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

I've previously opined on this blog and elsewhere that global warming litigation -- at least cases in which individuals seek damages from companies that emit greenhouse gasses -- has no leg to stand on because causation is so attenuated and the issue is tied up with important political questions that are committed to the expertise of federal agencies like the EPA, as well as Congress.

My viewpoint was confirmed a few years ago in a case called Comer, in which a Mississippi federal court dismissed a class action filed by Hurricane Katrina victims who sought to blame their loss on various energy and mining companies.  The trial court had held that the chain of causation was too attenuated to confer constitutional standing on the plaintiffs, and it further held that the case should be dismissed under the political question doctrine because it required the federal court to decide policy questions about greenhouse gas emissions that were committed to the province of the political branches.

Comer had a curious subsequent history.  Plaintiffs appealed to the Fifth Circuit, where they won a partial victory, with the appellate court reversing the judgment on the state law claims of public and private nuisance, trespass, and negligence.  The defendants, however, petitioned for rehearing en banc, and the Fifth Circuit granted the petition and vacated the three-judge panel's decision.  Then, a Fifth Circuit judge was recused, resulting in the loss of a quorum for an en banc panel to act.  The Fifth Circuit thus dismissed the appeal and reinstated the District Court's opinion.  Plaintiffs did not petition the U.S. Supreme Court for certiorari, but instead petitioned for a writ of mandamus to require the Fifth Circuit to reinstate the appeal.  The Supreme Court denied plaintiffs' petition, and thus the District Court's opinion dismissing the lawsuit remained the law of the case.

In May 2011, Ned Comer and the other plaintiffs filed a virtually identical lawsuit in the same District Court asserting the causes of action the three-judge panel had said should have been remanded:  public and private nuisance, trespass, and negligence.  Plaintiffs sued the same defendants, and added a few more.  Feeling as if it was Groundhog's Day, the defendants once again moved to dismiss.

Yesterday the court issued an opinion unsurprisingly granting the defendants' motion to dismiss.  See Comer v. Murphy Oil USA, Inc., No. 1:11CV220-LG-RHW, Slip op. (S.D. Miss. Mar. 20, 2012).  The court's primary holding is that the suit is barred by the doctrines of res judicata and collateral estoppel.  The 11 plaintiffs in Comer I are the same plaintiffs who have brought Comer II.  The district court's order in Comer I was a final order dismissing the case for lack of jurisdiction, which is a decision on the merits for the purposes of res judicata.  Plaintiffs had a full and fair opportunity to argue the issue in the first suit.  The two suits involve the same "transaction," namely damages arising out of the occurrence of Hurricane Katrina.  Moreover, the admitted purpose of the second lawsuit is to convince the court that it was wrong in the first lawsuit.

The district court's res judicata holding should have ended the issue.  However the court, "out of an abundance of caution," went on to address the defendants' additional arguments.

The court held that plaintiffs lacked Article III standing to assert their state law claims.  The court focused on the causation element of the standing inquiry.  It noted that the U.S. Supreme Court found that a state had standing to bring a lawsuit to force the EPA to issue greenhouse gas regulations in Massachusetts v. EPA, 549 U.S. 497 (2007).  However, the Supreme Court gave special deference to a state  suing in its capacity as a quasi-sovereign, and expressly reserved the question of whether an individual would have standing to bring a global warming claim.  Moreover, the Supreme Court had acknowledged that causation regarding greenhouse gases emissions was a difficult global problem, and that any domestic reductions in emissions likely would be offset by increases in developing countries.

The district court also observed that in American Electric Power Co. v. Connecticut, 131 S. Ct. 2527 (2011), the Supreme Court was equally divided on the question whether states had standing to file lawsuits against corporations to reduce greenhouse gas emissions, and it expressly reserved the question whether individuals could assert such standing.

The plaintiffs in Comer II relied on authorities under the Clean Water Act finding standing where the defendants were merely alleged to have contributed to plaintiffs' injuries.  The district court distinguished their authorities, relying in part on Native Village of Kivalina v. Exxonmobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009), which had explained that CWA cases only find "contribution" standing where a presumption of standing arises as a result of a defendant's violation of federally-mandated pollution limits.  Where, as here, there is no such federally-mandated limit on greenhouse gases (and thus no such violation), no presumption can arise.  Moreover, even the CWA cases recognized that a point of discharge can be too remote from the plaintiff's injury to be legally recognized as a contributing cause.  See slip op. at 21-22 (citing Friends of the Earth, Inc. v. Crown Cent. Petrol. Corp., 95 F.3d 358 (5th Cir. 1996) (plaintiffs whose injury was 18 miles from discharge did not have standing to sue over the discharge)).

Ultimately, the Comer II court recognized, even plaintiffs admit that global warming is attributable to numerous natural and man-made causes that interact cumulatively over the period of centuries to create climate effects:

The plaintiffs cannot allege that the defendants' particular emissions led to their property damage.  At most, the plaintiffs can argue that the types of emissions released by the defendants, when combined with similar emissions released over an extended period of time by innumerable manmade and naturally-occurring sources encompassing the entire planet, may have contributed to global warming, which caused sea temperatures to rise, which in turn caused glaciers and icebergs to melt, which caused sea levels to rise, which may have strengthened Hurricane Katrina, which damaged the plaintiffs' property.

