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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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A federal court has dismissed (with prejudice) a variety of consumer fraud and unjust enrichment claims in litigation alleging issues with front-loading washers. Butler, et al. v. Sears, Roebuck and Co., No. 06 C 7023 (N.D. Ill. Nov. 4, 2009).

In their Consolidated Complaint, plaintiffs alleged that the washing machines they bought
from Sears suffered from electronic control board failure and an alleged design defect that prevented adequate water drainage and proper self-cleaning. The water drainage and
cleaning defect allegedly resulted in odors on clothes. Plaintiffs contended that the electronic control board failure is manifested by the washing machines prematurely and repeatedly failing mechanically. 

Defendant was alleged to have known about the defects because of allegedly similar problems with other washing machines, and customer complaints of mold problems. As a result, plaintiffs contended that Sears violated their respective home states’ consumer fraud statutes.

The case has a bit of a history, as prior versions of these allegations had been the subject of three motions to dismiss. Although the court did allow plaintiffs to file this consolidated amended complaint (these cases were consolidated for purposes of discovery and pretrial proceedings on January 6, 2009), plaintiffs did not request leave to re-allege the claims that were dismissed with prejudice in the prior rulings, including consumer fraud claims under the laws of California, Illinois, Indiana, Kentucky, Michigan, Minnesota, New Jersey, New York, and Washington. See 2008 WL 4450307, at *8. Plaintiffs. however, re-alleged these claims in substantially the same form in their Consolidated Complaint.  Without leave to do so, and new details, these claims could not survive.

In order to survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of the claim’s basis, but must also establish that the requested relief is plausible on its
face. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Allegations of fraud are subject to the heightened pleading standard of Rule 9(b), which requires a plaintiff to state with particularity the circumstances constituting fraud. Fed. R. Civ. P. 9(b). This means that the plaintiff must plead the “who, what, when, where, and how" of the alleged fraud.

The court found that the new allegations  were insufficient to meet Rule 9(b)’s pleading requirements. Plaintiffs adequately averred defendant's knowledge, but they did not adequately allege the other required elements. For example, plaintiffs had not indicated how the alleged reported failure rate compares with the failure rates of comparable machines produced by comparable manufacturers. Plaintiffs also failed to specify how often design or manufacturing defects related to self-cleaning features of washers occur. No meaningful engineering explanation had been alleged. The language reproduced in the Consolidated Complaint offered far from a meaningful engineering explanation for the defects; the allegations were vague and indeterminate.

The alleged violation of California’s Song-Beverly Consumer Warranty Act, Cal. Civil Code § 1790 et seq., survived the motion to dismiss.  But, overall, product manufacturers can appreciate the court's application of the Twombly doctrine, the fraud pleading requirements, and its reluctance to give plaintiffs many, many bites of the apple.  Federal court litigation should not be "if at first you do not succeed, try, try again," with the trial court offering plaintiff's counsel a road map how to construct a proper pleading.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The FDA has accepted off-label use for decades:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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A federal judge in Florida has dismissed the class action claims of plaintiffs asserting economic loss from Bayer's drug Trasylol, ruling that they have failed to adequately plead that their alleged damages flowed directly from the company's alleged conduct in marketing the drug. See Southeast Laborers Health and Welfare Fund, et al. v. Bayer Corporation, et al., 2009 WL 2355747 (S.D. Fla.).

Trasylol was approved by the U.S. Food and Drug Administration to prevent excessive bleeding during coronary artery bypass graft (CABG) surgery. The plaintiffs, including a health and welfare fund responsible for paying for members' prescription drugs, allege that cheaper and safer alternatives were available but that Bayer somehow "over-promoted" the drug for CABG use.  They also allege the company promoted it for unapproved off-label uses, such as orthopedic surgery. They say, bottom line, that they would not have paid for Trasylol had they known the true story.

Such claims are typical of the consumer fraud act claims of plaintiffs in drug litigation, and equally typical is the fact that calculation of plaintiff's alleged losses would be extremely difficult, fact intensive, and absent such facts, purely speculative. Plaintiff must allege the causation element of the claim, and even the requisite short and plain statement of the claim requires more than labels and conclusions, and more than a formulaic recitation of the elements of a cause of action. (citing Twombly, 550 U.S. at 555 ).

