Consumer Class Actions and Mass Torts : Class Action Lawyer & Attorney : J. Russell Jackson : Skadden Law Firm : Complex Class Actions : Consumer Class Actions & Mass Torts Law Blog

A recent decision from the Louisiana Court of Appeals demonstrates once again why personal injury claims simply cannot be tried as class actions.  In Pollard v. Alpha Technical Services Inc., 2010 WL 323576 (Jan. 28, 2010), plaintiffs alleged that for more than forty years, industrial property in Harvey, Louisiana had been used to clean oilfield pipes of scale or crust that had built up in the interior of the tubing.  This scale or crust was alleged to be barium sulfate -- later identified as radium sulfate -- and other radioactive materials.  Plaintiffs alleged that "toxic dust" from the industrial property was deposited in their residential neighborhood, causing "various diseases and illnesses, including prenatal complications, various types of cancer, neurological disorders, impairment of kidney function," and impairment of liver function.  Id. at *2.

The trial court conducted a class certification hearing and determined that the putative class failed to meet the class certification prerequisites.  Plaintiffs appealed, and the Court of Appeals determined that, for the most part, the trial court had not abused its discretion in its analysis.

I say "for the most part" because the Court of Appeals did hold that the trial court abused its discretion in finding that the numerosity requirement was not satisfied.  Plaintiffs estimated the potential class to be between 2,000 and 4,000 people.  The trial court determined that 3,748 people already had indicated their intention to opt out.  Id. at *5.  The plaintiffs argued that there can be no opt outs until a certified class exists and absent class members can evaluate whether to participate.  The Court of Appeals agreed, holding that "the trial court was manifestly erroneous in finding that the plaintiffs failed to satisfy the numerosity requirement."  Id. at *6

But the Court of Appeal affirmed the trial court's remaining conclusions.  It found no abuse of discretion in the trial court's conclusion that the commonality requirement had not been satisfied:

There is no controlling issue subject to proof on a class-wide basis.  The differences in amounts and lengths of exposure, the personal history, habits and supposed illnesses of each particular claimant and the differences in operations and locations and customers of the five pipe-cleaning defendants, taken together and taken separately, mean that Plaintiffs cannot identify any common issue that can be resolved with respect to putative class members.

Id. at *7.

Similarly, the trial court was correct in concluding that the typicality requirement was not met:

The class representatives' claims are widely divergent from those of the putative class members. . . .  Some class representatives claimed no medical condition whatsoever, implicitly conceding that none could have been caused. . . .  Others claim widely varying problems, ranging from loss of smell to skin rashes to nosebleeds to hammer-toe to miscarriages to cancer.

Id.

And the trial court was correct in holding that the named class representatives could not adequately represent the absent class members because of the differences in their injuries.  Id. at *8.

The trial court also was correct in holding that the proposed class definition failed to properly identify at the outset who was in the class.  The trial court noted the inconsistencies and errors made by Plaintiffs' expert in modeling air dispersion and trying to establish times, spatial boundaries, and exposure levels for defining the class.  The trial court found that the proposed class definition "could potentially include anyone who once drove through the area," and it could not be saved by defining the class as persons who suffered injury from exposure because that would require a merits-based determination to be made in mini-trials at the outset just to decide who was in and out of the class.  Id. at *9.  The Court of Appeals agreed, but observed that if the other problems with the class had not been so insurmountable, it might have been inclined to remand so that plaintiffs could more narrowly define the class.  However, given the other fatal problems with the class, the court simply affirmed the trial court's conclusion on the class definition as well.  Id. at *11.

• Email This
• Print
• Comments
• Trackbacks

How many times have you said "I told you so" to an adversary who refused to listen to you when you explained that his case could not possibly proceed as a class action?  Sometimes my adversaries listen and drop their class claims.  Invariably, however, that is only after my client has spent large sums of money in class discovery and defending against the class certification arguments.

Recently I came across Johnson v. Microsoft Corp., Case No. C06-900RAJ, slip op. (W.D. Wash.  Jan. 15, 2010), in which the plaintiffs waited until the class certification motion was fully briefed and noticed for hearing before agreeing to drop most -- but not all -- of their class allegations from the complaint.  I waited too long to inform you of the opinion, however.  The folks at the Class Action Defense Blog described the case yesterday and included a downloadable pdf. 

Nevertheless, I highlight it here as encouragement for you defense counsel who want to file fee petitions in such situations:

If Plaintiffs had withdrawn their class-certification motion before Microsoft had prepared its Opposition, that could be a "no harm, no foul" situation.  But here, the "harm" was irreversibly inflicted when Plaintiff's' motion required Microsoft to prepare a defense, and it is not mollified by Plaintiffs' willingness to eliminate some of the additions to the Proposed TACC.  Under these circumstances, the court finds that it is appropriate for Plaintiffs to reimburse Microsoft for costs related to defending against the class certification motion.

