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.

State Court Affirms Striking Class Allegations Before Discovery

A New Jersey appeals court last week upheld the denial of class certification to plaintiffs with claims against automotive insurers relating to the diminished value of policyholders' vehicles. See Myska, et al. v. New Jersey Manufacturers Insurance Co., et al., No. A-4398-13T4 and A-0275-14T4 (Super. Ct. N.J.). 

Plaintiffs had been involved in separate accidents with uninsured or underinsured drivers, and were unhappy with the response of their insurance companies. What will be of interest to our readers is the class action legal issue.  We have extolled the importance and value of motions to strike class allegations and other procedural mechanisms for getting the class action issue resolved as early as possible, before expensive and wasteful discovery (even bifurcated class discovery). Here, prior to discovery, the Law Division judge concluded class certification was improper. And after review, the appeals court affirmed the denial of class certification, agreeing the controversy did not lend itself to a class action because the facts underpinning each plaintiff's claims were dependent upon the individual insurance policy provisions, the distinct vehicle damaged and the specific calculation of damages alleged, which require separate litigation of every action.

The court noted that no precise procedures are established for granting or denying class certification at the incipient stage of litigation. Rather, the NJ rules state "the court shall, at an
early practicable time, determine by order whether to certify the action." Rule 4:32-2(a).  The court rejected the view that would preclude dismissal, following the required analysis, when a court determines alleged claims do not properly lend themselves to class certification.  The certification test does not merely turn on the stage of the litigation. Rather, dismissal is dependent on the nature of the claims and the propriety of their presentation as a class action.  Thus, said the court, "we flatly reject plaintiffs' urging to impose a bright-line rule prohibiting examination of the propriety of class certification until discovery is undertaken."

Here, individualized facts and circumstances of the relationship between each insurer and its insured precluded a finding of predominance.  And the court also noted that the individual claims were not so small (approx. $15,000) as to make separate litigation impossible. 

 

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.

 

Design Defect Claim Rejected for Lack of Cost Estimate on Alternative Design

A federal court in Texas recently rejected design defect claims in a product liability case when plaintiff failed to offer a required cost estimate for the proposed alternative design. See Flynn, et al v. American Honda Motor Co. Inc., et al, No. 4:11-cv-3908 (S.D. Tex. 2015).

Plaintiff was involved in a fatal a collision with a Chevrolet truck. Ms. Flynn’s airbags deployed but, as alleged in the complaint, supposedly only after a delay.  Her parents brought this suit to recover damages resulting from the allegedly defective airbag system.  In the three years since this suit was filed, the parties had engaged in extensive discovery, including investigations by and depositions of numerous expert witnesses. Honda moved for summary judgment on Plaintiffs’ claims of a design defect under theories of strict liability, breach of warranty, and negligence.

Under Federal Rule of Civil Procedure 56, summary judgment is warranted if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). Importantly, “the mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material.” Willis v. Roche Biomed. Lab., 61 F.3d 313, 315 (5th Cir.1995). Material facts are those whose resolution “might affect the outcome of the suit under the governing law.” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Id. A court may consider any evidence in the record, “including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Fed. R. Civ. P. 56(c)(1)(A). “However, neither conclusory allegations nor hearsay, unsubstantiated assertions, or unsupported speculation will suffice to create or negate a genuine issue of fact.” Neal v. City of Hempstead, Tex., No. 4:12-CV-1733, 2014 WL 3907770, at *1 (S.D. Tex. Aug. 11, 2014).

Texas products liability law recognizes three kinds of product defects that will give rise to an actionable claim: manufacturing defects, design defects, and marketing defects. Temple EasTex, Inc. v. Old Orchard Creek Partners, Ltd., 848 S.W.2d 724, 732 (Tex. App. 1992), writ denied, (Sept. 29, 1993). Liability for personal injuries caused by a product's defective design can be imposed under several underlying legal theories, among them negligence, breach of warranty, and strict products liability. The requisite proof for recovery on a design defect claim was prescribed by statute in 1993 and made the same for any legal theory asserted.” Hyundai Motor Co. v. Rodriguez ex rel. Rodriguez, 995 S.W.2d 661, 664 (Tex. 1999). To prevail on his design defect claim, a plaintiff must prove that “(1) the product was defectively designed so as to render it unreasonably dangerous; (2) a safer alternative design
existed; and (3) the defect was a producing cause of the injury for which the plaintiff seeks
recovery.” Casey v. Toyota Motor Eng'g & Mfg. N. Am., Inc., 770 F.3d 322, 330 (5th Cir. 2014).

