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

In December I posted about Price v. Martin, in which the Louisiana Supreme Court expressly adopted the U.S. Supreme Court's analysis in Wal-Mart v. Dukes to reverse certification of a class of property owners who alleged that they were exposed to certain chemicals by a neighboring wood treatment facility.  In Price, the court recognized that there was no real commonality because establishing damages and causation would require individualized analysis.

Just last week, the Louisiana Supreme Court issued a per curiam opinion demonstrating that Price was not an anomaly.  In Alexander v. Norfolk Southern Corp., No. 11-C-2793, Slip op. (La. Mar. 9, 2012), the putative class action arose out of a chemical spill from a train in New Orleans in 2001.  The Fire Department investigation had established that ethyl acrylic fumes leaked from valves in two cars that were parked for less than an hour waiting for another train.  The firefighters tightened the valves, which solved the problem, and sent the trains on their way.  No evacuation was called.  Twenty people were treated at the scene for exposure and released.  Hundreds of other people complained of eye/nose/throat irritation and a noxious smell.  Naturally this spawned a class action, which was certified by the trial court and affirmed by the intermediate court of appeal.

The Louisiana Supreme Court, citing Price, reiterated that class certification requires a rigorous analysis and that there must be significant proof of a common question, the determination of which will "'resolve an issue that central to the validity of each one of the claims in one stroke.'"  Slip op. (quoting Price quoting Dukes).

The court ultimately premised its reversal on the lack of predominance of common issues, and the need for individual trials:

[T]he district court failed to take into account undisputed evidence in the record demonstrating that any determination of damages will be dependent upon proof of facts individual to each putative class member.  In particular, . . . plaintiffs' toxicologist testified that only those individuals with a unique susceptibility to ethyl acrylate would exhibit physical symptoms at the extremely low concentrations involved in the release, that this susceptibility would manifest itself in less than .1 percent of any given population, and determining whether any particular person was within this microcosm of the population would require an entirely individualized understanding of each person's health, medical history, records, and other variables impacting exposure.  In addition, [he] testified that the dose of exposure would be impacted by important individual variables, such as the specific location of the plaintiff at the time of exposure, and whether the plaintiff moved from location to location during the exposure.  Similarly, the defense toxicologist, . . . testified the symptoms complained of by the plaintiffs, such as irritation of the eyes and nose, respiratory irritation, coughing, nausea, and vomiting, are not specific or unique to ethyl acrylate exposure, but are common symptoms with a myriad of causes.

Given this testimony, it is clear that each member of the proposed class will necessarily have to offer different facts to establish liability and damages. . . . [T]he class would degenerate into a series of individual trials.

Slip op.

The decision in Alexander is a strong reminder that even in state court class actions, expert proof at the class certification stage is important because it can frame how the issues must be tried at trial.

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Have you ever tried to pound a square peg into a round hole?  See Wenger v. Cardo Windows, Inc., 2012 WL 280254 (N.J. Super. -- App. Div. Jan. 31, 2012).

In Wenger, plaintiffs received a postcard advertising the sale of replacement windows for their home.  They called and set up an appointment.  A salesman visited and, at the conclusion of his presentation, plaintiffs signed a Purchase agreement for 20 windows at $10,700.  They also signed a financing document to finance the cost over 60 months.  They also received a Notice of Cancellation, which would allow them to cancel the order.

Plaintiffs reflected on the deal and signed and submitted the Notice of Cancellation.  The seller wouldn't take "no" for an answer.  It reduced the price and had plaintiffs sign some more forms.  Plaintiffs then spoke to their roofing contractor, who said they needed single-unit bay windows that would be secured from the sides, not the top and bottom.  The defendant wouldn't do that.  So once again plaintiffs canceled the order. 

The defendants sued plaintiffs in small claims court for $3,000.  Plaintiffs brought a class action in New Jersey state court.  Initially, the trial court dismissed claims under New Jersey's Consumer Fraud Act, Contractor's Registration Act, and Home Improvement Practices regulations, and the appellate division affirmed.  But the appellate division had instructed the trial court to reconsider its dismissal of the claims under New Jersey's Door-to-Door Home Repairs Sales Act, Home Repair Financing Act, and Truth-in-Consumer Contract Warranty and Notice Act, as well as the FTC's "Cooling Off Rule."  On remand, the trial court granted class certification on those causes of action.  The appellate division refused to take the appeal, but the New Jersey Supremes instructed the court to do so.  And so the appellate division came to consider whether class certification was proper.

The defendant had numerous arguments for why there was no commonality or predominance, and why plaintiffs failed the typicality and adequacy of representation tests.  Simply put, plaintiffs were unlike most class members because they never paid any money or received any windows.  There were numerous oral interactions, in addition to the paperwork.  And there was the dispute on the type of windows plaintiffs needed.

The appellate division didn't care.  It kept claiming that the case was about the forms that were signed and whether or not those complied with the statutes.  The forms were the same, it reasoned, and thus the class could be certified.  The court never discussed the commonality standard of Wal-Mart v. Dukes.

The defendant argued that the class action was not superior, since there was no Consumer Fraud Act claim and no class member could recover any actual damages; rather, the most they could recover would be $100 statutory damages.  As such, the binding effect of the class judgment could harm class members with actual damages.  The appellate division swatted this concern away with the observation that class members with actual damages could opt out and the maxim that class actions provide a useful mechanism for the recovery of low-dollar claims.

Interestingly, no one appeared to challenge the class definition itself, which was:  "All person who . . . received a transaction document from Defendants the same or similar to the transaction documents given to Plaintiffs."

It will be interesting to see what, if anything, the New Jersey Supreme Court does with this case.

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Yes, you read that headline correctly.  The Ninth Circuit actually reversed certification of a class!  It was a split opinion, however.  And the swing vote -- again, who voted to reverse class certification -- was none other than U.S. District Judge James Gwin from Cleveland, sitting by designation.  January 12 was truly a red-letter day.  See Mazza v. Am. Honda Motor Co., 2012 WL 89176 (9th Cir. Jan. 12, 2012).

Mazza reaches a few conclusions that I disagree with, but it has some important analysis of conflicts of law and of class definitions that will provide important precedents in attacking consumer class actions in the Ninth Circuit.

Mazza was all about what Honda told customers about its cruise control and automatic braking system, the "Collision Mitigation Braking System" ("CMBS") during a three-year period beginning in 2005.  Plaintiffs claimed Honda should have disclosed that the system turns itself off in bad weather, might not stop a vehicle before impact, and that its three stages might overlap.

Honda had a limited TV ad campaign in November 2005 and for nine months in 2006.  It had a magazine ad campaign during the same timeframe in 2006.  Then it opted for smaller-scale marketing, such as videos viewable on kiosks at Acura dealerships, and videos available on an owner's website.

The district court certified a nationwide class asserting claims under California's Unfair Competition Law, False Advertising Law, Consumer Legal Remedies Act, and "unjust enrichment." 

Because Honda did not challenge the district court's finding that "common questions exist as to whether Honda had a duty to disclose or whether the allegedly omitted facts were material or misleading to the public," the Ninth Circuit held that the commonality requirement as described in Wal-Mart v. Dukes had been satisfied. 2012 WL 89176 at *5. 

The court then focused on what law should be applied.  The court began its analysis by holding that California law could have been applied to the class consistent with the Constitution:

California has a constitutionally sufficient aggregation of contacts to the claims of each putative class member in this case because Honda's corporate headquarters, the advertising agency that produced the allegedly fraudulent representations, and one fifth of the proposed class members are located in California.

