Motor Co., 2009 WL 2750352 (W.D. Pa. 8/25/09).

According to Plaintiffs, their vehicles were subject to front-end suspension defects which caused severe oscillation under ordinary driving conditions and allegedly created a safety hazard for the drivers of the vehicles as well as other motorists. Pennsylvania residents Timothy Lewis and Timothy Trapuzzano sued Ford on behalf of a statewide class of owners of 2005–2007 model year F-250 and F-350 trucks.  Plaintiffs moved seeking class certification as to Count III of their Complaint, the alleged violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law.  The court noted that the 3rd Circuit has recently re-evaluated the standard of review to be applied by a district court in considering a motion for class certification. First, the district court must consider carefully all relevant evidence and make a definitive determination that the requirements of Rule 23 have been met before certifying a class;  that is, it is no longer sufficient for a party to assure the court that it intends or plans to meet the requirements. Second, the decision to certify a class requires rigorous consideration of all the evidence and argu-ments offered by the parties.  This may require the court to 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.  Finally, weighing conflicting expert testimony at the certification stage is not only permissible; it may be integral to the rigorous analysis Rule 23 demands. In other words, to certify a class the district court must find that the evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 310 (3d Cir.2008.)

Originally, plaintiffs alleged the defendant failed to comply with the terms of a written guarantee or warranty given to the buyer at, prior to or after a contract for the purchase of goods or services.  But at the motion stage, instead, plaintiffs relied on the so-called “catch-all” provision, which broadl includes “unfair methods of competition” or “unfair or deceptive acts or practices” to include “engaging in any other fraudulent or deceptive conduct."   This switch may have been done to avoid the argument that plaintiffs need to prove relaince -- an indivdualized inquiry that can impede certification.  The court consluded, based on the almost universal agreement of the district courts of the 3rd Circuit, that a plaintiff must allege and show justifiable reliance even for claims brought under the catch-all provision of the state's Consumer Protection Act.

The reliance element was individual, and interestingly, the court noted that this affected the 23(a) issue of commonality as well as the 23(b) issue of predominance. Next, plaintiffs argued that while there may be some individual differences in the amount of damages, such discrepancies were not sufficient to defeat class certification. However, the court noted, they failed to recognize that the threshold questions do not concern the amount of the individual damages but whether or not the individual injury occurred. Proof of injury or fact of injury (whether or not an injury occurred at all) must be distinguished from calculation of damages (which determines the actual value of the injury. 

If proof of the essential elements of the cause of action requires individual treatment, then class certification is unsuitable. Here, each class member would have to show not only justifiable reliance but also loss as a result of that reliance, aspects subject to individual, rather than common questions of law or fact. This lack of commonality rendered this case unsuitable for class treatment.  And it logically followed that if plaintiffs failed to satisfy the criteria for showing commonality, they cannot satisfy the more strenuous demands of the predominance analysis.

Shortly thereafter, the 9th Circuit handed down a decision announcing a standard of review for legal issues related to certification orders, and overruled a district court's denial of class certification in a consumer fraud class action.  Yokoyama v. Midland Nat'l Life Ins. Co., 2009 WL 2634770
(9th Cir.  8/28/09).

Three consumer senior citizens, all residents of Hawaii, alleged that they had purchased Midland's annuities from an independent broker. Plaintiffs alleged that the the annuities were marketed through deceptive practices, in violation of Hawaii's Deceptive Practices Act. The district court held that the plaintiffs could not satisfy Federal Rule of Civil Procedure 23's requirements that common issues predominate over individual issues and that a class action is a superior method of adjudication.

The dispositive issue on appeal was whether the Hawaii Act requires a showing of individualized reliance.  But there was a debate over the standard of review.  WHile certification decisions generally were reviewed under an abuse of discretion standard, the 9th Circuit panel agreed with the Seventh Circuit's explanation of the appropriate standard of review. Andrews v. Chevy Chase Bank, 545 F.3d 570, 573 (7th Cir.2008).  That is, the underlying rulings on issues of law must be reviewed de novo even when they are made in the course of determining whether or not to certify a class. We generally review a grant of class certification for abuse of discretion, but purely legal determinations made in support of that decision are reviewed de novo. (Note that Judge Smith argued in his concurrence that Ninth Circuit precedent cannot be overturned by two judges, only en banc).

Hawaii courts have interpreted the word “deceptive” to include those acts that mislead consumers acting reasonably under the circumstances, observed the panel.   And a deceptive act or practice is  a representation, omission, or practice that is likely to mislead consumers acting reasonably under the circumstances.  The representation, omission, or practice is material if it is likely to affect a consumer's choice. Whether information is likely to affect a consumer's choice is an objective inquiry, turning on whether the act or omission is likely to mislead consumers as to information important to consumers in making a decision regarding the product or service.  Therefore, said the court, since Hawaii's consumer protection laws look to a reasonable consumer, not the particular consumer, inidivudal relaince is not an element. The fact-finder will focus on the standardized written materials given to all plaintiffs and determine whether those materials are likely to mislead consumers acting reasonably under the circumstances.

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A California appellate court last week affirmed a trial court ruling denying class certification to a group of Boeing employees suing over alleged exposure to harmful levels of beryllium. Marin v. Brush Wellman Inc.,  No. B208202 (Calif. Ct. App., 2nd Dist. Aug. 24, 2009).

The plaintiffs alleged that Brush Wellman, a contractor of their employer, misrepresented the permissible limit for beryllium exposure. Beryllium is a potentially toxic metal that is used in aircraft construction and other industrial applications because of its light weight and great strength. However, some exposed persons are beryllium sensitization, which can be a precursor to chronic beryllium disease, which is a serious illness. 

The court of appeals agreed with the trial court that common issues did not predominate. In a toxic tort case, the plaintiff must first establish some threshold exposure to the defendant's defective, toxic products, and must also establish to a reasonable medical probability that a particular exposure or series of exposures was a legal cause of his injury, i.e., a substantial factor in bringing about the injury. This typically requires expert testimony about the level of exposure that is unsafe, and expert testimony that exposure above a certain level will cause injury or disease. The significance of this is  that when individual claimants differ both in their makeup and in the amount of their exposure to the substance, the evidence of their injuries will differ from individual to individual.

Here, each of the class members would have to show where he worked, when he worked within each location or facility, what the beryllium levels were at these locations, and how much of the beryllium was Wellman's.  It is patent that each such package of facts will be largely unique to each claimant.  The six named plaintiffs worked at six different facilities, some of which had multiple buildings, over differing periods covering up to 40 years. Boeing's air monitoring and industrial hygiene records showed non-uniform results. In other words, the levels of exposure varied widely among the facilities over time, and even within a single facility. The sales and use evidence that could be used to trace the beryllium to Wellman implicated a necessarily individualized inquiry, not a common one.

In an effort to salvage a class, plaintiffs' counsel explained at oral argument that the proposed class was only for those who required medical monitoring. Those persons who actually contracted illness would be excluded from the class as their claims would be necessarily unique and individualized.  Even assuming this issue was properly presented to the trial court, the plan to certify a class of persons requiring medical monitoring and, in addition to such a class, allowing the more serious cases to proceed individually and separately, was to the court "an invitation to a litigation disaster."   Recourse to such a class would do nothing to streamline this litigation but would most probably convert it into a nightmare.

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A putative class action of purchasers of the asserted mood enhancer and belly fat reducer Relacore was recently rejected by a New Jersey appeals court.  Lee v. Carter-Reed Co., 2009 WL 2475314 (N.J. Super. Ct. App. Div. 8/14/09).  The court affirmed a lower court's decision not to certify the class action, in which plaintiffs had alleged that the defendant falsely advertised the benefits of the product.

Plaintiff Melissa Lee alleged she purchased Relacore, manufactured and distributed by Carter-Reed Co., and asserted that she purchased the product based on the promise that it would reduce belly fat. But, she averred, she actually gained belly weight during the time she took the product.  She claims that defendant's advertising campaigns touted that Relacore helps reduce stress-induced belly fat. Lee claimed that the defendant devised and utilized a fraudulent, deceptive advertising campaign for Relacore. She sought relief under the New Jersey Consumer Fraud Act, and related common law fraud theories.

Following discovery limited to class suitability, plaintiff moved for class certification. Defendants opposed the motion. Following oral argument, the trial court denied the application for class certification, citing absence of superiority,  manageability, and predominance. In an unpublished per curiam opinion, the Superior Court affirmed and held that individual issues predominated over issues allegedly common to the class.

The court noted first that the superiority requirement requires an analysis that includes: (1) an informed consideration of alternative available methods of adjudication of each issue, (2) a comparison of the fairness to all whose interests may be involved between such alternative methods and a class action, and (3) a comparison of the efficiency of adjudication of each method. Manageability of the class is a consideration, as well, but it is “disfavored” in NJ to deny class certification on this basis alone. In order to justify denial of class certification on this basis, the management issues must be of great magnitude. 

Here, the issues of superioirty and of manageability were subordinate to the issue of predominance.  A party asserting a CFA claim in New Jersey must establish wrongful conduct, an ascertainable loss, and a causal relationship or nexus between the wrongful conduct and the loss. A common law fraud claim requires proof of  a material representation of a presently existing or past fact, made with knowledge of its falsity and with the intention that the other party rely thereon, resulting in reliance by that party to his detriment. 

In this case, the central issue for the consumer fraud claim was the existence of a causal nexus between the wrongful conduct and any loss.  Plaintiff asserts that she relied on a false marketing campaign and she was induced by the false representations to purchase and use the product. Neither plaintiff nor the court knew, however, what caused others to purchase and use the product. Neither plaintiff nor the court knew whether putative class members even saw the alleged print or Internet advertisements or whether they purchased the product due to a recommendation from a friend or family member or for some other reasons.

Moreover, the Relacore market campaign was multi-faceted. In some ads, it was touted as a belly fat retardant; in others, a mood elevator; in others, a stress reducer.  There was no way to know on a common basis the reason any putative class members purchased the product, even assuming they heard or saw any advertising. This distinguished the case from Varacallo v. Massachusetts Mutual Life Insurance Co., 332 N.J. Super. 31 (N.J. Super. Ct. App. Div. 2000), in which the court certified a class of those who purchased “vanishing premium” life insurance, and in which the advertising approach was uniform and common to all class members.

The lack of predominance was even more obvious in the context of plaintiff's common law fraud claim. For this claim, the putative class must prove reliance -- which they could not on a common basis.

The case is useful as it analyzes establishing a causal nexus between the challenged conduct and an ascertainable loss.  Properly viewed, that causal link ought to be a major impediment to class certification because it requires individualized factual determinations for absent class members. Plaintiff's argument to extend Varacallo to false advertising product cases brought forth numerous opposing amici, including PLAC.

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We have posted before about just how difficult Canada is becoming as a jurisdiction for class actions defendants, particularly companies in the pharmaceutical industry. Frequently, identical consumer products, drugs, and medical devices are marketed in Canada as well as the U.S.  When a product is recalled, or new science suggests risks in a product leading to American product liability and mass tort litigation, Canadian plaintiff attorneys have not been bashful about bringing copycat litigation, borrowing from U.S.-conducted theories and discovery.

A ray of hope to the north?  The Quebec Superior Court last week declined to certify (authorize is the term they use) a class action for Canadians claiming to have experienced side effects from the use of GlaxoSmithKline Inc.’s antidepressant Paxil.  This is the first time a Quebec court has rejected a class action involving a prescription pharmaceutical product -- ever as far as we can tell. See Goyette v. GlaxoSmithKline Inc., Quebec Superior Court, No. 500-06-000157-020 (8/17/09).

Plaintiff sought to represent a national class of Paxil users. Three issues were prominent: Did the claims of the class members raise identical, similar or related questions of law or fact?  Did the facts alleged seem to justify the relief sought? And was the plaintiff an adequate class representative?  Importantly, at the time of the complaint, the class rules required plaintiff to submit a supporting affidavit (on which she was cross-examined).  Since that time, Quebec has sought to minimize the amount of factual material presented to the court in support of class certification (making opposition a bit more difficult).