It is insufficient for the plaintiffs to allege that the defendants' emissions contributed to the kinds of injuries that they suffered.

Slip op. at 20-21.  The court concluded that such tenuous causation should not allow plaintiffs to send the defendants on a discovery odyssey "that will likely cost millions of dollars."

The district court in Comer II also held that plaintiffs' claims were non-justiciable under the political question doctrine as established in Baker v. Carr.  Plaintiffs argued that Massachusetts v. EPA had rejected that argument.  But the district court held that Massachusetts v. EPA was fundamentally different because it involved the proper construction of a congressional statute.  Here, the policy judgments regarding greenhouse gas emission levels were expressly committed to the EPA.  Indeed, the district court noted, the Supreme Court had stated "that it possessed neither the expertise nor the authority to evaluate the policy judgments that EPA offered as justification for refusing to regulate motor vehicle emissions, such as issues involving foreign relations."  Slip op. at 26.  The Comer II court concluded:

[T]he plaintiffs are asking the Court, or more specifically a jury, to determine without the benefit of legislative or administrative regulation, whether the defendants' emissions are "unreasonable."  Simply looking to the standards established by the Mississippi courts for analyzing nuisance, trespass, and negligence claims would not provide sufficient guidance to the Court or a jury. . . .

. . . The Supreme Court held that judgments concerning the reasonableness of greenhouse gas emissions are properly committed to the EPA, and if district courts were to make such judgments, those judgments would interfere and potentially conflict with the EPA's actions.

. . . The Court finds that the claims presented by the plaintiffs constitute non-justiciable political questions, because there are no judicially discoverable and manageable standards for resolving the issues presented, and because the case would require the Court to make initial policy determinations that have been entrusted to the EPA by Congress.

Slip op. at 28-29.

The district court in Comer II also concluded that plaintiffs' state law causes of action are preempted by the Clean Air Act and the EPA actions that it authorizes, relying primarily on American Electric Power Company v. Connecticut.  That case had held that the CAA preempted a federal common law right to seek abatement of carbon dioxide emissions from power plants.  The Comer II court reasoned that plaintiffs' state law claims here required the court to do the same thing the federal common law claim would have in Connecticut:  determine the reasonableness of the defendants' greenhouse gas emissions.  Accordingly, it held that the state law claims were similarly preempted.

The district court in Comer II also held that plaintiffs' claims were barred by Mississippi's three-year statute of limitations.  Katrina had hit in 2005, but the lawsuit was filed in 2011.  Plaintiffs argued that Mississippi's savings statute operated to toll the statute of limitations.  The savings statute gives a plaintiff a year to commence a new suit where the prior suit has been dismissed or abated because of a defect or other matter not affecting the merits.

The district court held the savings statute did not apply because there was a judgment of dismissal with prejudice entered in Comer I.  Plaintiffs could have asked the U.S. Supreme Court for a writ of certiorari, but they did not.  Accordingly, the judgment was final.

There is, however, a slim reed of hope for plaintiffs to file a Comer III.  In ruling on the statute of limitations, the court concluded that plaintiffs' allegations about their future risk for more severe storms and loss of property are not yet actionable, in part because plaintiffs did not seek injunctive relief.  "As a result, the Court finds that the only actionable claims filed by the plaintiffs are the claims concerning Hurricane Katrina, and those claims are barred by the statute of limitations."  Slip op. at 33.  Could another storm or another theory of injury produce a Comer III?  It shouldn't.  But with these Plaintiffs, who knows?

Finally, the district court granted the defendants' motion to dismiss regarding proximate cause, which is a required element of each of plaintiffs' state law claims.  Mississippi defines proximate cause as a cause "'which in natural and continuous sequence unbroken by any efficient intervening cause produces the injury and without which the result would not have occurred.'"  Slip op. at 34 (citation omitted).  The court held that plaintiffs' theory couldn't meet this standard as a matter of law:

The assertion that the defendants' emissions combined over a period of decades or centuries with other natural and man-made gases to cause or strengthen a hurricane and damage personal property is precisely the type of remote, improbable, and extraordinary occurrence that is excluded from liability.

Slip op. at 35.

Judge Louis Guirola's opinion in Comer II is a strong reminder of the many difficulties that private plaintiffs would have trying to impose legal liability on companies for the purported effects of global warming.  Although I do not expect plaintiffs' counsel to simply vacate the field in the wake of this opinion, the strength of the arguments against liability suggest why there has been no great rush of firms to file suits asserting these theories of liability.

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I live and work in the middle of New York City, where even Helen Keller would immediately discern that it's Christmas.  Street decorations, store displays, carols blaring, Santas ringing, chestnuts roasting, slack-jawed tourons sporting gaudy Christmas sweaters, and multiple Grinches posing for pictures with them in Times Square at five bucks a pop. 

Yes, it's that time of year when we are extorted into giving extra cash to people to ensure they keep doing their jobs -- even the sleepy garage guy who lowered the door on my car at midnight, causing $2,000 of damage.  (How much should I pay him this year to stay awake and alert?)  And we buy presents for everyone we know, even though it's allegedly the birthday of only one dude, Jesus. 

He is credited with having said that "it is more blessed to give than to receive."  Acts 20:35.  Clearly, he had received presents from friends and family who were a lot like mine.  You know, the kind of presents you couldn't possibly give to goodwill, because it would break your heart to see some unfortunate soul actually wearing them.

