Federal Court Rejects Consumer Class Action

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

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

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

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

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

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

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

 

Seventh Circuit Affirms Ruling Despite Comcast

The Seventh Circuit reaffirmed class certification yesterday in a case involving front loading washers, despite the U.S. Supreme Court's remand of the matter in light of Comcast Corp. v. Behrend. See Butler v. Sears, Roebuck & Co., No. 11-8029 (7th Cir. 8/22/13). 

Readers will recall that earlier this year, the Supreme Court vacated and remanded the Seventh Circuit’s decision in Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012) for further consideration in light of Comcast  Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Seventh Circuit had certified two class actions of washer consumers despite multiple significant differences among class members, including 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..

On remand, the court of appeals affirmed its earlier ruling that the predominance requirement was satisfied; the court reasoned it supposedly "would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages.”  If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification, the court concluded.

The Seventh Circuit in essence found that Rule 23(c)(4) permits a class action limited to determining liability on a class-wide basis, with separate hearings to determine the damages of individual class members or groups of class members.

Of course, the Supreme Court did not require that all class members' damages be identical -- a straw man from the court of appeals -- but clearly disapproved of the traditional approach that damages were not part of the predominance requirement.  And the court of appeals' explicit reference to settlement as an equally valid and available mechanism for resolving individual damages issues fundamentally illustrates the error of its opinion.  A class action cannot be certified under Rule 23, under the Rules Enabling Act, or basic notions of due process, on the basis that settlement may resolve predominating individual issues.  That is the essence of blackmail class action settlements. A class has to be certified on the premise that it will not settle, that it will go trial, and that handling all of the individual issues can properly and efficiently take place in a trial.  The Seventh Circuit's approach to the Rule 23(c)(4) issue certification is also a dangerous “end-run” around Rule 23(b)(3) and the predominance requirement. Nor can this approach be reconciled with Comcast or Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011).

This case, along with Glazer v. Whirlpool Corp., 2013 WL 3746205 (6th Cir. July 18, 2013), are likely headed back to the Supreme Court.  In the meantime, defendants will need to focus the courts on issues of manageability and trial plan, and make clear they intend to try each and every mini-trial, exercising their full due process rights, if the courts actually certify these types of cases.

Class Certification Denied in Minivan Case

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

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

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

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

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

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

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

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

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

Certification denied.

Class Certification Denied in Auto Case

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

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

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

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

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

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


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

 

Update on Mass Tort Rules in Busy Court

We posted before about potentially important changes in the administrative rules for Philadelphia's busy mass tort system.  General Court Regulation No. 2012-01 represented the first general overhaul of the Complex Litigation Center’s practices in many years. The order was designed to revise and streamline the conduct of mass tort litigation in Philadelphia in a number of ways.  The order noted the pronounced upward trend in mass tort filings in this court, and the fact that the court’s disposition rate had not kept pace with filings; thus, a significant backlog developed. The order noted the impact of past policy which invited the filing of cases from other jurisdictions. A "dramatic increase in these filings" occurred after the court’s leadership invited claims from other jurisdictions.

In a recent report to the mass tort bar, Administrative Judge Herron of the Philadelphia Court of Common Pleas noted a significant percent reduction in mass tort filings from 2011 to 2012. There were 70% fewer filings in 2012 than 2011.  The overall inventory of mass tort cases declined by about 12%. Out-of-state filings declined slightly by percentage, and discovery disputes also declined, while settlement activity reportedly increased. The court thus indicated that the revised protocols would be continued.

While there are a number of factors that could impact filing rates, the decline in filings is significant, and it is hard to escape the conclusion that new protocols must have had some impact.  Judge Herron labeled the changes an "exceptional result" leading to a much more manageable number for the court.  Of the 2012 filings, 489 were pharmaceutical cases and 327 were asbestos, according to the court statistics. 

The court also disposed of more cases than new cases were filed, contributing to the decease in inventory. The new protocols encourage mediation of cases before former state and federal judges.

 

 

Class Denied for Failure to Show Common Injury

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

Federal Court Denies Class Certification in Licensing Case

A New York federal court rejected a class certification motion recently in a suit over Scholastic Corp.'s alleged use of photographs in publications for one of its reading skills programs. See Palmer Kane LLC v. Scholastic Corp., No.1:11-cv-07456 (S.D.N.Y. 7/16/12).

It's a copyright case, which is not one of our typical areas of focus, but the class issues are illustrative more broadly.  As an aside, your humble blogger recalls fondly when, as a wee lad, the monthly Scholastic flyer was distributed in grade school, and there was an opportunity to pick out a new book to read. Defendant Scholastic has, since its founding in 1920, been a designer and developer of educational publications and services.

Plaintiff brought this purported class action alleging that Scholastic committed copyright infringement on images it allegedly used in certain of its books by printing more copies of the books than was allowed under the licenses it held, or by publishing the books prior to obtaining a license. The "READ 180" program at issue had multiple components geared toward students, teachers and school administrators: printed workbooks, instructional software, electronic books, paperback books and videos. The printed components of the materials that made up the READ 180 program contained thousands of illustrations and photographs. 

Plaintiffs sought certification of a class allegedly impacted by excessive or unauthorized uses of the images. In response, defendant offered evidence of Scholastic's complex process for obtaining licenses for images used in READ 180.

In evaluating a motion for class certification, the district court is required to make a definitive assessment of Rule 23 requirements, notwithstanding their overlap with merits issues, and must resolve material factual disputes relevant to each Rule 23 requirement.  What matters to class certification is not the raising of common questions--even in droves--but, rather the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the real potential to impede the generation of common answers. E.g., Salon FAD v. L'Oreal USA, Inc., No. 10 Civ. 5063, 2011 WL 4089902, at *5 (S.D.N.Y. Sept. 14, 2011). 

Here, plaintiff could not show that a class can be certified under the predominance requirement of Rule 23(b) (3). The court determined that the core of plaintiff's allegations was that Scholastic exceeded the scope of licenses that it negotiated with agents of rights holders or rights holders themselves. Because in order to answer whether Scholastic in fact held a license to use those images would necessarily involve, and depend upon, inquiries into a multitude of individual  relationships and interactions (between Scholastic and the rights owner; between Scholastic and the licensing agent; between the rights owner and the licensing agent), common questions of law or fact did not predominate over individual questions and a class action would not fairly and efficiently adjudicate these issues.

For example, as to some images, defendant entered into what Scholastic called "Preferred Vendor Agreements" that set out terms of the two parties' licensing arrangement with respect to future images.  But these agreements were far from uniform, differing as to usage rights, print run limitations, invoicing practices and the reuse of images --  all key issues.  Moreover, the Preferred Vendor Agreements were a product of negotiations between different personnel at Scholastic and the photo houses. Any inquiry into their terms would a review of representations that were individualized and could vary case by case.