The first issues sounds like the commonality aspect of U.S. class procedure. GSK argued that the highly subjective nature of the alleged symptoms in the present case, such as headaches, nausea, vertigo, the infinite variations on the symptoms, and the intensity and duration are so subjective that they cannot be decided collectively and so cannot satisfy the common question element.  Nevertheless, the court found that while the claim for exemplary damages was not common, there were common questions concerning the warnings GSK had given.

However, even in the absence of a true predominance requirement, some Canadian courts will look at whether and what issues will require individual determination. Here, the court agreed that the underlying question is whether allowing the suit to proceed as a representative one will avoid duplication of fact-finding or legal analysis. Thus an issue will be “common” only where its resolution is necessary to the resolution of each class member’s claim. The court found that if  "a class action were permitted here, there would be no saving in judicial time since there is no real common question and each case must be litigated on its on merits."  The court noted that each year there was a different set of information in the CPS (Canadian PDR), and accordingly, there would be different sub-classes depending on changes in the relevant wording in each of the years.

Similarly, in this case, civil liability must be determined by assessing the specific risks disclosed for each individual patient which risks vary depending on multiple factors:

 a) whether the adverse effects occur during the use of the product and lead to discontinuation;

 b) whether adverse effects follow discontinuation;

c) whether the user was advised prior to use, by either their physician or pharmacist, of whether they may experience dependency or withdrawal symptoms;

d) whether the symptoms suffered were described in the C.P.S. (PDR);

e) whether the symptoms were not described in the C.P.S. but are proved to be directly related to the use of Paxil; or

f) to the extent that the symptoms arose following discontinuation, whether such symptoms were "mild and transient" and were described in the C.P.S.

Next, the court determined that the facts alleged do not support the relief requested. All of the symptoms that Ms. Goyette alleges to have experienced were mentioned by GSK in the C.P.S. and that any fault must have been through the misreading of the C.P.S. by Ms. Goyette's prescribing physician.  And she made no specific allegations about the injuries of the absent class members.  Accepting as true the well-pleaded allegations, in essence, the facts that are taken as proven do not include impressions, opinion, legal argument, inferences or hypotheses that are not verified.

Finally, adequacy of representation is evaluated on three criteria:

 1- an interest in undertaking the legal proceedings;

 2- an ability to instruct counsel; and

 3- absence of a conflict with the other group members.
 

Based on the previous analysis, the court found that Ms. Goyette could not represent a class since she herself does not have a valid cause of action.  Moreover, plaintiff had shown a singular lack of interest in that she never sought to speak with any of the other members of the proposed class, none of whom she knows; she has never sought to communicate with any of the individuals alleged to have signed up at her attorneys' website; and she could provide no explanation as to why these legal proceedings which started on May 2, 2002 remained dormant for several years.

An analysis with a little bit of teeth.
 

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MassTortDefense has posted about the dangers lurking in consumer fraud class actions before. About a year ago, we posted on a disturbing decision in Nafar v. Hollywood Tanning Systems, Inc., 2008 WL 3821776 (D.N.J., August 11, 2008), where the district court certified a nationwide class of tanning customers.  We concluded our post, by noting "Clearly, this certification decision ought to be reviewed by the Third Circuit."  Fortunately, that has happened. The Third Circuit granted Hollywood Tans’ petition for interlocutory review under Fed. R. Civ. P. 23(f), and has vacated the class certification decision. Nafar v. Hollywood Tanning Systems, Inc., No. 08-3994 (3d Cir. Aug. 5, 2009).

Plaintiff had alleged she purchased monthly tanning memberships from defendant Hollywood Tanning Systems, in New Jersey. Plaintiff alleged that defendant fraudulently failed to disclose the fact that any exposure to ultraviolet rays (UV rays) increases the risk of cancer and allegedly deceptively failed to warn consumers about the dangers of indoor tanning. While plaintiff acknowledged that defendant's machines may block out most UVB rays, she contended that defendant failed to inform consumers that UVA rays, also emitted by its machines, are allegedly linked to skin cancer. Plaintiff instituted suit alleging: (1) violation of the New Jersey Consumer Fraud Act (“NJCFA”), (2) fraud, (3) unjust enrichment, and (4) breach of warranty.

Plaintiff sought a nationwide class of consumers who had purchased tanning memberships. The district court’s analysis of the Rule 23(b) requirements for class certification was, unfortunately, devoid of substance. The 3d Circuit determined that the district court erred by not defining either the class or the class claims, as required by Rule 23(c);  erred by failing to conduct an adequate choice-of-law analysis when the potential class members for this consumer fraud action hail from numerous states; erred by failing to consider evidence suggesting that individual issues of fact and law regarding causation predominate over common issues, and finally, erred in failing to consider whether res judicata would apply to potential personal injury claims, and therefore whether Nafar was an “adequate representative” of the class.

In the context of class action certification, the Supreme Court has stated that a district court “may not take a transaction with little or no relationship to the forum and apply the law of the forum in order to satisfy the procedural requirement that there be a ‘common question of law.’" Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 821 (1985). A court must apply an individualized choice of law analysis to each plaintiff’s claims. Here, the district court had stated that common issues of law predominated: “Common questions of law predominate because New Jersey law is central to this litigation. The NJCFA [consumer fraud act] will apply to all class members because this particular law governs Defendant's behavior and uniform policies. New Jersey has a strong interest in this litigation because the case's outcome will likely affect Defendant's nationwide behavior…. Indeed, the NJCFA is one of this nation's strongest consumer protection laws and its application will not frustrate other states' consumer protection laws. ” That conclusion was not based on an analysis of the choice of law rules of the forum state; cited no state court cases suggesting that NJ law should apply to the claims of consumer from other states; failed to analyze the differences among the consumer protection laws of the various states; and failed to analyze the interests other states may have in applying their laws by simply assuming every state would rather apply NJ’s law.

The 3d Circuit noted that New Jersey now applies the Second Restatement’s “most significant relationship” test. On remand, the District Court was ordered to conduct a choice of law analysis under New Jersey’s most significant relationship test.

The trial court had stated that common fact issues predominated as well because the alleged misrepresentations and omissions concerning the negative consequences related to indoor tanning are alleged to be uniform. However, the court failed to conduct any analysis of the elements of the claims upon which the class was certified, and whether any of the elements might raise individual questions. In addition to the analysis that will be necessitated by a proper choice of law review, the 3d Circuit noted that evidence of plaintiffs’ conduct relevant to the causation issue cannot be ignored without comment in a predominance analysis. This is because the Supreme Court of New Jersey has held that individual issues regarding plaintiff’s behavior may, in certain cases, defeat predominance in a NJCFA class action, despite the alleged uniformity of a defendant’s misrepresentations or omissions.

As we noted last year about the certification decision, the defendant apparently submitted surveys showing that the risks of tanning are common knowledge, and many consumers understood the cancer risks involved. Even if plaintiffs were not required to present any direct proof of individual reliance – which they would be under some state laws – this would not prevent a defendant from presenting direct evidence that an individual plaintiff did not rely on any representations from the company. Defendants have a right to present evidence negating a plaintiff's direct or circumstantial showing of causation and/or reliance. The "predominance" inquiry here thus resembled a mere commonality test. On remand, the 3d Circuit held, the court should consider the evidence presented, resolve any disputes relevant to the predominance issue, and consider all the elements of the underlying claims to determine if individual issues predominate over common issues of fact and law.

Finally, named plaintiff had only economic injuries, but personal injury claims were ostensibly included in the class definition.  This raised the issue of claim splitting and res judicata, and the issue whether the named plaintiff could be an adequate class representative for a class alleging such disparate injuries.  The appeals court found that  the district court failed to consider this very important issue in assessing the adequacy of representation requirement. For that reason the court was told it should consider, on remand, New Jersey’s doctrines regarding preclusion, whether other states’ preclusion doctrines would apply, the specific claims and facts alleged here, and whether any potential future claims by class members with personal injury would be at risk of being barred by res judicata.

We will see what happens on remand, but for now, scary decision vacated.

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A federal court has dismissed the class action claim made against a number of manufacturers and sellers of the “Sleep Number” bed products. Molly Stearns, et al.,  v. Select Comfort Retail Corporation, No. 08-2746 JF, (N.D. Calif. June 5, 2009).

Plaintiff filed a complaint alleging that she had found mold on her Sleep Number® bed purchased in 2000. The complaint alleged various causes of action, including for strict product liability, intentional misrepresentation, negligent misrepresentation, concealment, breach of express warranty, and breach of implied warranty. Stearns also sought to bring a class action on behalf of other  purchasers and users of Sleep Number® beds. An amended complaint added claims for alleged violation of the Magnusson-Moss Warranty Act, the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.; the Racketeering Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962c; the  Consumer Product Safety Act;  in total, plaintiffs presently assert seventeen claims for relief.

Plaintiffs defined the purported class as all original purchasers of a Select Comfort® bed between January 1, 1987 and the present date, whose beds contained mold. At oral argument, and in response to defendants’ valid contention that a nationwide class would be overly ambitious in light of the differences in applicable state laws and the individualized circumstances of each bed purchaser, plaintiffs' counsel represented that they would be willing to limit the class to California residents. This concession, however, would have eliminated several of the putative class representatives. The court found that this alone would require denial of class certification based on the present state of the pleadings.

More importantly, the elements of proof with respect to the property damage alleged in the complaint likely will vary significantly among class members, depending on when the bed was purchased; whether any anti-fungal measures were included in the product; and the
surrounding environmental conditions. The amount of damage incurred also will vary among class members. Some class members might only require a new bed or a refund, while others conceivably might have suffered additional property damage from the spread of mold in their homes. Plaintiffs failed to show how these potentially diverging interests would be addressed in the single broadly defined class.

In addition, the court noted that Article III requires that the representative or named plaintiff must share the same injury or threat of injury.  DuPree v. U.S., 559 F.2d 1151, 1153 (9th Cir. 1977). See also Sosna v. Iowa, 419 U.S. 393, 403 (1975) (“A litigant must be a member of the class which he or she seeks to represent at the time the class action is certified”).  In the instant case, it was not yet clear whether any of the named plaintiffs had or could set forth a cognizable claim under any of their numerous legal theories. The court had done a claim by claim analysis leading to a dismissal with prejudice of several of the claims, including breach of implied warranty of fitness, breach of implied warranty of merchantability, fraud, intentional misrepresentation, racketeering, conspiracy, and violations of the Sherman Act and California's Cartwright Act. 

While the named plaintiffs, all of whom claim their Sleep Number beds are defective products, were given leave to amend their claims for negligence, strict product liability, breach of express warranty, and violations of the Magnusson-Moss Warranty Act, the current complaint failed to state a claim. For example, the generalized allegations of harm were insufficient for the court to know whether tort claims were barred by the economic loss doctrine. Accordingly the motion to strike was granted, without prejudice to plaintiffs filing an amended pleading consistent with the ruling.
 

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A federal court last week rejected an attempt to consolidate a newly filed proposed class action over Lexapro and Celexa with the multidistrict litigation involving the drugs. In Re: Celexa and Lexapro Products Liability Litigation, MDL No. 1736 (E.D. Mo.).

Judge Rodney W. Sippel said in his ruling that plaintiffs had not demonstrated that consolidation would be appropriate. The MDL is currently comprised of 42 cases brought by individual plaintiffs who claim Lexapro or Celexa caused or induced a suicide or suicide attempt. In originally creating this MDL in 2006, the Judicial Panel on Multidistrict Litigation noted that the actions shared allegations relating to the safety of Celexa or Lexapro and the adequacy of Forest's warnings concerning the possible adverse effects of using the drugs, in particular, the potential for each product to induce its users to commit, or attempt to commit, suicide. The JPML recently declined to transfer two personal injury cases to the MDL because they involved injuries other than suicide.