Id. at *6.  The court reaches this conclusion, however, without analyzing the expectations of the parties whose transactions were conducted wholly out of state.  Shutts taught that, constitutionally, such expectations matter.  Similarly, the court neglected to consider whether the causes of action here -- which are not product liability claims, but instead are all based on representations made (or not made) in the plaintiffs' home states -- really give California standing to assert an interest.  I may be a New York resident, but if I go to North Dakota, make some representations in North Dakota, and ultimately engage in a business transaction in North Dakota, that doesn't give my home state any interest in regulating the transaction, which occurred outside its borders.  I would argue the same is true in Massa.  The claim is not that Honda made a defective product that emanated from California.  Rather, it's that when Honda was in North Dakota dealing with a North Dakota purchaser, it chose not to say things there that it should have said.  That claim has no real nexus with California, other than Honda's citizenship.  And, I would argue, it would be unconstitutional for California to attempt to assert its laws extraterritorially to govern such conduct by its citizen in other states.

Regardless, the Ninth Circuit held that under California's own choice of law principles, "the district court abused its discretion in certifying a class under California law that contained class members who purchased or leased their car in different jurisdictions with materially different consumer protection laws."  Id. at *6.

Honda had briefed the differences in state consumer protection laws, but the district court had ignored them.  The Ninth Circuit concluded that these differences were important:  (1) some states require scienter, (2) some require reliance, while some don't, and (3) states have different available remedies.  Id. at *7.

In analyzing the interest of the competing jurisdictions in having their laws applied, the court recognized that a fundamental principle of federalism is giving a state the authority to regulate the conduct that occurs within its borders.  The Ninth Circuit also pointed out that in the context of consumer protection statutes, you can't simply look to see which state's statute "protects" consumers most.  Rather, these statutes involve a balancing of competing interests -- conducted primarily by the Legislature -- between protecting consumers and providing incentives to attract foreign businesses:

In our federal system, states may permissibly differ on the extent to which they will tolerate a degree of lessened protection for consumers to create a more favorable business climate for the companies that the state seeks to attract to do business in the state. . . . [T]he district court erred by discounting or not recognizing each state's valid interest in shielding out-of-state businesses from what the state may consider to be excessive litigation.  As California's Supreme Court recently re-iterated, each state has an interest in setting the appropriate level of liability for companies conducting business within its territory.

* * *

Getting the optimal balance between protecting consumers and attracting foreign businesses, with resulting increase in commerce and jobs, is not so much a policy decision committed to our federal appellate court, or to particular district courts within our circuit, as it is a decision properly to be made by the legislatures and courts of each state.  More expansive consumer protection measures may mean more or greater commercial liability, which in turn may result in higher prices for consumers or a decrease in product availability. . . . As it is the various states of our union that may feel the impact of such effects, it is the policy makers within those states, with their legislatures and, at least in exceptional or occasional cases where there are gaps in legislation, within their state supreme courts, who are entitled to set the proper balance and boundaries between maintaining consumer protection, on the one hand, and encouraging an attractive business climate on the other hand.

Id. at *8 (citations omitted).  The Ninth Circuit thus held that the district court failed to adequately recognize the interest of each state to applying its own law to the transaction, and further held that "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place."  Id. at *10.

The court next analyzed the predominance of common issues.  The Ninth Circuit held that the class definition -- which was an "all purchasers" and "all lessors" class -- swept into the class too many people who were never exposed to the alleged misrepresentations.  Plaintiffs pushed hard the argument that under In re Tobacco II, a California UCL class is entitled to a presumption of reliance on misrepresentations in advertising.  But the Ninth Circuit said no -- such a presumption of reliance only arises in the context of a "decades long" advertising campaign that not only denies the truth, but represents the polar opposite.  

Honda's advertising campaign fell far short of such an extensive and long-term ad campaign, and the ads did not deny that limitations to the CMBS performance exist.  These differences were significant, according to the court:

A presumption of reliance does not arise when class members "were exposed to quite disparate information from various representatives of the defendant."  California Courts have recognized that Tobacco II does not allow "a consumer who was never exposed to an alleged false or misleading advertising . . . campaign" to recover damages under California's UCL.  For everyone in the class to have been exposed to the omissions, as the dissent claims, it is necessary for everyone in the class to have viewed the allegedly misleading advertising.  Here the limited scope of that advertising makes it unreasonable to assume that all class members viewed it.

In the absence of the kind of massive advertising campaign at issue in Tobacco II, the relevant class must be defined in such a way as to include only members who were exposed to advertising that is alleged to be materially misleading.  The relevant class must also exclude those members who learned of the CMBS's allegedly omitted limitations before they purchased or leased the CMBS system.  The district court certified a class that included all persons who purchased or leased an Acura RL with the CMBS between August 2005 and class certification.  This class is overbroad.  We vacate the class certification decision on this ground because common questions of fact do not predominate where an individualized case must be made for each class member showing reliance.

. . . And even if the class was restricted to only those who purchased or leased their car in California, common issues of fact would not predominate in the class as currently defined because it almost certainly includes members who were not exposed to, and therefore could not have relied on, Honda's allegedly misleading advertising material.

Id. at *12 (citations omitted; emphasis added).

Mazza promises to be an invaluable tool in fighting UCL class actions in federal court.

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As a kid, I was a huge fan of Carnac the Magnificent on Johnny Carson's Tonight Show.  In this first post of the new year, I thought I would channel my inner Carnac to make some predictions about what we can expect in the field of consumer class actions and mass torts in 2012.

1.  Wal-Mart v. Dukes will have tremendous impact on consumer class actions and mass torts.  Despite plaintiffs' attempts to limit the opinion solely to employment discrimination cases, the actual holdings in Dukes go to the fundamental core of class actions.  A unanimous Court said you can't deprive a defendant of its substantive right to challenge the elements of individual class members' claims just to make it easier to have a class.  Similarly, a unanimous Court strongly suggested -- even if the 8th Circuit didn't get it -- that Daubert rules matter at the class cert stage.  And a unanimous Court rejected the use of "trial by formula" rather than proof of actual damages.  These holdings are just as important -- if not moreso -- as the Court's articulation of the commonality standard, and you will begin to see the impact of these Dukes holdings in consumer class action cases this year.

2.  So many courts -- primarily in California -- have struggled to get around the clear preemption analysis in AT&T Mobility v. Concepcion that the U.S. Supreme Court is going to have to take up the issue of class arbitration waivers again.  It may not happen by the end of 2012, but too many courts have shot the bird to the Supremes since Concepcion.  Some argue that the decision does not apply to a particular cause of action under a state statute.  Others just find the whole arbitration provision containing a class action waiver void as against public policy.  But the simple fact is that it is nearly impossible to square these opinions with the very clear preemption analysis in Concepcion, and in the right case, the Court is going to have to issue certiorari to say that it really meant what it said.

3.  Courts may struggle for the right standard by which to judge personal jurisdiction, but plain ole stream-of-commerce theory is dead.  A majority of justices made that much plain in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011).  They just couldn't agree on a new standard.  But we know there must be some purposeful availment in addition to mere awareness that the product might reach the forum.  I believe most courts that find jurisdiction will rely on web presence in the forum as the "plus" factor that shows purposeful availment of the forum's laws.

4.  Prescription medicine plaintiffs will continue to cast their plain old failure to warn claims as "design defect" claims to try to get around the clear bar of the learned intermediary doctrine.  Hopefully, most courts will continue to recognize that medicines are unavoidably unsafe products for which you cannot have a design defect claim.  Indeed, you can't even propose a feasible alternative design, because to do so is to change the product into something else!

5.  Global warming lawsuits seeking to foist on certain industries humanity's collective responsibility for climate change will continue, but the defenses of standing, remoteness, proximate cause and the political question doctrine will continue to be strong defenses.  Because the Supremes dealt only with federal law issues in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527 (2011), courts will still have to work these issues out as matters of state law.  We can expect plaintiffs to win at least one of these cases at a trial court level.  But the sheer magnitude of how far they are attempting to stretch state law should cause appellate courts to be more circumspect.