In a causation analysis that applies to both the consumer fraud act and RICO allegations, the court noted that there are many factors that a doctor may consider in determining what medication to administer to a given patient. Doctors are presumed to, and actually do, go beyond advertising and marketing and also use their independent knowledge in making medical decisions. Loss calculation, therefore, necessarily would require an analysis of whether or not a particular physician ever received or relied on Bayer's allegedly fraudulent statements, and whether or not a physician, knowing the risks vs. benefit of Trasylol, would still have used it during an operation.

It would require a determination as to how many doses a patient received, and whether or not the number of doses was tied into any fraudulent marketing. It would also require speculation as to what alternative medications a particular physician would have ordered in a particular surgery, and how much that medication would have cost. Such a cost calculation would be problematic, as costs clearly would have fluctuated over the ten year period. Lastly, it would entail determining those patients who received Trasylol who did not suffer any adverse reactions, and who might have been helped by the use of the drug. Plaintiffs plead none of those facts.

The plaintiffs here attempted to rely on a "fraud on the market" theory to avoid this analysis, citing In re Zyprexa Prod Liab. Litig., 493 F.Supp.2d 571 (E.D. N.Y. 2007), but the court called this "simply misplaced." The fraud-on-the-market doctrine in both the Eleventh and Third Circuits has been held to be limited strictly to securities cases and is inappropriate in claims alleging deceptive advertising such as the ones presented by drug litigation.   

Further, on the RICO count, the court said that the plaintiffs' factual allegations were not sufficient to constitute a representative sample of the defendants' allegedly fraudulent acts, when they occurred and who engaged in them.

Judge Middlebrooks granted the plaintiffs leave to amend but said it was "unlikely" they would be able to cure the proximate causation deficiency in their claims.

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Defendants have moved to dismiss the complaint in a proposed class action by parents claiming that the makers of shampoos and and soaps for kids failed to list toxic chemicals on product ingredients lists. Vercellono, et al. v. Gerber Products Co., et al., No. 2:09-cv-02350 (D.N.J.).

The complaint names Gerber, Johnson & Johnson Consumer Cos. Inc., Procter & Gamble
Distributing LLC, MZB Personal Care, Wal-Mart Stores Inc. and Nestle Inc. as defendants.
The plaintiffs claim that several products, including Grins & Giggles, Head-to-Toe Baby Wash and others, contain formaldehyde and 1,4-dioxane.  Plaintiffs further allege that these chemicals have been linked to cancer, skin allergies and other health problems.

The plaintiffs are seeking compensatory, punitive and/or exemplary damages for the proposed class, which is defined as all consumers nationwide who purchased the products in question.  Plaintiffs allege that the companies violated consumer fraud statutes by making or distributing baby care products specifically marketed for sensitive skin despite containing the chemicals, and misrepresented that the products they marketed, distributed, promoted, sold, and/or made were safe for children.

Defendants' motions attack several aspects of the complaint, including the injury allegations in connection with the consumer fraud count.  The motion illustrates one of the key battlegrounds in a consumer fraud class action.  While plaintiffs typically assert that the predominating issues are common, defendants will point to the injury element under the statute as requiring individual proof.  But before even deciding the class issues, the question is raised whether plaintiffs have adequately alleged an  injury.  Often, they will seek to avoid suggestion of personal physical injury, because of the individual issues it raises.  But there is risk in going too far.

According to the Gerber motion, plaintiffs suffered only mere exposure to the chemicals and failed to cite any actual injury. The complaint fails to allege that plaintiffs, their children, or anyone else has ever suffered any actual harm as a result of using the products. Nor does the complaint allege that the products failed to perform as a bath product. Rather, the complaint merely alleges that plaintiffs have suffered “exposure” to formaldehyde and 1,4-dioxane.  While they assert that they were injured by paying the purchase prices for the defendants’ products, under the New Jersey Consumer Fraud Act, as under many such acts, plaintiffs are required to allege that they have suffered an ascertainable loss, and allegations of economic loss are insufficient, as are allegations of  the vague potential of a speculative future injury.