Slip op. at 5.

Microsoft's fee petition is due February 12, and the issue should be fully briefed by March 5.  I'll keep an eye on it and let you know what happens.

• Email This
• Print
• Comments
• Trackbacks

The recent opinion in Fitzpatrick v. General Mills, 2010 WL 146846 (S.D. Fla. Jan. 11, 2010)highlights how important the reliance/causation requirement is in consumer fraud class action litigation.  The court in Fitzpatrick refused to certify a class for breach of express warranty because establishing that the challenged statements in yogurt advertising formed the "basis of the bargain" would require reliance, thus destroying predominance under Rule 23.  Nevertheless, because the court concluded that under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) no plaintiff was required to establish deception or causation specific to himself -- but instead could rely on a hypothetical reasonable everyman -- the court certified a class of Florida consumers.

Fitzpatrick was a challenge to General Mills's Yo-Plus yogurt, which contains probiotic bacterium, inulin (fiber), and vitamins A and D.  The defendant had marketed this probiotic yogurt as an "aid in promoting digestive health."  Plaintiff, who had been eating a competitor's probiotic yogurt, switched to Yo-Plus and, over a year, bought roughly 24 4-packs of Yo-Plus.  She claimed her digestive health was the same before, during, and after eating Yo-Plus, and thus claimed it provides no digestive benefits, its marketing is deceptive, and she is entitled to damages under the FDUTPA.

Despite the language of the FDUTPA and a number of decisions holding that an FDUTPA plaintiff must establish "causation" -- i.e., that the deceptive conduct was an actual cause of his damages -- the court concluded that plaintiff's class could be tried almost entirely on generic proof.  For example, the court reasoned that to establish deceptiveness a plaintiff need not point to any specific advertisement in which he heard an alleged misrepresentation; rather, he could "reach outside the circumstances of a single transaction to establish a 'practice' constituting a deceptive act."  Slip op. at n.5.  As the court put it, each plaintiff would need to prove that he was "exposed to" the "allegedly deceptive message that eating Yo-Plus promotes digestive health in ways that eating normal yogurt cannot," but in proving that the message is deceptive, he may introduce evidence about ads to which he was not personally exposed.  Slip. op. at 7.

As for "causation," the court relied on a Florida court of appeals decision to hold that "'[t]he question is not whether the plaintiff actually relied on the alleged deceptive trade practice, but whether the practice was likely to deceive a consumer acting reasonably in the same circumstances.'"  Slip op. at 7 (citation omitted). 

Untethering deception and causation from a particular plaintiff and pegging it instead to a hypothetical everyman will yield bizarre and unjustifiable results.  To begin with, under such a rule a class member who bought Yo-Plus for reasons other than digestive health would recover regardless of the fact that he was not deceived.  The same would be true for a doctor who actually read the studies General Mills relies upon, and bought Yo-Plus with full knowledge of the scientific literature. 

Moreover, should consumers who actually experienced digestive health benefits be allowed to recover damages under the FDUTPA?  The court says that the damages issue "centers on the scientifically complex question of whether Yo-Plus provides a digestive health benefit, and if General Mills had an adequate basis to disseminate that message to Florida consumers."   Slip op. at 16.  So apparently plaintiff's subjective claim that her digestive health was not benefited by Yo-Plus is defeated if the defendant is adjudicated to have had adequate scientific proof of such benefit generally.  And if the defendant is not determined to have had quite enough evidence, the court's clear implication is that consumers who nevertheless received digestive health benefits might have a damages claim.  That, of course, would be an absurd result.

Causation and injury are fundamental bedrocks of American jurisprudence.  Indeed, one cannot have standing to sue without them.  When courts read the causation and injury requirements out of causes of action and make the outcomes determined by hypothetical actors, they increase the risk that uninjured people will benefit unfairly from a lawsuit.  Where, as here, such rules are to be applied in a class action, that risk increases exponentially.  The causation and injury requirements of the FDUTPA -- read in plain English as the legislature wrote them -- require individualized determinations that should have precluded class certification.

Here, even the class definition, as amended by the court, requires a subjective individual determination that ought to have prevented class certification:  "all persons who purchased Yo-Plus in the State of Florida to obtain its claimed digestive health benefit."  That is not an objectively identifiable class -- it requires inquiry at the outset into why class members bought the product.  Who is bound by a judgment in that class?  And if the class loses, couldn't one simply argue in a future suit that she was not bound by the Fitzpatrick judgment because she had bought Yo-Plus for a different reason?