Try as I might, I can't convince my loving family and friends to refrain from giving me presents, or to give a donation to the charity of my choice.  So I have resorted to the dreaded Christmas/Birthday List.  (Yes, Jesus and I are both Saggitarians, although I don't share Jesus's misfortune of having my birthday fall right on Christmas.)

The problem with enforcing rigid compliance with The List is that one must actually spend the time to find items to put on The List that you'd actually want and your family would actually buy.  (Unlike Jesus, I come from serious teetotalers and, as a result, no matter how many times I put Pappy Van Winkle bourbon on The List, I won't receive it.  Indeed, my Baptist relatives are more like anti-Christs in this one important respect:  they turn Perrier-Jouet into Perrier.)  

I have to believe that I am not the only person with this problem.  So this year, I've decided to include in the month of December a series of posts called "All I Want for Christmas Is . . .," which will bring to your attention some items that you might actually appreciate receiving, and thus could put on your own List.

First up is the new book Drug and Device Product Liability Litigation Strategy (Oxford 2011), by Mark Herrmann and David B. Alden.  One of the reasons that I like this book is that it not only is useful for attorneys who are new to drug and device litigation, but it also has plenty of insight and handy resources for those of us who have more than a little grey in our beards.  (You, too, ladies.)

In fact, much of what is in the book is practical advice that would be useful for any litigator.  For example, after a discussion about the regulatory process applying to drugs and medical devices, the authors include a chapter on "pre-litigation counseling," which has some good suggestions for how to talk to clients about avoiding the creation of documents that can become plaintiffs' exhibits at trial.  It also discusses how to plan for the need to retain documents and how to ensure that the attorney-client privilege is protected.

The treatise addresses not only the legal theories underlying these cases, but the ever-important procedural problems of removal, consolidation, class actions, and aggregation.  It has a particularly instructive chapter on MDL proceedings, including a discussion of the JPML's history of granting and denying MDL consolidation.  If you anticipate facing MDL issues, you really must read this book.

This book really has it all.  It analyzes discovery, expert witnesses, motions in limine, jury selection and trial.  It even tries to make sense of the Supreme Court's preemption jurisdprudence, lays out the rationale underlying the learned intermediary doctrine and categorizes the cases that have chipped away at it.  You really should see the table of contents.

Besides its ambitious scope and depth, what really pleases me about this book is that it is written so well.  I know Mark Herrmann to be a master of the short, pithy sentence that even a layman could understand.  I was not familiar with David Alden's prior writings, unfortunately.  But together, Hermann and Alden have written a book that is both easy to read and chock full of information.  That's no small feat.  (And given how busy I know Herrmann to be, I largely credit Alden with that achievement.)

So put this on The List.  Tell the family it can be bought with a few clicks from the publisher, Oxford.  Sure, $250 for a 458-page paperback may seem a little expensive, but it's worth it.  Besides, Herrmann probably has a sailboat on The List this year and needs the help. 

**Federal Trade Commission note:  I received an advance copy of this book so that I could actually read it before reviewing it upon its release.  As a result, I did not put this book on my List and no one has to spend money to get it for me.

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Food companies increasingly are being hit with claims about their labeling.  "You may have included this particular ingredient on your label, and you may have accurately reported how much of it is in your product," plaintiffs' counsel seem to be saying, "but we want you to pay us huge sums of money because you didn't tell us where the ingredient came from."  Diplomatically speaking, such claims are horse puckey.

That's why it's fitting that Judge Posner's recent decision affirming dismissal of such a claim came in a suit about fiber.  See Turek v. General Mills, Inc., No. 10-3267, Slip op. (7th Cir. October 17, 2011).  In Turek, plaintiff sued the makers of certain brands of "chewy bars," including Kellogg's chocolate-chip chewy bar called "Fiber Plus."  The Nutrition Facts on the package discloses that a serving contains 9 grams of dietary fiber, and that this is 35% of a person's Daily Value of dietary fiber.  The front of the package touts, "35% of your daily fiber."  

The fiber in these chocolate chip chewy bars is inulin that has been extracted from chicory root.  In fact, it's listed that way in the ingredients right on the Nutrition Facts on the label.  Plaintiff claimed that such fiber is somehow inferior to the unprocessed fiber found in bananas, onions, leeks, Jerusalem artichokes and other veggies.  She alleged that it causes some people to have stomach problems and can be harmful to women who are pregnant or breast feeding.  And thus plaintiff sued under the Illinois Consumer Fraud and Deceptive Practices Act, alleging that the Act is violated and consumers are defrauded by the defendants' failure to disclose that the inulin is not "natural," but instead is processed.

The trial court had dismissed the case for lack of federal subject matter jurisdiction, based on its conclusion that the claims were preempted by the federal Nutrition Labeling and Education Act. 

Judge Posner, writing for a unanimous panel of the Seventh Circuit, said the trial court had gotten it only partially wrong.  Yes, the claim was preempted, but the disposition should have been a dismissal on the merits under Rule 12(b)(6), rather than a dismissal for lack of jurisdiction.

