Supreme Court Offers Some Guidance on Standing

The Supreme Court has decided a case involving injury-in-fact and standing issues that may have significant impacts on class actions.  See Spokeo Inc. v. Robins, No. 13-1339 (U.S. 5/16/16).

Spokeo, Inc. operated a “people search engine,” which searches a wide spectrum of databases to gather and provide personal information about individuals to a variety of users, including employers wanting to evaluate prospective employees. After respondent/plaintiff Robins discovered that his Spokeo-generated profile allegedly contained inaccurate information, he filed a federal class action complaint against Spokeo, alleging that the company willfully failed to comply with the Fair Credit Reporting Act’s requirements.

The District Court dismissed Robins’ complaint, holding that he had not properly pleaded injury in fact as required by Article III. The Ninth Circuit reversed. Based on Robins’ allegation that “Spokeo violated
his statutory rights” and the fact that Robins’ “personal interests in the handling of his credit information are individualized,” the appeals court ruled that Robins had adequately alleged an injury in fact.

The Supreme Court ruled that the Ninth Circuit failed to consider both aspects of the injury-in-fact requirement, so its Article III standing analysis was incomplete. A plaintiff invoking federal jurisdiction bears the burden of establishing the “irreducible constitutional minimum” of standing by demonstrating (1) an injury in fact, (2) fairly traceable to the challenged conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife, 504 U. S. 555, 560–561. Particularly relevant here, the injury-in-fact requirement requires a plaintiff to show that he or she suffered “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Id. at 560. 

The Ninth Circuit’s injury-in-fact analysis neglected the independent “concreteness” requirement. Both observations it had made about the statutory claim concerned only “particularization,” i.e., the requirement that an injury “affect the plaintiff in a personal and individual way,” Id.at 560, n. 1.  But an injury in fact must be both concrete and particularized. Concreteness is quite different from particularization and requires an injury to be “de facto,” that is, to actually exist.  

The Ninth Circuit also failed to address whether the alleged procedural violations entail a degree of risk sufficient to meet the concreteness requirement. A “concrete” injury need not always be a physical or “tangible” injury. See, e.g., Pleasant Grove City v. Summum, 555 U.S. 460. To determine whether an intangible harm constitutes injury in fact, both history and the judgment of Congress are instructive. Congress is well positioned to identify intangible harms that meet minimum Article III requirements, but a plaintiff does not automatically satisfy the injury-in-fact requirement whenever a statute grants a right and purports to authorize a suit to vindicate it. Article III standing requires a concrete injury even in the context of a statutory violation.  So, the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact; in such a case, a plaintiff need not allege any additional harm beyond the one identified by Congress, see Federal Election Comm’n v. Akins,
524 U. S. 11, 20–25. But in some circumstances a mere alleged violation of a federal statute will not be sufficient. Plaintiffs cannot automatically satisfy the demands of Article III by alleging a bare procedural violation. In addition, not all substantive inaccuracies cause harm or present any material risk of harm.

The Court remanded for consideration of these issues (which means the case may come back up).

The ruling that a mere allegation of a statutory violation by itself and mere procedural violations of a statute do not necessarily create standing will likely impact numerous class actions.  Lead plaintiffs will not be able to assert mere statutory violations as a means to show standing with respect to each absent putative class member.  Often, there will need to be an individualized inquiry as to each class member on issues surrounding the concreteness of each injury, the degree of risk posed by each violation to each class member, such as the nature and level of information the defendant allegedly got wrong. Many plaintiff lawyers, in order to maximize damages, seek to draw their class so broadly as to almost certainly include many individuals who have only a technical claim. The need for individual inquiry will loom large in the predominance analysis. Absent a proper standing analysis, the economy will continue to see huge payouts in no-injury lawsuits, a wealth transfer that overcompensates for non-existent injuries and over-deters insubstantial or technical regulatory violations.  

Court of Appeals Rejects Washer Class Action

The 11th Circuit recently ruled that class certification had been improperly granted to owners of front-loading washing machines that allegedly were susceptible to mold build-up. See Brown v. Electrolux Home Prods. Inc., No. 15-11455, 2016 WL 1085517 (11th Cir. 3/21/16).

Across the country, consumers have filed class actions against the manufacturers of front-loading washing machines. Front-loaders are considered an improvement over traditional top-loading machines because they use less water and energy. But the initial models allegedly had a problem: the rubber seal on the front door of the machine retains water, which allows mildew to grow.  In this case, consumers from California and Texas filed a class action against Electrolux Home Products, the manufacturer of Frigidaire front-loading washing machines. After the district court certified two statewide classes, see Terrill v. Electrolux Home Prods., Inc., 295 F.R.D. 671 (S.D. Ga. 2013), Electrolux filed this interlocutory appeal. The 11th Circuit vacated the certification as the district court abused its discretion in determining the predominance requirement of Federal Rule of Civil Procedure 23(b)(3).

The district court certified two statewide classes: California Class: All persons and entities who purchased, other than for resale, after March 5, 2004, and while in the State of California, a Frigidaire front-loading washing machine with a convoluted bellow. And Texas Class: All persons and entities who purchased, other than for resale, after March 5, 2004, and while in the State of Texas, a Frigidaire front-loading washing machine with a convoluted bellow.  

The district court recognized that it must conduct a "rigorous analysis" to determine whether a class action satisfies Rule 23 . See Vega v. T-Mobile USA, Inc., 564 F.3d 1256 , 1266 (11th Cir. 2009). And it correctly explained that "[a] party seeking class certification must affirmatively demonstrate his compliance with the Rule."  Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).  The district court concluded that the questions of law or fact common to class members predominate over any questions affecting only individual members, Fed. R. Civ. P. 23(b)(3). With respect to the consumer claims, the district court somehow concluded that every element was susceptible to class-wide proof. For example, the district court concluded that each class member presumably relied on the fact that defendant provided Washing Machines suited for cleaning and freshening clothing.  The district court then explained that the class members could show their reliance on defendant's alleged failure to disclose the Washing Machines' alleged design defect and the inevitable consequences of that defect through the same class-wide proof that they purchased machines to clean and freshen their clothes rather than to soil and odorize them.  As for the warranty claims, the district court rejected Electrolux's argument that the questions whether the class members gave Electrolux pre-suit notice of the defect, whether the class members gave Electrolux an opportunity to cure the defect, and whether the defect manifested during the warranty period would require individual proof. Instead, it concluded that the questions whether pre-suit notice, an opportunity to cure, and manifestation of the defect are required under California and Texas law are "common questions" that weigh in favor of class certification.

The court of appeals noted first that the district court misstated the law when it said that it "resolves doubts related to class certification in favor of certifying the class."  Indeed, the party seeking class certification has the burden of proof. Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181 , 1187 (11th Cir. 2003). And the entire point of a burden of proof is that, if doubts remain about whether the standard is satisfied, "the party with the burden of proof loses." Simmons v. Blodgett, 110 F.3d 39 , 42 (9th Cir. 1997). All else being equal, the presumption is against class certification because class actions are an exception to our constitutional tradition of individual litigation. See Comcast Corp. v. Behrend, 133 S. Ct. 1426 , 1432 (2013); Hansberry v. Lee, 311 U.S. 32 , 40-41 (1940). A district court that has doubts about whether "the requirements of Rule 23 have been met should refuse certification until they have been met." Fed. R. Civ. P. 23 advisory committee's note to 2003 amendment; accord In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 , 321 (3d Cir. 2008); Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 725 F.3d 1213, 1218 (10th Cir. 2013).

The district court also misstated the law when it said that it "accepts the allegations in the complaint as true." and "draws all inferences and presents all evidence in the light most favorable to Plaintiffs." The party seeking class certification has a burden of proof, not a burden of pleading. See Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 , 2412 (2014). He "'must affirmatively demonstrate his compliance' with Rule 23 " by proving that the requirements are "in fact" satisfied. Comcast, 133 S. Ct. at 1432 (quoting Wal-Mart, 131 S. Ct. at 2551 ). And the district court must conduct a "rigorous analysis" to determine whether the movant carried his burden, which "will frequently entail 'overlap with the merits of the plaintiff's underlying claim.'" Id . (quoting Wal-Mart, 131 S. Ct. at 2551 ). Of course, the district court can consider the merits to the extent "they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 , 1195  (2013). And if a question of fact or law is relevant to that determination, then the district court has a duty to actually decide it and not accept it as true or construe it in anyone's favor. See Comcast, 133 S. Ct. at 1432-33 ; Szabo v. Bridgeport Machs., Inc., 249 F.3d 672 , 675-76 (7th Cir. 2001); Gariety v. Grant Thornton, LLP, 368 F.3d 356, 365-66 (4th Cir. 2004). The district court erred when it stated the opposite.
 

Ultimately, the district court abused its discretion when it decided that the questions of law or fact common to class members predominate over any questions affecting only individual members, Fed. R. Civ. P. 23(b)(3). To determine whether the requirement of predominance is satisfied, a district court must first identify the parties' claims and defenses and their elements. The district court should then classify these issues as common questions or individual questions by predicting how the parties will prove them at trial. Common questions are ones where "the same evidence will suffice for each member," and individual questions are ones where the evidence will "vary] from member to member." Blades v. Monsanto Co., 400 F.3d 562 , 566 (8th Cir. 2005).  After identifying the common and individual questions, the district court should determine whether the common questions predominate over the individual ones. Many courts  have adopted the following rule of thumb: if common issues truly predominate over individualized issues in a lawsuit, then the addition or subtraction of any of the plaintiffs to or from the class should not have a substantial effect on the substance or quantity of evidence offered. If, on the other hand, the addition of more plaintiffs leaves the quantum of evidence introduced by the plaintiffs as a whole undisturbed, then common issues are likely to predominate.

But predominance requires a qualitative assessment too; it is not bean counting, and the relative importance of the common versus individual questions also matters. Predominance can only be determined after considering what value the resolution of the class-wide issue will have in each class member's underlying cause of action.  District courts should assess predominance with its overarching purpose in mind—namely, ensuring that "a class action would achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Amchem Prods., Inc. v. Windsor, 521 U.S. 591 , 615 (1997).

Electrolux argued that the district court misapplied California and Texas law when it concluded that the plaintiffs could prove causation on a class-wide basis. Electrolux argued that causation requires individual proof. Under California law, one who was not exposed to the alleged misrepresentations and therefore could not possibly have lost money or property as a result of the unfair competition is not entitled to restitution. Pfizer Inc. v. Superior Court, 182 Cal. App. 4th 622 , 105 Cal. Rptr. 3d 795 , 803 (Cal. Ct. App. 2010); accord Am. Honda Motor Co. v. Superior Court, 199 Cal. App. 4th 1367 , 132 Cal. Rptr. 3d 91 , 101 (Cal. Ct. App. 2011); Kaldenbach v. Mut. of Omaha Life Ins. Co., 178 Cal. App. 4th 830 , 100 Cal. Rptr. 3d 637 , 652 (Cal. Ct. App. 2009). The district court rejected Electrolux's argument because it concluded that the class members were exposed to uniform business practices.
The district court misunderstood the plaintiffs' complaint. Brown alleged that Electrolux engaged in unfair competition by omitting essential information in its advertisements. The only advertisements that Brown identified were on Frigidaire's website, but he made no effort to prove that any member of the California Class visited the website before purchasing a washing machine. Brown in fact admitted that he never saw any advertisements from Frigidaire. Because the class members were not exposed to a uniform misrepresentation, the claim under the California Unfair Competition Law is unsuitable for class treatment. See Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880 , 883 (5th Cir. 1973); Mazza v. Am. Honda Motor Co., 666 F.3d 581 , 595 (9th Cir. 2012).

The Texas Deceptive Trade Practices—Consumer Protection Act prohibits "[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce." Tex. Bus. & Com. Code Ann. § 17.46(a) . To recover under the Act, a plaintiff must prove that he "relied on" the defendant's conduct to his detriment. Id.§ 17.50(a)(1) (B). This reliance element requires that the plaintiff "actually did rely" on the defendant's statement or omission, not that the defendant "wanted purchasers to rely on its advertisements and other representations." Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675 , 694 (Tex. 2002).  It appears that no Texas court has ever certified a class action under the Texas Deceptive Trade Practices—Consumer Protection Act, see Tex. S. Rentals, Inc. v. Gomez, 267 S.W.3d 228 , 237 (Tex. App. 2008). That a plaintiff could prove reliance on a class-wide basis is "a near-impossibility," according to the Texas Court of Appeals. Id . (quoting Fid. & Guar. Life Ins. Co. v. Pina, 165 S.W.3d 416 , 423 (Tex. App. 2005)).  The district court certified a class anyway, and it erred.  The court cannot presume that the class members relied on any uniform misrepresentation. The court could have no inkling whether the class members saw any advertisements from Frigidaire, much less uniform advertisements, before they purchased their washing machines. This means that their claim under the Texas Deceptive Trade Practices-Consumer Protection Act cannot proceed as a class action. See Wal-Mart, 131 S. Ct. at 2552 n.6; Sandwich Chef of Tex, Inc. v. Reliance Nat. Indem. Ins. Co., 319 F.3d 205, 219 (5th Cir. 2003); In re Clorox Consumer Litig., 301 F.R.D. 436, 446 (N.D. Cal. 2014).

Electrolux next argued that the district court prematurely certified the warranty claims because it did not first resolve several questions of state law that were relevant to predominance. That is, the district court could not determine predominance without first deciding whether California and Texas law require pre-suit notice, an opportunity to cure, and manifestation of the defect. The court of appeals agreed. A district court must decide all questions of fact and law that bear on the propriety of class certification. For example, a question of state law bears on predominance if, answered one way, an element or defense will require individual proof but, answered another way, the element or defense can be proved on a class-wide basis. Because each requirement of Rule 23 must be met, a district court errs as a matter of law when it fails to resolve a genuine legal or factual dispute relevant to determining the requirements.  

The questions of state law that Electrolux asked the district court to resolve—whether the plaintiffs must prove pre-suit notice, an opportunity to cure, and manifestation of the defect—bear on predominance. If California and Texas law do not excuse pre-suit notice and an opportunity to cure when the defendant had prior knowledge of the design defect, as the district court speculated, then each class member will need to prove that he gave Electrolux pre-suit notice and an opportunity to cure. This showing could require individual proof.  And if California and Texas law require the defect to manifest, then each class member will need to prove that his washing machine actually grew mildew during the warranty period. This showing could also require individual proof. See Gen. Motors Corp. v. Garza, 179 S.W.3d 76 , 82-84 (Tex. App. 2005). Because the answers to these preliminary questions of California and Texas law could affect whether Rule 23(b)(3) is satisfied, the district court had a duty to resolve them.What matters to class certification is not the raising of common 'questions'—even in droves—but, rather the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation. Wal-Mart, 131 S. Ct. at 2551.  Answering the questions whether California and Texas law require pre-suit notice, an opportunity to cure, and manifestation of the defect would not resolve issues that are "central to the validity" of the plaintiffs' warranty claims. Because the district court punted these questions instead of answering them, it abused its discretion.

Finally, on damages, even if individual issues regarding damages do not always defeat predominance in and of themselves, individual damages defeat predominance if computing them will be so complex, fact-specific, and difficult that the burden on the court system would be simply intolerable. Klay, 382 F.3d at 1260.  Furthermore, individual damages defeat predominance when they are accompanied by "significant individualized questions going to liability." Id. (citing Sikes v. Teleline, Inc., 281 F.3d 1350 , 1366 (11th Cir. 2002). The court of appeals left it to the district court on remand to decide whether the latter rule was satisfied here.
 

Defendant Seeks Review of Trial by Formula Decision

Defendant Google has filed a powerful cert petition, asking the U.S. Supreme Court to review a controversial Ninth Circuit decision reviving a putative class action. See Pulaski & Middleman LLC, et al. v. Google Inc., No. 15-1101 (U.S. petition filed 3/1/16).

 

This case presents the issue whether plaintiffs may use a formula that relies on a uniform measure of harm derived from the average experience of all class members as common proof of damages.

Google AdWords is an online advertising service. During the class period, AdWords allowed advertisers to place ads alongside Google search results or on other webpages that were part of Google’s advertising network. The ads generally were matched to Internet users based on the search queries the users entered on Google (or other search engines) or the subject-matter of the websites they viewed. The ads typically were short strings of text with hyperlinks that, when clicked, took the user to the advertiser’s website.  Advertisers paid Google each time an Internet user clicked on an advertisement link. Plaintiffs in this suit all purchased advertising services from Google AdWords. They alleged that Google misled them in violation of California law by showing their ads on two types of websites: “parked domains” and “error pages.”

 

 

The plaintiffs moved for class certification, and the district court denied this motion for a Rule 23(b)(3) class. The court found that while the issue whether Google’s alleged omissions were misleading to a reasonable AdWords customer could be seen as common, the individual nature of the restitutionary relief sought predominated. Plaintiffs’ theory rested on what AdWords customers would have paid but forthe alleged misstatements or omissions.  Yet, any effort to determine what advertisers would have paid requires a complex and highly individualized analysis of advertiser behavior for each particular ad that was placed.

A panel of the Ninth Circuit reversed, concluding that the predominance requirement was satisfied. In
reaching that conclusion, the court of appeals concluded  that any differences in calculating
the amount of restitution could not predominate. That is because, the court declared, damage calculations alone cannot defeat certification.  Applying that categorical rule, the court did not even consider whether, in the particular circumstances of this case, there were any individual issues of damages—much less whether those issues overwhelmed questions common to the class. 

The Ninth Circuit embraced a general, one-size-fits-all formula to resolve damages for the whole class, because it did “not turn on individual circumstances.”  But the Supreme Court has expressly disapproved just that “novel project” of computing class damages by a formula “without further individualized proceedings.” Wal-Mart, 131 S. Ct. at 2561. Wal-Mart’s holding on that point directly follows from the Rules Enabling Act, 28 U.S.C. § 2071,  which “forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right.’ ” Wal-Mart, 131 S. Ct. at 2561 (quoting 28 U.S.C. § 2072(b)). “Trial by Formula” forecloses individual defenses and sets damages for plaintiffs at amounts divorced from their particular circumstances, thereby giving plaintiffs greater substantive rights than they would have in individual proceedings. 

Consistent with the Rules Enabling Act, the Second, Fourth, Fifth, and Seventh Circuits have all
held that damages in class actions cannot be computed using an abstract analysis of averages. E.g., Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 343 (4th Cir. 1998). The Ninth
Circuit’s decision erroneously joins the minority viewof the Eighth and Tenth Circuits, contrary to WalMart’s instruction. 


In short, argues the petition, the Ninth Circuit’s decision conflicts with Comcast and Wal-Mart, and it creates and deepens divisions among the circuits regarding class certification standards. This is actually not the only case raising this issue with the Court.  One to watch.

Court Hangs Up On Cell Phone Class Action

A Texas federal court recently denied class certification to a group of cell phone customers who alleged they were sold defective models. See Shane Galitsky et al. v. Samsung Telecommunications America LLC, No. 3:12-cv-04782 (N.D. Tex. 9/11/15).

Plaintiffs brought a putative class action against Samsung on behalf of hundreds of thousands of California consumers who purchased allegedly defective Galaxy S mobile phones. Plaintiffs alleged that four models suffered from a common hardware defect that could cause them to randomly freeze, shut down, reboot, and power off while in standby or sleep mode, rendering the phones unfit for their intended use and purpose.  The suit included claims under federal and California law for breach of express warranty; breach of implied warranty; violations of the Song-Beverly Consumer Warranty Act (“Song-Beverly Act”), Cal. Civ. Code § 1792 (West 2009); violations of the MagnusonMoss Warranty—Federal Trade Commission Improvement Act (“Magnuson-Moss Act”), 15 U.S.C. § 2301 et seq.; violations of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ.
Code § 1750 et seq. (West 2009); violations of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq. (West 2008); and common law claims for assumpsit and quasi-contract. Several of those claims were kicked out on motions to dismiss.

Plaintiffs then filed for class certification on the remaining warranty and consumer fraud claims. The court's analysis focused on the  Rule 23(b) requirements of “predominance” and “superiority,” which require that common questions “predominate over any questions affecting only individual members,” and that class resolution be “superior to other available methods for fairly and efficiently adjudicating the controversy.” Rule 23(b)(3).  The court noted that the class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. To come within the exception, a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23. The Rule does not set forth a mere pleading standard. Rather, a party must not only be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, typicality of claims or defenses, and adequacy of representation, as required by Rule 23(a). The party must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b).

