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.

Fail Safe Class Rejected in TCPA Case

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

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

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

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

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

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

So, motion granted; class allegations struck.

 

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.

 

Federal Court Rejects Fraud Class Action

A federal court stayed a  rejected proposed class action pending the outcome of plaintiffs' petition for interlocutory appeal of the class certification denial.  See Wiedenbeck v. Cinergy Health Inc., No. 12-cv-508-wmc (W.D. Wis., 9/20 class decision; stay 10/15/13).

Readers may be interested in the logic of the denial. Plaintiffs alleged that defendants used false or misleading infomercials to induce the purchase of a medical benefit plan that was deceptively limited, and then acted in bad faith in denying coverage under the plan.  The plaintiffs sought class certification for their fraud claim for a class of for all Wisconsin residents who purchased an insurance policy since Jan. 1, 2007.

Before addressing the specific requirements for class certification, the court discussed various Seventh Circuit precedents, including Thorogood v. Sears, Roebuck & Co., 547 F.3d 742 (7th Cir. 2008), in which the Seventh Circuit reversed the district court‟s order certifying a class because common issues of law or fact did not predominate over issues particular to each putative class member's purchase of the defendant's dryer. Thorogood alleged that the words “stainless steel” imprinted on the dryer were deceptive because the dryer drum was not made entirely of stainless steel.  In rejecting plaintiff‟s motion, the Seventh Circuit concluded that a fraud claim necessarily would turn on each class member's understanding of the meaning of the “stainless steel” label, reasoning that at least some portion of the class -- and, based on the court‟s pointed query, “Does anyone believe this besides Mr. Thorogood?”, perhaps all -- would not share the plaintiff‟s understanding of this point-of-sale advertisement. 

The court concluded that this case was arguably even less suited for class treatment than Thorogood.  Plaintiffs relied on different television commercials with different language; moreover, the record demonstrated that given the dates they aired, some class members could not have seen the alleged uniform representations. Defendants used at least 10 different "call scripts" for telemarketing, and transcripts of calls showed each representative responding to specific, individual questions posed by or information received from the customer, meaning the content of actual consumer calls necessary would vary.  There was evidence some consumers received other, material information about the policy at issue, which may have impacted their individual purchase decisions. For example, it is undisputed that purchasers had ten days to cancel the policy from receipt of a member handbook provided post-purchase.  Thus, there was evidence of no common misrepresentation, and no evidence of a common understanding by class members. 

Readers will note the response to plaintiffs' argument that a fraud claim is subject to common proof because the reasonableness of a consumer's reliance (or whether the reliance is justified) is allegedly judged from an “objective” standard. Even if true, an intentional misrepresentation claim under Wisconsin law still requires a plaintiff to demonstrate that he or she actually relied on the false representation (i.e., was misled), which is separate from any inquiry as to whether the reliance was justified or reasonable. And for this element, plaintiffs provided no basis for proving reliance or causation on a class-wide basis.  The courts have repeatedly rejected attempts to certify a class where a fraud claim turns on an individual's understanding in order to demonstrate causation or reliance.  Accordingly, plaintiffs could not meet the commonality prong of Rule 23. 

Final point worth noting, the court also declined to certify a single issue class. There was no common representation, so there really was no single issue as asserted by plaintiffs.

 

Class of Coffee Purchasers Rejected

Let's continue on our recent focus on some interesting class action decisions. A federal court recently rejected a proposed class of coffee product purchasers.  See McManus v. Sturm Foods Inc., No. 3:11-cv-00565 (S.D. Ill., 8/26/13).

Plaintiffs claimed that defendants violated the consumer protection statutes and unjust enrichment laws of the eight states with regard to their Grove Square Coffee single serving coffee product.  Per the amended complaint, defendants allegedly misrepresented and omitted the true nature of Grove Square Coffee products by indicating the product contained fresh ground coffee and a filter rather than “instant” or “soluble” coffee.

