Ninth Circuit Refuses to Revive Water Class Action

The Ninth Circuit this week declined to revive a proposed class action in Washington federal court accusing defendant of mis-labeling a water drink containing caffeine.  See Harold Maple v. Costco Wholesale Corporation, No. 13-36089, 14-35038 and 14-35059, 2016 WL 2621345 (9th Cir. 5/9/16).

 

This was a putative class action arising from allegedly unfair or deceptive statements found on the label of a product known as VitaRain Tropical Mango Vitamin Enhanced Water Beverage (“VitaRain”) bottled by Niagara Bottling and sold by Costco. The putative class was defined as all Washington residents who purchased the VitaRain product over the four years preceding the filing of the lawsuit.
Plaintiff's First Amended Complaint asserted claims for violations of the Washington Consumer Protection Act (“CPA”), RCW 19.86.010 et seq.; misrepresentation; and negligence. Plaintiff specifically alleged that the VitaRain beverage (1) lacked a front-facing disclosure that the beverage contains caffeine; (2) failed to disclose the relative amount of caffeine in the beverage; and (3) falsely claimed that the beverage was a “natural tonic” and that it contained “natural caffeine.”

Thus this case falls within the ongoing trend of litigation challenging anything and everything a product maker says on a label, no matter how innocent or general.

The district court dismissed the complaint, and plaintiff Harold Maple appealed. The 9th Circuit affirmed that the district court correctly held that the complaint failed to state a claim. As a matter of law, the name of the beverage is not “likely to mislead a reasonable consumer.” Panag v. Farmers Ins. Co. of Wash., 204 P.3d 885, 894–95 (Wash.2009). Here, the term “Vita” could mean many things,not necessarily vitamins, and rain could not be an actual ingredient, and the label contained no misleading statements.  To the extent that Plaintiff's claim challenged the labeling of the type of “caffeine” or “tonic” as “natural” or “all natural” and the failure to describe the caffeine and other ingredients as “unnatural,” the claim failed because Plaintiff did not allege that he read those parts of the label. Accordingly, he could not establish causation. See, e.g., Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 170 P.3d 10, 22 (Wash.2007) (“A plaintiff must establish that, but for the defendant's unfair or deceptive practice, the plaintiff would not have suffered an injury.”).

The district court also correctly held that dismissal without leave to amend was proper. On appeal, Plaintiff argued that amendment could save the complaint because he could somehow allege a subclass of plaintiffs who did read the relevant parts of the label. But because Plaintiff's own individual claim failed, dismissal without leave to amend was correct.  Here's the useful point - the potential existence of other classes of which Plaintiff is not a member is irrelevant. Sanford v. MemberWorks, Inc., 625 F.3d 550, 560–61 (9th Cir.2010); Boyle v. Madigan, 492 F.2d 1180, 1182 (9th Cir.1974) (citing O'Shea v. Littleton, 414 U.S. 488, 494 (1974)).

The only error was dismissing without prejudice, which the panel corrected.

 

 

Noodle Class Action Dismissed

A California federal court recently dismissed a proposed class action over alleged trans fat in defendant's Cup Noodle products. See Guttmann v. Nissin Foods (USA) Co. Inc., No. 3:15-cv-00567 (N.D. Cal. 8/17/15).  The reasoning may be interesting to our readers.

Plaintiff's complaint cited numerous studies that have associated the consumption of artificial trans-fat to increased risk of certain medical conditions such as cardiovascular heart disease, and alleged that there is ‘no safe level’ of artificial trans fat intake.  While the case was pending, the Food and Drug Administration issued a final determination that partiallyhydrogenated oils are no longer “generally recognized as safe.” 80 Fed. Reg. 34650 (June 17, 2015). Pursuant to that determination, manufacturers must remove partially-hydrogenated oils from their products within three years.

Guttmann claims that he assumed all of Nissin’s noodle products were safe to consume, because of inadequate labeling.  He also claimed he was economically harmed because he was deprived of the benefit of his bargain, having thought he got safe food when, in fact, he got unsafe food.

Guttmann was, however, a plaintiff in at least four other lawsuits regarding artificial trans-fat and food labeling, against The Quaker Oats Company, Hostess Brands, Inc., Ole Mexican Foods, and 
La Tapatia Tortilleria.  Thus, he was was aware that (i) products could be labeled “0g Trans Fat” under FDA regulations if they contained less than 0.5 grams of trans-fat, (ii) partially-hydrogenated oils contained artificial trans-fat, (iii) he could check the ingredients labels on food products to see if they contained partially-hydrogenated oils, and (iv) artificial trans-fat was linked to health risks. It was undisputed that Nissin listed partially-hydrogenated oils among the ingredients on all of its product labels, and judicial notice was taken of the contents of the product  labels. Thus, the court found that plaintiff should have been keenly aware of the alleged injury he might suffer by eating Nissin’s noodles, and he knew he could have avoided any such injury caused by Nissin by simply checking the product label. This fact was fatal to Guttmann’s claims.

Interesting procedural note: plaintiff argued that his litigation history was not contained within the pleadings, and so could not be considered in this motion to dismiss.  Although allegations of fact in a complaint are accepted as true for the purposes of adjudicating a motion to dismiss, such allegations may be rejected if contradicted by matters properly subject to judicial notice. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

On the consumer fraud claim, the court noted an act or practice cannot be unfair within the meaning of California Code Section 17200 if it caused an “injury the [plaintiff] could reasonably have avoided.” Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824, 839 (2006). Since commencing his litigation campaign, plaintiff could reasonably have avoided any injury based on Nissin’s alleged use of artificial trans-fat by reading the nutrition-facts panel and deciding not to purchase or consume them based on the presence of partially-hydrogenated oil.

And on the implied warranty claim, the court noted it need not determine whether a typical consumer could have a claim for breach of the implied warranty of merchantability because Guttmann was not a typical consumer but is "a self-appointed inspector general roving the aisles of our supermarkets. He continues on a five-year litigation campaign against artificial trans-fat and partially-hydrogenated oil" and has admitted that he has inspected products for those ingredients before. Guttmann’s apparent refusal to inspect Nissin’s noodles for an alleged defect despite his extensive knowledge of and concern for this particular ingredient was fatal to his claim for breach of the implied warranty of merchantability.

Action dismissed.

Snack Bar Class Action Dismissed

An Illinois federal judge recently dismissed a proposed class action alleging the defendant somehow misled consumers about sugar in its snack bars despite the ingredient label.  See Rochelle Ibarrola v. Kind LLC, No. 3:13-cv-50377, 2015 WL 1188498 (N.D. Ill. 3/12/15).

Plaintiff brought a putative class action against a maker of food products, alleging she purchased its Vanilla Blueberry Clusters with Flax Seeds (“Vanilla Blueberry Clusters”)—on two occasions in 2013. Citing the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill. Comp. Stat. 505/1 et seq., she alleged that the packaging of Vanilla Blueberry Clusters was deceptive in that it claimed that the product contained “no refined sugars.” Specifically, she asserted that evaporated cane juice and molasses, identified on the products’ ingredient lists, are refined sugars. She proposed both a statewide and nationwide class of individuals who purchased any of defendant's four identified Healthy Grains products.

Defendant moved to dismiss, and the Court agreed that plaintiff had not plausibly alleged that a reasonable consumer would be deceived by the statements in light of the label information (and the express warranty claim was dismissed because she did not notify Kind of the alleged breach of warranty as required by Illinois law.)

To prevail on her ICFA claim, plaintiff had to allege and ultimately prove: (1) a deceptive act or practice by Kind, (2) that the deceptive act or practice occurred in the course of conduct involving trade or commerce, (3) that Kind intended that plaintiff rely on the deception, and (4) that the deception caused her actual damages. Oshana v. Coca–Cola Co., 472 F.3d 506, 513 (7th  Cir. 2006). In addition to these elements, common law fraud requires plaintiffs to allege that the plaintiff actually relied on the contested statement and that the defendant acted with scienter. Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir.1997).

Ibarrola claimed, somewhat obliquely, that she understood “no refined sugars” to mean that the Vanilla Blueberry Clusters contained only “naturally occurring” sugars that had not been refined at all.  But, said the Court, this is not plausible. The Court noted it must view the allegedly misleading statement in light of the information available to plaintiff at the time of her purchase.  Plaintiff stated that she read the entire product label before purchasing the Vanilla Blueberry Clusters. In doing so, she learned that the product contained evaporated cane juice and molasses—sweeteners that she alleged are at least partially refined.  That is, because she admitted reading the entire product label she thus saw that the product contained evaporated cane juice, and must have recognized that at least one of the sweeteners in the Vanilla Blueberry Clusters was derived from sugar cane. Thus, taken at her word, plaintiff alleged that she thought that Vanilla Blueberry Clusters contained sugar cane in its natural state, not having gone through any process to refine it.  But sugar cane in its natural state is a grass that contains jointed stalks resembling bamboo. The stalks are made up of fibrous flesh surrounded by bark!

Given this reality, no reasonable consumer would think—as plaintiff alleged that she did—that the sugar contained in the products was still in its natural, completely unrefined state.  Even though a reasonable consumer may not understand everything that happens to sugar cane before its derivative can be added as an ingredient, a reasonable consumer would know that all sugar cane-derived sweeteners suitable for human consumption must be at least partially refined. Reasonable consumers do not believe that they are eating straight sugar cane in Vanilla Blueberry Clusters or any other food product because sugar cane in its natural, unprocessed state is indigestible. That is, a reasonable consumer would recognize that, at the least, impurities or unwanted material must be removed from sugar cane before it can be used as an ingredient in Vanilla Blueberry Clusters, and thus, that all sugar cane-derived sweeteners require some form of  “refining,” as the dictionary defines the term.

Thus, the Court found that the only reasonable conclusion after reading the entire Vanilla Blueberry Clusters label is that defendant used the word “refined” as a term of art to distinguish only partially refined sugars like evaporated cane juice and molasses from fully refined sugars like table sugar.

 

Courts have dismissed other complaints premised on such logical inconsistencies. E.g., Rooney v. Cumberland Packaging Corp.,  No. 12–CV–0033–H DHB, 2012 WL 1512106, at *4 (S.D.Cal. Apr. 16, 2012). See also Kane v. Chobani, Inc., No. 12–CV–02425–LHK, 2013 WL 5289253, at *6 (N.D.Cal. Sept. 19, 2013).