6.  Product sellers from tobacco to telephones will continue to vigorously defend their commercial speech rights under the First Amendment.  Appellate courts will grapple with these sellers' rights to not be forced to convey government messages about their products where there are other, less intrusive means of achieving the government's purpose.

7.  Plaintiffs will attempt to circumvent the federal preemption for generic medicines recognized in Pliva, Inc. v. Mensing, 131 S. Ct. 2567 (2011), by trying to describe various claims -- such as express warranty claims -- as enforcing voluntarily adopted standards, rather than imposing state law requirements that conflict with federal law.  Plaintiffs will be hard-pressed to succeed on such dubious claims for at least two reasons.  First, the statements they point to will be consistent with what FDA has approved for the label, making plaintiffs' claims conflict with federal law.  And second, it will be very difficult to find statements that were actually material and became part of the basis of the bargain.

8.  The food and beverage industries are going to continue to be a primary target for consumer fraud claims.  Often these suits are fueled by health claims in advertising or on the label.  But increasingly such suits are being brought based on an ingredient in the product.  Although FDA has balked at issuing regulations that fully define when products may be labeled "natural," it has begun enforcement actions against products that use the term and contain synthetic preservatives or other synthetic ingredients.  Expect more of such consumer fraud class actions in 2012.

9.  Although class action suits over head injuries in professional football players may capture the imagination of sports writers and the public, the fact remains that class actions for personal injuries are almost never certified because the individualized issues regarding each class member's alleged injury, causation, and damages predominate over any common issues.  Don't expect 2012 to bring a big class action payday for professional footballers who allege concussion-related harm.

10.  The U.S. Supreme Court's majority and dissenting opinions in Kiobel v. Royal Dutch Petroleum, No. 10-1491, are going to be fascinating reading.  Kiobel, of course, raises the issue of whether legally fictitious entities -- corporations, rather than individuals or Nation-States -- can be sued under the Alien Tort Statute, which dates back to 1789.  The Second Circuit -- looking around the globe to foreign legal precedents -- held that corporations were not subject to ATS suits.  One may imagine that certain Justices who might concur in that result might bristle at relying on foreign legal precedents to get there.  While I'm willing to bet that the result in Kiobel is affirmed, I'll honestly admit that I can't predict what the opinion(s) will look like in reaching that result.

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Still need proof that the U.S. Supreme Court's decision is going to have far-reaching effects in the world of mass torts and consumer class actions?  Look no further than Price v. Martin, No. 2011-C-0853, Slip op. (La. Dec. 6, 2011).

Price was a class action that had been certified by the trial court and affirmed on appeal.  It alleged that the various owners of a wood treatment facility ran it in such a way as to pollute the neighborhood's air, soil and water -- including plaintiffs' properties -- with various chemicals, including dioxin.  The class of over 3,000 people alleged that it had suffered property damage, diminished property values, and increased risk of disease.  It asserted theories of nuisance and negligence.  The class was defined as all people or entities who, from 1944 to the present, owned or were present on property in a defined area who claim property damage and diminished property value.

The Louisiana Supreme Court began its analysis by indicated that it had granted certiorari "to examine whether [the lower] courts engaged in the rigorous analysis required to determine whether this action meets the requirements imposed by law for class action certification."  Slip op. at 5.  The court concluded that they had not, and therefore reversed and remanded the case.

The court explained that Louisiana's class action rules were extensively revised in 1997 to essentially adopt Federal Rule of Civil Procedure 23.  Citing Dukes, the court explained that a class action is an "exception to the rule that litigation be conducted by and on behalf of individual named parties only."  Slip op. at 6 (citation omitted).  That is why there is a rigorous analysis standard on whether the requirements for class certification are met.  And that rigorous analysis, the court explained, often will overlap with the underlying merits of the claim.  Id. at 7 (citing Dukes).

The court bought in to the Dukes formulation of the commonality requirement completely:

The mere existence of common questions, however, will not satisfy the commonality requirement.  Commonality requires a party seeking certification to demonstrate the class members' claims depend on a common contention, and that common contention must be one capable of class-wide resolution--one where the 'determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.' Wal-Mart Stores, Inc., 131 S. Ct. at 2551. . . .

In the context of mass tort litigation, this court has further refined the commonality requirement, stating that, in such cases, 'in order to meet the common cause requirement, each member of the class must be able to prove individual causation based on the same set of operative facts and law that would be used by any other class member to prove causation.'

Id. at 10-11 (citations omitted).  The court, citing Dukes, reiterated that not only must there be a common question that is suitable for classwide resolution, but the proof of commonality must be significant.  Id. at 13.

This class failed the commonality requirement for a variety of reasons.  The facility's owners -- and its operations -- changed significantly over the 66-year period of emissions.  Depending on the date and the nature of the emission, different owners could be responsible.  Moreover, even the legal standards applying to the discharge of the chemicals changed over time, such that "[c]lass members who owned property damaged by emissions in the 1950s will not be able to rely on the same environmental standards invoked by those who own property damaged by emissions in the 1980s."  Id. at 14.  Thus, the "issue of breach will thus turn on different conduct, by different defendants, at different times, under different legal standards."

Citing Dukes, the court also noted that plaintiffs could not prove common causation, i.e., that the facility was the source of dioxin in area attics.  Id. at 15.  The court explained:

Given the multitude of alternate sources of PAHs and dioxins proven to exist in the area in question and the inability of plaintiffs to link those contaminants solely to emissions from the Dura-Wood facility, it is clear that plaintiffs have failed to offer significant proof that causation for each class member will be determined by a common nucleus of operative facts.

Id. at 18.  The court concluded that:

Plaintiffs do not in fact allege that damage has been caused by only one defendant; they allege damage emanated from one facility, but that facility was operated successively and independently by more than one owner over a period of 66 years, providing more than one source of emissions from multiple operations performed according to varying standards of conduct.  [A prior Louisiana case] instructs that, unlike the present case, only mass torts 'arising from a common cause or disaster' are appropriate for class certification. 

Id. at 21.

The court also held that plaintiffs failed to meet the predominance requirement for largely the same reason as why they had failed the commonality requirement.  It also held that the district court erred in finding a class action superior to other methods of adjudication.  But the reasoning seems to implicated adequacy of representation concerns as much as anything.  The court reasoned that by defining the class to include such a long period covering property owners, there were conflicts of interest between present and prior property owners.   The court also found that the need for individual adjudication of so many issues meant the class was not superior because it could not vindicate the public policies underlying class actions.  Id. at 26.

Louisiana thus falls squarely in the camp of states aligned with the U.S. Supreme Court on the rigorous analysis required for class actions, as well as the reinvigorated commonality standard.  And it applies the rule in tort cases -- not just in the employment discrimination context that was at issue in Dukes.  Look for more state court decisions adopting the Dukes approach.

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As many of you know, I participated in a symposium over at SCOTUSblog on the future of class actions in light of the Supreme Court's many class action decisions this term.  There were a number of participants, including Professor Scott Dodson from my alma mater, William & Mary's Marshall-Wythe School of Law.  Professor Dodson's position was that it was unfortunate that the Supreme Court had been so restrictive in its class action decisions; this was contrary to salutary purpose of class actions (to help society and advance public policy) and was, in essence, a form of judicial activism.  Amendments to Rule 23, Professor Dodson suggested, would better be made by the Civil Rules Advisory Committee, not courts.

This argument -- which I've heard before -- rings hollow for me given the history of Rule 23.  Nobody who was actually on the 1966 Advisory Committee that amended Rule 23 to give us the (b)(3) class action could have predicted the explosion of class action litigation that has occurred in the last 45 years.  They believed that class actions were rarely certifiable, but imminently useful where appropriate.  The prerequisites that they built into Rule 23 were designed to restrict certification to only those cases that really warranted certification.  Far from being activist, the Supreme Court's insistence on the application of Rule 23's prerequisites is advancing the goals of the 1966 Advisory Committee.