In considering a motion for class certification, the court looked to the implicit, foundational prerequisites. A court must first ensure that the class is sufficiently “defined.” Jamie S. v. Milwaukee Public Schools, 688 F.3d. 481, 493 (7th Cir. 2012) (“a class must be sufficiently definite"). The class should be “ascertainable,” which it is if the court can  determine membership with objective criteria. A class is, on the other hand, overbroad if it sweeps in a great number of members who “for some reason could not have been harmed by the defendant’s allegedly unlawful conduct.” Messner, 669 F.3d 802 at 824; Kohen v. Pacific Inv. Management Co. LLC, 571 F.3d 672, 677 ( 7th Cir. 2009) (“a class should not be certified if it is apparent that it contains a great many persons who have suffered no injury at the hands of the defendant.”); Oshana v. Coca-Cola Co., 472 F.3d 506, 514 (7th Cir. 2006) (denying class certification when “[c]ountless members of Oshana’s putative class could not show any damage, let alone damage proximately caused by the alleged deception.”). A class is overbroad if it sweeps in many members who could not have been harmed at all: This distinction is critical for class certification purposes. If a proposed class consists largely (or entirely, for that matter) of members who are ultimately shown to have suffered no harm, that may not mean that the class was improperly certified but only that the class failed to meet its burden of proof on the merits. If, however, a class is defined so broadly as to include a great number of members who for some reason could not have been harmed by the defendant’s allegedly unlawful conduct, the class is defined too broadly to permit certification.  A class cannot, then, include numerous people who have no claim at all, observed the court.

The court here found that under any of the relevant the state consumer protection laws requiring causation or actual reliance, the plaintiffs’ class definitions were overbroad. The class definition included all individuals who purchased a Grove Square Coffee product. This definition necessarily includes purchasers who knew, or who were indifferent to the product’s alleged insoluble coffee content. For those purchasers, plaintiffs cannot prove causation, reliance, or actual injury from defendants’ alleged misrepresentation. For this reason, plaintiffs’ claims under Alabama, New York, New Jersey, North Carolina, Illinois, and South Carolina were overbroad and improper for class certification.

Turning to the remaining states, the court engaged in a specific analysis of the state law.  For example, to the extent a state requires plaintiffs to prove an actual loss, but would allow a class-wide presumption of actual loss if the defendant’s alleged misrepresentations were material and made to the entire class, the definition still ran into problems,  In California, said the court, an inference of reliance may be established on a class wide basis with a showing of materiality.  Materiality is objective and exists if a reasonable person would attach importance to the misrepresentation’s existence or nonexistence in determining his choice of action in the transaction in question. However, the inference of reliance is only appropriate if all purported class members were exposed to the alleged misleading advertising. Plaintiffs’ proposed class definition here included individuals who were not exposed to
defendants’ alleged misrepresentation; therefore a court could not presume reliance. In 2011, Sturm Foods allegedly changed its label to include the word “instant.” Class members that were exposed to the packaging after this date (nearly 4 million dollars of gross sales; a vast majority of the overall sales during the class period) were not exposed to what plaintiffs claim was defendants’ primary deception. 

Moreover, the record indicates that extensive sales occurred online, and the class as defined by plaintiffs included these online purchasers. Consumers who purchased the product online without ever seeing the packaging or product placement could not have been exposed to the alleged misrepresentation prior to purchase.

Plaintiffs’ amended complaint thus did not contain sufficient evidence of sales such that any presumption of exposure was appropriate. Materiality cannot be presumed and plaintiffs cannot adequately allege actual injury for the California class.

Overall, the class potentially included a great many individuals who bought Grove Square Coffee products because of, or in spite of, knowing that it contained instant coffee;  thus, the class included a great number of individuals who could not prove causation or an ascertainable loss, as required in various states. These individuals suffered no lost value or incurred no out of pocket expenses as a result of the alleged misrepresentation. Since this class definition potentially swept in a great number of individuals that could not show harm resulting from defendant’s conduct, the class definition was fatally overbroad.

