The 8th Circuit recently affirmed the grant of summary judgment to the defendant in a proposed class action brought by an Iowa homeowner suing over allegedly defective house trim.  See Brown v. La.-Pac. Corp., No. 15-1830, 2016 WL 1425824 (8th Cir. 4/12/16).

In 2003, Brown purchased a lot and hired a contractor, who in turn selected defendant’s  TrimBoard as the product to be installed on Brown’s new home. The TrimBoard installed on Brown’s home came with a ten-year limited warranty, covering delamination, checking, splitting, cracking and chipping of the basic substrate for a period of ten years from the date of installation under normal conditions of use and exposure, providing the trim is properly stored, installed, maintained, and protected as specified in defendant’s Application Instructions.

Plaintiff never viewed informational or advertising literature for TrimBoard, never spoke to any representative of defendant about the TrimBoard product, and did not see a copy of the limited warranty prior to the product’s installation on his home.

In August 2004, Brown moved into his new home. Sometime in 2010, plaintiff allegedly noticed damage to certain pieces of the installed TrimBoard. Ultimately, defendant offered Brown $197.67 in compensation for the damaged TrimBoard, which Brown rejected. In January 2011, Brown hired a local contractor to replace various pieces of TrimBoard on his house, at a total cost of $1,700.00, inclusive of labor and materials.

Brown subsequently filed this putative class action, alleging claims for negligence, fraudulent misrepresentation, breach of warranty, and unfair or deceptive practices, and requesting declaratory relief and money damages. After some rounds of motion practice, the claims were dismissed. On appeal, Brown argued that the district court erred in granting summary judgment  on his claims for fraudulent misrepresentation, unfair or deceptive practices, and breach of warranty.

The court of appeals began with the fraudulent misrepresentation claim. For Brown to prevail on his fraudulent-misrepresentation claim under Iowa law, he needed to prove the following elements:

(1) defendant made a representation to the plaintiff, (2) the representation was false, (3) the representation was material, (4) the defendant knew the representation was false, (5) the defendant intended to deceive the plaintiff, (6) the plaintiff acted in reliance on the truth of the representation and was justified in relying on the representation, (7) the representation was a proximate cause of plaintiff’s damages, and (8) the amount of damages.  Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001).

The court focused on justifiable reliance. Brown contended that LP’s alleged misrepresentations were passed through a third party—his contractor—and then communicated to Brown and relied upon by him. Iowa law provides that “persons who fraudulently misrepresent the truth can be held liable to third parties if they have a ‘reason to expect’ their misrepresentation will be communicated to third parties.” Clark v. McDaniel, 546 N.W.2d 590 , 593 (Iowa 1996) (quoting Restatement (Second) [*4] of Torts § 533 (1977)); see also United States v. Hawley, 619 F.3d 886 , 897 (8th Cir. 2010) (“The [Iowa Supreme] Court [in Clark] expressly adopted section 533 of the Restatement (Second) of Torts (1977) . . . .”).  An objective standard applies to whether one has “reason to expect” reliance by another: “‘The maker of the misrepresentation must have information that would lead a reasonable man to conclude that there is an especial likelihood that it will reach those persons and will influence their conduct.'” Id. (quoting Restatement (Second) of Torts § 533 cmt. d (1977)). “[T]he fact that the maker has an advantage to gain, even though it is in some other transaction, by furnishing the misrepresentation for repetition to the third person is of great significance in determining whether he has reason to expect that the original recipient should so repeat it.” Restatement (Second) of Torts § 533 cmt. e (1977) (emphasis added).

Here, however, the court found that Brown presented insufficient evidence that his contractor ever received a relevant communication from LP. The contractor failed to identify “which advertisements he viewed, when he viewed them, or which statements from the advertisement he read and relied upon in advising [Brown] of the suitability of the product.”  In fact, it appeared that the contractor was provided with copies of ads at the time of his sworn affidavit and he could only affirm that the advertisements were consistent with materials he recalled possibly viewing some nine to ten years ago. So the record left open the distinct possibility that the contractor had heard of TrimBoard from another source.

The court turned next to the unfair and deceptive trade practices act claim. The Iowa Private Right Act provides that any “consumer who suffers an ascertainable loss of money or property as the result of a prohibited practice or act in violation of this chapter may bring an action at law to recover actual damages.” Iowa Code Ann. § 714H.5(1)(including material misrepresentations). Brown argued that the materiality of LP’s alleged misrepresentations created an inference of causation that satisfied factual causation between LP’s alleged unfair or deceptive trade practice and Brown’s damages. But the act requires that plaintiff “suffer[ed] an ascertainable loss of money or property as the result of a prohibited practice.” Iowa Code Ann. § 714H.5(1). And Brown failed to establish such causation as a matter of law. To show causation, Brown needed to prove that, but-for LP’s purported misrepresentation, he would not have elected to purchase TrimBoard and install it on his home. And to satisfy this requirement, he needed to show that his contractor received a material representation that LP made. As noted, Brown failed to satisfy this showing. Because Brown produced no evidence that the contractor was the recipient of any representation made by LP, Brown “failed to generate a genuine issue of material fact with respect to causation.”

Finally, Brown argued that the limited warranty failed of its essential purpose by inadequately compensating him for the costs to repair the direct and consequential damages to his home. The Iowa Supreme Court has elaborated on the meaning of “essential purpose,” stating:  A remedy’s essential purpose “is to give to a buyer what the seller promised him.” Hartzell v. Justus Co., Inc., 693 F.2d 770 , 774 (8th Cir. 1982). The focus of analysis “is not whether the remedy compensates for all damage that occurred, but that the buyer is provided with the product as seller promised.” Brunsman v. DeKalb Swine Breeders, Inc., 952 F. Supp. 628 , 635 (N.D. Iowa 1996); Nelson v. DeKalb Swine Breeders, Inc., 952 F. Supp. 622 , 628 (N.D. Iowa 1996).