The NLEA disclaims any intent to occupy the field of food product labeling.  Nevertheless, it does preempt state law claims by prohibiting states from imposing any requirement respecting a food label that is not identical to the requirement of section 343(r) of the Food, Drug, and Cosmetic Act.  Thus, a state may impose penalties for violating a federal requirement under section 343(r), but it cannot require anything different than federal law.  Slip op. at 5.  As Judge Posner explained,

It is easy to see why Congress would not want to allow states to impose disclosure requirements of their own on packaged food products, most of which are sold nationwide.  Manufacturers might have to print 50 different labels, driving consumers who buy food products in more than one state crazy.

Slip op. at 6.

The court then looked at federal regulations governing labeling regarding fiber.  They require disclosure of the amount of dietary fiber contained in each serving size, but do not require any statement regarding whether it is "natural" or processed.  Accordingly, plaintiff's claims are preempted because they would require different labeling than the federal law.  Judge Posner conceded that the disclaimers plaintiff proposed might be consistent with the federal regulatory scheme, but "consistency is not the test; it identity is."  Slip op. at 7-8.  Because the state law claim imposed requirements that were not identical to federal law, the state law claim was preempted.

Judge Posner also noted that even if plaintiff's claim had not been preempted, it would have been subject to dismissal under Illinois law because ICFA has a safe harbor provision for actions that are specifically authorized by a regulatory body or federal or state law.  Because "[t]he representations on the packaging of the defendants' chewy bars concerning dietary fiber are specifically authorized by the federal statutes and regulations that we've discussed," there could be no consumer fraud claim brought under ICFA.  Slip op. at 8.

Judge Posner's decision in Turek -- dumping the putative fiber class -- makes tremendous sense.  It remains to be seen, however, whether it will have the effect of flushing similar cases against food companies from the system.

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It's amazing the lengths some courts will go to get around U.S. Supreme Court decisions holding that the Federal Arbitration Act preempts laws that seek to place conditions on or otherwise thwart agreements to arbitrate consumer contracts.

Recently, the Ninth Circuit held that actions of the Federal Trade Commission taken under power delegated to it by the Magnuson-Moss Warranty Act effectively preclude the use of pre-suit binding arbitration with consumer products that have written warranties to which the MMWA applies.  See Kolev v. Euromotors West/The Auto Gallery, No. 09-55963, Slip op. (9th Cir. Sept. 20, 2011).  In Kolev, the plaintiff bought a used Porsche that allegedly developed serious mechanical problems during the warranty period.  The plaintiff sued for breach of express and implied warranties, as well as breach of contract.  The defendant pointed to the mandatory arbitration provision in the sales contract, and the District Court granted a motion to compel arbitration.  It later confirmed the arbitrator's award.

A split panel of the Ninth Circuit reversed.  It expressly acknowledged that the text of the MMWA does not specifically prohibit binding arbitration clauses.  The FTC, however, had issued a rule providing that the decisions of any pre-suit informal settlement procedure would not be legally binding on any person.  The majority gave this rule Chevron deference, stating that it was consistent with congressional intent, the purpose of the statute (in protecting consumers from being forced into contracts of adhesion), and had been the FTC's interpretation of the statute for more than 35 years.

The majority noted that both the Eleventh and Fifth Circuits have reached a different conclusion, holding that the FTC's construction of the MMWA is unreasonable in light of the Supreme Court's repeated holdings that Congress created a liberal federal policy favoring arbitration when it enacted the FAA in 1924, more than 50 years before Congress enacted the MMWA in 1975.  Slip op. at 17801-17802 (citing cases).  The Ninth Circuit majority rejected these holdings because: (1) it viewed the prior statute, the FAA, as "less specific" than the later MMWA, (2) it found the FTC's interpretation "reasonable," and (3) the MMWA differs in certain respects from other statutes that the Supreme Court has found to be trumped by the FAA.  Slip op. at 17804.

Judge N. Randy Smith dissented vociferously.  First, he argued that the majority got it wrong in interpreting the FTC's regulation.  Binding arbitration is not an "informal dispute settlement procedure" to which the FTC's rule even applies, and it does not meet the FTC's extensive regulations for IDSMs.  (The FTC has a number of requirements for pre-suit informal dispute settlement mechanisms.  Where a manufacturer establishes such a mechanism, the buyer must engage in the mechanism as a prerequisite to filing suit.  Interestingly, the same panel of Ninth Circuit judges issued a split opinion on the same day as Kolev, addressing whether that prerequisite goes to the court's subject matter jurisdiction.  See Maronyan v. Toyota Motor Sales, Inc., No. 09-56949, Slip op. (9th Cir. Sept. 20, 2011).)

Rather than being a pre-suit settlement mechanism, the sales contract at issue in Kolev made arbitration a binding alternative to litigation, not some sort of prerequisite to suit.  Slip op. at 17809 (Smith, J., dissenting).  And even the FTC has acknowledged that "nothing in the Rule precludes the parties from agreeing to the use of some avenue of redress other than the [IDSM] if they feel it is more appropriate.  Thus, Judge Smith argues, "If we truly must afford Chevron deference to the FTC's interpretation of the MMWA . . . the Majority's determination that all ADR procedures are 'Mechanisms' plainly contradicts the FTC's view of the statute."  Slip. op. at 17810-11. 

Judge Smith argues that the FTC's interpretation is not due Chevron deference because Congress did not authorize the FTC to regulate non-judicial remedies outside of the informal dispute settlement procedures now known as "Mechanisms."  Thus, the FTC's opinions about binding arbitration as an alternative dispute resolution procedure is beyond the scope of the FTC's authority.  But even more important, under the MMWA, federal courts -- not the FTC -- are the entities charged with Congress of deciding enforcement issues under the MMWA.  Slip op. 17813-14.