Here, because plaintiff already had an opportunity to amend, the dismissal was with prejudice.

 

New Year's Fitness Resolution- Drop the Fitness Tracker Class Action

Surveys show that getting fit is one of the top 5 New Year's resolutions.  So perhaps timely that a federal court recently dismissed a proposed nationwide class concerning fitness-tracker wristbands. See Frenzel v. Aliphcom, No. 14-cv-03587-WHO (N.D. Cal., 12/29/14). While there also was discussion in the opinion of the motion to dismiss various counts of the complaint under California law, let's focus on the class allegations.

Defendant markets and sells a fitness-tracker wristband that contains an accelerometer designed to track the user's daily movements and sleep patterns. Users can connect, or "sync," their device to a mobile application that helps them set personal exercise and diet goals, monitor their progress, and collaborate with other users. The product box states: "Battery life up to 10 days."   It is available in major retail stores across the country and online. Defendant has distributed three generations of the device.

Frenzel alleged that each generation has been plagued with power problems, including significant delay in charging, syncing problems, flashing lights indicating low charge, extremely short battery life, and failure to charge at all. Even with later generations, plaintiff alleged, consumers continued to complain about the device's performance, and multiple articles appeared online describing the ongoing power problems. 

Frenzel resides in Kansas City, Missouri and is a Missouri citizen. In November 2012, Frenzel purchased a second generation device, and before purchasing the device, Frenzel  allegedly reviewed defendant's marketing materials and representations, including that the battery is expected to last for 10 days when fully charged.  Within a few months, Frenzel's device allegedly stopped maintaining its charge. Frenzel contacted defendant and was issued a replacement second generation version.  The replacement also allegedly experienced power problems as well. On the basis of these allegations, Frenzel sought to represent a national class defined as all persons who purchased any of the three generations for personal use, excluding those who purchased the product for resale.

Defendant moved to dismiss.  A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible when it allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. In considering whether the complaint is sufficient to state a claim, the court need not accept as true allegations that contradict matters properly subject to judicial notice. In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). Nor is the court required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. Id. It is within the district court's purview to reject, as implausible, allegations that are too speculative to warrant further factual development.  See Dahlia v. Rodriguez, 735 F.3d 1060, 1076 (9th Cir. 2013). 

A threshold issue was choice of law. Defendant contended that under Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), Frenzel's claims should be governed by the law of the state in which he purchased his device (which Frenzel conceded was not California). Defendant argued that plaintiff's claims under California law (the CLRA, UCL, and FAL) must therefore be dismissed. Also, defendant made the separate argument that under Mazza, Frenzel cannot maintain a national class action that would apply California law to nonresident class members who purchased their devices in other states. 

In Mazza, a putative class sued Honda for violations of the CLRA, UCL, and FAL. Honda was headquartered in California, and the alleged misrepresentations emanated from California, but the transaction that caused the alleged injury (i.e., the lease or purchase of a Honda automobile), had occurred in other states for the majority of class members. The Ninth Circuit reversed the district court's certification of a national class after concluding that, under California's choice of law rules, each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place. The Ninth Circuit found that there were material differences between the consumer protection regimes of California and a number of other states, and that each state's interest in deciding for itself how to balance the range of products and prices offered to consumers with the legal protections afforded to them outweighed California's attenuated interest in applying its law to residents of foreign states. Id. at 590-94.

Importantly, since Mazza, a number of courts have dismissed CLRA, UCL, and/or FAL claims asserted by named plaintiffs (or on behalf of unnamed class members) who did not purchase the defendant's product in California. See, e.g., Frezza v. Google Inc., No. 12-cv-00237-RMW, 2013 WL 1736788, at *5-6 (N.D. Cal. Apr. 22, 2013); Granfield v. NVIDIA Corp., No. 11-cv-05403-JW, 2012 WL 2847575, at *3 (N.D. Cal. July 11, 2012); Littlehale v. Hain Celestial Grp., Inc., No. 11-cv-06342-PJH, 2012 WL 5458400, at *1-2 (N.D. Cal. July 2, 2012).

Notwithstanding the argument that discovery might be needed to make a choice of law decision, the court here found that in the circumstances of this case, it was not appropriate to delay until class certification to consider the choice of law issue. First, although Mazza was decided at class certification, the principle articulated in Mazza applies generally and is instructive even when addressing a motion to dismiss.  In factually analogous cases, Mazza  was not only relevant but controlling, even at the pleading phase.  Second, while choice of law analysis is often a fact-specific inquiry, this does not necessarily mean that it can never be conducted on a motion to dismiss. There are cases in which further development of the factual record is not reasonably likely to materially impact the choice of law determination. In such cases, there is no benefit to deferring the choice of law analysis until class certification.

The court pointed out  that in Werdebaugh v. Blue Diamond Growers, the court applied the governmental interest test to CLRA, UCL, and FAL claims asserted on behalf of a national class, 2013 WL 5487236, at *15-16, at the class certification but with only minimal fact-specific analysis. That court concluded that a national class could not be certified in light of Mazza. 2014 WL 2191901, at *18-21. Likewise, in Brazil v. Dole Food Co., Inc., the court deferred until class certification to consider whether California state-law claims could be asserted on behalf of nonresident class members, but then held that Mazza precluded certification of a national class. 2014 WL 2466559, at *12-14. As in Blue Diamond, the court was able to reach this conclusion with minimal fact-specific analysis. See id. The court concluded that here it was highly unlikely that discovery would uncover information relevant to whether Frenzel could maintain a national class action asserting claims under California law.

Thus, under California's choice of law rules, Frenzel's claims (both individual and class) had to be dismissed. Frenzel's individual claims were dismissed because he had not identified the state in which he purchased his device, but admitted it was not California. Defendant had the burden to demonstrate the material differences in the relevant law of California and the other state or states with regard to the particular claims and facts of the case, and a plaintiff may not preclude a defendant from making it by obfuscating the state in which he purchased his product. As to Frenzel's class claims, the court found that defendant adequately demonstrated that this was a case, like Mazza, where "each class member's consumer protection claim[s] should be governed by the consumer protection laws of the jurisdiction in which the transaction took place." 666 F.3d at 594. The CLRA, UCL, and FAL claims on behalf of the putative class were subject to dismissal for this reason as well.

Plaintiff sought to rely on a choice of law provision allegedly in the terms and conditions of sale of the product, although he never pleaded such terms in his complaint.  Moreover, the plain language of the terms limited their application to on-line purchases, and plaintiff alleged he purchased his in a store. Also, the allegations of defect did not claim that the product violated the terms and conditions. See Nikolin v. Samsung Electronics Am., Inc., No. 10-cv-01456, 2010 WL 4116997, at *4 (D.N.J. Oct. 18, 2010); see also, In re Sony Gaming Networks & Customer Data Sec. Breach Litig., 903 F. Supp. 2d 942, 964-65 (S.D. Cal. 2012) (rejecting argument that plaintiffs' CLRA, UCL, and FAL claims were governed by the choice of law provision in defendants' terms of service contract, where "[b]y its own terms, . . . the provision dictates only that California law applies to the construction and interpretation of the contract, and thus the provision does not apply to plaintiffs' non-contractual claims asserted under California's consumer protection statutes").

Complaint dismissed with leave to try to amend. 

Class Action on Smoke Detectors Dismissed: All Smoke No Fire

A California federal court recently rejected rejected a proposed class action in which plaintiffs alleged smoke alarms were defective in that the product’s packaging allegedly omitted safety information.  See Bird v. First Alert Inc. et al., No. 4:14-cv-03585 (N.D. Cal. ).

The defendant sells two types of smoke detectors — ionization, which the opinion said are better at catching fast-flaming fires, and photoelectric, which are reportedly more sensitive to smoldering fires. The basis of plaintiff's complaint is that the defendant failed to adequately disclose the
dangers of using ionization smoke alarms – specifically, that ionization smoke alarms do
not alert occupants of smoldering-type fires as effectively as photoelectric smoke alarms.  However, the ionization alarm, which Bird purchased, explains these differences clearly on its packaging and recommended the use of both types of alarms for “maximum protection." 

Defendant moved to dismiss. The allegations in the complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).  A motion to dismiss should be granted if the complaint does not proffer enough facts to state a claim for relief that is plausible on its face. See id. at 558-59. W]here the well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct, the complaint has alleged – but it has not shown – that the pleader is entitled to relief.  Although the court generally may not consider material outside the pleadings when resolving a motion to dismiss for failure to state a claim, the court may consider matters that are properly the subject of judicial notice. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Additionally, the court may consider exhibits attached to the complaint, see Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989),

Plaintiff obviously had a high hurdle to overcome to state a claim here, given that the product packaging explains that the two types of smoke alarms respond differently to different types of fires, and recommends that consumers utilize both types. Nevertheless, plaintiff contended that the disclosures on the packaging did not constitute a "warning" and did not amount to a "sufficient disclosure" of the extent of the "safety defect" inherent in the ionization smoke detectors, because they allegedly failed to state that the ionization smoke detectors might not safely alert consumers in time to escape the deadly effects of smoldering fires.

The court recognized that even a nondisclosure claim sounding in fraud must still be pled with particularity. Kearns, 567 F.3d at 1126-27; see also Marolda v. Symantec Corp., 672 F.Supp. 2d 992, 1002 (N.D. Cal. 2009). Specifically, the plaintiff must set forth an explanation as to why the omission complained of  made the warning or label false and misleading in order to state a claim under Rule 9(b). Bias v. Wells Fargo & Co., 942 F.Supp. 2d 915, 935 (N.D. Cal. 2013). Thus, plaintiff must describe the content of the omission and where the omitted information should or could have been revealed, as well as provide representative samples of advertisements, offers, or other representations that plaintiff relied on to make her purchase and that failed to include the allegedly omitted information. See Eisen v. Porsche Cars North Am., Inc.,, 2012 WL 841019 at *3 (citing
Marolda, 672 F.Supp. 2d at 1002). While the complaint alleged that the "packaging" on plaintiff's ionization smoke detector did not contain any warning, instructions, or other information disclosing,
describing, or warning about the smoke detector's inability to adequately, effectively, and
safely detect, warn, alert, and protect occupants from smoldering-type fires,  in fact the packaging did disclose information regarding the performance of ionization alarms in smoldering fires.