The new suit, Universal Care, Inc., et al. v. Forest Laboratories, Inc., et al., on the other hand, involves allegations relating to Forest Laboratories Inc.'s marketing of the drugs, and economic damages allegedly caused from the sale of Celexa or Lexapro. Specifically, the new suit alleges violations of the Missouri Merchandising Practices Act and makes claims for unjust enrichment,  fraudulent concealment , and misrepresentation. The plaintiffs in this case claim that Forest engaged in improper promotional activities, causing third-party payors to reimburse patients and health care institutions for prescriptions of Lexapro and Celexa that were written for patients for whom the drugs were not indicated.

Moreover, the cases pending in the MDL are individual actions, not a putative class actions. The extensive discovery and motion practice relating to the alleged appropriateness of class-wide treatment and the adequacy of the class representatives are not part of the current MDL. These factors could significantly delay the progress of the MDL proceedings, prejudicing both the MDL plaintiffs and Forest. A final factor is that the MDL is already more than 2 years old, with significant pretrial proceedings already haven taken place.

Even in the MDL context, Rule 42 applies, and the court has discretion to assess the impact of allegedly common questions.  Consolidation is inappropriate if it causes confusion or leads to delay, inefficiency, inconvenience, or unfair prejudice to a party. E.g., EEOC v. HBE Corp., 135 F.3d 543, 551 (8th Cir. 1998).

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The certification decision in a proposed class action may be the most important aspect of such litigation. Few certified class actions go to jury verdict (they settle), and, frequently, cases in which class certification is denied are dismissed without even named plaintiffs’ claims being adjudicated. Accordingly, the preparation for the class certification hearing/briefing is crucial. Both sides have important tactical decisions to make about the amount and nature of pre-certification discovery they wish to conduct. Discovery of named plaintiffs and absent class members, when available, can show important distinctions among the class members, which in turn demonstrate an absence of commonality, a predominance of individual issues, and manageability problems. Not infrequently, plaintiffs object to defendants’ attempted discovery as allegedly "going to the merits" and thus as inappropriate for the certification stage. In an interesting, recent little decision in the Ketek antibiotic litigation, the show was on the other foot.

Plaintiffs, who alleged the maker of the antibiotic Ketek fraudulently concealed the drug's dangers, were denied the right to depose various non-party witnesses at the certification stage of this litigation. Sergeants Benevolent Association Health and Welfare Fund v. Sanofi-Aventis U.S. LLP, 2009 WL 1181808 (E.D.N.Y., 4/30/09). The plaintiffs are employee benefit plans that paid for Ketek, known generically as telithromycin. The FDA approved Ketek in 2004 for treatment of three medical conditions. Plaintiffs assert that this approval was based in part on data generated in a study that allegedly “was contaminated by fraudulent activity.”

As part of class certification discovery, plaintiffs proposed to take the deposition of nine non-party witnesses, all of whom were involved with the challenged study and the FDA's approval of Ketek. The court found “unconvincing” plaintiffs' assertion that the proposed non-party depositions were necessary to establish common impact through a “loss of value” methodology; the court found that plaintiffs had misunderstood that methodology in the Zyprexa litigation, which they claimed to be mirroring. Second, the proposed non-party depositions were highly unlikely to produce or lead to evidence relevant to numerosity, typicality, or adequacy of representation. Evidence relating to the complexity of attempting to prove plaintiffs' civil RICO claim may be relevant to predominance and superiority, but plaintiffs need not actually prove their RICO claim, or conduct the discovery necessary to prove that claim, in order to make this showing. Third, defendants did not dispute that the evidence relating to the study was common to all members of the putative class. Thus, discovery postponed to merits phase.
 

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A federal court has rejected class certification in the multidistrict litigation concerning McDonald's Corp.'s french fries. In Re McDonald’s French Fries Litigation, MDL No. 1784, Civ. No.06-C-4467 (N.D. Ill. May 6, 2009). Plaintiffs in all 50 states and Washington, D.C., brought claims against McDonald's for allegedly putting hydrolyzed wheat bran and hydrolyzed casein in a beef flavoring for oil used in production of french fries and hash browns. Plaintiffs included individuals with celiac disease; galactosemia; autism; and wheat or gluten allergies. Defendant was alleged to have falsely claimed the "Potato Products" were gluten, wheat, and dairy-free through its website and in literature available at the restaurants.

The plaintiffs did not claim that they were physically harmed by the presence of trace amounts of wheat gluten and casein — a milk protein — in the beef flavoring. Rather, they based their claims on theories of consumer fraud and alleged economic losses. Plaintiffs claim they purchased Potato Products based solely on defendant’s representations that those products were free of gluten, milk and/or wheat ingredients, that the Potato Products in fact contained these allergens, and that absent defendant’s misrepresentations, plaintiffs would not have purchased the Potato Products.

The court first addressed the class definition. Named plaintiffs had testified in their depositions that they were quite satisfied with the Potato Products they consumed. (This shows the importance of pre-certification discovery, and the common common disconnect between the theories of class counsel and the reality of the class). None of the named plaintiffs had any physical reaction to eating the Potato Products. It was clear, therefore, that many persons in the class as defined by plaintiffs had gone on eating defendant’s Potato Products even after defendant clarified its product disclosures. Expert testimony showed that many patients with food allergies conduct their own ‘trials’ to determine what foods with gluten they have previously enjoyed that they may eat in moderation without experiencing symptoms. People who continued to use the products suffered no injury, not even the economic one claimed in this lawsuit. So the class was both over-inclusive and too indefinite for certification.

Regarding a narrower possible class of persons who because of their diagnosis of celiac disease, galactosemia, autism or a wheat, gluten or dairy allergy would not have eaten McDonald’s french fries or  hash browns if they had known they contained, potentially, a small amount of hydrolyzed wheat bran and hydrolyzed casein in the beef flavor that makes up one percent of the oil in which the potato suppliers par-fry the potatoes before shipping them to McDonald’s, and who relied on a representation by defendant that its Potato Products were wheat or milk free in purchasing and eating the french fries or hash browns….the court found that individual issues and individualized proofs would destroy manageability of a class action. That class in essence asked the court or jury to, at a minimum, review and evaluate potentially millions of letters from doctors for each class member. In addition, each claimant would have to individually affirm that he or she had seen the representation, purchased Potato Products on the basis of the representation, and no longer did so following defendant’s expanded product disclosure in February, 2006. Such a necessary separate evidentiary inquiry into each class member’s claim precluded certification.

Finally, choice of law issues ensured that individual issues of law clearly predominated over
common issues, making a nationwide class unmanageable. In at least some jurisdictions, reliance is necessary to connect the representations with the economic harm claimed, and in others individual proof is necessary to show that any injury was proximately caused by the misrepresentation made by a defendant.
 

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Judge Engelhardt of the U.S. District Court for the Eastern District of Louisiana, overseeing the MDL relating to the alleged formaldehyde contamination of FEMA trailers used in the aftermath of Hurricane Katrina, has chosen a lawsuit by a New Orleans woman and her son to serve as the first bellwether case in this MDL. See In re: FEMA Trailer Formaldehyde Products Liability Litigation, MDL-1873 (E.D. La.).  Plaintiffs generally allege that trailers issued by the government following Hurricane Katrina exposed residents to high levels of the chemical formaldehyde.

The court had ordered the parties to submit the names of no less than 50 potential bellwether trial plaintiffs. From these names, one plaintiff for each of four bellwether jury trials was to  be selected. The manufacturer defendants for these four trials had to be the four estimated to have the most emergency housing units at issue in this proceeding. (These four manufacturers are Gulf Stream, Fleetwood, Forest River, and Keystone RV.)  Only plaintiffs who have identified and sued one of the four manufacturers, the relevant contractor, and the Government, were eligible to serve as bellwether trial plaintiffs. In addition, the bellwether plaintiffs must be selected from those plaintiffs for whom Plaintiff Fact Sheets already have been obtained and provided to the defendants. In addition, actions chosen for bellwether trials must have proper venue in the Eastern District of Louisiana, unless the parties in question consent to trial in this district.  The court, from that list, selected the case brought by Alana Alexander and Christopher Cooper against Gulf Stream Coach Inc. to be the first that will be tried in federal court. The trial is set for Sept. 14, with three other cases against the other different defendants scheduled to follow as the court approached the hundreds of suits through a series of bellwether trials.

Readers will recall that last December, the court properly refused to grant class certification to the six proposed subclasses of plaintiffs, finding they did not meet the standards required for class certification under Rule 23. The plaintiffs had sought certification of four state subclasses of individuals who resided in trailers provided by the Federal Emergency Management Agency in Louisiana, Texas, Alabama and Mississippi following hurricanes Katrina and Rita, as well as a future medical monitoring subclass, and an economic loss subclass.

The U.S. Judicial Panel on Multidistrict Litigation consolidated a number of suits against the
government and a handful of trailer manufacturers over the alleged formaldehyde exposure
in October 2007, despite defendants’ objections. The Centers for Disease Control and Prevention  released in 2008 the results of a study which it commissioned concerning formaldehyde levels in mobile homes provided to residents of the Gulf Coast affected by Hurricane Katrina in 2005.  CDC has been working with FEMA and other agencies to investigate possible levels of formaldehyde in the trailers and mobile homes.
 

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When one thinks of global mass tort issues, questions of actions by European citizens in U.S. courts or the spate of class actions in Canada may come to mind. Perhaps we will need a broader perspective, as the courts in China have reportedly given the green light to suits arising out of the distribution of tainted dairy products. We have posted on this issue before, within the larger context of product issues arising from goods made in China.

The move signals an apparent change in the way Beijing is handling fallout from the melamine scandal, which was implicate din the death of at least six infants and sickening of nearly 300,000 others with kidney problems. A government-sanctioned compensation plan had been proposed to resolve the issues, but a large number of families have refused government compensation because it is too small, electing instead to try to sue. Under the payout plan organized by the dairies, families whose children died would have received 200,000 yuan ($29,000), while others received 30,000 yuan ($4,380) for serious cases of kidney stones and 2,000 yuan ($290) for less severe cases.

Plaintiffs needed government permission to bring suit, and it remains unclear how the government plans to handle the cases. Chinese courts often turn down class-action or group action suits, preferring to deal with cases one by one to avoid running afoul of Communist Party officials, who ultimately control the judiciary.

The crisis highlighted the need for major overhauls to China's food safety system, culminating in a law passed recently that proposes to consolidate hundreds of regulations covering the country's 500,000 food processing companies.
 

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The Ontario Court of Justice earlier this month certified a class action against Dell Canada Inc. for alleged damage caused to about 120,000 individuals, corporations, and government agencies by allegedly defective notebook computers. See Griffin v. Dell Canada Inc., Ontario Superior Court of Justice, No. 07-CV-325223D2 (2/3/09). Here at MassTortDefense, we have posted about just how difficult Canada is becoming as a jurisdiction for class actions defendants. Frequently, identical consumer products, drugs, and medical devices are marketed in Canada as well as the U.S.

The court concluded that a class action was the preferred option to address the issues, that it was “fanciful” to think that any claimant could pursue an individual claim in a complex products liability case, and rejected Dell's arguments that an arbitration clause in its terms and conditions of sale precluded direct litigation by its customers.

The court minimized the importance under the Class Proceedings Act of plaintiffs’ obligation to produce a workable litigation plan. Such a plan is necessary to help the court decide whether a class action is the preferable procedure, and whether the litigation is manageable. The more complex the litigation, the more detailed a plan is needed that indicates how to manage the litigation. The court ruled, however, that the plaintiff is not required to show that there is a fair, efficient, and manageable method of resolving the claim, but only that there is a fair, efficient, and manageable method for advancing the claim. Order at para. 95. Who cares about theoretical advancement if the claim cannot efficiently be resolved?  A class proceeding in this case achieved this lesser goal and met the objective of judicial economy, even though plaintiff’s plan provided no detail of the resources the class law firm has to administer a claims process of this dimension to ensure that the interests of class members are protected, and there was no analysis of the resources that will be required to litigate the class members' claims to conclusion. Nevertheless, the court went ahead and certified the action conditionally, subject to the plaintiffs producing an acceptable litigation plan. Order at para. 102.