Texas law defines “safer alternate design” as a product design other than the one actually used, that in reasonable probability:

(1) would have prevented or significantly reduced the risk of the plaintiff's personal injury, property damage, or death without substantially impairing the product's utility; and
(2) was economically and technologically feasible at the time the product left the control of the manufacturer or seller by the application of existing or reasonably achievable scientific knowledge.
TEX. CIV. PRAC. & REM. CODE § 82.005(b). See also Casey, 770 F.3d at 331; Hodges v. Mack
Trucks, Inc., 474 F.3d 188, 196 (5th Cir. 2006).

Honda argued that summary judgment was appropriate because plaintiffs did not present such evidence of a safer alternative design -- instead offering an algorithm that was a generalized concept for a design, which is insufficient under Texas law. Honda used one algorithm and Plaintiffs proposed that a different one – an algorithm patented by Plaintiffs’ expert – should have been used instead. The question of whether an algorithm and its alleged fit to a particular vehicle can constitute a safer alternative design was, the court said, one it need not consider here because, in an event, of Plaintiffs’ failure to provide evidence of economic feasibility. By definition, a safer alternative design must be reasonably probable to be economically feasible at the time the product left control of the manufacturer. See TEX. CIV. PRAC. & REM. CODE § 82.005(b)(2). “To establish economic feasibility, the plaintiff must introduce proof of the ‘cost of incorporating [the] technology.’” Casey, 770 F.3d at 334 (citing Honda of Am. Mfg., Inc. v. Norman, 104 S.W.3d 600, 607 (Tex.Ct.App.2003)). “To prove economic feasibility where the product is not yet in use, courts generally require a party to present evidence of either an estimate or range of the cost of the alternative design.” Casey, 770 F.3d at 335 (citing Brochtrup v. Mercury Marine, 426 Fed.Appx. 335, 339 (5th Cir.2011) (concluding that testimony from builder of alternative design that building cost was $400 was sufficient evidence of economic feasibility to avoid judgment as a matter of law); A.O. Smith Corp. v. Settlement Inv. Mgmt., No. 2–04–270–CV, 2006 WL 176815, at *3–4 (Tex. Ct. App. Jan. 26, 2006) (concluding that detailed testimony about how proposed alternative design would add between $5 and $200 per unit was some evidence of economic feasibility). 

In this case, Plaintiffs presented no evidence of either an estimate or a range of the cost of implementing their expert's alternative algorithm. Specifically, the expert report and deposition transcript offered no such calculation, and thus the court found summary judgment appropriate for Honda on Plaintiff’s design defect claim.

 

 

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.

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.
 

Motion to Strike Class Allegations Granted

Mercedes-Benz USA LLC made a successful preemptive strike against class certification in a proposed class action suit over alleged suspension problems in GL model Mercedes vehicles. See Becnel v. Mercedes-Benz USA, LLC, No. 2:14-cv-00003 (E.D. La., 6/3/14).

 

This matter arose from Plaintiff's claims for negligence, strict product liability, breach of implied warranty, fraud, and violations of the Louisiana Unfair Trade Practice Act,and the Magnuson-Moss Warranty Act. Plaintiff's claims arise from his purchase of a 2008 Mercedes-Benz GL320 from Mercedes-Benz of New Orleans.  Plaintiff brought the vehicle to the Dealer for service several times. Each time that Becnel tendered the vehicle to the Dealer, the Airmatic Suspension System allegedly was cited as the problem and was repaired. Plaintiff alleged that MBUSA knew that the Suspension System was defective but concealed that fact from current, future, and past owners and/or lessors of GL model vehicles. Plaintiff filed a class action complaint on January 2, 2014 against MBUSA on behalf of "[a]ll current and past owners or people who leased Mercedes-Benz USA, LLC GL model of vehicles since 2007."

Defendant moved to strike the class allegations. The standard applied to the motion to strike is essentially identical to the standard applied in class certification motions. See Grant,2010 WL 3303853; see also Markey v. Louisiana Citizens Fair Plan, 2008 WL 5427708 (E.D. La. Dec. 30, 2008)(Vance, J.) ; Truxillo v.Johnson & Johnson, et al., 2007 WL 4365439 *1 (E.D. La. Dec. 12, 2007)(Barbier, J.) (noting that the issues raised in a motion for judgment on the pleadings regarding class allegations overlap with the issues raised in a motion to certify the class.)