Was there any way to cure the deficiency? It must be administratively feasible for the court to determine whether a particular individual is a member of the proposed class. Clay v. American Tobacco Co., 188 F.R.D. 483, 490 (S.D. Ill. 1999). And the administrative burden of using subjective membership criteria obviates the judicial efficiency that is the fundamental motive for class actions. See Milwaukee Public Schools, 668 F.3d 481, 496 (7th Cir. 2012) (denying class certification for indefiniteness when “identifying disabled students who might be eligible for special-education services is a complex, highly individualized task, and cannot be reduced to the application of a set of simple, objective criteria.”); Simer v. Rios, 661 F.2d 655, 669 (7th Cir. 1981) (noting that determining whether potential class members “knew of the existence of the regulation and were
discouraged from applying for [state heating] assistance . . . would be a burden on the court and require a large expenditure of valuable court time.”); Alliance, 565 F.2d at 978 (“In those cases in which class certification has been denied on account of indefiniteness, the primary defect in the class definition has been that membership in the class was contingent on the state of mind of the prospective class members.”).

Here, the only way to avoid over-inclusiveness would have been to impose criteria limiting class
membership to individuals properly captured by the underlying claim. However, any such criteria would necessarily be subjective. Limiting class membership to individuals that were actually exposed to the deceptive packaging or advertisement would be largely subjective and thus improper. See In re Yasmin, 2012 WL 865041, at *16. This court saw no way to limit class membership without an impermissible plaintiff-by-plaintiff subjective inquiry. Plaintiff’s proposed class was inadequate.

Another useful recent decision as courts place proper focus on the implicit requirements of Rule 23 and the no-longer-pro-forma issues of class definition.

Class certification denied.

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.

Third Circuit Issues Opinion on Ascertainability

We have posted before about the potential importance of the implicit requirement under Rule 23 that a class be ascertainable under the definition proposed by plaintiffs.  Earlier this week, the Third Circuit vacated class certification of a class of WeightSmart supplements purchasers on the basis of ascertainability.  See Carrera v. Bayer Corp., No. 12-2621 (3d Cir. 8/21/13).


Last year the Third Circuit had decided Marcus v. BMW of North America, LLC, in which it held “[i]f class members are impossible to identify without extensive and individualized fact-finding or mini-trials, then a class action is inappropriate.” 687 F.3d 583, 593 (3d Cir. 2012). The court explained that if class members cannot be ascertained from a defendant's records, there must be a reliable, administratively feasible alternative; the court cautioned against approving a method that would amount to no more than ascertaining by potential class members' say so. Id. at 594. A plaintiff does not satisfy the ascertainability requirement if individualized fact-finding or mini-trials will be required to prove class membership. Id. at 593. Administrative feasibility means that identifying class members is a manageable process that does not require much, if any, individual factual inquiry.

The court of appeals explained that 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. Third, it protects defendants by ensuring that those persons who will be bound by the final judgment are clearly identifiable. If a class cannot be ascertained in an economical and administratively feasible manner, any significant benefits of a class action are lost.

Accordingly, a trial court should ensure that class members can be identified without extensive and individualized fact-finding or mini-trials, a determination which must be made at the class certification stage.  Class ascertainability is an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3). Marcus, 687 F.3d at 592-93. There is „no reason to doubt that the “rigorous analysis” requirement for trial courts considering class certification applies with equal force to all Rule 23 requirements. Accordingly, said the court, a plaintiff must show, by a preponderance of the evidence, that the class is currently and readily ascertainable based on objective criteria, and a trial court must undertake a rigorous analysis of the evidence to determine if the standard is met.

Of great interest to our readers is the court of appeal's analysis of the due process implications of ascertainability. In this case, the ascertainability question was whether each class member purchased WeightSmart in Florida. If this were an individual claim, a plaintiff would have to prove at trial that he purchased WeightSmart. A defendant in a class action has a due process right to raise individual challenges and defenses to claims, and a class action cannot be certified in a way that eviscerates this right or masks individual issues. See McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 231-32 (2d Cir. 2008) (rejecting a “fluid recovery” method of determining individual damages, in which aggregate damages would be based on estimates of the number of defrauded class members and their average loss), abrogated on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008); see also Dukes, 131 S. Ct. at 2561 (rejecting a method of class certification in which a sample set of class members would be used to extrapolate average damages). A defendant has a similar, if not the same, due process right to challenge the proof used to demonstrate class membership as it does to challenge the other elements of a plaintiff's claim. To force a defendant to accept as true the absent class members' declarations that they are members of the class, without further indicia of reliability, would have serious due process implications.  Ascertainability thus helps provide a measure of due process by requiring that a defendant be able to test the reliability of the evidence submitted to prove class membership.