The court's decision in Fitzpatrick is subject to serious challenge on appeal.  But by contrasting the effect of a causation/reliance requirement by denying certification of the express warranty class, the opinion can serve as a useful teaching tool for why it is important not to read the basic causation and injury requirements out of state consumer protection statutes.

• Email This
• Print
• Comments
• Trackbacks

Well, this is a little awkward.  I mean, it's the New Year . . . Christmas is over . . . and I didn't get you anything.  I got a Nano and a couple of gift cards for iTunes.  But what to get you . . .

I know!  A boxed set of three decisions involving Apple, circa December 2009!

In Hovespian v. Apple, Inc., 2009 WL 5069144 (N.D. Cal. Dec. 17, 2009), the court granted Apple's motion to dismiss and its motion to strike class allegations.  (It was a good holiday for Apple, too, apparently.)  Plaintiff -- a Florida resident -- had brought a class action in California federal court, purporting to represent all people who bought iMAC G5 personal computers.  Plaintiff alleged that the display screen was prone to developing vertical lines that ultimately rendered the screen unusable, that Apple knew of this fact and concealed it, refusing to repair the machines because the lines developed after the one year express warranty had run on the machine.  (Plaintiff bought his Mac in October 2006, but the lines did not appear until March 2008.)  Plaintiff's Second Amended Complaint ("SAC") pled causes of action under California's Consumer Legal Remedies Act, the Unfair Competition Law, for fraudulent omission, for unjust enrichment, and for a declaration that the one-year warranty limitation was unenforceable.

The court dismissed plaintiff's CLRA claim without leave to amend because it failed to state with particularity -- as required by Rule 9(b) -- "when and where Apple made an affirmative misrepresentation, if any, that contradicts its alleged omissions."  Id. at *3.  The complaint contained only generalized allegations that Apple had exclusive knowledge of the problem and concealed it.  This was insufficient -- without affirmative statements that contradict the omitted information -- to state a CLRA claim.

The court also granted dismissal of the UCL claim without leave to amend.  Citing to Clemens v. DaimlerChrysler Corp., 534 F.3d 1017 (9th Cir. 2008), the court held that an alleged defect that may shorten the life span of a product that performs as warranted throughout the express warranty term does not cause a substantial injury to consumers and cannot serve as the basis for a UCL claim.

The court granted dismissal of the common law fraudulent omission claim for the same reason it dismissed the CLRA claim, but it made the dismissal without prejudice to give plaintiff leave to re-plead to elaborate on what duty to speak Apple had that it allegedly had violated.

The court also dismissed the unjust enrichment claim with prejudice, holding that an unjust enrichment claim that is premised on the same course of conduct that underlies the statutory and common law tort claims cannot stand alone as an independent claim for relief.  Id. at *5.  It fails for the same reason the other claims fail.

The court also granted Apple's motion to strike the class allegations, citing its authority under Federal Rules of Civil Procedure 23(c)(1)(A), 23(d)(1)(D), and 12(f).  Plaintiff defined the class as all persons who purchased iMAC G5 personal computers from Defendant Apple, Inc.  The court held that the complaint failed to state a valid class action claim against Apple:

First, the class is not ascertainable because it includes members who have not experienced any problems with their iMAC display screens.  Such members have no injury and no standing to sue.  Second, the class is not maintainable under Rule 23(b)(3) because it includes members who can have no claim against Apple.  For example, the putative class includes members who (a) did not purchase the particular iMac model or the type of iMac screen that Hovespian alleges is defective and (b) experienced the alleged defect after their warranty expired.  Finally, the class is not maintainable under Rule 23(b)(1) or Rule 23(b)(2).  These types of class actions are not suitable for actions where recovery of money damages is the primary relief sought by the plaintiff.

Id. at *6.  The court struck the class allegations without prejudice, thus allowing amendment after plaintiff amended his fraudulent concealment claim.

The second case in our Apple boxed set was well reported on:  Birdsong v. Apple, Inc., 2009 WL 5125776 (9th Cir. Dec. 30, 2009).  Birdsong involved a class action challenge to Apple's iPod based on the potential for hearing loss.  Plaintiffs alleged that the iPod was defective in that it could achieve sounds of 115 decibels, the long battery life allows those sounds to be played over long periods of time, the ear buds are designed to be placed deep in the ears (rather than over the ears), the ear buds lack noise cancelling properties, and the iPod lacks a volume meter that tells users they are listening at dangerous levels. 