Judge Smith also cast himself squarely with the 11th and 5th Circuits, reasoning that Congress's adoption of the FAA established a federal policy favoring arbitration, and that agreements to arbitrate should be vigorously enforced.  He noted that "in every case raising a statutory right that does not explicitly preclude arbitration, the Supreme Court has enforced the presumption of arbitrability under the Arbitration Act."  Slip op. at 17817.

It remains to be seen whether the Kolev opinion will prompt Supreme Court review of an obvious circuit split.  Given the Court's recent Concepcion decision, which broadly asserted the supremacy of the FAA and its presumption favoring the parties' agreement to arbitrate, one could have reasonable grounds for believing that review would be forthcoming.

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Today the Supreme Court issued its much-anticipated opinion in a global warming suit.  See American Elec. Power Co. v. Connecticut, No. 10-174, Slip op. (U.S. June 20, 2011).   As many commentators predicted, the Court did not answer all of the public's questions surrounding global warming -- including whether individuals may sue under state law to enjoin discharges of so-called "greenhouse gasses" or to compensate individuals for damages allegedly attributable global warming.  See Slip op. at 8.  And it did not address the political question doctrine

Rather, the holding in AEP was narrow:  the federal Clean Air Act and the EPA's actions pursuant to it "displace" (or, in common parlance, "preempt") federal common law claims to regulate carbon dioxide emissions.  But the reasoning the court used to get there, as well as much of its dicta, will come in useful to defendants fighting private claims based on climate change.

To begin with, this was a split 4-4 Court on the question of jurisdiction and whether the plaintiffs in the case -- some non-profit organizations, political subdivisions, and a handful of States -- had standing to sue under Article III.  Slip op. at 6.  Of course, a tie goes to the victor in the court below, so the Court affirmed the Second Circuit's conclusion that it properly had jurisdiction to hear the claim.  Nevertheless, AEP suggests that jurisdictional challenges may remain in the defendants' arsenal to defend against climate change lawsuits.

Plaintiffs were relying on the argument that a long line of cases applying specialized federal (as opposed to state) common law allowed them to sue to abate a nuisance.  The Court rejected this argument.  First, it cautioned that although some States have been allowed to sue to enjoin a nuisance in another State, "[w]e have not yet decided whether private citizens (here, the land trusts) or political subdivisions (New York City) of a State may invoke the federal common law of public nuisance to abate out-of state pollution.  Nor have we ever held that a State may sue to abate any and all manner of pollution originating outside its borders."  Slip op. at 8.

Ultimately, in concluding that federal common law was "displaced" by the Clean Air Act, the Court described the deference to the political branches that underlies the displacement doctrine and stressed the inefficiency of having courts set regulatory policy:

Legislative displacement of federal common law does not require the "same sort of evidence of a clear and manifest [congressional] purpose" demanded for preemption of state law.  "'Due regard for the presuppositions of our embracing federal system . . . as a promoter of democracy,'" does not enter the calculus, for it is primarily the office of Congress, not the courts, to prescribe national policy in areas of public interest.  The test for whether congressional legislation excludes the declaration of federal common law is simply whether the statute "speak[s] directly to [the] question" at issue.

* * *

It is altogether fitting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions.  The expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions.  Federal judges lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order.  Judges may not commission scientific studies or convene groups of experts for advice, or issue rules under notice-and-comment procedures inviting input by any interested person, or seek the counsel of regulators in the States where the defendants are located.  Rather, judges are confined to a record comprising the evidence the parties present.  Moreover, federal district judges, sitting as sole adjudicators, lack authority to render precedential decisions binding other judges, even members of the same court.

Notwithstanding these disabilities, the plaintiffs propose that individual federal judges determine, in the first instance, what amount of carbon dioxide emissions is "unreasonable" and then decide what level of reduction is "practical, feasible, and economically viable." . . .

The judgments the plaintiffs would commit to federal judges, in suits that could be filed in any federal district, cannot be reconciled with the decisionmaking scheme Congress enacted.

Slip op. at 9-10, 14-15 (citations omitted).  Of course, these are the same sort of institutional limitations that come into play in the political question doctrine.  As such, this language may have application beyond the mere displacement of federal common law.

The court stressed that it was the very act of delegating decisionmaking to the EPA that displaced federal common law, and even if EPA failed to properly exercise that delegation, such failure would not give rise to a cause of action in federal common law nuisance.  Slip op. at 12.

The Court stressed, however, that the plaintiffs were not left without a remedy:  they could petition EPA for a rulemaking and sue in federal court if the EPA failed to make a reasoned judgment in the rulemaking.  Slip op. at 13 ("If the plaintiffs in this case are dissatisfied with the outcome of EPA's forthcoming rulemaking, their recourse under federal law is to seek Court of Appeals review, and, ultimately, to petition for certiorari in this Court."). 

The standard, however, would be a deferential "abuse of discretion" review, and Congress charged the EPA with balancing environmental effects with the need for energy and the economic effect of any regulation.  Id.  As such, the EPA would have wide latitude in making a reasoned decision. 

