Amicus Brief Applies Comcast in Ninth Circuit Appeal

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

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

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

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

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

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

Another Artificial All Natural Class Action Rejected

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

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

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

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

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

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

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

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

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

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

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

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

Class Certification Denied in Drug Case

A federal court rejected a proposed class action in which plaintiffs alleged that a drug maker misstated the frequency of potential side effects.  See Saavedra v. Eli Lilly & Co., No. 12-09366 (C.D. Calif., 12/18/14).

Plaintiffs alleged they were harmed because the defendant allegedly understated the risk of withdrawal-related side effects, so they purportedly received a product that had less value than they expected it to have. Plaintiffs asserted that their proposed class met the requirements for Rule 23(b)(3). To qualify for certification under this subsection, a class must satisfy two conditions: (1) common questions of law or fact must “predominate over any questions affecting only individual members,” and (2) class resolution must be “superior to other available methods for the fair and efficient adjudication of the controversy.” Fed. R. Civ. P. 23(b)(3). The predominance requirement is satisfied where common questions comprise a significant portion of the case and can be resolved for all class members in one adjudication. See In re ConAgra Foods, Inc.,  No. CV 11-05379 MMM AGRX, 2014 WL 4104405, at *29 (C.D. Cal. Aug. 1, 2014). 

Rule 23(b)(3)’s predominance prong also requires the moving party to show that “damages are capable of measurement on a classwide basis.” Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1433 (2013). Specifically, this requires plaintiffs to tie their method of proving damages to their theory of liability. We have posted about the impact of this decision before, and here.

Plaintiffs relied on Dr. Joel W. Hay to establish their method of proving class-wide damages.  Plaintiffs did not seek damages for personal injuries. Instead, plaintiffs argued that class members were harmed because they purchased a product that was represented to have a lower risk of withdrawal side than it actually had.  Thus, plaintiffs claim they were injured because the drug as received was worth less than the drug as represented. However, plaintiffs did not assert that class members were harmed by being overcharged or by being induced to purchase something that they would not have otherwise purchased. Instead, plaintiffs argued that the harm was in receiving a product that had less value than the value of the product as class members expected to receive it. Plaintiffs thus seemed to use the term “value” to mean consumer utility—a concept distinct from and not directly related to price. According to plaintiffs, this consumer value or "utility" supposedly was the measure of the benefit that consumers believe they will obtain by using or owning a product.

Plaintiffs’ theory of injury thus was trying to be distinct from the typical benefit-of-the bargain claim
because it focused only on the demand side of the equation, rather than on the intersection of  supply and demand. In other words, plaintiffs sought to prove injury by showing that each class member received a drug that the average consumer would subjectively value less than the average consumer subjectively valued the drug he expected to purchase. In contrast, the typical benefit-of-the-bargain claim relies on a difference in fair market value (i.e. the amount that a willing
buyer and willing seller would both accept) between the product as represented and the product
actually received.

The court rejected this theory, and agreed with defendant that its flaws impacted predominance and superiority. Dr. Hay’s model looked only to the demand side of the market equation. By looking only to consumer demand while ignoring supply, Dr. Hay’s method of computing damages converts the lost-expectation theory from an objective evaluation of relative fair market values to a seemingly subjective inquiry of what an average consumer wants. But plaintiffs provided and the court found no case holding that a consumer may recover based on consumers’ willingness to pay irrespective of what would happen in a functioning market (i.e. what could be called sellers’ willingness to sell).


Second, at some point the subjective valuation had to be converted to actual dollar damages. But as Dr. Hay readily admitted, the prescription drug market is not an efficiently functioning market. Unlike markets for ordinary consumer goods, the prescription drug market is heavily regulated and restricted. The market is further complicated by insurance plans’ (or their absence’s) and their determinative effect on the price that an individual pays.  This price, in turn, relies on prices set by a complex array of contracts between such entities as health plan sponsors, third-party payers, pharmacy benefit managers, retail pharmacy chains, and the drug manufacturer.  Thus, depending on her insurance plan, an individual might pay nothing, a percentage of a “full price” determined by a contract between her insurance provider and another entity, a flat co-payment, or some other “full” price.

So, even assuming the expert's analysis could be used to compute the relative value consumers place on a drug having a lower withdrawal risk (which of course defendant disputed), Hay's proposed measure was highly flawed.  As noted, the numerous complicating factors in the prescription drug market sever the relationship between price and value. See In re POM Wonderful LLC, No. ML 10-02199 DDP RZX, 2014 WL 1225184, at *4 (C.D. Cal. Mar. 25, 2014) (stating that in contrast to an efficient market, in an inefficient market some information is not reflected in an item’s price). In other words, a consumer’s out-of-pocket cost for a drug is not a proxy for the drug’s value to that consumer. Thus, class members’ out-of-pocket costs are not a proxy for the value of the drug as represented. Therefore, applying the value ratio to class members’ out-of-pocket costs fails to tether the consumers’ relative valuations of product features to the drug's fair market value. Instead, it yields an arbitrary amount that is unrelated to the amount of harm incurred by individual class members.

While Dr. Hay might have been correct that a rational consumer would not pay more for the drug than she believes it is worth, a rational consumer would surely pay less than she believes the drug is worth. Thus, it does not follow that a consumer who pays a $20 co-payment believes that the drug is only worth $20. Therefore applying the refund ratio to that consumer’s co-payment does not yield an accurate approximation of the difference between the consumer’s subjective valuation of the drug as represented and the drug as actually received (even assuming plaintiffs' medical facts were right). 


Additionally, Dr. Hay’s model suffered from serious methodological flaws. He proposed conducting a survey in 2014 (or later) to estimate consumers’ valuation and apply this estimate to harms incurred by class members beginning in 2004, a decade ago.  With no legitimate basis for that leap.