“To decide whether there is a class-wide basis for deciding the predominant issues, [the court] must first ascertain which are the predominant issues that must be decided on a class basis.” Gene and Gene LLC v. BioPay LLC, 541 F.3d 318, 326 (5th Cir. 2008). The court must identify the substantive issues that will control the outcome of the case, assess which of these issues will predominate, and determine whether these issues are common throughout the proposed class. Id. A class plaintiff cannot merely point to a so-called “common course of conduct” without also demonstrating whether the common course of conduct provides a class-wide basis for deciding the predominant class issues of fact and law. And in order to predominate, common issues must constitute a significant part of the individual cases.

In analyzing whether a class certification motion satisfies the predominance requirement, the court also “must consider how a trial on the merits would be conducted if a class were certified.” See  Sandwich Chef of Tex., Inc. v. Reliance Nat’l Indem. Ins. Co., 319 F.3d 205, 218 (5th Cir. 2003). “This, in turn, entails identifying the substantive issues that will control the outcome, assessing which issues will predominate, and then determining whether the issues are common to the class, a process that ultimately prevents the class from degenerating into a series of individual trials.” Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003) (citation and internal quotation marks omitted). “Considering whether ‘questions of law or fact common to class members predominate’ begins, of course, with the elements of the underlying cause of action.” Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 131 S.Ct. 2179, 2184 (2011) (quoting Rule 23(b)(3)).  The failure to satisfy the predominance requirement is sufficient of itself to warrant denying class certification.

Plaintiffs argued that their legal claims focused on defendants' conduct; that all plaintiffs got the same warranty; that the alleged defect was common to all phones. But the facts revealed that certain class members who experienced uninitiated power off or freezing of the phone may not be covered by the Warranty; for each class member whose phone exhibited the alleged power-off issue, Samsung was entitled to introduce evidence that, as to that class member’s phone, there was another, more likely cause of the power-off issue (including a cause not covered by the Warranty). Thus the determinative question of whether the alleged breach can be established via class-wide proof must, given the particular facts of this case, be answered in the negative, said the court.

While plaintiffs alleged a common design issue, the court noted that plaintiffs will not be able to prevail on their breach of express warranty claims merely by presenting class-wide proof that all Galaxy S phones contained the same alleged defect. Rather, under California law, it would be necessary for plaintiffs to prove that each individual class member’s Galaxy S phone experienced the power-off issue as a result of the allegedly defect, and that this occurred during the one-year Warranty period. This showing could not be made through proof of a common design defect that, for any given class member’s phone, may or may not have caused that phone to malfunction at all,
or to have malfunctioned during the one-year Warranty period. Instead, it would be be necessary
for plaintiffs to introduce individual evidence for each member of the proposed class establishing that the alleged defect caused that particular class member’s phone to experience the power-off
defect within Warranty period.

Individual issues also predominated with respect to the Warranty precondition that a phone purchaser return the phone to an “authorized phone service facility” during the applicable warranty period.  Accordingly, no class member could recover for breach of the Samsung Warranty unless the member first established that he or she returned the phone to an authorized phone service facility during the warranty period. Any trial of plaintiffs’ express warranty claims would require the jury to determine, for each individual class member, whether and when that class member returned the phone to an authorized phone service facility.

Although the presence of individualized issues will not necessarily prevent certification, there must be some underlying common question whose resolution would constitute a significant part of the individual cases. Only mini-trials can determine the issues, so the court held that the predominance requirement of Rule 23(b)(3) was not satisfied regarding the warranty claims.

On the UCL claims, the court held that plaintiffs could not establish through class-wide proof the amount that Samsung should disgorge from profits earned from sales of the Galaxy S phones, because Samsung would be entitled to present at trial that most class members received some benefit from their phones—indeed, that many class members received the full benefit from their phones. Plaintiffs could not establish that awarding class members the full amount by which Samsung profited from its sale of the phones correlated, in any way, to the amount necessary to restore to each class member that which Samsung obtained by its allegedly unfair practices. Awarding class members the full amount that Samsung profited could possibly be achieved on a class-wide basis, but this method would result in the award of non-restitutionary disgorgement for many of plaintiffs’ proposed class members, which California law does not permit. 

The court also concluded that plaintiffs had not met their burden of establishing that the award of restitution damages presented a common issue that can be determined on a class-wide basis. The methods that plaintiffs proposed for awarding restitution damages to individual class members actually would require the jury to decide, inter alia, for each individual class member, whether he or she received any value from his or her Galaxy S phone.

Certification motion denied.

 

No-Injury Class Rejected by State Supreme Court

Last week, the Ohio Supreme Court ruled in Felix v. Ganley Chevrolet, Inc., No. 2015-Ohio-3450 (Aug. 27, 2015), that courts cannot certify class actions that include uninjured members, as such a class will fail to satisfy predominance.

In this case, a trial court had certified a class action of all consumers who purchased vehicles from a dealership through a contract that included an unenforceable arbitration provision. The trial court did so even though there was no evidence that any class member, aside from the class representative, had a dispute with the dealership and had experienced an injury. The trial court eventually awarded each consumer $200 in damages.  

The Court identified several key principles. Class action suits are the exception to the usual rule that litigation is conducted by and on behalf of only the individually named parties. Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432 (2013), citing Califano v. Yamasaki, 442 U.S. 682, 700-701 (1979). To fall within that exception, the party bringing the class action must affirmatively demonstrate compliance with the procedural rules governing class actions. Id., citing Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551-2552 (2011).  The United States Supreme Court has insisted that courts give careful consideration to the class certification process, holding that Rule.23 is not “a mere pleading standard.” Dukes, 131 S.Ct. at 2551.  Rather, the party seeking class certification must affirmatively demonstrate compliance with the rules for certification and be prepared to prove that there are in fact sufficiently numerous parties, common questions of law and fact, etc.

Next, plaintiffs bringing consumer fraud (OCSPA) class action suits must allege and prove that actual damages were proximately caused by the defendant’s conduct.  See Konarzewski v. Ganley, Inc., 8th Dist. Cuyahoga No. 92623, 2009–Ohio–5827 (“class action plaintiffs must prove actual damages under the CSPA”). Thus, proof of actual damages is required before a court may properly certify a class action. Searles v. Germain Ford of Columbus, L.L.C., 10th Dist. Franklin No. 08AP-728, 2009-Ohio-1323; see also Butler v. Sterling, Inc., 2000 WL 353502, *4 (6th Cir. Mar. 31, 2000); Johnson v. Jos. A. Bank Clothiers, Inc., 2014 WL 4129576, *3-4 (S.D. Ohio Aug. 19, 2014). These requirements in Ohio are consistent with the majority of decisions by other states’ appellate courts, which also hold that plaintiffs who bring private causes of actions under their states’ consumer-protection statutes are required to plead and prove actual damages or injury.  See, e.g., Meyer v. Sprint Spectrum  L.P., 45 Cal.4th 634, 642-643, 88 Cal.Rptr.3d 859, 200 P.3d 295, (2009); Wallis
v. Ford Motor Co., 362 Ark. 317, 327-328, 208 S.W.3d 153 (2005); Tietsworth v.  Harley-Davidson, Inc., 270 Wisc.2d 146, 169, 677 N.W.2d 233 (2004); Frank v. DaimlerChrysler Corp., 292 A.D.2d 118, 741 N.Y.S.2d 9, 12-13 (2002); Yu v. Internatl. Business Machines Corp., 314 Ill.App.3d 892, 845-846, 732 N.E.2d 1173 (2000); Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 783-784, 792, 719 P.2d 531 (1986).

Third, plaintiffs in class action suits must demonstrate that they can prove, through common evidence, that all class members were in fact injured by the defendant’s actions. In re Rail Freight Fuel Surcharge Antitrust Litigation—MDL No. 1869, 725 F.3d at 252. Although plaintiffs at the class certification stage need not demonstrate through common evidence the precise amount of
damages incurred by each class member, Behrend, 133 S.Ct. at 1433, they must adduce common evidence that shows all class members suffered some injury. In re Rail Freight Fuel Surcharge Antitrust Litigation at 252, citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623–624, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997), and Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 815-816 (7th Cir.2012).  This inquiry into whether there is damage-in-fact is distinct from the inquiry into actual damages: fact of damage pertains to the existence of injury, as a predicate to liability; actual damages involves the quantum of injury, and relate to the appropriate measure of individual relief.  See Martino v. McDonald’s Sys., Inc., 86 F.R.D. 145, 147 (N.D.Ill.1980). Even if determining the amount of damages does not defeat the predominance inquiry, a proposed class action requiring the court to determine individualized fact of damages does not meet the predominance standards of Rule 23(b)(3). See In re Live Antitrust Litigation, 247 F.R.D. 98 (C.D.Cal.2007) (recognizing the
distinction between demonstrating the fact of damages and the amount of damages); Catlin v. Washington Energy Co., 791 F.2d 1343, 1350 (9th Cir.1986) (“[T]he requirement that plaintiff prove
‘both the fact of damage and the amount of damage * * * are two separate proofs.’ ”)

If a class plaintiff fails to establish that all of the class members were damaged, there is no showing of predominance under Civ.R. 23(b)(3). See Behrend, 133 S.Ct. at 1432; see also Cullen v. State Farm Mut. Auto. Ins. Co., 137 Ohio St.3d 373, 2013-Ohio-4733, 999 N.E.3d 614.  Indeed, a key purpose of the predominance requirement is to test whether the proposed class is sufficiently cohesive to warrant adjudication by representation, observed the Court.  Perhaps the most basic requirement to bringing a lawsuit is that the plaintiff suffer some injury. Apart from a showing of wrongful conduct and causation, proof of actual harm to the plaintiff has been an indispensable part of civil actions. See Schwartz & Silverman, Common Sense Construction of Consumer Protection Acts, 54 U.Kan.L.Rev. 1, 50 (2005).

Based on these principles, the Court held that all members of a class in class action litigation alleging violations of the OCSPA must have suffered injury as a result of the conduct challenged in the suit.  Here, the class, as certified, failed because there was no showing that all class members suffered an injury in fact. The broadly defined class encompassed consumers who purchased a vehicle through a purchase contract that contained the unconscionable arbitration provision. But there was absolutely no showing that all of the consumers who purchased vehicles through a
contract with the offensive arbitration provision were injured by it or suffered any damages at all.
Finally, the trial court’s holding that it could award $200 to each member of the class as a matter of the trial court’s discretion is "based on a fiction."

 

Another All Natural Class Shot Down

A federal court rejected a proposed class of  New York consumers challenging the “all natural” labeling of four Crisco oils that allegedly contained genetically modified ingredients.   See Ault v. J.M. Smucker Co., No.13-03409 (S.D.N.Y., 8/6/15).

On May 21, 2013, Plaintiff Adrianna Ault filed a complaint alleging that Defendant violated N.Y. Gen. Bus. Law ("GBL") §§ 349 and 350, and breached an express warranty by labeling certain Crisco cooking oils as "All Natural." Plaintiffs proposed class included: consumers who purchased one or more of the following products in New York: Crisco Pure Vegetable Oil and/or Crisco Pure Com Oil between February 15,2 009 and June 1, 2014; and/or Crisco Pure Canola Oil and/or Crisco Natural Blend Oil between June 1, 2010 and June 1, 2014.

According to Plaintiff, the "All Natural" label was deceptive for two reasons. First, Defendant allegedly purchased from third parties the crude soy, canola, and corn oils from which it
manufactures its cooking oils. Some of such crude oils were allegedly derived from GMO crops, and Defendant allegedly did not differentiate between GMO and non-GMO crops when purchasing crude oils.  Second, Plaintiff argued that the "All Natural" label was misleading because the Natural
Label Oils were "heavily processed" using chemicals: after Defendant purchases source oils from its suppliers, it allegedly refined the oils using a multi-step process,  Plaintiff argued that, as a result, the Natural Label Oils are chemically altered and highly processed, and cannot be considered "natural."

Plaintiffs moved for class certification.  Defendant responded that class certification is improper because the term "natural" is not susceptible to a uniform meaning. The Food and Drug Administration has declined to adopt a definition of "natural," Consumers define "natural" in diverse ways. Defendant pointed to a survey conducted by its expert, which determined that 55% of respondents could not define or did not even know what "All Natural" cooking oil meant.

Defendant argued that class certification must also fail because consumers bought the Natural Label Oils for many reasons unrelated to whether the products were "natural." According to the  Survey, respondents' most common considerations in deciding whether to purchase cooking oil were price and brand awareness.  Only 1.6% of respondents indicated that whether an oil was "natural" factored into their purchasing decision. Under the New York General Business Law, the plaintiff must demonstrate that she "sustained injury as a result" of defendant's action, and the plaintiff must show that she suffered a loss "because of' the defendant's "deceptive act." Rodriguez v. It 's Just Lunch, Int 'l, 300 F.R.D. 125, 147 (S.D.N.Y. 2014). Defendant argued this element highlighted individual issues among the class members.

The court noted that class action law recognizes an "implied requirement of ascertainability." In re Initial Pub. Offering Sec. Litig., 471 F.3d 24, 30 (2d Cir. 2006). A class is ascertainable if it is "readily identifiable, such that the court can determine who is in the class and, thus, bound by the ruling." Charrons v. Pinnacle Group NY LLC, 269 F.R.D. 221, 229 (S.D.N.Y.2010). The class must be "defined by objective criteria that are administratively feasible," and identifying class members should not "require a mini-hearing on the merits of each case." Id.

Here, it was undisputed that many potential class members will not have retained records of their
cooking oil purchases.  Plaintiffs argued that some class members could be identified by retailer records.  But, the court concluded, this fell well short of establishing ascertainability. While the criteria may be objective, Plaintiff had not shown that it was "administratively feasible." See Charrons, 269 F.R.D. at 229. The mere assertion that "records exist to identify many class members" does not suffice. Defendant sold to retailers and distributors, not to consumers, and therefore has no records regarding the ultimate purchasers of the Natural Label Oils. Plaintiffs' information did not relate exclusively to New York retailers, and there was no evidence concerning what percentage of sales this data represents, nor whether such data would identify more than a small percentage of class members.

As many plaintiffs do, the argument was made that self-identification was also a feasible method for determining class membership; however, there was no proof of  how such self-identification would be authenticated. Most courts reject such an approach, especially when there were a variety of related products only some of which fall within the class definition. Often, putative class members are unlikely to remember accurately every purchase during the class period, and soliciting  declarations from putative class members regarding their history of purchases would invite them to speculate, or worse. Here, defendant was selling nine different brands of cooking oil, only four of which ever bore the challenged label. Permitting potential class members to self-identify would require them to specifically recall each variety of Crisco cooking oil they purchased during the class period. Adding to the confusion, the "All Natural" label appeared on the four brands at different times, and the proposed class period was defined differently for the Vegetable and Corn Oils  than the Canola and Natural Blend Oils.  Based on the class definition, therefore, an individual who purchased Crisco Corn Oil in 2009 would be a member of the class, but one who purchased Canola Oil that same year would not. "Who could possibly recall that level of detail six years (or more) later?"  Indeed, the named Plaintiff herself could not recall the number of bottles of Crisco cooking oil  she had purchased during the class period.

The court turned next to commonality and predominance. Commonality requires plaintiffs' claims to "depend upon a common contention" that is  "capable of class-wide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). The determining factor is not whether common questions exist, but rather "the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation." !d. The predominance requirement "is a more demanding criterion than the commonality inquiry under Rule 23(a)." Moore v. PaineWebber, Inc. , 306 F.3d 1247, 1252 (2d Cir. 2002). Class-wide issues predominate if "resolution of some of the legal or factual questions ... can be achieved through generalized proof," and are "more substantial than the issues subject only to individualized proof." Id.  Although individualized damages determinations alone traditionally did not preclude certification under Rule 23(b )(3), the fact that "damages may have to be ascertained on an individual basis" is a factor that courts "must consider in deciding whether issues susceptible to generalized proof outweigh individual issues." Roach v. T.L. Cannon Corp., 778 F.3d 401, 408-09 (2d Cir. 2015). A plaintiffs damages model "must be consistent with its liability case," and  must "measure only those damages attributable to that theory." Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1433 (2013). 

Here, plaintiff asserts that the injury to Plaintiff and class members was subject to common
proof' because the inclusion of the "All Natural" label had the effect of increasing the price of
the cooking oils for everyone.  Yet, Plaintiff offered no evidence that a price premium actually existed for cooking oils labeled "All Natural," nor had she proposed a reliable method for determining the existence or amount of any such price premium.  This plaintiffs proposed a survey to identify the allege price premium.  But such a methodology is not "consistent with [Plaintiffs] liability case," see Comcast Corp., 133 S. Ct. at 1433, because it made no attempt to calculate the amount that consumers actually overpaid due to the "All Natural" label. Rather than analyzing actual pricing and sale data for the Natural Label Oils, plaintiffs' expert merely proposed to ask some unspecified subsection of Crisco customers what they would pay for a hypothetical Crisco product. Moreover, this analysis further compounded the problems with the ascertainability of the class, by designating potential class members- many of whom may be unidentifiable--as the very individuals who will determine the amount of damages to which they are entitled.

Accordingly, Plaintiffs motion for class certification under Rule 23(b)(3) was denied.

 

Drug Class Action Rejected Again

Class certification was denied -- again -- in litigation brought by plaintiffs who allege a drug maker misstated the likelihood of withdrawal symptoms in use of a prescription medication.  See Saavedra v. Eli Lilly & Co., No. 12-09366 (C.D. Calif., 7/21/15).

Plaintiffs originally moved to certify four classes under the state consumer fraud acts of Missouri, New York, Massachusetts and California. The court rejected those proposed classes, noting plaintiffs' "unusual" theory of injury and damages. Plaintiffs did not allege they suffered the alleged withdrawal effects, or that they were injured by being overcharged.  They asserted instead that they were harmed because they received a product that had less value than the class expected it to have.  They got a product with less utility, defined as the benefit consumers believe they will get by using the product.  This flawed model looked only to the demand side of the market because it focused on a refund tied to consumers out of pocket costs; yet, the prescription drug market is quintessentially inefficient and the relationship between price and value is "severed."  In turn, causation and injury could not be shown on a class-wide basis, and common issues did not predominate. 

Plaintiffs tried again, with a proposal to certify New York and Massachusetts classes. This effort, too, raised serious issue of predominance. Plaintiffs claimed to seek only the minimum statutory damages provided under the laws of the two states,  Thus, they sought to avoid the problems of their original damages model.  But plaintiffs still had to show that each class member was injured as a result of defendant's alleged misleading act -- that the act caused the loss.  Plaintiffs could only show that harm by alleging the acts caused them to pay the wrong price, too much, a price premium, for the drug;  this is either a variant on the rejected fraud-on-the-market theory or a theory that calls for a subjective individual inquiry into what each class member got and paid for.  Because the prescription drug market is not efficient (for example, it is complicated by the role of insurance and co-payments), plaintiffs cannot rely on price to show injury in this way.  Pricing affected different class members to varying degrees because of different health insurance and the different terms of benefits that can accompany it. Even if, under the new theory, plaintiffs did not need to quantify the subjective injury each felt to quantify damages, that didn't change the fact that plaintiffs would need to show that same thing to establish causation and fact of injury.  This could not be done on a class-wide basis.

Here, the class period spanned a decade and included class members who paid different prices for the drug and had different insurance. Different class members would have been affected to different degrees.  And use of a defendant's internal marketing or pricing documents wouldn't bridge the gap: the suggestion that a lower level of withdrawal symptoms might lead some consumers to pay more for a drug does not prove that a premium was actually charged, that the price charged was in excess of the drug's true value, or that prices negotiated with third-party payers were directly and fully passed on to the class.

So, again, the attempted showing of predominance failed.

 

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. 

 

Federal Court Rejects Off-Label Marketing Class Action

A Pennsylvania federal court recently refused to certify a proposed class action accusing a drugmaker of off-label marketing. See  In re: Actiq Sales and Marketing Practices Litigation, No. 2:07-cv-04492 E.D. Pa. March 23, 2015).

Plaintiffs were various entities who pay for employee's prescription drugs.  They alleged that defendant promoted its drug Actiq for uses not approved by the FDA.  As readers know, it is legal for doctors in their judgment to prescribe medications for uses other than those approved by the FDA, i.e., off-label uses. Plaintiffs argued that Cephalon’s conduct somehow caused Plaintiffs to make excessive off-label prescription payments for Actiq to treat conditions not approved by the FDA and for whom less expensive pain management drugs were appropriate. They asserted that under the circumscriptions of Actiq’s approved label, off-label marketing is not permissible since most forms of off-label use were for contraindicated conditions.