Yet, the complaint alleged no facts regarding these disclosures – in particular, when plaintiff looked
at the packaging (if ever), whether she reviewed the disclosures on the packaging (if at all),
or why she disregarded the clear recommendation that she use both ionization and photoelectric alarms. Nor did the complaint allege any facts showing that the disclosures were inadequate.

Motion to dismiss granted without prejudice.

Mouthwash Class Action Washed Out

A federal judge earlier this month granted defendant's motion to dismiss a putative class action lawsuit accusing it of using misleading labeling on its market mouthwash.  See Suzanna Bowling v. Johnson & Johnson et al., No. 1:14-cv-03727 (S.D.N.Y., 11/4/14).

The issue here was preemption.  Plaintiff Bowling filed this action on behalf of herself and others similarly situated, alleging that the defendant violated (1) numerous state statutes, as well as (2) the Magnuson-Moss Warranty Act ("MMWA"), when it sold Listerine Total Care ("LTC"), a line of
mouthwashes. Defendant moved to dismiss on the grounds that the state law claims were preempted by the Food Drug and Cosmetics Act ("FDCA"). (Put the MMWA issue aside for today.)

Plaintiffs alleged that purported claims that the mouthwash can help with tooth enamel issues were false. But FDA had trod on this ground in "monographs" that set out labeling regulations for over-the-counter ("OTC") dental hygiene products.  First, in 1980, the FDA published a proposed
monograph ("1980 Monograph"), which found, inter alia, that "[t]he deposition of fluoride in dental enamel has been shown to increase resistance to enamel solubility and therefore dental decay" - or in plain English, flouride is good for preserving enamel. Second, in 1995, the FDA published a final monograph ("1995 Monograph"), which permits manufacturers of OTC drugs containing sodium
fluoride (such as LTC) to market the product as "aid[ing] the prevention of dental .. . decay,"'  along with "other truthful and nonmisleading statements [further] describing [this] use."  In other words, pursuant to the 1995 Monograph, manufacturers of OTC drugs containing sodium fluoride are allowed (1) to represent that such drugs prevent tooth decay and (2) to provide further labeling to explain how decay is prevented.  Furthermore, on multiple occasions, the FDA has sent letters to manufacturers of OTC drugs containing sodium fluoride to clarify the parameters of the Monographs.  In each of these letters, the FDA has objected to certain labeling practices - for example, certain representation that sodium fluoride "fights plaque"- but it has expressed no concern about the label "Restores Enamel."

Defendant moved to dismiss. In the context of OTC drugs, the FDCA expressly preempts state law labeling requirements that are "different from," "addition[ al] to," or "otherwise not identical with" federal labeling requirements. Under this standard, said the court, preemption is certainly appropriate when a state law prohibits labeling that is permitted under federal law. But it is also appropriate when a state law prohibits labeling that is not prohibited under federal law. The standard, in other words, is not only whether a state law actively undermines federal law. It is whether state law diverges from federal law at all.

That means, found the court, that plaintiffs would need to plead facts suggesting that the FDA has
affirmatively prohibited the challenged label language. Otherwise, plaintiffs' state law causes of action would be, in effect, imposing a labeling requirement that is "not identical with" labeling requirements under federal law. "Plaintiffs cannot meet this burden." If the FDA had prohibited the
"Restores Enamel" kind of label, there would obviously have been a regulation saying so. But there was no such regulation. As it stands, observed the court, the FDA has issued a monograph directly on point but declined to indicate either in the monograph itself or in advisory interpretations of the monograph that a phrase like "Restores Enamel" is misleading. If successful, this litigation would thus do exactly what Congress sought to forbid: using state law causes of action to bootstrap labeling requirements that are "not identical with" federal regulation.

Motion granted, 

Motion to Dismiss Granted in Juice Case

A California federal court has rejected a proposed class action complaint arising from alleged misleading labeling and advertising of vegetable juice products as "raw" and "organic." See Alamilla, et al. v. The Hain Celestial Group Inc., et al., No. 3:13-cv-05595 (N.D. Calif. 7/2/14).

Specifically, the complaint asserted that the effects of a pressure treatment in the making of the products were "similar to those of cooking and pasteurization, namely the destruction of vitamins, nutrients, live enzymes, nutritional value, and health benefits." On their own, said the court, these allegations might seem to state a plausible claim that the defendants' representations could lead a reasonable consumer to conclude that pressure treatment did not deprive the juice of its nutritional value in the same way that pasteurization does.

But, the court said, the complaint also incorporated by reference two articles that contradicted the plaintiffs' claim. In particular, the complaint quoted and incorporated by reference a published article that concluded that pressurization has "little or no effects on nutritional and sensory quality aspects of foods."  Although the plaintiffs did not include this specific conclusion language in their complaint, there was no doubt they had incorporated by reference the entire text of the articles they quoted in their complaint.

The articles the plaintiffs cited contradicted the allegation upon which their entire complaint hinged—namely, that pressure treatment deprives juice of nutritional value to a similar degree as pasteurization. Courts "need not accept as true allegations contradicting documents that are referenced in the complaint." Lazy Y Ranch LTD v. 24 Behrens, 546 F.3d 580, 588 (9th Cir. 2008). "A plaintiff can plead himself out of court by alleging facts which show that he has no claim, even though he was not required to allege those facts." See Sprewell v. Golden State Warriors, 266 F.3d 979, 988-989 (9th Cir. 2001). 

Accordingly, the complaint was dismissed with prejudice.
 

Consumer Fraud Class Claim Dismissed in Beverage Case

Readers have seen our warning about the trend in food and beverage claims attacking virtually every aspect of the product's label as a supposed consumer fraud act violation. A federal court earlier this month dismissed just such a proposed class action challenging the labeling on VitaRain Tropical Mango Vitamin Enhanced Water Beverage.  See Maple v. Costco Wholesale Corp., No. 12-5166 (E.D. Wash., 8/1/13).

Plaintiffs alleged in their amended complaint that one defendant manufactured and bottled a product known as VitaRain Vitamin Enhanced Water Beverage. VitaRain came in four flavors: Tropical Mango, Raspberry Green Tea, Kiwi Strawberry, and Dragonfruit. The product was marketed and distributed by another defendant and sold at Costco warehouses throughout the
country. Plaintiffs alleged that the VitaRain Tropical Mango drink in particular was marketed as a natural product but in fact contained “unnatural” ingredients, including large amounts of “synthetic caffeine.” Specifically, plaintiffs alleged that the VitaRain Tropical Mango drink (1) lacked a front-facing disclosure that the beverage contained caffeine; (2) failed to disclose the relative amount of caffeine in the beverage; and (3) falsely claimed that the beverage is a “natural tonic” and
contains “natural caffeine.” Plaintiffs further alleged they “reasonably believed that they [had] purchased a Drink similar to vitamin water.” 

On behalf of a putative class consisting of all Washington residents who purchased the product over the four years preceding the filing of the lawsuit, the named plaintiff asserted claims for (1) violations of the Washington Consumer Protection Act; (2) misrepresentation; and (3) negligence.

Defendant Costco moved to dismiss the amended complaint, contending, inter alia, that some
of plaintiff’s claims were preempted by federal law; and that parts of the amended complaint failed to meet the pleading standards of Rules 8 and 9(b) of the Federal Rules of Civil Procedure.

To withstand dismissal, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Naked assertion[s],” “labels and conclusions,” or “formulaic recitation[s] of the elements of a cause of action will not do.” Id. at 555, 557.  A claim has facial plausibility only "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

First an interesting civil procedure issue. Ordinarily, when the district court considers matters outside the pleadings it must convert a motion to dismiss brought under Civil Rule 12(b)(6) into a Civil Rule 56 motion for summary judgment. Fed. R. Civ. P. 12(d). However, a court may consider certain materials without converting the motion to dismiss into a motion for summary judgment. See, e.g., United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Such materials include documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice.  A document may be incorporated by reference into a complaint where the
plaintiff refers extensively to the document or the document forms the basis of plaintiff’s claim. In such cases, the defendant may offer that document and the district court may treat the document as part of the complaint for the purposes of a motion to dismiss. Here, the court concluded that judicial notice of the product label was appropriate and that it could consider the labeling without converting Costco’s motion to dismiss into one for summary judgment.

Defendants argued that plaintiff’s claims were expressly preempted by the Federal Food Drug and Cosmetics Act (“FDCA”), as amended by the National Labeling and Education Act (“NLEA”), 21 U.S.C. § 301 et seq. The FDCA “comprehensively regulates food and beverage labeling.” Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1175 (9th Cir. 2012).  And specifically, they govern whether and how a label must disclose the presence of caffeine.  Here, the Amended Complaint sought "to create and impose”  two new requirements which would directly conflict with federal law: (1) a requirement that caffeinated beverages disclose the fact that they contain caffeine on the front label; and (2) a requirement that labels state the “relative amount” of caffeine by providing a “daily value” amount.  By virtue of imposing these new and conflicting requirements, defendants contended, plaintiff’s claims were preempted.  The court agreed; defendants showed that these food labeling requirements are expressly covered by the regulations. Federal law preempts any state law that would impose additional requirements on how food labels present nutrition information.  See Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011).  Specifically, the court held that federal law preempts plaintiff’s claims that (1) defendants were required to disclose that the drink contained caffeine on the front label of the drink and (2) that defendants were required to state the “relative amount” of caffeine in the drink. Therefore Costco’s motion to dismiss was granted as to these claims.

Next, defendants contended that plaintiff had also failed to adequately plead causation, an element of the remaining consumer fraud-based allegations. Specifically, defendants argued that plaintiff had not alleged that he even read the complained-of labels before purchasing the VitaRain drink. The court noted that while the amended complaint contained detailed allegations about what was, and what was not, on the label of the VitaRain Tropical Mango drink he allegedly purchased, nowhere did he state that he actually read the label, or that his purchasing decision was driven by the alleged deceptive statements on the label.  Broad conclusory statements on causation. such as that class members have suffered "as a result of" purchasing the energy Drink, were insufficient, especially in light of Plaintiff’s failure to allege that he even read the allegedly deceptive labels prior to purchasing the drink.