Other agreements, not covered by a PVA, also raised individual issues. Each license obtained by Scholastic may have had different limitations placed on it by its rights holder and/or licensing agent--making an inquiry into the nature of the alleged infringements difficult (and maybe impossible) to resolve on a class-wide basis. The individualized inquiries necessary to determine the breadth of the licenses granted by each individual rights holder, often as a product of individual negotiation processes, was yet another factor militating against granting class certification.
 

Thus, plaintiff failed to demonstrate by a preponderance of the evidence that it could prove its claims on a class-wide scale, by referring to generalized proof. Accordingly, its motion to certify a class was denied.

The key here for our readers is when the facts involving plaintiffs' interactions with defendant appear complicated, use that complexity to full advantage on the issues of commonality and predominance.

 

Amici Weigh in On Consumer Class Certification in 6th Circuit

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

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

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

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

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

This is one worth keeping an eye on.

Find the amicus briefs here and here and here.

 

Consumer Fraud Class Action Decertified in Drug Case

A state appeals court last week de-certified a class action by consumers over alleged misrepresentations in marketing a drug.  See Merck & Co. v. Ratliff, No. 2011-000234 (Ky. Ct. App.,  2/10/12).

The case involved the drug Vioxx, which was a highly effective medication formerly in widespread use for patients with arthritis and other conditions causing chronic or acute pain.  Plaintiff was a former user of Vioxx for his chronic osteoarthritis.  Although Ratliff’s insurance paid for most of the cost of the drug, which was at the time approximately $66 per month, Ratliff contributed about $5 each month out of pocket.  Ratliff discontinued using Vioxx in early 2004.

Plaintiff brought a putative class action on behalf of product users who had not suffered cardio-vascular side effects, alleging that the defendant deceived the members of the proposed class in violation of the state Consumer Protection Act by promoting and/or allowing the sale of Vioxx with the use of unfair, false, misleading or deceptive acts or practices.  As a result, the class purchased the drug when it wouldn't have otherwise.

The case followed a twisting path, to federal court, to the MDL, back to state court, up to the state supreme court on mandamus, and back.  Long story short, the class was certified by the trial court, and that decision eventually became ripe for review by the court of appeals.

The Kentucky rules are similar to the federal class action rules. The trial court certified the class under the prong (like b3) requiring that the questions of law or fact common to members of the class predominate over any questions affecting only individual members, and that a class action
is superior to other available methods for the fair and efficient adjudication of the controversy. The trial court found that common questions of law and fact did predominate, stating that there was a common nucleus of facts from which the potential plaintiffs’ claims arose. All of the potential
plaintiffs were prescribed Vioxx by doctors who supposedly relied on Merck’s assertions that it was safe and effective.

On appeal, Merck contended that plaintiff’s claims would require individualized proof such that common questions would not predominate. Merck argued that individual proof would be necessary to show that Merck made fraudulent or negligent misrepresentations toward each putative class member or his or her physician through the marketing and sale of Vioxx, that the alleged
misrepresentations were received by each putative member’s physician, that each putative member’s physician relied on such representations in his or her decision to prescribe Vioxx over another drug, and the amount of any damages suffered by each putative member.

The court of appeals noted that the common law misrepresentation claims would require proof of causation in the nature of reliance, and while "there are fewer obstacles to a class claim proceeding under the" state consumer protection act, that law still requires loss as a result of the wrongful act. Plaintiffs alleged that there was supposedly a consistent pattern of deception lasting essentially the entire time that Vioxx was on the market, and thus that generalized proof could be used to show the elements of fraud and misrepresentation in this case. This theory concerning generalized proof regarding Merck’s alleged conduct was similar to the rebuttable presumption of reliance and causation known in securities litigation as "fraud-on-the-market." The court of appeals noted that the “fraud-on-the-market” approach had never been recognized in the state for a fraud or misrepresentation case. Indeed, pretty much every other jurisdiction which has been confronted with the theory has rejected it outside of the securities litigation context. See, e.g., Kaufman v. i-Stat Corp, 754 A.2d 1188, 1191 (N.J. 2000); International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., Inc, 929 A.2d 1076, 1088 (N.J. 2007); Mirkin v. Wasserman, 858 P.2d 568, 584-95 (CA. 1993); Southeast Laborers Health and Welfare Fund v. Bayer Corp., 2011 WL 5061645 (11th Cir. 2011); Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001).

Accordingly, causation, reliance, and damages must be shown on an individual basis. Thus, if the action were tried as a class, even after the alleged common questions of Merck’s representations were decided, the case would essentially fragment into a series of amalgamated “mini-trials” on each of these individualized questions. Because these individualized questions would substantially overtake the litigation, and would override any common questions of law or fact concerning defendant’s alleged conduct, the court found that a class action was not the superior mechanism by which to try these cases. See, e.g., Zinser v. Accufix Research Institute, Inc., 253 F.3d 1180, 1192 (9th Cir. 2001).

 

 

Ninth Circuit Applies Dukes

The Ninth Circuit issued an interesting class action decision applying several of the key aspects of the recent Supreme Court decision in Wal–Mart Stores, Inc. v. Dukes.  See Ellis v. Costco Wholesale Corp., 2011 WL 4336668  (9th Cir. 2011).

The case was a gender discrimination claim; while we don't focus on labor law here at MassTortDefense, the Rule 23 guidance is instructive generally for many of our class action cases.

The district court certified the class, which alleged gender discrimination, and Costco appealed. Let's focus on three instructive aspects of the Ninth Circuit's analysis.

The trial court had found the commonality prerequisite, but the court of appeals noted that it is insufficient for plaintiffs to merely allege a common question. See Wal–Mart, 131 S.Ct. at 2551–52. Instead, they must pose a question that “will produce a common answer to the crucial question.” Id. at 2552; see also id. at 2551 (“What matters to class certification is not the raising of common ‘questions' ... but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.”). In other words, plaintiffs must have a common question that will connect many individual promotional decisions to their claim for class relief.

In thinking about common issues, some courts have remained reluctant to delve into the merits of the claims. The Ninth Circuit reminds us that it is not correct to say a district court may consider the merits to the extent that they overlap with class certification issues; rather, a district court must consider the merits if they overlap with the Rule 23(a) requirements. Here, the defendant challenged the admissibility of the plaintiffs' experts' opinions, and the district court seemed to have confused the Daubert standard with the distinct “rigorous analysis” standard to be applied when analyzing commonality. Instead of judging the persuasiveness of the evidence presented about commonality, the district court seemed to end its analysis of the plaintiffs' evidence after determining such evidence was merely admissible. To the extent the district court limited its analysis of whether there was commonality to a determination of whether plaintiffs' evidence on that point was admissible, it did so in error.

(Specifically, while plaintiffs alleged nationwide discrimination, their proof seemed to show great variation in defendant alleged conduct by region. Plaintiffs would face an exceedingly difficult challenge in proving that there were questions of fact and law common to the proposed nationwide class, but the district court failed to engage in a “rigorous analysis” on this point.)