Apple includes this warning with each iPod:

Warning:  Permanent hearing loss may occur if earphones or headphones are used at high volume.  You can adapt over time to a higher volume of sound, which may sound normal but can be damaging to your hearing.  Set your iPod's volume to a safe level before that happens.  If you experience ringing in your ears, reduce the volume or discontinue use of your iPod.

Id. at *1.

The Ninth Circuit affirmed dismissal of the implied warranty of merchantability count, observing that nothing in the complaint says the iPod is defective for its ordinary purpose of listening to music.  Rather, the statements in the complaint merely suggest that users have the option of using the iPod in a risky manner, but it does not suggest the product lacks any minimum level of quality.  Where, as here, the complaint merely seeks additional features to make the product safer, it fails to allege the sort of lack of baseline utility that would support a breach of the implied warranty of merchantability claim.  Id. at *2-*3.

Plaintiffs abandoned the breach of express warranty and breach of the implied warranty of fitness for a particular purpose claims on appeal. 

The Ninth Circuit also affirmed dismissal of the Unfair Competition Law claim because they failed to allege the requisite injury to have standing to bring the claim.  To begin with, the complaints did not allege that the plaintiffs themselves ever suffered hearing loss or were at risk of imminent hearing loss.  Nor did they allege that plaintiffs themselves ever used their iPods in a way that exposed them to a risk of hearing loss.  Rather, they cast their allegations as potential impacts on unidentified users.  This was insufficient to meet the injury requirement for Article III standing.  Id. at *4.

The court also held that plaintiffs failed to allege an economic harm (lost money or property) that would confer standing to sue under the UCL because "the alleged loss in value does not constitute a distinct and palpable injury that is actual or imminent because it rests on a hypothetical risk of hearing loss to other consumers who may or may not choose to use their iPods in a risky manner."  Id. at *5.  And the court rejected plaintiffs' "benefit of the bargain" theory, holding that the "plaintiffs' alleged injury in fact is premised on the loss of a 'safety' benefit that was not part of the bargain to begin with."  Id.

The third case in our boxed set is a lump of coal:  Owens v. Apple, Inc., 2009 WL 5126940 (S.D. Ill. Dec. 21, 2009).  Plaintiffs brought a putative nationwide class action, alleging that Apple breached a contract and violated various consumer fraud statutes when it sold gift cards to people with the representation that songs cost $.99 a song, and then on April 7, 2009 raised the price of certain songs to $1.29.

Apple moved to dismiss, asserting a privity defense to the breach of contract claims.  The court rejected it outright, where the gift card at issue was marketed by Apple and could be used only on Apple's website. 

The court also held that there was nothing vague about the representation:  "Songs are 99 cents, and videos start at $1.99."  The complaint alleged plaintiffs relied on the price guarantee as part of the basis of the bargain, and that plaintiffs were damaged as a result of the price increase.  The court refused to dismiss the breach of contract counts.

The court also refused to dismiss the consumer fraud counts.  Apple had argued that the statement "Songs are 99 cents," did not mean that the price of all songs was 99 cents, but rather that some songs were 99 cents.  Plaintiffs argued that this interpretation was a "slippery slope" that would allow Apple to market its gift cards in the same way so long as one song was 99 cents.  The court refused to find that the phrase was not deceptive as a matter of law.

So that's it.  A boxed set of Apple decisions for you.  If they don't fit and you want to exchange them for a sweater vest I received this Christmas, just let me know.

• Email This
• Print
• Comments
• Trackbacks

Yesterday Merck won an important appeal in a California Vioxx class action in which plaintiffs had argued that the California Supreme Court's recent decision in In re Tobacco II Cases, 46 Cal. 4th 298 (2009) required the reversal of a trial court's refusal to certify a class action under California's Unfair Competition Law.  See In re Vioxx Class Cases, No. B216521 (Cal. App. -- 2d Dist. Dec. 15, 2009).  The Vioxx Class Cases decision is important because it recognizes that although Tobacco II imposed a new understanding of the UCL's standing requirement, it did not fundamentally alter the other elements of the statute, and a proposed class can still fail the class action prerequisites where the relief requested requires individualized determinations and where the named plaintiffs' claims are not typical of those of other class members.

Vioxx was a Non-Steroidal Anti-Inflammatory Drug ("NSAID") that was used to treat pain until it was removed from the market in 2004.  Unlike aspirin or naproxen, which are NSAIDs that can cause gastrointestinal complications, Vioxx was a "COX-2" inhibitor that was expressly designed to avoid the gastrointestinal effects inherent in NSAIDs like naproxen.  Vioxx was removed from the market after studies determined that it presented a risk of adverse cardiovascular effects.