The Second Circuit had not ruled on the plaintiffs' arguments that their state law nuisance claims were viable.  Rather, it had based its decision solely on the federal common law of nuisance.  Moreover, none of the parties' briefs had addressed the availability of a claim under state nuisance law or whether such claims were preempted by the Clean Air Act.  Accordingly, the Court chose to leave the issue open for consideration on remand.  As such, we'll have to wait for another day to learn whether the state law claims of public and private plaintiffs in climate change cases are viable.  That said, much of what is in this opinion -- including the discussion of the complex public policy balancing that Congress delegated to the EPA -- would support a preemption argument.

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For those interested in charting the effects of AT&T Mobility LLC v. Concepcion, 131 S, Ct. 1740 (2011), see the new opinion by U.S. District Judge William Alsup in Arellano v. T-Mobile USA, Inc., 2011 WL 1842712 (N.D. Cal. May 16, 2011).

In Arellano, the plaintiffs had sued the defendants for injunctive relief under, inter alia, California's Unfair Competition Law, the Consumer Legal Remedies Act, and the False Advertising Act.  California's Supreme Court previously had held that suits for injunctive relief under those statutes were not subject to arbitration as a matter of public policy.

The defendant moved to compel arbitration, and the plaintiffs resisted, citing the California precedents.  The court held that Concepcion compels a finding that the Federal Arbitration Act preempts the state court decisions because it "decided that states cannot refuse to enforce arbitration agreements based on public policy."  Id. at *2.  Thus, "despite public policy arguments thought to be persuasive in California, Concepcion has trumped these considerations, at least for cases in federal court."

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Today we have two cases that illustrate the maxim that if you have a beef with an airline, you're screwed, plain and simple, thanks to federal preemption.

In Hickcox-Huffman v. US Airways, Inc., 2011 WL 1585560 (N.D. Cal. Apr. 27, 2011), a passenger who had paid a $15 baggage fee sued the airline for the return of the fee because it lost her bag.  Naturally, this was a putative class action on behalf of all passengers who were charged such fees and their bags were lost or delayed.  Her theory was that by charging the $15, the airline assumed a duty to deliver the baggage in a timely manner.  She asserted a variety of causes of action, including breach of contract, unjust enrichment, and misrepresentation.

The airline moved to dismiss the claims as preempted by the Airline Deregulation Act of 1978, which provides that "no State . . . shall enact or enforce any law . . . relating to rates, routes, or services of any carrier."

What, then, is a service?  And does the timely conveyance of baggage fit within the definition?

The Ninth Circuit has held that although service involves the prices, schedules and other things associated with getting people and "cargo" from point A to point B, it does not include the "provision of in-flight beverages, personal assistance to passengers, the handling of luggage, and similar amenities."  Id. at *2 (quoting Duncan v. Northwest Airlines, Inc., 208 F.3d 1112, 1114-15 (9th Cir. 2000)).  Naturally, the airline said the plaintiff's bag was "cargo," while the plaintiff said it was "luggage," the handling of which is not a preempted "service."

The court looked to whether the underlying claims frustrate the goal of economic deregulation by interfering with the forces of competition:

Using this approach, this Court believes that Plaintiff's state law claims would do just that.  It is obvious that baggage fees are just one of the many fronts on which airlines are doing competitive battle.  Indeed, the baggage fees imposed (or not imposed) by each airline has become an important consideration for consumers. . . .  In these circumstances, Plaintiff's claims would impermissibly "frustrate the goal of economic deregulation by interfering with the forces of competition."

Id. at *4 (citation omitted).  Accordingly, it held that the plaintiff's claims were preempted, and US Airways could keep the $15 it charged to deliver her baggage late.

The passengers were similarly unlucky in National Federation of the Blind v. United Airlines, Inc., 2011 WL 1544524 (N.D. Cal. Apr.25, 2011).  There, blind plaintiffs brought a class action because the airline used ticketing kiosks that -- unlike Automatic Teller Machines -- use only visual prompts and fail to include an option for audio prompts for the blind.  The plaintiffs sought equitable and declaratory relief under various statutes.

Once again, the court held that the claims were preempted, this time by the Air Carrier Access Act, which prohibits discrimination against disabled people in air travel.  The Department of Transportation has specifically addressed the issue of automated kiosks, concluding that if they cannot be used by passengers with a disability, "you must provide equivalent service to the passenger (e.g., by assistance from your personnel in using the kiosk or allowing the passenger to come to the front of the line at the check-in counter)."  Id. at *3 (citation omitted).  DOT expressed its intent that the regulations have preemptive effect.

The court concluded that "[b]ecause the DOT has pervasively regulated airport kiosk accessibility, plaintiffs' claims are field preempted by the ACCA."  Id. at *4.

The court found an additional source for federal preemption in the Airline Deregulation Act that was at issue in Hickcox-Huffman.  The court concluded that the airport kiosks -- because they facilitate checking in, printing tickets, selecting seats, and other tasks related to air travel, they are a "service" that falls within the express preemption provision of the ADA.

The plaintiff argued for the "presumption against preemption" and suggested that the Federal Airline Act's savings clause -- "a remedy under this part is in addition to any other remedies provided by state law" -- augured against federal preemption.  The court disagreed:

The Airline Deregulation Act unequivocally declared that no state may enact a law related to airline service.  Congress could have drawn the preemption provision more narrowly; it did not.  The provision does not except discrimination claims from its scope.  Thus, this argument must fail.