Next is typicality. Costco argued that plaintiffs could not satisfy the typicality requirement because each of the named plaintiffs' respective discrimination claims were subject to unique defenses. The district court rejected this argument and held that, as a general matter, individualized defenses do not defeat typicality. This was also error. A named plaintiff's motion for class certification should not be granted if there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to him or her. A unique background or factual situation may require a named plaintiff to prepare to meet defenses that are not typical of the defenses which may be raised against other members of the proposed class. 

Third, the court examined the effort of plaintiffs to get damages in a 23(b)(2) class. The prior thinking was that in Rule 23(b)(2) cases, monetary damage requests might be allowable if they were merely incidental to the litigation, but "this standard has been called into doubt by the Supreme Court" in Wal–Mart, 131 S.Ct. at 2560. The Supreme Court rejected the “predominance” test for determining whether monetary damages may be included in a 23(b)(2) class certification. Id. at 2559. Instead of considering the amount of the damages sought or the subjective intent of the class members seeking relief to determine if injunctive relief “predominates,” the first relevant inquiry, said the Ninth Circuit, is what procedural safeguards are required by the Due Process Clause for the type of relief sought. Id. at 2557–58.

While rule 23(b)(3) arguably expanded the breadth of possible class actions, it also expanded the procedural protections afforded the class. Unlike classes certified under Rule 23(b)(1) or (b)(2), a(b)(3) class is not mandatory. Instead, putative class members are afforded the right to be notified of the action and to opt out of the class. The absence of these protections in a class action predominantly for monetary damages violates due process. And the Wal–Mart court opined: “We fail to see why the Rule should be read to nullify these protections whenever a plaintiff class, at its option, combines its monetary claims with a request—even a ‘predominating request’—for an injunction.” 131 S.Ct. at 2559.

Even beyond the due process issue, the Supreme Court also stated that claims for individualized relief (like the backpay at issue here) do not satisfy Rule 23(b)(2), because the “key to the (b)(2) class is the indivisible nature of the injunctive or declaratory remedy warranted."  Id. at 2557.  Rule 23(b)(2) does not authorize class certification when each class member would be entitled to an individualized award of monetary damages. Here, the district court erred, therefore, by focusing on evidence of plaintiffs' subjective intent, instead of on whether the monetary relief could be granted absent individualized determinations of each class member's eligibility.

The court of appeals vacated the district court's order finding that Plaintiffs had satisfied Rule 23(b)(2) and remand for the district court to apply the legal standard confirmed in Wal–Mart.  

Class Certification Denied in Printer Litigation

A federal court recently denied class certification in a case brought on behalf of consumers accusing Epson America Inc. of misrepresenting how its NX series of printers functioned with ink cartridges. Christopher O’Shea et al. v. Epson America Inc. et al., No. 09-cv-08063 C.D. Cal.). Readers may recall our post that the court earlier dismissed many of the plaintiffs' claims on the basis that a manufacturer is not required under consumer protection laws to denigrate its own product and broadcast that its product may not perform as well as its competition.

In May 2009, plaintiff Rogers purchased a “Stylus NX 200” inkjet printer manufactured by defendants. Her decision to purchase this printer was allegedly based, in part, on a statement on the printer box that read: “Replace only the color you need with individual ink cartridges.”  Plaintiff allegedly understood this statement to mean that the printer would only require a black cartridge to print black text. In actuality, plaintiff alleged, the Epson NX 200 printer requires all cartridges to function. She subsequently filed suit against Epson claiming that Epson failed to disclose and affirmatively misrepresented the features of the printer.

Plaintiff  moved for class certification.  The interesting part of the court's analysis relates to the predominance issue under Rule 23(b)(3). Even though individualized questions of reliance and materiality were diminished under some of the plaintiff's theories because the consumer fraud claims are governed by the “reasonable consumer” test, which requires plaintiff to show that members of the public are likely to be deceived, Williams v. Gerber Products Co., 523 F.3d 934, 938 (9th Cir. 2008), the notions of reliance and injury still impacted class certification. Specifically, the court was not convinced that members of the putative class had standing to pursue their claims in federal court. To have standing under Article III, a plaintiff must present an injury that is concrete, particularized, and actual or imminent; fairly traceable to the defendant’s challenged action; and redressable by a favorable ruling.

In the context of Rule 23(b)(3), questions of Article III standing amount to an inquiry as to whether individual issues of injury-in-fact and causation predominate over common issues. While case law suggested that absent class members need not establish standing under the requirements of California’s consumer laws, there is a distinct requirement of Article III standing in federal court.  Statutory interpretations cannot permit a federal class action to proceed where class members lack Article III standing.  The requirement that all members of the class have Article III standing makes sense. If that were not the rule, a class could include members who could not themselves bring suit to recover, thus permitting a windfall to those class members and allowing Rule 23 to enlarge substantive rights.  The court therefore held that absent class members must satisfy the requirements of Article III.

Satisfaction of Article III’s requirements in turn raised individualized issues that defeated certification under Rule 23(b)(3) in this case. Article III requires some showing of injury and causation for a plaintiff to recover. Even if the alleged failure to disseminate truthful information about the product  would be subject to common proof, whether each class member was entitled to recover was not susceptible to proof on a class-wide basis because, to establish standing under Article III, each class member was required to show that they suffered some injury as a result of using or buying the product. Plaintiff therefore must show that all persons in the United States who purchased an Epson NX series printer during the class period suffered an injury which was caused by Epson’s alleged misrepresentation, and which was likely to be redressed by a decision in plaintiff’s favor. The record contained evidence indicating that the injury purportedly suffered by some members of the putative class could not fairly be traced to Epson’s allegedly deceptive representation.  Those individuals who purchased printers from certain third-party on-line sources, such as Amazon.com, were not exposed to the allegedly deceptive representation before they purchased their printers. Not all consumers who purchased an NX200 printer bought it at a retail store. Nor could standing be established by plaintiff’s (unsupported) assertion that the misrepresentation was on every box of the subclass, since some individuals purchased class printers without ever having been exposed to the allegedly deceptive representation. The fact that these individuals may have subsequently seen the misrepresentation when the package arrived in the mail was beside the point. There cannot be a causal connection between the consumer’s injury (the money spent on the printer) and Epson’s alleged misconduct (the purportedly deceptive advertising) because these consumers purchased the printers without ever seeing the purported misrepresentation.

Based on the foregoing, the court found that individualized issues of injury and causation permeated the class claims.The proposed class failed to satisfy Rule 23(b)(3)’s requirement that common issues predominate.

----------

 

Court of Appeals Rejects Medical Monitoring Class Action

The Third Circuit last week affirmed a lower court decision denying class certification in a medical monitoring case alleging vinyl chloride exposures. Gates v. Rohm & Haas Co., No. 10-2108 (3d Cir.,  8/25/11).

Readers may recall we posted on this case at the trial court level last year.  Plaintiffs alleged that vinyl chloride released from Rohm & Haas’s specialty chemicals manufacturing facility in Ringwood, Illinois contaminated the groundwater in and around McCollum Lake Village, as well as the air in the Village. Plaintiffs alleged that between 1968 and 2002, the vinyl chloride evaporating from the shallow plume blew over the Village, contaminating the air in the Village and causing some Village residents to breathe varying amounts of it. Plaintiffs claimed that the levels of vinyl chloride in the Village air were higher than the background level.