Defendant advanced several arguments in support of its motion to strike.   For example, MBUSA contended that due process barred the Court from applying Louisiana law to all the claims of absent class members from other states, and that the application of every other applicable state's laws would be unmanageable. Plaintiff suggested that this argument was premature. He argued that despite the potential for uncommon issues of law, it cannot be denied that there were some common issues of fact. Even if the Court would have to engage in a conflicts analysis to determine if the various state laws were incompatible, that only means that class certification may be improper further along in litigation, but was not improper now.

The court focused on the predominance and manageability challenges that were presented by the proposed class. The Court said it could not accept Plaintiff's assertion that he "cannot foresee any manageability problems." Based on the pleadings alone, the Court pointed to several issues: it was reasonable to assume that this matter will require the application of laws from fifty-one different jurisdictions, as it was readily apparent that at least one person from every state and the District of Columbia will be found to have purchased or leased a 2007 GL Class Mercedes. The Court anticipated serious manageability issues in applying these differing laws to Plaintiff's numerous state law causes of action, including claims for: negligence; products liability based on manufacturing defects, design defects, warning defects, and breach of express warranty; redhibition; fraudulent concealment; and unfair trade practices.

Additionally, Plaintiff, and presumably other class members, faced serious prescription.statute of limitations issues that would ultimately hinge on their ability to show that the discovery doctrine tolled the prescriptive period. The use of the discovery doctrine would necessarily involve the task of determining at what time it became unreasonable for each class member to ignore the problems with the vehicles at issue. See Chevron USA, Inc. v. Aker Mar., Inc., 604 F.3d 888, 893-94(5th Cir. 2010) (noting that in such cases, "the prescriptive period [does] not begin to run until [a plaintiff has] a reasonable basis to pursue a claim against a specific defendant.") The same issue would present itself with regard to the fraud claims, in that the Court would have to determine the element of reliance for each and every class member. See Castano, 84 F.3d at 745 ("fraud class action cannot be certified when individual reliance will be an issue.")

These serious manageability problems far outweighed any benefit that a class action would create, said the court. Plaintiff conclusorily pointed to the usual presumed benefits highlighted in class certification motions, but did not propose any concrete strategy for achieving these goals. In light of the manageability issues. The Court said it could not imagine that that the many issues that would require individual treatment for each class member would not outweigh or at least balance out any benefit conferred by class treatment.

Motion to strike granted.

 

Fail Safe Class Rejected in TCPA Case

This year marks the 50th Anniversary of the taut Cold War thriller "Fail-Safe", starring Henry Fonda and Walter Matthau. (If I recall, there is no music in the entire B&W film.) In honor of the film, we post about a modern day fail-safe issue, less dramatic of course.

A crucial implicit requirement for class certification is that the plaintiff propose a workable, ascertainable class definition. One sub-set of this issue is the highly improper "fail-safe" class in which absent class members can use an imprecise class definition to affirm their membership when the class wins, but assert they were never members of the class when the defendant wins. A recent federal case sees the court striking class allegations that fall under this impermissible “fail safe” class rubric. See Sauter v. CVS Pharmacy, Inc., No. 2:13-cv-846 (S.D. Ohio, 5/7/14).

The Plaintiff brought a putative class action against the Defendant for alleged violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227. Plaintiff alleged that the class received phone calls from CVS, which utilized an automatic telephone dialing system (ATDS) to call, without the Plaintiffs' consent.  The call allegedly provided general information about a prescription refill and the location of his local CVS pharmacy.  (actually sounds kind of useful, but we digress)

Defendant made a Motion to Strike Plaintiff's Class Allegations. Most courts recognize that a motion to strike class action allegations may properly be filed before plaintiffs have filed a motion for class certification. See, e.g., Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 945 (6th Cir. 2011); Bearden v. Honeywell Intern., Inc., No. 3:09-01035, [2010 BL 63279], 2010 WL 1223936, at *9 (M.D. Tenn. Mar. 24, 2010).  A court may strike class action allegations before a motion for class certification where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met. See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160 (1982) ("Sometimes the issues are plain enough from the pleadings"). 

The big issue here was whether the complaint proposed a fail-safe class.   A class definition is impermissible where it is a class that cannot be defined until the case is resolved on its merits. See Randleman v. Fidelity Nat'l Title Ins. Co., 646 F.3d 347, 352 (6th Cir. 2011). A fail-safe class is defined to in essence include only those who are entitled to relief.  Such a class is prohibited because it would allow putative class members to seek a remedy but not be bound by an adverse judgment — either those class members win or, by virtue of losing, they are not in the class and are not bound.