Plaintiffs moved for certification of one Nationwide Class defined as follows:
All Third Party Payors (“TPP”) in the United States who paid and/or reimbursed, in whole or in part, for the cost of Actiq prescribed for indications other than cancer and for consumption by their members, employees, plan participants, beneficiaries or insureds during the period from January 1, 2002 through December 31, 2006. Plaintiffs also suggested multi-state classes. 

The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (quoting Califano v. Yamasaki, 422 U.S. 682, 700-01 (1979)).  Class certification is proper only if the trial court is satisfied, after a rigorous analysis, that the prerequisites’ of Rule 23 are met. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 309 (3d Cir. 2008) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982)).

A decision to certify a class requires findings by the court, not merely a threshold showing by a party, that each requirement of Rule 23 is met.  In re Hydrogen Peroxide, 552 F.3d at 306; see Wal-Mart Stores, Inc., 131 S. Ct. at 2551. In conducting its analysis, a court is to resolve factual disputes by a preponderance of the evidence and to consider all relevant evidence and arguments by the parties. In re Hydrogen Peroxide, 552 F.3d at 306, 320. “Frequently [the court’s] ‘rigorous analysis’ will entail some overlap with the merits of the plaintiff’s underlying claim.” Wal-Mart Stores, Inc., 131 S. Ct. at 2551. Merits questions may be considered to the extent that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.  Amgen Inc. v. Conn. Ret. Plans and Trust Funds, 133 S. Ct. 1184, 1195 (2013). Plaintiffs’ burden is to show that the elements of their claims are capable of proof through evidence that is common to the class. See In re Hydrogen Peroxide, 552 F.3d at 311-12.

In opposing class certification here, Cephalon argued that individualized factual issues would predominate over their common claims, and the class action would be impossible to manage if certified. The Court agreed.

Nationwide and multi-state classes raise the issue of applicable substantive law.  Because choice of law is thus relevant to a determination under Rule 23, the Court first had to determine what law applied to Plaintiffs’ claim of unjust enrichment. 22 Powers v. Lycoming Engines, 328 F. App’x 121, 124 (3d Cir. 2009). Irreconcilable conflicts among state laws may defeat class certification. Federal courts sitting in diversity are to use conflict of laws rules of the forum state to determine which substantive law applies. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); Kaneff v. Del. Title Loans, Inc., 587 F.3d 616, 621 (3d Cir. 2009). This Court therefore used Pennsylvania rules on conflict of laws.

“[U]njust enrichment is a tricky type of claim that can have varying interpretations even by courts within the same state, let alone amongst the fifty states.” In re Sears, Roebuck & Co. Tools Mktg. and Sales Practices Litig., Nos. 05 C 4742, 05 C 2623, 2006 WL 3754823, at *1 n.3 (N.D. Ill. Dec. 18, 2006).  Here, Cephalon presented several bases upon which states’ laws conflict. For example, states apply various statutes of limitations to unjust enrichment claims. These differences meant that Plaintiffs’ claim for unjust enrichment  could withstand a statute of limitations defense in some jurisdictions but not in others, depending on the applicable law. A statute of limitations evidences a state’s policy interest in preventing litigation of delayed claims and preventing injustice by affording a defendant a fair opportunity to defend.

Additional variances in states’ unjust enrichment jurisprudence existed, including the availability of unjust enrichment as an independent cause of action, the need to show an absence of an adequate remedy at law, the requirement that a benefit be obtained at the direct expense of the plaintiff, the level of misconduct a plaintiff must prove, and the availability of defenses such as unclean hands and laches.  

Applying Pennsylvania's choice of law rules,most of the relevant factors weighed in favor of applying the laws of TPPs’ various home states, including the most important factors. See Restatement (Second) of Conflict of Laws § 221 cmt. d. Policy considerations also led to the same conclusion. Plaintiffs’ home states had a regulatory interest in providing redress to its citizens for acts of wrongdoing.

For the same reasons why an actual conflict existed among the unjust enrichment laws of the fifty states, individual issues of law predominated with regard to a nationwide class. In addition to proving different elements for all class members to establish unjust enrichment at trial, other individual issues that may predictably arise included the level of misconduct required to be proven and whether defendant might avail itself of particular defenses. 

Plaintiffs argued their smaller multi-state classes addressed this issue. Plaintiffs’ notable grouping efforts, however, still did not account for individual fact issues such that common issues predominated. “The polestar of the unjust enrichment inquiry is whether the defendant has been unjustly enriched[.]” Limbach Co., LLC v. City of Phila., 905 A.2d 567, 577 (Pa. Cmmw. Ct. 2006). Resolution to this question is, by nature, fact-sensitive. Id. Even if some common proof regarding equitable circumstances was present here, Plaintiff’s proposal to make a class-wide showing of whether Cephalon’s enrichment was unjust failed. Under an unjust enrichment theory, all facts and circumstances are considered to determine whether, without a remedy, inequity would result or persist. It is a physician’s prerogative whether to prescribe Actiq for any medical purpose, on-label or off. Physicians may have accounted for a number of factors in making their Actiq prescriptions, including their experiences with patients and their experiences with prescribing Actiq. See Ironworkers Local Union 68 v. AstraZeneca Pharm., LP, 634 F.3d 1352, 1362 (11th Cir. 2011) (“Several considerations shape the physician’s medical judgment, including both individual patient concerns and drug-specific information regarding the propriety of a drug’s use for treatment of a patient’s given condition . . . The physician learns about a drug through multiple sources, only one of which might be the drug manufacturer’s promotions and literature.”  It was also uncontested that Actiq provided the benefit of effective pain relief to many who used it. If doctors would have written Actiq prescriptions regardless of the defendant's alleged acts, then payment for prescriptions beyond would not be unjust.  In sum, whether  payments for Actiq prescriptions resulted in "unjust" enrichment is a question resolved by examination into the actions not only of Cephalon, but also of individual payers  and prescribing doctors. See Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 611 (3d Cir. 2012).

The class also failed the superiority prong. Together with predominance, the superiority criterion is designed to “achieve economies of time, effort, and expense, and promote . . . uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” Amchem Prods., Inc., 521 U.S. at 615 (quoting Fed. R. Civ. P. 23 advisory committee’s note). The Court here considered the factors enumerated in Rule 23(b)(3) for determining superiority:
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.

Here, the largest impediment to a finding of superiority was the difficulty of managing a class action in which the laws of plaintiffs' various home states applied and individual questions of fact predominated. Also, plaintiffs here were sophisticated institutional entities with an interest in controlling litigation when relatively large amounts of money are at stake.  Indeed, some putative absent class members had already filed suit based on Cephalon’s distribution of Actiq.

Motion for class certification denied.

Federal Court Denies Certification in Groundwater Class Case

A federal judge in Oklahoma earlier this week denied class certification to homeowners living near a research facility, holding that individual issues outweighed allegedly common issues among the class claiming injury from contamination from the site. See Mitchell McCormick, et al. v. Halliburton Co. et al., No. 5:11-cv-01272 (W.D. Ok. 3/3/15).

For several decades, Halliburton performed a variety of important tasks on the Site at issue, including work for the United States Department of Defense cleaning out missile motor casings. This work involved removing solid rocket propellant, consisting primarily of ammonium perchlorate, from the missile casings using a high pressure water jet. As the missile motor casings were  cleaned, water from the hydrojet and the dislodged propellant was run through screens to separate the solid materials from the cleaning water. The solid propellant was collected and periodically burned in pits on the Site, and the cleaning water was ultimately discharged into evaporation ponds. Over time, plaintiffs alleged, perchlorate from these operations reached the groundwater under the Site and migrated off-site.

So in 2011, plaintiffs filed the instant action, asserting causes of action for private nuisance, public nuisance, negligence, trespass, strict liability, and unjust enrichment. Plaintiffs then moved the Court to certify a class with respect to Halliburton’s alleged liability to the class for damages to their properties.

The Court began its analysis by noting that the class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.  Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011). “To come within the exception, a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23.” Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013). Further, plaintiff ultimately bears the burden of showing that the Rule 23 requirements are met, and the district court must engage in its own “rigorous analysis” to ensure that certification is appropriate. See Shook v. El Paso Cnty., 386 F.3d 963, 968 (10th Cir. 2004).

Here, that analysis revealed that plaintiffs had not shown that questions of law or fact common to class members predominate over any questions affecting only individual members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.
“Considering whether ‘questions of law or fact common to class members predominate’
begins, of course, with the elements of the underlying cause of action.” Erica P. John Fund, Inc.
v. Halliburton Co., 131 S. Ct. 2179, 2184 (2011). Halliburton’s liability as to any of plaintiffs’ causes of action could not  be determined on a class wide basis because certain elements of plaintiffs’ causes of action require significant individualized evidence.

Regarding plaintiffs’ nuisance causes of action, observed the court, “[a] nuisance consists in unlawfully doing an act, or omitting to perform a duty which act or omission either . . . annoys, injures, or endangers the comfort, repose, health, or safety of others; or . . . in any way renders the other persons insecure in life, or in the use of property. . . .” Okla. Stat. tit. 50, § 1. Further, “[i]n order to maintain a cause of action for nuisance, the plaintiff must prove an unlawful act or omission of duty which either injured or endangered his use of his property.” N.C. Corff P’ship, Ltd. v. OXY USA, Inc., 929 P.2d 288, 294 (Okla. Civ. App. 1996).  Thus, in order to establish Halliburton’s liability for nuisance, plaintiffs had to prove an injury to the use and/or the enjoyment of the property or that the use and/or the enjoyment of the property was endangered. This clearly required an individual plaintiff by plaintiff factual determination, i.e., did that particular plaintiff have a well on his property; did that particular plaintiff use the well for drinking water; was that particular plaintiff already on public water; what was the actual use of that particular property, etc. Additionally, regarding a cause of action for public nuisance, “before an individual can abate a public nuisance, it must be shown that the activity is specifically injurious to the person’s rights.” Smicklas v. Spitz, 846 P.2d 362, 369 (Okla. 1992). Further, in order to make this showing, a plaintiff must demonstrate that he sustained injuries “different in kind from that suffered by the public at large.” Schlirf v. Loosen, 232 P.2d 928, 930 (Okla. 1951). Thus, no class member could recover under a public nuisance theory without introducing individualized evidence of special harm different from other members of the public, which would necessarily include other members of the class.

Similarly, regarding plaintiffs’ negligence cause of action, while it is possible plaintiffs could establish duty on a class-wide basis in theory, plaintiffs could not show injury: establishing that defendant proximately caused an injury to a plaintiff is necessarily a highly individualized determination requiring each plaintiff to show that his property contains perchlorate and that the perchlorate came from the Site and not from some other source. Individual issues permeated the other causes of action as well.

The court concluded that "the vast number of important individualized issues" relating to defendant's alleged ultimate liability as to all of plaintiffs’ causes of action overwhelmed any common questions. The Court also found that a trial on whether defendant  released perchlorate into the groundwater, as well as the current and future scope and extent of that groundwater contamination, was unlikely to substantially aid resolution of the ultimate determination of liability. Proof of these allegedly class wide facts would neither establish liability to any class member nor fix the level of damages awarded to any plaintiff; the common facts would not establish a single plaintiff’s entitlement to recover on any theory of liability, or even show that a single plaintiff was injured. Simply put, the individual issues would dwarf whatever common issues there may be, such that a vast array of mini-trials would be required for each class member if certification were granted.

Accordingly, a class action in relation to Halliburton’s liability was not superior to other available methods for fairly and efficiently adjudicating the controversy. Even if the Court were to certify the allegedly common issues, the subsequent separate proceedings necessary for each plaintiff
would undo whatever efficiencies such a class proceeding would have been intended to promote.

 

 

Another Artificial All Natural Class Action Rejected

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

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

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

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

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

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

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

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

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

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

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

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

Federal Court Grants Defense Motion to Deny Class Certification

A federal court earlier this month denied class certification in a case involving allegedly defective Sonicare Diamond Clean and Healthy White powered toothbrushes.  Coe v. Philips Oral Healthcare, Inc., No. C13-518MJP (W.D. Wash., 10/10/14).  Readers should note this was another example of a putative class defendant taking the initiative and moving preemptively to strike class allegations.

Plaintiffs sought a certification of a nationwide class of toothbrush purchasers under the Washington Consumer Protection Act-- something having to do with the attachment of the metal shaft of the device affecting the brush strokes per minute.  Defendant moved to deny class certification. We have posted about this tactic before.  Fed.R.Civ. P. 23 does not preclude affirmative motions to deny class certification. In Vinole v. Countrywide Home Loans, Inc.,571 F.3d 935 (9th Cir. 2009), the Ninth Circuit affirmed the right of defendants to bring preemptive motions, provided that plaintiffs are not procedurally prejudiced by the timing of the motion. Id. at 994.

Resolution of the class certification issue, said the court, turned primarily on the choice-of-law analysis, which determines whether Washington law or the laws of putative class members' home states should apply. If Washington law applied, common questions were more likely to predominate for a nationwide class, and a class action may seem more efficient and desirable. On the other hand, if the consumer protection laws of the consumers' home states apply, variations in the laws will overwhelm common questions, precluding certification. The next inquiry then was whether sufficient discovery had taken place to allow for the choice-of-law analysis. The court concluded it had.

Defendant showed that an actual conflict exists between the Washington Consumer Protection Act ("WCPA") and the consumer protection laws of other states.  Because a conflict exists, the court applied Washington's most significant relationship test in order to determine which law to apply. In adopting the approach of the Second Restatement of Law on Conflict of Laws (1971), Washington has rejected the rule of lex loci delicti (the law of the place where the wrong took place).  Instead, Washington's test requires courts to determine which state has the "most significant relationship" to the cause of action.  If the relevant contacts to the cause of action are balanced, the court considers the interests and public policies of potentially concerned states and the manner and extent of such policies as they relate to the transaction. 


Washington, observed the court, has a significant relationship to alleged deceptive trade practices by a Washington corporation. Washington has a strong interest in promoting a fair and honest business environment in the state, and in preventing its corporations from engaging in unfair or deceptive trade practices in Washington or elsewhere. Conversely, said the court, the putative class members' home states have significant relationships to allegedly deceptive trade practices resulting in injuries to their citizens within their borders. The Toothbrushes were sold and purchased, and representations of their quality made and relied on, entirely outside of Washington. No Plaintiff resides in Washington. While Plaintiffs contend Philips Oral Healthcare spent considerable time and resources analyzing the problem and attempting to fix it at their Washington facilities, thus increasing Washington's relationship to the action, the crux of Plaintiffs' action involves the marketing and sale of the Toothbrushes, which took place in other states.

Furthermore, the Ninth Circuit recently recognized the strong interest of each state in determining the optimum level of consumer protection balanced against a more favorable business environment, and to calibrate its consumer protection laws to reflect their chosen balance. Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012). Washington has formally adopted § 148 of the Restatement in the fraud and misrepresentation context. FutureSelect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc., 180 Wn.2d 954, 331 P.3d 29, 36 (2014). Section 148 of the Restatement and its comments make clear that the alleged misrepresentation to consumers and the consumers' pecuniary injuries, both of which occurred in consumers' home states and not in Washington, should be considered the most significant contacts in this particular case. Restatement (Second) of Law on Conflict of Laws § 148 cmts. i, j (1971).


Thus, the court agreed with defendant that consumers' home states had the most significant relationship to their causes of action. Therefore, the consumer protection laws of those states, and not WCPA, would apply. Material differences between the various consumer protection laws prevent Plaintiffs from demonstrating Rule 23(b)(3) predominance and manageability for a nationwide class. Accordingly, the Court granted defendant's motion to deny certification of a nationwide class under WCPA.

 

Federal Court Denies Class Certification in "Smart Meter" Case

A Florida federal court recently denied class certification in a case alleging negligence against Honeywell  over its installation of smart electric meters at the homes of Florida Power & Light customers. See Cortes, et al. v. Honeywell Building Solutions SES Corporation, et al., No. 1:14-cv-20429 (S.D. Fla., Sept. 25. 2014). 

Plaintiffs alleged the meters were defective, damaging the connections and allegedly causing electrical arcing, which resulted in more extensive damage to items like pools and air conditioners. 
They sought certification of a class defined as “All Florida Power & Light customers in Florida who had a Smart Meter installed at their property after September, 2009 and who have suffered or will suffer unreimbursed economic loss arising from the defendant’s improper installation of the Smart Meter."

The court noted that, although the trial court should not determine the merits of the plaintiffs’ claim at the class certification stage, the trial court can and should consider the merits of the case to the degree necessary to determine whether the requirements of Rule 23 will be satisfied. Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 1188 n.15 (11th Cir. 2003).  Indeed, sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question; certification is proper only if the trial court is satisfied, after a rigorous analysis, that the
prerequisites of Rule 23 have been satisfied. Frequently that rigorous analysis will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped.

Before analyzing the Rule 23(a) requirements, a court must determine whether the class definition is adequate. O’Neill v. The Home Depot U.S.A., Inc., 243 F.R.D. 469, 477 (S.D. Fla. 2006); see also Bussey v. Macon Cnty. Greyhound Park, Inc., 562 F. App’x 782, 787 (11th Cir. 2014).  A vague
class definition portends significant manageability problems for the court.  O’Neill, 243 F.R.D.
at 477. “An identifiable class exists if its members can be ascertained by reference to objective criteria."   The analysis of the objective criteria also should be administratively feasible, said the court. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual inquiry.  Bussey, 562 F. App’x at 787.

Defendants argued that membership in the proposed class required a determination whether the
Smart Meter was improperly installed; whether the customer had unreimbursed economic loss;
and whether the loss was caused by the improper installation. The court agreed that the proposed class definition impermissibly required a finding of liability and causation at the class certification stage. For the court to determine membership, it would also need to determine the validity of putative class members’ claims and defenses to those claims. The focus on individuals’ experiences — merely to determine membership in the class — would typically require the putative class members to self-report electrical problems started occurring after the Smart Meters were installed. As such, “the only evidence likely to be offered in many instances will be the putative class member’s uncorroborated claim that he or she” observed electrical problems after the Smart Meter installation. Perez v. Metabolife Int’l, Inc., 218 F.R.D. 262, 269 (S.D. Fla. 2003). This self-interested reporting, often unverifiable but for the Plaintiffs’ own testimony, implicates defendants’ due process rights, and “individualized mini-trials would be required even on the limited issue of class membership.” Id.  The repeated use of these procedures would result in inefficient resolution of the claims, defeating one of the central purposes of the class action tool. See McGuire v. Int’l Paper Co.,
1994 WL 261360, at *5 (S.D. Miss. Feb. 18, 1994).

The court also found the definition of the class impermissibly vague in its inclusion of “customers . . . who have suffered or will suffer unreimbursed economic loss . . . .”  Plaintiffs were requesting a class to be certified of individuals who, at any point in the future, may suffer economic losses as a result of the Smart Meter installations. Apart from the considerations of causation, this proposed subset of class membership was presently impossible to determine.

The court also questioned the showing of numerosity ( a somewhat rare gem for the class action defense reader). Plaintiffs made reference to 603 FPL customer inquiries involving alleged property damage related to Smart Meter installation, but they failed to indicate whether any of these 603 inquiries involve “unreimbursed economic loss,” a requirement contained in the proposed class definition. Plaintiffs then tried to point to evidence of a subset of customers who sought repairs following installation. But nothing in plaintiffs’ factual showing indicated these customers’ problems were caused by the Smart Meter installation — as opposed to any number of other factors — or, again, involved unreimbursed economic loss, two prerequisites to membership in the proposed class. Thus, said the court, these assertions did not come close to showing the number of plaintiffs is large enough to satisfy the numerosity requirement. See Hugh’s Concrete & Masonry Co. v. Southeast Pers. Leasing, Inc., No. 8:12-CV-2631-T-17AEP, 2014 WL 794317, at *2 (M.D. Fla. Feb. 26, 2014) (“[T]he Court cannot find Plaintiff’s bases for numerosity go beyond mere speculation, bare allegations, or unsupported conclusions. Thus, Plaintiff fails the numerosity requirement.”).