Here, Carrera advanced two ways to ascertain the class: first, by retailer records of online sales and sales made with store loyalty or rewards cards; second, by affidavits of class members, attesting they purchased WeightSmart and stating the amount they purchased (despite the fact that in named plaintiff's own deposition testimony, he failed to remember when he purchased WeightSmart and confused it with WeightSmart Advanced and other generic or similar products, none of which are part of this litigation). The Third Circuit concluded this evidence did not satisfy the ascertainability requirement.  There was no evidence that a single purchaser of WeightSmart could be identified using records of customer membership cards or records of online sales. There was no evidence that retailers even have records for the relevant period.  As to the second, this argument failed because it did not address a core concern of ascertainability: that a defendant must be able to challenge class membership. 

Another key feature for our readers relates to plaintiff's claim that because he was proceeding under a state consumer fraud act (Florida's FDUTPA) which allegedly did not require individual proof of reliance, the total amount of damages that defendant would pay (the total sales in the state in the class period) did not change -- only which class member got what amount. Under Carrera's view, if fraudulent or inaccurate claims were paid out, the only harm was to other class members. But ascertainability protects absent class members as well as defendants, said the court, so Carrera's focus on defendant alone was misplaced. It would be unfair to absent class members if there was a significant likelihood their recovery will be diluted by fraudulent or inaccurate claims. In this case, there was the possibility that Carrera's proposed method for ascertaining the class via affidavits would dilute the recovery of true class members.  The defendant still had an interest in ensuring it pays only legitimate claims. If fraudulent or inaccurate claims materially reduce true class members' relief, these class members could argue the named plaintiff did not adequately represent them because he proceeded with the understanding that absent members may get less than full relief. When class members are not adequately represented by the named plaintiff, they potentially are not bound by the judgment.

Thus, the case could be an important precedent for defendants, especially those facing class actions asserting fraud allegations about products for which detailed, accurate receipts likely no longer exist.

Case remanded for further limited discovery on the issue, given the timing of Marcus.


 

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.

Rule 23's "Ascertainability" and "Numerosity" Prerequisites Again Prove Their Worth in Defeating Class Certification

Today a special treat for our readers: my partner Becky Schwartz has submitted a post as guest blogger.  Becky has defended numerous high profile class actions for tobacco, pharmaceutical, medical device, and alcoholic beverage manufacturers, and others. Her focus is a recent Third Circuit class action decision.  And she writes:

Good news for defendants facing threatened consumer class actions: the Third Circuit has once again confirmed that ascertainability and numerosity, two seemingly humble definition-related prerequisites of Fed. R. Civ. P. 23, can be sufficient to foil class certification. In a companion decision to last year’s Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012), last week the Third Circuit vacated a New Jersey district court’s order certifying a class against defendant Wal-Mart Stores, Inc. See Hayes v. Wal-Mart Stores, Inc., No. 12-2522, 2013 WL 3957757 (3rd Cir. Aug. 2, 2013). Plaintiff asserted claims for violation of the New Jersey Consumer Fraud Act, breach of contract and unjust enrichment in connection with the sale of extended warranty (service) plans for items sold at Wal-Mart’s wholly owned subsidiary, Sam’s Club. Plaintiff had allegedly purchased two “as is” items from Sam’s Club a clearance area, along with extended warranty service plans for each item. The express terms of the service plans sold, however, allegedly made them inapplicable to the “as is” items. The district court certified a class of persons who had purchased service plans to cover ineligible “as is” products sold at Sam’s Club, and Wal-Mart appealed the class certification on an interlocutory basis pursuant to Fed. R. Civ. P. 23(f).

Ascertainability and Numerosity Are Evidentiary Questions the Proponent of Certification Must Prove.

The district court’s certification of the Hayes class occurred before last year’s decision by the Third Circuit in Marcus, where the appellate court addressed Rule 23’s ascertainability, and numerosity requirements in significant detail. The Third Circuit here agreed to consider Wal-Mart’s appeal based on the company’s argument that Hayes had failed to establish by a preponderance of the evidence that the class was both ascertainable and sufficiently numerous under the class action rule. Specifically, Wal-Mart argued that the district court had erred by finding the Hayes class ascertainable without considering whether it was administratively feasible to determine class membership. And as to numerosity, Wal-Mart asserted that plaintiff had not adduced evidence sufficient to demonstrate that anyone (including himself) and thus that sufficient claimants could satisfy the proposed class definition.