Plaintiffs sought certification of two classes: (1) a class seeking medical monitoring for Village residents exposed to the airborne vinyl chloride between 1968 and 2002, and (2) a liability-only issue class seeking compensation for property damage from the exposure. (We will focus on medical monitoring.)

The district court denied certification; it found the medical monitoring class lacked the cohesiveness needed to maintain a class under Rule 23(b)(2), and that common issues of law and fact did not predominate as required under Rule 23(b)(3). Both failed for the same reason—the “common” evidence proposed for trial did not adequately typify the specific individuals that composed the two classes. In particular, the court found plaintiffs failed to present common proof of three issues critical to recovering on the medical monitoring claim—(1) that plaintiffs suffered from exposure greater than normal background levels, (2) the proximate result of which is significantly increased risk of developing a serious disease, and (3) whether the proposed medical monitoring regime is reasonably medically necessary.  The court also found the remaining individual issues would require individual trial proceedings, undoing any efficiencies of class treatment and possibly leading a second jury to reconsider evidence presented to the jury in the class proceeding.

Plaintiffs took an interlocutory appeal under Fed. R. Civ. P. 23(f) from the denial of class certification. The court of appeals affirmed.

The Third Circuit offered a number of important points for readers that may be confronting putative medical monitoring class actions:

1) what is a medical monitoring class?

A medical monitoring cause of action allows those exposed to toxic substances to recover the costs of periodic medical appointments and the costs of tests to detect the early signs of diseases associated with exposure. The few states that recognize medical monitoring as a remedy recognize it as a cause of action, like Pennsylvania, Redland Soccer Club, Inc. v. Dep’t of the Army, 696 A.2d 137, 142 (Pa. 1997), or treat it as a type of relief granted in connection with a traditional tort cause of action, see, e.g., Bourgeois v. A.P. Green Indus., Inc., 716 So.2d 355, 359 (La. 1998).

The remedy of medical monitoring has divided courts on whether plaintiffs should proceed under Rule 23(b)(2) or Rule 23(b)(3), said the court. The Pennsylvania Supreme Court has talked about awarding medical monitoring damages as a trust fund which “compensates the plaintiff for only the monitoring costs actually incurred.” Redland Soccer Club, 696 A.2d at 142 n.6. But it has not yet clearly decided whether or when medical monitoring awards can be in the form of a lump-sum verdict.

The appeals court noted, however, that some guidance may have come from the fact that the Supreme Court recently clarified that Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. Wal-Mart Stores, Inc., v. Dukes, 131 S. Ct. 2541, 2557 (2011). In light of the Supreme Court's recent decision, the Third Circuit would "question whether the kind of medical monitoring sought here can be certified under Rule 23(b)(2)."  If the plaintiffs here prevailed, class members' regimes of medical screenings and the corresponding cost would vary individual by individual. A single injunction or declaratory judgment would seem to not be able to provide relief to each member of the class proposed here. Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.” Wal-Mart, 131 S. Ct. at 2557. But it did not need to reach the issue, because certification was improper under either category of Rule 23 for reasons apart from the monetary nature of plaintiffs' claims.

2) Cohesion and (b)(2) Certification

Although Rule 23(b)(2) classes need not meet the predominance and superiority requirements of Rule 23(b)(3), it is well established that the class claims must be cohesive. A key to the (b)(2) class is the indivisible nature of the injunctive or declaratory remedy warranted—the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them. Wal-Mart Stores, Inc, 131 S. Ct. at 2557 (quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132 (2009)). Indeed, a (b)(2) class may require more cohesiveness than a (b)(3) class. As all class members will be bound by a single judgment, members of a proposed Rule 23(b)(2) injunctive or declaratory class must have strong commonality of interests. The Supreme Court in Wal-Mart recently highlighted the importance of cohesiveness in light of the limited protections for absent class members under subsections (b)(1) and (b)(2) of the class rule. 

3) Individual Issues in Medical Monitoring Class

Because causation and medical necessity often require individual proof, medical monitoring classes may founder for lack of cohesion. See In re St. Jude Med. Inc., 425 F.3d 1116, 1122 (8th Cir. 2005); Ball v. Union Carbide Corp., 385 F.3d 713, 727-28 (6th Cir. 2004); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1195-96, amended, 273 F.3d 1266 (9th Cir. 2001); Barnes, 161 F.3d at 143-46; Boughton v. Cotter Corp., 65 F.3d 823, 827 (10th Cir. 1995). Frequently the rigorous analysis of common and individual issues  will entail some overlap with the merits of the plaintiff‟s underlying claim.  Wal-Mart Stores, Inc, 131 S. Ct. at 2551.  The trial court may consider the substantive elements of the plaintiffs' case in order to envision the form that a trial on those issues would take.  The District Court here did so and found individual issues were significant to certain elements of the medical monitoring claims here.

Readers will recall that to prevail on a medical monitoring claim under Pennsylvania law, plaintiffs must prove:
(a) exposure greater than normal background levels;
(b) to a proven hazardous substance;
(c) caused by the defendant‟s negligence;
(d) as a proximate result of the exposure, plaintiff has a significantly increased risk of contracting a serious latent disease;
(e) a monitoring procedure exists that makes the early detection of the disease possible;
(f) the prescribed monitoring regime is different from that normally recommended in the absence of the exposure; and
(g) the prescribed monitoring regime is reasonably necessary according to contemporary scientific principles.
Redland Soccer Club, 696 A.2d at 145-46.  “Expert testimony is required to prove these elements.” Sheridan v. NGK Metals Corp., 609 F.3d 239, 251 (3d Cir. 2010).

Here, the District Court identified individual issues that would eclipse common issues in at least three of the required elements, noting several potential variations in proving exposure above background, a significantly increased risk of a serious latent disease, and the reasonable necessity of the monitoring regime.

4) Exposure

Plaintiffs proposed to show the exposure of class members through expert opinions on air dispersion modeling that mapped concentrations of vinyl chloride exposure (isopleths) that allegedly could provide average exposure per person. But in fact those isopleths only showed average daily exposure, not minimum exposure, used average exposure over very long periods of time when exposure likely varied, and thus could not show that every class member was exposed above background.  Instead of showing the exposure of the class member with the least amount of exposure, plaintiffs proof would show only the amount that hypothetical residents of the village would have been exposed to under a uniform set of assumptions without accounting for differences in exposure year-by-year or based upon an individual's characteristics. At most, the isopleths showed the exposure only of persons who lived in the village for the entire period the isopleth represents and who behaved according to all assumptions that the experts made in creating the isopleth.