. . .

. . . This area [of airline travel] has . . . "long been reserved for federal regulation."  The presumption against preemption, therefore, does not apply in the instant action.  Thus, neither the FAA savings clause nor the presumption against preemption undermine this order's holdings.

Id. at *7 (citations omitted).

As these two decisions -- rendered two days apart -- demonstrate, airlines have powerful preemption arguments against consumer class actions.  It remains to be seen whether the reasoning from these decisions -- especially the field preemption conclusion from National Federation of the Blind -- can be easily translated other federal regulatory schemes.

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I am traveling on the Left Coast for business this week.  And so it was with a certain amount of bemusement that I read this article that came across my Blackberry yesterday.  It explains that an environmental activist group, "Our Children's Trust," has decided to sue a number of states, seeking to force judges into ordering state governments to mandate the reduction of greenhouse gases, with the goal of preventing global warming. 

One of the activists is quoted as saying:

"We should be getting youths in front of the courts, not polar bears," Wood said, referring to a widely publicized attempt to have courts declare polar bears endangered as rising temperatures melt Arctic ice.

So how are these activists using America's youth to paint a compelling picture for judicial regulation of greenhouse gases?  Read this portion of a complaint apparently filed by the organization in New Mexico:

Climate change is adversely affecting [16-year-old] Akilah Sanders-Reed now.  Akilah is a skiing enthusiast and has been skiing regularly for the last 8 years.  Over that time, Akilah has seen a decrease in the snowpack on the slopes of Taos and Santa Fe.  The snowpack on those slopes has been thin and generally not good for skiing.  Akilah plans to continue skiing and to teach her younger brother to ski.  Therefore she is concerned that if the quality and amount of snowpack on the Taos and Santa Fe ski slopes continues to decline, she will have fewer opportunities to ski during the already abbreviated ski season in New Mexico.

Compl. para. 10.

Really?!!!  This is the tragedy that justifies judicial exercise of Executive Branch powers?  No skiing on Spring Break?  Bring back the cute, cuddly Polar Bears whose very existence is threatened, please!

The group's legal strategy seems as flawed as its storytelling.  It is suing the governors of various states on the so-called "public trust doctrine," which they describe as a common law theory.  But it's hardly a cause of action, like public nuisance.  Rather, it is simply a doctrine recognizing the sovereign's ownership interest in the land underlying navigable waters.  Ironically, the whole reason for the doctrine is to preserve the ability of the public to use such waters for commerce.  Our Children's Trust, of course, wants to invoke the doctrine to impede commerce and economic activity, state by state.

The fact that it can't cite in its New Mexico complaint a single New Mexico case applying the doctrine as they request gives you some idea of just what a long-shot their legal theory actually is.  They do nothing in their pleadings to anticipate the defenses that typically have proven fatal to climate change cases.  For example, they do nothing to establish the children's standing to assert a claim.  In public nuisance -- which is an actual cause of action designed to protect interference with the public's right of enjoyment of property -- the right to sue is reserved to the sovereign unless an individual can prove that he or she suffers a special injury that is different in type and degree from that suffered by the general public.  Notably, a bad ski day (if there really is such a thing) wouldn't cut it.

Similarly, defendants have argued that federal statutes and regulations preempt individual common law claims aimed at regulating greenhouse gas emissions.  Notably, even the cases that Our Children's Trust cite in its complaint expressly recognize the preeminence of federal authority.  For example, in Illinois Central Railroad v. Illinois, 146 U.S. 387 (1892), the court observed that the state's rights and obligations under the public trust doctrine were "subject always to the paramount right of Congress to control [the] navigation [of the state's navigable waters] so far as may be necessary for the regulation of commerce with foreign nations and among the States."  Id. at 435.  Likewise, in Montana v. United States, 450 U.S. 544 (1981) -- also cited by plaintiffs -- the court cautioned that:

The State's power over the beds of navigable waters remains subject to only one limitation:  the paramount power of the United States to ensure that such waters remain free to interstate and foreign commerce. 

Id. at 551.

Moreover, the plaintiffs make no allowance in their pleading for defenses such as the political question doctrine, primary jurisdiction, or causation.  Notably, courts and advocates that have considered the climate change question have acknowledged that the issue of greenhouse gas emissions is a global one; emissions from one part of the globe may travel and have effects in other parts of the globe.  Thus, localized emissions caps -- like plaintiffs advocate -- have no real hope of abating the alleged nuisance locally, and local emissions cannot be deemed the substantial cause of alleged local climate change.

Ultimately, all that Our Children's Trust has achieved is making cash-strapped states that have no ability to solve the problem defendants in frivolous litigation that will cost lots of time and money to defend.  And they did so without finding a more compelling mascot than fluffy polar bears.

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Lots of ink has been spilled of late about litigants trying to use the courts to achieve certain results regarding global warming.  And much has been written about nuclear power in the wake of the tragedy in Japan.

So you can imagine that my eyebrows arched as I thumbed through my "to read" pile and discovered a decision from the Connecticut Supreme Court addressing a citizen's challenge to a nuclear plant's plan to increase its power generation, thereby increasing its discharge of radioactive waste and the discharge of warm water into Long Island Sound.  The court's decision is a good reminder that plaintiffs seeking to regulate through litigation often lack the sort of personal and direct injury that give rise to standing to sue.