The various subclasses here included those who received calls and did not provide prior express written consent, and those who received calls who had expressly revoked their consent for such calls.  Thus, each of the Plaintiff's proposed classes was defined to include only those individuals who did not expressly consent to the receipt of the defendant's phone calls made with the use of an ATDS. Because the TCPA prohibits calls to cellular telephones using ATDSs unless prior express consent has been given, defining the class to include anyone who received such a call without prior express consent meant that only those potential members who would prevail on this liability issue would be members of the class.  In other words, the proposed classes consisted solely of persons who could establish that defendant violated the TCPA. Thus, if the Plaintiff successfully demonstrated that the Defendant made calls using an ATDS without the class members' prior express consent, then the class members would win, said the court. However, if the Plaintiffs were unsuccessful in meeting their burden of proof, the class did not even not exist and the apparent class members (folks who got a call) would not be bound by the judgment in favor of the Defendant. This was the very definition of a prohibited fail-safe class.

So, motion granted; class allegations struck.

 

Summary Judgment Granted on Product Identification

Sometimes simpler is better.  In product liability litigation nothing is more basic, perhaps, than proof the plaintiff used defendant's product.  Last week, a federal judge granted summary judgment against two plaintiffs' making claims in multi-district litigation over injuries allegedly related to the painkillers Darvocet and Darvon. See In Re: Darvocet, Darvon and Propoxyphene Products Liability Litigation, No. 2:11-md-02226 (E.D. Ky.). The issue was this basic cause in fact element.

Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

Defendant argued that it was entitled to summary judgment because neither plaintiff demonstrated the ingestion of a propoxyphene product manufactured, sold, or distributed by the defendant. In their Amended Complaint, both plaintiffs allege that they ingested propoxyphene products manufactured by Lilly. It is indeed a general principle of products liability law in Texas and Georgia (the applicable rules under choice of law in an MDL) that a plaintiff must allege sufficient facts to allow the reasonable inference that the injury-causing product was sold, manufactured, or distributed by the defendant. Plaintiffs could not dispute that they failed to establish the ingestion of a Lilly  product.

Instead, Lilly presented evidence demonstrating that plaintiffs represented that they intended to pursue only claims that relate to generic drugs; that is, they would seek to hold Lilly liable for
the injuries allegedly arising out of their taking of generic drugs made by someone else.

Such arguments were already rejected by the Court in this MDL.  The Court had previously found unpersuasive the plaintiffs’ argument that a brand-name manufacturer may be held liable under a misrepresentation theory of liability to a plaintiff who ingested generic propoxyphene. The prevailing rule regarding misrepresentation claims against brand-name manufacturers has its origins, noted the Court, in Foster v. American Home Products Corp., 29 F.3d 165 (4th Cir. 1994), which rejected “the contention that a name brand manufacturer’s statements regarding its drug can serve as the basis for liability for injuries caused by another manufacturer’s drug.” Id. at 170.

The majority of courts that have addressed similar claims have followed the Fourth Circuit’s lead. Notably, federal district courts in Texas have repeatedly found that “the Texas Supreme Court would conclude that a brand-name manufacturer does not owe a duty to warn users of the risks related to another manufacturer’s product.” Finnicum v. Wyeth, Inc., 708 F. Supp. 2d 616, 621 (E.D. Tex. 2010); see also Burke v. Wyeth, Inc., No. G-09-82, 2009 WL 3698480, at *2-3 (S.D. Tex. Oct. 29,
2009).  And, similarly, there can be no recovery under Georgia law, “[u]nless the manufacturer’s defective product can be shown to be the proximate cause of the injuries . . .” Hoffman v. AC&S, Inc., 548 S.E.2d 379, 382 (Ga. Ct. App. 2001) (“To survive summary judgment, [the plaintiff] clearly
needed to present evidence that she was exposed to defendants’ products.”).

Defendant thus sufficiently established that there was no genuine dispute concerning the only
material fact that determined the viability of these plaintiffs’ misrepresentation claims: the identity
of the propoxyphene product ingested.  Therefore, the plaintiffs’ claims failed as a matter of law.

 

 

 

Defense Verdict Upheld on Post-trial Motion in Levaquin MDL

About 1700 federal cases sit in the MDL for the product Levaquin makers.  Levaquin is an antibiotic used to treat a variety of bacterial infections, including upper respiratory infections. Plaintiffs in the MDL allege they have been prescribed Levaquin, and allege that it causes tendons to rupture. They claim that defendants' warnings about this alleged side effect were inadequate.  Defendants deny these allegations.