Plaintiffs brought a statewide class action under the UCL, the False Advertising Act, the Consumer Legal Remedies Act, and common law unjust enrichment.  They sought classwide restitution of the difference in price between what they paid for Vioxx and what they would have paid for a safer, equally effective, pain reliever.  Their economist calculated that price differential to be $8.3 billion nationally, but did not break it down to what allegedly was owed to California purchasers.

Plaintiffs' theory of liability was simple:  Merck knew its drug presented cardiovascular risks, but concealed that fact and marketed Vioxx as safe to the public and to doctors.  Slip op. at 7.  As a result, they said, they were entitled to classwide restitution of the difference between the price of Vioxx and the price of generic naproxen.

Interestingly, in discovery, plaintiffs would not say that they would have taken naproxen instead of Vioxx.  Rather, they would only say that they would not have taken Vioxx if they had known the risks, and that the drug they would have used instead was irrelevant.  Slip op. at 6.

In the trial court, Merck had established that roughly 16,500 people in the US died from gastrointestinal bleeds -- the most common NSAID complication -- each year, and over 100,000 were hospitalized.  It presented medical testimony that for patients with a history of serious gastrointestinal problems who could not tolerate traditional NSAIDs, COX-2 inhibitors like Vioxx were the only appropriate option.  Further, it presented evidence from third party payors -- who were included in the class of purchasers, even though the named plaintiffs were all individuals -- establishing that some third party payors' Pharmaceutical and Therapeutics committees had studied the risks of Vioxx thoroughly and only approved the drug for use with patients who had a history of gastrointestinal disease and had first tried one or two traditional NSAIDs without success.  The third party payors' records also established that when Vioxx was removed from the market, most patients did not switch to generic NSAIDs like naproxen, but rather switched to another branded COX-2 inhibitor with a price comparable to Vioxx.

Merck also established in the trial court that doctors apply their clinical judgment to each patient's unique situation in choosing which pain medicine to prescribe, looking at eight different factors.  Merck also established that doctors rely on different sources of information, with some even rejecting out of hand research the company provides.

On appeal, plaintiffs challenged three conclusions of the trial court.  First, they challenged the trial court's conclusion that the individual plaintiffs' claims were not typical of the claims of third party payors.  Second, they said the trial court erred in concluding that individual issues of reliance barred a class action.  And third, they urged that their method of calculating damages was subject to common, class-wide proof, making classwide restitution appropriate.

Typicality and Third Party Payors

Plaintiffs argued that the individual plaintiffs could represent the interests of the third party payors -- like union health benefit plans -- because if an individual relied on Merck's alleged misrepresentations to buy Vioxx, then the third party payor who paid for most of that prescription should be entitled to recover, too.  The Court of Appeal held that the flaw in this analysis is that it treats the third party payor as a passive entity that pays without having any say in what is prescribed.  But the evidence showed that, at least for some large third party payors, their Pharmaceutical and Therapeutics committees conducted literature reviews and studies, and made their own decisions about what they were going to pay for.  As a result, evidence about what alleged misrepresentations the individuals received or relied upon could not apply to third party payors, and the court could not presume reliance across all third party payors based on any individual's reliance.  Slip op. at 21.  Indeed, for third party payors who only paid for Vioxx where there was a history of gastrointestinal problems and the patient could not tolerate other NSAIDs, every penny it paid for Vioxx was for a patient who benefited from the prescription.  Id. at 22.  Accordingly, the individuals' claims were not typical of the third party payors.

Individual Issues of Reliance Predominate the CLRA Claim

California's Consumer Legal Remedies Act requires some form of causation between the unlawful act and the consumer's damages:  it gives a cause of action to "[a]ny consumer who suffers any damage as a result of the use or employment" of an unlawful act.  Cal. Civ. Code sec. 1780(a) (emphasis added).  Some California cases have held that an "inference of reliance" may arise for the class where a material misrepresentation has been made to the whole class.  But "if the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is not properly certified as a class action."  Slip op. at 16.

Plaintiffs suggested that hiding an increased risk of death from cardiovascular complications is about as material as a misrepresentation can get, and that reliance should be inferred to the whole class for purposes of the CLRA.  But the Court of Appeal rejected this notion for four reasons.

First, Vioxx did not present an increased risk of death for all patients, because there were patients with gastrointestinal problems who would have been more likely to die from complications with traditional NSAIDs like naproxen.  Second, the record evidence reflected that there were patients who would still take Vioxx if it were on the market today, and physicians who would still prescribe it.  Thus, for some subset of the class, the cardiovascular risks were not material to their decision whether to take the medicine.  Third, the differences in how doctors study and evaluate the risks of medicines prevented a classwide inference of materiality.  And fourth, the patient-specific factors that doctors evaluate in prescribing a pain medicine also made a presumption of materiality not viable.  For example, a doctor might downplay the clotting risk of Vioxx for a patient already receiving a blood thinner like Coumadin.  Slip op. at 24. 