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

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

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

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

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

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

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

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

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

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The federal court has dismissed a proposed class action accusing Dell Inc. of fraudulently marketing an ink-jet printer feature to convince customers to replace ink cartridges that don't need to be replaced yet. Dajani v. Dell Inc., 2009 WL 1833983 (N.D.Cal. June 25, 2009).

Dajani alleged that Dell fraudulently marketed its Ink Management System, a technology feature on all Dell ink jet printers.  The feature will display ink levels on a status window during a print job. The complaint alleged that the Ink Management System was highly imprecise and inaccurate, and that it was designed to deceive customers into replacing what they believed to be nearly empty cartridges, when they actually still contained a substantial amount of usable ink. Dajani sought to represent a class of all Californians who own or have owned Dell ink jet printers.

Judge Susan Illston rejected the lawsuit, without leave to amend the complaint.  Previously, the court had dismissed California-law based claims, as the terms and conditions of his sales agreement provided for Texas law to be allied to all claims. The amended complaint alleged a claim under Texas law for breach of implied warranty of merchantability and a claim of unjust
enrichment.

The court ruled last week that the claim for the breach of implied warranty of merchantability could not survive, because the printer was not unmerchantable as the term is defined under Texas law. The product must be unfit for the ordinary purposes for which it is used because of a lack of something necessary for adequacy.  Dell argued that the ordinary use of the product was printing, not measuring ink, and that any alleged imprecision in the Ink Management System had no impact on that basic function. The court agreed, finding that at most, plaintiff had alleged that the use of the Ink Management System is cumbersome because of allegedly premature replacement prompts. The device still worked.  And plaintiff hurt his claim by alleging that upon receiving “low ink” warnings, he simply removed and discarded his ink cartridge and replaced it with a new one. Such was "plainly at odds" with the product’s instruction manual, which states that a low ink warning appears when ink cartridges are low, not yet empty, and that a separate "reserve tank"  window appears when they are empty.

The judge also dismissed the unjust enrichment claim because under Texas law, when a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a theory of unjust enrichment. Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex.2000) (“Parties should be bound by their express agreements. When a valid agreement already addresses the matter, recovery under an equitable theory is generally inconsistent with the express agreement.”).

Because plaintiff cannot cure the defects mentioned above through the pleading of additional facts which do not contradict those already made, plaintiff's complaint was dismissed without leave to amend.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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A federal district court has rejected a proposed nationwide class action in the litigation alleging that Hewlett Packard engaged in unfair and deceptive conduct in connection with the “smart chip” technology in its ink cartridges. In re HP Inkjet Printer Litigation, 2008 WL 2949265 (N.D.Cal. July 25, 2008). According to Plaintiffs, the “smart chips” are programmed to indicate prematurely that replacement is needed, when in fact “hundreds of additional pages” of ink remain. The “smart chip” technology allegedly also renders cartridges unusable on a concealed, built-in “expiration date,” which is the earlier of thirty months after installation or thirty months after a factory-set “install-by” date, regardless of the amount of usable ink remaining. Plaintiffs claim that HP's “SureSupply” marketing campaign falsely promised consumers an easy way to maintain adequate printer supplies that saves time and money while failing to disclose the premature ink warnings and built-in expiration dates. HP makes some of the best printers in the world and stands behind its technology.

Plaintiffs asserted several claims for relief including: (1) breach of express warranty; (2) breach of implied warranty; (3) unjust enrichment; (4) violations of several California consumer fraud statutes. The court addressed competing motions – defendant's for summary judgment and plaintiffs' for class certification.

Defendant moved for summary judgment, contending that named plaintiffs did not have standing because they cannot prove that they ever received a “low on ink” warning. However, the court found an issue of fact based on their deposition testimony, despite the fact they could not remember the precise wording of the low ink message received and did not recognize the actual message when shown it by opposing counsel at the deposition. “While the evidence is weak,” a reasonable jury could find that each named plaintiff has suffered a cognizable injury, said the court.

