Federal Courts Address Plaintiffs' Motions to Intervene to Dismiss Competing Class Actions in Favor of First-Filed Actions
What exactly is it about food products litigation that brings out plaintiffs' lawyers' claws? Today we have two decisions rendered on the same day that address a fight between competing law firms to control putative class actions in food litigation.
The first is Glover v. Ferrero USA, Inc., 2011 WL 5007805 (D.N.J. Oct. 20, 2011). It involves various class actions alleging that the maker of Nutella -- a delicious hazelnut spread -- fraudulently markets the product as healthy when, in fact, it is not.
What we'll call "Group 1" of plaintiffs' lawyers filed two putative nationwide Nutella class actions in California . What we'll call "Group 2" of plaintiffs' lawyers filed a similar putative nationwide Nutella class action in New Jersey three weeks later, and subsequently filed in New Jersey yet another putative nationwide class action.
Group 1 and Group 2 proceeded to fight like cats in a gunny sack over who would control the litigation. Group 2 filed a motion with the Joint Panel on Multidistrict Litigation to have the cases transferred into an MDL based in New Jersey. The JPML denied the request.
Group 1 then launched an assault on Group 2, filing a motion to have its plaintiffs intervene in the New Jersey actions for the purpose of filing a motion to dismiss them under the "first filed" rule, which is the basic principle that in cases of concurrent federal jurisdiction, the court that has first possession of a subject must decide it.
In analyzing Group 1's motion to intervene, the court applied the four factors applicable to intervention as of right under Rule 24(a)(2):
first, a timely application for leave to intervene; second, a sufficient interest in the litigation; third, a threat that the interest will be impaired or affected, as a practical matter, by the disposition of the action; and fourth, inadequate representation of the prospective intervenor's interest by existing parties to the litigation.
2011 WL 5007805 at *2.
Although the court found the intervention motion to be timely, it held that Group 1 did not have sufficient interest in the litigation that merited protecting. The court explained that a mere economic interest in the litigation is insufficient to support a motion to intervene as of right, and thus the mere fact that the lawsuit may impede the proposed intervenor's right to recover in a separate suit ordinarily does not support intervention. More important, the interest expressed by the proposed intervenors was not an interest in participating in the New Jersey case; rather, it was an interest in shutting it down under the first filed rule. The court reasoned that the first-filed rule was inapplicable, in large part because the actions were not duplicative. Group 1's California actions sought to represent a class that stretched back to the year 2000, and it sought to apply only California law and statutes to the class claims. Group 2's New Jersey actions, by contrast, represented purchasers from 2008 to the present, and sought to apply New Jersey law and statutes to the nationwide class. Thus, the class periods and the claims were different. (The court noted in a footnote that it was unlikely indeed that California law would be applied to the nationwide class, as the defendant had no connection to that forum. It was, however, a resident of New Jersey.)
The court also observed that by denying intervention, it wasn't affecting Group 1's ability to litigate the California action. No class had been certified in either forum, and there was much litigating to be done -- including over choice of law -- before either set of plaintiffs could be deemed to represent anyone other than themselves.
The court proceeded to consider whether to allow discretionary intervention under Rule 24(b)(1)(B). For the same reasons that it denied intervention as of right, it denied discretionary intervention.
The second opinion to consider the issue is Askin v. The Quaker Oats Company, 2011 WL 5008524 (N.D. Ill. Oct. 20, 2011). This case involved various putative class actions alleging that Quaker's marketing of its granola and oatmeal products as "heart healthy" was fraudulent because their ingredients contain trans fats.
This litigation was even more hard-fought than Nutella. Here, what we'll call "Group A" of plaintiffs' lawyers filed three sets of putative nationwide class actions in California. After the third filing, the plaintiffs moved to consolidate and appoint their counsel as interim class counsel. One of the plaintiffs, however, substituted in a new firm, which we'll call "Group B." Group B filed a copycat class action in Illinois, and then within a week filed a petition with the JPML seeking to consolidate and transfer the actions to Illinois. The JPML denied the petition.
Immediately thereafter, Group A sought to consolidate all of the California cases before the same judge and have themselves appointed interim class counsel. Group B opposed and sought appointment as interim class counsel. Group A won its motion in California, and Group B then amended its complaint in Illinois to include "allegations that are partly copied from the California consolidated complaint." The defendant, Quaker Oats, moved to dismiss the Illinois action under the first-to-file rule and for plaintiff's lack of standing. Group A sought to intervene in the Illinois action to assert its own motion to dismiss under the first-to-file rule.
The district court -- like the New Jersey district court in the Nutella litigation -- applied the four factors to conclude that Group A did not meet the prerequisites for intervention as of right. The Group A plaintiffs argued that they would be harmed in their California litigation by the stare decisis effect of any decision by the Illinois court. The court, reviewing precedents, held that this was not enough to justify intervention as of right:
That is because 'the opinion of a single district judge rarely yields an effect broader than the force its reasoning carries,' and that reason is not enough to justify 'adding as parties all who might be concerned about the court's choice of words.' Thus in a situation where a proposed party 'has nothing to contribute except legal argument,' concerns about stare decisis do not rise to the standard of Rule 24(a)(2).
2011 WL 5008524 at *4 (citations omitted); see also id. ("their interest in avoiding the possible stare decisis effect in California of decisions related to the first-to-file question here does not have sufficient teeth to meet the Rule 24(a) standard for intervention as of right").
The court also considered and rejected Group A's interest in retaining its role as interim class counsel: "But the Guttmann plaintiffs have not cited any cases in which a law firm's interest in protecting its role as interim class counsel is characterized as the kind of 'direct, significant, legally protectable' interest required to justify intervention as of right." Id. at *5.
Nevertheless, the court decided to exercise its discretion to allow Group A to intervene under Rule 24(b)(1)(B). In support of this decision, the court noted that it already had pending the defendant's motion to dismiss in favor of the first-filed rule. Because it was not fully briefed, allowing intervention and giving the Group B plaintiffs the opportunity to file a consolidated response would not delay the proceedings. Moreover, the court reasoned that the absent class members should not have to rely on the defendant to make the first-filed argument for them.
Glover and Askin are instructive because they demonstrate just how much effort competing plaintiffs' firms put into trying to obtain (and retain) control of class action litigation, even in (or perhaps especially in?) dubious cases that involve significant defenses and choice-of-law issues.
A question for my readers: In your experience, are intervention motions becoming commonplace in competing class actions?
Great post, Russell! In particular because (and this should answer your question), I've been getting questions about this myself in the last month. Not sure what's in the water, but the motions to intervene do seem to be more common.
(And, based on some earlier reporting by Alison Frankel, it may be that some firms are getting less patient with copycat suits. http://newsandinsight.thomsonreuters.com/Legal/News/2011/08_-_August/As_e-book_antitrust_suits_proliferate,_Hagens_Berman_cries_foul/)