Turning to predominance under Rule 23(b)(3), under the law of the Eleventh Circuit, the combination of significant individualized questions going to liability and the need for individualized assessments of damages precludes Rule 23(b)(3) certification. In re Conagra Peanut Butter Products Liab. Litig., 251 F.R.D. 689, 698 (N.D. Ga. 2008).  As is typical, plaintiffs pointed to alleged common issues of defendant's conduct, such as training of employees on installation. While defendants may well have employed similar methods of training employees to install the Smart Meters, those actions were but one component of the tort inquiry. Plaintiffs also would need to prove a breach of duty, if any, was the proximate cause of the damages. The proximate cause determinations would predominate over the determination of the common issue of defendants’ alleged conduct, due to the numerous potential causes of meter can damage. The mere fact that installers were negligent in installations does not mean that negligence caused any damages. Even assuming negligence could be proven, plaintiffs “would still have the bulk of
their cases to prove,” namely injury in fact and causation. Neenan v. Carnival Corp., 199 F.R.D.
372, 376 (S.D. Fla. 2001); see also In re Agent Orange’ Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 165 (2d Cir. 1987) (“The relevant question, therefore, is not whether Agent Orange has the capacity to cause harm, . . . but whether it did cause harm and to whom. That determination is highly individualistic [] and depends upon the characteristics of individual plaintiffs (e.g. state of health, lifestyle) and the nature of their exposure . . . .”).  The fact-finder would still need to make specific determinations of proximate causation for additional plaintiffs, which would predominate over a class-wide determination of negligence.

Certification denied.

 

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

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

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

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

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

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

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

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

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

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

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

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

For a variety of good reasons, certification denied.

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.

 

Long-lasting Lipstick Class Kissed Off

A federal court has rejected a proposed class of plaintiffs who alleged that they purchased deceptively labeled lipstick and foundation, in part because of an inability to show class-wide damages. See Algarin v. Maybelline, LLC,  No. 12-03000 (S.D. Cal., 5/12/14).

Maybelline manufactures, markets, sells, and distributes SuperStay 24HR Lipcolor, a line of lipcolors, and SuperStay 24HR Makeup, a line of skin foundations, Plaintiffs alleged these products were marketed to provide "all day comfort,” that withstands “heat, sweat, and humidity,” but allegedly do not. Plaintiffs alleged they paid a price premium because of the company's claims. On behalf of a proposed California class of consumers who bought the SuperStay products, they asserted claims under the California Unfair Competition Law and Consumers Legal Remedies Act.

In assessing the motion for class certification, the court found that there were issues with the proposed class definition. Plaintiffs defined the class as: “[a]ll California consumers who purchased SuperStay 24HR Lipcolor and/or SuperStay 24HR Makeup for personal use."  Given the number of differences between the two products, including but not limited to, pricing differences, claims differences, labeling differences, and ultimately merits differences, the Court questioned whether creating sub-classes would be needed. Beyond that, though not explicitly stated in Rule 23, courts have held that the class must be adequately defined and clearly ascertainable before a class action may proceed. See Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 365, 376 (N.D. Cal. 2010) .  A class is sufficiently defined and ascertainable if, among other things, it is administratively feasible for the court to determine whether a particular individual is a member. See O’Connor v. Boeing N. American, Inc., 184 F.R.D. 311, 319 (C.D. Cal. 1998).   It must be administratively feasible to determine whether a particular person is a class member as an identifiable class exists if its members can be ascertained by reference to objective criteria, but not if membership is contingent on a prospective member’s state of mind. While here the class definition seemed ascertainable in the sense that class membership might be determined based on an objective criterion -- whether members purchased either the SuperStay lipcolor of the SuperStay makeup --  Plaintiffs failed to provide a reliable method of determining who the actual members of the class were. So it was not ascertainable in the sense that members could actually ever be determined. Plaintiffs failed to show how it was “administratively feasibile" to determine whether a particular person was a class member. The court correctly noted that this inquiry overlaps with the “manageability” prong of Rule 23(b)(3).

Specifically, Maybelline argued that purchasers were unlikely to have documentary proof of purchase of products like these years later, and Maybelline does not maintain a purchaser list or other identifying method. In such a situation, the Court and the parties would necessarily rely on class members to self-identify. There are a number of cases that stand for the proposition that where a court has no way to verify if a purchaser is actually a class member, class certification may be improper. See e.g., Red, 2012 WL 8019257, at *4;  Hodes v. Int’l Foods, 2009 WL 2424214, at
*4 (C.D. Cal. July 23, 2009). Here, the relevant purchase was not a memorable “big ticket” item, but rather small-ticket items that cost around $10.00; it was extremely unlikely the average purchaser would even remember she purchased the specific SuperStay products versus a competitor product.

The court also observed that expert evidence shows that materiality and reliance varied from consumer to consumer, such that these elements were not an issue subject to common proof. Under the claims alleged, a representation is considered material if it induced the consumer to alter his position to his detriment. If the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action. Maybelline introduced evidence of who the reasonable consumer in the target audience was and what drives her in making purchasing decisions. With cosmetics such as the ones at issue here, customers can readily discern how well they work and whether they lived up to the claimed representations. Accordingly, repeat purchasers can not be considered injured in the manner proposed by Plaintiffs. A repeat purchase indicates satisfaction. The evidence suggested that duration was not the only motivating factor in making the purchases; actual duration expectations varied widely among purchasers; and very few consumers actually read the package the way plaintiffs' counsel did and thus could have been “injured” in the manner alleged by Plaintiffs.

This undermined both the commonality and the typicality prerequisites. Based upon the evidence presented, the named Plaintiffs’ reliance on the alleged misrepresentations was not typical of other class members.

Under Rule 23(b)(2), the court concluded that the injunctive relief requested by the plaintiffs wasn't appropriate for the class as a whole. Class members who bought the cosmetics and used them became well aware of the realities of the products, and wouldn't benefit from the relief sought.

Under Rule 23(b)(3), the Plaintiffs sought individual monetized relief that would require an assessment of each class member's claim based on purchase history.  Given the number of individual purchasing inquiries, as well as the evidence showing materiality and reliance varied from consumer to consumer, it was evident that common issues did not predominate.  As is standard, Plaintiffs proposed the “price premium” method of determining class-wide damages, contending  that their damage theory was “simple."  It was not obvious to the Court, however, that the alleged 24 hour/no transfer claim commanded the alleged premium of $1.00-$3.00. Indeed, that was pure speculation on the part of Plaintiffs. Pricing could have been equally impacted by a higher quality of ingredients, the selection of colors offered, or the unique costs Maybelline expended in the research and development of these products. Plaintiffs’ method of using comparable products from other sellers is inconsistent with the law. To establish that any difference in price was attributed  to the alleged misrepresentation, the Court needed to compare a product, exactly the same but without the challenged marketing claim. Such a task was nearly impossible as no two products are completely identical.

Moreover, Maybelline did not sell retail and does not set retail prices. Establishing a higher price for a comparable product would be difficult where prices in the retail market differ and are affected by the nature and location of the outlet in which they are sold and/or the use of promotions and coupons. The Court could not simply assume that all retailers throughout California purchase and sell the products at one price. 

Finally, the existence of an economic injury was also not a common question as many purchasers were satisfied with the products. Economic injury is not a common question when many purchasers find the class products were worth the amount paid and fully satisfied.

Class motion denied.

Comcast Requirement of Class-wide Damages Dooms Class

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

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

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

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

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

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

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

 

Certification Rejected in Dietary Supplement Claim

The important issues of ascertainability and choice of law led a federal court to deny class certification in litigation relating to the dietary supplement VPX Meltdown Fat Incinerator.  See Karhu v. Vital Pharm., Inc., No. 13-60768 (S.D. Fla., 3/3/14).

Plaintiff filed a class complaint against Vital Pharmaceuticals Inc.  to recover damages based upon VPX's alleged false advertisements, and to enjoin any further alleged misrepresentations. He sought to bring the suit on behalf of all persons in the United States who have purchased Meltdown for purposes other than resale since April 4, 2008. The claims included:  (1) breach of express warranty under the Magnuson-Moss Warranty Act ("MMWA"), 15 U.S.C. § 2301, et seq.; (2) breach of
express warranty; (3) unjust enrichment; and (4) violation of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), Fla. Stat. § 501.201, et seq.

The court concluded that the case would be unmanageable as a class action. First, the court saw no practical method of verifying membership in the proposed Class of Meltdown purchasers. No central record of Meltdown customers existed, and it was unlikely that each Meltdown purchaser since 2008 has retained a proof of purchase. Second, the claims of the Nationwide Class would implicate the laws of multiple states. The varied requirements of the states' laws would require different proof on each claim depending on the locations of the class members. These legal permutations would render an eventual trial unwieldy, and would overshadow the common factual questions that otherwise allegedly united the class members' claims.

Regarding ascertainability, a plaintiff seeking class certification must first craft a class definition clear enough to allow the court to understand whether a particular individual is a member of the class, and that membership is ascertainable. A class is ascertainable only if the court can determine whether a given person is a class member through administratively feasible methods. See In re Checking Account Overdraft Litig., 286 F.R.D. 645, 650–51 & n.7 (S.D. Fla. 2012). Here, plaintiff failed to propose a realistic method of identifying the individuals who purchased Meltdown. The courts have come to recognize that purchasers are less likely to retain receipts or other records of minor purchases, and thus cannot rely on those proofs to ascertain the identities of class members. See Red v. Kraft Foods, Inc., 2012 U.S. Dist. LEXIS 186948, at *14–19 (C.D. Cal. Apr. 12, 2012).

Nor could the court trust individuals to identify themselves as class members through the submission of affidavits. Accepting affidavits of Meltdown purchases without verification would deprive VPX of its due process rights to challenge the claims of each putative class member.  On the other hand, having VPX contest each affidavit would require a series of mini-trials and defeat the purpose of class-action treatment. Using affidavits to determine class membership would also invite fraudulent submissions and could dilute the recovery of genuine class members, said the court.

Regarding predominance, the court noted that the MMWA does not define a stand-alone federal cause of action for breach of express written warranty, but instead borrows state law causes of action for breach of both written and implied warranties. Under choice of law analysis, the law governing each class member's warranty claim is the law of the state where he or she purchased the Meltdown. The court noted that state law varied on issues such as privity and reliance. In short, varied state laws would govern the MMWA claims of class members across the country, imposing different legal requirements and overshadowing the allegedly common factual bases of the claims. Moreover, some of these laws would require individualized proof inappropriate for class treatment. In light of the differences among applicable laws and the potential need for individualized proof, the court found that individualized legal and factual issues predominate over the common aspects of the proposed class MMWA claims, rendering class certification inappropriate under Rule 23(b)(3).

Class certification denied.

Class Certification Denied in Baby Seat Case

A California federal court declined to certify a class of consumers accusing a manufacturer of designing a baby seat that is allegedly prone to having unhealthy mold. See Butler v. Mattel Inc. et al., No. 2:13-cv-00306 (C.D. Calif.).

Plaintiffs move to certify a nationwide class of individuals who “acquired” a Fisher-Price Rock ‘N Play Sleeper (Sleeper) prior to January 8, 2013.  The court's analysis focused on predominance. The predominance inquiry under Rule 23(b) tests whether proposed classes are
sufficiently cohesive to warrant adjudication by representation. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997) (citation omitted). The thrust of plaintiffs’ case was that the Sleeper is defective because it has a “dangerous propensity” to grow mold. From that proposition, plaintiffs raised several claims for product defects and misrepresentations about the quality of the Sleeper.

The court concluded that plaintiffs’ bid to have the case handled on a class basis failed because they could not establish that any actual defect was common to the entire class. There was ample evidence in the record that the vast majority of the proposed class did not experience mold growth on the Sleeper to a degree that they saw fit to complain to defendant or to the Consumer Product Safety Commission.

The Sleeper was only alleged to have a “propensity” for mold growth – which the court saw as an issue separate and apart from the issue of an actual reaction by the consumer to whatever mold may be present. There was no evidence that every Sleeper developed notable levels of mold and ample evidence that most of them did not. Based on the record before the court, it appeared that the vast majority of the proposed class, for whatever reason, was in no way affected by the alleged increased propensity of the Sleeper to grow mold.  It was not clear whether any child suffered a reaction or injury. There was merely a limited “recall” by which defendants provided additional care instructions for cleaning any mold that may occur.

This meant that many of the proposed class members likely do not have standing to raise the class claims, and whether or not a particular class member has standing was an individual issue that was not amenable to class treatment. Only class members who actually experienced mold or who could show that their particular circumstances made it likely that they would actually experience a mold issue would likely have standing, said the court.

The dispositive issue of standing thus was not common to all class members and must be
addressed on an individual basis. The overarching importance of this question predominated over any common questions that may exist as it was impossible to award class wide relief without consideration of standing.

Class certification denied.

Class Certification Denied in Dog Treat Case

 A federal court recently denied certification to a proposed nationwide class in a suit alleging defective dog treats. See Holt, et al. v. Globalinx Pet LLC, et al. (C.D. Cal., 1/30/14).  Differences in applicable state laws was a central factor.

The named class plaintiff, a resident of Texas, sued Globalinx Pet alleging her dog was injured by ingesting dog treats containing chicken jerky produced in China. Specifically, plaintiff began feeding the chicken jerky dog treats to her dog, Tucker, one to three times a week  in 2011-12. Tucker was a small mixed breed dog and about 8 years old at the time. (Although there is plenty of data about the number and distribution of purebred dogs in North America, such robust data is not really available for mixed breed dogs. The estimates are that "mutts" make up 53% of the dogs in the United States.)  Tucker fell ill, and after blood tests was reported to be in “acute kidney failure,” which resulted in Tucker being put down.

Plaintiff alleged that the dog treats’ packaging claimed that the food was “made from ‘100% Natural
Ingredients’ [salt, vegetable glycerin, and chicken] that were ‘delicious’ and had a ‘taste dogs
love.’ . . . [and were] ‘wholesome and nutritious.’”  Plaintiff concluded that these statements represented that the jerky dog treats were “safe” and “enjoyable” for dogs to eat.  However, plaintiff alleged that in past years, the FDA has warned about dog treats containing chicken jerky from China. Furthermore, news reports from around the world had allegedly discussed the alleged dangers of Chinese chicken jerky dog food products. Defendants’ pet food packaging did not warn consumers about the information from the FDA, claimed the plaintiff. 

Plaintiff filed her amended complaint  alleging eight causes of action for (1) Violation of implied warranties; (2) Violation of express warranties; (3) Common law fraud; (4) Unjust Enrichment; (5) Negligence; (6) Strict products liability (defect); (7) Strict products liability (failure to warn); and (8) Violation of the state Deceptive Trade Practices—Consumer Protection Act.  And then a series of proposed classes defined similarly as all persons in the United States (except Louisiana and Puerto Rico) who purchased any dog treat product containing chicken jerky manufactured or sold by defendants and containing chicken imported from China.

The court noted that a party seeking class certification must affirmatively demonstrate compliance
with Rule 23—that is, the party must be prepared to prove that there are in fact sufficiently
numerous parties and common questions of law or fact. Wal-Mart Stores, Inc. v. Dukes, 131 S.
Ct. 2541, 2550 (2011). This requires a district court to conduct a “rigorous analysis” that frequently “will entail some overlap with the merits of the plaintiff’s underlying claim.” Id.

In order for a class action to be certified under Rule 23(b)(3), the class representatives must show “the questions of law or fact common to the members of the class predominate over any questions affecting only individual members and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.”  The predominance inquiry tests whether proposed class actions are sufficiently cohesive to warrant adjudication by representation, and when the causes of action in a complaint are based on state statute or common law, material differences in state law across the jurisdictions covered by the class may compound the disparities among class members from different states and reveal that a proposed class fails to satisfy the predominance requirement.  See Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1189, amended by 273 F.3d 1266 (9th Cir. 2001). The Ninth Circuit has held that a nationwide class should not be certified if materially different consumer protection laws would require different state laws to govern different class plaintiffs, based on a conflict of law analysis using the facts and circumstances of each specific case. See Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 590, 594 (9th Cir. 2012).

Here, while the plaintiff maintained that the laws of California should apply to the proposed nationwide classes, defendants cataloged a series of material differences between the consumer protection laws of several states and those of California.  By the time of certification, the court had already performed a case-specific conflict of law analysis and determined that Texas law would govern four of the named plaintiff’s causes of action. In addition, defendants outlined a number of ways in which California’s consumer protection laws differed from those of other states, based on plaintiff’s claims in this particular case. For example, at least three states have passed comprehensive product liability statutes that preempt common law causes of action based on
harms caused by a product, which would certainly materially affect the warranty and strict product liability claims of potential class plaintiffs in those states.

Because of the material differences between the laws of California and the laws of other states, and the holding that the named plaintiff herself would be subject to different laws than a California plaintiff, the court concluded that the alleged common questions did not predominate over questions affecting individual class members. Nor could the court consider the plaintiff’s proposed nationwide classes a superior method for the fair and efficient adjudication of the present controversy. See Zinser, 253 F.3d at 1192 (“We have previously held that when
the complexities of class action treatment outweigh the benefits of considering common issues
in one trial, class action treatment is not the superior method of adjudication.”) 

Class certification denied.

 

Ice Cream Class Action Melts

Happy New Year to all our readers. Let's start 2014 with a delicious class action decision, a Late night snack for our readers.

A California court recently rejected a proposed statewide class in a suit accusing Ben & Jerry's Homemade Inc. of falsely advertising ice cream products as “all-natural.”  See Astiana v. Ben & Jerry’s Homemade Inc., No. 4:10-cv-04387 (N.D. Cal., 1/7/14).  Yes, we are starting off the year right where we left off, another all natural complaint.

Readers probably know that with a $5 correspondence course from Penn State in making ice cream, two regular guys named Ben and Jerry opened their first ice cream scoop shop in Burlington, Vermont, in 1978. 

Here, plaintiffs claimed that both the packaging and the advertising for the Ben & Jerry's ice cream products were deceptive and misleading to the extent that the cocoa in some of them was allegedly alkalized with a "synthetic" agent. Plaintiff filed the complaint in this action in 2010, alleging six causes of action – "unlawful business practices" in violation of Business & Professions Code § 17200; "unfair business practices" in violation of § 17200; "fraudulent business practices" in violation of § 17200; false advertising, in violation of Business & Professions Code § 17500; restitution based on quasi-contract/unjust enrichment; and common law fraud.  Everything but the ...pretty typical in these kinds of label attacks.

The parties originally reached a tentative settlement, which fell apart because of cy pres problems and S'mores issues regarding settlement distribution procedures.

Eventually, plaintiffs moved for class certification. Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Federal Rule of Civil Procedure 23. Mazza v. American Honda Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012). The party seeking class certification must affirmatively demonstrate that the class meets the requirements of Rule 23. See Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011); see also Gen'l Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 156 (1982).  As a threshold matter, and apart from the explicit requirements of Rule 23, the party seeking class certification must also demonstrate that an identifiable and ascertainable class exists. Mazur v. eBay Inc., 257 F.R.D. 563, 567 (N.D. Cal. 2009).

The court here found that the motion must be denied, for two primary reasons – plaintiff had not established that the class was ascertainable, and she had not established that common issues predominated over individual issues.

While there is no explicit requirement concerning the class definition in Rule 23, courts have held that the class must be adequately defined and clearly ascertainable before a class action may proceed. See Xavier v. Philip Morris USA Inc., 787 F.Supp. 2d 1075, 1089 (N.D. Cal. 2011); Schwartz v. Upper Deck Co., 183 F.R.D. 672, 679-80 (S.D. Cal. 1999). A class definition need not be Berry, berry extraordinary, but should be precise, objective and presently ascertainable. See Rodriguez v. Gates, 2002 WL 1162675 at *8 (C.D. Cal. May 30, 2002). That is, the class definition must be sufficiently definite so that it is administratively feasible to determine whether a particular person is a class member. See Xavier, 787 F.Supp. 2d at 1089.

Defendant contended that because cocoa can be alkalized using one of several alkalis – some of which are "natural" and some of which are allegedly "non-natural" (i.e., "synthetic") – it would be necessary to determine which class members bought an ice cream containing alkalized cocoa processed with a synthetic ingredient.  However, there was no way to identify which class members bought which type of ice cream, particularly given that Ben & Jerry's is a wholesale manufacturer that does not maintain records identifying the ultimate customers or their purchases. What a cluster it would be.

The district court agreed with the defendant that the class was not sufficiently ascertainable. The class was defined as persons who bought Ben & Jerry's labeled "all natural" which contained alkalized cocoa processed with a synthetic ingredient. However, plaintiffs provided no evidence as to which ice cream contained the allegedly "synthetic ingredient" (assuming that alkali can even be considered an "ingredient"). More importantly, plaintiffs had not shown that a means exists for identifying the alkali in every class member's ice cream purchases. The packaging labels said only "processed with alkali," because that is all the FDA required.