Where repair or replacement can give the buyer what is bargained for, a limitation of remedies does not fail of its essential purpose. Badgett Constr. & Dev. Co. v. Kan-Build, Inc., 102 F. Supp. 2d 1098 , 1105 (S.D. Iowa 2000). In other circumstances, however, repair or replacement is not sufficient, and then a court may find the remedy failed of its essential purpose. See Select Pork, Inc. v. Babcock Swine, Inc., 640 F.2d 147 , 150 (8th Cir. 1981). “The issue of whether a limited remedy fails of its essential purpose is separate and distinct from whether a limited remedy is unconscionable.” Baptist Mem’l Hosp. [*9] v. Argo Constr. Corp., 308 S.W.3d 337 , 345 (Tenn. Ct. App. 2009). Here, Brown essentially argued that the warranty fails of its essential purpose because the defect was latent and could not have been discovered. But numerous jurisdictions have held that a latent defect does not cause an exclusive contractual remedy to fail of its essential purpose. See Arkwright-Boston Mfrs. Mut. Ins. Co. v. Westinghouse Elec. Corp., 844 F.2d 1174 , 1179-80 (5th Cir. 1988); Wis. Power & Light Co. v. Westinghouse Elec. Corp., 830 F.2d 1405 , 1412-13 (7th Cir. 1987); Boston Helicopter Charter, Inc. v. Agusta Aviation Corp., 767 F. Supp. 363 , 374 (D. Mass. 1991); Hart Eng’g Co. v. FMC Corp., 593 F. Supp. 1471 , 1479 (D.R.I. 1984); Regents of the Univ. of Colo. ex rel . Univ. of Colo. at Boulder v. Harbert Constr. Co., 51 P.3d 1037 , 1041 (Colo. Ct. App. 2001 ); Clark v. Int’l Harvester Co., 99 Idaho 326 , 581 P.2d 784 , 802-03 (Idaho 1978)). The court of appeals concluded that the Iowa Supreme Court would follow this majority rule.  The court also noted that there is no evidence—and Brown made no allegation—that the purported defects in the TrimBoard were not remedial and could not be repaired or replaced.  So, the mere fact that the Limited Warranty does not compensate a buyer for the entirety of his damages does not mean it has failed of its essential purpose.

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

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

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

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

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

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

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

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

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

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

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

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

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

A federal court in California has rejected a proposed class action in a case challenging claims on tea labels. See Alex Khasin et al. v. R.C. Bigelow Inc., No. 4:12-cv-02204 (N.D. Calif. 3/29/16),

Plaintiff Khasin sought certification of a class of all persons in California who purchased for household use one or more of several green tea products manufactured and sold by Bigelow since May 2, 2008 (a companion case covered black tea products).

Plaintiff alleged that the front of the Green Tea Products’ packaging bore the statement, “Healthy Antioxidants,” and the back panel included the statement, “Mother Nature gave us a wonderful gift when she packed powerful antioxidants into green tea.” He claimed these food labeling practices were unlawful because they were deceptive and misleading to consumers. Khasin allegedly purchased three of the Green Tea Products: Green Tea, Green Tea with Lemon, and Green Tea Naturally Decaffeinated. He allegedly read and “reasonably relied” on “the antioxidant, nutrient content and health labeling claims including the ‘healthy antioxidants,’ and ‘packed with powerful antioxidants’ claims and based and justified the decision to purchase [Bigelow’s] products in substantial part on [Bigelow’s] package labeling including the antioxidant, nutrient content and health labeling claims.” Had they not been misbranded, he would not have bought the products, or paid a “premium” for them.

Plaintiff sought class certification under Rule 23 (b)(3). 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 v. Blue Sky Nat. Beverage Co., 268 F.R.D. 365, 379 (N.D. Cal. 2010).  Khasin offerred three damages models: (i) a restitution calculation; (ii) statutory damages; and (iii) a nominal alternative. None, said the court, had any merit.

Khasin’s restitution calculation essentially amounted to damages totaling the full retail price of the tea. Plaintiff purportedly based his calculation on a formulation that the proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received, not the full purchase price or all profits. See Brazil v. Dole Packaged Foods, LLC, No. 12-cv-01831-LHK, 2014 WL 5794873, at *5 (N.D. Cal. Nov. 6, 2014) (finding that “[t]he proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received”); Ivie v. Kraft Foods Glob., Inc., No. 12-cv-02554-RMW, 2015 WL 183910, at *2 (N.D. Cal. Jan. 14, 2015) (concluding that “restitutionary damages [in a mislabeling case should] be the price premium attributable to the offending labels, and no more”).  Khasin contended that the “product as labeled” is the retail purchase price. And that because the product is legally worthless, the “product as received” has a value of $0.