Specifically regarding the warranty claim, while neither plaintiff identified the precise language of the statements upon which he allegedly relied, the court found that recitation of the precise language is not an element of an express warranty claim. Again, while Plaintiffs' evidence is weak, it was sufficient to survive summary judgment.

No Class

Importantly for readers of MassTortDefense, the court rejected the proposed class. First, plaintiffs were seeking to represent the claims of a nationwide class without addressing any of the complexities involved in doing so. Plaintiffs appeared to simply presume that California law should apply to all putative class members nationwide; they made no attempt to satisfy their burden of establishing that the application of California law to the entire proposed class would be appropriate under Rule 23(b)(3). Plaintiffs did not adequately address any of the potential jurisdictional and due process limitations upon the application of California law to the claims of non-resident class members. Second, the plaintiffs did not address the potential choice of law problems that would arise should the court certify a nationwide class, noting each class member's home state has an interest in protecting its consumers from in-state injuries caused by foreign corporations and in delineating the scope of recovery for its citizens under its own laws.

In contrast to plaintiffs' dropping the ball, HP submitted a detailed analysis of the variations in state consumer protection and deceptive trade practice laws. This analysis demonstrates the many differences among states with respect to, for example, statutes of limitations, scienter requirements, and calculation of damages. See, e.g., In re Bridgestone/Firestone, 288 F.3d 1012, 1017-18 (7th Cir.2002) (“State consumer-protection laws vary considerably, and courts must respect these differences rather than apply one state's laws to sales in other states with different rules.”).

Based on the record before it, the court concluded that the proposed nationwide class would be unmanageable.
 

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A federal court has denied Whirlpool Corp.’s motion to dismiss in a proposed class action arising over allegedly defective ice chutes in the company’s side-by-side refrigerator models. Nessle v. Whirlpool Corp., No.1:07-cv-03009 (July 25, 2008 N.D. Ohio). See here.

Judge Christopher Boyko denied the motion, finding plaintiff had sufficiently pled the key elements required to allege a claim under the Ohio Consumer Sales Practices Act. MassTortDefense has posted before on the growing impact of state-law based consumer fraud class actions.

Nessle purchased a Whirlpool-manufactured side-by-side refrigerator in May, 2006. The refrigerator came with a one-year limited warranty. It was sold under Whirlpool’s “Gold” label, which Nessle alleges she took to mean that the product was special and worth purchasing at a premium, or at a minimum would work properly, according to the opinion. Within a few weeks of purchasing the refrigerator, Nessle claimed, she began experiencing problems with the ice dispensing function of the refrigerator’s ice maker, including clogs in the ice chute. A service technician was dispatched to service the ice maker on several occasions, the complaint claimed. But plaintiff alleged that the ice chute would allegedly jam up and freeze again.

The lawsuit, filed in October, 2007, claims Whirlpool was aware of an alleged design defect in the refrigerators and failed to disclose the defect. It seeks to represent a statewide class consisting of all current and former Ohio residents who have, since 2000, purchased a side-by-side Whirlpool refrigerator with a purportedly defective ice chute. The complaint seeks an order requiring Whirlpool to repair or replace the defective ice chutes, as well as monetary relief.

Whirlpool argued that plaintiff failed to plead any act or omission by the company that would constitute an unfair or deceptive act under the OCSPA. Second, plaintiff had failed to adequately plead the element of proximate cause.

The court gave a narrow reading to the Supreme Court guidance in Bell Atlantic v. Twombly, 127 S.Ct. 1955 (2007), as requiring only enough facts to state a claim that is plausible on its face. Of course, the Court also has stated that, “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 1965.

On the conduct element, and the use of the term “Gold,” the court relied on the purpose of the Act to compensate consumers and the need to “liberally construe” such legislation.  One would presume that beyond the motion to dismiss stage a serious challenge exists to plaintiff's alleged interpretation of the term "Gold." 