Putative Class Members’ “Say So” Is Not Enough to Establish Class Membership.

Last year in Marcus, the Third Circuit held that to satisfy the implied Rule 23 prerequisite of ascertainability, a proposed class must be defined with reference to objective criteria, and an administratively feasible mechanism must exist for determining whether putative class members fall within the class definition. 687 F.3d at 593-94.  One key factor in assessing ascertainability is whether the defendant possesses records that could show whether individuals should be included in the class; if not, the class definition would be insufficient. Id. at 593.

In Hayes, the evidence reflected that Wal-Mart kept some records related to “as is” clearance items for sale, but lacked records that could definitively link the sale of extended service plans to ineligible “as is” clearance items. The Third Circuit confirmed that in such circumstances, a lack of evidence is the class proponent’s problem, not the defendant’s. “[T]he nature or thoroughness of a defendant’s record-keeping does not alter the plaintiff’s burden to fulfill Rule 23’s requirements,” particularly where there is no “statutory or regulatory authority obligating [defendant] to create and maintain a particular set of records.” Hayes, 2013 WL 3957757 at *4. “Rule 23’s requirements . . . cannot be relaxed or adjusted” simply because a defendants’ records prove to be no help to plaintiff. Id. Importantly, a dearth of evidence in defendant’s possession cannot be overcome by form affidavits provided by putative class members: a “petition for class certification will founder if the only proof of class membership is the say-so of putative class members or if ascertaining the class requires extensive individual fact-finding.” Id. at *5.

Mere Speculation Is Insufficient to Prove Rule 23(a) Numerosity.

The Third Circuit also made clear that precise proof is required to prove numerosity. Just as it had previously in Marcus, 687 F.3d at 596-97, the Third Circuit in Hayes considered whether and when “common sense” or “logic” could be substituted for such evidence. Sam’s Club had records reflecting 3,500 sales transactions that might have qualified purchasers for class membership, but no record evidence to establish which of those transactions actually did qualify purchasers for class membership. Proof of class membership would thus have required impermissible mini-trials for each putative class member. The district court nonetheless found the Rule 23(a)’s numerosity prerequisite met by reasoning that if even a mere hypothetical 5% of those potential class members actually qualified, the class would be sufficiently numerous under Rule 23. Hayes, 2013 WL 3957757 at *5.

Despite acknowledging that in some limited instances “circumstantial evidence” might permit the district court to make a factual finding by using “’common sense’ to forgo precise calculations and exact numbers,” the Third Circuit made clear that a district court cannot certify a class based on “improper speculation.” Id. at *6. And that, it found, is precisely what the district court had done: “the only conclusion that can be drawn from the evidence presented to the trial court is that the number of class members would equal-to-or-less than 3,500 and equal-to-or-greater than zero,” meaning that the court “can only speculate as to the number of class members.” Id. at *6. “[W]here a putative class is some subset of a larger pool, the trial court may not infer numerosity from the number in the larger pool alone.” Id. (citations omitted). Nor can a trial court take a “wait-and-see approach” to numerosity (or any other requirement of Rule 23). Id.

Key Takeaways.

Defense counsel working with clients facing class action allegations – particularly in the consumer fraud context where complete transactional histories and other class membership related records may not be available in defendants’ records – should recognize the potential power of Rule 23’s ascertainability and numerosity prerequisites to bar class certification.  

Keep the following in mind:
- Lack of available evidence to prove ascertainability and/or numerosity is plaintiff’s problem, not defendant’s;
- Class member affidavits alone (mere “say-so”) cannot be used to establish class membership; the result would be an impermissible compromise of defendants’ rights;
- Plaintiffs’ imperative to find evidence supportive of class certification could very well give rise to surprisingly aggressive and contentious discovery;
- Some trial courts may require reminders of the evolving standards applicable to these Rule 23 prerequisites, including burden of proof; and
- Defendants’ briefing and argument should focus on any gaps (when available) in the evidence supporting ascertainability and/or numerosity; courts must be dissuaded from employing speculation masquerading as “common sense” and “logic” to fill such gaps.