Individual Issues Regarding Injury and Restitution Predominate the UCL and FAA Claims

The Court of Appeal noted that although the UCL liberalizes the standards for finding liability, it narrowly prescribes the remedies available under the statute:  injunctive relief and restitution.  There was no need for injunctive relief, since the product had been pulled from the market.  So the question was one of restitution.  Plaintiffs' economist proposed comparing the price of Vioxx with the price of generic naproxen, using the difference as the amount of restitution. 

But the Court of Appeal concluded that this approach could not be applied to the class as a whole, because there was substantial record evidence that after Vioxx was withdrawn from the market, most Vioxx patients switched to other similarly-priced brand-name COX-2 inhibitors, not generic naproxen.  Plaintiffs argued that adjudicating the validity of naproxen as a comparison improperly went to the merits of the action, but the Court of Appeal said no.  Rather, it went to whether a "measurable amount" of restitution could be proven on a classwide basis.  The court held that it could not, and that class members thus would have to individually establish the appropriate comparator medicine, and then whether he suffered an injury.  This was a patient-specific issue, the court held, "incorporating the patient's medical history, treatment needs, and drug interactions."

Dicta on the Class Definition

The Court of Appeal was highly critical of the plaintiffs' class definition, which included "all individuals or entities in California who . . . paid some or all of the purchase price for the prescription drug Vioxx."  Slip op. at 6-7.  Besides improperly lumping individuals and third party payors together, the Court of Appeal also was clearly troubled that there was no carve-out for people who suffered physical injuries (slip op. at 5-6, n.4), thereby presenting problems of claim-splitting.  The court said the class definition was overbroad, and that those with physical injuries "should not be bound in an action pursuing only economic damages for the price of Vioxx."  Slip op. at 20, n.16.  Moreover, the class definition also was overbroad because it included those with flat co-payment obligations who would have paid the same amount of co-payment regardless of what drug was applied; they would have suffered no injury, and thus should not be in the class.  Id. 

Moreover, given the fact that -- as the Court of Appeal noted -- many of the class members actually derived benefit from Vioxx's lack of gastrointestinal effects, I would argue that the class definition also should have been required to exclude those people from the class.

The decision in Vioxx Class Cases is an important reminder that the elements of the causes of action for UCL, CLRA, FAA and unjust enrichment claims in California provide important defenses to class certification.  Just because a UCL claim may survive a demurrer does not mean that it can be tried on a classwide basis.  Defendants would be wise to follow Merck's lead and develop strong factual bases for why classwide presumptions are not viable and individual proof of injury should be required.

• Email This
• Print
• Comments
• Trackbacks

It's not often that a federal judge dismisses a class action sua sponte.  Ordinarily, a defendant who is served with even the most frivolous complaint must go to the trouble of hiring a lawyer to research and draft a motion to dismiss the case.  That's why it's such a breath of fresh air to read Judge Milton I. Shadur's opinion in Radke v. University of Illinois at Urbana-Champaign, 2009 WL 3617462 (N.D. Ill. Nov. 2, 2009).  There, Judge Shadur preaches the importance of federal judges taking a first look at newly-filed complaints to ensure that federal jurisdiction is proper, and sua sponte dismissing complaints where jurisdiction clearly does not lie.  Id. at *2.

Ironically, the complaint that Judge Shadur dismissed in Radke is a clone of the complaint that formed the basis of last month's Specious Complaint Contest on this blog, which was won by Brian Perryman three days ago.  It's the same lawyers.  Same class definition.  Same counts.  Just a different plaintiff.  (Of course, this suggests that counsel may have been engaged in judge shopping, i.e., filing multiple class actions in the same court to see who they are assigned to, and then subsequently dropping those assigned to judges they deem less favorable.  If so, Judge Shadur's sua sponte dismissal must have been quite a shock to plaintiffs' counsel.)

Brian, who won our contest, had expressed some doubt about the jurisdiction argument he included in his outline of the contest's hypothetical motion to dismiss, but I had determined to leave that argument in because it seemed correct to me.  Obviously, Judge Shadur agreed that there was no federal jurisdiction.