In this mass tort, the MDL court has begun to try bellwether cases. Recently the MDL court rejected a plaintiff's post-trial motion after he lost the third such trial. See Straka v. Johnson & Johnson, No. 08-5742 (D. Minn., 9/28/12).  A jury found that the alleged failure to warn Straka's prescribing physician about the risk of tendon rupture did not cause the plaintiff's injuries. After trial, one issue was the ubiquitous and almost never prevailing "verdict against the weight of the evidence" argument.  The court disposed of this by noting the sufficient evidence at trial supporting the jury's finding in that Straka's injuries were caused by something other than Levaquin, and that a different warning would not have changed his physician's decision to prescribe Levaquin. Defendants presented evidence about Straka’s steroid use and testimony that steroid use can contribute to tendon injury without the use of Levaquin.  And defendants did a good job presenting evidence that the prescriber could not remember reading the Levaquin label and did not learn of the tendon-associated risks of Levaquin until well after the black box warning was added and a Dear Doctor letter was distributed.

Perhaps more interesting for the trial lawyers among our readers is the argument for a new trial because one juror worked for a company that had a business connection to one of the defendants. Specifically the juror disclosed after trial began that her employer provided services to one of the defendants' (J&J) disability insurance carrier. Straka contended the doctrine of “implied bias” required the court to strike this juror. But the juror could not recall having ever worked on a Johnson & Johnson issue, and she indicated that she was unaware what proportion of her work came indirectly from Johnson & Johnson. When asked if her company’s connection with Johnson & Johnson would affect her ability to be fair and impartial, she said no. 

The doctrine of implied bias (also referred to in some cases as “implicit bias”) requires a court to strike a juror in extreme situations where the relationship between a prospective juror and some aspect of the litigation is such that it is highly unlikely that the average person could remain impartial in his deliberations under the circumstances. See Sanders v. Norris, 529 F.3d 787, 792 (8th Cir. 2008).  The juror here did not have the type of financial relationship that would require the Court to presume implied bias: she was not employed by defendants, or even employed by a company that worked directly for Johnson & Johnson.  Nor was it unlikely that the average person could remain impartial in deliberations in this situation. She was sufficiently removed from Johnson & Johnson that she did not realize that her company did any work relating to the defendants until a co-worker recognized it. So no error in proceeding.

[FYI, according to the court, some MDL parties discussed have discussed a tentative settlement agreement reached on September 25, 2012, in a conference held in front of Chief Magistrate Judge Boylan. This tentative settlement agreement is being drafted, and involves the case inventories of 6 law firms. The effect of this settlement would reduce the MDL case count by 845 cases and plaintiffs. At the time of the status conference several other plaintiffs' firms have expressed an interest in exploring settlement, but there remain firms that are interested in going forward with the litigation, according to the court.]


 

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. 

 

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. 


 

Observations from Judges on Scientific Evidence

I spoke last week at a CLE seminar on "Chemical Products Liability and Environmental Litigation."  One of the panels included an array of federal and state court judges who offered their thoughts on a number of interesting topics, including Daubert/Frye issues.

No surprise for the savvy readers of MassTortDefense, but one clear takeaway is that judges have differing views and approaches on a variety of expert-related issues, including when they hold a hearing vs. deciding on the paper, and when they want the experts to appear live vs. argument.

There were a few areas of consensus. 

  • The panel agreed you need to know your judge, learn his or her preferences, and know how busy their docket is. 
  • In Daubert or Frye hearings, don't waste time on Rule 56 or Rule 702 black letter law.
  • In filings, always cite to the record so the judge or clerk can find the basis of factual assertions. This was called a "lost art."
  • A stipulated joint glossary of key terms is appreciated when possible.

The judges agreed that they are not overly impressed with arguments noting the expert was excluded by other courts on other cases.  If the facts are nearly identical, and they respect the other judge, and there is an opinion or order with some reasoning, they may give it some weight.  But if the expert opinion was also admitted in some other cases, this may cancel out the influence of prior exclusions.

Finally, while many lawyers talk about filing an iffy or uncertain motion to "educate" the court as to important science issues, the panel suggested this often doesn't help. There may be a time lag between the motion and trial; and the loss of momentum from losing a motion may have carry-over effects in the litigation.