So, I took the folks at SCOTUSblog up on their offer to respond to a panelist's post.  You can find that response here.   

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A recent appellate decision from California is an excellent example of how common issues can fail to predominate even in property-based public nuisance claims.

In Department of Fish and Game v. Superior Court, No. CO66158 (Cal. Ct. App. -- Third Dist. Aug. 2, 2011), various real property and business owners brought a putative class action against the California Department of Fish and Game for its application of poison to Lake Davis to eradicate an invasive species of fish, the northern pike.  The Department allegedly widely publicized its plan to poison the pike, closed all roads providing access to the lake, and posted blinking signs about the lake's closing on Highway 70.  The lake was closed from September 2007 through January 2008, and it was not re-certified as a source of drinking water until May 2008.  By statute, area residents could present claims to a victim compensation claims board for damages.

Plaintiffs sought certification of three subclasses:  (1) all businesses in the area whose timely claims were rejected by the Department's claims board, (2) all real property owners whose timely claims for the decrease in real property values were rejected by the Department's claims board, and (3) all persons or entities whose timely claims for lost tax revenues or lost economic growth were rejected by the Department's claims board.

The Court of Appeal granted mandamus against the trial court's certification of the classes.

The court first analyzed whether common issues actually predominated.  In concluding that they did not, the court rejected the plaintiffs' proffer of expert testimony purporting to support the use of a classwide economic model or formula to calculate the class members' damages.  Instead, it found that every member of the class would be required to litigate a number of substantial questions about his or her right to recover, even after a judgment on the so-called "common" issues pertaining to all class members.

In determining that the issues of liability and damages could not be determined on a collective basis, the court determined that the different situations of the various putative class members caused individual issues to predominate:

[T]he impact of the 2007 poisoning . . . may be different depending on the particular characteristics and location of each individual parcel.  And, in light of the claims asserted byplaintiffs, these differences are more than just a matter of damages, but go to the fundamental issues of liability.

Slip op. at 17.

The trial court had applied the wrong standard for looking at the expert proof in the action, the Court of Appeal explained.  It had looked at the plaintiffs' experts' reports, concluded that they met the plaintiff's burden of establishing predominance, and then shifted the burden to the defendant's experts to disprove predominance.  But the burden at all times should rest with the plaintiff, the Court of Appeal instructed, and a fear of reaching the "merits" should not prevent the trial court from weighing the expert testimony to determine how the case will have to be tried.

In this instance, as the defendants' expert had explained, an across-the-board formula for damages would not properly take into account individual differences among class members:

'The reasons for this conclusion include the varied nature of the industries within the business community of the Lake Davis Area, the different economic pressures and influence felt by different industries, the differing levels of bookkeeping sophistication and record keeping methodologies used by different businesses and individuals, changes in local economic influences specific to individual businesses but unrelated to the treatment of Lake Davis including changes in contractual relationships, competition, and the labor force among others.  Finally, tourism obviously affects businesses differently and reduced tourism would not have a common impact on all businesses owned by proposed class members.' 

Slip op. at 40 (quoting defendant's expert).

The court of appeals then went through each cause of action, identifying the necessary elements of proof and whether those elements could be proven with common evidence or individual evidence.  It noted that "it is not enough simply to prove there was an average loss per parcel of property" because "[a]ll parcels are, more or less, different," and one "must look at the characteristics of each parcel, the reasonable expectations of the owner and the actual loss."  Slip op. at 49.  the court concluded that the issues of duty, causation, and the amount of damages must be determined on an individual basis.

Particularly in light of the US Supreme Court's recent treatment of commonality and expert testimony in Wal-Mart Inc. v. Dukes -- which is not cited in this opinion -- the California court's decision in Department of Fish and Game is a strong example of a state court focusing on how the case actually would be tried and scrutinizing expert testimony about statistical modeling.

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As many of you recall, I've written a considerable amount about the anticipated opinion in Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (U.S.).  See, e.g., here, and here.  Indeed, in a roundtable discussion over at Point of Law, I even included a wish list of what I wanted the Supremes to bring me from Wal-Mart.

Today, Justice Scalia delivered the opinion.  And it's like an 8-year-old's Christmas morning in my office! 

Dukes was an employment discrimination case in which the Ninth Circuit had affirmed certification of a class of roughly 1.5 million women who worked or had worked for Wal-Mart (in positions from management to custodian) in any of its roughly 3,400 stores across the U.S.  The allegation was that despite Wal-Mart's written non-discrimination policy, its managers (including women) discriminated against women in the exercise of their roughly unfettered individual discretion of whom to promote, demote and fire, as well as how they were compensated.  The class sought injunctive relief, as well as back pay for all class members.  (It disclaimed consequential damages.)

The majority opinion was written by Justice Scalia.  The opinion has a five-justice majority for some parts, and is unanimous in other parts.  Here is what Scalia Claus brought me this morning:

1.  A Unanimous Conclusion That Rule 23 Cannot Eviscerate Individual Defenses:  All nine justices joined in the part of the opinion holding that certification under Rule 23(b)(2) was improper because it included individualized claims for back pay.  A unanimous Supreme Court rejected a common attempt to impose statistical proof to cure the problem of individual defenses:

The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula.  A sample set of the class members would be selected, as to whom liability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master.  The percentage of claims determined to be valid would then be applied to the remaining class, and the number of (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery -- without further individualized proceedings.  We disapprove that novel project.  Because the Rules Enabling Act forbids interpreting Rule 23 to "abridge, enlarge, or modify any substantive right," a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.

Slip op. at 27 (emphasis added; citations omitted).  This means that third-party-payor claims and consumer fraud class actions will not be able to prove causation or reliance using statistical proof like that proposed and rejected in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008) in order to facilitate class certification.  This is BIG NEWS!!!

2.  A Unanimous Conclusion that Individualized Monetary Damages Claims Cannot Be Included in a Rule 23(b)(2) Class:  The Supreme Court brushed aside the whole question of whether money damages are "incidental" to the claims or "predominate," instead instructing that if monetary damages require individualized determinations, they do not belong in a 23(b)(2) class, but instead require the opt-out and notice rights inherent in a Rule 23(b)(3) class.  Slip op. at 21-23.  It refused to decide "whether there are any forms of 'incidental' monetary relief that are consistent with the interpretation of Rule 23(b)(2) we have announced and that comply with the Due Process Clause."  Slip op. at 26.  But this holding will make it very difficult for plaintiffs to continue the practice of attempting to plead cases about money as cases for so-called "equitable relief" with incidental damages.  Indeed, the court made it plain that Rule 23(b)(2) talks about injunctions and declarations, not "equitable relief."  As such, attempts to couch "disgorgement" or other so-called equitable remedies involving money as 23(b)(2) classes should be rejected from this point forward.

3.  Unanimous Dicta on Claim Splitting and the Potential for Issue Preclusion:  In discussing why it was improper for individualized back pay claims to be included in a Rule 23(b)(2) class, the Court observed that doing so "created the possibility . . . that individual class members' compensatory-damage claims would be precluded by litigation they had no power to hold themselves apart from."  Slip op. at 24.  Such as if the class received a judgment that there was no discrimination.  This part of the Dukes opinion will provide strong support for attacking (b)(2) classes that may impact monetary claims as lacking due process protections, and should strengthen classic adequacy-of-representation arguments based on claim-splitting.