Finally, on the misrepresentation claims, defendants suggested that plaintiff could not prove the reliance elements of his fraudulent misrepresentation and negligent misrepresentation claims because he had not alleged that he saw the alleged misrepresentations prior to purchasing
the drink. The court dismissed plaintiff’s misrepresentation claim for the same reason that the CPA claim was dismissed: Plaintiff failed to adequately plead reliance because he had not alleged that he based his purchasing decision on the complained-of labels or that he even read the labels
prior to purchasing the drink.  The court refused to credit the naked assertion that he would not have purchased the drink had the label not contained such statements in light of the missing averments.

Claims dismissed (with leave to amend).

 

Medical Monitoring Complaint Held Insufficient

A federal trial court last week dismissed a medical monitoring claim by an employee of a pipe cleaning company pursuant to Twombly. Royal v. Exxon Mobil Corp., No. 12-00081 (E.D. La.,  2/6/12).

Junius Royal sued several oil companies for damages in connection with oil pipe cleaning services that he allegedly performed. Plaintiff asserted that the oil pipes he cleaned contained carcinogenic radioactive materials commonly referred to as naturally occurring radioactive material, or "NORMS.'" Plaintiff claimed that the defendants knew about the radioactive material in
the pipes, but failed to warn.  He thus became exposed to dangerously high levels of radiation during his work, and he now has a substantially increased risk of developing cancer. He sought medical monitoring. Defendants moved to dismiss plaintiff's medical monitoring claim for failure to state a claim on which relief could be granted.

To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead enough facts to state a claim to relief that is plausible on its face. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 569 (2007)). Factual allegations must be
enough to raise a right to relief above the speculative level.  In deciding whether dismissal is warranted, the court will not accept conclusory allegations in the complaint as true. Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982).

To prove common law medical monitoring claim under Louisiana law (there is a separate statutory claim), a plaintiff must show: (1) Significant exposure to a proven hazardous substance, (2) As a
proximate result of this exposure, plaintiff suffers a significantly increased risk of contracting a serious latent disease, (3) Plaintiff's risk of contracting a serious latent disease is greater than (a) the risk of contracting the same disease had he or she not been exposed and (b) the chances of
members of the public at large of developing the disease, (4) A monitoring procedure exists that makes the early detection of the disease possible, (5) The monitoring procedure has been
prescribed by a qualified physician and is reasonably necessary according to contemporary scientific principles, (6) The prescribed monitoring regime is different from that normally
recommended in the absence of exposure, and (7) There is some demonstrated clinical value in the early detection and diagnosis of the disease. Bourgeois v. A.P. Green Indus., 716 So. 2d 355,
360-61 (La. 1998).

Here, plaintiff failed to allege or urge that he had a manifest physical injury or mental injury or disease, as required by the statute. The fact that he may have been exposed to radiation was not, in and of itself, sufficient. Further, the plaintiff failed to plead facts which bear directly on several of the common law factors. For example, plaintiff made no mention of what type of monitoring he was
looking for, who prescribed him the monitoring, or what the efficacy of the monitoring might be.

 

Court of Appeals Affirms Dismissal of FEMA Trailer Claims

The Fifth Circuit recently upheld the dismissal of putative class actions filed by Mississippi and Alabama residents against the federal government alleging trailers provided to Hurricane Katrina-impacted citizens contained hazardous levels of formaldehyde. See In re: FEMA Trailer Formaldehyde Products Liability Litigation (Mississippi Plaintiffs), No. 10-30921, and In re: FEMA Trailer Formaldehyde Products Liability Litigation (Alabama Plaintiffs), No. 10-30945 (5th Cir. 2012).

Plaintiffs-Appellants brought this Federal Tort Claims Act action against the United States for injuries allegedly related to their exposure to elevated levels of formaldehyde contained in the component materials of the Emergency Housing Units (“EHUs”) provided to them by the Federal Emergency Management Agency (“FEMA”) after Hurricanes Katrina and Rita. Readers will recall we have posted about various aspects of this litigation before. In October 2007, the United States Judicial Panel on Multidistrict Litigation created MDL No. 07-1873 (In re: FEMA Trailer Formaldehyde Products Liability Litigation), and assigned the complex litigation to the United States District Court for the Eastern District of Louisiana.

The key facts: After the hurricanes, FEMA activated its Individual and Household Assistance Program and, from September 2005 through May 1, 2009, the agency supplied disaster victims with EHUs, at no cost, to use as temporary shelter. The EHUs were taken from FEMA’s preexisting inventory, which had been purchased from public retailers as well as directly from manufacturers. The EHUs were small, portable, and usually placed at the disaster victims’ home sites. The trailers were installed by government contractors who placed the units on blocks or piers, anchored them to the ground using straps or bolts, and connected them to public sewer and water lines.

In March 2006, when FEMA began receiving formaldehyde-related complaints, it encouraged shelter occupants to ventilate their EHUs by opening the doors and windows. In June 2006, FEMA prepared an informational brochure informing EHU occupants of the potential risks of formaldehyde exposure, encouraging them to ventilate their units, and urging them to seek medical help if they developed health problems related to formaldehyde. In September 2006, FEMA began working with the Environmental Protection Agency to test the EHUs for formaldehyde, and also developed various new mitigation techniques.  In July 2007, FEMA distributed another informational brochure to EHU occupants, set up a hotline and a dedicated call center to field formaldehyde complaints from occupants, and continued to assist occupants in locating alternative housing. FEMA subsequently entered into an agreement with the CDC to conduct additional testing, the findings of which were compiled in a third informational brochure and distributed to EHU occupants in early 2008.

The federal government filed various motions to dismiss the claims against it, or in the alternative for summary judgment, based on the FTCA’s discretionary function exception.The district court denied the motions and held that the FTCA’s discretionary function exception might not apply to some or all of appellants’ claims, the determination of which would be driven by the facts of each individual case.  The district court then denied class certification and scheduled a series of bellwether trials in the MDL, but none of the FTCA claims brought by the bellwether plaintiffs against the Government advanced to the trial stage.

The Government then moved under Federal Rule 12(b)(1) to dismiss Appellants’ FTCA claims for lack of subject-matter jurisdiction on the grounds that no analogous private liability existed under the Mississippi and Alabama emergency statutes.  The district court granted the Government’s motion and dismissed appellants’ FTCA claims. Plaintiffs appealed to the Fifth Circuit.

 A plaintiff may only sue the United States if a federal statute explicitly provides for a waiver of sovereign immunity. The United States must consent to be sued, and that consent is a prerequisite to federal jurisdiction. Delta Commercial Fisheries Ass’n v. Gulf of Mex. Fishery Mgmt. Council, 364 F.3d 269, 273 (5th Cir. 2004). Waivers of sovereign immunity are narrowly construed in favor of the United States. In re Supreme Beef Processors, Inc., 468 F.3d 248, 253 (5th Cir. 2006). The FTCA is recognized as providing a waiver of sovereign immunity and provides the sole basis of recovery for tort claims against the United States. See 28 U.S.C. § 1346 and § 2671, et seq.; In re Supreme Beef Processors, 468 F.3d at 252 n.4. But the Act provides that the United States shall be liable in the same manner and to the same extent as a private individual under like circumstances. See
28 U.S.C. § 2674.

The "same manner" analysis is a mix of federal and state law. The FTCA requires the  Government's liability to be measured in accordance with the law of the state where the alleged act or omission occurred, so here the Appellants’ FTCA claims were limited by the relevant provisions set forth in Mississippi and Alabama tort law. See 28 U.S.C. § 1346(b)(1); Richards v. United States, 369 U.S. 1, 11-14 (1962); Cleveland ex rel. Cleveland v. United States, 457 F.3d 397, 403 (5th Cir. 2006). Whether a private person in “like circumstances” would be subject to liability is also a question of sovereign immunity and, thus, is ultimately a question of federal law. See United States v. Olson, 546 U.S. 43, 44 (2005). Because the federal government could never be exactly like a private actor, a court’s job in applying the standard is to find the most reasonable analogy. LaBarge v. Cnty. of Mariposa, 798 F.2d 364, 366-69 (9th Cir. 1986). Inherent differences between the government and a private person cannot be allowed to disrupt this analysis. The Fifth Circuit has consistently held that the government is entitled to raise any and all defenses that would potentially be available to a private citizen or entity under state law. Camacho v. Tex. Workforce Comm'n, 445 F.3d 407, 410 (5th Cir. 2006). Therefore, if a private person under “like circumstances” would be shielded from liability pursuant to a state statute, lower courts must decline to exercise subject matter jurisdiction in a case like this.

Because, here, the Mississippi and Alabama emergency statutes abrogate the tort liability of a private person who, (1) voluntarily, (2) without compensation, (3) allows his property or premises to be used as shelter during or in recovery from a natural disaster, the Government’s voluntary, cost-free provision of the EHUs to disaster victims, in connection with Hurricanes Katrina and Rita, was
also immunized conduct under the statute.  Despite plaintiffs' arguments, the Government’s provision of the government-owned EHUs, as implemented by FEMA, was voluntary because it was under no contractual or legal obligation, under any federal legislation, to provide the EHUs to disaster victims in response to the disasters. The Government did not receive compensation from the disaster victims in exchange for letting them use the EHUs. (The collection of taxes by the Government was not comparable to the traditional quid pro quo compensation contemplated by the statute.) In addition, the Government’s actions relating to the EHUs fell within the time frame contemplated by the statute as “during or in recovery from” a major disaster, since FEMA’s temporary emergency housing program ran from the hurricanes up to May, 2009.

Because Mississippi and Alabama emergency laws would protect those private individuals who shelter natural disaster victims from tort liability, the federal government's voluntary provision of the trailers was likewise immunized, the court concluded.

As an alternative, the appellants asked the Fifth Circuit to certify questions to the state supreme courts of Alabama and Mississippi regarding the meaning of the state emergency statutes, but the appeals court agreed with the district court that these questions did not warrant certification. Dismissals affirmed.

Dismissal of Actimmune Proposed Class Action Affirmed

The Ninth Circuit late last month upheld the dismissal of a proposed class action concerning alleged off-label marketing of the drug Actimmune.  In re: Actimmune Marketing Litigation, Nos. 10-17237 and 10-17239 (9th Cir. 12/30/11).

The panel, in an unpublished opinion, affirmed the judgment of the district court “for the reasons set forth in the district court's orders.”  See In re Actimmune Marketing Litig., 614 F.Supp.2d 1037
(N.D. Cal. 2009) (Actimmune I); In re Actimmune Marketing Litig., 2009 WL 3740648 (N.D. Cal. Nov. 6, 2009)(Actimmune II ); In re Actimmune Marketing Litig., 2010 WL 3463491 (N.D. Cal. Sept. 1, 2010) (Actimmune III).