But this “full refund” method of calculating restitution has been repeatedly rejected by the courts. See, e.g., See Jones v. ConAgra Foods, Inc., No. 12-cv-01633-CRB, 2014 WL 2702726, at *23 (N.D. Cal. June 13, 2014) (rejecting the “legally worthless” damages model); Werdebaugh v. Blue Diamond Growers, No. 12-cv-2724-LHK, 2014 WL 2191901, at *22 (N.D. Cal. May 23, 2014) (“[F]ull refund model is deficient because it is based on the assumption that consumers receive no benefit whatsoever from purchasing the accused products.”); Lanovaz v. Twinings N. Am., Inc., No. 12-cv-02646-RMW, 2014 WL 1652338, at *6 (N.D. Cal. Apr. 24, 2014) (rejecting the “full refund” model as an appropriate measure of restitution). Attributing a value of $0 to the Green Tea Products assumes that every consumer had gained no benefit in the form of enjoyment, nutrition, caffeine intake, or hydration from consuming the teas. This is implausible.  In order to comply with Rule 23(b)(3) requirements, the damages calculation must contemplate “the production of evidence that attaches a dollar value to the consumer impact or advantage caused by the unlawful business practices.” Lanovaz, 2014 WL 1652338, at *6 (internal quotation marks and citations omitted). Accordingly, Khasin needed to present a damages model that can likely determine the price premium attributable only to Bigelow’s use of the allegedly misleading claim. The proposed methodology did not do so.

Alternatively, plaintiff sought statutory damages under the California Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750, et seq., and/or nominal damages. Mot. at 18. Under the CLRA, any consumer who suffers damage may bring an action to recover, among other things, “[a]ctual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000).” Cal. Civ. Code § 1780(a)(1). That language sets the minimum for a total award of damages in a class action at $1,000 but does not provide for an automatic award. A plaintiff must still prove “actual damages” in order to be entitled to the $1,000 minimum award. Therefore relief under the CLRA is specifically limited to those who suffer damage, making causation a necessary element of proof. Here, Khasin failed to provide a viable theory for calculating damages under the CLRA that would be tied to his theory of liability. Plaintiff also sought nominal damages, but could not cite a single case demonstrating that nominal damages are available under his causes of action.

Alternatively, plaintiff sought Rule 23 (b)(2) certification to enjoin the defendant from continuing to mislabel the subject products. However, plaintiff had not demonstrated standing to seek injunctive relief. First, Khasin did not plausibly allege an intent to purchase Bigelow products in the future. In a class action, “[u]nless the named plaintiffs are themselves entitled to seek injunctive relief, they may not represent a class seeking that relief.” Hodgers-Durgin v. De La Vina, 199 F.3d 1037, 1045 (9th Cir. 1999). Khasin testified that he has not purchased any of the Green Tea Products since the commencement of this lawsuit.  A plaintiff may not manufacture standing for injunctive relief simply by expressing an intent to purchase the challenged product in the future. See Rahman, 2014 WL 5282106, at *6. Other courts considering these “conditional” declarations have found them unavailing. See In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 980 (C.D. Cal. 2015) (noting that “[ot]her courts have questioned whether this type of statement demonstrates there is a real and immediate threat of future injury.”). Pursuant to Article III’s standing requirements, a plaintiff must present a “sufficient likelihood” that he will be injured. City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). The alleged injury cannot be “conjectural” or “hypothetical.” Id. at 102.

Second, said the court, standing for injunctive relief in this case requires more than simply declaring an intent to purchase the Green Tea Products in the future. Even if Khasin were to satisfactorily demonstrate a future intent to purchase the products, he had not established a likelihood of suffering the same harm he alleged. See Morgan v. Wallaby Yogurt Co., Inc., No. 13-cv-00296-WHO, 2014 WL 1017879, at *6 (N.D. Cal. Mar. 13, 2014) (“Plaintiffs must be must be threatened by the same alleged harm in order to seek injunctive relief, even if on behalf of a class of consumers.”). Plaintiffs who were previously allegedly misled by deceptive food labels and now claim to be better informed, lack standing for injunctive relief because there is no danger that they will be misled in the future by that conduct. See Ham v. Hain Celestial Grp., Inc., No. 14-cv-02044-WHO, 2014 WL 4965959, at *6 (N.D. Cal. Oct. 3, 2014) (“Because [plaintiff] is now aware that [defendant’s] products [are mislabeled], she cannot allege that she would be fraudulently induced to purchase the products in the future.”).
This, concluded the court, plaintiff lacked standing to pursue injunctive relief and failed to satisfy the requirements of Rule 23(b)(2).

The Ninth Circuit last week rejected a putative class action accusing a defendant of deceiving consumers about the quantity of product accessible in a lip balm tube.  See EBNER V. FRESH, INC., No. Case: 13-56644 (9th Cir. 03/17/2016).

Plaintiff alleged that cosmetics and skin care products manufacturer Fresh, Inc. deceived consumers about the quantity of lip balm in its Sugar Lip Treatment product line. Although Sugar’s label accurately indicates the net weight of included lip product, the tube design uses a screw mechanism that allegedly allows only most of the product to advance up the tube. A plastic stop device allegedly prevents the remaining portion from advancing past the tube opening. Each Sugar tube contains a weighted metallic bottom and is wrapped in oversized packaging. Plaintiff brought a putative consumer class action against Fresh, alleging that Fresh’s label, tube design, and packaging were deceptive and misleading. The complaint asserted four state-law causes of action: (1) violation of California’s False Advertising Law (“FAL”), (2) violation of the California Consumers Legal Remedies Act (“CLRA”),  (3) violation of California’s UnfairCompetition Law (“UCL”), (4) unjust enrichment. The district court granted Fresh’s Rule 12(b)(6) motion to dismiss Plaintiff’s First Amended Complaint with prejudice. And the Ninth Circuit affirmed on appeal.