5) Composite Proof
Plaintiffs cannot, said the court,  substitute for evidence of exposure of actual class members evidence of hypothetical, composite persons in order to gain class certification. The evidence here was not  truly common because it was not shared by all (possibly even most) individuals in the class. Averages or community-wide estimations would not be probative of any individual's claim because any one class member may have an exposure level well above or below the average.
Attempts to meet the burden of proof using modeling and assumptions that do not reflect the individual characteristics of class members have been met with skepticism, noted the court of appeals. See In re Fibreboard Corp., 893 F.2d 706, 712 (5th Cir. 1990); In re “Agent Orange” Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 165 (2d Cir. 1987); see also 2 Joseph M. McLaughlin, McLaughlin on Class Actions: Law and Practice § 8:9, at 8-55 to -57 (3d ed. 2006).

Plaintiffs have traditionally loved medical monitoring in part because they think that class certification may come more readily given their alleged ability to use epidemiological or group or aggregate proof to establish some the elements of the medical monitoring claim.  That is why it is significant that the Third Circuit recognized that plaintiffs' aggregate proof in the form of exposure isopleths did not reflect that different persons may have different levels of exposure based on biological factors or individual activities over the class period. Factors which affect a person's exposure to toxins can include activity level, age, sex, and genetic make-up. See Federal Judicial Center, Reference Manual on Scientific Evidence 430 (2d ed. 2000).  For example, some people will have higher breathing rates per body weight which would create a disparity between the concentrations of vinyl chloride (based on estimated exposure as opposed to actual exposure).
Each person's work, travel, and recreational habits may have affected their level of exposure to vinyl chloride. Differences in the amount of time spent outside the village would create different average concentrations to which the class members were exposed. A person who worked outside the village would have been exposed less than a stay-at-home parent, or retiree. The isopleths approach simply assumed exposure to the same concentration for class members who may have spent very different amounts of time in the village.

6) Significant Increased Risk

Plaintiffs were unable to prove a concentration of vinyl chloride that would create a significant risk of contracting a serious latent disease for all class members. Nor was there common proof that could establish the danger point for all class members. The court rejected plaintiffs' attempted use of a regulatory threshold by the EPA -- for mixed populations of adults and children—as a proper standard for determining liability under tort law. Even if the regulatory standard were a correct measurement of the aggregate threshold, it would not be the threshold for each class member who may be more or less susceptible to diseases from exposure to vinyl chloride.  Although the positions of regulatory policymakers are relevant in litigation, their risk assessments are not necessarily conclusive in determining what risk an exposure presents to specified individuals. See Federal Judicial Center, Reference Manual on Scientific Evidence 413 (2d ed. 2000) (“While risk assessment information about a chemical can be somewhat useful in a toxic tort case, at least in terms of setting reasonable boundaries as to the likelihood of causation, the impetus for the development of risk assessment has been the regulatory process, which has different goals.”); id. at 423 (“Particularly problematic are generalizations made in personal injury litigation from regulatory positions. . . . [I]f regulatory standards are discussed in toxic tort cases to provide a reference point for assessing exposure levels, it must be recognized that there is a great deal of variability in the extent of evidence required to support different regulations.”).  Plaintiffs proposed a single concentration without accounting for the age of the class member being exposed, the length of exposure, other individual factors such as medical history, or showing the exposure was so toxic that such individual factors are irrelevant. The Third Circuit concluded that the trial court did not abuse its discretion in concluding individual issues on this point make trial as a class unfeasible, defeating cohesion.

7) Necessity of Monitoring

Nor did the lower court abuse its discretion in determining individual issues defeat cohesion with respect to whether the proposed monitoring regime is reasonably medically necessary. Many courts have been skeptical that the necessity for individuals' medical monitoring regimes can be proven on a class basis. See Barnes, 161 F.3d at 146; see Principles of the Law of Aggregate Litigation § 2.04 reporter‟s notes cmt. b, at 126 (2010). Plaintiffs' experts had no compelling answer to the point that the negative health effects of screening may outweigh any potential benefits. For example, the proposed regime of serial MRIs would be contraindicated and potentially risky because the contrast agent used for MRIs poses dangers to those with kidney disease.

8) Certification under (b)(3)

Courts have generally denied certification of medical monitoring classes when individual questions involving causation and damages predominate over (and are more complex than) common issues such as whether defendants released the offending chemical into the environment. See In re St. Jude Med., Inc., 522 F.3d 836, 840 (8th Cir. 2008).  Here, the same the inquiries into whether class members were exposed above background levels, whether class members faced a significantly increased risk of developing a serious latent disease, and whether a medical monitoring regime was reasonably medically necessary all required considering individual proof of class members' specific circumstances.  Common issues did not predominate.

 

 
 

Dukes Applied to Reconsideration of Class Certification

A state court recently denied the motion of a group of Michigan residents to certify a class action regarding their dioxin claims against Dow Chemical Co. See Henry v. Dow Chemical Co., No. 03-47775-NZ (Saginaw County, Mich., Cir. Ct.,  7/18/11).

Here at MassTortDefense we typically focus on appellate decisions, but we thought it interesting that this court relied heavily on the Supreme Court's decision in Dukes v. Wal-Mart  to re-analyze the prerequisites for class certification under state law.

Plaintiffs live in an area along the Tittabawassee River near Dow's plant in Midland, and allege their properties were contaminated by dioxin from the plant.

The trial court originally certified a class, and on appeal the Michigan Supreme Court vacated the decision and remanded the issue in 2009, calling for the trial court to clarify its evaluative framework, particularly for the general prerequisites of typicality, adequacy, and commonality.

On remand, the court concluded that Dukes has “far-reaching implications for certification of class action lawsuits, including the present case.”  Accordingly the court “must reanalyze whether the commonality prerequisite to class certification was satisfied in this case."


Relying on the Supreme Court analysis in Dukes, the court changed its mind and denied certification based on a failure by plaintiffs to establish the commonality element, because of the absence of a “glue” to hold all of the plaintiffs’ claims together. The only common issue, said the court, was whether the defendant negligently released the chemical, so whether and how each class member was injured involved a highly individualized inquiry regarding issues such as the level and type of contamination allegedly on the specific properties, the different remediation needs of the properties, and the varying stages of ongoing remediation.

Similarly, even under the nuisance claim, it was clear that individual plaintiffs used and enjoyed their properties in different ways. “Whether plaintiffs have suffered an interference with or loss of use and enjoyment of their property requires an individualized factual inquiry into each plaintiff’s use and enjoyment of their property.”

The court rejected plaintiffs' argument that the allegation of "one defendant" with a supposedly singular act of pollution in "one discrete geographic area" distinguished this case from the Supreme Court's commonality concerns in the discrimination context. 

In light of the commonality failing, the court did not reach the reconsideration of the other factors, such as typicality and adequacy.

 


 

Class Certification Denied in BPA MDL

The federal judge in the MDL involving BPA in baby bottles refused last week to certify
three proposed  multistate classes in this multidistrict litigation. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 08-1967 (W. D. Mo. July 7, 2011).

On August 13, 2008, the Judicial Panel on Multidistrict Litigation centralized the cases; there are approximately twenty-four cases left in this litigation.