In September 2010, the trial court had issued a ruling dismissing the amended complaints filed by consumers and an insurer, who alleged that defendants had improperly marketed Actimmune as a treatment for idiopathic pulmonary fibrosis.  Despite the additional allegations included in plaintiffs' latest amended pleadings, plaintiffs still failed to properly allege that defendants' conduct caused plaintiffs' injuries. Therefore, plaintiffs lacked standing to pursue their off-label marketing claims under the asserted consumer fraud claims.  Establishing that a defendant violated a law only accomplishes part of a plaintiff's burden; plaintiffs were also required to prove that they were injured “as a result of” defendants' alleged law-violating conduct.

In the context of the instant case, the “as a result of” language placed the burden on plaintiffs to establish that they actually relied upon the representations delivered through defendants' off-label marketing. Plaintiffs failed to allege a plausible causal chain of injury as required by Iqbal/Twombly.

The shortcoming in the consumer plaintiffs' pleadings was simple: all of the consumer plaintiffs failed to allege that their doctors believed that Actimmune was an effective treatment for IPF “as a result of” defendants' off-label promotion of Actimmune. With respect to each plaintiff, the complaint alleged only that their doctors were “exposed to at least some of InterMune's unfair and unlawful off-label marketing.”  That was not enough;  claims dismissed.

Coffee's On: Claims Dismissed in Single-Cup Brewing Class Litigation

A federal court last week dismissed the claims in a case accusing Green Mountain Coffee Roasters of misrepresenting the performance quality of its single-cup brewing systems. See Green v. Green Mountain Coffee Roasters Inc., et al., 2011 WL 6372617 (12/20/12 D.N.J.).

Your humble blogger is in the minority, not being a coffee drinker. Nearly 60% of adults drink coffee daily. The average American drinks 3.1 cups of coffee each day. This contributes to an $18 billion U.S. coffee market. One of the tremendous innovations (speaking from experience, having given these as holiday gifts) in the market is the single cup brewing machine for the home, allowing coffee lovers to make less than a full pot, and to choose from among hundreds of flavors and brands of coffee-related beverages.

Defendants are in the specialty coffee and coffee maker businesses. They manufacture single-cup brewers, accessories and coffee, tea, cocoa and other beverages in "K–Cup portion packs.” Plaintiff Green maintained that his machine failed to brew the programmed amounts of K–Cup coffee within a few weeks of use. Plaintiff asserted that the machines had defective components, including defective pumps. As a result, the machines allegedly failed and brewed less than the specified amount. Furthemore, this defect allegedly caused consumers to use additional K–Cups to brew a single beverage. 

Plaintiff maintained that defendants' actions were in violation of the New Jersey Consumer Fraud Act (“CFA”), N.J. Stat. Ann. § 56:8–1, et seq., and constituted a breach of implied warranty. 

Defendants moved to dismiss.  The court noted that threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice under Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).  If the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint should be dismissed for failing to show that the pleader is entitled to relief. A plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 

The motion challenged plaintiffs' standing. To have standing, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.  The injury-in-fact element is often determinative.

The injury must affect the plaintiff in a personal and individual way.  Here, Green alleged that he purchased and used the Keurig Platinum Brewing System (model series B70).  Nevertheless, he sought to represent all individuals in New Jersey who “purchased or received”  a variety of Keurig Brewing Systems. Plaintiff did not have standing to pursue a claim that products he neither purchased nor used did not work as advertised.

Regarding that model series B70, plaintiff contended in his complaint that, because of defective components, the coffee machines at issue brew a lesser amount of coffee than the companies represented, compromising the quality of the beverage. Consumers are then forced to use additional K-Cups, which are a portion pack for the systems, according to the complaint. Defendants maintained that even if their alleged conduct was unlawful, plaintiff had not sufficiently pled ascertainable loss.  In a misrepresentation case, a plaintiff generally may show ascertainable loss by either out-of-pocket loss or a demonstration of loss in value.  In this case, Green did not allege that he made a claim for warranty repair or replacement of his machine.  The warranty provided as part of the contract of sale is part of the benefit of the bargain between the parties. Any defects that arise and are addressed by warranty, at no cost to the consumer, do not provide the predicate loss that the CFA expressly requires for a private claim.  Because plaintiff had not availed himself of defendants' warranty, he could not allege that the warranty does not address the defect in his machine.

Furthermore, the court found unpersuasive plaintiff's argument that the warranty did not address the defects in the brewers because other consumers allegedly reported that their replaced or repaired brewers were equally defective.  Allegations regarding the experience of absent members of the putative class, in general, cannot fulfill the requirement of pleading injury with adequate specificity.

Similarly, plaintiff did not sufficiently plead loss in value.   Plaintiff broadly asserted that he suffered a loss because each brewer failed to perform its advertised purpose and caused purchasers to suffer a loss of value of the product. But Green failed to allege how much he paid for his brewer and how much other comparable brewers manufactured by competitors cost at the time of purchase. Furthermore, Green had not suffered a diminution in value because the defective brewer could have been repaired or replaced with a new brewer which would have had its own one-year warranty.


Regarding the implied warranty claim, the general purpose of the brewers is to brew beverages. Even if defendants may have advertised that the machines would brew a specific amount of beverage, that alone did not transform the “general” purpose.  Green did not allege that his machine would not brew coffee or that it was inoperable.  The complaint was also devoid of any allegation that plaintiff can no longer use his brewer. Therefore, Green had not sufficiently alleged that his brewer was unfit for its ordinary purpose of brewing beverages at the time of purchase.

Defendants also contended that the class allegations should be dismissed. Plaintiff argued that the Court should deny the motion because it was premature. Nevertheless, a court may strike class action allegations in those cases where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met.  Here, the court concluded that the plaintiff could not  meet the predominance requirement set forth in Fed.R.Civ.P. 23(b).

The complaint did not allege that all individuals in New Jersey who purchased the Keurig Brewing Systems had experienced the defect. Plaintiff acknowledged that there were members in the putative class who had not yet suffered the alleged pump failure. Consequently, the putative class included individuals who do not presently have a claim against defendants. Proving that defendants breached the implied warranty of merchantability would also require an individualized inquiry. Not every member of the putative class experienced a defect with the model series B70. Even if the purported defect had manifested in all of the brewers purchased within the class period, the court would have to make individual inquiries as to the cause and extent of the defect.  Motion granted. 

 

Fruit Juice MDL Court Dismisses Claims

The Massachusetts federal court overseeing multidistrict litigation against 11 beverage companies, including Coca-Cola Co. and Del Monte Corp., alleging that their fruit juices contained trace amounts of lead, dismissed the claims last week.  In re Fruit Juice Products Marketing and Sales Practices Litigation, No. 11-2231 (D. Mass., 12/21/11).

Plaintiffs alleged that the defendants misled them into believing that certain of their products were safe, whereas the products in fact contained lead and posed a health risk, especially to children.  The issue had caught the attention of the FDA, which concluded that while several of the products contained trace amounts of lead, in each case the level found would not pose an unacceptable risk to health.  (The FDA’s conclusion was based in part on a guidance report it issued in 2004. The agency concluded that many food products contain small amounts of lead because the substance is in the environment naturally and also released through many human activities.)

The majority of plaintiffs’ claims were for violations of the consumer protection laws of states in which defendants maintained their principal places of business. Plaintiffs also brought claims under the consumer protection laws of all states in which potential class members purchased the  products. Finally, the plaintiffs alleged breach of the implied warranties of merchantability and fitness for a particular purpose and for unjust enrichment.

Defendants moved to dismiss on several grounds, but the foundational argument that plaintiffs lacked standing was fatal to all of plaintiffs’ claims, and was in the eyes of the court so compelling that it was unnecessary for the court to reach the numerous satellite theories that defendants offered.

To establish Article III standing, a plaintiff must first demonstrate that he has suffered an injury in fact.  Whitmore v. Arkansas, 459 U.S. 149, 155 (1990). The injury must be concrete and the alleged harm actual or imminent, and not conjectural or hypothetical. Los Angeles v. Lyons, 461 U.S. 95, 101-02 (1983). If a plaintiff fails to allege sufficient facts to satisfy this requirement, the case must be dismissed.

In this case, plaintiffs did not allege a sufficient injury in fact. Plaintiffs offered two potential theories of injury in fact. First, they alleged that the lead in defendants’ products posed a health risk and that, by consuming these products, they placed themselves and their children at risk of future harm from lead poisoning. Second, plaintiffs alleged that they suffered economic injury when they purchased products that defendants advertised as safe, but that in fact contained allegedly dangerous amounts of lead. Both theories, according to the court, ran into the same problem -- plaintiffs
failed to allege any actual injury caused by their purchase and consumption of the products.

The claim of exposure to “potential adverse health effects” or “potential harm” was insufficient for Article III standing. A threatened future injury must be “certainly impending” to grant Article III
standing.  In product liability cases, courts have held that to establish standing based on a threat of future harm, plaintiffs must plead a credible, substantial threat to their health.  E.g., Herrington v. Johnson & Johnson Consumer Cos., Inc., 2010 WL 3448531, at *3 (N.D. Cal. Sept. 1, 2010); see also Public Citizen, Inc. v. Nat’l Highway Traffic Safety Admin., 489 F.3d 1279, 1293-96 (D.C. Cir. 2007); Sutton v. St. Jude Medical S.C., Inc.,419 F.3d 568, 570-75 (6th Cir. 2005).  But the complaint here contained no allegations that either plaintiffs or anyone else ever suffered any type of injury from consuming the products. The products were not recalled, and in fact, the FDA found that at least some of the specific products did NOT pose an unacceptable risk to human health.

Plaintiffs made no allegations as to the amount of lead actually in these products, did not claim that any particular amount in the products is dangerous, and did not allege that any specific amount had caused actual injuries to any plaintiff. The court also stressed that plaintiff did not allege that the levels of lead in the products violated any FDA standards. Under these circumstances, the allegations of risk of future harm to class members were insufficient to meet the “credible or substantial threat” standard. The claim of potential future injury was simply too hypothetical or conjectural to establish Article III  standing.