The court rejected Dell Canada’s argument that the significant individual issues involved in each of the potential claims far outweigh the common issues, as merely a “familiar refrain.” Order at para. 90.  Perhaps it is familiar because it is frequently true? The court concluded that the trial judge will be able to fashion efficient and fair trial plan procedures using the extensive powers and discretion conferred on the court by Sec. 25 of Ontario's Class Proceedings Act. The prospect of individualized mini-trials on whether, and to what extent, other factors contributed to the computer failures did not deter the certification. Nor did potentially difficult issues of causation and damages. Order at para. 90.

Dell did not propose that consumers undertake individual lawsuits, but argued that adjudication through arbitration administered by the National Arbitration Forum, as specified in Dell's terms and conditions of sale, was preferable to a class action. The court found, however, that arbitration was not the kind of process that would be easy for class members to navigate without legal representation. The multitude of individual issues that Dell says precludes class treatment would also lead to more complex and therefore more costly arbitration hearings, said the court. Order at para. 92-93.

“On the other hand, aggregating similar individual actions in a class proceeding avoids unnecessary duplication of fact-finding and analysis, and distributes fixed litigation costs among class members, making it economical to prosecute this claim, thereby improving access to justice.” Order at para. 93.
.
 

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A federal court has issued an opinion on an important aspect of the Class Action Fairness Act, namely whether the denial of class action status deprives a federal court of jurisdiction under the Act. In Kitts v. Citgo Petroleum Corp., 2009 WL 192550 (W.D. La., 1/23/09), the district court declined to remand to state court a personal injury action stemming from an oil spill. Although some district courts have held that post-removal events such as class certification denial can render the court without subject matter jurisdiction under CAFA, the Western District of Louisiana held that the better approach is to retain jurisdiction.

On June 15, 2007, plaintiffs filed a putative class action suit in state court in Louisiana, claiming damages resulting from a 2006 oil spill alleged to have occurred from a facility owned and operated by defendant. Plaintiffs' complaint alleged they suffered injuries from this spill, respiratory problems and illnesses, sinus damage, difficulty breathing, and burning of the throat and nasal passages. Defendant removed, based on CAFA. The federal district court later denied class certification. Plaintiffs then filed a Motion to Remand alleging that remand to state court was appropriate because the refusal to certify this matter as a class action divested the court of subject matter jurisdiction.

The court, however, found compelling the reasoning of those cases finding jurisdiction continues to exist even after denial of the class action. Particularly appropriate was the conclusion reached by the Southern District of Florida in Colomar v. Mercy Hospital, Inc., 2007 WL 2083562, *3 (S.D.Fla.07/20/2007). In support of its denial of a Motion to Remand filed in a case properly removed under CAFA, but after the minimally diverse defendant was dismissed and class certification was denied, the Florida district court stated that the courts considering the issue of whether a federal court retains jurisdiction after class certification is denied have concluded that case developments subsequent to removal do not alter the courts' CAFA jurisdiction, if jurisdiction was proper at the time of removal.

The court quoted from the CAFA legislative history, the Senate Report stating that “once a complaint is properly removed to federal court, the federal court's jurisdiction cannot be ousted by later events.... If a federal court's jurisdiction could be ousted by events occurring after a case was removed, plaintiffs who believed the tide was turning against them could simply always amend their complaint months (or even years) into the litigation to require remand to state court.... [I]f subsequent events could unravel a federal court's jurisdiction, a defendant could prevail on the merits, only to have the federal court conclude that it lacks jurisdiction to enter judgment."  S. Rep. 109-14, 109th Cong., 1st Sess.2005, reprinted in 2005 U.S.C.CA.N. 3, *70-71, *66-67.

Here, the court said that to litigate the case up to the eve of trial, and then to seek remand after adverse rulings have issued and summary judgment is briefed, equates to a forum shopping. Plaintiffs admitted that this matter was properly removed under CAFA. Plaintiffs' efforts to unravel jurisdiction on the eve of trial was forum shopping which the traditional rules of removal and remand are designed to preclude.
 

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A federal district court recently denied defendant’s motion to dismiss in a putative class action under California's Unfair Competition Law alleging that defendant engaged in misleading conduct by advertising its “Healthy Choice” pasta sauce as “all natural” even though it includes some “high fructose corn syrup.” Lockwood v. Conagra Foods, Inc., 2009 WL 250459 (N.D.Cal. Feb. 3, 2009).

Defendant moved to dismiss on several grounds: arguing plaintiffs' claims were expressly preempted by the Nutrition Labeling and Education Act; were impliedly preempted by comprehensive FDA regulations under the Federal Food and Drug Cosmetic Act; that the court should defer to the FDA under the “primary jurisdiction” doctrine. Finally, defendants asserted that the court should strike the class allegations because plaintiffs cannot prove reliance on a class-wide basis.

Regarding the field preemption argument, the court noted that the purpose of the NLEA was to clarify and to strengthen FDA's authority to require nutrition labeling on foods, and to establish the circumstances under which claims may be made about the nutrients in foods. Under the Act, states may impose labeling requirements for artificial favors, colors or preservatives only if such requirements are identical to those imposed by the FDCA; any differences are preempted. But, the court held, this provision does not apply to plaintiffs' complaint as currently pled. Plaintiffs did not allege that defendant's pasta sauce contains artificial flavoring, coloring or a chemical preservative; rather, they allege that the “high fructose corn syrup” is not produced by a natural process and therefore the pasta sauce is not “all natural.”  One wonders why the claims of not all "natural" due to the use of an "artificial" flavor isn't squarely in that ballpark.

Turing to implied field preemption, the court noted that NLEA's provisions suggest Congress did not intend to occupy the field of food and beverage labeling. The FDA's policy as to the word “natural” similarly suggested an intent not to occupy the field of food labeling. Under the policy, the agency has considered natural to mean merely that nothing artificial or synthetic (including colors regardless of source) is included in, or has been added to, the product that would not normally be there. Although the FDA acknowledges that some consumers may be misled by the use of the term “natural,” it has declined to adopt any regulations governing this term. This inaction is consistent with an intent not to occupy the field. This is especially so given that at the time the FDA declined to formally define “natural” it was aware of and had reviewed state regulation of the use of the term, yet it made no mention of the need for uniformity or a preemptive federal regulation.

On conflict preemption, the court found that the defendant had not proved as a matter of law that plaintiffs' claims, if successful, make compliance with federal law a physical impossibility. A manufacturer could comply, that is, not violate, the FDA's policy as to use of the term “natural” and still comply with state law as articulated by plaintiffs in this case, thought the court. Nor does California law stand as an obstacle to the accomplishment and execution of the objectives of the FDCA. Again, it seems questionable that this type of claim wouldn't risk imposing labeling requirements for "artificial" favors, directly in contrast to federal regulations.

Regarding primary jurisdiction, the court found application of the doctrine was not appropriate here. At a minimum, various parties have repeatedly asked the FDA to adopt formal rulemaking to define the word natural and the FDA has declined to do so because it is not a priority and the FDA has limited resources. Moreover, the court did not feel this was a technical area in which the FDA has greater technical expertise than the courts. Finally, plaintiffs' claims were based on state law and, thus, federal law would not dispose of plaintiffs' state law claims.

Finally, the court declined to strike the class allegations at this juncture, finding that if a misrepresentation is material an inference of class-wide reliance may be inferred under the California law. MassTortDefense has posted about the growing trend of plaintiffs to use consumer fraud act claims in place of traditional product theories. Plaintiffs continue to believe that claims based on unfair and deceptive trade practices acts are somehow easier to certify as class actions because of differing notions of reliance and causation.
 

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The U.S. Court of Appeals for the Second Circuit recently agreed to hear Eli Lilly’s appeal of a federal district court's orders granting class certification and denying summary judgment in litigation over its anti-psychotic medication, Zyprexa. See In re Zyprexa Products Liability Litigation, 08-4685-mv (2d Cir. 1/15/09).

Judge Jack B. Weinstein of the the Eastern District of New York had granted class certification last fall to a group of third-party payers, including insurance companies, who were suing Eli Lilly for alleged overpayment after the company allegedly exaggerated the benefits of the drug and supposedly failed to disclose certain side effects. The 2d Circuit has now granted the 23(f) motion for leave to appeal.

Readers of MassTortDefense may recall that the 2d Circuit just last year in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008), overruled Judge Weinstein's certification of a class of “light” cigarette smokers, finding that individualized issues regarding reliance, loss causation, damages and injury all precluded a finding that common issues predominated over individualized ones as required by Federal Rule of Civil Procedure 23(b)(3). The Zyprexa class claim was brought under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1964, as plaintiffs seek to take advantage of their reading of the U.S. Supreme Court’s ruling in Bridge v. Phoenix Bond & Indemnity Co., 128 S. Ct. 2131 (2008), regarding reliance in a RICO fraud claim.

In certifying the class in Zyprexa, Judge Weinstein applied his take on the reasoning in Bridge, finding that third-party payers had colorable claims based on the allegedly fraudulent statements made to and relied upon by doctors who prescribed the drugs (not parties). As warned of in our post here last year, the Supreme Court had appeared to reject the defense argument that the proximate cause requirement inherent in the “by reason of” language of the RICO statute demands that a civil RICO plaintiff asserting a claim based on fraud establish his reliance on a misrepresentation by the defendant. In the context of a civil RICO claim predicated on fraud, the required causal link demands a showing that the plaintiff relied on an alleged misrepresentation made to the plaintiff by the defendant. Otherwise, the causal relationship between the alleged injury and the alleged fraud is too attenuated.

The Court appeared to reject petitioners' arguments that under the “common-law meaning” rule, Congress should be presumed to have made reliance an element of a civil RICO claim predicated on a violation of the mail fraud statute. And rejected the argument that a plaintiff bringing a RICO claim based on mail fraud must show reliance on the defendant's misrepresentations in order to establish proximate cause. The Court felt it had no ability to respond to the policy argument that RICO should be interpreted to require first-party reliance for fraud-based claims in order to avoid the “overfederalization” of traditional state law claims. A RICO plaintiff who alleges injury by reason of a pattern of mail fraud cannot prevail without showing that someone relied on the defendant's misrepresentations. But that does not mean, under one reading of Bridge, that the only injuries proximately caused by the misrepresentation are those suffered by the recipient.

The Court’s decision on reliance was based on statutory interpretation, rather than logic or common sense. We predicted that the absence of a clear reliance requirement may in fact make this type of claim even more popular with mass tort plaintiffs. And we are seeing its potential effect on class certification decisions in some district courts.
 

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An interesting little case: a personal injury class gets certified, defendant stipulates to key elements of liability, and defendant wins the trial anyway.

The Louisiana appeals court has affirmed a lower court ruling in favor of E.I. du Pont de Nemours & Co. in a case involving an accidental chemical release at a DuPont facility in Reserve, Louisiana. See Johnson v. E.I. du Pont de Nemours & Co., 2009 WL 91481 (La.App. 5 Cir. 2009).

The named plaintiffs filed a class action petition in 1994, alleging they were injured by the release of toxic chemicals at a DuPont facility after a small chemical accident. The trial court certified the matter as a class action in September, 1997. DuPont stipulated to certain elements of liability in 2000, but reserved their right to trial on damages, causation, the nature of the chemicals released, and the area affected. The plaintiffs apparently agreed to waive all claims for punitive damages in the stipulation.

At a bench trial in 2006, the trial court ruled in favor of DuPont, finding that the plaintiffs had not met their burden on causation. The plaintiffs failed to show exposure to harmful levels of chemicals, and to show that plaintiffs' injuries were caused by the chemical explosion.

The Louisiana Court of Appeal has agreed, saying that plaintiffs' sole medical expert did not establish that the plaintiffs' injuries— nausea, eye and skin irritation, coughing, and headaches—were caused by the chemical release. Plaintiff’s expert treated the plaintiffs at the time of their alleged injury and had diagnosed them with “fume inhalation,” but based entirely on the history provided by the plaintiffs.