The court’s discussion focused on three of the components required for certification: commonality, predominance, and superiority. The court said it focused on these issues because they presented "the most insurmountable obstacles to" plaintiffs’ request.

The analysis offered several interesting points:

1. Choice of law.  The court noted that many problems and immense difficulties arose from the vagaries of state law. The difficulties involved in comparing and contrasting all of the nuances of the laws of fifty-one jurisdictions is "undeniably complicated." Several courts have indicated the mere need to engage in such an analysis – and the exponential increase in the potential grounds for error – demonstrates a class action is inappropriate. E.g., Cole v. General Motors Corp., 484 F.3d 717, 724-26 (5th Cir. 2007); Klay v. Humana, Inc., 382 F.3d 1241, 1267-68 (11th Cir. 2004); Castano v. American Tobacco Co., 84 F.3d 734, 751-52 (5th Cir. 1996); In re American Medical Systems, Inc., 75 F.3d 1069, 1085 (6th Cir. 1996); In re Sch. Asbestos Litig., 789 F.2d 996, 1010 (3d Cir. 1986).

Here, the court offered a sampling of the legal disputes that the court was unable to resolve without delving into a legal inquiry more extensive than had been provided by the parties in order to ascertain (or predict) the holdings of the highest courts in these jurisdictions on legal issues. While defendants cannot thwart certification simply by tossing out imagined or slight variances in state laws, it is the plaintiffs' burden to demonstrate the common issues of law. Here, the plaintiffs could not show that the legal groupings they proposed actually satisfy Rule 23(a)(2)’s commonality requirement. And they present significant manageability concerns.

Significantly, the court noted that even if the plaintiffs had correctly grouped similar states’ laws, the application of those laws can turn out to be different even if they appear similar on the surface.  For example, plaintiffs have never alleged that the FDA banned BPA or argued that any government agency has definitively concluded that BPA in baby products is unsafe. Rather, the underlying theory of plaintiffs’ case is that, during the class period, there existed a serious scientific debate or controversy regarding the safety of BPA and that all defendants were aware of this  controversy;  defendants failed to advise them that the product contained BPA, a substance that the FDA approved for use but that was the subject of ongoing scientific discussion or controversy.  But, would every state regard this fact as material and something defendants were obligated to warn about?

2. Common issues of fact? The court relied on the recent Dukes v. Wal-Mart decision to note that commonality requires the plaintiff to demonstrate that the class members have suffered the same injury. This does not mean merely that they have all suffered a violation of the same provision of law. Their claims must depend upon a common contention that is capable of class-wide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.  Even before Dukes, many courts held that commonality required an issue (1) linking the class members (2) that was substantially related to the litigation’s resolution. DeBoer v. Mellon Mortg. Co., 64 F.3d 1171, 1174 (8th Cir. 1995), cert. denied, 517 U.S. 1156 (1996); Paxton v. Union Nat’l Bank, 688 F.2d 552, 561 (8th Cir. 1982), cert. denied, 460 U.S. 1083 (1983).

While there were some common issues, other facts plaintiffs described as “common” clearly were not. For instance, “Plaintiffs’ testimony regarding the purchase of their Baby Products” was not common for all class members. One plaintiff’s actions, decisions, knowledge, and thought
processes are unique to that plaintiff. While this question must be answered for each plaintiff, the question will not be proved with the same evidence or have the same answer for each plaintiff. Even the simple question “Did each Plaintiff purchase a product manufactured by Defendant?” is not a common question because it is not capable of class-wide resolution as required by Dukes.

3. Individual issues.  Numerous individual issues predominated, including damages. Individual issues relating to damages do not automatically bar certification, but they also are not completely ignored. E.g., In re St. Jude Medical, Inc., 522 F.3d 836, 840-41 (8th Cir. 2008) (individual issues related to appropriate remedy considered in evaluating predominance); Owner-Operator Independent Drivers Ass’n, Inc. v. New Prime, Inc., 339 F.3d 1001, 1012 (8th Cir. 2003), cert. denied, 541 U.S. 973 (2004) (individual issues related to damages predominated over common issues); see also In re Wilborn, 609 F.3d 748, 755 (5th Cir. 2010).

Another individual issue in this case was each plaintiff’s knowledge about the BPA "controversy." A consumer’s knowledge of BPA’s existence and the surrounding controversy is legally significant.
Knowledge of the controversy carries with it knowledge of the likelihood (or at least possibility) that a plastic baby bottle contained BPA. A consumer who knew about the BPA knew what defendants allegedly failed to disclose. Similarly, a consumer who knew about the controversy and exhibited no concern about whether the product purchased contained BPA may have difficulty convincing a jury that the seller did anything wrong.

The time and other resources necessary to resolve the individual issues in a single forum, in the context of a single case, in front of a single jury, would be staggering. In contrast, the common factual issues would be relatively easy to litigate, said the court.

4. Adequacy.  The court observed that plaintiffs had elected not to assert consumer protection
claims and warranty claims against certain defendants, apparently motivated by the fact that the class representatives are from states that do not support certification of such claims. But other states may have more favorable law for plaintiffs, and thus the court concluded the class representatives were inadequate to protect the class. There was a problem with  depriving absent class members of his/her opportunity to pursue a warranty claim just because the class representative cannot assert such a claim on his/her own.

Plaintiffs proposed state-wide classes in the alternative, but the MDL court noted that the judges who preside over the individual cases would be best-equipped to rule on the
single-state classes.

 

Plaintiffs' Class Allegations Flattened in Tire Case

A federal court in New York last week denied plaintiffs' motion for class certification in a case alleging that the run-flat tires on defendant BMW's MINI Cooper S were defective. See Oscar v. BMW of North America LLC, No. 1:09-cv-00011-RJH (S.D.N.Y. 6/7/11).

Oscar purchased a new 2006 MINI Cooper S from BMW-MINI of Manhattan, an authorized MINI dealership, but prior to purchasing the MINI did not do any sort of research. Nor did he take the car for a test drive. The car came with run-flat tires (RFTs), an innovation that allows drivers to drive to the nearest service station even after the tire was flat. As of December 2, 2009, a period of about three years, Oscar had had five flat tires.  Plaintiff alleges that  his troubles stemmed from the fact that his car was equipped with RFTs rather than with standard radial tires. He considered the number of flat tires he experienced to be evidence of a widespread defect.

Plaintiff proposed a nationwide class (or a New York class) of all consumers who purchased or leased new 2005, 2006, 2007, 2008, and 2009 MINI vehicles equipped with Run-Flat Extended Mobility Technology tires manufactured by Goodyear and sold or leased in the United States whose Tires have gone flat and been replaced.

On the first prerequisite of Rule 23(a), the court offered an interesting discussion arising from the fact that most of plaintiff's evidence of numerosity did not correlate directly to his class definition: data that may have included other vehicles, or non-RFT tires, or makers other than Goodyear. But the opinion noted that courts have relied upon "back-of-the-envelope calculations in finding numerosity satisfied."  Conservative assumptions leading to a likelihood of numerosity have at times sufficed. This case fell "right on the border between appropriate inference and inappropriate speculation."  Accordingly, numerosity was satisfied for the proposed national class but not the New York class.