The court cited a series of cases involving lead in lipstick, which we have posted on, making clear that the type of speculative future injury here cannot form the basis of a lawsuit. See Koronthaly v. L’Oreal USA, Inc., 374 F. App’x 257(3d Cir. 2010), aff’g 2008 WL 2938045 (D.N.J. July 29, 2008); Frye v. L’Oreal USA, Inc., 583 F. Supp. 2d 954 (N.D. Ill. 2008).

Plaintiffs’ second theory of injury in fact was equally flawed. Plaintiffs alleged that defendants promised to provide products that were safe for consumption, but that plaintiffs received products that posed a health risk to them and their children. Consequently, the products were unsuitable for their intended purpose -- consumption -- and supposedly valueless. Because plaintiffs supposedly would not have purchased these products if they had known the products contained any lead, they suffered an economic injury -- the price of the product -- when they purchased the products.

But because plaintiffs were unable to show that any actual harm resulted from consumption of the fruit juice products, their allegation of “economic” injury lacked substance. The fact is that plaintiffs paid for fruit juice, and they received fruit juice, which they consumed without suffering harm. Again, the products were not recalled, did not cause any reported injuries, and did not violate any federal standards. The products thus had no diminished objective value due to the presence of the lead. These plaintiffs received the benefit of the bargain, as a matter of law, when they purchased these products and were able to consume them.

Other courts that have addressed similar “benefit of the bargain” standing arguments agree that plaintiffs who have not been injured by an allegedly defective product generally do not have standing to sue the product’s manufacturer. See, e.g., Rivera v. Wyeth-Ayerst Labs., 283
F.3d 315 (5th Cir. 2002).  Plaintiffs’ allegations only support the contention that the levels of lead in the products were unsatisfactory to them. This allegation was simply insufficient to support a claim for injury in fact. 

 

 

Class Action Complaint on 100% Natural Oil Dismissed

A federal court recently dismissed a proposed class action accusing a food company of misleadingly labeling cooking oils as 100% natural when they allegedly were made from genetically modified plants. Robert Briseno, et al. v. ConAgra Foods Inc., No. 2:11-cv-05379 (C.D. Calif.).

Quick research reveals that 88-94% of the nation’s crops of corn, soy and canola are grown from seeds that are the product of bioengineering.  There is no credible science that there are serious health issues with these products, and multiple peer reviewed studies on "GM" crops worldwide show farmers in underdeveloped countries have seen an increase in yield of about 29% from using them, along with decreased use of insecticide applications.

Plaintiff alleged that he regularly purchased Wesson Canola Oil, bearing labels that state the product is “100% Natural.” Plaintiff contended that contrary to these representations, ConAgra used plants grown from genetically modified organism seeds that have been engineered to allow for greater yield, and to be pest-resistant, to make Wesson-branded oils. He asserted that the genetically modified organisms are somehow not “100% natural,” and thus the labels and advertising are deceptive. Plaintiff filed a complaint seeking to represent a class of all persons in the United States who have purchased Wesson Oils from 2007 on. As is typical, he alleged
violation of California’s false advertising law (“FAL”), California’s unfair competition law (“UCL”), and California’s Consumer Legal Remedies Act (“CLRA”).

Defendant moved to dismiss. The first issue was preemption of the state law causes of action, based on FDA guidance regarding food labels. Federal preemption occurs, generally, when: (1) Congress enacts a statute that explicitly pre-empts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field. Specifically, ConAgra argued that Briseno’s claims were preempted because the FDA has repeatedly concluded that bioengineered foods are not meaningfully different from foods developed by traditional plant breeding, and thus that the fact that a food product is derived from bioengineered plants need not be reflected on a product’s label. Plaintiff responded that he was not arguing that ConAgra was required to state whether its products were made from genetically modified plants. Rather, he contended that the decision to label its products “100% Natural” was misleading.

Courts have split on food preemption issues. Compare Dvora v. General Mills, Inc., 2011 WL 1897349 (C.D. Cal. May 16, 2011)(cereal-yes); Turek v. General Mills, Inc., 754 F.Supp.2d 956 (N.D. Ill. 2010)(snack bars-yes); Yumul v. Smart Balance, Inc., 2011 WL 1045555 (C.D. Cal. Mar. 14, 2011)(yes), with Lockwood v. Conagra Foods, Inc., 597 F.Supp.2d 1028 (N.D. Cal. Feb. 3, 2009)(pasta-no); Wright v. General Mills, Inc., 2009 WL 3247148 (S.D. Cal. Sept. 30, 2009)(granola bars-no).

Here, the court found no preemption on most of the complaint. The bulk of the complaint, said the court, alleged that use of the phrase “100% Natural” is misleading, and did not contend that additional information must be added to Wesson Oil labels. Regulations requiring that each product list its ingredients by their “common or usual name,” together with the regulations requiring that vegetable oils be denominated “ oil,” were inapplicable since plaintiff’s central argument was not that ConAgra cannot use the common or usual names of canola oil, vegetable oil or corn oil.

The FDA has expressed that it has no basis for concluding that bioengineered foods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed by the new techniques present any different or greater safety concern than foods developed by traditional plant breeding. So, plaintiff, in essence, sought to create a distinction – between “natural” oils and those made from bioengineered plants when the FDA has determined that no such distinction exists. The court rejected this argument, refusing to read the FDA guidance as formal enough or clear enough on the issue.

Plaintiff did also seek an order requiring defendant to adopt and enforce a policy that requires appropriate disclosure of GM ingredients. Entering an order of this type would impose a
requirement that is not identical to federal law, and thus this particular prayer for such relief was preempted.

Rule 9(b) requires that in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. The pleading must identify the circumstances constituting fraud so that a defendant can prepare an adequate answer to the allegations. While statements of the time, place and nature of the alleged fraudulent activities are often sufficient, mere conclusory allegations of fraud are insufficient. Even if fraud is not a necessary element of a claim under the CLRA and UCL, when a plaintiff alleges fraudulent conduct then the claim can be said to be grounded in fraud or to sound in fraud.

Plaintiff alleged that he regularly purchased Wesson Canola Oil for his own and his family’s consumption. But his complaint contained no allegations as to whether he became aware of the
representation through advertising, or labeling, or otherwise. He provided no information about how often he was exposed to the allegedly misleading statement. He did not allege how
frequently he purchased the product and over what period of time, whether he relied on
statements on canola oil labels, on a website, in advertisements, or all of the above,
whether the statements remained the same throughout the class period, or, if they did not, on
which label(s), advertisement(s) or statement(s) he relied.

Thus, this complaint did not afford ConAgra adequate opportunity to respond. Consequently, defendant's motion to dismiss was granted (without prejudice).


 

MDL Court Rules on Availability of Punitive Damages in Gulf Oil Spill Litigation

The MDL court overseeing the claims arising from the 2010 Gulf of Mexico oil spill has ruled that plaintiffs can seek punitive damages against allegedly responsible parties in economic loss and property damage suits. In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico on April 20, 2010, No. 2:10-md-02179 (E.D. La., 8/26/11).

Readers may recall that this MDL consists of hundreds of consolidated cases, with thousands of claimants, arising from the April 20, 2010 explosion, fire, and sinking of the Deepwater Horizon  mobile offshore drilling unit, which resulted in the release of millions of gallons of oil into the Gulf of Mexico before it was finally capped approximately three months later. In order to efficiently  manage this complex MDL, the court consolidated and organized the various types of claims (e.g., personal injury, environmental, property, and economic damages) into several “pleading bundles.”  One such pleading bundle includes all claims for private or non-governmental economic loss and property damages.  There are in excess of 100,000 individual claims encompassed within this bundle.

The court recently ruled on several pending motions to dismiss the claims by this sub-group of plaintiffs, but let's focus on the punitive damages claims. The court's analysis began with the Oil Pollution Act of 1990: the OPA is silent as to the availability of punitive damages. So the issue became whether plaintiffs who could assert general maritime claims pre-OPA enactment could still plausibly allege punitive damages under general maritime.  The court concluded they could.

First, punitive damages have long been available at common law, and the common-law tradition of punitive damages extends to maritime claims. The court reasoned that Congress had not occupied the entire field of oil spill liability in light of the OPA provision preserving admiralty and maritime law, “except as otherwise provided.” OPA does not mention punitive damages; thus, while punitive damages are not available under OPA, the court did not read OPA’s silence as meaning that punitive damages are precluded under general maritime law. The MDL court observed that Congress knows how to proscribe punitive damages when it intends to, as it did in the commercial aviation exception under the Death on the High Seas Act, 46 U.S.C. § 30307(b) (“punitive damages are not recoverable”).
 

Second, the court saw nothing to indicate that allowing a claim for punitive damages in this context would frustrate the OPA liability scheme. All claims against the allegedly Responsible Party must comply with OPA’s procedure, regardless of whether there is also cause of action against the Responsible Party under general maritime law. However, the behavior that would give rise to punitive damages under general maritime law–gross negligence–would also break OPA’s limit of liability. See 33 U.S.C. § 2704(a). Thus, the imposition of punitive damages under general maritime law would not, according to the court, circumvent OPA’s limitation of liability.

Finally on this issue, the court noted that some courts had held that the Trans-Alaska Pipeline Authorization Act (“TAPAA”), which provided “the liability regime governing certain types of Alaskan oil spills, imposing strict liability but also capping recovery,” did not restrict the availability of punitive damages.  OPA, like TAPAA, creates a liability regime governing oil spills, imposes strict liability on the Responsible Parties, includes liability limits, and is silent on the issue of punitive damages.

Thus, the court concluded, the OPA does not displace general maritime law claims for those plaintiffs who would have been able to bring such claims prior to OPA’s enactment. 


 

Class Rep Who Dismisses Individual Claim Lacks Standing to Appeal Denial of Certification

A proposed class representative who voluntarily dismisses his individual claims lacks standing to appeal the denial of certification of the class claims, according to the Fourth Circuit.  Rhodes v. E.I. du Pont de Nemours & Co., No. 10-1166 (4th Cir.,  4/8/11).

The plaintiffs were residents of the City of Parkersburg in Wood County, West Virginia, and  customers of the Parkersburg City Water Department  which supplied water to homes located in Wood County.  DuPont operated a manufacturing facility in Wood County. For an extended period of time, DuPont’s plant  allegedly discharged perfluorooctanoic acid (PFOA) into the environment
surrounding the plant. Measurable quantities of PFOA were allegedly detected in the water that is pumped by the Water Department into the plaintiffs’ residences.