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).

 

Another Plaintiff Fails to Obtain Class Certification for Claims About Products Not Actually Purchased

We've posted before about the curious phenomenon of plaintiffs suing about the labeling on a product they never even purchased.  Recently class certification was denied in yet another case alleging false labeling on a product the named plaintiff did not buy  See Major v. Ocean Spray Cranberries Inc., No. 12-03067 (N.D. Cal., 6/10/13). We flag this case for our readers, because of the court's emphasis on the Rule 23(a) element of typicality instead of the equally applicable notion of standing.

Plaintiff alleged that she purchased several of defendant’s products in California. Her Complaint stated that Plaintiff purchased various “Ocean Spray juices and drinks” that were allegedly improperly labeled "No Sugar Added," or were bearing improper nutrient content claims, or had misrepresentations that the products were free from artificial colors, flavors or preservatives.  She alleged the usual causes of action, including violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq. (counts 1–3); violation of the False Advertising Law (“FAL”), Cal. Bus. & Prof. Code §§ 17500 et seq., (counts 4–5); violation of the Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq. (count 6); restitution based on unjust enrichment or quasi-contract (count 7); and breach of warranty (8).

She sought certification of a class of similar purchasers. Rule 23(a)(3) requires that a named plaintiff’s claims be typical of those that would be advanced by the proposed class. Fed. R. Civ. P. 23(a)(3). The test for Rule 23(a) typicality in the Ninth Circuit is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct. See Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010); Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523, 539 (N.D. Cal. 2012).

In the context of cases involving several products at issue —like this one— district courts have held that the typicality requirement has not been met where the named plaintiff purchased a different product than that purchased by unnamed, absent class, plaintiffs. Wiener, 255 F.R.D. at 666; see also Gonzalez v. Proctor & Gamble Co., 247 F.R.D. 616 (S.D. Cal. 2007); Lewis Tree Serv., Inc. v. Lucent Techs. Inc., 211 F.R.D. 228 (S.D.N.Y.2002); Kaczmarek v. Int’l Bus. Machs. Corp., 186 F.R.D. 307, 313 (S.D.N.Y. 1999).

With that standard in mind, here the court found that plaintiff, the proposed class representative, had not met her burden of showing that her claims are typical of those of the proposed class members pursuant to Rule 23(a)(3).  The primary reason behind the court’s determination that the typicality requirement had not been met is that plaintiff’s proposed classes were so broad and indefinite that they encompassed products that she herself did not purchase. See Wiener, 255 F.R.D. at 666. In her deposition, plaintiff asserted that she purchased five of the defendants’ products. But the putative class definitions that plaintiff wanted the court to certify would have included a whole host of other products that plaintiff had nothing to do with. For example, the putative class would include any of defendant’s products “represented to contain no artificial colors, flavors or preservatives but which contained artificial colors, flavors or preservatives.”  The putative class also included entire lines of products; as an example, any product from the “Sparkling” line of products. However, in both of these examples, plaintiff failed to make an allegation that she purchased all of such products, all the products in these product lines. As such, the claims of the unnamed plaintiffs who purchased products plaintiff herself did not buy were not fairly encompassed by the named plaintiff’s claims.

The second basis of the finding that plaintiff's claims failed to meet the Rule 23(a) typicality requirement is the fact that the labels and nutrition claims on each of the products at issue was unique to that product itself. For example, plaintiff based her mislabeling causes of action with regard to the Diet Sparkling Pomegranate Blueberry drink product, in part, on the claims made on the specific label of this specific drink product -- language that included specific claims about blueberries, applicable only to drinks containing blueberries. The evidence needed to prove plaintiff’s claim that the Diet Sparkling Pomegranate Blueberry drink contained false or misleading labeling was not probative of the claims of unnamed class members who purchased products within the “Sparkling” line that did not contain blueberries. 

Certification denied.

 

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.

 

Class Denied for Failure to Show Common Injury

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

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

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

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

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

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

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 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).

Ninth Circuit Applies Dukes

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

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

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

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

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

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

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

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

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

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

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