 

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."

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. 

 

Partial Summary Judgment Granted in Genetically Modified Rice MDL

The judge overseeing the federal MDL involving genetically modified rice has granted partial summary judgment to the defendants, dismissing several claims, including a public nuisance allegation. In re: Genetically Modified Rice Litigation, No.4-md-1811 (E.D. Mo. 10/9/2009). 

This multi-district litigation relates to the claims of U.S. long-grain rice producers, and others in the rice business, who allege that certain defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice. The first of a series of bellwether trials will begin in November; this first trial involves Missouri farmer plaintiffs, and the court's Order rules on only the portions of the motions directed to the claims of the Missouri plaintiffs.

The Missouri plaintiffs are seeking damages under a variety of theories, including negligence,  public and private nuisance, negligence per se, and the North Carolina Unfair Trade Practices Act. The plaintiffs are suing to recover allegedly lost income they claim resulted from the drop in market price for rice; following the announcement of the contamination in 2006, some rice companies around the world banned the importation of U.S. rice, which allegedly caused a dramatic drop in the U.S. market price for rice.

Judge Catherine Perry of the U.S. District Court for the Eastern District of Missouri issued an opinion on a host of summary judgment  issues, most notably granting defendants’ motion for summary judgment on plaintiffs’ claims under the North Carolina Unfair Trade Practices Act and on plaintiffs’ claims for public nuisance and negligence per se.

Defendants asserted first that the economic loss doctrine bars all the common-law claims.  The economic loss doctrine bars recovery of purely pecuniary losses in certain tort cases if there is no personal injury or physical damage to property other than the property at issue in the case – usually an allegedly defective product in a products liability case. A plaintiff suing over damage to a product he contracted for is limited to his contract remedies. Many states have adopted the economic loss doctrine for products liability cases, and some states have applied the doctrine to other torts
as well. Here, however, the court found that the alleged damages were not to any property that was the subject of a contract, and the plaintiffs were not claiming damage to any property that is alleged to be defective. Rather, they claim market losses and damage to other property, including equipment, land, and rice. Because they alleged damage to other property, the doctrine does not
apply, concluded the MDL court.

Defendants fared better with plaintiffs' attempt to rely on the more pro-plaintiff North Carolina statute.  The court noted that plaintiffs are not suing based on contracts with Bayer, and although some of Bayer’s decision-making occurred in North Carolina, the claims of plaintiffs cannot be said to arise mainly from those North Carolina activities.  Although there was some conflicting authority, the court concluded that the better reasoned cases require an in-state injury to a plaintiff’s in-state business operations. In other words, the North Carolina Unfair and Deceptive Trade Practices Act is intended to protect the North Carolina consumer.  Plaintiffs had not shown that their claims here had a sufficient effect on North Carolina business for them to benefit from this act intended to protect North Carolina commerce.

Third, in Missouri, a public nuisance is an offense against the public order and economy of the state that violates the public’s right to life, health, and the use of property, while, at the same time annoys, injures, endangers, renders insecure, interferes with, or obstructs the rights or property of the whole community, or neighborhood, or of any considerable number of persons. Bayer was able to show that, as matter of law, plaintiffs cannot recover for public nuisance. There is no evidence in the record showing the sort of public harm or negative effect on the entire community that public nuisance law was developed to remedy.

A private nuisance, on the other hand, is the unreasonable, unusual, or unnatural use of one’s property so that it substantially impairs the right of another to peacefully enjoy his property.  Plaintiffs’ private nuisance claim survived summary judgment because factual disputes remain regarding whether contamination of plaintiffs’ crops may interfere with their enjoyment of their land. The focus of a private nuisance claim, said the MDL court,  is on defendant’s unreasonable interference with the use and enjoyment of plaintiff’s land.  A genuine issue of fact remains regarding whether plaintiffs can prove a private nuisance.

Defendants were entitled to summary judgment on plaintiffs’ negligence per se claim, to the extent it relied on a violation of federal Animal and Plant Health Inspection Service regulations. This is because they are more in the nature of performance standards that do not provide a standard of
care.  So, for example, if a building code says a stair riser must be six inches tall, that is a precise directive that a builder can follow, and if someone is injured because the riser is taller or shorter, negligence per se might apply.  A building code that says the stair riser should be of a sufficient height not to be dangerous or so that a person will not fall could not provide a basis for a negligence per se claim because the question of what is reasonable was not answered by the building code regulations.

We will keep an eye on the first bellwether case for our readers.