On the causation issue, defendant stressed that plaintiff did not contend the “Gold” label affected her decision to buy her refrigerator, and that Plaintiff did not read, hear, or see any statements of fact by Whirlpool prior to purchasing the refrigerator. Defendant’s argument, the court said, is “largely unpersuasive” because there is no provision in the statute itself requiring Plaintiff to show reliance on any statement of fact or omission. While proximate cause is an essential element of an OCSPA claim, the court relied on dicta from the Sixth Circuit that “a showing of subjective reliance is probably not necessary to prove a violation of the OCSPA.” Butler v. Sterling, Inc., No. 98-3223, 2000 WL 353502 at *4 (6th Cir. Mar. 31, 2000).

The court also relied on an intermediate appeals level state court opinion, which the court read to suggest  that individual reliance is not necessary with regard to class action suits under the state consumer fraud act. Amato v. General Motors Corp., 11 Ohio App. 3d 124, 126 (1982). In Amato, the court specifically noted: “[C]onsumer claims would amount to little if acceptance of the representations made for the product could be manifested only by one-on-one proof of individual exposure.”   MassTortDefense notes that that 25 year-old opinion actually held that proof of reliance may be sufficiently established by inference or presumption from circumstantial evidence to warrant submission to a jury without direct testimony from each member of the class. That does not mean that reliance is not relevant to the causation element. And how one proves causation in an alleged fraud case without showing reliance of some sort is an issue many state courts have refused to clarify in their desire to have the reliance element not defeat consumer class actions (as a dominant individual issue). 

Judge Boyko also let stand Nessle’s claim for breach of implied warranty of merchantability, and unjust enrichment, but dismissed the claim for breach of express warranty. “The written warranty contains no language pertaining to the reliability or performance of the ice maker, and provides only for repair or replacement of any defective parts during the one-year limited warranty period.”
 

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A federal court earlier this month permitted a proposed class action to move forward with its central allegation that Christian Dior lipstick contains excessive levels of lead. See Stella v. LVMH Perfumes and Cosmetics USA Inc., No. 1:07-cv-06509, 2008 WL 2669662 (N.D. Ill. 7/8/08).

Named plaintiff Pamela Stella alleges that she purchased Christian Dior "Addict Positive Red" lipstick, manufactured by LVMH Perfumes and Cosmetics USA Inc., at a Nordstrom department store in June, 2007. The so-called “Campaign for Safe Cosmetics” group issued a report in October, 2007 claiming that tests showed a lead level in LVMH lipsticks which slightly exceeds the regulatory limit established by the Food and Drug Administration for lead content in certain products like candy.  In reality, the average amount of lead a woman would be exposed to when using cosmetics is 1,000 times less than the amount she would get from eating, breathing and drinking water that meets Environmental Protection Agency (EPA) drinking water standards, according to the Cosmetics, Toiletry and Fragrance Association (CTFA).

Plaintiff then sued LVMH in November, 2007 on behalf of a proposed nationwide class of lipstick purchasers. She alleged that the company violated the Illinois deceptive business practices statute and breached an implied warranty of merchantability. She also brought claims for strict liability, negligence per se, unjust enrichment, and injunctive relief.

Judge Elaine E. Bucklo of the U.S. District Court for the Northern District of Illinois denied defendant’s motion to dismiss. She determined that Stella sufficiently alleged a claim under the deceptive trade practices law, including its requirement of actual damages. Stella sought to recover actual damages, the court said, "in the form of pecuniary damages (the cost of the lipstick).” The court also noted that plaintiff had alleged that her reliance on defendant's omission caused her to buy the lipstick and become exposed to lead. “This sufficiently alleges proximate cause.”

The court also agreed with plaintiff that Illinois law would permit medical monitoring as a remedy. The Illinois Supreme Court has not ruled on the question. But in Carey v. Kerr-McGee Chemical Corp., 999 F. Supp. 1109, 1118-19 (N.D. Ill. 1998), the district court had predicted that medical monitoring would be recognized as cognizable under Illinois law.