The district court divided plaintiff’s claims into two categories: (1) claims based on Sugar’s labeling; and
(2) claims based on Sugar’s tube design and packaging. In dismissing the label-based claims, the district court relied, inter alia, on California’s safe harbor doctrine.  As for the design and packaging claims, the district court concluded that neither Sugar’s tube design nor packaging were deceptive or misleading to the reasonable consumer.

The UCL, CLRA, and FAL, under which plaintiff’s deceptive labeling claims were brought, all prohibit unlawful,unfair, or fraudulent business practices. In California, unfair competition claims are subject to the safe harbor doctrine, which precludes plaintiffs from bringing claims based on “actions the Legislature permits.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 973 P.2d 527, 542 (Cal. 1999). To fall within the safe harbor, the challenged conduct must be affirmatively permitted by statute – the doctrine does not immunize from liability conduct that is merely not unlawful. Plaintiff here alleged that, although the Sugar label accurately states the net weight of lip product in the tube, only 75% of that product is reasonably accessible. To the extent this challenged the Sugar label’s accurate net weight statement, this claim was barred by the safe harbor doctrine. Both federal and California law affirmatively require cosmetics manufacturers to include an accurate statement of the net weight of the cosmetic product. 21 C.F.R. § 701.13(g); Cal. Bus. & Prof. Code § 12603(b).  Because Fresh complied with federal and state law requiring a net weight statement on Sugar’s label, this conduct cannot form the basis of an unfair competition claim.

Plaintiff’s other label claim was based on Fresh’s omission of any supplemental or clarifying statement about product accessibility. This omission, plaintiff argued, renders the existing net weight label deceptive and misleading. Although the panel concluded that neither the safe harbor doctrine nor FDCA preemption barred this supplemental statement claim, this label claim ultimately failed anyway because plaintiff could not  plausibly allege that the omission of supplemental disclosures about product weight rendered Sugar’s label “false or misleading” to the reasonable consumer. Plaintiff’s claims under the California consumer protection statutes are governed by the “reasonable
consumer” test. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). Under this standard, a plaintiff must “show that ‘members of the public are likely to be deceived.’” Id.; Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995). This requires more than a mere possibility that Sugar’s label “might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner.” Lavie v. Procter & Gamble Co., 129 Cal. Rptr. 2d 486, 495 (Ct. App. 2003). Rather, the reasonable consumer standard requires a probability “that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Id.

Plaintiff’s claim that the reasonable consumer would be deceived as to the amount of lip product in a tube of Sugar was found not plausible. It is undisputed that the Sugar label discloses the correct weight of included lip product. Dispenser tubes that use a screw mechanism to push up a solid bullet of lip product are commonplace in the market. The reasonable consumer understands the general mechanics of these dispenser tubes and further understands that some product may be left in the tube to anchor the bullet in place.  The complaint admitted that even after the plastic stop device prevents more product from advancing up the tube, the consumer can still see the surface of the remaining bullet. Although the consumer may not know precisely how much product remains, the consumer’s knowledge that some additional product lies below the tube’s opening is sufficient to dispel any deception; at that point, it is up to the consumer to decide whether it is worth the effort to extract any remaining product, such as with a finger or a small tool. A rational consumer could not simply assume that the tube contained no further product when he or she can plainly see there is remaining material. And so the Sugar tube is not false and deceptive merely because the remaining product quantity may be “‘unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons. . .’” that may purchase the product. Davis, 691 F.3d at 1162 (quoting Lavie, 129 Cal. Rptr. 2d at 494).

Because plaintiff had not alleged facts to state a plausible claim that the Sugar label is false, deceptive, or misleading, the district court did not err in dismissing the label-based claims.

While packaging can sometimes form part of an FAL claim, the FAL claim ultimately failed because plaintiff had not alleged a plausible claim for relief. Sugar sells for approximately $22.50 to $25.00 a unit. When viewed in the proper context of the high-end cosmetics market, Sugar’s elaborate packaging and the weighty feel of the tube is commonplace and even expected by a significant portion of Fresh’s “targeted consumers.”  Because of the widespread nature of this practice, no reasonable consumer expects the weight or overall size of the packaging to reflect directly the quantity of usable product contained therein. Because the plaintiff could not plausibly allege that Sugar’s design and packaging is deceptive, the district court did not err in dismissing the packaging-based claims.

Finally, plaintiff claimed that the Sugar tube violated a prohibition on containers that contain non-functional slack fill. Cal. Bus. & Prof. Code § 12606(b). Slack fill is defined as “the difference between the actual capacity of a container and the volume of product contained therein.” Nonfunctional slack fill is the empty space in a package that is filled to substantially less than its capacity for reasons other than” one or more of the enumerated reasons listed in the statute. Here, the complaint was not about empty space but about product that wasn’t automatically accessible.  This cannot constitute “slack fill”
because under the plain language of the statute, slack fill means the portion of the container without product, i.e., empty space.

Dismissal affirmed.

Amarin Pharma and the FDA recently announced a widely expected settlement of First Amendment litigation over restrictions on the company’s promotion of its Vascepa product.