4.  A Reinvigorated Commonality Standard:  Many courts had pretty much read commonality out of the Rule 23(a) analysis, concluding that if any common questions existed, the commonality standard was met.  No more.  The Court adopted the late Professor Richard Nagareda's characterization of commonality as the capacity of the class proceeding to generate common answers.  Slip op. at 9.  The Court instructed:

Commonality requires the plaintiff to demonstrate that the class members 'have suffered the same injury.'  This does not mean merely that they have all suffered a violation of the same provision of law. . . .  Their claims must depend upon a common contention -- for example, the assertion of discriminatory bias on the part of the same supervisor.  That common contention, moreover, must be of such a nature that it is capable of classwide resolution -- which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

Id. (citation omitted).

5.  A Strong "Rigorous Analysis" Standard:  Stick a fork in Eisen v. Carlisle & Jacquelin.  It's done!  The majority once again declared that the class action proponent must actually prove each element of Rule 23, and embraced the Falcon "rigorous analysis" standard that courts must use to evaluate that proof.  Moreover, the Court explained:  "[f]requently that 'rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim.  That cannot be helped."  Slip op. at 10.  Finally, the Court interred the long-dead (but often resurrected) canard that Eisen somehow precludes a look beyond the pleadings when deciding whether certification is proper.  Id. at n.6.

6.  A Strong Hint That Daubert Applies at the Class Certification Stage:  Plaintiffs had proffered testimony from a "corporate culture" expert who opined that there was a general policy of discrimination at Wal-Mart, although "he could not calculate whether 0.5 percent or 95 percent of [its] employment decisions . . . might be determined by stereotyped thinking."  Slip op.at 13.  As the Court observed, the "District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings."  Slip op. at 14.  The Court opined:  "We doubt that this is so."  But it did not need to reach the question because the testimony, even if fully credited, was "worlds away from 'significant proof' that Wal-Mart 'operated under a general policy of discrimination.'"  Id.  Below, the Ninth Circuit had refused to apply Daubert to expert testimony on class certification.  It seems unlikely that a court can ignore Daubert principles at class certification now.

So let's see what I had listed at Point of Law prior to the issuance of the Dukes opinion.  It looks like Scalia Claus brought me a majority of what was on my initial list.  Everything that is in Dukes from the original list is marked with an asterisk:

*1. District courts must give rigorous scrutiny to whether the class action prerequisites are met.

*2. Rule 23 is a procedural rule that cannot alter the substantive claims or defenses.

*3. You can’t use a mandatory class to elude the prerequisites for an opt-out class.

4. Money is not an available remedy under Rule 23(b)(2).

5. The canard that the need for individualized damages determinations cannot preclude class certification should be shot.

6. Intra-class conflicts fail the adequacy of representation requirement.

*7. Expert testimony merits particularly close scrutiny at the class certification stage. 

*8. Although courts should not reach to judge the merits at the class certification stage, they must decide merits issues where necessary to determine whether the class action prerequisites are met.

All in all, this was an extraordinarily useful opinion for class action defense counsel -- beyond even employment discrimination lawyers.

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A recent decision denying class certification in two putative class actions brought over a coal ash spill reminds us that numerosity is not a throw-away element of class certification and it cannot be satisfied merely by spouting a number of claimants who "may" be affected by the challenged conduct.  The decision was first reported by Law 360 (subscription required).

In Mays v. Tennessee Valley Authority, No. 3:09-CV-06 (Varlan/Guyton) (E.D. Tenn. May 10, 2011), the plaintiffs asserted a number of causes of action against the defendants because the defendant's dike failed and allowed coal ash to spill into rivers and allegedly harm properties downstream.  The cases were consolidated before a single judge.  One of the classes was defined as all people who owned property on the adjoining the TVA's property or downstream from the plant on the Emory or Clinch rivers on Dec. 22, 2008.  It asserted a private nuisance claim only.  The other class actions originally had asserted claims for personal injury, medical monitoring and property damage, although the class certification motion only sought certification of property damage claims.  The motion originally had been heard by a magistrate judge who issued a report and recommendation against class certification.  The District Court adopted the report and recommendation.

Interestingly, the court stressed that it was required to give "rigorous analysis" to class certification motions and look beyond the pleadings to the merits of the case, if necessary.  Slip op. at 29-30.  Of course, the rigorous analysis standard -- which rejects the misreading of Eisen that some courts have used to justify turning a blind eye to anything related to the merits of the case -- came into play in the Wal-Mart v. Dukes case and may receive further explanation by the Supreme Court in the next six weeks.

The Mays court began its class certification analysis with the numerosity requirement.  As I have lamented in this space before, too many people (courts, lawyers, litigants) treat numerosity as a throw-away requirement.  If there are potentially more than some magic number of claimants (often 40 or 100), some treat numerosity as "established" and can get very upset if a defendant won't concede it.

A word of advice:  don't.

As the Mays court explained, numerosity requires much more than simply counting how many people might have claims.  Rather, the proponent of class certification has the burden of establishing the actual impracticability of joinder.  Slip op. at 11 (citation omitted).  Thus, the court can consider a number of factors, including the ease of identifying and locating class members, their geographical dispersion, and ease of service if they were joined.  As the court explained:

. . . The joinder inquiry, like that required for the entire class certification inquiry, requires a fact-specific analysis that turns on the unique circumstances of each case and not on a single factor, such as the number of potential claimants. . . .

Plaintiffs argue . . . that there are a number of properties within the proposed class definitions where coal ash may be present and that these property owners may want to bring claims against TVA.  However, beyond providing the Court with estimates of the number of potential claimants, plaintiffs have not shown what make joinder impracticable given the large number of individual cases that have been filed and are proceeding to trial, the relatively small geographic area in which potential claimants reside or are located, the publicity surrounding the coal ash spill and this litigation, the close proximity of this Court to the location of the potential claimants, the number of attorneys willing to take these cases, the Court's familiarity with this litigation, the Court's ability to resolve broad legal questions and pre-trial discovery issues, and the procedures put in place for moving these cases forward and toward trial.

Slip op. at 12-13 (citations omitted).  The court also rejected the plaintiffs' argument that some claimants may not be able to afford bringing suit, reasoning that such speculation "is not specific evidence showing or indicating that there are indeed barriers to filing suit that would weigh towards a finding of class certification."  Id. at 13.

The Mays court concluded that although plaintiffs had identified a large number of people who might have been affected by the coal ash spill, they had not met their burden to prove "that joinder of these potential claimants is impracticable, or that potential claimants could not bring suit on their own."  Id. at 14.

The court also found that the plaintiffs were inadequate class representatives because they did not seek certification of (and thus risked losing, through res judicata and issue preclusion) personal injury and medical monitoring claims like the ones they had asserted on behalf of many of the named plaintiffs in their complaints.  The Mays court concluded that claim-splitting matters:

. . . [T]he Court finds that it cannot conclusively determine the res judicata effect of a decision yet to be handed down by this Court.  Such a decision is for the forum presented with the issue if and when it arises.  The Court believes that it can, however, assess the risks of such a determination and weigh it in the Court's consideration of class certification.  Accordingly, given the potential effect of res judicata, the application of which may preclude subsequent litigation under certain conditions, along with the application of the single injury rule, which Tennessee courts appear to follow, the Court finds that whether putative class members could bring these claims in a subsequent suit is, at best, undeterminable. 

Id. at 16-17 (citations omitted).  Because claims that had once been asserted by the putative class representatives have now been abandoned without any indication that the absent class members have willingly abandoned those claims, the court concluded that plaintiffs failed to adequately represent the class under Rule 23(a)(4).

The Mays court also determined that the commonality and typicality requirements were not satisfied because "the ultimate determination of each plaintiff's claim will turn primarily on individualized inquiries into how the coal ash affected each plaintiff's specific property interest.  Given the unique location of each plaintiff's individual property, and the unique situation of each plaintiff and his or her use and enjoyment of the property, individualized inquiries will apply to both the property damage and nuisance claims."  Id. at 22-23.