The court also rejected plaintiffs’ challenge to the testimony of a DuPont witness about plaintiffs' alleged injuries, because such testimony was about his observations of plaintiffs' alleged injuries, not testimony as a medical expert. Although he was closer to the incident than plaintiffs, he did not hear any explosion, did not smell anything, and did not experience nausea, headaches, eye irritation, or other symptoms.
 

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The U.S. Supreme Court has denied General Motor's cert petition seeking review of the Arkansas Supreme Court's affirmation of a nationwide class of owners of pickup trucks and sports utility vehicles with allegedly defectively designed parking brakes. General. Motors Corp. v. Bryant, U.S., No. 08-349, certiorari denied 1/12/09.

GM filed the petition after the Arkansas Supreme Court ruled, in June, 2008, that an Arkansas circuit court was not required to conduct a choice-of-law analysis before certifying a multi-state class action.

Last June, we called this a “disturbing” opinion. General Motors had noted that the significant variations among the fifty-one pertinent product defect laws should defeat predominance. [Most courts have accepted this notion.] But the trial court provided four reasons for its finding that the potential application of multiple states’ law did not create predominance concerns. First, the court noted that, unlike the federal rule which requires a rigorous analysis of class certification factors including the impact state law variations may have on predominance, no such rigorous analysis is required in Arkansas. Second, the potential application of many states’ laws was not germane to class certification, but was instead a task for the trial court to undertake later in the course of exercising its autonomy and substantial powers to manage the class action. Third, the trial court found that assessing choice of law was a merits-intensive determination and thus inappropriate at the certification stage. “It would be premature for the Court, at this stage in the case, to make the call on choice of law.” Fourth, if application of multiple states’ laws was eventually required, and it proved too cumbersome or problematic, the circuit court could always consider decertifying the class. The state supreme court agreed.

MassTortDefense would suggest that most courts and commentators do not equate a choice of law analysis with an impermissible examination of the merits of the plaintiffs’ claims. Choice of law is a threshold question that ultimately permits a court to reach the merits of the dispute by establishing the governing legal rules. The selection of the proper law cannot fairly be termed a “merits-intensive determination.”  Moreover, the trial court need not make any determination about the merits of the causes of actions alleged in order to assess, based on relevant contacts, which state’s law ought to apply to those claims. Nor does the trial court even have to “make the final call” on what law will apply to each and every claim by every class member. It is sufficient for class certification for the trial court to discover that the law of many other states will likely have to be applied to many class members’ claims, and factor that into superiority and manageability of the proposed class.

The repeated references to the trial court’s ability to later decertify the class smacks of the improper, rejected, concept of conditional certification – a practice that has been soundly rejected in recent years by state and federal courts and is now prohibited under both the Arkansas Rules of Civil Procedure and the federal rules on which they are modeled. After considerable time and effort is expended, courts are reluctant to decertify. Here, for example, GM presented the court with a thorough analysis of conflicts of laws regarding the state-law fraud claims, breach of warranty, applicable statutes of limitations, and unjust enrichment. It seems unlikely that the trial court (after its certification was affirmed) will ever seriously revisit this issue in the context of a new predominance determination. If the Arkansas court’s approach were correct, class certification would be a meaningless exercise since courts would not address the most difficult and important class certification-related questions – i.e., whether a class trial is fair or feasible – until long after certification. 

Perhaps it is not surprising that the Supreme Court would decline to weigh in on a state procedural law issue, particularly one billed by respondents as a preliminary determination, but a shame that resources will be wasted on a clearly inappropriate class action.  And let's not forget the "blackmail settlement" pressure that these types of cases create.  Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir. 1996); In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir.1995); Bruce L. Hay & David Rosenberg, “ ‘Sweetheart’ and ‘Blackmail’ Settlements in Class Actions,” 75 Notre Dame L.Rev. 1377, 1389-92 (2000).
 

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Here's one to keep an eye out for: Wholesale Justice,Constitutional Democracy and the Problem of the Class Action Lawsuit by Martin H. Redish.  Coming in the Spring from Stanford Univ. Press.

In recent years, much political and legal debate has centered on the class action lawsuit. Many lawyers and judges have noted the intense pressure to settle caused by the very filing of a class suit. Some contend that the procedure amounts to a form of judicial blackmail. The risk is greater when the number of claims aggregated in the class action is so large great that an adverse verdict would push the defendant into bankruptcy, for then the defendant will be under great pressure to settle even if the merits of the case are slight. Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir. 1996); In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir.1995); Bruce L. Hay & David Rosenberg, “ ‘Sweetheart’ and ‘Blackmail’ Settlements in Class Actions,” 75 Notre Dame L.Rev. 1377, 1389-92 (2000). Plaintiffs counter that it is an effective means of policing corporate behavior and assuring injured victims' fair compensation.

According to the previews, this book represents a scholarly effort to view the modern class action comprehensively through the lenses of American political and constitutional theory. Redish argues that the modern class action undermines foundational constitutional principles, including procedural due process and separation of powers. He also asserts that the class action has been improperly transformed from its origins as a complex procedural device into a means for altering the controlling substantive law in highly undemocratic ways.  This despite the admonitions of a number of courts that the procedural device of Rule 23 should not be allowed to expand the substance of the claims of class members. Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998); see Cummings v. Connell, 402 F.3d 936, 944 (9th Cir.2005)(“It is axiomatic that Rule 23 cannot ‘abridge, enlarge or modify any substantive right’ of any party to the litigation.”); Blaz v. Belfer, 368 F.3d 501, 504 (5th Cir.2004)(“A class action is merely a procedural device; it does not create new substantive rights.” (quoting Frazar v. Gilbert, 300 F.3d 530, 545 (5th Cir.2002)), rev'd on other grounds sub nom., Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004)); Mace v. Van Ru Credit Corp., 109 F.3d 338, 346 (7th Cir.1997)(stating that “[t]he application of Rule 23 does not abridge, enlarge or modify any substantive right”); In re Baldwin-United Corp., 770 F.2d 328, 335 (2d Cir.1985)(stating that the federal class-action procedure set forth in Rule 23 “is a rule of procedure and creates no substantive rights or remedies enforceable in federal court”); Southwestern Refining Co. v. Bernal, 22 S.W.3d 425, 437 (Tex.2000) (holding that class action is procedural device which does not alter the substantive requirements of the underlying substantive claim); Winters v. Kan. Hosp. Serv. Ass'n, 1 Kan.App.2d 64, 562 P.2d 98, 101 (1977)(stating that Kansas' class-action statute “is a procedural statute” that “creates no substantive rights”).

Redish goes on to propose an alternative vision of the class action lawsuit, one that is designed to enable the device to serve its potentially  valuable procedural purposes in certain contexts without simultaneously contravening core precepts of American constitutional democracy.

Martin Redish is the Louis and Harriet Ancel Professor of Law and Public Policy at the Northwestern University School of Law.

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The MDL court in the Teflon products litigation has refused to certify 23 proposed statewide consumer fraud class actions. In re Teflon Products Liability Litigation, 2008 WL 5148713 (S.D. Iowa, 2008).

Plaintiffs alleged that in producing and marketing Teflon® and unbranded, non-stick cookware coatings (“NSCC”), defendant DuPont allegedly made misleading representations regarding safety. None of the proposed class representatives alleged that he or she had been injured by the use of DuPont NSCC. Rather, in each of the purported class actions, plaintiffs sought recovery solely for economic damage and injunctive relief. In particular, plaintiffs demanded creation of a fund for scientific researchers to further investigate the potential for adverse health effects from the use of products containing DuPont's non-stick coating; that DuPont discontinue selling cookware containing the non-stick coating; that DuPont stop making alleged misstatements regarding the safety of its product; that DuPont replace and/or exchange all existing cookware containing DuPont non-stick coating possessed by class members with non-hazardous cookware; rescission and restitution; and/or that DuPont provide a new warning label or other disclosure on cookware made with or containing DuPont non-stick coating.

DuPont has steadfastly denied that PFOA's or any other chemicals are released at harmful levels when cookware coated with Teflon is used as intended.

The Class
The court first identified key deficiencies in plaintiffs’ attempt to define an ascertainable class. As they typically do, plaintiffs argued that at this stage, they do not need to show that each class member ultimately will be able to prove his or her membership; rather, the court need only ensure that the appropriate criteria exists to evaluate membership when the time comes. The court felt this argument necessarily depended upon the availability of evidence to establish membership at a later stage of the proceeding. No such evidence existed to be produced in the case. Deposition testimony showed that it is virtually impossible to identify a brand of non-stick coating based on a visual examination of the item of cookware. Testimony from the class members was thus a key component of the product identification and thus class membership issue. But, even after a lengthy discovery period, during which each proposed representative was thoroughly deposed, many class reps were unable to ascertain whether they belonged in the class or a particular sub-class. An “abundance” of proposed representatives had no memory whatsoever of the circumstances surrounding their purchase of the cookware—let alone records to document their purchase. Bottom line, too many infirmities existed in the class definitions to ensure that the court could determine objectively who was in the class, without resort to speculation. For example, many class representatives mistakenly believed their product contained Teflon coating-even when they were informed the particular brand of cookware at issue never used Teflon.

Lastly, membership in this class necessarily required a plaintiff to pinpoint the date on which he or she purchased the item of cookware; the proposed class representatives were unable to recall this information one-fourth of the time.

Typicality, Coherence, Predominance
An analysis of the claims made clear that common issues did not predominate; class reps’ claims were not typical. Plaintiffs built the majority of their claims around statements made and/or marketing practices employed by DuPont regarding its NSCC products. According to plaintiffs, the fact that each cause of action derived from an alleged  “common practice or course of conduct” on the part of DuPont rendered the claims made by a representative plaintiff typical of the claims of all class members. However, the alleged misstatements cited by plaintiffs span a forty-plus-year period, across a wide variety of advertising and promotional media. Each plaintiff was exposed to different representations, at different time periods. Because reliance is a key element of plaintiffs' claim for negligent misrepresentation, and is necessary for recovery under the consumer fraud statutes in many jurisdictions, an individualized inquiry must be conducted not only to pinpoint the representations at issue, but also to determine the extent to which each plaintiff relied upon the particular representations. Due to the widespread nature of DuPont's advertising over the years, however, determining the precise statements each plaintiff heard could only be accomplished through individualized inquiry.

The court also pointed out the varying degrees to which each plaintiff became educated about NSCC prior to purchase.  Even if class members were exposed to the same representation, advertisement, or omission, the court could not presume that each member responded to the representation or omission in an identical fashion. Here, some proposed class representatives who were informed of potential health risks from NSCC stopped using the cookware, but others exposed to similar information continued to use their existing cookware, and others purchased new non-stick cookware.

Finally the court worried that plaintiffs were splitting their cause of action and thus harming absent class members. Under any one of their alternative bases for relief, plaintiffs necessarily must establish first that DuPont's non-stick cookware coating is dangerous to the health of its users. But the class disclaimed personal injury and had abandoned their original claims for medical monitoring. The representative plaintiffs risked a future waiver not only of their own personal injury and medical monitoring claims, but also those of the absent class members.

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MassTortDefense has posted about the growing trend of plaintiffs to use consumer fraud act claims in place of traditional product theories. Plaintiffs continue to believe that claims based on unfair and deceptive trade practices acts are somehow easier to certify as class actions because of differing notions of reliance and causation. Score one for the defense in the effort to beat back this tide, with the lesson that if plaintiffs live by such statute they have to live by all the statute. Silverstein v. The Procter & Gamble Manufacturing Company,  2008 WL 4889677 (S.D.Ga. Nov. 12, 2008).