MassTortDefense has posted on medical monitoring before, here and here. The clear trend has been away from recognizing these claims, see Lowe v. Philip Morris USA, Inc., 344 Or. 403, 183 P.3d 181 (2008), or to narrow their scope. See Sinclair v. Merck & Co., 195 N.J. 51, 948 A.2d 587 (2008).

Where recognized, medical monitoring plaintiffs typically must prove:
1. exposure greater than normal background levels;
2. to a proven hazardous substance;
3. caused by the defendant's negligence;
4. as a proximate result of the exposure, plaintiff has a significantly increased risk of contracting a serious latent disease;
5. a monitoring procedure exists that makes the early detection of the disease possible;
6. the prescribed monitoring regime is different from that normally recommended in the absence of the exposure; and
7. the prescribed monitoring regime is reasonably necessary according to contemporary scientific principles.

Medical monitoring is almost always seen as a potential class action claim, for several reasons:
• First, the individual damages associated with periodic testing of a so-far healthy plaintiff may not be all that financially attractive to plaintiff attorneys.
• Secondly, a number of the elements of the claim (or remedy) of medical monitoring seem, on the surface, amenable to “common” proof in the form of epidemiological evidence. For example, the increased risk that typically must be shown.

When the issue is ripe, it should be clear that such claims are not appropriate for class treatment, as numerous individual issues will arise, including choice of law, properly viewed, in a nationwide class.

Defendant LVMH's also challenged the implied warranty claims, based on the absence of contractual privity between plaintiff and LVMH. But the court narrowly construed the privity requirement to say that Illinois law requires contractual privity as a prerequisite for breach of implied warranty claims only for recovery of economic losses. Voelker v. Porsche Cars North Am., Inc., 353 F.3d 516, 527 (7th Cir.2003). The medical monitoring claim, as "a form of personal injury claim," brought plaintiff out from under this privity requirement, said the court.

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The Third DCA appeals court in Florida ruled last week that a class action involving consumers who bought Sephia model vehicles with allegedly defective brake systems from Kia Motors should not have been certified. Kia Motors America Corp. v. Butler, 2008 WL 2356354 (June 11, 2008, Fla. App. 3rd Dist.).

The panel held that the trial court in Miami-Dade County had abused its discretion by certifying the class. The named plaintiff, Yvonne Butler, had filed the proposed class action on behalf of all Florida purchasers of 1999-2001 Kia Sephia model passenger motor vehicles. The complaint alleged that all Sephias manufactured during those years contain a brake system design defect that causes premature wear of the brakes, as a result of which the vehicles fail to meet a U.S. market brake-wear expectation of 20,000-30,000 miles. According to the complaint, the defect caused the cars to be unable to stop, or to suffer impaired stopping performance, increased stopping distances, brake shudder, brake vibration, or brake lockup and loss of control. The class sought damages to each class member for economic losses, including the difference between the price paid for each vehicle and the value of the vehicle, reduced resale value, and any out-of-pocket repair costs on the cars. It was estimated that about 18,000 Sephia vehicles were sold or leased in the state during the class period.

Consumer Fraud Claim Made

Plaintiffs sought to proceed under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Fla. Stat. §§ 501.201-.213, as well as breach of statutory, implied and express warranty. That makes the case one of the recent trend in which plaintiffs bring consumer fraud claims for what in the past might have been traditional products liability claims for product defects, under the theory that consumer fraud claims are easier to get certified as class actions. Not this time.

The Decision

The appeals court noted that class actions are an exception to the general rule that litigation is conducted by, and on behalf of, individual named parties only. For that reason, the trial court must conduct a rigorous analysis to determine whether the elements of the class action rule have been met. The first set of these requirements are referred to as the numerosity, commonality, typicality, and adequacy of representation elements of class certification. But in addition to satisfying those, a plaintiff also must satisfy one of the three subdivisions of Florida Rule of Civil Procedure 1.220(b). The relevant subdivision in this case was subsection (b)(3), which requires that common questions of law or fact predominate over any individual questions of the separate members, and that class representation is superior to other available methods for the fair and efficient adjudication of the controversy. Thus, to certify a class, this rule requires not only that common questions exist, but that those common questions predominate over individual questions; and that the class action to be manageable and superior to other proceedings. (much like the federal rule)

To determine if these requirements have been met, a trial court must envision how a class action trial would proceed. (MassTortDefense has frequently urged trial judges to "look down the road" and not blindly accept plaintiffs' bold assertions about trial procedures.) Under this analysis, the trial court must determine whether the purported class representatives can prove their own individual cases and, by so doing, necessarily prove the cases for each one of the thousands of other members of the class. If they cannot, a class should not be certified.