A second basis for rejecting the class was the predominance requirement. This inquiry requires the weighing of the common questions in the case against the individualized questions, and the predominance analysis under Rule 23(b)(3) can be more stringent than the commonality requirement of Rule 23(a)(2).  Rule 23(b)(3) focuses on the relationship between the common and individual issues. The inquiry is rigorous as it tests whether proposed class is sufficiently cohesive to warrant adjudication by representation. See AmChem Prods., 521 U.S. at 623-24. 

Defendant asserted that reliance, materiality, and causation were all inherently individual; for example, its experts established that consumer choice is affected by many different factors, and plaintiff had no evidence to show that "all natural" has any uniform meaning or that it would have any major impact on a consumer's decision to purchase (or not to purchase) a particular brand of ice cream. Defendant also contended that the likelihood of confusion from the label must be "probable," not just "possible," and that studies showed that at most 3% of consumers who saw "all natural" on the packaging expected that the alkali used to process the cocoa was "natural."

Defendant similarly argued that the only way to test materiality and reliance would be to determine how much each consumer would have de-valued the ice cream products given the alleged presence of the "synthetic" alkalizing agent. However, this also could not be done on a class-wide basis, because consumer choice is affected by myriad factors. 

Most importantly, the damages claim was Half-baked, as the evidence showed that no one paid a premium for the "all natural" Ben & Jerry's ice cream, as Ben & Jerry's charges its wholesale customers the same price regardless of flavor and regardless of the contents of the label. When Ben & Jerry's changed its label and removed the "all natural" label from some ice cream packages, the prices did not decrease (neither the wholesale nor the retail prices);  so there was no support for plaintiff's speculation that "all natural" ice creams command a premium.

The Court agreed. Whichever way one approached it, plaintiff had not met her burden of showing that there was a class-wide method of awarding relief that was consistent with her theory of deceptive and fraudulent business practices, false advertising, or common law fraud (or the alternative theory of restitution based on quasi-contract). Plaintiff had not offered any expert testimony demonstrating that the market price of Ben & Jerry's ice cream with the "all natural" designation was higher than the market price of Ben & Jerry's without the "all natural" designation. More importantly, plaintiff had not offered sufficient expert testimony demonstrating a gap between the market price of Ben & Jerry's "all natural" ice cream and the price it purportedly should have sold for if it had not been labeled "all natural" – or evidence demonstrating that consumers would be willing to pay a premium for "all natural" ice cream that was made with cocoa alkalized with a "natural" alkali, and did in fact pay such a premium.

Under Comcast, the plaintiff is required to provide evidentiary proof showing a class-wide method of awarding relief that is consistent with plaintiff's theory of liability. See 133 S.Ct. at 1432. Here, however, plaintiff provided no such damages evidence, and the failure to offer a damages model that was capable of measurement across the entire class for purposes of Rule 23(b)(3) barred her effort to obtain certification of the class. 

Federal Court Rejects Consumer Class Action

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

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

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

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

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

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

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

 

Homeowner Class Decertified Under Statute of Repose

A federal court last week decertified a class of North Carolina homeowners who alleged breach of warranty against the manufacturer of window trim in a short, interesting decision.  See Hart v. Louisiana-Pacific Corp., No. 2:08-cv-00047 (E.D.N.C., 8/30/13).

Trimboard was a product allegedly sold for use on the exterior of homes. Plaintiffs alleged it was defective in design and manufacture because it allegedly would absorb water, warp, and bulge. The court had certified a homeowner class in July, 2011.

Then in July, 2013, the North Carolina Court of Appeals issued an opinion in Christie v. Hartley Const., Inc., 745 S.E.2d 60 (N.C. App. 2013), clarifying the state's statute of repose.  Per the appeals court, the statute bars claims for damages not filed within the repose period, even in the context of an alleged an express warranty that includes a longer term than the repose peiriod.

Defendants moved for decertification, contending that the recent decision of the Court of Appeals meant that the named plaintiffs' claims were barred by the applicable statute of repose under North Carolina law. "Summary judgment is proper if the pleadings or proof show without contradiction that the statute of repose has expired." Bryant v. Don Galloway Homes, Inc., 147 N.C. App. 655, 657 (2001).

It was undisputed that this suit was filed beyond the six-year statute of repose applicable to the claims of the named plaintiffs. Since any action for damages brought outside of the statute of repose is barred, summary judgment was therefore appropriate as to the claims of the named plaintiffs.

That of course raised issues of adequacy of representation, and more importantly, predominance. The task of  determining which absent plaintiffs would be permitted to bring an action for damages would
necessarily require an individualized determination of factors such as "the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion of the improvement." N.C. Gen. Stat. § 1-50(a)(5), under the statute. The necessity for such a determination did in fact destroy "typicality, ... predominance, [and] otherwise foreclose class certification." Gunnells v. Healthplan Services, Inc., 348 F.3d 417,427-28 (4th Cir. 2003).

Accordingly, pursuant to Rule 23(c)(1)(3) of the Federal Rules of Civil Procedure and in light of the Court's broad discretion to certify or decertify a class action, Ward v. Dixie Nat. Life Inc. Co., 595 F.3d 164, 179 (4th Cir. 2010), the class certified by the court's July, 2011 order was decertified. 

 

Seventh Circuit Affirms Ruling Despite Comcast

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

Readers will recall that earlier this year, the Supreme Court vacated and remanded the Seventh Circuit’s decision in Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012) for further consideration in light of Comcast  Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Seventh Circuit had certified two class actions of washer consumers despite multiple significant differences among class members, including admitted variations in laundry habits; differences in remedial efforts; variation in service performed on the machines. And despite the fact that a reported 97% of the class had never complained of a problem or suffered the alleged defect..

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

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

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

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

D.C. Circuit Applies Comcast Guidance to Class Certification

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

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

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

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

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

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

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

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

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

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

Class Certification Denied in Minivan Case

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

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

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

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

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

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

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

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

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

Certification denied.

Class Certification Denied in Auto Case

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

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

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

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

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

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


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

 

Supreme Court Remands Two Class Actions in Light of Comcast

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


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

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

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

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

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

 Two to keep an eye on.

 

 

Supreme Court Decides Comcast

The Supreme Court weighed back in on the issues of class certification last month in Comcast v. Behrend, No. 11-864 (U.S. 3/27/13). Writing for the majority, Justice Scalia stated that the class had been improperly certified under Fed. R. Civ. P. 23(b)(3)'s predominance prong, in an opinion that bears careful scrutiny for our readers, but probably did not cover as much ground as some thought it would when cert was granted (no further guidance on Daubert at the class stage).

Plaintiffs brought a class action antitrust suit, under Rule 23(b)(3), claiming Comcast subscribers in the Philadelphia area were harmed because of a specific Comcast strategy that allegedly lessened competition and would lead to higher prices. Comcast allegedly “clusters” their cable television operations within a particular region by swapping their systems outside the region for competitor systems inside the region.  Plaintiffs offered several theories as to why this alleged approach harmed them: it allowed Comcast to withhold local sports programming from its competitors, resulting in decreased market penetration by direct broadcast satellite providers; it allegedly reduced the level of competition from “over-builders,” companies that build competing cable networks in areas where an incumbent cable company already operates; it reduced the level of “benchmark” competition on which cable customers rely to compare prices; and it allegedly increased Comcast’s bargaining power relative to content providers.

The District Court ruled that plaintiffs had to show that the “antitrust impact” of the violation could be proved at trial through evidence common to the class and that the damages were measurable on a class-wide basis through a “common methodology.” The trial court then certified the class, but accepted only one of the four proposed theories of antitrust impact. The Third Circuit affirmed, noting again its artificial separation of class and merits issues:  we "have not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative." The court of appeals concluded that Comcast's attacks on the merits of the methodology had "no place in the class certification inquiry.”

Of course class certification is a procedural step, not the occasion to decide which side has the winning case, but in recent years the Supreme Court has been telling the lower courts that the line between merits and certification is not such a bright line.  The Third Circuit ran afoul of this admonition when it refused to entertain arguments against the damages model that bore on the propriety of class certification simply because they might also be pertinent to the merits determination. A certifying court may have to probe behind the pleadings before coming to rest on the certification question; certification is proper only if the trial court is satisfied, after a rigorous analysis, that Rule 23’s prerequisites have been satisfied. Such an analysis will frequently overlap with the merits of the plaintiff ’s underlying claim because a class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff ’s cause of action. A District Court cannot refuse to evaluate evidence at the class certification stage just because that same evidence relates to the merits of the claims. In so doing, the Court made clear that the rigorous analysis discussed in Wal-Mart Stores v. Dukes, 131 S. Ct. 2541 (2011), applies to both the Rule 23(a) factors and the Rule 23(b) prerequisites. 

The figures that plaintiffs' expert used were calculated assuming the validity of all four theories of antitrust impact originally proposed, and did not delineate the differences between the allegedly supra-competitive prices prices attributable to over-builder deterrence, and the prices caused by other economic factors.  To ignore that would reduce the Rule 23(b)(3) predominance requirement to a nullity. The questions of individual damages calculations here would inevitably overwhelm questions common to the class in this antitrust case; the plaintiffs' model fell far short of establishing that damages were capable of measurement on a class-wide basis. Thus, the Court made clear that plaintiffs must offer a method sufficient to calculate damages on a class-wide basis in Rule 23(b)(3) class actions or risk losing certification.

 

Denial of Class Certification Affirmed in Cellphone Case

The Eleventh Circuit last week upheld a trial court’s refusal to certify a class action accusing the defendant of improperly reactivating lost or stolen cellphones.  See Robinson et al v. T-Mobile USA Inc., No. 12-10170 (11th Cir. 2012).

MassTortDefense has often wondered why the issue of damages seems to get insufficient weight in the class certification decision. Would a class be satisfied with proving its case except damages? Would an award of zero damages to a class be devastating to a defendant? Shouldn't it matter that each plaintiff get a fair an accurate amount of damages to compensate for the alleged conduct of defendant? Doesn't a defendant have a right to dispute claimed damages regarding each class member? Here, the trial court determined that plaintiffs failed to offer a viable method for how proposed damages were to be calculated, and plaintiffs paid too little attention to this issue on appeal as well.

The plaintiffs filed a proposed class action against T-Mobile asserting state-law claims of conversion, trespass to chattels, and unjust enrichment. They alleged that: (1) they had reported to T-Mobile that their cell phones had been lost or stolen; (2) an unknown person brought their lost or stolen phones to T-Mobile; and (3) T-Mobile unlawfully reactivated the phones without the plaintiffs’ permission.

The district court denied the plaintiffs’ motion for class certification on five grounds. The first ground was that the plaintiffs had not satisfied their preliminary burden of establishing that their
proposed class was clearly ascertainable. Before a district court may grant a motion for class certification, a plaintiff seeking to represent a proposed class must establish that the proposed class is “adequately defined and clearly ascertainable.” DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970)1; cf. John v. Nat’l Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007) (“The existence of an ascertainable class of persons to be represented by the proposed class representative is an implied prerequisite of Federal Rule of Civil Procedure 23.”).  Here, the court reasoned, in part, that the plaintiffs had “made no effort to separate out those putative class members who may very well be barred from pursuing class claims due to the existence of valid arbitration agreements or class action waivers that potentially prohibit such litigation.”

The second ground on which the district court denied class certification was that the plaintiffs had not satisfied the Rule 23(a)(1) numerosity requirement. The court reasoned that the plaintiffs had offered no evidence showing numerosity, nor made any “effort to account for those putative class members who waived their right to pursue relief against T-Mobile on a class-wide basis or who are bound by their agreement to arbitrate disputes with T-Mobile.”

The third ground the district court stated for denying class certification was that the plaintiffs had failed to satisfy the predominance requirement in Rule 23(b)(3) because there were “significant state-wide variations in the law” of conversion and in the law regarding other issues, such as the enforceability of class-action waivers.

The fourth ground the court stated for denying class certification was that  the plaintiffs had failed to establish superiority under Rule 23(b)(3). The court based that determination, in part, on the plaintiffs’ failure “to suggest how to manage the rather thorny issue of putative class members whose rights to litigate their conversion claims as part of a class proceeding in this forum may have been cutoff by either a class action waiver provision, an agreement to arbitrate, or both.”
 

The fifth reason was that “damage-related concerns evidence a predomination of individualized inquiries and render the proposed class unfit for certification under Rule [23](b)(3).” The district court explained what those damage-related concerns were. Here, plaintiffs contended that “in this era of Ebay and other public online sites selling used phones by the millions, determining a particular model phone’s value is a relatively simple matter of online research.” However, they certainly offered no concrete proposal or methodology about how to effectively and accurately manage such online research on a nationwide basis. For example, when conducting online research, would 2011 be the year to use for establishing the value for a used phone of a certain model or would the year in which the phone was misplaced or stolen be the more appropriate time frame? Plaintiffs also ignored how individualized issues relating to the age of the phone, what contents or applications were previously on the phone, and whether the original owner was a heavy or light user of the phone, might affect the value of the used phone.  Additionally, plaintiffs did not address whether loss of use of the phone should be compensable and, if so, suggest how it might be reduced to a formula-type calculation.  

The district court’s determination that the plaintiffs had not established the predominance of common issues under Rule 23(b)(3) because of individual damage-related issues was an alternative, independent ruling -- and one that prevailed on appeal. Class certification would have been denied for that reason regardless of the variations instate law relating to conversion and regardless of the enforceability of class-action waivers.

Then on appeal, plaintiffs failed to adequately challenge in their opening brief the district court’s  independent, alternative ruling that damage-related concerns evidence a predomination of individualized inquiries and render the proposed class unfit for certification under Rule [23](b)(3). The plaintiffs’ opening brief failed to clearly argue the predominance issue involving variation in damages. They also failed to raise it in their reply brief after T-Mobile had argued in its answer brief that one of the reasons the court of appeals should affirm the denial of class certification was
that variation in damages destroyed the predominance of common issues, as the district court had ruled.  By failing to challenge in their brief the district court’s ruling, the plaintiffs had abandoned any contention that the court erred in denying class certification on that ground.

Decision affirmed.

Court of Appeals Vacates Class Certification in Tire Case

Last week, the Third Circuit reversed a trial court's certification of a class of consumer who alleged their vehicles were equipped with allegedly defective run-flat tires. Marcus v. BMW of North America LLC, Nos. 11-1192, 11-1193 (3d Cir.,  8/7/12).

As their name suggests, run-flat tires  can “run” while “flat.” Even if an RFT suffers a total and abrupt loss of air pressure from a puncture or other road damage, the vehicle it is on remains operable.  Plaintiff alleged he experienced four “flat” tires during his three-year lease of a BMW equipped with this tire technology.  In each case, the RFT worked as intended. That is, even though the tire lost air pressure, Marcus was able to drive his car to a BMW dealer to have the tire replaced. He nonetheless sued BMW and the tire maker Bridgestone, asserting consumer fraud, breach of warranty, and breach of contract claims. in part because the tires needed to be replaced rather than repaired.  The District Court certified plaintiff’s suit under Federal Rule of Civil Procedure 23(b)(3) as an opt-out class action brought on behalf of all purchasers and lessees of certain model-year BMWs equipped with Bridgestone RFTs sold or leased in New Jersey with tires that “have gone flat and been replaced.” Defendants appealed.

The requirements set out in Rule 23 are not mere pleading rules. The party seeking certification bears the burden of establishing each element of Rule 23 by a preponderance of the evidence. The Third Circuit has repeatedly emphasized that actual, not presumed, conformance with Rule 23 requirements is essential. Newton v. Merril Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 167 (3d Cir. 2001) (quoting Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160 (1982)).  To determine whether there is actual conformance with Rule 23, a district court must conduct a “rigorous analysis” of the evidence and arguments put forth. When doing so, the court cannot be bashful. It must resolve all factual or legal disputes relevant to class certification, even if they overlap with the merits — including disputes touching on elements of the cause of action.

The term "game-changer" is often misused and overused as a buzz word in the business world by those who want sound trendy, but the Third Circuit here correctly recognized that, as a practical matter, the certification decision is "typically a game-changer, often the whole ballgame," for the parties and counsel. That is, denying or granting class certification is often the defining moment in class actions. 

The Third Circuit first addressed the issue of numerosity.  When a plaintiff attempts to certify both a nationwide class and a state-specific subclass, as plaintiff did here, evidence that is sufficient to establish numerosity with respect to the nationwide class is not necessarily sufficient to establish numerosity with respect to the state-specific subclass. See Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1266-68 (11th Cir. 2009) (plaintiff could not simply rely on the nationwide presence of T-Mobile to satisfy the numerosity requirement without Florida-specific evidence).  The District Court found that the New Jersey class met the numerosity requirement because “it is common sense" that there will probably be at least 40 class members in New Jersey. The court of appeals noted that this may be a bet worth making, but it cannot support a finding of numerosity sufficient for Rule 23(a)(1);  a district court must make a factual determination, based on the preponderance of the evidence, that Rule 23’s requirements have been met. Mere speculation is insufficient.

The second major issue was predominance. A plaintiff must demonstrate that the elements of the legal claim capable of proof at trial through evidence that is common to the class predominate over the issues that must be litigated through proof individual to its members. The court’s  obligation to consider all relevant evidence and arguments on a motion for class certification  extends to expert testimony on the common or individual nature of issues and proof, whether offered by a party seeking class certification or by a party opposing it. Expert opinion with respect to class certification, like any matter relevant to a Rule 23 requirement, calls for rigorous analysis. Weighing conflicting expert testimony at the certification stage is not only permissible, it may be integral to the rigorous analysis Rule 23 demands.  

Here, the District Court then found plaintiff could show, without resort to individual proofs, that the alleged common defect (RFTs go "flat" too easily) caused the class members’ damages. But that causation finding was an abuse of discretion.  Central to plaintiff's claim was what caused class members’ tires to go flat and need replacement. Causation was pivotal to each of Marcus’s claims. The District Court failed to analyze an undisputed, fundamental point: any tire can “go flat” for myriad reasons. Even “defective” tires can go flat for reasons completely unrelated to their defects. Critically, to determine why a particular class member’s Bridgestone RFT had “gone flat and been replaced” requires an individual examination of that class member’s tire. But these individual inquiries are incompatible with Rule 23(b)(3)’s predominance requirement.

For example, of the two tires plaintiff presented for inspection in his lawsuit, one went “flat” and was replaced because he ran over a jagged chunk of metal, and the other because he ran over a sharp object that tore and gouged the tire and damaged the sidewall. All the experts agreed that the two tires could not have been repaired and that any tire (run-flat or conventional, defective or not) would also have been damaged under the circumstances. Thus, even if Marcus could prove that Bridgestone RFTs suffer from common, class-wide defects, those defects did not cause the damage he suffered for these two tires: the need to replace them. In this sense, Marcus was no different than a class member who, seconds after buying his car, pulled off the dealership lot and ran over a bed of nails -- neither could claim a “defect” caused his tires to go flat and need replacement.

One other key aspect of the opinion for our readers: the court of appeals also raised an issue should plaintiffs attempt to get a different class certified on remand.  Many courts have recognized that an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria. See, e.g., John v. Nat. Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007).  If class members are impossible to identify without extensive and individualized fact-finding or “mini-trials,” then a class action is inappropriate. Some courts have held that where nothing in company databases shows or could show whether individuals should be included in the proposed class, the class definition fails. See Clavell v. Midland Funding LLC, No. 10-3593, 2011 WL 2462046, at *4 (E.D. Pa. June 21, 2011); Sadler v. Midland Credit Mgmt, Inc., No.06-C-5045, 2008 WL 2692274, at *5 (N.D. Ill. July 3, 2008); In re Wal-Mart Stores, Inc. Wage & Hour Litig., No. C 06-2069 SBA, 2008 WL 413749, at *8 (N.D. Cal. Feb. 13, 2008); Deitz v. Comcast Corp., No. C 06-06352 WHA, 2007 WL 2015440, at *8 (N.D. Cal. July 11, 2007).

The ascertainability requirement serves several important objectives. First, it eliminates serious administrative burdens that are incongruous with the efficiencies expected in a class action by insisting on the easy identification of class members.  Second, it protects absent class members by facilitating the “best notice practicable” under Rule 23(c)(2) in a Rule 23(b)(3) action. See Manual for Complex Litigation, § 21.222 (4th ed. 2004). Third, it protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable. See Xavier v. Philip Morris USA, Inc., 787 F. Supp. 2d 1075, 1089 (N.D. Cal. 2011). Ascertainability is needed for properly enforcing the preclusive effect of final judgment. The class definition must be clear in its applicability so that it will be clear later whose rights are merged into the judgment; that is, who gets the benefit of any relief and who gets the burden of any loss. If the definition is not clear in its applicability, then satellite litigation will be invited over who was in the class in the first place.