Turning to the Rule 23(b)(3) requirements, the court confronted the choice of law issues inherent in a national class. Although plaintiff conceded that the law of the fifty states plus the District of Columbia would apply to the members of the nationwide class, he argued that the differences between the states’ laws on implied warranty claims were negligible because the implied warranty is a Uniform Commercial Code claim. But numerous courts have recognized that there are significant variances among the interpretation of the elements of an implied warranty of merchantability claim among the states. See Walsh v. Ford Motor Co., 807 F.2d 1000, 1016 (D.C. Cir. 1986); In re Ford Motor Co. Ignition Switch Litig., 194 F.R.D. 484, 489 (D.N.J. 2000).  In particular, several states still require privity; so, plaintiff advanced a theory of privity-by-agency. But this theory has not been accepted in all states. Readers know that choice of law issues impact, among other things, the manageability of the class and the superiority of the use of the class device.

The court also found that plaintiff failed to demonstrate that common questions of fact predominate. Plaintiff was unable to articulate and allegedly common defect, merely hypothesizing that the failure rate could stem from the RFTs’ "stiffness" and stating that further discovery would be necessary to ascertain the precise nature of the defect. Plaintiff did not provide the court with any evidence that Goodyear RFTs are likely to fail because of a particular common defect. The failure to specify an alleged common defect provided a further basis for concluding that plaintiff had not demonstrated predominance. See Am. Honda Motor Co. v. Allen, 630 F.3d 813, 819 (7th Cir. 2010) (holding predominance was not satisfied where forty-one plaintiffs owners alleged that their motorcycles wobbled, but failed to provide competent evidence that a common defect underlay their claims).

Even if Oscar had put forth evidence of a common defect, breach of warranty suits like this one often involve complicated issues of individual causation that predominate over common questions regarding the existence of a defect. See, e.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1018-19 (7th Cir. 2002) (noting that class treatment of tire defect litigation was unmanageable in part because individual factors could affect the alleged tire failure); Sanneman v. Chrysler Corp., 191 F.R.D. 441, 451-52 (E.D. Pa. 2000) (declining to certify a class of vehicle owners whose paint had delaminated allegedly because of faulty painting process in part because the paint could delaminate for reasons other than the alleged defect); In re Ignition Switch Litig., 194 F.R.D. at 490-91 (declining to certify a class of vehicle owners whose passenger compartments caught on fire allegedly because of a faulty ignition switch because issues of individual causation would predominate); Feinstein v. Firestone Tire and Rubber Co., 535 F. Supp. 2d 595, 603 (S.D.N.Y. 1982) (declining to certify a class of tire purchasers because of “myriad [individual] questions,” including “other possible causes of the problem encountered”); see also Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1172-74 (9th Cir. 2010).

Here, individualized issues of causation would swamp the common inquiry into an as yet to be identified tire design defect.  Even if the plaintiffs were to show that the Goodyear RFTs suffered from a common defect, they would still need to demonstrate that this defect caused each class member’s RFT to puncture. But tires can puncture for any number of reasons, and not all of these reasons will relate to the alleged defect. RFTs can go flat for reasons that would also cause a standard radial tire to go flat -- for example, if the driver ran over a nail, tire shredding device, or large pothole, or if a vandal slashed the tire. In order to demonstrate liability, plaintiff would have to demonstrate in each individual class member's case that the tire punctured for reasons related to the defect, rather than for a reason that would cause any tire to fail.

Similarly, under the state consumer fraud law claim, where the link between the defendant’s alleged deception (about the tires) and the injury suffered by plaintiffs is too attenuated and requires too much individualized analysis, courts will not certify a class. See, e.g., Pelman v. McDonald’s Corp., 272 F.R.D. 82 (S.D.N.Y. 2010) (declining to certify a class allegedly misled by McDonald’s claims that its food was healthy).  Again, determining whether each tire failed as a result of the allegedly concealed defect or as a result of unrelated issues, e.g., potholes or reckless driving habits, would devolve into numerous mini-trials.

Certification denied.

 

 

Class Action Alleging False Food Ads Rejected

Plaintiffs have failed in a proposed class action against McDonald's in which they alleged that the food company's advertising somehow misleads customers into believing that they can eat fast food daily without any potential health consequences.  Pelman v. McDonald's Corp., No. 02-civ-07821 (S.D.N.Y. 10/27/10).  Yes, loyal readers, you read that correctly: the claim is that the people of New York only know about fast food what they read in (or into) ads.

Plaintiffs in this action were New York State consumers claiming, pursuant to Section 349 of New York’s General Business Law, injury from defendant McDonald’s Corporation’s allegedly deceptive marketing scheme.  Plaintiffs claimed that the effect of defendant’s marketing – from 1985 until the filing of this case in 2002 – was to mislead consumers into falsely believing that defendant’s food products can be consumed on a daily basis without incurring any adverse health effects.  They alleged that, as a result of this marketing scheme, class members suffered injury. Specifically, plaintiffs alleged that defendant attempted to mislead plaintiffs and putative class members with misleading nutritional claims, in widespread advertising campaigns, that its foods were healthy, nutritious, of a beneficial nutritional nature, and/or were easily part of anyone’s healthy daily diet, each and/or all claims supposedly being in contradiction to medically and nutritionally established acceptable guidelines. Plaintiffs claimed that  they suffered injury in the form of the financial costs of defendant’s  products; “false beliefs and understandings" as to the nutritional content and effects of defendant’s food products, and physical injuries in the nature of obesity, elevated levels of  cholesterol, pediatric diabetes, high blood pressure, etc.

Plaintiffs moved for class certification pursuant to Federal Rule of Civil Procedure 23(b)(3).  The court "begins and ends" its analysis of class certification with consideration of the predominance requirement of Rule 23(b)(3). The court concluded that establishment of the causation and injury elements of plaintiffs’ claims would necessitate extensive individualized inquiries; the questions of law and fact which would be common to putative class members would not predominate over questions affecting only individual members. Accordingly, certification of this action for class litigation under Rule 23(b)(3) was not appropriate. 

The court found that the focus was on whether the elements of plaintiffs’ cause of action under GBL § 349 may be established by common, class-wide proof.  The court had earlier in the case ruled that in accordance with GBL § 349’s requirement that plaintiffs’ injuries be "by reason of" defendant’s conduct, the plaintiffs had be aware of the nutritional scheme they alleged to have been deceptive, and that the injuries that were suffered by each plaintiff  were by reason of defendant’s alleged deceptive marketing.  However, allegations of “false beliefs and understandings” did not state a claim for actual injury under GBL § 349.  Neither did allegations of pecuniary loss for the purchase of defendant’s products. (In some states that kind of "the product worked and didn't harm me but I wouldn't have purchased it" argument does fly.)