The facts in Radke are simple enough to recap:  The Chicago Tribune had run some stories about a so-called "clout list" that the University allegedly used to admit students who otherwise did not meet the school's grade or testing standards.  Plaintiff alleged that had he and the class known of these practices, they never would have paid $40 to submit an application to attend the school.  Plaintiff was a disgruntled student who had been denied admission to the University.  He brought a class action alleging breach of contract, fraud, unjust enrichment, denial of due process and equal protection, and the need for an accounting.  The class was defined as:

All . . . applicants to the University of Illinois at Urbana-Champaign [not on the "clout list"] who, during the time period of 1999 until August 2009, applied for admission to the University, paid an application fee to defendants in consideration of admission to the University and were subsequently denied admission to the University.

Judge Shadur held that this putative class action could not, on its face, meet the jurisdictional prerequisites of the Class Action Fairness Act, including its $5 million amount-in-controversy threshold.  The court noted at the outset the fundamental flaw with the class definition:  it was extraordinarily overbroad.  Even under the facts pled in the complaint, it was clear that some two-thirds of the class as defined by counsel would not have been admitted even without the use of a clout list.  Thus, they had suffered no injury and had no standing to sue.  Id. at *1.  And it was clear that the number of allegedly improper admissions involved only a small percentage of the 7,000 annual admissions to the school, so that at $40 per application it was "patently absurd to claim that the boxcar figure of $5 million" would come into play, as CAFA requires.

Moreover, by going back ten years to 1999, the class included many people "who are too long in the tooth for current admission, so that a Rule 23(b)(2) class that provides only injunctive or declaratory relief would not be appropriate."  Addiitionally, for those who were suing for damages under Rule 23(b)(3), the court noted that there obviously could be no class because individual issues predominated:

Just think of the individualized hearings required to evaluate each applicant to determine whether he or she would or would not have been admitted on the merits -- a decision that always legitimately involves subjective criteria, even when impermissible political considerations are taken out of the picture.

Id. at *2.

Ultimately, the court dismissed the complaint for lack of federal subject matter jurisdiction under CAFA, although the dismissal was without prejudice for plaintiff to:  (1) replead an equal protection claim that could meet the Rule 8 pleading standards, as interpreted by Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), or (2) assert the state law claims in state court. 

Radke is an excellent example of a court taking a hard look at a class that never could be certified and refusing to let putative class allegations obfuscate the fact that CAFA's amount in controversy requirement obviously cannot be met.  One can only hope that more courts will, sua sponte, act with such swiftness and precision to prevent defendants from unnecessarily incurring legal defense and discovery fees.

• Email This
• Print
• Comments
• Trackbacks

When I teach my product liability course as an adjunct professor, I often include on the exam a class action question.  It's always a traditional issue-spotting exam, and I expect to see students set forth the elements for class certification and analyze them in the course of their answer.

One of the elements of class certification that all but the best of my students often ignore is the class definition.  Although Federal Rule of Civil Procedure 23 does not have any express requirements for class definitions, courts recognize that there is an inherent rule for all class actions that the class be objectively identifiable and ascertainable at the outset of the litigation.  Otherwise, how could one tell who would be bound by the class adjudication?

I previously have written about a decision in which a court refused to certify a class based on problems with the class definition.  Today, I proffer to you another -- which, incidentally, was won by my new colleagues John Beisner and Jessica Miller.

In Solo v. Bausch & Lomb, Inc., MDL No. 1785, Slip Op. (D.S.C. Sept. 25, 2009) (AmLaw Daily registration may be required), the court refused to certify two classes of California and Pennsylvania consumers, respectively, who bought contact lens  solution between September 1, 2004 and April 10, 2006 and discarded it after the defendant told consumers to do so.

The ReNu with MoistureLoc litigation is familiar to everyone.  It was posited that ReNu was responsible for an increase in cases of eye infection and blindness due to a fungus, fusarium keratitis.  The infections were first noticed in Asia, and after the CDC noted an increase in fusarium keratitis infections in the United States, the defendant recalled its product and advised consumers to switch to another contact lens solution.  In exchange, the defendant offered a refund or a coupon applicable to others of its contact lens solutions.

Nevertheless, there were a slew of lawsuits seeking recovery for "economic harm" allegedly suffered by ReNu consumers.  The MDL court had refused to certify a nationwide class action, and subsequently refused to certify a class action involving just California-only and Pennsylvania-only classes.

Plaintiffs filed another amended complaint for Pennsylvania-only and California-only classes, asserting various breach of warranty claims, consumer fraud claims, and unjust enrichment claims.  The court dismissed the warranty claims, but allowed the California statutory claims and the California and Pennsylvania unjust enrichment claims to proceed.