If plaintiff attempts to certify a class on remand, the District Court would have to resolve the critical issue of whether the defendants’ records can ascertain class members and, if not, whether there is a reliable, administratively feasible alternative. The Third Circuit cautioned against approving a method that would amount to no more than ascertaining by potential class members’ say so. For example, simply having potential class members submit affidavits that their Bridgestone RFTs have gone flat and been replaced may not be “proper or just.”  Defendants would be able to cross-examine an individual plaintiff at trial about whether and why his tires “have gone flat and been replaced.” So, forcing defendants to simply accept as true absent persons’ declarations that they are members of the class, without further indicia of reliability, "would have serious due process implications."

 

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

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

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

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

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

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

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

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

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

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

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

 

 

Federal Court Denies Class Certification in Licensing Case

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

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

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

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

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

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

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

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

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

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

 

Class Certification Denied Under Ascertainability Analysis

We typically focus on appellate decisions regarding class certification, but wanted to note for you a recent lower court federal decision in case involving a proposed class of patients who claim they were implanted with a medical device for treating acid reflux . See Haggart v. Endogastric Solutions Inc., No. 2:10-cv-00346 (W.D.Pa. 6/28/12).


Readers will want to note the discussion of ascertainability. The implicit requirement of ascertainability is an important but sometimes overlooked prerequisite to class certification. A plaintiff must offer a definition of a class that is precise, objective and presently ascertainable. A threshold requirement to a Rule 23 action is the actual existence of a class which is sufficiently definite and identifiable. See, e.g., Kline v. Sec. Guards, Inc., 196 F.R.D. 261, 266 (E.D. Pa. 2000); Reilly v. Gould, Inc., 965 F. Supp. 588, 596 (M.D. Pa. 1997); Clay v. Am. Tobacco Co., 188 F.R.D. 483 (S.D. Ill. 1999). The initial inquiry on class definition is distinct from the analysis required by Federal Rule of Civil Procedure 23. See, e.g., Sanneman v. Chrysler Corp., 191 F.R.D. 441, 446 n. 8 (E.D. Pa. 2000). This notion means, in part, that the court can see sufficient administrative feasibility in determining whether a particular person belongs to a class -- that the court can identify class members in a practical and non-burdensome manner. A “proposed class must be sufficiently identifiable,” and it must be “administratively feasible to determine whether a given individual is a member of the class.”Mueller v. CBS, Inc., 200 F.R.D. 227, 233 (W.D. Pa. 2001). A class may not be ascertainable if it will require individual inquiry into each class member’s particular situation to determine whether that plaintiff suffered the injury alleged. Similarly, a class is not ascertainable if membership depends on a particular subjective state of mind. And even when plaintiffs offer ostensibly objective criteria for membership, the court must be able to apply that objective criteria to determine who is in the class without addressing numerous fact-intensive questions. Certification is denied when determining membership in the class essentially requires a mini-hearing as to each prospective class member. E.g., Agostino v. Quest Diagnostics Inc., 256 F.R.D. 437, 478 (D.N.J. 2009); Solo v. Bausch & Lomb Inc., 2009 WL 4287706, (D. S.C. Sept. 25, 2009) (class not appropriate for certification where determining class membership would require “fact-intensive mini-trials”).
 

Here, plaintiff claimed that defendant had misrepresented implantation of a medical device for treatment of acid reflux — describing it as “reversible” rather than “revisable.”  Plaintiff offered one class definition as “all individuals who have undergone the [procedure] . . . and who have relied upon representations” related to its reversibility and/or revisability,  This, the court said, was "simply a non-starter."  The determination of class membership under this definition would require the court to adjudicate on a person-by-person basis whether each proposed class member relied on defendant’s representations. That is, class membership would not be ascertainable without the imposition of serious administrative burdens incongruous with the efficiencies expected in a class action.

Plaintiff then went to an alternate class defined as “all individuals who have undergone the EsophyX procedure in the United States since September 24, 2007.” But this very broad proposed class failed the typicality requirement owing to marked differences as to information received and relied upon, the legal theory underlying plaintiff’s claims, and other factors.  Specifically, there would be numerous, inevitable questions regarding the information received by individual patients - from their physicians or other sources - and their reliance on particular representations. While named plaintiff was unhappy, plaintiff conceded that most patients undergoing an EsophyX procedure have had a successful result.  Putative class members received information regarding the procedure primarily from their physicians, which information likely varied for reasons related to both the physicians themselves and the individual patient’s medical circumstances; the amount and content of information received by a patient directly from defendant’s marketing or other materials likely differed from plaintiff’s and as between putative class members as well; and individual decisions to undergo the procedure were likely influenced by and premised on varying individual considerations -- all of which also undercut predominance.

Motion for class certification denied.

Amici Weigh in On Consumer Class Certification in 6th Circuit

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

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

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

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

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

This is one worth keeping an eye on.

Find the amicus briefs here and here and here.

 

Federal Court Denies Certification of MP3 Class Action - Again

A New Jersey federal court last week declined to certify a proposed class in a suit over alleged defects in the Zune MP3 player's display screen. See Maloney, et al. v. Microsoft Corp., No. 3:09-cv-02047 (D.N.J. 2012).

Readers may recall we blogged about this case when the court denied certification of a nationwide class, in part because of choice of law issues. The court at that point reserved decision as to whether or not a New Jersey-wide class might be certified, subject to further briefing by the parties.  We said at that time: "clearly additional individual issues will predominate in that context as well."  Hope our college Madness pool predictions will be as accurate.

The new proposed class was NJ residents who purchased or owned a Microsoft Zune 30gb model and whose Zune liquid crystal display screen cracked without cracking or chipping of the outer screen that covers the LCD screen within their applicable warranty period (one-year, unless under an extended warranty) and who notified Microsoft orally or in writing about the cracked LCD but did not receive repair or replacement of their Zune from Microsoft.  That's a mouthful.

Defendant argued that plaintiffs had no unifying theory of causation capable of class-wide proof and that individual questions of fact would therefore predominate at trial.  Plaintiff, on the other hand, argued that causation could be established on a class-wide basis because class members‘ LCD screens fractured without external damage to the outer lens;  fractured in locations that were disproportionately clustered around four identified alleged internal design defects; and were 20 times more likely to crack without external damage than were LCD screens on the later-model Zune.

Our readers know that the burden is on the plaintiff to prove that the requirements of Rule 23 have been satisfied. Class certification is proper only if the trial court is satisfied, after a rigorous analysis, that the prerequisites‘ of Rule 23 are met. Predominance was the key element here, as issues common to the class must predominate over individual issues. If any key elements of a claim can be proven only by resort to individual treatment, class certification is inappropriate. Plaintiffs seeking class certification must demonstrate that each element of [the cause of action is capable of proof at trial through evidence that is common to the class rather than individual to its members.

Here, the court determined that plaintiffs' purported proofs failed to establish that any of the alleged design defects commonly caused class members‘ injuries because this evidence suffered from what the United States Supreme Court has termed a failure of inference. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2555 (2011).  Procedurally, any factual dispute concerning whether causation is capable of proof at trial through common evidence must be determined by the court. This often requires the weighing of conflicting expert testimony, and the court must then resolve expert disputes in order to determine whether the predominance requirement has been met. A court must engage in this analysis even if it overlaps with the merits.

The practical considerations underlying the presentation of a case at trial should be considered by the court in determining whether individual questions of fact would predominate.  In the context of proving the element of causation, numerous courts have held that individualized questions of fact prevent class certification where resort to case-by-case testimony would be necessary. In the context of consumer fraud, for example, class certification is inappropriate where oral representations are made to each class member and where plaintiffs must rely on this evidence to prove causation.

Here, the court noted that a jury must be able to independently weigh whether each alleged design defect actually existed and whether that specific defect was the cause of each class member‘s injury.  Plaintiff‘s proffered evidence was largely the plaintiff‘s lawyers‘ comparison effort.  Plaintiff‘s expert conducted no statistical analysis. It was thus impossible to tell from plaintiff‘s proffered evidence whether any of the numbers put forward were statistically significant.  Also, plaintiff had not put forth any evidence that a jury could rely upon in determining which alleged design defect led to which Zune failure or which grouping of Zune failures. As framed by the plaintiffs, the alleged LCD cracks resulted from a muddled mix of causes and effects. There was no indication that each purported cause led to a uniform result (e.g., an origination point in the same location), which would permit the jury to draw an inference of a specific design defect. Thus, there was no way to determine which of the purported causes or which grouping of these causes led to which individual LCD crack or group of LCD cracks.

Indeed, according to plaintiff‘s own expert, one of the most basic concepts of failure analysis is that the origin (position) of failure can be determined from the failure pattern on the fracture surface of an object. Plaintiffs also admitted that a number of the 30gb Zunes sampled by their expert fell outside the high-frequency areas identified in the expert report.  Just as statistical evidence of gender disparity at the regional or national level in Dukes could not establish gender disparity at the local level, plaintiffs' proof could not establish the design defects on a common basis.

Moreover, and this is an important point that some courts ignore, even if prima facie evidence of causation could be established on the basis of statistically significant recurrence of crack-origination points—something the plaintiffs had not established — the defendant must be given the opportunity to rebut such an inference; to defend against each of these alleged defects; to respond to that proof.  The only way in which the defendant could rebut plaintiff‘s proposed class-wide evidence would be through the presentation of individual evidence regarding the circumstances surrounding each cracked LCD screen. A lack of damage to the outer lens did not necessarily preclude evidence that other portions of the outer shell of the 30gb Zune were damaged by misuse.  Defendant would have to be given the opportunity to cross-examine each Zune owner to assure that there was no damage to the outer casing (as opposed to the outer lens covering the LCD screen) that resulted from misuse or abuse. This would result in hundreds of mini-trials.

Lastly, internal defendant communications did not establish causation as to each individual class member‘s injury. Generalized statements about an alleged design defect are merely that—general statements; they fail to show that all LCD cracks must have been the result of this alleged defect. Just as in Dukes, anecdotal evidence generally cannot serve as a basis for class certification.

Consumer Fraud Class Action Decertified in Drug Case

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

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

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

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

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

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

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

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

 

 

Class Certification Denied in Baby Formula Case

A federal court last week denied class certification in a lawsuit over insect parts allegedly found in baby formula, recognizing that the claims raised multiple individual issues. Brandner v. Abbott Laboratories, et al., No. 2:10-cv-03242 (E.D. La. 1/23/12).

Plaintiff filed this suit in connection with Abbott’s September, 2010 recall of Similac brand infant formula because of the concern that insect parts may have been observed in a batch of finished product.  Brandner asserted that she purchased, and her child consumed, Similac that was
part of the product recall.  Plaintiff contended that during this period her child suffered alleged gastrointestinal problems, which symptoms required numerous visits to a physician, and that she allegedly experienced severe emotional distress upon learning she had fed her child infant formula containing beetles and beetle larvae.

Plaintiff's Rule 23 (b)(2) class allegations were dismissed, but plaintiff then sought monetary damages and moved to certify a class on her products liability and redhibition claims under
Federal Rule of Civil Procedure 23(b)(3). Defendant opposed this certification motion on the grounds that she failed to satisfy the commonality, typicality, and adequacy of representation requirements of Rule 23(a), as well as the predominance and superiority requirements of Rule 23(b)(3). The court's focus was on the predominance and superiority issues, and found no need to reach all the other questions.

Predominance of individual issues under the product liability claim-

Louisiana law requires a plaintiff to demonstrate that the product was unreasonably dangerous when it left the manufacturer’s control. Whether each class member actually purchased contaminated Similac was subject to individualized, not collective proof. Second, each putative class member would need to establish that Abbott’s actions were a proximate cause of his or her injury. Jefferson v. Lead Indus. Ass’n, Inc., 106 F.3d 1245, 1247 (5th Cir. 1997).  The plaintiff's cause of action here would require proof of medical causation, which has two components, general causation, which establishes that a substance has the capability of causing the injury or disorder in humans, and specific causation, which focuses upon whether the substance caused a particular injury to a particular individual. E.g., Ridgeway v. Pfizer, Inc.,, 2010 WL 1729187, at *2 (E.D. La. Apr. 27, 2010).  Even assuming general causation, proving specific causation would require a determination of an individual’s family and medical history; age; gender; diet; the timing of ingestion of the product; whether that individual suffered an injury, when the injury occurred, the type of injury suffered, and the number of occurrences of injury; and more. See In re Vioxx Prods. Liab. Litig., 239 F.R.D. 450, 459 (E.D. La. 2006)(citing In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 208 F.R.D. 625, 631-32 (W.D. Wash. 2002)).

This highly individualized inquiry led the court to conclude that issues common to the class did
not predominate.   Interestingly, the court went on to note that all plaintiffs who claimed emotional distress (an issue that plaintiff contended was common to the class) would have to establish not only the distress but also the attendant damages. The damages issue required a determination  whether plaintiffs sought medical treatment, psychiatric treatment, the degree to which plaintiffs manifested generalized fear, and the severity of plaintiffs’ emotional distress. See Howard v. Union Carbide Corp., 897 So.2d 768, 774 (La. App. 2005). Because the determination of whether each member suffered emotional distress turned on a highly individualized assessment, questions of fact regarding individual members predominated over common issues of fact.  While the individual nature of damages alone does not necessarily preclude class certification, class treatment may not be suitable where the calculation of damages is not susceptible to a mathematical or formulaic calculation. Establishing emotional damages would entail the exact type of “mini-trials” the courts have cautioned against. Indeed, the very nature of these damages, compensating plaintiffs for emotional and other intangible injuries, necessarily implicated the subjective differences of each plaintiff’s circumstances; they were an individual, not class-wide, remedy.  See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 417 (5th Cir. 1998). See also In re Katrina Canal Breaches Litig., 401 Fed. Appx. 884, 887 (5th Cir. 2010) (class certification not appropriate when individualized issues, such as the nature and extent of a class member’s damages, will predominate).

Superiority- 

The court also found that plaintiff made no showing of how she would try these claims on a class-wide basis. She thus failed to demonstrate how she would overcome the manageability problems posed by claims that require such disparate proof. Accordingly, she had not satisfied the requirement that a class action be superior to other available methods of adjudicating the controversy.

Other claims-

Plaintiff's redhibition claims also could not be certified as a class because common issues did not predominate, and a class action was not a superior mechanism for trying these claims. Plaintiff argued, in essence, that defendant admitted defect in recalling lots of the product.  But the court found that the recall notice was far from an admission that every unit contained a
redhibitory defect. Indeed, the press release actually stated that there was only a “remote possibility” of contamination in the products subject to recall. Plaintiff could not show through common proof that each class member purchased a defective product.  Plaintiff's expert did not convince the court otherwise. The overall rate of contamination in tested samples was only 0.16%.  The expert admitted there was no scientific way to evaluate contamination in units that were recalled but not tested.  And even if the product was considered “adulterated” per the FDCA, a food product is adulterated, inter alia, if it has been prepared, packed, or held under insanitary
conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health. So a product can be “adulterated” under the FDCA without being contaminated or defective.

Class certification denied under (b)(3).

Food Spread Class Action Certified: What Happened to Wal-mart?

A California federal judge recently denied certification of a nationwide class, but certified a statewide class of plaintiffs in a suit over allegedly misleading promotion of the hazelnut spread Nutella as part of a healthy breakfast for kids. Hohenberg et al. v. Ferrero USA Inc., No. 3:11-cv-00205 (S.D. Calif.).

This type of case falls squarely in the zone we have warned readers about: the aggressive and excessive use of consumer fraud act claims by plaintiff attorneys, and certification triggering the need to think about "blackmail settlements."

Plaintiffs brought a putative consumer class action lawsuit on behalf of people who purchased Ferrero’s Nutella spread after relying on allegedly deceptive and misleading labeling and advertisements. Specifically, Plaintiffs alleged that Ferrero misleadingly promoted its spread as healthy and beneficial to children when in fact it contains levels of fat and sugar inconsistent with that claim.  We have posted on this product before.

Typically, plaintiffs brought causes of action alleging (1) violations of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.; (2) violations of California’s False Advertising Law, (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq.; (3) violations of California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1770 et seq.; (4) breach of express warranty; and (5) breach of implied warranty of merchantability.

Plaintiffs moved for class certification. Defendant Ferrero argued that plaintiffs did not satisfy the commonality requirement as clarified by the United States Supreme Court in Wal-Mart, because they did not offer evidence of a common injury. Indeed, plaintiffs did not support their motion with expert declarations that, for example, all class members were misled by a common advertising campaign that had little to no variation.  But the court, relying in part on pre-Wal-Mart decisions, e.g., Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019-20 (9th Cir. 1998), stressed that commonality under Rule 23(a)(2) only requires there be some common issues of fact. To the extent that defendant interpreted the decision in Wal–Mart as requiring plaintiffs to prove common class-wide injury at the class certification stage, the court disagreed. Rather, all plaintiffs must show, said the court, is that the claims of the class depend upon a common contention of such a nature that it is capable of class-wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. While that clearly was part of Wal–Mart, the decision is best read as finding that commonality requires the plaintiff to demonstrate that the class members have suffered the same injury, which means more than merely that they have all suffered a violation of the same provision of law.  Nevertheless, in this case, the court found sufficient the claims made on behalf of the proposed class based on a common advertising campaign,

But then there was the predominance issue of Rule 23(b).  Defendant disputed that common issues predominate, arguing that proposed class members’ injuries would require individualized assessment. Notably, one named plaintiff did not regret buying Nutella despite the alleged marketing, and continued using the spread after she learned about its sugar content. Another named plaintiff testified that her family loved Nutella and was upset when she took it away. Clearly, this case involved class members’ individual expectations, dietary preferences, nutritional knowledge, and the availability or non-availability of substitutes in the market. The court conceded that plaintiffs’ dietary choices may prove relevant to the merits of their case, but felt that it need not "decide the merits" of the case at this stage. However, as we have posted before, the Ninth Circuit has noted that it is not correct to say a district court may consider the merits to the extent that they overlap with class certification issues; rather, a district court must consider the merits if they overlap with the Rule 23(a) requirements. 


The court did reject the proposed national class, because plaintiffs made no showing that non-California class members saw the advertising at issue in California, purchased Nutella in California, or that their claims arise out of conduct that occurred in California. The choice of law issue thus overwhelmed the alleged common issues. So the certified class included “all persons who, on or after Aug. 1, 2009, bought one or more Nutella products in the state of California” for personal use.  Wal-Mart needs to have more impact than this.

Class Certification Denied in Printer Litigation

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

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

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

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

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

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

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Federal Court Denies Class Certification in Vitamin Consumer Case

A federal court late last month declined to certify a proposed class action in which plaintiffs challenged alleged claims about the weight-loss properties of One-A-Day WeightSmart vitamins. Gray v. Bayer Corp., No. 08-4716 (D.N.J. 7/21/11).  Our readers will be interested in the discussion of the predominance and superiority requirements for class actions.

Plaintiff alleged that the packaging of One-A-Day WeightSmart falsely claimed that the vitamin enhances a user’s metabolism. Plaintiff filed a complaint against Bayer alleging claims based on intentional and negligent misrepresentation, and the New Jersey Consumer Fraud Act (NJCFA), N.J.S.A. 56:8-1, et seq.;  plaintiff later moved  to certify a class of purchasers of One-A-Day WeightSmart pursuant to Rule 23(b)(3), which requires that a plaintiff establish that the questions of law or fact common to the class members predominate over any questions affecting only individual members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

As plaintiff’s proposed nationwide class called for the application of state substantive law, the court first looked to determine which state’s law governed the claims. Plaintiff argued that New Jersey had the most significant relationship to the claims because all of the decisions with respect to marketing allegedly took place in New Jersey, and all of the alleged operative misrepresentations originated in New Jersey, at Bayer’s headquarters. Defendant noted that because consumers purchased One-A-Day WeightSmart throughout the United States and thereby received the alleged misrepresentations in various jurisdictions other than New Jersey, the consumer fraud laws of the states where the product was purchased should apply. The court agreed that .the place where the
putative class members received Bayer’s alleged representations and the place where the consumers acted in reliance upon those representations, were key factors pointing to the law of the individual states where the product was purchased. (Consumers purchased One-A-Day WeightSmart at retail locations nationwide, not from Bayer itself.)