In 2006, the plaintiffs filed a complaint against DuPont in the Circuit Court of Wood County, West Virginia. Defendant removed. The plaintiffs asserted six common law claims, individually and on behalf of a class of customers of the Water Department, addressing the contamination of their municipal water supply and the alleged resulting presence of PFOA in their blood. The plaintiffs sought damages and injunctive relief to obtain medical monitoring for latent diseases on behalf of a class of Water Department customers allegedly exposed to PFOA beginning in 2005.

After conducting a hearing on the plaintiffs’ motion for class certification under Federal Rule of Civil Procedure 23(b), the district court concluded that the elements of a medical monitoring claim could not be proved on a class-wide basis using the type of evidence presented by the plaintiffs. The district court therefore denied the plaintiffs’ motion for class certification of their stand alone medical monitoring claims. The district court further held that the plaintiffs had not met their burden under Rule 23 for certification of a class to pursue medical monitoring relief based on the plaintiffs’ claims of negligence, gross negligence, battery, trespass, and private nuisance, the common law torts. The district court then denied the plaintiffs’ motion for class certification of the traditional common law tort claims for damages also.

DuPont filed motions seeking summary judgment on all the plaintiffs’ claims. The district court granted in part and denied in part DuPont’s motions. The district court granted DuPont’s
motions with respect to all the plaintiffs’ traditional common law tort claims, Rhodes v. E.I. Du Pont De Nemours and Co., 657 F. Supp. 2d 751, 762-73 (S.D.W. Va. 2009), but denied summary judgment with respect to the plaintiffs’ individual claims of medical monitoring.

Rather than proceed to trial on those remaining individual claims, in order to appeal immediately the adverse summary judgment and certification rulings, the plaintiffs filed a stipulation of voluntary dismissal under Federal Rule of Civil Procedure 41(a)(1) of their individual claims for medical monitoring.

The court of appeals affirmed the summary judgments, but what will be of more interest to our readers is DuPont’s argument that the 4th Circuit lacked appellate jurisdiction to address the merits of plaintiff’s appeal of the denial of class certification of their medical monitoring claims. DuPont asserted that the plaintiffs no longer had standing to advance this argument on appeal because, by voluntarily dismissing their individual claims for medical monitoring, the plaintiffs abandoned their interest in litigating the certification question. As a result, DuPont contended, the plaintiffs had no personal stake in this issue and did not satisfy the requirements for Article
III standing.

In response, the plaintiffs maintained that litigants routinely are permitted to dismiss various claims in order to appeal other claims and, that under federal precedent, this court could review the denial of class certification for a particular claim even though no plaintiff presently was advancing individual claims asserting that cause of action. The plaintiffs further argued that by its plain terms, their stipulated dismissal applied only to their individual medical monitoring claims. Thus, the plaintiffs contended that they did not abandon their stake in the certification question.

As a general matter, circumstances may change while a case is pending, thereby leaving a plaintiff
without the personal stake necessary to maintain Article III standing. For example, claims can expire, or parties can settle or dismiss their claims entirely. In such situations, the district court or appellate court must dismiss the case for lack of subject-matter jurisdiction. On the other hand, generally, a class representative not only has a "personal stake" in the substantive claim he or she asserts, but also a distinct procedural right to represent the interests of similarly situated individuals. This second, representative interest sometimes gives a putative class representative a sufficient "stake" in the class certification question to appeal an adverse certification ruling even after the putative class representative’s claim is mooted by intervening events.

Two conditions must be met, however, to retain Article III jurisdiction, according to the 4th Circuit. The imperatives of a dispute capable of judicial resolution must be sharply present, and there must be self-interested parties vigorously advocating opposing positions.

Other federal circuit courts addressing this issue have reached different conclusions on the question whether a plaintiff may voluntarily settle or dismiss his or her individual claims and still
appeal a certification denial. Some courts have held that standing is maintained when a named plaintiff expressly reserves the right to appeal a certification denial. See Richards v. Delta Air Lines, Inc., 453 F.3d 525 (D.C. Cir. 2006) (express reservation of class claim preserves standing of class
representative to appeal certification denial); Dugas v. Trans Union Corp., 99 F.3d 724 (5th Cir. 1996) (reservation of right sufficient to give putative class representative who settles individual claims standing to appeal denial of class certification). Cf. Narouz v. Charter Commc’ns, LLC, 591 F.3d 1261 (9th Cir. 2010) (putative representative retains standing to appeal unless releases interest in class claims in settlement agreement). Other courts have held that even an express reservation of right is not sufficient to satisfy Article III standing requirements. See Muro v. Target Corp., 580 F.3d 485 (7th Cir. 2009) (recitation in settlement agreement that plaintiff reserves right to appeal denial of class certification not sufficient to create concrete interest in class certification issue); Anderson v. CNH U.S. Pension Plan, 515 F.3d 823 (8th Cir. 2008) (same).

Although several of these cases held that the language of a plaintiff’s settlement agreement is determinative of that plaintiff’s "stake" in an appeal, the 4th Circuit seemed less concerned about the language of the dismissal than the fact of dismissal. It concluded that when a putative
class plaintiff voluntarily dismisses the individual claims underlying a request for class certification, as happened in this case, there is no longer a "self-interested party advocating" for class treatment in the manner necessary to satisfy Article III standing requirements.

The court held that it thus did lack jurisdiction to decide the issue whether the district court abused its discretion in denying the plaintiffs’ request for class certification of their medical monitoring
claims.

Third Circuit Affirms Forum Non Conveniens Dismissal

We have posted before about how foreign plaintiffs desire to take advantage of U.S. product liability law and remedies.  The Third Circuit last week affirmed the granting of a forum non conveniens motion against the claims of hundreds of Australian plaintiffs seeking to sue Alcoa Inc. in the U.S. over injuries allegedly caused by emissions at three refineries in Western Australia. See Cameron Auxer et al. v. Alcoa Inc., No. 10-2131(3d Cir. 1/20/11).

These five consolidated cases involved 244 plaintiffs who claim to have suffered personal injuries caused by their alleged exposure to emissions from three alumina refineries in Western Australia.  The plaintiffs filed suit in June, 2009, alleging that Alcoa was liable for exposing them to a variety of  toxic chemicals from the Wagerup, Kwinana and Pinjarra refineries, and allegedly intentionally concealing the dangers of the pollution.  Alcoa produces alumina or aluminum oxide at its Western Australia facilities. 

FYI, the state of Western Australia is Australia’s face on the Indian Ocean. Its capital, Perth, is closer to Singapore and Jakarta than it is to Canberra. The majority of people live in and around Perth. Western Australia is the largest Australian State. With an area of more than 2,500,000 sq km, a 12,500 km coastline, and spanning 2,400 km from north to south, it occupies a third of the continent.

Defendant moved to dismiss, and the lower court dismissed the five consolidated suits on forum non conveniens grounds. Plaintiffs appealed.

While plaintiffs acknowledged that their exposure, injuries, diagnoses, and medical treatment all occurred exclusively in Western Australia, and that none of the operative facts material to causation, injuries, diagnoses and treatments occurred in Pennsylvania, they insisted that the witnesses and documentary evidence necessary for the plaintiffs to prove liability are located at defendant’s corporate headquarters in Pittsburgh.  Thus, the cases should proceed in Pennsylvania.

The key issues to be considered in reaching a decision on the appropriate forum are: (1) what degree of deference is to be given the plaintiffs’ choice of forum, (2) whether there is an adequate alternative forum, (3) whether a balancing of the private factors weighs in favor of dismissal, and (4) whether a balancing of public factors weighs in favor of dismissal. See, e.g., Lacey v. Cessna Aircraft Co., 862 F.2d 38, 43 (3d Cir. 1988).

The court of appeals addressed the lower court's treatment of factors 2-4.  On the second, Alcoa was registered to do business and subject to service of process in Western Australia; the courts of Western Australia had jurisdiction over cases of this kind and recognize theories of liability for negligence, reckless conduct, and “damage caused by hazardous activities,” and, the applicable foreign court rules provide for discovery of documents, interrogatories, and the compelling of the attendance of witnesses and production of documents at trial by court-ordered subpoenas. For these reasons, numerous federal courts have found Australia to be an adequate alternative forum and dismissed on grounds of forum non conveniens. Some have specifically held that the mere absence of pretrial depositions does not render an alternative forum inadequate.

On factor three, the court observed that Pennsylvania evidence from a party would be much more accessible to plaintiffs for trial in a Western Australian forum than Western Australian evidence from non-parties would be for Alcoa for trial in a Pennsylvania forum. Because of this distinction between access to party and non-party witnesses and documents and the primary importance of a party’s being able to present its case at trial, the District Court correctly had concluded that this factor weighed heavily in favor of dismissal.

On the final factor, the lower court was fully aware that plaintiffs alleged culpable conduct in Pennsylvania and expressly recognized at the outset of its public interest factor discussion that it must consider the locus of the alleged culpable conduct and the connection of that conduct to plaintiff’s chosen forum.  But, said the Third Circuit, even if the District Court had failed to take this interest of Pennsylvania into account, it would not alter the outcome of these appeals. The applicable precedent does not suggest that, where culpable conduct takes place in a mass tort case in both jurisdictions and injury in only one, the interests of the two are in any way “comparable.”  This issue is "not a close call."

Twombly and Iqbal Webinar

Since the U.S. Supreme Court’s rulings in Twombly and Iqbal —which updated the Conley “any set of facts” standard for motions to dismiss, and confirmed that the new plausibility standard applies to all civil cases— federal courts and some state courts have wrestled with how to apply the clarified pleading standards to all sorts of complaints.

BNA is holding a webinar on Wednesday, November 17, and my partner Stephen J. McConnell and I will be on a panel to discuss the impact of the rulings on plaintiffs and the courts.

The seminar will be November 17, 2010; 1:00 PM – 2:30 PM EST.

Topics to be discussed will include:

■ Have courts granted significantly more motions to dismiss in the wake of these cases?


■ Have plaintiffs’ attorneys risen to the challenge of meeting the plausibility standard laid out in the cases?


■ What types of claims have been most affected since the rulings came down?


■ Will Congress respond to these decisions?



To register for this webinar or for more information, please click here.