This action arose out of Procter & Gamble's manufacture and sale of Crest Pro-Health mouthwash, which allegedly stains its users'  teeth and impairs their sense of taste. Plaintiffs purchased Crest Pro-Health mouthwash as consumers. After using the mouthwash, each allegedly noticed that his teeth had acquired a brown stain and that his sense of taste allegedly was impaired. Since then, both plaintiffs stopped using Crest Pro-Health mouthwash. Plaintiffs alleged a violation of Georgia's Uniform Deceptive Trade Practices Act (“UDTPA”) and moved to certify a plaintiff class. Defendant opposed this motion and moved for summary judgment.

The court noted that an analysis of class certification must begin with the issue of standing. Specifically, the court must determine whether the named plaintiffs, as individuals, have standing to pursue the claims they intend to pursue on behalf of the class. There are multiple types of standing. Constitutional standing ensures that courts do not assume jurisdiction over disputes that are not cases or controversies within the meaning of Article III. Prudential standing encompasses a host of doctrines of judicial self-restraint, such as the rule that courts will not address political questions more appropriately resolved by the representative branches of government. Statutory standing asks whether a statute creating a cause of action permits the plaintiff before the court to prosecute that cause of action. Here, the court addressed constitutional and statutory standing.

Plaintiffs in this case sought injunctive relief, as injunctive relief is the only remedy permitted to consumers by Georgia's UDTPA. The function of an injunction is to afford preventative relief, not to redress alleged wrongs which have been committed already. Because injunctions can rectify ongoing or future harm but cannot redress past harm, a plaintiff who cannot show continuing, present adverse effects or a real and immediate threat of future harm lacks Article III standing to pursue an injunction. Plaintiffs alleged past harm --browned teeth and a loss of taste. An injunction could not right these wrongs. They stopped using the product, and they now obviously know of the alleged defects. In determining whether to certify the class that plaintiffs proposed, the court determined it must not focus on the standing of unnamed class members, some of whom might, in theory, have standing to seek an injunction because they do not yet know about Crest Pro-Health's alleged defects. Whether the unnamed class members have standing is irrelevant, found the court. The result of the rule, in most applications, acknowledged the court, is that once a plaintiff learns about a product's defect, he has lost his standing to enjoin the manufacturer from producing it. “Such is the state of the law.”

When a plaintiff asserts statutory authorization to sue, he must fall within the class of plaintiffs to whom the statute grants the authority to maintain suit. It has been said that statutory standing comprises the zone-of-interests test, which seeks to determine whether the plaintiff is within the class of persons sought to be benefited by the provision at issue. A plaintiff who demonstrates past harm, but does not allege ongoing or future harm, has not shown that he is “likely to be damaged” within the meaning of the statute. Instead, Plaintiffs' alleged harm is entirely past. Because plaintiffs cannot “raise a factual question about the likelihood of some future wrong,”  they lack statutory standing to maintain an action under the UDTPA.

While plaintiffs described this result as a “catch twenty-two of statutory construction,” the court found no Joseph Heller-like dilemma: this result is actually a vindication of the UDTPA drafters' intent. Although its text does not foreclose lawsuits by consumers, the UDTPA was drafted primarily to allow businesses to enjoin their competitors' unfair or deceptive trade practices.

Because it determined that plaintiffs lacked constitutional and statutory standing to maintain their UDTPA claim, the court granted defendant's motion for summary judgment as to plaintiffs' UDTPA claim.
 

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At MassTortDefense, we typically focus on product liability, toxic tort, and consumer fraud litigation. But a recent decision arising from the largest retail security breach in history, where, the intruders made off with data relating to over 45,000,000 credit and debit cards, raises important class action issues for our readers. In re TJX Companies Retail Security Breach Litigation, 2008 WL 4786658 (D.Mass. November 03, 2008).

Consumers made several complaints, many of them putative class actions. The federal court consolidated these cases, and later received additional cases by order of the Judicial Panel on Multidistrict Litigation, see In re TJX Cos. Customer Data Security Breach Litig., 493 F.Supp.2d 1382, 1383 (J.P.M.L.2007). By September, 2007, TJX and counsel for the consolidated putative class action reached an agreement on settlement. After reviewing objections to the Agreement and holding a fairness hearing, the court gave final approval to the agreement on July 15, 2008. The court then considered class counsel's petition for attorneys' fees.

Determining whether a requested fee is reasonable requires consideration of a variety of factors. Some of the most typical include (1) the reaction of the class members to the settlement and proposed attorneys' fees; (2) the skill and efficiency of the attorneys involved; (3) the complexity and duration of the litigation; (4) the risk that the litigation will be unsuccessful; (5) the amount of time devoted to the case by counsel, and (6) the extent of the benefit obtained. The potential problem here was with the last item. Plaintiffs’ counsel asked for $6.5 million in fees, but as of October 30, 2008, class members had claimed just over $6,100,000 in benefits, a figure unlikely significantly to increase. To grant the petition would thus put more money in the pockets of the attorneys than in those of the wronged clients in whose name the suit was brought. When viewed through this prism, the benefits obtained for the class seem “virtual rather than real,” said the court. At bottom, said the court, class action litigation should benefit the individuals who have been harmed.

Simply awarding fees by reference to the valuation of the settlement presented by counsel requires a court to ignore two interrelated realities about class action litigation. First, only a fraction of any given class is likely to claim the benefits provided for in a settlement. Indeed, it is not unusual for only 10-15% of the class members to bother filing claims, and when settlements require class members to file statements or proofs of claim in order to receive their share response rates rarely exceed 50%. See Leslie, The Significance of Silence: Collective Action Problems and Class Action Settlements, 59 Fla. L. Rev. 71, 119-20 (2007)

The weakness in the approach of awarding fees based on benefits made available rather than actually utilized is that it arguably sets up a conflict between counsel and the class by creating an incentive for counsel to accept a settlement unlikely to yield a high claiming rate, for example, a coupon-in exchange for being guaranteed a percentage of the fund made available, not claimed. Similarly, some class counsel may agree to conditions on a settlement -- such as a short time frame in which to make claims or a burdensome claims procedure --in order to obtain additional concessions from the defendant that purportedly increase the value created by the litigation and that support an enhanced fee award.

“Simply put, the class action vehicle is broken,” opined the court.  And tying the award of attorneys' fees to claims actually made by class members is one step that judges can take toward repair. This approach will not only encourage more realistic settlement negotiations and agreements, but also will drive class counsel to devise ways to improve how class action suits and settlements operate. Class counsel would have an incentive to pay attention to the needs and desires of the class and to “think outside the box” to devise better notice programs, settlement terms, and claim procedures, all to the benefit of the consumers.

Linking attorneys' fees to claims would serve two additional objectives, thought the court. First, it might prevent “windfalls” for attorneys created by “class apathy.” Second, the court noted that there are surely plaintiffs' lawyers who bring putative class action lawsuits without merit, assuming, correctly, that in many cases the defendant will bw forced to settle the case to avoid a small probability of a substantial judgment. The failure to link fees to benefits claimed thus could encourage the filing of needless lawsuits.

Class counsel may argue that “You can lead a horse to water, but you can't make him drink.”   But the court responded that while this may be true, it stands to reason that one can maximize the chances that a horse will drink by, for example, verifying the horse can see the water; choosing clear, fresh, and cold water so that the horse is given the utmost incentive to drink; and making sure there are no obstacles in the horse's path.  (Gotta love it when a court takes a lawyer's analogy and runs with it!)

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The Seventh Circuit has rejected a national consumer fraud class action. Thorogood v. Sears, Roebuck and Co., 2008 WL 4709500 (7th Cir. October 28, 2008).

As explained in the opinion of Judge Posner, plaintiff bought a Kenmore-brand clothes dryer from Sears Roebuck (Kenmore is a Sears brand name). The words “stainless steel” were imprinted on the dryer, and point of sale advertising explained that this meant that the drum in which the clothes are dried inside the dryer was made of stainless steel. The plaintiff says he thought it meant that the drum was made entirely of stainless steel. The plaintiff alleged that part of the drum rusted and stained the clothes that he dried in his dryer.

He filed a class action suit on behalf of himself and the other purchasers, scattered across 28 states plus the District of Columbia, of the half million or so Kenmore dryers advertised as containing stainless steel drums. He claims that the sale of a dryer so advertised is deceptive unless the drum is made entirely of stainless steel, since if it is not it may rust and cause rust stains on the clothes in the dryer. His individual claim is that the representation violated the Tennessee Consumer Protection Act. Although some members of the huge class are citizens of the states of which Sears is a corporate citizen (New York and Illinois), so that diversity of citizenship is not complete, the suit properly invoked federal jurisdiction under the Class Action Fairness Act, since the amount in controversy exceeds $5 million. The district court certified the class, but the 7th Circuit reversed.

After noting the potential benefits of a class action, especially where individual damages are small, the court noted that the class action device has its downsides. There is first of all a much greater conflict of interest between the members of the class and the class lawyers than there is between an individual client and his lawyer. The class members are interested in relief for the class, but the lawyers are interested in their fees, and the class members' stakes in the litigation may be too small to motivate them to supervise the lawyers in an effort to make sure that the lawyers will act in their best interests.

A further problem with the class action is the enhanced risk of costly error. When enormous consequences turn on the correct resolution of a complex factual question, the risk of error in having it decided once and for all by one trier of fact rather than letting a consensus emerge from several trials may be undue. Mejdrech v. Met-Coil Systems Corp., 319 F.3d 910, 912 (7th Cir.2003); see also Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir.1996); McMillian, “The Nuisance Settlement  Problem,“ 31 Am. J. Trial Advoc. 221, 252-53 (2007); Stempel, “Class Actions and Limited Vision,” 83 Wash. U. L.Q. 1127, 1213-14 (2005). If a company is sued in a number of different cases for selling a defective product, and then it ins some of the cases and loses some, the aggregate outcome may be a fair reflection of the uncertainty of the plaintiffs' claims. But when the central issue in a case is given class treatment and so resolved by a single trier of fact, a trial becomes a roll of the dice; a single throw will determine the outcome of a large number of separate claims-there is no averaging of divergent responses from a number of triers of fact having different abilities, priors, and biases.

The risk is asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy, for then the defendant will be under great pressure to settle even if the merits of the case are slight. In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir.1995).

There is still another downside to the class action, and it is the tendency, when the claims in a federal class action are based on state law, to undermine federalism. In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1020-21 (7th Cir.2002); Elizabeth M. v. Montenez, 458 F.3d 779, 788 (8th Cir.2006). Here, the instructions to the jury on the law it is to apply would have to be an amalgam of the consumer protection laws of the 29 jurisdictions, and procedural rules by which particular jurisdictions expand or contract relief will be ignored. The Tennessee Consumer Protection Act, for example, does not authorize class actions.

Judge Posner felt that this case turns out to be a notably weak candidate for class treatment. “Apart from the usual negatives, there are no positives.” Common issues of law or fact not predominate over the issues particular to each purchase and purchaser of a “stainless steel” Kenmore dryer. The plaintiff claims to believe that when a dryer is labeled or advertised as having a stainless steel drum, this implies, without more, that the drum is 100 percent stainless steel because otherwise it might rust and cause rust stains in the clothes dried in the dryer. Do the other 500,000 members of the class believe this, asked the court? Does anyone believe this besides Mr. Thorogood? It is not as if Sears advertised the dryers as eliminating a problem of rust stains by having a stainless steel drum. There is no suggestion of that. It is not as if rust stains were a common concern of owners of clothes dryers. There is no suggestion of that either, and it certainly is not common knowledge.

Accordingly, the evaluation of the class members' claims will require individual hearings. Each class member who wants to pursue relief against Sears will have to testify to what he understands to be the meaning of a label or advertisement that identifies a clothes dryer as containing a stainless steel drum. Does he think it means that the drum is 100 percent stainless steel because otherwise his clothes might have rust stains, or does he choose such a dryer because he likes stainless steel for reasons unrelated to rust stains and is indifferent to whether a part of the drum not easily seen is made of a different material? In granting class certification, the district judge said that because “Sears marketed its dryers on a class wide basis ... reliance can be presumed.” Reliance on what? On stainless steel preventing rust stains on clothes? Since rust stains on clothes do not appear to be one of the hazards of clothes dryers, and since Sears did not advertise its stainless steel dryers as preventing such stains, the proposition that the other half million buyers, apart from Thorogood, all shared this understanding of Sears's representations and paid a premium to avoid rust stains is, to put it mildly, implausible, and so would require individual hearings to verify.
 