Readers may recall that this was one of several recent challenges to the FDA’s attempt to restrict off-label promotion of prescription products, even if that speech is truthful and not misleading. Several trends have combined to undercut this overreach by FDA. A pharmaceutical representative’s promotion of an FDA-approved drug’s off-label use is speech. And “speech in aid of pharmaceutical marketing … is a form of expression protected by the Free Speech Clause of the First Amendment.”  Sorrell v. IMS Health, Inc., 131 S.Ct. 2653, 2659 (2011).  Then, in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012), the court vacated a conviction for conspiracy to sell a misbranded drug, recognizing that to criminalize the simple promotion of a drug’s off-label use by pharmaceutical manufacturers would run afoul of the First Amendment.  Off-label drug usage is not unlawful, and the FDA’s drug approval process generally contemplates that approved drugs will be used in off-label ways.  So, it does not follow that prohibiting the truthful promotion of off-label drug usage would directly further the government’s stated goals of preserving the efficacy of FDA’s drug approval process and reducing patient exposure to unsafe and ineffective drugs. This ruling was not limited to a subset of truthful promotional speech, such as statements responding to doctors’ queries or statements by non-sales personnel.

In Amarin Pharma, Inc. v. FDA, No. 1:15-cv-03588 (S.D.N.Y. Aug. 7, 2015), the issues surrounded proposed statements by the company concerning its Vascepa®, an omega-3 fatty acid, approved in 2012 as an adjunct to diet to reduce triglyceride levels in adults with severe hypertriglyceridemia. The FDA had entered into an SPA (Special Protocol Assessment) with the company for an expanded use. Amarin believed it had satisfied all of FDA’s requirements to obtain approval of Vascepa® for persistently high triglycerides pursuant to the SPA.  But FDA warned that any effort by Amarin to market Vascepa® for the proposed supplemental use could constitute misbranding under FDCA.

The company sued, arguing that the threat of prosecution for misbranding has a chilling effect on commercial speech protected by the First Amendment. It sought an injunction prohibiting the FDA from bringing a misbranding action for Amarin’s truthful and non-misleading statements regarding Vascepa® directly to healthcare professionals—not in direct-to-consumer advertising.  Specifically the company wanted to affirm its right to disseminate study results; report supportive but not conclusive research shows that their product may reduce the risk of coronary heart disease; and distribute reprints of peer-reviewed scientific publications relevant to the reduction of the risk of coronary heart disease.  The company was willing to do this along with “contemporaneous disclosures” to ensure that the messages Amarin communicated to doctors concerning the use of Vascepa® in patients with persistently high triglycerides was not misleading.  The FDA did not agree, and attempted to distinguish Caronia as fact-bound, turning on the particular jury instructions given in that trial.

Judge Paul A. Engelmayer rejected FDA’s interpretation of Caronia: the FDA may not bring such an action based on truthful promotional speech alone, consistent with the First Amendment.  Misbranding is not analogous to speech crimes of jury tampering, blackmail, or insider trading. “Where the speech at issue consists of truthful and non-misleading speech promoting the off-label use of an FDA-approved drug, such speech, under Caronia, cannot be the act upon which an action for misbranding is based.”

The court then evaluated and ruled on each of Amarin’s proposed off-label statements concerning Vascepa® along with FDA’s responses.  The “agreed-upon statements and disclosures” (e.g., statements concerning the results of the key study; statements, along with the proposed contemporaneous disclosures) were “based on current information, truthful and non-misleading.”
The “contested disclosures” such as “not-approved for” language were handled through a court-crafted, revised disclosure. The proposed cardiovascular disease claim, as revised during litigation, given its qualified phrasing and its acceptance elsewhere by the FDA, was found by the court to be presently truthful and non-misleading.

The court did mention some caveats: A manufacturer that leaves its sales force at liberty to communicate unscripted with doctors about off-label use of an approved drug invites a misbranding action if false or misleading (e.g., one-sided or incomplete) representations result. Caronia leaves the FDA free to act against such lapses. The dynamic nature of science and medicine is that knowledge is ever-advancing. A statement that is fair and balanced today may become incomplete or otherwise misleading in the future as new studies are done and new data is acquired. So, said the court, Amarin bears the responsibility, going forward, of assuring that its communications to doctors regarding off-label use of Vascepa® remain truthful and non-misleading.

Rather than appeal, the government worked towards a settlement.  Under its terms, the FDA agrees to be bound by the court’s conclusion that Amarin may engage in truthful and nonmisleading speech promoting the off-label use of the drug.  The company committed t ensure that it stays current on evolving science and updates its promotional statements accordingly.  The settlement agreement also provides for a procedure by which the FDA will give advance review to as many as two promotional communications annually for off-label uses of Vascepa, along with a timetable and process for resolving any concerns that the FDA may have about those new communications.

 

A copy of the settlement here.

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

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

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

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

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

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

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

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

The Tenth Circuit recently affirmed a trial court’s ruling in a putative class action raising the local controversy exception under the Class Action Fairness Act.  See Reece v. AES Corp., 2016 WL 521247 (10th Cir. Feb. 9, 2015).

Plaintiffs brought a putative class action in Oklahoma state court, alleging that several companies were responsible for environmental pollution stemming from the generation and disposal of coal-combustion waste (“CCW”) and fluid waste from oil and gas drilling (“produced fluid waste” or “PFW”).   Defendants removed the case to the United States District Court for the Eastern District of Oklahoma pursuant to CAFA, 28 U.S.C. § 1332(d)(2). Plaintiffs subsequently filed a motion for remand, claiming that their case fell within the “local controversy” and “home state” and “interest of justice” exceptions articulated in 28 U.S.C. § 1332(d), which require the court to refrain from exercising jurisdiction. To get remand, plaintiffs were obliged to demonstrate, inter alia, that a certain portion of the class members are Oklahoma citizens. See 28 U.S.C. § 1332(d)(3) (requiring a showing under the interest of justice exception that “greater than one-third but less than two-thirds of the members of all proposed plaintiff classes” are citizens of the state where the action was filed); id. § 1332(d)(4)(A)(i)(I) (requiring a demonstration under the local-controversy exception that “greater than two-thirds of the members of all proposed plaintiff classes” are citizens of the forum state); id. § 1332(d)(4)(B) (requiring under the home-state exception that “two-thirds or more of the members of all proposed plaintiff classes” be citizens of the forum state).