Moreover, to apply the NJCFA to all the out-of-state consumers in this case would be to ignore the interests of potentially fifty other jurisdictions. Simply because New Jersey has struck a particular balance between consumer protection and the promotion of business within its borders does not suggest that its interest in deterrence should displace the differing policy goals of its fellow states. Those states have instead struck their own legislative balances, awarding compensation based on differing standards of, inter alia, intent, causation, reliance, and damages. The interests of interstate comity and the competing interests of the states counseled against the blanket application of one state’s law over the laws of other interested states.

Thus, the court had to next consider whether variations in state laws presented the types of insuperable obstacles which render class action litigation unmanageable. See In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 529 (3d Cir. 2004). Where the applicable law derives from the law of the 50 states, as opposed to a unitary federal cause of action, differences in state law will compound any disparities among class members from the different states. It is plaintiff’s burden to
credibly demonstrate, through an extensive analysis of state law variances, that class certification does not present insuperable obstacles. 

Here, plaintiff failed to carry this burden.The court acknowledged a “brewing issue” in the Third Circuit over whether the NJCFA could be applied in a national class action. But the better view was that the court would be required to apply distinct standards of, inter alia, intent, causation, reliance, and damages in order to adjudicate plaintiff’s claims under each state’s consumer fraud law. Litigating plaintiff’s claims based on law from potentially fifty-one different jurisdictions would likely require a multitude of mini-trials to determine Bayer’s liability to each statewide group of consumers. Such a procedure would be an inefficient use of  judicial resources and would defeat the purported economies of class treatment.

The court therefore concluded that plaintiff’s proposed nationwide class failed both the predominance and superiority requirements under Rule 23(b)(3). 

Bayer argued that the alternative proposed Florida class was not ascertainable because claims under the Florida consumer fraud act are subject to a four-year statute of limitations and thus the claims of some Florida class members would be barred -- an issue requiring an individual analysis. Plaintiff was, however, granted leave to file a revised motion for class certification with respect to a more ascertainable Florida class only.

 

Class Certification Denied in BPA MDL

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

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

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

The analysis offered several interesting points:

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

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

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

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

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

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

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

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

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

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

 

Plaintiffs' Class Allegations Flattened in Tire Case

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

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

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

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

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

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

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

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

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

Certification denied.

 

 

Class Certification Denied in YAZ MDL

The federal judge managing the multidistrict litigation over the birth control pill Yaz last week declined to certify a proposed national class of users allegedly harmed by the contraceptive, and struck the class action allegations from the complaint.  In re: Yasmin and Yaz (Drospirenone) Marketing, Sales Practices and Products Liability Litigation, No. 3:09-md-02100 (S.D. Ill.).

In the opinion, Judge Herndon noted that named plaintiff Plaisance was a 44-year-old citizen of the State of Louisiana who was prescribed YAZ in May of 2006 by her physician. During the summer of 2006, plaintiff was hospitalized due to a deep vein thrombosis (“DVT”) in her left leg.  She alleged that the DVT, as well as other adverse effects, were caused by her ingestion of YAZ.  Plaintiff sought class certification of a nationwide class of YAZ purchasers who contracted DVT, but in the alternative proposed separate state-wide classes.

Plaintiff asserted claims for negligence, strict product liability, breach of express warranty, breach of implied warranty, fraudulent misrepresentation, fraudulent concealment, negligent misrepresentation, medical monitoring, and fraud and deceit.

Plaintiff maintained that the putative nationwide and state wide classes met the requirements of Rule 23(a) and 23(b)(3). In addition, plaintiff contended that the unitary application of the law of Louisiana was appropriate and somehow resolved issues related to the application of the substantive laws of multiple jurisdictions.

Here, the Court’s analysis began and ended with Rule 23(b)(3); it was "evident" to the court that individual questions of law and fact predominated, and therefore the case was not manageable as a nationwide or statewide class action.  Rule 23(b)(3)’s predominance and manageability  requirements also precluded any proposed “issue” certification under Rule 23(c)(4).

To satisfy the requirements of Rule 23(b)(3), a plaintiff must show that common questions of factor law predominate over individual questions and that class treatment is superior to other available methods of adjudication.Fed. R. Civ. P. 23(b)(3). Assessing the predominance factor requires consideration of the substantive elements of a plaintiff’s claims and the proof necessary to establish those elements. See Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 673-74, 677-78 (7th Cir. 2001); In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1015-19 (7th Cir. 2002). In addition, a court must consider issues pertaining to manageability and choice of law.

On that last point, this action was transferred from the United States District Court for the Eastern District of Louisiana. Therefore, Louisiana choice of law rules governed the complaint. See Chang v. Baxter Healthcare Corp., 599 F.3d 728, 732 (7th Cir. 2010). Under Louisiana’s codified choice of law rules, the substantive law of each plaintiff’s home state would govern the merits of the case. Accordingly, the laws of all fifty states plus the District of Columbia would be applicable to the putative nationwide class members’ claims. Amongst the states, there are differences in the law of product liability as well as in the applicable theories of recovery and their subsidiary concepts. These differences, said the court, "are not insignificant." See e.g., Rhone-Poulenc Rorer Inc., 51 F.3d 1293, 1300-1301 (7th Cir. 1995). Indeed, “such differences have led [the Seventh Circuit] to hold that other warranty, fraud, or products-liability suits may not proceed as nationwide classes”). In re Bridgestone/Firestone, Inc., 288 F.3d at 1015.See also Isaacs v. Sprint Corp., 261 F.3d 679 (7th Cir.2001); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir.2001); In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir.1995).  In the class action context differences in state law cannot be swept away by electing to apply the law of a single state to all class members’ claims. See Id. at 1017-1020. Although the unitary application of a single state’s law might promote  efficiency, it would also constitute an unacceptable violation of principles of federalism.   Differences across states may be costly for courts and litigants alike, but they are a fundamental aspect of our federal republic and must not be overridden in a quest to clear the queue in court.

The court went on to correctly note that mass product liability suits are rarely sustainable as class actions. Establishing the requisite elements of product liability claims sounding in strict liability, negligence, warranty, and/or fraud generally requires fact intensive inquiries unique to each plaintiff(such as questions related to causation, injury, affirmative defenses, and damages). In the instant case, almost every element of the asserted claims would have required highly individualized factual inquiries unique not only to each class member but also to each class member’s  prescribing physician. For example, establishing causation would require (1) an examination
of each class member’s medical history, including pre-existing conditions and use of other medications; (2) an evaluation of potential alternate causes for the alleged injury; and (3) an assessment of individualized issues pertaining to each class member’s prescriber, including how the doctor balances the risks and benefits of the medicine for that particular patient, the particular doctor’s prescribing practices, the doctor’s knowledge about the subject drug, and the doctor’s sources of information with regard to the subject drug. Establishing elements of the fraud and warranty claims would also turn on facts unique to each plaintiff, particularly with regard to questions of materiality and reliance.

On the (c)(4) issue, the court recognized that Seventh Circuit jurisprudence indicates that Rule 23(b)(3)’s requirements of predominance and manageability are applicable to “issue” certification under Rule 23(c)(4).  There is disagreement amongst district courts with regard to whether, under Rule 23(c)(4), the predominance evaluation is a limited inquiry, focusing only on the individual issue for which class treatment is sought, or requires consideration of the cause of action as a whole. See e.g., In re Fedex Ground Package System, Inc., Employment Practices Litigation, 2010 WL 1652863, *1-2 (N.D. Ind. Apr. 21, 2010); In re General Motors Corp. Dex-Cool Prods., 241 F.R.D. 305, 313-314 (S.D.Ill.2007).  The Fifth Circuit Court of Appeals in particular has been critical of district courts that fail to consider the case as a whole when evaluating predominance under Rule 23(c)(4). See Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n. 21 (5th Cir. 1996). 

Here, the court felt no need to choose a side, because In the instant case, the putative common issues, including matters such as whether the subject drugs were defective or whether these defendants failed to give adequate warnings,  were enmeshed with the same individual issues of law and fact as affected certification of the putative class as a whole. The allegedly common issues had subsidiary concepts (such as causation, duty of care, and reliance) which would present questions that can only be answered by considering facts that are unique to each putative class member and her prescribing physician.

In addition, many – if not all – of the proposed common issues could not be certified without triggering the Seventh Amendment concerns discussed in Rhone-Poulenc Rorer. See Rhone-Poulenc Rorer, 51 F.3d at 1303. A trial court must divide issues between separate trials in such a way that the same issue is reexamined by different juries. Here, multiple juries in follow-up trials would have to examine such issues as comparative negligence and proximate cause after a first jury examined the alleged negligence.

Court of Appeals Vacates Class Certification in Toxic Tort Case

The Fifth Circuit has vacated the decision of the trial court in granting class status to a group of plaintiffs alleging that a refinery exposed them to toxic dust. Madison v. Chalmette Refining LLC, No. 10-30368 (5th Cir. 4/4/11).

Back in 2007, a number of schoolchildren, chaperoned by parents and teachers, participated in a historical reenactment at the Chalmette National Battlefield, the site of the January 8, 1815, Battle of New Orleans, the last great battle of the War of 1812 and “the site along the Mississippi River where Andrew Jackson gave the British their comeuppance.” D. BRINKLEY, The Wilderness Warrior: Theodore Roosevelt and the Crusade for America,p. 414 (2009). Adjacent to the battlefield is the Chalmette Refinery, which allegedly released an amount of petroleum coke dust that migrated over the battlefield. Plaintiffs sued on behalf of a class of all persons or entities located at the Chalmette National Battlefield in St. Bernard Parish, Louisiana, in the early afternoon of Friday, January 12, 2007 and who sustained property damage, personal injuries, emotional, mental, or economic damages and/or inconvenience or evacuation as a result of the incident.

The District Court granted the motion to certify, and defendants appealed. The court of appeals reviews the district court's decision to certify a class for an abuse of discretion. See, e.g., McManus v. Fleetwood Enters., Inc., 320 F.3d 545, 548 (5th Cir. 2003). The decision to certify is within the discretion of the trial court, but that discretion must be exercised within the framework of Rule 23. Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996).  The Supreme Court requires district courts to conduct a rigorous analysis of Rule 23 prerequisites.

The crux of this appeal was the legal basis for and sufficiency of evidence supporting the district court’s findings of superiority and predominance under Rule 23(b)(3). Before certifying a class under Rule 23(b)(3), a court must determine that questions of law or fact common to the members of the class predominate over any questions affecting only individual members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. Determining whether the plaintiffs can clear the predominance hurdle set by Rule 23(b)(3) requires district courts to consider how a trial on the merits would be conducted if a class were certified.

Chalmette Refining cited the advisory committee note to Rule 23(b)(3), which has been quoted numerous times by the Fifth Circuit as highlighting the “relationship between predominance and superiority in mass torts.” See Castano v. American Tobacco Co., 84 F.3d 734, 745 n.19 (5th Cir. 1996). According to the note, a  “mass accident” resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses to liability, would be present, affecting the individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice into multiple lawsuits separately tried.

Here, the district court abused its discretion by failing to afford its predominance determination the “rigorous analysis” that Rule 23 requires. In particular, the district court did not meaningfully consider how plaintiffs’ claims would be tried.  Plaintiffs cited, and the trial court relied on, two cases that are among the very few certifying a tort injury class action. In Watson v. Shell Oil, the court certified a class of over 18,000 plaintiffs seeking damages stemming from an explosion at a Shell plant. 979 F.2d 1014, 1016 (5th Cir. 1992). Notably the court of appeals now clarified that "whether Watson has survived later developments in class action law–embodied in Amchem and its progeny–is an open question."  But even in Watson, the district court had a detailed four-phase plan for trial. Similarly, in Turner v. Murphy Oil USA, Inc., the district court granted class certification to a class of plaintiffs who suffered damages resulting from a post-Hurricane Katrina oil storage tank spill. 234 F.R.D. 597, 601 (E.D. La. 2006). Critical to the court’s predominance inquiry was the fact that plaintiffs had submitted a detailed proposed trial plan to the court, calling for bifurcation of certain issues.

In contrast, here there was no analysis or discussion regarding how the court would administer the trial.  Robinson v. Tex. Auto. Dealers Ass’n, 387 F.3d 416, 425–26 (5th Cir. 2004). The court failed to identify the substantive issues that would control the outcome, assess which issues will predominate, and then determine whether the issues are common to the class. Absent this analysis, it was impossible for the court to know whether the common issues would be a significant portion of the individual trials, much less whether the common issues predominate.  Instead, the trial court appears to have "adopted a figure-it-out-as-we-go-along approach." 

Even among the named class representatives, significant disparities existed, in terms of exposure, location, and whether mitigative steps were taken. The primary issues left to be resolved would turn on location, exposure, dose, susceptibility to illness, nature of symptoms, type and cost of medical treatment, and subsequent impact of illnesses on individuals.

 


 

Class Action Alleging False Food Ads Rejected

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

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

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

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

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

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

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


 

Snapple The Best Stuff in Court - Consumer Class Action Denied

Earlier this month a trial court in New York denied class certification purchaser of Snapple beverages who complained that drinks labeled “All Natural” are somehow misleading because they contain high fructose corn syrup.  See Weiner v. Snapple Beverage Corp., (S.D.N.Y. 8/3/10).

Off and on, we have commented on the growing and alarming trend for plaintiffs lawyers to concoct consumer fraud class action claims against products, even when consumers were not injured and got basically what they paid for, because of some alleged ambiguity in the label or old-fashioned puffing.

Snapple Beverage Corporation was founded in New York’s Greenwich Village in 1972. Snapple began selling and marketing its teas and juice drinks in the late 1980s. In marketing its beverages, Snapple focused on, among other things, flavor, innovation, and humor. Snapple became known for its quirky personality and funny advertising, as well as its colorful product labels and beverage names. For instance, Snapple’s television advertisements featured, among other things, Snapple bottles dressed in wigs and hats, singing in a Backstreet-esque “boy-band,” running with the bulls (hamsters with cardboard horns) in Spain, and performing synchronized swimming.

When Snapple entered the beverages market in the late 1980s, it avoided putting preservatives, which were then commonly found in some similar beverages, in its teas and juice drinks. Snapple was able to do so by using a “hot-fill” process, which uses high-temperature heat pasteurization to preserve products immediately before bottling. Snapple also used 16-ounce glass bottles instead of aluminum cans or plastic. Hence the term on their label "All Natural."

From their inception, Snapple’s beverages were sweetened with high fructose corn syrup.  HFCS is made from corn ( a natural product last time we checked), and its primary constituents are glucose and fructose, the sugars that comprise table sugar and honey (which also sound pretty natural). It is undisputed that Snapple disclosed the inclusion of HFCS in the ingredient list that appears on the label of every bottle of Snapple that was labeled “All Natural.”

But plaintiffs alleged that they paid a price premium for Snapple beverages as a result of the “All Natural” labeling, and that Snapple’s “All Natural” labeling was misleading because Snapple had HFCS.  They brought a class action on behalf of all people who purchased Snapple in New York.  The FDA is reportedly looking at whether high fructose corn syrup may be considered a natural ingredient, but the court didn't need that guidance to dispose of this bogus class claim.

The court focused on the Rule 23(b)(3) predominance inquiry which tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. The predominance requirement is met only if the plaintiff can establish that the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole, predominate over those issues that are subject only to individualized proof.  The issues in turn are determined by the causes of action and defenses to them.  Plaintiffs' main claim was for alleged deceptive acts or practices in the conduct of any business, trade or commerce under N.Y. Gen. Bus. L. § 349. Generally, claims under § 349 are available to an individual consumer who falls victim to misrepresentations made by a seller of consumer goods through false or misleading advertising.

New York's § 349 does not require proof of actual reliance. But the plaintiff must show that the defendant’s material deceptive act caused the injury. In addition, a plaintiff must prove actual injury to recover under the statute.  The court noted that proof of actual injury in this case is bound up in proof of damages, or by how much plaintiffs have been harmed. Only by showing that plaintiffs in fact paid more for Snapple beverages as a result of Snapple’s “All Natural” labeling could plaintiffs establish the requisite elements of causation and actual injury under § 349.

The court concluded that plaintiffs had not proposed a suitable methodology for establishing the critical elements of causation and injury on a class-wide basis. Without a reliable methodology, plaintiffs had not shown that they could prove at trial using common evidence that putative class members in fact paid a premium for the beverage. Because individualized inquiries as to causation, injury, and damages for each of the millions of putative class members would  predominate over any issues of law or fact common to the class, plaintiffs’ § 349 claim could not be certified under Rule 23(b)(3).

In support of their contention that causation and injury were susceptible to generalized proof on a class-wide basis, plaintiffs relied on the expert report of Dr. Alan Goedde, an economist.  In his report, Goedde proposed two “approaches” for determining the purported price premium attributable to Snapple’s “All Natural” labeling: (1) a “yardstick” approach, which would use “class-wide economic data and standard economic methodologies” to “compare the price of products labeled ‘All Natural’ to similar products which do not have ‘All Natural’ labeling;” and (2) an “inherent value”  approach, which would analyze unspecified “studies and market research” to gather “data that can be used to determine the increased value, standing alone, that a product realizes due to the perception of that product being natural.”

The court found Goedde’s testimony unreliable. The witness did not demonstrate in adequate detail how his proposed “approaches” would be used to develop an empirical algorithm to determine, on a class-wide basis, whether there was a price premium as a result of Snapple’s “All Natural” labeling and, if so, how such a premium could be quantified. For example, he did not identify the products to which Snapple should be compared. He did not explain how his approach would isolate the impact of the “All Natural” labeling from the other factors that purportedly affect the price of Snapple and its competitors. He failed to take into account that there was no uniform price for Snapple beverages during the class period, and thus did not explain how his approach would account for the various prices that putative class members actually paid in determining injury
on a class-wide basis.

Goedde relied on two internal Snapple marketing strategy documents to support his alternate hypothesis that Snapple’s “All Natural” label allowed it to command a premium in the marketplace. Yet he did not review the deposition transcripts of Snapple’s witnesses or any of the other  documents produced by Snapple, which would have provided critical context for these documents.

The court accurately spotlighted the common plaintiff tactic in these kinds of cases: the failure to
invest sufficient time and effort to develop a reliable methodology to support an expert opinion at the class certification stage.  Although the court thought plaintiffs correct in arguing that Goedde need not “implement” or fully “test” his methodology at the class certification stage, an expert must still provide sufficient detail about the proposed methodology to permit a court to determine whether the methodology is suitable to the task at hand.

Without Goedde’s testimony, plaintiffs offered no evidence that a suitable methodology is available to prove the elements of causation and actual injury on a class-wide basis. Individualized inquiries would therefore be required in order to determine whether class members in fact paid a premium for Snapple beverages, and whether any such premium was attributable to the “All Natural” labeling. This would require, among other things, an examination of each of the millions of class members’ Snapple purchases, which the evidence showed were made in different locations, at different times, and for different prices, over the nearly eight-year class period.

One further issue of note is class definition.  The court found that plaintiffs failed to show how the potentially millions of putative class members could be ascertained using objective criteria that were administratively feasible. Plaintiffs - typically  - suggested that after certification, the court could require simply that class members produce a receipt, offer a product label, or even sign a declaration to confirm that the individual had purchased a Snapple beverage within the class period. The court labeled this suggestion "unrealistic." Plaintiffs offered no basis to assume that putative class members retained a receipt, bottle label, or any other concrete documentation of their purchases of Snapple beverages bearing the “All Natural” description.  Indeed, putative class members were unlikely to remember accurately every Snapple purchase during the class period, much less whether it was an “All Natural” or diet beverage, whether it was purchased as a single bottle or part of a six-pack or case, whether they used a coupon, or what price they paid. Soliciting declarations from putative class members regarding their history of Snapple purchases would invite them "to speculate, or worse."

However beloved Snapple may be, said the court,  there is no evidence to suggest that its consumers treat it like a fine wine and remove and save its labels.

 

Digitek Class Action Denied in MDL

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

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

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

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

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

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

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

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

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

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

Update on Chinese Drywall Litigation

The Consumer Product Safety Commission last week announced the results of testing performed by the Lawrence Berkeley National Laboratory on allegedly defective drywall samples.  Among the findings, most of the drywall that has allegedly caused personal injury and corroded electrical components in various homes throughout the U.S. was indeed manufactured in China;  specifically,  the most reactive sulfur-emitting drywall samples were all produced in China, according to the CPSC.  The worst-testing samples of the Chinese drywall showed emission rates of hydrogen sulfide 100 times greater than non-Chinese drywall samples.