Predominance Lacking

The class certification in this case failed, first, to satisfy the predominance criteria. While plaintiffs alleged a common defect, the evidence demonstrated that the brake systems found in the three Kia Sephia models in this case were far from uniform. The disc braking process in an automobile is a complicated mechanical and hydraulically assisted process. The Kia Sephia vehicle disc brakes installed during the model years at issue were comprised of component parts specific to that model year. For example, the pad material was changed, the pad shim material was changed, the pad shim protector was removed, and rotor material modified. The 2000 model Sephia was manufactured with a different brake pad design from the prior model. Additionally, the rotor thickness was changed. For the 2001 model-year, the Sephia's front brake system was completely redesigned.

Thus, the court concluded that the component and design changes resulted in significant  differences in the performance of the Kia Sephia's front brakes over the three model years at issue here. “It is therefore scientifically and logically impossible to conclude that any performance issues for these three model years were the result of a common design.”  And it follows that even if there existed a difference between the price paid for each vehicle and the value of the vehicle as delivered for any design period, that difference cannot be proven on a class-wide basis.

Due Process Concerns

Importantly, the court took on plaintiffs' vague trial plan assertions, noting that to proceed at the level of abstraction urged by plaintiffs would raise due process concerns. See Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 377-78 (1996). The Third DCA cited the famous language from Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331, 344 (4th Cir.1998), about a trial plan denying a class action defendant a fair trial when it is forced to defend against a composite “perfect plaintiff” pieced together for litigation. The court went on to note that due process requires that class actions not be used to diminish the substantive rights of any party to the litigation. See generally Moller, The Rule of Law Problem: Unconstitutional Class Actions and Options for Reform, 28 Harv. J.L. & Pub. Pol. 855 (2005); Epstein, Class Actions: Aggregation, Amplification, and Distortion, 2003 U. Chi. Legal F. 475 (2003).

Consumer Fraud Act Analysis

A claim for damages under FDUTPA has three elements: (1) a deceptive act or unfair practice; (2) causation; and (3) actual damages. The FDUPTA class claim failed in this case on both the causation and actual damages elements. Among the individual questions that can be reasonably envisioned in the prosecution of this count, said the court, are: (1) whether the purchaser had knowledge of the alleged brake defect and purchased the vehicle despite such knowledge; (2) whether a deficiency attributable to Kia manifested itself; (3) whether an individual vehicle suffered diminished value as a result of the alleged deficiency if the deficiency was repaired; and (4) whether the purchase price of the vehicle reflected the alleged defect at the time it was purchased. These issues are compounded by the fact that the class representative in this case sought compensation not only for class members whose brakes have manifested a deficiency, but also for those whose brakes have performed satisfactorily. In certifying the class, the trial court had deviated from the majority of jurisdictions which consistently have denied class recovery on this type of theory.

The court concluded that without individual inquiry, there is no way to adjudicate this case to determine whether the need for a particular repair made by a class member was based on normal wear, a defective original part, a defective after market part, environmental factors, such as weather or road conditions, the presence of foreign objects in the braking system, the failure of parts other than the braking system, poor workmanship by a third party, or individual driving habits.

Superiority Lacking Too

To find superiority, a court must find all other methods of resolving the issues in a case to be inferior to a class action. Here, fewer than half of the class members reported brake difficulty. An individual inquiry and an inestimable number of mini-trials would be necessary to identify the class. Class certification is not ipso facto required where there exist multiple claims and potentially low dollar recovery.

Accordingly, the class was decertified.  And a decision product sellers may be able to use.

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