The district court held an evidentiary hearing on the motion, at which plaintiffs relied on their amended petition’s class definition and summary exhibits based upon data that had been collected from various local and federal sources that purported to compare—as to the class area—the percentage of Oklahoma class members against the percentage of non-Oklahoma class members in that same area. The district court denied the motion for remand, finding that plaintiffs had not met their burden of proving by a preponderance of the evidence that any of the exceptions applied. The district court concluded that, with respect to the class definition itself, there were simply too many variables to assume that the class met the citizenship threshold for any of the exceptions. In particular, the court noted that the class definition included Oklahoma residents and property owners—two groups that could include people who were not Oklahoma citizens.

The district court also observed that the absence of limitations on the temporal period that encompassed the proposed class complicated the citizenship calculus and interjected an additional element of uncertainty into it. Specifically, the court reasoned that the difficulty in assuming citizenship based on residence or property ownership becomes significantly greater because the proposed class was not limited in time. Plaintiffs viewed the proposed class as embracing persons who had been residents in the mid–1990’s, the time when the coal-related activities allegedly began, and those impacted as early as 2003 by the disposal of produced oil and gas fluids. Inclusion in the class definition of people who lived in, or owned property in, the class area within the last twenty years injects an additional and substantial amount of uncertainty into the citizenship determination. Some portion of former residents and/or owners will have since moved and become citizens of states other than Oklahoma. Even a relatively low annual rate of such turnover for an area could, over twenty years, substantially impact the citizenship composition of the proposed class.

Plaintiffs appealed.  Under CAFA, a federal district court has subject matter jurisdiction “over class actions involving [1] at least 100 members and [2] over $5 million in controversy when [3] minimal diversity is met (between at least one defendant and one plaintiff-class member).” Coffey v. Freeport McMoran Copper & Gold, 581 F.3d 1240, 1243 (10th Cir.2009) (per curiam); see 28 U.S.C. § 1332(a).

CAFA contains certain mandatory jurisdictional exceptions; where the requirements of those exceptions are met, the district court must eschew jurisdiction and remand the case. Notably, Plaintiffs argued the local-controversy exception, 28 U.S.C. § 1332(d)(4)(A).  The local-controversy exception requires plaintiffs seeking remand to show that “greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed”—here, Oklahoma. See 28 U.S.C. § 1332(d)(4)(A)(i)(I); see, e.g., Coffey, 581 F.3d at 1243 (describing the citizenship requirement as one of the “three main requirements for plaintiffs to meet in order to satisfy the ‘local controversy exception’ ”). Rather than divesting a court of jurisdiction, the local-controversy exception “operates as an abstention doctrine.” Graphic Commc’ns Local 1B Health & Welfare Fund “A” v. CVS Caremark Corp., 636 F.3d 971, 973 (8th Cir.2011). The local-controversy provision is “a narrow exception that was carefully drafted to ensure that it does not become a jurisdictional loophole” and “all doubts [are] resolved ‘in favor of exercising jurisdiction over the case.’ “ Evans v. Walter Indus., Inc., 449 F.3d 1159, 1163 (11th Cir.2006) (quoting S.Rep. No. 109–14, at 42 (2005)); see also Woods v. Standard Ins. Co., 771 F.3d 1257, 1262 (10th Cir.2014) (“[CAFA]’s provisions should be read broadly, with a strong preference that interstate class actions should be heard in a federal court if properly removed by any defendant.” (quoting S.Rep. No. 109–14, at 43 (2005)).

Plaintiffs defined the class as consisting of all citizens and/or residents and/or property owners’ whose injuries occurred within LeFlore County, OK. Plaintiffs bear the burden of establishing the applicability of the local-controversy exception. See, e.g., Woods, 771 F.3d at 1262 (noting that “a party seeking remand to the state court bears the burden of showing jurisdiction in federal court is improper under one of CAFA’s exclusionary provisions”); see also Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1019 (9th Cir.2007) (“The structure of the statute and the long-standing rule on proof of exceptions to removal dictate that the party seeking remand bears the burden of proof as to any exception under CAFA.”). Several circuits have required plaintiffs to establish the elements of a CAFA jurisdictional exception by a preponderance of the evidence. See, e.g., Mondragon v. Capital One Auto Fin., 736 F.3d 880, 884 (9th Cir.2013); Vodenichar v. Halcon Energy Props., Inc., 733 F.3d 497, 503 (3d Cir.2013); Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 570 (5th Cir.2011); In re Sprint Nextel Corp., 593 F.3d 669, 673 (7th Cir.2010). Some district courts, however, have required less proof, embracing a reasonable-probability standard or something akin to it. See, e.g., Dunham v. Coffeyville Res., LLC, No. 07–1186–JTM, 2007 WL 3283774, at *3 (D.Kan. Nov. 6, 2007) (requiring a “reasonable probability” that the citizenship threshold is satisfied).  Under either approach, the movant must make some minimal showing of the citizenship of the proposed class at the time that suit was filed. Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793, 802 (5th Cir.2007).