Accordingly, the only alleged injuries for which putative class members could claim damages under GBL § 349 were those related to the development of certain medical conditions; and the causal connection, if any, for those kinds of injuries depended heavily on a range of factors
unique to each individual. Defendant’s nutritional expert concluded there are many factors that contribute to obesity and to obesity-related illnesses, and thus it is improper to generalize and make assumptions as to causation in any individual.  Many foods, not just defendant's, are high in fat, salt, and cholesterol, low in fiber and certain vitamins, and contain beef and cheese, and there is no evidence to suggest that all who consume such foods develop the kinds of medical conditions which were at issue in this case. 

Moreover, whether or not plaintiffs’ claims (that they ate McDonald’s food because they believed it to be healthier than it was in fact) are true for any particular person was an inquiry which also required individualized proof. A person’s choice to eat at McDonald’s and what foods (and how much) he eats may depend on taste, past experience, habit, convenience, location, peer
choices, other non-nutritional advertising, and cost, etc.

Plaintiffs also argued for issue classes, asserting that the 1) existence; 2) consumer-orientation; and 3) materially misleading nature of the marketing scheme alleged by plaintiffs were each
questions which could be settled upon a showing of objective evidence and legal  argument. Even if true, the court noted that all elements of the class action rule have to be met even for issue classes. Named plaintiffs did not present any specific evidence about the number of other persons within the relevant age group who were exposed to the nutritional marketing at issue, then regularly ate at McDonald’s, and subsequently developed the same medical injuries as those allegedly suffered by named plaintiffs.  So they hadn't even shown numerosity.


 

Digitek Class Action Denied in MDL

The federal judge in the multidistrict litigation concerning the heart drug Digitek has denied class certification in the MDL's six remaining class actions.  In re: Digitek Products Liability Litigation, MDL No. 1968 (S.D. W. Va.).

Quick history. Digitek® is a trade-name for a drug called digoxin. Digoxin was approved by the FDA to treat various heart problems. At some point, a handful of non-conforming dose tablets were found in a lot of 4.8 million tablets.  Defendant initiated a voluntary Class I nationwide product recall.  A flood of civil actions were instituted in state and federal courts across the country. The plaintiffs claimed a variety of injuries and losses resulting from the recalled Digitek®. In 2008, the Judicial Panel on Multidistrict Litigation established an MDL proceeding.

The MDL court addressed several overlapping motions for class certification. The class representatives each sought some kind of economic loss class certified pursuant to Federal Rule of Civil Procedure 23. Two of the class complaints sought only a single-state class. Others sought a nationwide class of all persons residing in the United States who purchased Digitek® pursuant to prescription, during the time period when the recalled Digitek® was manufactured, or sold, who suffered economic losses, including, but not limited to, payments for recalled Digitek®, out-of-pocket expenses for diagnostic testing, medical visits, and/or new prescriptions, as a result of having received recalled Digitek®.

Generally, the plaintiffs focused not on the distinct and highly individualized alleged injuries to the class, but -- as is typical -- on defendants’ alleged misconduct that led to the recall.  In doing so, the plaintiffs tried to paint New Jersey as the nerve center for certification purposes. In fact, they said New Jersey law should control all of the potentially hundreds of thousands of class members’ claims and recoveries throughout the United States. They thus downplayed the individual issues that would arise, including choice of law. They stressed instead that the damages  allegedly suffered by each individual class member were modest and, absent a certified class, millions of consumers would be left without remedy.

The court first addressed the choice of law issues in a nationwide class, as the state in which each claimant was injured has an overriding interest in having its laws applied to redress any wrong done to its citizens.  For example, state consumer protection laws vary considerably, and courts must respect these differences rather than just apply one state's law to sales in other states with different rules.  In re St. Jude Medical, Inc., 425 F.3d 1116, 1120 (8th Cir. 2005).  See generally Kanner, Consumer Class Actions After CAFA, 56 Drake L. Rev. 303, 334 (2008).  Unjust enrichment law varies considerably throughout the United States as well.  Tyler v. Alltel Corp., 265 F.R.D. 415, 422 (E.D. Ark. 2010).  The court reached the same conclusion with the express and implied warranty claims.  See, e.g., Walsh v. Ford Motor Co., 807 F.2d 1000, 1016-17 (D.C. Cir.1986).  The differences impact the class certification factors of typicality, predominance, and manageability.

Putting aside the choice of law issue (that is, assuming a class of New Jersey residents alone and applying only New Jersey law to their claims), the court found that common issues still did not predominate. Violation of the NJ Consumer Fraud Act is subject to proof of a number of
elements, including that plaintiff suffered an ascertainable loss as a result of the unlawful conduct; and a causal relationship between the unlawful practice and the loss sustained.  That is, the New Jersey Consumer Fraud Act affords a right to monetary relief only if there has been an  ascertainable loss in consequence of the consumer receiving something other than what he bargained for, and losing the benefits of the product which he was led to believe he had purchased.  Plaintiffs' contention here that everyone in the class sustained an ascertainable loss presumes that the drug was worthless. But the drug was enormously beneficial to many patients; most got the right dose. Those patients presumably got their money's worth and suffered no economic injury. And the question whether an individual class member got his or her money's worth is inherently individual. Indeed, it involves very much the same questions as would a claim for money damages for personal injury.

This was seen in the differences between the class representatives: one returned Digitek® following the recall. But he received, in return, replacement digoxin at no charge. Another wanted a co-payment for a doctor visit that he had post-recall. He admitted, though, that the appointment was scheduled pre-recall. If certification were granted, this type of fact-intensive investigation and specific explanation would likely be necessary for all claimants to assure that their claims were compensation worthy.

The individual questions also proliferate to the extent the jury is ultimately required to determine which class members received defective Digitek® and which did not. In other words, it may ultimately be inappropriate, said the court, to treat all the recalled Digitek® as a single “defective” product for purposes of making the determination of whether it was unsafe.  Thus product identification would have individual, as opposed to collective, hallmarks.

Another individual issue was the vast array of individualized damages the representatives were seeking. The plaintiffs tried to sweep this concern aside. But even if not controlling,  individualized damage determinations cut against class certification under Rule 23(b)(3).  Ward v.
Dixie Nat. Life Ins. Co.
, 595 F.3d 164, 180 (4th Cir. 2010).

Finally, the court confronted the individualized process of sorting out those potential class members who were already fully compensated by the defendants' refund process. Mitigation was  another highly individualized matter.  Certification appropriately denied. 

Decision to Not Conduct Daubert Inquiry Leads to Class Certification

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

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

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

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

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

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

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

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

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

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

 

 

Class Action Motion Rejected in Human Tissue MDL

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.


 

State Supreme Court Reverses Class Certification on Predominance Grounds

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.

Federal Court Denies Class Certification in Boat Fuel Case

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.

MDL Court Denies Class Certification in Device Litigation

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.

Appeals Court Affirms Rejection of Class Action in HDTV Case

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.

Two Consumer Fraud Class Actions Offer Contrast

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.

 

 


 

Canadian Court Rejects Pharmaceutical Class Action

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.