 

Proposed CFA Class Action on Bath Products Is Dismissed

A federal court has dismissed a putative class action accusing Johnson & Johnson Consumer Co. Inc., L'Oreal USA Inc., Kimberly-Clark Corp., and other defendants, of selling children's bath products that contain toxic and carcinogenic substances. See Herrington v. Johnson & Johnson Consumer Co. Inc., et al., No. 09-cv-01597 (N.D. Calif. 9/1/10).

Specifically, plaintiffs alleged that the defendants failed to disclose that their products contain probable carcinogens, other unsafe contaminants, and/or ingredients that have not been shown to be safe. Plaintiffs further contended that defendants deceived consumers by affirmatively misrepresenting the safety of their products.  Plaintiffs averred that they purchased the products for use on their young children, and contended that, had defendants disclosed the contaminants in their children’s products and the fact that all ingredients were not "proven safe," they would not
have purchased the products at all.

To evidence the alleged hazards, plaintiffs cited a press release and a report entitled “No More Toxic Tub,” both of which were published by an extremist anti-business group, the Campaign for Safe Cosmetics. In the report, the Campaign points to trace amounts of chemicals such as formaldehyde allegedly in defendants’ products.

They sued for alleged violations of California’s false advertising statute, Cal. Bus. & Prof. Code §§ 17500, et seq.; California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200, et seq.; and California’s Consumer Legal Remedies Act (CLRA), Cal. Civ. Code §§ 1750, et seq.; and
various other state unfair and deceptive trade practices acts, as well as making common law claims for misrepresentation; fraud; and breach of warranties.  Plaintiffs noted they intended to move for certification of a nationwide class and various subclasses.

Defendants filed a motion to dismiss.  They first argued that plaintiffs did not have standing to sue
because they cannot show that they have suffered a concrete, actual injury-in-fact. Plaintiffs responded that they pleaded two injuries sufficient to confer standing: “(1) risk of harm to their children resulting from their exposure to carcinogenic baby bath products; and (2) economic harm resulting from the purchase of these contaminated, defective bath products.”

The court rejected this plaintiff argument, noting that plaintiffs did not cite controlling authority that the “risk of harm” injury employed to establish standing in traditional environmental cases in some states applies equally to what is, at base, a product liability action. To the extent that an increased risk of harm could constitute an injury-in-fact in a product liability case such as this one, in any event, plaintiffs would have to at lease plead a credible or substantial threat to their health or that of their children to establish their standing to bring suit.  But plaintiffs did not allege such a threat. They made general statements about the alleged toxicity of various chemicals, but did not allege that the amounts of the substances allegedly in defendants’ products have caused harm or create a credible or substantial risk of harm.  {Fundamental principle of toxicology - dose matters.}  Plaintiffs did not plead facts sufficient to show that a palpable risk exists. In fact, plaintiffs' own pleading noted that the Consumer Product Safety Commission (CPSC) has stated that, although the presence of certain chemicals “is cause for concern,” the CPSC is merely continuing “to monitor its use in consumer products.”  Seemed a far cry from substantial risk.

The court found this case analogous to Koronthaly v. L’Oreal USA, Inc., 2008 WL 2938045 (D.N.J.), aff’d, 2010 WL 1169958 (3d Cir. 2010), which we posted on before, and which was dismissed on standing grounds. There, the plaintiff was a regular user of the defendants’ lipstick, which, according to another report by the same Campaign group, contained lead.  The plaintiff alleged that she had been injured “by mere exposure to lead-containing lipstick and by her increased risk of being poisoned by lead.”  However, she did not complain of any current injuries. The district court concluded, and the Third Circuit affirmed, that the plaintiff’s allegations of future injury
were “too remote and abstract to qualify as a concrete and particularized injury.” Id. at *5.

The court here also held that the various counts failed to state a claim. For example the fraud-related claims failed to plead, as required by Federal Rule of Civil Procedure 9(b), “the who, what, when, where, and how of the alleged fraud.” See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).  While plaintiffs tried to argue that their consumer fraud act claims are different from common law fraud, the Ninth Circuit has held that Rule 9(b) applied to a plaintiff’s claims under the CLRA and UCL when they were grounded in fraud.  Also, plaintiffs did not not plead the circumstances in which they were exposed to the alleged false statements. Nor did they plead which of these alleged misrepresentations they relied on in making their purchase of products.  Again, plaintiffs cited In re Tobacco II Cases, 46 Cal. 4th 298 (2009), to argue that they were not required to allege which representations they specifically saw. That case was factually distinguishable on many grounds.  And, in any event, to the extent In re Tobacco II provides that to establish UCL standing, reliance need not be proved through exposure to particular advertisements under some unique factual circumstance, the case does not stand for, nor could it stand for, a general relaxation of the pleading requirements under Federal Rule 9(b).

Similarly, plaintiffs made the general allegation that defendants engaged in unfair business acts or practices but did not allege facts suggesting that consumers have suffered an injury based on the defendants’ alleged conduct. Thus, for the same reasons they lacked Article III standing, they failed to state a claim for those types of claims as well. 

The court gave plaintiffs leave to try to file an amended complaint.

 

Ninth Circuit "Strikes" a Blow for Proper Motion Procedure

Phillies' slugger Ryan Howard was ejected from a game this week in extra innings, leaving his team (which had no more position players) to insert ace pitcher Roy Oswalt into the outfield and to use him at the plate. First time the Phils used a pitcher in the field in decades. Howard argued a mistakenly called third strike on a check swing.

Today's post relates to a different kind of mistaken strike. The Ninth Circuit has explained that trial courts cannot strike a claim for damages on the ground that the damages are precluded as a matter of law.  Whittlestone Inc. v. Handi-Craft Co., No. 09-16353 (9th Cir. Aug. 17, 2010).  Specifically, Rule 12(f) of the Federal Rules of Civil Procedure does not authorize the court to strike the claim for damages on the basis that such damages are legally not recoverable.

Here, the defendant field a Rule 12 motion to strike the paragraphs of the complaint that sought the recovery of lost profits and consequential damages, in alleged violation of the plain language of the parties' contract.  The trial court granted the motion, and plaintiff appealed.

Rule 12(f) states that a district court “may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” The function of a 12(f) motion
to strike is to avoid the expenditure of time and money that would arise from litigating spurious issues by dispensing with those issues prior to trial.  While the motion here seemed to fit the purpose of the rule, it didn't fit the language. The court found that the damages allegations met none of those listed categories. 

Handi-Craft argued that Whittlestone’s claim for lost profits and consequential damages should be stricken from the complaint, because such damages were precluded as a matter of law.  But that meant that Handi-Craft’s 12(f) motion was really an attempt to have certain portions of  Whittlestone’s complaint dismissed or to obtain summary judgment against Whittlestone as to those portions of the suit, which attempt was better suited for a Rule 12(b)(6) motion or a Rule 56
motion, not a Rule 12(f) motion. 

And this was not harmless error, said the 9th, because the standard for review of the different motions is not the same, and there was some question whether a 12(b)(6) motion would be granted, had it been filed.

The court concluded that Rule 12(f) of the Federal Rules of Civil Procedure does not authorize a district court to dismiss a claim for damages on the basis it is precluded as a matter of
law.


 

Latest Round in Lipstick Wars Goes to Defendants

We previously posted about a case in which a federal judge threw out  a purported class action against L’Oreal USA Inc. and Procter & Gamble Distributing LLC that accused the companies of selling Cover Girl and Maybelline lipsticks containing lead. Koronthaly v. L’Oreal USA, Inc., et al., No. 07-5588 (D.N.J. July 29, 2008).

The U.S. Court of Appeals for the Third Circuit has affirmed the decision. Koronthaly v. L'Oreal USA,  No. 08-4625 (3d Cir. 3/26/10).

Koronthaly purchased lipstick products manufactured, marketed, and distributed by appellees L’Oreal. and P&G. She alleged these lipstick products contained lead. The FDA does not regulate the presence of lead in lipstick, but Koronthaly asserted that the lipstick contained lead in greater amounts than permitted in candy by the FDA. Koronthaly alleged that she did not know when she purchased the products that they contained any lead, and when she learned of the lead content she immediately stopped using them. Moreover, had she known of the lead she claims she would not have purchased the products.

To prove constitutional standing, said the court of appeals, a plaintiff must demonstrate (1) an injury-in fact that is actual or imminent and concrete and particularized, not conjectural or hypothetical, (2) that is fairly traceable to the defendant’s challenged conduct, and (3) is likely to be redressed by a favorable judicial decision. Summers v. Earth Island Inst., 129 S. Ct. 1142, 1149 (2009). In this case, standing foundered on the first requirement, injury-in-fact, said the court.

Koronthaly’s argument that she was misled into purchasing unsafe lipstick products was belied by an FDA report finding that the lead levels in the defendants’ lipsticks were not dangerous and therefore did not require warnings. Moreover, Koronthaly conceded that she has suffered no adverse health effects from using the lipsticks. Koronthaly therefore had to fall back on only a subjective allegation -- that the trace amounts of lead in the lipsticks were unacceptable to her, not an injury-in-fact sufficient to confer Article III standing. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 (1992)(injury-in-fact must be accompanied by “continuing, present adverse effects”); Georgine v. Amchem Prods., Inc., 83 F.3d 610, 636 (3d Cir. 1996) (Wellford, J., concurring) (“Fear and apprehension about a possible future physical or medical consequence . . . is not enough to establish an injury in fact.”).

Furthermore, to the extent that Koronthaly contended that the injury-in-fact was the loss of her “benefit of the bargain,” she mistakenly relied on contract law, said the court. See Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319-21 (5th Cir. 2002) (plaintiff, whose only claim was that she “would like her money back” for having purchased a product that failed to make certain disclosures and allegedly was defective, did not have an injury-in-fact sufficient to create standing). Her lipstick purchases were not made pursuant to a contract involving lead levels, and therefore she could not have been denied the benefit of any bargain. Absent any allegation that she received a product that failed to work for its intended purpose or was worth objectively less than what one could reasonably expect, Koronthaly had not demonstrated a concrete injury-in-fact.

The dismissal was affirmed. In the lipstick wars, attention now will focus on Stella v. LVMH Perfumes and Cosmetics USA Inc., N.D. Ill., No. 1:07-cv-06509, dismissed 4/3/09; which is currently on appeal before the Seventh Circuit.
 

 

BPA Litigation Update- Part I

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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