Plaintiffs’ class here was not restricted to citizens; instead, it included “citizens and/or residents and/or property owners.” This definition encompasses groups who may not necessarily be Oklahoma citizens. A person is a citizen of a state if the person is domiciled in that state. Middleton v. Stephenson, 749 F.3d 1197, 1200 (10th Cir.2014). A person acquires domicile in a state when the person resides there and intends to remain there indefinitely, which is established by the “totality of the circumstances.” Id. at 1200–01 (emphasis added).  To be sure, the place of residence is prima facie the domicile. But “allegations of mere residence may not be equated with citizenship.“ Whitelock v. Leatherman, 460 F.2d 507, 514 (10th Cir.1972).  Domicile requires residence in the state and an intent to remain in the state.  And it is even more obvious that mere property ownership in a state does not necessarily equate to citizenship in that state; a person may own property in a state without either being a state resident or intending to remain there. See, e.g., Evans, 449 F.3d at 1165–66.

Accordingly, plaintiffs had to marshal and present some persuasive substantive evidence (extrinsic to the amended complaint) to establish the Oklahoma citizenship of the class members. See, e.g., Lafalier v. Cinnabar Serv. Co., No. 10–CV–0005–CVE–TLW, 2010 WL 1486900, at *5 (N.D.Okla. Apr.13, 2010) (“Mere allegations that plaintiffs are citizens of Oklahoma will not suffice, and plaintiffs must come forward with some evidence establishing their citizenship.”). Indeed, courts have required evidentiary proof even for “propositions that appear likely on their face.” Mondragon, 736 F.3d at 884.
Plaintiffs failed to do so; even sensible inferences are really just “guesswork,” and the district court properly refrained from engaging in such. In sum, the district court here did not err in insisting that plaintiffs demonstrate, through more than their broad pleading averments, that over two-thirds of the proposed class were Oklahoma citizens. And plaintiffs did not meet the burden.

A recent case in New York reaffirms that under the now-minority Frye standard for the admissibility of expert opinion, testimony about the extent of a plaintiff’s exposure to an alleged toxic substance must rely on a sufficiently rigorous methodology.  See Sean R. v. BMW of North America LLC, 2016 WL 527107 (N.Y. Feb. 11, 2016).

Plaintiffs alleged their child was born with severe mental and physical disabilities as a result of in utero exposure to unleaded gasoline vapor; they brought a personal injury action against the manufacturer of the vehicle driven by the plaintiff mother during her pregnancy and an auto repair shop, alleging that the vehicle’s allegedly defective fuel hose and the repair shop’s failure to timely discover and fix the defective hose, combined to cause the child’s injuries.

The trial court granted the defendants’ motion to preclude plaintiffs’ causation experts from testifying at trial and the issue eventually reached the NY Court of Appeals.  The court affirmed, holding that the methodology employed by the experts was not generally accepted in the scientific community, and thus the experts’ testimony was inadmissible.

A central issue was exposure: even if a toxic substance can cause a type of injury under some circumstance, the fundamental notions of toxicology dictate that the effects of exposure relate to the dose of exposure.  Very often, there is no contemporaneous measure or testing that will indicate the level of exposure.  Instead, plaintiffs will typically seek to estimate a historical exposure level, by analogy to documented exposures similar product or work contexts, or reference to baseline data. Some plaintiffs will rely on a logical fallacy: if plaintiff testifies she has experienced an effect, then she must have experienced a dose sufficient to cause that alleged effect- the injury proves the cause. Indeed, here plaintiffs’ experts concluded that plaintiff’s mother inhaled 1,000 parts per million (ppm) of gasoline vapor based on the fact that she and others experienced symptoms of acute toxicity during exposure, such as headache, nausea and irritation of the throat and mucous membranes. For symptoms such as these to occur immediately, a gasoline vapor concentration of at least 1000 ppm is supposedly required.

The Court of Appeals noted that in toxic tort cases, an expert opinion on causation must set forth (1) a plaintiff’s exposure to a toxin, (2) that the toxin is capable of causing the particular injuries plaintiff suffered (general causation) and (3) that the plaintiff was exposed to sufficient levels of the toxin to cause such injuries (specific causation), see Parker v. Mobil Oil Corp., 7 N.Y.3d 434, 448, 824 N.Y.S.2d 584, 857 N.E.2d 1114 (2006). Although it is not always necessary for a plaintiff to quantify exposure levels precisely, the courts have never dispensed with a plaintiff’s burden to establish sufficient exposure to a substance to cause the claimed adverse health effect.  At a minimum, there must be evidence from which the fact-finder can conclude that the plaintiff was exposed to levels of the agent that are known to cause the kind of harm that the plaintiff claims to have suffered. See also Wright v. Willamette Indus., Inc., 91 F.3d 1105, 1107 (8th Cir.1996). In Frye jurisdictions, not only is it necessary for a causation expert to establish that the plaintiff was exposed to sufficient levels of a toxin to have caused his injuries, but the expert also must do so through methods found to be generally accepted as reliable in the scientific community.

The court agreed that plaintiffs here had failed to make that showing in this case. The experts concluded that the minor plaintiff was exposed to a sufficient amount of gasoline vapor to have caused his injuries based on the reports by plaintiff’s mother and grandmother that the smell of gasoline occasionally caused them nausea, dizziness, headaches and throat irritation. The experts did not identify any text, scholarly article or scientific study, however, that applied  this type of methodology, let alone a “consensus” as to its reliability.

The studies relied by plaintiffs merely supported a conclusion that there is a dose-response relationship between exposure to the chemical constituents of gasoline and symptoms of toxicity.  Certainly there were known exposure levels which cause people to report symptoms such as nausea and headache.  But while there is an ability to measure symptoms in response to a given exposure, those studies do not support the inverse approach employed in this case—working backwards from reported symptoms to divine an otherwise unknown concentration of gasoline vapor. The experts could not identify any study, report, article or opinion that admits or employs such a methodology.