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The recent decision in Boyd v. Allied Signal, Inc., 2008 WL 4603401 (La.App. 1st Cir., October 17, 2008), illustrates a distressingly common feature of class actions, particularly those in the toxic tort context. Class representatives who are not injured, and not even members of the class.

The basic facts: a compressed gas trailer owned by Allied Signal, Inc. and loaded with boron trifluoride developed a leak from one of its tubes while being transported as a tractor-trailer unit. After the leak was discovered, the tractor-trailer unit stopped around noon on the westbound shoulder of I-12 on or near its overpass for Cedarcrest Avenue in Baton Rouge, where the tube continued to leak and dispersed BF3 in the air. Mitigation efforts ensued, and were completed approximately eighteen hours later.

A number of civil actions seeking class action status were subsequently filed by those allegedly impacted by the leak. The trial court consolidated the various actions and ultimately certified a class action as to the issue of liability, establishing geographic boundaries approximately corresponding to those of an emergency “shelter in place” plan for nearby residents and to various gas dispersion plumes or isopleths estimated on a successive hourly basis by the plaintiffs' expert in atmospheric dispersion. The Louisiana court of appeals affirmed the trial court's decision to certify the class action. Boyd v. Allied Signal, Inc., 898 So.2d 450, 453-54 (La.App. 1st Cir.12/30/04), writ denied, 897 So.2d 606 (La.4/1/05).

One of the class reps claimed she had entered the westbound portion of Interstate Highway 12, and about five to ten minutes later encountered stalled traffic and observed a police officer some distance ahead, standing outside his unit. After pulling her vehicle onto the shoulder, she and her husband allegedly exited the vehicle and walked to the side of the highway, where she observed a truck ahead, surrounded by a haze. Ms. Smith claimed that she experienced eye irritation and coughing during the course of events, and washed her eyes with eyewash after arriving at her destination. She did not seek medical treatment for those claimed symptoms.

Ms. Smith was confirmed as a class representative. But identification of members of the class based upon their claims of physical presence in its geographic and temporal limits is an issue separate from proof of the veracity of such claims. Ms. Smith was not thereby relieved of her burden of proof on the issues of causation and damages by virtue of her status as a class representative. Defendants appealed the judgment in favor of Ms. Smith.

Under cross-examination, Ms. Smith had acknowledged there was nothing that prevented her from using an exit to get off I-12, rather than remain on the shoulder. Her husband admitted they were told to get back in their vehicle. In deposition he admitted that they never drove past the leaking tractor-trailer. Thus, during the time she was on I-12, she never closely approached the class geographic boundaries. The geographic boundaries of the class were carefully drawn to coincide as closely as practicable with a circle defined by the quarter-mile “shelter-in-place” radius centered on “ground zero” and the BF3 dispersion plumes postulated by the plaintiffs' expert in air dispersion in his air modeling.

At the conclusion of Ms. Smith's presentation of evidence, the defendants moved for involuntary dismissal of Ms. Smith's cause of action on the grounds that she failed to prove any symptomatic exposure to BF3. The defendants emphasized that the plaintiffs' own expert testified that the exit plaintiff used was outside the area of his air modeling, and that any concentration at that location “was so low that it would not have any significance from the point of view of a toxicologist.”

The trial court clearly erred in finding that Ms. Smith sustained symptomatic BF3 exposure while traveling on I-12. There was no testimony or other evidence supporting that finding. The court of appeals carefully reviewed the maps, diagrams, and aerial photographs showing the geographic boundaries of the class. That review leads to the inescapable conclusion that Ms. Smith failed to prove that she was within the class geographic boundaries and that she suffered any exposure to airborne BF3 sufficient to cause any symptoms.
 

It is amazing that the claim was handled properly only on appeal, for a plaintiff who was not exposed, not injured, should never have been a class rep, was not a class member, and had no business obtaining a judgment at trial.

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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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A federal district court has declined to certify a proposed class action involving as many as 33,000 residents living near a Kentucky manufacturing plant. Cochran v. Oxy Vinyls, 2008 WL 4146383 (W.D. Ky. Sept. 2, 2008). For readers of MassTortDefense, an interesting feature of this proposed toxic tort class action was the court’s focus on the proposed class definition.

Plaintiffs, residents of neighborhoods surrounding an industrial area known as “Rubbertown,” alleged that emissions from defendant's operations in its nearby plant invaded their property in the form of particulate matter fallout and noxious odors. Defendant operated a plant in the Rubbertown area, at which it manufactured polyvinyl chloride resins (“PVC”); but defendant's plant is only one of several industrial facilities in the Rubbertown area.

Plaintiffs filed their complaint in 2006, alleging nuisance, negligence and/or gross negligence, strict liability for ultrahazardous activities, and trespass. Plaintiffs moved for class certification under Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3), for a class defined as including owners or residents of single family residences within two miles of the Oxy Vinyls facility, who allege the invasion of their property….a circular and largely geographic-based definition.

The court rejected this proposed definition. Although not specifically mentioned in Rule 23, the proper definition of the class is an essential prerequisite to maintaining a class action. The class must be sufficiently definite that it is administratively feasible for the court to determine whether a particular individual is a member. Courts have rejected certifying proposed classes where plaintiffs failed to identify any logical reason for drawing the class boundaries where they did. See, e.g., Daigle v. Shell Oil Co., 133 F.R.D. 600, 602-03 (D .Colo.1990) (holding that the plaintiffs had “failed to identify a class” where the proposed boundaries did not appear to “relate to the defendants' activities,” but were instead “arbitrarily ... drawn lines on a map”).

After an initial failed stab at certification, plaintiffs supplemented their effort with the expert report of an industrial hygienist, Roger Wabeke, who spent two days collecting air and settled dust samples in the neighborhoods immediately around the plant operated by Oxy Vinyls in an effort to tie the plant's alleged particulate pollution to the proposed class. The court's review of the record, even as supplemented by Mr. Wabeke's report, revealed an insufficient relationship between the proposed class definition and the evidence provided regarding the alleged emissions of the facility. The court concluded that Mr. Wabeke's report utterly failed to substantiate any sort of evidentiary relationship among the proposed class members that would justify certification of the proposed class.

The Wabeke report had numerous infirmities, but the most significant to the court was that the dust and air samples he collected were "virtually meaningless." The court noted that its rigorous review of the scientific evidence was not an inquiry into the merits, but rather a careful analysis of the Rule 23 prerequisites. Mr. Wabeke's report was “stunningly inadequate.” Far from a proposed class definition that was “objectively reasonable,” plaintiffs had offered no meaningful evidence that airborne contaminants from Oxy Vinyls spread in a uniform fashion in all directions from defendants' facility for a distance of up to two miles, or really that they spread that far from Oxy Vinyls at all. Therefore, the court was left without a basis upon which it could properly conclude that the members of the proposed class were distinguishable from the general public. For example, plaintiffs offered no way in which the proposed class members would be distinguished from those whose property may have been damaged by similar emissions from other facilities.

The faulty class definition also infected other elements of the Rule 23 analysis. Numerosity is inextricably bound up in the question of class definition. Thus, a flawed class definition can make it difficult to determine whether a class defined by geographical boundaries satisfies the numerosity requirement; indeed, courts faced with overbroad proposed classes have rejected plaintiffs' numerosity arguments due to this difficulty.

Similarly, the court was unable to conclude that named plaintiffs represented an adequate cross-section of the proposed class. For example, a proposed class member's lesser proximity to defendant's facility or closer proximity to one of the other facilities in the area may completely eliminate defendant's liability for the alleged harm they experienced. Mr. Wabeke's report provided no assurance of typicality, since the samples taken of settled dust were clearly and admittedly not “typical” of anything.

As for Rule 23(b)(3), the critical evidence of causation would be based upon highly individualized testimony. Thus, the Court was not at all convinced that defendant's liability to the class would involve predominating common issues or that a class action would be the superior method of adjudicating plaintiffs' claims.

The court concluded that Rule 23 and the vast majority of other mass tort cases “do not support the idea that simply by demanding a class and filing a document styled as an expert report a group of plaintiffs are thereby entitled to certification of whatever class they propose.”
 

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MassTortDefense has posted about the dangers lurking in consumer fraud class actions before. The threat is no more evident than in the recent decision in Nafar v. Hollywood Tanning Systems, Inc., 2008 WL 3821776 (D.N.J., August 11, 2008), where the district court certified a nationwide class of tanning customers.

Plaintiff alleged she purchased monthly tanning memberships from defendant Hollywood Tanning Systems, in New Jersey. Plaintiff alleged that defendant fraudulently failed to disclose the fact that any exposure to ultraviolet rays (UV rays) increases the risk of cancer and allegedly deceptively failed to warn consumers about the dangers of indoor tanning. While plaintiff acknowledged that defendant's machines may block out most UVB rays, she contended that defendant failed to inform consumers that UVA rays, also emitted by its machines, are allegedly linked to skin cancer. Plaintiff instituted suit alleging: (1) violation of the New Jersey Consumer Fraud Act (“NJCFA”), (2) fraud, (3) unjust enrichment, and (4) breach of warranty. Plaintiff disclaimed any remedy for personal injuries suffered, but proceeded on her fraud-based causes of action, seeking return of her membership fees, treble damages, punitive damages, and attorney's fees.

Plaintiff sought a nationwide class of consumers who had purchased tanning memberships. The court’s analysis of the Rule 23(b) requirements for class certification was, unfortunately, devoid of substance. For the all-important predominance inquiry, the court first stated that common issues of law predominated: “Common questions of law predominate because New Jersey law is central to this litigation. The NJCFA [consumer fraud act] will apply to all class members because this particular law governs Defendant's behavior and uniform policies. New Jersey has a strong interest in this litigation because the case's outcome will likely affect Defendant's nationwide behavior…. Indeed, the NJCFA is one of this nation's strongest consumer protection laws and its application will not frustrate other states' consumer protection laws. ” That conclusion was not based on an analysis of the choice of law rules of the forum state; cited no state court cases suggesting that NJ law should apply to the claims of consumer from other states; failed to analyze the differences among the consumer protection laws of the various states; and failed to analyze the interests other states may have in applying their laws by simply assuming every state would rather apply NJ’s law.

The court then stated that common fact issues predominated as well because the alleged misrepresentations and omissions concerning the negative consequences related to indoor tanning are alleged to be uniform. However, the court failed to conduct any analysis of the elements of the claims upon which the class was certified, and whether any of the elements might raise individual questions. Nor did it discuss any of the defenses. For example, the defendant apparently submitted surveys showing that the risks of tanning are common knowledge, and many consumers understood the cancer risks involved. Even if plaintiffs were not required to present any direct proof of individual reliance – which they would be under some state laws – this would not prevent a defendant from presenting direct evidence that an individual plaintiff did not rely on any representations from the company. Defendants have a right to present evidence negating a plaintiff's direct or circumstantial showing of causation and/or reliance. The "predominance" inquiry here thus resembled a mere commonality test.

Similarly, the cursory superiority analysis reads as a mere recitation of the elements of the inquiry rather than as an application of the elements. It also fails to cite a single federal appellate decision supporting the conclusion reached. To determine if these requirements have been met, a trial court must envision how a class action trial would proceed. (MassTortDefense has frequently urged trial judges to "look down the road" and not blindly accept plaintiffs' bold assertions about trial procedures.) Under this analysis, the trial court must determine whether the purported class representatives can prove their own individual cases and, by so doing, necessarily prove the cases for each one of the thousands of other members of the class. If they cannot, a class should not be certified.

Clearly, this certification decision ought to be reviewed by the Third Circuit.
 