Interestingly, one of the three named plaintiffs in the action subsequently voluntarily dismissed her claims after changing her story about whether she bought and discarded Renu in 2006.  But the claims of two plaintiffs (one California, one Pennsylvania) made it to the certification motion.  For each state class, the definition was:

All people in [California/Pennsylvania] who purchased MoistureLoc, other than for resale, from September 1, 2004 through April 10, 2006, who lack full reimbursement for any quantity discarded following Bausch's MoistureLoc recall.

Id. at 5. 

The court described the class definition as "'an essential prerequisite to maintaining a class action,.'"  Id. at 6 (citation omitted).  Citing Wright, Miller & Kane, the court declared that the class definition must be "'sufficiently definite so that it is administratively feasible for a court to determine whether a particular individual is a member,'" and noted that the definition "'must not depend on subjective criteria or the merits of the case or require an extensive factual inquiry to determine who is a member.'"  Id. at 7 (citations omitted).  Thus, "[w]here determining membership in the class would require fact-intensive mini-trials, the class is not ascertainable, and the court should deny certification."  Id. at 8.  Citing the court's decision in In re Phenylpropanolamine (PPA) Products Liability Litigation, 214 F.R.D. 614 (W.D. Wash. 2003), the court exhibited great sensitivity to how class members would prove that they bought the product, as well as how much was left when they discarded it,  Slip op. at 9.  

The court was especially aware that memories fade over time, and it noted the varying testimony of the two remaining named plaintiffs, as well as the named plaintiff who had voluntarily dismissed her claim after changing her testimony about whether she bought and discarded the product.  The court also recognized that determining who "lack[ed] full reimbursement" for their losses would require mini-trials.  Would a consumer who used most of the solution and received an $8 replacement coupon be a class member?  What if he failed to use the coupon?  Id. at 11.

The court concluded that mini-trials were unavoidable, and that they made any class unmanageable:

[T]he membership of plaintiffs' proposed class would require countless factual inquiries into the individual circumstances of potential class members, most of whom will have long ago forgotten the details relevant to plaintiffs' allegations.  Moreover, it is hard to fathom how thousands of unnamed putative class members could possibly provide credible testimony about their class membership more than three years after the fact when the proposed class representatives themselves have presented conflicting testimony that changed over time. . . . While the court realizes it is likely that many individuals incurred some monetary loss as a result of the MoistureLoc recall, plaintiffs must still meet the requirements for class certification.

Id. at 14.

The opinion in Solo should prove useful in other cases where consumer products have already been consumed and proving loss is a difficult case of recall, rather than documents. 

• Email This
• Print
• Comments
• Trackbacks (1)

The class action rule itself gives little guidance regarding how to properly define a class, which may explain why attacks on the class definition are discussed in the case law with little frequency.  Nevertheless, courts increasingly are recognizing that there are common law rules governing how classes may be defined, and they are more than willing to dismiss a case for definitional problems.

One of the most common problems with class definitions is that membership in the class is not immediately and objectively identifiable, making membership in the class itself something that must be the subject of mini-trials.  This is particularly problematic, as the court and the parties have no knowledge at the outset what people will be bound by the judgment in the class action.  Cases rejecting these kinds of definitions include Intratex v. Beeson (Tex. 2000), and The Coca Cola Company v. Nixon (Mo. 2008).

Add to this list Brown v. SBC Communications, Inc., 2009 WL 260770 (S.D. Ill. Feb. 4, 2009).  In Brown, plaintiff sued on behalf of a putative class of telephone subscribers who allegedly had been the victims of "cramming" -- i.e., having unauthorized charges placed on their bill for products or services they did not receive.  Plaintiff sued for violations of Illinois' Consumer Fraud and Deceptive Business Practices Act and unjust enrichment.  

The court concluded that class could not be certified because the definition -- "all persons or entities who were residents of Illinois and who were improperly billed for cramming charges" -- would require individualized factfinding:

Similarly, here, the Court will need to make individual determinations as to whether each proposed class member authorized the charges for which he was billed by defendants.  The proposed class member authorized the charges for which he was billed by defendants.  The result will be multiple mini-trials, each requiring individual proofs.

Id. at *3.

Backpedaling in his reply brief, plaintiff proposed another definition that would include only subscribers who paid for charges they did not use.  The court held that this was no better:

While the Court agrees that the fact that an individual member did not utilize the service for which he was charged is evidence that he did not actually authorize the charge, the Court would still have to resolve the issue of whether each individual class member actually authorized the charge for which he or she was billed.  If an individual member did authorize the charge, then Defendants did not act improperly, at least as alleged by Plaintiff, in billing for the charge, regardless of whether the member actually utilized the service for which he or she was charged.

Id. at *4

When analyzing arguments in defense of class action litigation, it pays to start up front with close consideration of the class definition.

• Email This
• Print
• Comments
• Trackbacks