Accordingly, plaintiffs failed to show that damages could be “feasibly and efficiently calculated” once liability issues common to the class were decided. Rahman v. Mott's LLP, No. 13-CV-03482-SI, 2014 WL 6815779, at *8 (N.D. Cal. Dec. 3, 2014); accord Lilly v. Jamba Juice Co., No. 13-CV-02998-JST, 2014 WL 4652283, at *9–10 (N.D. Cal. Sept. 18, 2014) (same). Plaintiffs’ failed to present a method of calculating damages that was tied to their theory of liability. The court therefore declined to grant the motion to certify a damages class under Rule 23(b)(3).

 

Federal Court Decertifies "Natural" Damages Class Action- Naturally

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

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

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

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

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

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

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

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

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

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

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

Damages class decertified.

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

 

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

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

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

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

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

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

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

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

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

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

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

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

For a variety of good reasons, certification denied.

Class Plaintiffs Ordered to Brief Damages Theory Under Comcast

We have posted about the impact of Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1435 (2013). As the Supreme Court reemphasized in Comcast, in order for Rule 23(b)(3)’s predominance requirement to be satisfied, a plaintiff must bring forth a damages measurement that can be applied class-wide and that ties the plaintiffs’ legal theory to the impact of the defendant’s allegedly illegal conduct. Thus, after Comcast, a key question is whether a plaintiff has met its burden of establishing that damages can be proven on a class-wide basis. See In re Diamond Foods, Inc., Sec. Litig., 2013 WL 1891382, at *252 (N.D. Cal. May 6, 2013).

One approach of lower courts to this issue is to require plaintiffs seeking class certification of their state law claims to file briefing specifically to address whether they have a reasonable way to measure damages on a class-wide basis.  See Edwards v. Nat'l Milk Producers Fed'n, No. 3:11-cv-04766-JSW (N.D. Cal., 5/28/14).

The trial court noted that in Comcast, the Supreme Court held that “[c]alculations need not be exact, ... but at the class certification stage (as at trial), any model supporting a plaintiff’s damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation.” Comcast, 133 S.Ct. at 1433 (internal quotation marks and citations omitted).
Moreover, “for purposes of Rule 23, courts must conduct a rigorous analysis to determine
whether that is so.” Id. (internal quotation marks and citation omitted).

Plaintiff moved for class certification in an antitrust case involving milk cow herds, and defendants moved to strike plaintiff's expert, Dr. Connor.  He purported to calculate the effects of the defendant's herd retirement program on a national level and multiplied his total calculation by the percentage of the population of the states in which Plaintiffs were bringing state-law claims. The problem with this method was that Plaintiffs, as indirect purchasers, were not bringing a federal anti-trust claim. They were only bringing state-law claims, and not in every state. Dr. Connor’s calculations included the effects from states in which Plaintiffs were not challenging any activity as illegal.

Thus, the Court found that Plaintiffs had not shown “that their damages stemmed from the defendant’s actions that created the legal liability.” Leyva v. Medline Indus. Inc., 716 F.3d 510, 514 (9th Cir. 2013) (citing Comcast, 133 S.Ct. at 1435). It was not clear whether Plaintiffs could modify their method of calculations in order to capture only the alleged effects from the states in which they contend Defendants violated antitrust laws. But, the Court directed Plaintiffs to file an additional brief to address whether they have a reasonable method for determining, on a class-wide basis, the alleged antitrust violations’ impact on class members.

Comcast Requirement of Class-wide Damages Dooms Class

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

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

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

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

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

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

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

 

Juice Class Decertified at Close of Discovery

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

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

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

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

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

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

Class decertified.

D.C. Circuit Applies Comcast Guidance to Class Certification

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

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

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

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

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

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

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

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

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

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

DRI Class Action Seminar Underway

Your humble blogger is attending the DRI CLE seminar on class actions in our nation's capital, organized by my pal Jeff Holmstrand and my partner Tim Congrove, outstanding class action practitioners. 

The lead off speaker was Miguel Estrada, speaking on Comcast, which we have posted on before, as well as the aftermath

He offered some interesting personal observations about this important class action decision. Key take aways: individual damage questions can be a significant barrier to class certification under Rule 23(b)(3). A district court considering class certification must look at how damages will be tried and managed if a class is certified.  Is it a mere mathematical exercise, or are there factual issues that vary by class members? And the district court must conduct a rigorous analysis of the class plaintiff's proposed method for computing damages allegedly on a class-wide basis (which almost certainly will require a Daubert analysis in most cases).

Interesting observation: while it is unusual for a dissenting justice to read the dissent from the bench, in this case two justices did so.  One wonders whether that emphasis on the intensity of the dissent is inconsistent with the content of the dissent, which tried to argue that the decision could be limited to its facts, nothing big happened here, nothing to look at, keep moving...

Most lower courts are following and applying the Comcast decision.  E.g., Forrand, 2013 WL 1793951 (C.D. Cal.); TL Cannon, 2013 WL 1316452 (N.D.N.Y.).  see also the Martin case we posted on here.

One going the other way is Leyva in the 9th Circuit, 2013 WL 2306567, which performs gymnastics to read Comcast as stating only the proposition that a plaintiff must show the damages flow from the alleged illegal acts of the defendant.

 

 

Supreme Court Remands Two Class Actions in Light of Comcast

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


In Glazer, the lower court had certified a class of purchasers of washing machines despite admitted variations in laundry habits; differences in remedial efforts; variation in service performed on the machines.  And despite the fact that a reported 97% of the class had never complained of a problem or suffered the alleged defect. 678 F.3d 409 (6th Cir. 2012).

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

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

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

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

 Two to keep an eye on.