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The possible transplantation of U.S.-style class actions to other countries has been a subject of much concern and study by those defending companies that market and sell their products internationally. Some have expressed skepticism that other nations, particularly those in Europe, will ever adopt true class actions because of general cultural differences, or specific factors, such as the absence of contingency fees. Others, pointing to examples like Canada, predict that the spread, while slow, may be inexorable.

Now comes a report issued by the advisory body responsible for overseeing the modernization of the English civil justice system recommending an expansion of class-like procedures in England. Entitled “Improving Access to Justice Through Collective Actions,” the Civil Justice Council proposes that the English civil justice system should add an “opt-out” class action to the existing range of procedural options available for civil claims. (The CJC is an Advisory Public Body, established under the Civil Procedure Act 1997 with responsibility for overseeing and coordinating the modernization of the civil justice system. The group provides advice to the Secretary of State for Constitutional Affairs on the effectiveness of aspects of the civil justice system, and makes recommendations to test, review or conduct research into specific areas. The Council includes members of the judiciary, members of the legal profession, civil servants concerned with the administration of the courts, persons with experience in and knowledge of consumer affairs, and persons able to represent the interests of particular kinds of litigants (for example business or employees)).

The Council report made several key findings:
-Existing English procedure does not provide sufficient or effective access to justice for consumers, small businesses, and employees;

-Existing collective actions could be improved considerably to promote better enforcement of citizens’ rights, while also protecting defendants from non-meritorious litigation;

-There are meritorious claims that could fairly be brought with greater efficiency and
effectiveness on a collective rather than unitary basis;

-Collective claims can benefit defendants in resolving disputes more economically and
efficiently, with greater conclusive certainty than can arise through unitary claims.

-The Courts are the most appropriate body to ensure that any new collective procedure is
fairly balanced as between claimants and defendants, the latter of which should be properly protected from unmeritorious, vexatious or spurious claims as well as from “blackmail” claims.

In turn, the CJC made several major recommendations:

-A generic collective action should be introduced.

-Collective claims should be brought by a wide range of representative parties: individual
representative claimants or defendants, designated bodies, and ad hoc bodies.

-Where an action is brought on an opt-out basis the statute of limitation period for class members should be suspended pending a defined change of circumstance.

-Certification of class status should be subject to a strict certification procedure.

-Appeals from either positive certification or a refusal to certify a claim should be subject
to the current rules on permission to appeal from case management decisions.

-Collective claims should be subject to an enhanced form of case management by
specialist judges.

-To protect the interests of the represented class of claimants any settlement agreed by the
representative claimant and the defendant(s) must be approved by the court within a
‘Fairness Hearing’ before it can bind the represented class of claimants.

While the CJC claimed to be wary of adopting the exact same model utilized by the U.S. justice system, and said it studied the pros and cons of the U.S. class action system, the report also suggests changes to the English court system that ought to be a cause for concern. These include aggregate damages, and the ability to have unallocated damages from an aggregate award distributed by a trustee of the award according cy-près.

The report invites a formal response from the lord chancellor, who is responsible for government policy on the legal system.
 

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The MDL court overseeing the litigation arising from alleged contamination of the U.S. rice supply by genetically modified strains has declined to certify a proposed class. In re Genetically Modified Rice Litigation, MDL No.1811, 2008 WL 3539879 (E.D. Mo. August 14, 2008).

Plaintiffs, U.S. long grain rice producers, alleged that the defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice, thereby affecting the market price for plaintiffs' crops. Plaintiffs alleged that the U.S. market price for rice dropped dramatically as a result of defendant's alleged contamination of the rice supply. (The United States is one of the leading producers in the world of rice, accounting for approximately 13% of the worldwide rice trade. Nearly half of the U.S. rice supply is exported to other countries.)

Mass Accident
While plaintiffs' primary claim for damages was that the defendants' activities caused a market loss injury to the U.S. rice market, the complaint asserted statutory and common law claims of public nuisance, private nuisance, negligence, products liability, and strict liability for ultra-hazardous activities. Thus, the court observed that, in many respects, the alleged widespread contamination of U.S. rice is akin to a “mass accident” mass tort - the sort of case that the Advisory Notes to Rule 23 say should rarely be afforded class treatment. A mass tort resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses to liability, would be present, affecting the individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice to multiple lawsuits separately tried. See Pruitt v. Allied Chemical Corp., 85 F.R.D. 100, 111 (E.D.Va.1980) (denying class certification for all plaintiffs who claimed to be injured as a result of defendant's pollution of a river, as the pollution affected various groups of plaintiffs in significantly different ways).

Damages Key on Predominance
MassTortDefense notes how significant the issue of damages was to the certification decision, and in particular the predominance inquiry balancing individual issues and alleged common issues. The court observed that, ordinarily, variation in individual damage amounts is not a bar to class certification. Even wide disparity among class members as to the amount of damages suffered does not necessarily mean that class certification is inappropriate. See Bell Atlantic v. AT & T Corp., 339 F.3d 294, 306 (5th Cir.2003). However, class certification “may not be suitable where the calculation of damages is not susceptible to a mathematical or formulaic calculation, or where the formula by which the parties propose to calculate damages is clearly inadequate.” Bell Atlantic, 339 F.3d at 306 (citing Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 342-343 (4th Cir.1998)).

Here, plaintiffs argued that they could show on a class-wide basis the total amount of economic harm caused by the contamination. Plaintiffs argued they could show the total quantity of long-grain rice affected. Using these two market-based figures, plaintiffs would supposedly calculate damage on a per-hundredweight basis. This figure will be used to calculate each individual plaintiff's damages. Each class member would attest to the quantity of rice sold, and that figure would be multiplied by the per-hundredweight loss.

But the court was not persuaded that the calculation of damages in this case was a common issue. What plaintiffs have proposed was a convenient shorthand calculation that might represent an estimate of some damages for some plaintiffs. It might be a reasonable basis on which to reach a settlement of some claims, mused the court. But plaintiffs' proposed method for calculating damages does not represent an actual adjudication of any one plaintiff's claims. Rather, calculation of actual damage is an individual issue specific to each plaintiff in this case, involving a unique inquiry into the time, place, and manner in which each plaintiff both priced and sold the rice.

For example, some rice producers entered pools or cooperatives to sell their rice. Others sold rice through booking contracts, where a quantity of rice to be delivered or a price to be paid might be set far in advance. Rice producers using basis contracts or hedge-to-arrive contracts employed yet more complicated methods for pricing and selling their rice. An accurate, true assessment of any plaintiff's damages would require an extensive inquiry involving the circumstances of that particular plaintiff. This case was therefore more like those cases where class certification was denied because individual damages issues predominated over common elements. This individual inquiry on damages predominated over the common issues allegedly raised in the class action complaint.

Superiority Lacking
The class method was not superior either. The claims process would devolve into an endless series of “mini-trials” that would fail to meet the goals of class certification. Also, hundreds of plaintiffs had shown significant interest in prosecuting their own claims. While plaintiffs argued that to deny class certification in this case would result in hundreds of full-scale individual trials across five states, all dealing with the same issues, the court noted that there are many options available to resolve the hundreds of cases in this MDL. The parties can propose a collection of “test cases” to be tried to verdict before deciding how other cases should be handled. The MDL court also has the option of going to trial on the claims of the plaintiffs named in the master consolidated complaint that was filed in its home district.

The opinion is thus also instructive on the willingness to look at real world trial plans and alternate methods of moving an MDL forward, beyond class action treatment.
 

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In a putative class-action suit alleging deceptive conduct by producers of smokeless tobacco products pursuant to the Pennsylvania Uniform Trade Practices and Consumer Protection Law, the Third Circuit has overruled a district court’s denial of defendants’ motion to dismiss, remanding the case for further proceedings under the rubric that a complaint alleging deceptive conduct must allege that plaintiff justifiably relied on defendant's wrongful conduct or representation.

In Hunt v. U.S. Tobacco Co., 2008 WL 2967249 (3d Cir., August 05, 2008), the Third Circuit considered whether a private plaintiff alleging “deceptive” (rather than fraudulent) conduct under the amended so-called catch-all provision of the Pennsylvania Uniform Trade Practices and Consumer Protection Law must prove that he justifiably relied on the defendant’s alleged deceptive conduct or statements.

Hunt and proposed class members alleged that U.S. Smokeless Tobacco Co. engaged in anti-competitive behavior that artificially inflated the price of the company’s moist smokeless tobacco products. Hunt claimed that consumers “relied on a presumption that they were paying prices set by an efficient market, when in fact they were paying prices artificially inflated by the anti-competitive and deceptive conduct.” The alleged misconduct was framed as consumer deception in violation of Pennsylvania’s Uniform Trade Practices and Consumer Protection Law. Specifically, plaintiff brought suit under the so-called “catch-all provision” of the Consumer Protection Law, which proscribes engaging in any fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.

Defendant moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) on the ground that Hunt failed to allege that he had justifiably relied on the alleged deceptive conduct and suffered harm as a result of that reliance. The district court denied the motion, holding that a plaintiff does not need to establish reliance under the catch-all provision of the Consumer Protection Law. Interlocutory review was granted.

The Third Circuit disagreed, focusing on the causation requirement in the Consumer Protection Law’s standing provision, the part permitting suit by private plaintiffs who suffer loss “as a result of” the defendant’s deception. A private plaintiff pursuing a claim under the statute must prove justifiable reliance, otherwise the loss is not as a result of the conduct. See, e.g., Schwartz v. Rockey, 932 A.2d 885, 897 n.16 (Pa. 2007) (“the justifiable reliance criterion derives from the causation requirement” which is express on the face of the statute’s private-plaintiff standing provision). The Pennsylvania intermediate Superior Court had also applied the Supreme Court’s standing rule to the catch-all provision, see Debbs v. Chrysler Corp., 810 A.2d 137, 156–58 (Pa. Super. Ct. 2002).

Pennsylvania thus rejects the approach of those states which interpret their consumer fraud acts, and the “as a result of” kind of language, to require only a mere and tenuous causal connection, which could be established by, for instance, proof that a misrepresentation supposedly inflated a product’s price, thereby injuring every purchaser because he paid more than he would have paid in the absence of the misrepresentation. [Even then, one wonders about proof that the plaintiff would not have happily paid the other price even knowing the info.] A justifiable reliance requirement, by contrast, requires the plaintiff to go further—he must show that he justifiably bought the product in the first place (or engaged in some other detrimental activity) because of the misrepresentation.

Indeed, the Third Circuit has already interpreted the justifiable reliance/standing requirement to apply to multiple substantive subsections of the Consumer Protection Law.  In Tran v. Metro. Life Ins. Co., 408 F.3d 130, 139–41 (3d Cir. 2005), the court observed that the plaintiff was wise to retreat at oral argument from his contention that, because he alleged only unfair business practices and deceptive conduct, not fraud, he need not allege justifiable reliance.

Such a reading is especially appropriate because the justifiable-reliance requirement emanates not from the catch-all provision that the legislature added to the consumer fraud act in 1996, but rather from the private-plaintiff standing provision. A private-plaintiff standing provision, by its nature, applies to all private plaintiffs, whatever substantive subsection of the act they invoke, for its purpose is to separate private plaintiffs (who may only sue for harm they actually suffered as a result of the defendant’s deception) from the state Attorney General (who typically may sue to protect the public from conduct that is likely to mislead).

The Third Circuit then went on to find that Hunt had not adequately alleged reliance. Hunt’s complaint was that defendant’s alleged “deception, including its affirmative misrepresentations and omissions concerning the price of moist smokeless tobacco products, likely misled all consumers acting reasonably under the circumstances to believe that they were purchasing moist smokeless tobacco products at prices born[e] by a free and fair market.” No real reliance there. And the court rejected Hunt’s suggestion that he enjoys a presumption of reliance, as this suggestion is inconsistent with Pennsylvania case law. Hunt could not enjoy a presumption of what he must prove affirmatively—that is, under the Consumer Protection Law, Hunt must prove justifiable reliance affirmatively.

Case remanded for consideration whether plaintiff should get leave to amend.
 

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