Exclusion of expert opinion affirmed.

The U.S. Supreme Court issued a decision earlier this week in a case raising the issue whether a defendant can cut off a Telephone Consumer Protection Act class action by making an offer of full relief to individual named plaintiffs. See Campbell-Ewald Co. v. Gomez, No. 14-857 (U.S. 1/20/16).

Here is the background: the Navy contracted with petitioner Campbell to develop a multimedia recruiting campaign that included the sending of text messages to young adults, but only if those individuals had “opted in” to receipt of marketing solicitations on topics that included Navy service. Respondent Gomez alleged that he did not consent to receive text messages and, at age 40, was not in the Navy’s targeted age group anyway. Gomez filed a nationwide class action, alleging that Campbell violated the Telephone Consumer Protection Act (TCPA), 47 U. S. C. §227(b)(1)(A)(iii), which prohibits “using any automatic dialing system” to send a text message to a cellular telephone, absent the recipient’s prior express consent. He sought treble statutory damages for a willful and knowing TCPA violation and an injunction against Campbell’s involvement in unsolicited messaging.

Before the deadline for Gomez to file a motion for class certification, Campbell proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule. Campbell then moved to dismiss the case pursuant to Rule 12(b)(1) for lack of subject-matter jurisdiction. Campbell argued first that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well.

The District Court denied the motion. After limited discovery, the District Court then granted
Campbell’s motion for summary judgment on the merits, relying on the Navy’s sovereign
immunity from suit under the TCPA. The Ninth Circuit reversed. It agreed that Gomez’s case remained live but concluded that Campbell was not entitled to “derivative sovereign immunity.”

The Supreme Court took the case and ruled that a mere unaccepted settlement offer or offer of judgment does not automatically moot a plaintiff’s case, so the District Court retained jurisdiction to adjudicate Gomez’s complaint.  While Article III’s “cases” and “controversies” limitation requires that “an actual controversy . . . be extant at all stages of review, not merely at the time the complaint is filed,” Arizonans for Official English v. Arizona, 520 U. S. 43, 67, a case does not become moot as “long as the parties have a concrete interest, however small,” in the litigation’s outcome. Here Gomez’s complaint was not effaced by Campbell’s unaccepted offer to satisfy his individual claim. Under principles of contract law, Campbell’s settlement bid and Rule 68 offer of judgment, once rejected, had no continuing efficacy. With no settlement offer operative, the parties remained adverse; both retained the same stake in the litigation they had at the outset. (Of course, our readers may well recognize that laying a legal controversy to rest may not be quite the same thing as making a contract.)

On the merits, less interesting to our readers, Campbell’s status as a federal contractor did not entitle it to immunity from suit for its violation of the TCPA. Unlike the United States and its agencies, federal contractors do not enjoy absolute immunity. A federal contractor who simply performs as directed by the Government may be shielded from liability for injuries caused by its conduct. But no “derivative immunity” exists when the contractor has exceeded its authority or its authority was not validly conferred.

The decision resolved a circuit split on the settlement offer issue, and closed the loop on an issue left open by the Court in its 2013 decision in Genesis Healthcare Corp. v. Symczyk.

Interestingly, the majority declined to address the related issue whether the result would have been different if Campbell had actually paid up rather than merely offered to pay. “That question is appropriately reserved for a case in which it is not hypothetical. ”

The Chief Justice dissented, arguing that “The problem for Gomez is that the federal courts exist to solve real disputes, not to rule on a plaintiff’s entitlement to relief already there for the taking.”  It seemed beyond dispute that the offer made would have fully satisfied Gomez’s claims. “That makes the case moot, and Gomez is not entitled to a ruling on the merits of a moot case.”

The ruling may impact other consumer type claims under statutes, such as the TCPA, under which damages can be easily calculated.  But one has to wonder about a rule in which  federal courts are forced to preside over cases where plaintiffs insist on litigating, with all of the burden and expenses, even when they have been offered 100% of what they could possibly recover.

Most employers and workers recognize that the “workers comp.” system is entirely separate from the civil law courts, with its own special remedies and procedures.   Employers also generally understand that such workers comp. benefits are supposed to be the “exclusive remedy” for any workplace injury.

But the recent case of Prue v. Brady Company, Inc., offers a timely reminder that an exception to this “exclusivity” doctrine may apply whenever a workplace injury also results in a “disability” covered by the California Fair Employment and Housing Act (“FEHA”).  Indeed, most medical conditions that substantially limit an employee’s ability to work — such as the need to recuperate or take leave due to an injury — will also qualify as a covered “disability.”  This, in turn, triggers a number of statutory obligations including: the duty to engage in an “interactive process;” the duty to “reasonably accommodate” the employee’s condition; and the duty to prevent any retaliation or discrimination.

For example, in Prue v. Brady, the employee alleged that his supervisor terminated him rather than allow him to return to work with restrictions after he suffered a hernia at work.  The lower court had granted summary judgment based on the employer’s argument that this was really a glorified workers comp claim for which no additional remedy should be allowed.

The Appellate Court reversed, explaining that the legal duties imposed by the FEHA would support not only a statutory claim under that law itself, but also a common law claim for “termination in violation of public policy.”

This is a cautionary tale for employers who may have a tendency to be complacent about workers comp. claims.  Likewise, workers should be aware that the FEHA’s reinstatement and non-retaliation rights are also likely to protect their right to return to employment following a workplace accident or injury.