For similar reasons, the court concluded that the proposed class failed the predominance inquiry of Rule 23(b)(3):

[T]he Court agrees with Judge Guyton that these individualized inquiries, such as whether coal ash is or was present on a specific property, the proximate causation inquiry as to whether nondiscretionary conduct for which TVA can be sued caused coal ash to be present on a specific property, how each plaintiff's property interest and use and enjoyment of property has been impacted by the coal ash, and the extent of each plaintiff's damages, will predominate.

Id. at 26.

The Mays opinion is a strong, workmanlike analysis of each element of the class certification inquiry and what issues will have to be tried.  It is notable because -- even though it arose out of a common incident (a coal ash spill) -- the court recognized that the individual issues involved in establishing liability and damages would make the case unmanageable to be tried as a class action.

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Sometimes I feel like I'm beating a dead horse.  But can the horse really be that dead when a subject continually bears repeating?

Even though it's not written in the rule, one prerequisite to class certification is that the class has a definition that makes class membership objectively ascertainable at the outset of the litigation.  If you can't figure out who will be bound by a final judgment until after the merits are determined, then the class is not properly defined.  Judge Jeremy Fogel recently reiterated this fact in his denial of class certification in Heisler v. Maxtor Corp., 2010 WL 4788207 (N.D. Cal. Nov. 17, 2010). 

Heisler involved a series of complaints about Maxtor's manufacturing and warranty service procedures.  Plaintiffs moved for certification of two classes; one was comprised of California residents and purchasers, while the other was comprised of non-California U.S. residents.  The class definition required merits determinations, and was defined as:

All end-user persons or entities who purchased in the United States, excluding consumers who either lived in or purchased in California, a [Maxtor Hard Drive] sold by Maxtor Corporation or an authorized Maxtor retailer or distributor that have experienced a failure and (a) reported the failure to Maxtor and/or Seagate (the "Reporting" Class) and (b) who did not report the failure to Maxtor and/or Seagate (the "Non-Reporting" Class).

Id. at *1.

The plaintiffs moved for certification.  The trial court first considered and rejected their argument that the court could not reach the merits when deciding the motion, quoting Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 590 (9th Cir. 2010):  "A district court must sometimes resolve factual issues related to the merits to properly satisfy itself that Rule 23's requirements are met."

Next, the court moved to the Rule 23(a) requirements, beginning with numerosity.  It was here that the court addressed the class definition issue:

Here, the ascertainability of the proposed classes is questionable.  Plaintiffs' definition fails to explain clearly what causes a 'failure' of the subject hard drives; and no relevant date range is provided to exclude individuals who may have experienced a failure after expiration of the [one-year] warranty. . . .

Moreover, there is a real concern that the term ["failure"] could be interpreted too broadly, encompassing even hard drive problems resulting from operator error. . . .

Neither the list [of customer complaints] nor the Plaintiffs' proposed class definition includes objective limitations that would exclude temporary failures or failures occurring as a result of factors other than manufacturing defects.

Heisler, 2010 WL 4788207 at *2-*3.

The court also concluded that there was no commonality because plaintiffs could not point to one particular defect.  Rather, they had broad-ranging criticisms of Maxtor's processes, any one of which might have resulted in various kinds of problems.  For example, they claimed Maxtor employees did not employ adequate electrostatic discharge prevention measures.  But they also criticized the defendant's pre-sale testing methods, its procedures for diagnosing returned hard drives, and the hard drives' component parts.  Id. at *3-*4.  The court held that plaintiffs had failed to identify a common specific defect in the manufacturing process, and thus failed the commonality test.

The court observed that plaintiffs also had serious typicality problems, particularly on the issue of whether they had made a timely claim under the warranty.  One plaintiff couldn't locate his receipt.  Another testified that he was aware he was out of warranty when his hard drive failed.  Another broke the seal on the hard drive with knowledge that doing so would void the warranty.  And yet another returned the hard drives for a full refund and suffered no data loss.  The court noted that even though "injury within the warranty period is a threshold requirement in order to bring a claim based upon warranty," it was "far from clear that the named Plaintiffs have suffered a cognizable injury, let alone an injury that is common to the class."  Id. at *5.

The court gave the plaintiffs the benefit of the doubt on the adequacy of representation requirement, it concluded, when analyzing the predominance requirement of Rule 23(b), that "[p]laintiffs cannot meet this standard if issues common to the class are lacking at the outset, as is the case here."  Id. at *6.  The court denied the class certification motion without prejudice to plaintiffs later renewing it.

Heisler is an important reminder that warranty class actions must have objective, ascertainable class definitions at the outset, and that they must be based upon a theory of defect that is truly common to the whole class.

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Colleagues at my firm are involved in this litigation, so I'll stick to brief reportage, but the MDL transferee presiding over Light Cigarette Litigation, Judge John A. Woodcock, Jr., issued an opinion on Wednesday denying class certification for lack of predominance, superiority and/or constitutional standing.  See In re Light Cigarettes Marketing Sales Practices Litig., No. 1:09-md-02068-JAW, Slip op. (D. Me. Nov. 24, 2010).

In the cases, plaintiffs are suing Philip Morris USA and Altria Group, claiming that the marketing for light cigarettes was misleading in that it caused people to think they would consume less tar and nicotene by smoking light cigarettes than they would if they smoked regular cigarettes, when in fact they allegedly would not.  Plaintiffs alleged that smokers "compensated" for the cigarettes' lower tar and nicotene levels by, inter alia, smoking heavier and blocking ventilation holes, so that they ended up consuming the same amount of tar and nicotene as the smokers of regular cigarettes.

The plaintiffs' lawyers were very careful about the classes and claims that they first advanced for class certification.  They moved to certify a class of California residents, asserting claims under the Unfair Competition Law, the Consumer Legal Remedies Act, and the False Advertising Law.  They moved to certify a class of District of Columbia residents under the DC Consumer Protection and Procedures Act and common law unjust enrichment.  They moved to certify a class of Ilinois residents under the Illinois Consumer Fraud Act and common law unjust enrichment.  And they sought to certify a Maine class just under the theory of unjust enrichment.

The court first analyzed the requirements of Rule 23(a), and concluded that the proposed classes met each of these requirements:  numerosity, commonality, typicality and adequacy of representation.  Notably, the court rejected the defendants' argument that plaintiffs -- by splitting causes of action and abandoning personal injury claims and other causes of action for economic harm -- had failed the adequacy of representation requirement.  Slip op. at 25-26.  The court acknowledged the general rule against claim-splitting, but reasoned that personal injury damages are different enough from causes of action for economic harm that the former could not be said to be capable of being obtained in this putative class action.  (The court did not, however, address the fact that many of the causes of action the plaintiffs failed to assert, such as for common law fraud and breach of warranty, were capable of being pursued in the action and would be barred by the res judicata effect of any classwide judgment in the case.)

The court concluded, however, that the predominance requirement of Rule 23(b)(3) was not met because plaintiffs could not establish causation and injury with classwide proof:

Whether the class members were damaged because of the Defendants' misrepresentations is an individual inquiry that cannot be proven on a class-wide basis.  The record contains unrefuted evidence that many light cigarette smokers do not fully compensate when they smoke and that the extent of their compensation can only be predicted by assessing their smoking habits. . . .  If smokers did not fully compensate, they were not injured by the representations because they received lower levels of tar and nicotene.  There is also significant record evidence that many smokers did not believe the Defendant's claims that light cigarettes had lower tar and nicotene and smoked light cigarettes for reasons unrelated to the alleged health benefits. . . .  For these smokers, there is no causal conection between the misrepresentation and the purchases of light cigarettes. 

Slip op. at 28-29 (citations omitted).

