ALI Annual Meeting Continues

Another report from the annual meeting of the American Law Institute. (Readers likely know that ALI is the leading independent organization in the United States producing scholarly work to clarify, modernize, and otherwise improve the law. It publishes the Restatements and other works, including, notably for our readers, the Principles of the Law of Aggregate Litigation.)

Day 2 highlights included an address by the still-new Chief Justice of the California Supreme Court, the Honorable Tani Cantil-Sakayue.  Her remarks focused on the issues of access to justice in these challenging economic times.  She talked about the looming issues in her first 5 months as Chief Justice, presiding over a judicial branch with 2000 judges, 21,000 employees, and 500 facilities.

She noted how over the past 14 years the California judicial system has evolved from a loose confederation to a more unitary system, having more control over where the courts will be situated. The use of court fees is a primary mechanism funding 60 major construction projects to bring the California judicial system into the 21st century.

Another interesting session concerned the recently completed Restatement Third of Restitution and Unjust Enrichment.  Starting about a generation ago, many law schools stopped having courses on these doctrines, which had been a staple of law school curricula. For the younger ALI members, the Reporter, Prof. Kull noted that restitution is like in the game of Monopoly;  you land on Community Chest and get a card "Bank error in your favor, collect $20", and then the next day the bank wants that money back.

But even if the classes have, the claims have not vanished -- ask Mets fans about the Madoff-related litigation. Indeed, along with torts, contracts, equity, and statutory claims, restitution provides one of the fundamental sources of economic harm claims.  Restitution is a distinct form of liability, not necessarily based on a tort or a contract, and its remedies can be distinct as well.

The First Restatement from the 30's and the leading treatises from the early 70's had been outdated and out paced -- hence this project.  The new restatement strives for plain English, and does not rely on arcane pleading doctrines. It attempts to fit the cases into a set of General Principles, and then discusses the rules governing liability, remedies, and defenses. Publication is expected by summer 2011.


Claim Against Classic Coke Down the Drain

The Coca-Cola Co. has successfully obtained summary judgment in a case alleging that the company unfairly marketed its Coca-Cola Classic soft drink as “original formula” despite allegedly having substituted high-fructose corn syrup for the ordinary table sugar it used when the drink was introduced. Judge Patrick Murphy issued an order last week in the U.S. District Court for the Southern District of Illinois.

Plaintiffs Amanda Kremers and Jason McCann, sued on behalf of themselves and a proposed class of Illinois citizens, alleging that Coca-Cola’s conduct in labeling cans and bottles of “Classic” Coke with the terms “Original Formula” constitutes a deceptive and unfair trade practice. This is because, plaintiffs contended, the “Original Formula” of Coke, which was invented in 1886, called for Coke to be sweetened using sucrose (ordinary table sugar, in essence), whereas “Classic” Coke currently is sweetened using high fructose corn syrup (“HFCS”). They alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), and unjust enrichment.

Proposed class rep Kremers conceded at her deposition that she has known since the 1990's that “Classic” Coke contained HFCS and that “Classic” Coke is marketed as the “Original Formula” of Coke.  Kremers admitted also that she read the words “Original Formula” on a container of “Classic” Coke in the 1990s.  That was sufficient to put her on notice to inquire about her alleged claims, and that she knew or reasonably should have known of her so-called injury. Thus, her claim was barred by the statute of limitations, even with the discovery rule.

Turning to the merits of the case, the state statutory cause of action requires: (1) a deceptive act or practice by the defendant, (2) the defendant’s intent that the plaintiff rely on the deception, (3) the occurrence of the deception in the course of conduct involving trade or commerce, and (4) actual damage to the plaintiff (5) proximately caused by the deception.  To prove that element of proximate causation in a private cause of action brought under the ICFA, a plaintiff must allege that he was, in some manner, actually deceived. 

McCann’s testimony at his deposition was that he wasn't actually deceived.  He never read the key language until after he was approached by counsel for plaintiffs in this case about serving as the representative of the proposed class. Hence, he could not prove proximate causation for purposes of a claim for deceptive trade practices under the ICFA.

To establish a prima facie case of unfair trade practices under the ICFA, a plaintiff must prove that a defendant intentionally engaged in an unfair practice in the course of conduct involving trade or commerce, and that this practice proximately caused harm to the plaintiff. The court found that as a matter of law, the sales here were not unfair trade practices. The trade practices in dispute in this case were not deceptive acts (as above). No public policy of Illinois proscribed the use of HFCS as a sweetening agent in beverages and foodstuffs. The facts concerning plaintiffs' use hardly suggested they had been oppressed by Coca-Cola’s trade practices, or had been afforded the lack of meaningful choice necessary to establish unfairness.

Perhaps most importantly, McCann could not show the necessary substantial harm for an unfair trade practice, given the small amount of the product he purchased, the fact that he continued to purchase "Classic” Coke after the commencement of this suit and despite knowledge that the product contains HFCS, and because the alleged injury was one any consumer of “Classic” Coke quite easily could have avoided, by, for example, simply drinking a different soft drink or other beverage.

Although fraud is not an element of a claim for unjust enrichment under Illinois law, the Seventh Circuit nevertheless has made clear that where the plaintiff’s claim of unjust enrichment is predicated on the same allegations of fraudulent conduct that support an independent claim of fraud, resolution of the fraud claim against the plaintiff is dispositive of the unjust enrichment claim as well.

Class motion dismissed as moot.