CPSC released the names of the 10 worst-performing samples, including those of Knauf Plasterboard (Tianjin) Co. Ltd. for drywall manufactured in 2005, Taian Taishan Plasterboard Co. Ltd. for drywall manufactured in 2006, Shandong Taihe Dongxin Co. for drywall manufactured in 2005, Beijing New Building Materials for drywall manufactured in 2009.  Drywall samples manufactured in the United States in the same period contained low or no detectable emissions of hydrogen sulfide, according to the agency. 

At the U.S.-China Strategic and Economic Dialogue meetings in Beijing May 24-25, U.S. officials reportedly pressed the Chinese government to facilitate a meeting between CPSC and the Chinese drywall companies whose products were used in U.S. homes, and which exhibit the emissions identified during the testing procedures. The Strategic and Economic Dialogue represents the highest-level bilateral forum to discuss a broad range of issues between the two nations.

Federal cases concerning the drywall products are coordinated in multidistrict litigation pending in the U.S. District Court for the Eastern District of Louisiana. More than 7,000 plaintiffs have claimed that Chinese-made drywall in their homes emits sulfide gases that corrode electrical wiring and/or cause personal injury such as nasal damage and other respiratory problems.  In the first trial, the court ordered Taishan Gypsum to pay $2.6 million to seven plaintiffs last April. In the second trial, the court ordered Knauf Plasterboard to pay a plaintiff family $164,000.  In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No. 2047 (E.D. La.).

Cases are also pending in state court, and a state trial court in Miami recently certified a class in this litigation. Harrell v. South Kendall Construction Corp. et al., No. 09-008401 (11th Judicial Circuit, Fla.). Following a hearing last Thursday, Judge Farina granted class certification, the first Chinese drywall case to be certified. The class consists of approximately 150 claimants who were purchasers of homes in three subdivisions of the Keys Gate community there. The class alleged that those homes were built using Chinese drywall. Defendants are home builder Kendall Construction Corp., Palm Isles Holdings LLC, broker Keys Gates Realty Inc, and supplier Banner Supply Co.

The court found that a predominating common issue in each class member's case is whether the drywall installed in his or her house was defective. The trial court found that the alleged defect, the potential to emit sulfur gases that can cause damage, is inherent in the physical characteristics of the product and thus has a uniform nature. With one supplier and one builder allegedly involved, the court distinguished the case from other product defect cases in which individual issues are typically found to predominate.

The opinion noted that differences among proof of damages has typically not defeated class certification. The court stressed that if individual class member homeowners were to file their own separate actions, the court would be confronted with a multiplicity of lawsuits that would unnecessarily burden the court system and create the risk of inconsistent rulings and contradictory judgments.

While the court was clearly influenced by the belief that the issues surrounding the allegedly defective product were "unaffected by outside variables," like the way the product was used, its analysis of predominance is quite questionable.  For example, it concluded that a common issue was whether the defective drywall damaged the homes of the putative class members, and thus that the issue of injury (whether the drywall damaged all the homes) could be proved with class-wide evidence.  The fact is that enough of the drywall was imported to damage more than 50,000 homes; yet only a small percentage of that has been observed. Thus, it may be that any number of factors may be impacting the damage drywall is or is not causing in a particular house. Moreover, it is far too simplistic to talk about the injury or "damage" being caused, when there are hotly debated issues about whether there is injury to, or the need for remediation of, non-problem drywall, insulation, flex duct, molding, encapsulated wiring, counter tops, and a whole host of house components. Similar issues will relate to the causation of corrosion of a home’s electrical wiring or AC system.  

Decision to Not Conduct Daubert Inquiry Leads to Class Certification

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

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

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

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

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

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

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

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

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

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

 

 

Class Action Motion Rejected in Human Tissue MDL

We have posted before about the interesting Human Tissue litigation.  The multidistrict litigation consolidated hundreds of cases filed either by plaintiffs who received allografts — transplants from cadavers — harvested by defendants allegedly without obtaining proper consent and following appropriate regulations, or by those plaintiffs who allegedly had allografts improperly taken from deceased relatives. The MDL court last week denied the latter plaintiffs' motion for class certification. In re: Human Tissue Products Liability Litigation, No. 06-135/MDL 1763 (D.N.J.).

According to the named representative plaintiffs, each of the class members had a deceased family member whose body went to one of the defendant funeral homes; plaintiffs claim that the funeral homes, after taking possession of the bodies, allowed another defendant to extract bones and tissue from the decedents. Following this, the harvested tissue then allegedly was given to other defendants, tissue banks. The purported class consisted of “all next of kin relatives of decedents whose bodies were desecrated by [defendants] for the harvesting and sale of human body parts."

Two parts of the opinion will be of the most interest to readers.  First, under the Rule 23(a) prerequisites, the court found that the typicality element was not established because of the highly individualized nature of the claims in this action.  Plaintiffs asserted emotional distress claims against the funeral homes that handled the donor decedents' remains and the tissue processors who allegedly received the harvested tissue. The Third Circuit has stated that class certification is inappropriate in mass tort claims, generally, because they often present questions of individualized issues of liability. In re Life USA Holding Inc., 242 F.3d 136, 145 (3d Cir. 2001). This observation is particularly true where the tort claims alleged are premised on emotional distress. The factual circumstances underlying each of the individual claims – including but not limited to plaintiffs' relationships with the decedents and the injuries allegedly suffered – were sufficiently personal and specific as to prevent any finding of similarity with regard to their claims.  

Also, plaintiffs were bringing contractual claims against the funeral home defendants, which again hinged on different factual circumstances that also might give rise to different defenses. There was no allegation that the individual contracts made with the funeral homes concerning final arrangements for the donor decedents were identical; in fact, since they were drafted and negotiated by different funeral home representatives and family members, they likely contained different representations, again subject to different defenses. For example, the meetings between funeral home personnel and the decedents' family members involved representations regarding the specific services requested and potential tissue donation. "These are all very personalized discussions," said the court.  All in all, the court found sufficient factual differences among the contracts negotiated with the different funeral homes to preclude a finding of typicality. See In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 598 (3d Cir. 2009)(“Ensuring that absent class members will be fairly protected required the claims and defenses of the representative to be sufficiently similar not just in terms of their legal form, but also in terms of their factual basis and support.”); see also In re Life USA Holding, Inc., 242 F.3d at 144-46 (vacating class certification in part because plaintiffs' claims of deceptive insurance sales practices arose from individual and non-standardized presentations by numerous independent agents).

It is significant that the court put some teeth into the 23(a) element. While the court acknowledged that factual differences will not automatically render a claim atypical if the claim arises from the same event or practice or course of conduct that gives rise to the claims of the class members, and if it is based on the same legal theory, here plaintiffs failed to demonstrate, other than through a bald assertion, that any practice or course of conduct existed among the funeral homes or among the tissue processors.

The same differences undermined a showing of predominance and superiority under Rule 23(b)(3), which provides for certification when the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

The individual factual circumstances, including contractual arrangements, personal relationships with the decedents, injuries suffered, etc. precluded a 23(b)(3) class.  The superiority inquiry compels a court to balance, in terms of fairness and efficiency, the merits of a class action device against those of alternative available methods of adjudication.  Here, the multitude of individualized issues presented in plaintiffs' claims would entail complicated mini-trials within the class action itself.  The claims presented by plaintiffs and their unique factual underpinnings would require such extensive individual consideration that it would be neither more fair nor more efficient to proceed with this matter as a class action.  Class rejected.


 

State Supreme Court Rejects Nationwide Consumer Fraud Class

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

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

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

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

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

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

State Supreme Court Reverses Class Certification on Predominance Grounds

The Alabama Supreme Court has recently reversed a lower court's certification of a class of third-party payers of health care services who complained about damages allegedly flowing from the recall of a drug from the market.  Wyeth, Inc. v. Blue Cross and Blue Shield of Alabama, 2010 WL 152123 (Ala. Jan. 15, 2010).

Defendant Wyeth voluntarily withdrew Duract from the market, notifying the public of its decision to do so through a press release.  As part of the process of withdrawing Duract from the market, Wyeth voluntarily instituted a customer refund program for customers who still had Duract capsules in their possession. The third-party payers sued Wyeth solely on a theory of unjust enrichment, alleging that their payment for the drug had conferred an inappropriate benefit on Wyeth in light of the withdrawal.

After a hearing on the class certification motion, the trial court entered an order certifying a nationwide class of TPPs who paid for the prescription drug Duract that was not used as of the date of its withdrawal from the market.  On appeal, the defendant argued that predominance of common issues had not been established, a requirement of Alabama Rule 23 analogous to FRCP 23 (b)(3).

As in many states, Alabama recognizes that unjust enrichment claims are particularly unsuitable for class treatment. Funliner of Alabama, L.L.C. v. Pickard, 873 So.2d 198, 211 (Ala.2003) (unjust enrichment claims based on allegations of mistake or fraud require an individualized inquiry into the state of mind of each plaintiff).  The trial court distinguished this body of law, finding that this particular enrichment claim was not based on fraud or mistake, but on the somehow different theory that “equity and good conscience” required the defendant to disgorge money that belongs to the plaintiff.

The court observed that Wyeth probably had the better of the argument on this, meaning that the trial court had fashioned on a distinction without a difference.  But the state high court did not need to resolve the unjust enrichment issue under Alabama law, because the plaintiffs sought a nationwide class. Regardless of what Alabama law was, there had been no adequate showing, either to the trial court or to the Supreme Court, that the laws of all (or even most of) the 49 other states would allow unjust enrichment claims to proceed on such a "good conscience" basis somehow distinct from a traditional claim. 

Even a cursory examination showed that variances exist in state common laws of unjust enrichment. The actual definition of unjust enrichment varies from state to state. Some states do not specify the misconduct necessary to proceed, while others require that the misconduct include dishonesty or fraud. See Clay v. American Tobacco Co., 188 F.R.D. 483, 501 (S.D.Ill.1999).

Accordingly, common issues could not predominate.  Certification was vacated.

Federal Court Denies Class Certification in Boat Fuel Case

A federal court last week denied class certification in a case arising from alleged damage to boats allegedly caused by ethanol blended gasoline. Kelecseny v. Chevron U.S.A., Inc., et al., No. 08-61294-CIV-ALTONAGA/Brown (S.D. Fla. Nov. 25 2009).

Recent federal and state legislation requires that ethanol usage be expanded and that gasoline contain 9 to10% ethanol by December 31, 2010. Plaintiff sued several defendant gasoline manufacturers who have produced and/or marketed the ethanol blended gasoline (E10) used by the proposed class members for use in boats and watercraft in Florida allegedly without adequate warnings to consumers. The plaintiff asserted that E10 can cause difficulty starting the engine or rough engine operation, engine overheating, engine fires,  corrosion of aluminum tanks, degradation of fiberglass tanks and resins, and other damages.

The court noted the evidence that some defendants have, in other countries, posted warning signs that E10 may not be suitable for use in boats. Numerous articles have appeared in boating magazines, some boat manufacturers provide E10 warnings in their owners’ manuals, and many marine mechanics are aware that E10 may cause problems in certain types of boats.

 

The class sought relief against all defendants under a “market share” theory of negligence, based on Conley v. Boyle Drug Co., 570 So. 2d 275, 286 (Fla. 1990), alleging that because of the general methods for the use and distribution of gasoline used to fuel boats, plaintiffs did not know the identity of each of the named defendants that sold the ethanol blended gasoline that they purchased for use in their boats.

 

Our review focuses on the damages class, defined as owners of boats in the state of Florida whose fuel tanks are composed of polyester of vinyl ester resin fiberglass fuel tanks. The court noted first that even to determine whether certain individuals may be in the class, a detailed individual inquiry would be required. Because it would be impossible to definitively identify class members prior to individualized fact-finding and litigation, the proposed class fails to satisfy the most basic requirements for a class action under Rule 23, ascertainability.

 

Turning to the Rule 23(a) factors, while it is possible that the proposed class could satisfy the numerosity requirement, plaintiff had not made a clear showing that the number of actual class members will be so high that joinder of all members is impracticable. Plaintiff argued that his starting number (680) was so large that defense attempts to carve certain boats out of the total number would never work to defeat numerosity. However, courts have made it abundantly clear that the burden to satisfy numerosity is on the plaintiff seeking to certify a class, and a plaintiff is not permitted to make a purely speculative showing that numerosity has been met.

 

Next, although typicality “does not require identical claims or defenses,” a factual difference in the representative’s claims will render those claims atypical if the factual position of the class representative “markedly differs from that of other members of the class.” Named plaintiff’s damages claims and the defenses to those claims differed markedly from those of other potential class members, said the court. The uncontroverted expert testimony at the certification stage established that the type of fiberglass tanks at issue are found in relatively large boats that are not suitable to be transported or carried by trailer.  Owners whose boats are equipped with fiberglass fuel tanks, therefore, are most likely to purchase their fuel at marinas, where their boats are kept or to which they travel on water for fueling. In contrast, plaintiff purchased fuel for his boat at numerous gas stations by use of a fuel caddy that he carried in his pick-up truck. Expert witnesses and the parties agree that this behavior was atypical. This difference in behavior between named plaintiff and other potential class members “jeopardizes Plaintiff’s ability to sue Defendants collectively under a market share theory.”

 

Importantly, the court noted that plaintiff cited no case in which market share liability has been applied in a class action, “and there appears to be good reason why no such case exists.” It is simply untenable to apply market share liability [in those few states that recognize it], with its requirement of the narrowest possible geographic market, to a class action consisting of members whose activities cover an entire state.  The requirement of a narrowly tailored geographic market is particularly important in market share liability cases because only with a narrow geographic market may a defendant avail itself of the defenses afforded by the market share theory.

 

On the Rule 23(b) factors, plaintiff’s argument disregarded the many individualized inquiries that would be required in the proposed class action and which clearly outweighed the asserted common issues. As to each individual plaintiff, a fact finder would have to determine where that particular plaintiff purchased fuel, and what, if any, warnings were in place at that station at that time or at different times. Also, plaintiffs had to show that defendants’ failure to warn of the dangers of E10 was the proximate cause of the damage to the boats. This requisite showing raised two issues of individualized inquiry. First, each proposed class member must demonstrate that had warnings of the danger of E10 existed, he or she would have heeded those warnings and not used E10 in his or her boat. Non-ethanol blended fuel is more difficult to find than E10 and is generally more expensive than E10. It is conceivable that some boat owners, even if warned that E10 might damage their fuel tanks, would opt for the convenience and lower cost of E10, and assume the risk of damage. Indeed, plaintiff himself apparently continued to use E10 in his boat despite his knowledge of the risks.

 

The proximate cause requirement also mandates an individualized inquiry into whether each proposed class member had personal knowledge that E10 could damage fiberglass fuel tanks. As noted above, some information was available from other sources that E10 may not be appropriate.

Finally, the court noted something that is extremely important to readers of MassTortDefense, and which some courts ignore: fact issues can be created by defenses and by a defendant’s response to plaintiff’s claims. If those fact issues are individual, that is every bit as important to the class certification decision as individual issues raised by plaintiff’s own affirmative proof. While plaintiff’s experts asserted that no individual examination of fiberglass fuel tanks was necessary, defendants’ experts disagreed. Thus, inspection of the fuel tank of each proposed class member was a reasonable request to determine whether any existing damage was actually caused by E10.

Similarly, defendants have the right to assert the comparative fault defense, and its assertion would involve individual inquiries concerning each proposed class member’s knowledge and behavior. Inquiry would be necessary as to whether each boat owner received an owner’s manual that warned against the use of E10; whether any had ever been told by a mechanic not to use E10; whether any had ever seen a warning sign at a marina or researched E10 on the internet; and whether, despite personal knowledge, the boat owner nonetheless chose to fuel the boat with E10 based on convenience and cost savings.

MDL Court Denies Class Certification in Device Litigation

The court overseeing the MDL concerning panacryl sutures declined last week to certify a proposed national class action. In re Panacryl Sutures Products Liability Cases, 2009 WL 3874347 (E.D.N.C. 11/13/09).

Panacryl Sutures are synthetic, braided, un-dyed, absorbable surgical sutures, designed to remain in the body for 24-36 months after surgery to provide wound support. Various plaintiffs alleged that Panacryl Sutures were defective in that they allegedly caused a high rate of foreign body reactions when used as directed. Plaintiffs alleged also that defendants failed to provide adequate warning of the dangers associated with the devices. Plaintiffs eventually filed a Motion to Certify a National Class Action.

The court first addressed the difficult choice of law issue -- a central, overarching issue in a proposed national class.  The court analyzed the choice of law factors -- interests of interstate comity, the interests underlying the field of tort law, the interests of the parties, the interests of judicial administration, and the competing interests of the various states, and concluded that under New Jersey's choice of law rules it should apply the substantive laws of each class member's home jurisdiction to his or her claims.  Again, a not unusual result, and is one which directly impacts the class certification elements.

Turning to the Rule 23(a) requirements, the court first focused on Rule 23(a)(3), commonly referred to as the “typicality” requirement, which states that the claims and defenses of the class representatives must be typical of the claims of the other class members.  Here, because plaintiffs had not shown that the prospective class representatives' claims can encompass or would take into account the varying substantive laws governing every class member, this element was not met.

Similarly, although the named plaintiffs interests are in some ways similar to the interests of class, the “adequate representation requirement overlaps with the typicality requirement because in the absence of typical claims, the class representative has no incentive to pursue the claims of the other class members.” In re American Med. Sys., 75 F.3d 1069, 1083 (6th Cir., 1996). Plaintiffs here did not meet their burden of showing that the claims of the prospective class representatives would take into account the variations in state law. The court found that therefore the prospective class representatives here did not satisfy Rule 23(a)(4).

Turning to Rule 23(b), the court observed that in class actions governed by the laws of several states, variations in state law will often overwhelm any common issues. See Ward v. Dixie Nat'l. Life Ins. Co., 257 F. App'x 620, 628-29 (4th Cir. 2007), cert denied, 128 S.Ct. 82 (2008), Castano v. Am. Tobacco, 84 F.3d 741 (5th Cir.1996).  To have any shot here, plaintiffs must provide an “extensive analysis” of the laws of the interested jurisdictions showing that variations among the applicable state laws do not pose “insuperable obstacles” to class certification. Walsh v. Ford Motor Co., 807 F.2d 1000, 1017 (D.C.Cir.1986); Gariety v. Grant Thornton, LLP, 368 F.3d 356, 370 (4th Cir.2004). Plaintiffs did not carry this burden.

Moreover, courts have generally founds that common questions of fact do not predominate in medical products liability cases. See In re American Med. Sys., 75 F.3d at 1074 (decertifying class of users of penile implants because “complications ... may be due to a variety of factors, including surgical error, improper use of the device, anatomical incompatibility, infection, device malfunction, or psychological problems.”); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180 (9th Cir.2001) (affirming denial of class certification in an action involving allegedly defective pacemakers). Here, plaintiffs alleged a variety of complications from the product, each of which has potential other causes. And Panacryl Sutures were used in a variety of surgical procedures which require different skills and techniques on the part of the surgeon and present different risks of post-surgical complications. These individual facts would have to be weighed against the alleged defects of Panacryl Sutures in light of the normal background rate of the various post-surgical complications identified by plaintiffs.  So no predominance of common issues.

This in turn led the court to conclude that the difficulties in managing the class proposed here would undermine the theoretical efficiencies that might be obtained through class certification.

Perhaps most importantly to readers of MassTortDefense, plaintiffs' last-ditch effort turned to the "issue class." But, noted the court, Rule 23(c)(4) may not be used to manufacture predominance for the purposes of Rule 23(b)(3). See Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir.1996) (“A district court cannot manufacture predominance through the nimble use of subdivision (c)(4).”); Peoples v. Wendover Funding, Inc., 179 F.R.D. 492, 501 n.4 (D.Md.1998) (“Rule 23(c)(4) does not permit a federal district court to certify a class under Rule 23(b)(3) by splitting a class action to create predominance.”). Plaintiffs' proposed issues trial plan did not eliminate the necessity of applying the laws of several jurisdictions or the individualized inquiry into whether Panacryl Sutures caused each plaintiff's injuries. And even under plaintiffs' proposed c4 trial plan, the difficulty of applying the laws of several states to the issues of liability and general causation would remain.  Lots of reasons to deny class certification.

Two Consumer Fraud Class Actions Offer Contrast

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

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

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

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

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

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

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

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

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