In analyzing the argument, the court recognized that Illinois' ICFA, Illinois unjust enrichment, and California's CLRA, all require proof of causation.  Plaintiffs said they could put on classwide proof of causation, but the court disagreed.  The plaintiffs also argued that California's UCL and DC's CPPA, along with the unjust enrichment causes of action in Maine and DC, do not require proof of injury or causation. 

The court conceeded that the elements of unjust enrichment in Maine and DC do not articulate a precise injury and causation requirement.  Nevertheless, the court held that they were inherent in the cause of action:

However, the Plaintiffs do not explaine why it is unjust for the Defendants to retain the money from someone who did not believe their representations when purchasing, did not purchase because of their representations, or received the benefit promised. . . . [Plaintiffs] have not established why, absent injury and causation, the Defendants' 'retention of the benefit is unjust."

Id. at 33.

The court also acknowledged that the DC CPPA and California's UCL purport not to require injury and causation of absent class members.  But the court held that it would be without Article III  jurisdiction to adjudicate a class action for which the claimants had not experienced an injury caused by the challenged conduct:

Here, the proposed classes include class members without standing.  Each state's class effectively includes everyone who purchased light cigarettes in the respective limitations periods, and this group necessarily includes class members who knew light cigarettes were not healthier than other cigarettes, notwithstanding Defendants' alleged representations to the contrary.  Those class members were not injured by the Defendants' misconduct and thus do not have standing. 

Id. at 37.

Importantly, the court also held that the defendants' affirmative defenses -- the statute of limitations and the voluntary payment doctrine -- presented individual issues that could not be adjudicated on a classwide basis and thus prevented class certification.  Id. at 40-41.  Additionally, the court concluded that "[d]espite the strong policy in favor of certification, individual issues of injury, causation, and affirmative defenses defeat the superiority of class treatment."  Id. at 42.  Finally, it found the California plaintiff's claim for certification of injunctive relief under Rule 23(b)(2) failed because it was mooted by the federal Family Smoking Prevention and Tobacco Control Act, which included a prohibition on certain marketing that was "broader than the relief [plaintiff] seeks."  Id. at 43.

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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.

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I knew it was too good to be true.  A few months ago I posted about a decision from the Arkansas Supreme Court that affirmed dismissal of a deceptive trade practices claim because it fell within a safe harbor of regulatory approval.  At the time, I asked if there had been a sea-change in Arkansas class action jurisprudence.  Today, I'm sad to report that the answer is "no."

If there's one thing I learned growing up in Southwest Missouri, it's that everything is just a little bit different in Arkansas.  (Even my friends from Rogers, Arkansas concede as much.)  Apparently that principle goes double for class actions.

At a time when the Supreme Court, most federal Circuit Courts of Appeal, and many state supreme courts have held that due process requires a rigorous analysis of how a case is actually going to be tried before a class can be certified, Arkansas continues to instruct its trial courts to retreat from any sort of reality that touches upon the substantive elements of a claim.  See Rosenow v. Alltel Corp., 2010 WL 199247 (Ark.  Jan 21, 2010).  

In Rosenow, a customer sued his mobile phone service provider for damages allegedly resulting from the early termination fee in its standardized customer contract.  Plaintiff asserted on behalf of those who paid the early termination fee a putative statewide class action for violation of Arkansas' Deceptive Trade Practices Act and for common law unjust enrichment.

The trial court rejected class certification, holding that although a number of elements of Rule 23 had been met, the commonality, predominance and superiority requirements were not met.  In doing so, the trial court had relied upon the defense expert's testimony that determining whether the early termination fee (i.e. liquidated damages provision) was a reasonable approximation of the defendant's damages would be an individualized inquiry that would make the class unmanageable.

The Arkansas Supremes reversed, articulating a theory of class actions that is just a little bit different than anywhere else.  According to the Arkansas Supremes, so long as there are common issues, the class should be certified for trial of those issues even if it must later be bifurcated into a second phase of individual trials over things like damages, and in deciding whether the class action prerequisites are met, courts should not inquire into defenses to plaintiffs' claims, as that is an impermissible inquiry into the merits of the case:

In this case, Appellant alleges that the common wrong giving rise to this litigation is that the Appellees engaged in an unfair and deceptive business practice of imposing the early termination fee.  Appellant further asserts a laundry list of common questions of law and fact that stem from this alleged common wrong.  There must be a determination on these common issues.  The mere fact that individual issues and defenses may be raised regarding the recovery of individual members cannot defeat class certification where there are common questions concerning the defendant's alleged wrongdoing which must be resolved for all class members.  Moreover, an attempt to raise defenses at this stage is an attempt to delve into the merits of the case. . . .

* * *

This court has further said that if a case involves preliminary issues common to all class members, predominance is satisfied even if the court must subsequently decertify a class due to individualized damages.  However, if the preliminary issues are sufficiently individualized, then predominance is not satisfied and class certification is improper.  Indeed, a case that presents numerous individual issues regarding the defendants' conduct, causation, injury and damages will best be resolved on a case-by-case basis.  Stated another way, predominance does not fail simply because there are individual issues that may arise; the central question to be resolved by the circuit court is whether there are overarching issues that can be addressed before resolving individual issues. . . .

* * *

Here, by focusing on the merits of the case, the court noted that it might be necessary to conduct thousand[s] of mini-trials that would overwhelm its docket and thus concluded that the superiority requirement was not satisfied.  However, as we have explained, the circuit court's reasoning was based on an impermissible evaluation of the merits of this case.  Accordingly, the circuit court abused its discretion in finding that the requirement of superiority could not be satisfied.

Id. (citations omitted).  Because the defense expert's testimony addressed issues of how to prove damages and the reasonableness of the liquidated damages as compared to actual damages, the Arkansas Supremes concluded that it was concerned with the underlying merits of the case and the trial court had abused its discretion in refusing to strike such testimony.

Of course, Rule 23 is a procedural device that is not intended to change the substantive elements of underlying claims or defenses viz a viz any individual class member.  See, e.g., Compaq Computer Corp. v. LaPray, 135 S.W.3d 657 (Tex. 2004).  By wholly ignoring how the defendant will prove its defenses with respect to each class member in a classwide trial, the Arkansas approach effectively alters substantive elements of the defenses -- which is not what the drafters of Rule 23 intended.  Thankfully, Arkansas remains an outlier jurisdiction, and the trend toward rigorous analysis of how the case will actually be tried -- both the causes of action and the defenses -- remains the norm in class action jurisprudence.

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It's hardly news when another court refuses to certify a personal injury class action.  These days, it's almost a given that such litigation presents too many individual issues of fact to meet the predominance standard of Rule 23(b)(3).

But the recent decision from Judge Terrence Boyle in the Panacryl Sutures Multidistrict Litigation is notable for its considerable discussion of the choice of law problems presented by such claims.  See In re Panacryl Sutures Prods. Liab. Cases, No. 5:08-MD-1959-BO, Slip op. (E.D.N.C. Nov. 13, 2009).  In this case, plaintiffs alleged that they suffered personal injuries as a result of having been implanted with absorbable surgical sutures that were designed to remain in the body for 24-36 months after surgery to provide wound support.  The sutures had been the subject of a Class II recall by the defendant.  Plaintiffs alleged that they were prone to cause a high rate of infection, and that the defendant failed to warn of that fact.  Interestingly, the opinion never once quotes the proposed class definition, but we know that it was a putative nationwide class with representatives from North Carolina, Wisconsin, and Arkansas.

The court began its analysis with the choice of law issue, and it took the plaintiffs to task for not having provided a comprehensive survey of the substantive laws potentially applicable to all class members' claims, holding that they failed to carry their burden of proving that common questions of law predominate.  Slip op. at 4.

Nevertheless, the court completed the analysis, noting the differences in the substantive laws of the various states, and examining the factors identified in Section 6 of the Restatement (Second) of Conflict of Laws to determine what law governs in a tort action.  The court rejected the plaintiffs' suggestion that the law of the manufacturer's residence should govern, instead holding that the interests of the class members' home states in protecting their residents from in-state injuries caused by foreign companies outweighed New Jersey's interest in regulating domestic corporations.  Slip. op. at 6-7.  It noted that plaintiffs would not likely have imagined that their claims could be governed by foreign New Jersey law, and that the defendant had to expect to be subject to the laws of all jurisdictions in which it sold products.  The court also held that the plaintiffs' home states were where the injuries occurred, where the conduct causing the injury (sale and marketing) occurred, and where the relationship between the defendant and the plaintiffs was centered.  Id. at 9.

The court also cited a recent New Jersey Supreme Court decision -- Rowe v. Hoffman LaRoche, Inc., 917 A.2d 767 (N.J. 2007) -- in which the court held that applying New Jersey law to a Michigan plaintiff's claims merely because the drug was made in New Jersey "completely undercuts Michigan's interests, while overvaluing our true interest in this litigation."  Accordingly, the court held that the law of each class member's home jurisdiction would apply to his or her claims.

The court found that the numerosity and commonality requirements of Rule 23(a) were satisfied, but the conflict of laws problem required a finding that the typicality and adequacy of representation requirements of Rule 23(a) were not satisfied.  Slip op. at 12-14.

In analyzing the predominance requirement of Rule 23(b)(3), the court noted that "[c]ourts have generally found that common questions of fact do not predominate in medical products liability cases."  Id.  But beyond the individual fact issues trumping the predominance of any common issues, the conflict of law issues also required the same result.  Indeed, once again the court took plaintiffs to task for failing to provide an "'extensive analysis' of the laws of the interested jurisdictions showing that variations among the applicable state laws do not pose 'insuperable obstacles" to class certification."  Id. at 15.

Judge Boyle also rejected a proposed trial plan that would have used "issue classes" to decide common issues even though Rule 23(b)(3)'s requirements were not satisfied.  In the proposed trial plan, "Phase One" would have addressed "common issues of liability and general causation," and "Phase Two" would have consisted of "individual trials to determine specific causation and damages."  Id. at 18.  In rejecting the plan, the court stated:

But Rule 23(c)(4) may not be used to manufacture predominance for the purposes of Rule 23(b)(3).  Plaintiffs' trial plan does not eliminate the necessity of applying the laws of several jurisdictions or the individualized inquiry into whether Panacryl Sutures caused each plaintiff's injuries.  And even under Plaintiffs' proposed trial plan, the difficulty of applying the laws of several states to issues of liability and general causation would remain.

Id. at 19.

Judge Boyle's opinion is an excellent recent example of a trial court confronting head-on the proof problems presented by a personal injury class action and refusing to vary the substantive law (including the elements of causes of action, as well as individual defenses) just to achieve the so-called "procedural efficiency" of a classwide trial.

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One of my all-time favorite bartenders, Howie, just can't believe what I do for a living.  "You mean you defend cases brought by a bunch of people who weren't hurt and didn't have their product break on them," he asks incredulously.

"For a lot of my cases, that's pretty much it."  I respond.

"So what kindof money do they think they're going to get outta these class actions?"

"Well, Howie, sometimes they want everybody who bought the product to get all of their money back.  And sometimes they just want the difference between the value of what they thought they were buying and the so-called "diminished value" of what they actually bought.  And again, they want this for everybody who bought the product, which can be a lot of money."

"Aww, that's ridiculous," Howie says.  Shaking his head and pouring another round, he consoles me:  "Well, Cuz, with cases like that out there for you to defend, at least you ought to win a lot!"

I'll enjoy telling Howie this weekend about Williams v. Nidek Co., Ltd., 2009 WL 226024 (Cal. App. -- 4th Dist. Feb. 2, 2009).  Fortunately, the court in Williams got it right, affirming the denial of class certification.  But the claims in Williams go a long way toward demonstrating everything that is wrong with consumer class action practice today. 

The plaintiffs in Williams had undergone Lasik surgery on their eyes to achieve hyperopic corrections (i.e., corrections for far-sightedness).  The Nidek laser that had been used during their surgeries had not yet been approved by the FDA for hyperopic correction.  (It subsequently was in 2006.)  Plaintiffs claimed that Nidek and plaintiff's doctors violated a host of statutes by "concealing" from plaintiffs that the Nidek laser was not approved by the FDA for this particular kind of Lasik surgery.  But plaintiffs admitted that they had not relied on any representations from the doctors about FDA approval, and they conceded that they "do not contend they were disappointed in the results of the surgery."  Id. at *6.  Indeed, plaintiffs defined a California residents class and a nationwide class, both consisting of people who had had the surgery, but who had not suffered personal injuries.  Id. at n.8. 

Yes, you read that right:  the putative class members were perfectly satisfied with the results of their surgeries and had not been physically injured.  Still, they wanted money back:  either "the entire cost of the surgery (because they did not receive what they had been promised) or, alternatively, the difference between the value of what they had been promised (surgery on an approved Laser) and what they received (surgery on a nonapproved Laser)."  Id. at n.14.

Of course the reason consumer class actions like Williams are pled to exclude the very people, if any, who may have been injured is that including them in the class would present too many individual issues, making class certification inappropriate.  So instead, plaintiffs plead it as a straightforward fraudulent concealment claim for economic harm, thinking that doing so will make it seem like there are fewer individual issues that would predominate a trial of the action.

California's class action rule doesn't mirror the federal Rule 23 exactly, but as it has been interpreted by California's courts, its elements are similar.  In particular, the common issues to be tried on a classwide basis need to predominate over the issues that require individual determination for each class member.  The trial court in Williams concluded that they did not, and the Court of Appeal affirmed.

As the court observed, the bulk of plaintiffs' claims were misrepresentation claims; they "turned on the assertion that the physicians misrepresented the Lasers as appropriate or approved for hyperopic procedures, or intentionally concealed (or negligently failed to disclose) that the Lasers were not approved for such treatments, and/or conspired to engage in such conduct."  Id. at *9.

But as the Court of Appeal recognized, "plaintiffs' misrepresentation/concealment/nondisclosure claims would have required a mini-trial to assess each permutation of the representations made to each class member by 60 to 70 doctors or their staff . . . and required an examination of the informed consent forms signed by the patient, and/or each patient's discussion with his or her doctor or staff, and whether [Nidek's Patient Information Booklet] had been given to some patients by some physicians."  Id. (emphasis in original).  Nidek had distributed, as required by the FDA, a booklet explicitly advising patients that the Laser was not approved for hyperopia.  Id. at n.13.  Moreover, even the named plaintiff's doctor had a patient's informed consent form disclosing that the FDA had not yet approved the Laser for hyperopia.

As the Court of Appeal recognized, these patient-specific mini-trials "would be further complicated by the fact that the physicians making (and the patients receiving) the representations spanned an approximately seven-year period," making "mini-mini-trials" on statute of limitations and tolling issues necessary for each class member.  Id. at *10.  Also, issues inherent to the 60-70 doctors potentially would be added to the mix.

Moreover, by adding the distributor, Nidek -- which had had interactions with many of the doctors, informed them that the hyperopic use was unapproved, and asked them to install software that would prevent use of the Laser to treat hyperopic conditions -- mini-trials also would be necessary addressing Nidek's dealings with each physician.

Even the damages inquiry would require individual mini-trials because the measure of damages required comparing the amounts paid and the value actually received by each patient.  Id. at *11.

The Court of Appeal in Williams clearly reached the right result by affirming the denial of class certification.  And yet it's disappointing that such a frivolous lawsuit had to go even that far:  through costly discovery, dispositive motion practice, and ultimately a class certification hearing. 

Just try explaining to Howie why this suit wasn't easily dismissed at the outset.  If you can do that, the next one's on me.

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