In Burton v. Dominion Nuclear Connecticut, Inc., No. SC 18603 (Conn. Apr. 19, 2011), the plaintiff sued to prevent the operator of the Millstone Nuclear Power Station in Waterford from implementing its plan to increase its pwer generating capacity in its Unit 3 reactor by 7%.  The Plaintiff alleged that this would both increase the amount of nuclear waste released into the atmosphere, and would generate a warm-water plume in Long Island Sound that would injure the acquatic wildlife. 

(The operator had applied for and received all appropriate permits, with the Nuclear Regulatory Commission issuing a safety evaluation report finding that even with the increased radioactivity, the discharge would remain within federal guidelines and the thermal plume would pose no threat to endangered or threatened species of marine life.  Slip op. at 2.)

The plaintiff sued for a TRO and a permanent injunction in state court, asserting causes of action under the Connecticut Environmental Protection Act, common law public nuisance, "classical aggrievement," and violation of Connecticut's Unfair Trade Practices Act.

The trial court dismissed the claim, and the Connecticut Supreme Court affirmed.

The Connecticut Supreme Court first analyzed whether the plaintiff's claims were preempted by the federal Atomic Energy Act, concluding that one of them was.  As the court explained it, the AEA reserves to the federal government the regulation of the radiological safety aspects of nuclear plants, but reserves to the states their traditional responsibility for regulating utilities.  Thus, the court concluded, the trial court "had no jurisdiction to consider the plaintiff's claim regarding the increase in radioactive waste because the federal government has exclusive regulatory authority over radiation hazards and safety as well as radiological discharges from nuclear power plants."  Slip op. at 4. 

As for the plaintiff's claim about the thermal plume, however, that fell within the state's traditional powers and was not preempted.  Accordingly, the court went on to consider the plaintiff's standing to raise these claims.  The court quickly dispatched the CEPA claim, holding that because she merely challenged the result of the agency's decisionmaking, but did not allege that the discharges would result in pollution that exceeded the amount permitted under the regulatory scheme, she lacked standing to assert a CEPA claim.  The court described this problem as lacking the "substantive heft" required under the CEPA to establish citizen standing.  

Plaintiff relied on a prior case in which she had successfully sued to protect marine life in Long Island Sound.  But the Supreme Court distinguished that case, noting that there she had pled procedural violations by the agency in its decisionmaking process.  Because there were no such allegations in this case, however, and no allegations that the discharge levels would exceed established standards, the court found plaintiff's authority inapposite. Slip op. at 7.

The court then analyzed the public nuisance claim.  It instructed that private individuals have no standing to bring public nuisance claims generally; that power typically is reserved to the state.  The exception is where the individual has sustained injury of a different type and degree from the public at large.  Here, the plaintiff alleged no special injury and, as such, lacked standing to bring a public nuisance claim.  Slip op. at 8.

In Connecticut, the doctrine of "classical aggrievement" operates almost exactly like the special injury requirement of the public nuisance cause of action.  The plaintiff must allege a distinct legal interest in the subject matter of the lawsuit that is different from the general public's, and must show that the agency's decision has specifically injured that interest.  Slip op. at 9.  Because plaintiff could not make that showing, she had no standing to bring such a claim.

Finally, the court considered the plaintiff's Hail Mary theory:  violation of CUPTA.  In reasoning that should resonate beyond the facts of this case, the Supreme Court reiterated that where plaintiffs plead unfair trade practices under CUTPA, they must plead a direct injury caused by the unfair trade practice.  See slip op. at 9 (citing cases holding that the doctrines of remoteness and proximate causation apply to CUTPA claims).  The court concluded:

We concluded that the plaintiff has failed to establish standing to bring her CUTPA claim because she does not allege harm from the increase in the temperature of the thermal plume that is not remote, indirect, or derivative.  Her principal allegation is that the elevated temperature of the water will affect wildlife, fish and other aquatic organisms, which, in turn, will indirectly pose a danger to her health and affect ther ability to enjoy her recreational pursuits of swimming, boating and consuming seafood from Long Island Sound and estuary.  She does not allege, however, precisely how her health will be endangered from the elevated temperature of the thermal plume or how her recreational pursuits will be affected; nor did she present evidence to that effect at the hearing on the motion to dismiss.  Thus, without more specificity, it is impossible to conclude that the harm the plaintiff has alleged is direct.  We therefore conclude that the trial court properly dismissed her claim of unreasonable pollution under CUTPA for lack of standing.

Slip op. at 9 (citation omitted).

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For those of you interested in following the discussion on Dukes over at Point of Law, I've entered another post.  You can read it here.

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The Supreme Court issued an interesting decision today holding that the Federal Arbitration Act ("FAA") preempts any state law that would require consumer contracts including arbitration provisions to make class arbitration available.  The Court's analysis of the FAA's Savings Clause -- which broadly interpreted Congress's purposes and objectives in passing the FAA -- just goes to show that the Court continues to be all over the lot when it comes to preemption analysis.  Perhaps what is most interesting about the opinion is what it portends for Wal-Mart v. Dukes, which should be decided later this term.

In AT&T Mobility LLC v. Concepcion, No. 09-893 (U.S. Apr. 27, 2011), the plaintiff claimed AT&T should not have charged him sales tax on a phone it marketed as "free."  The mobile phone contract between the parties precluded class arbitration, providing instead that the plaintiff could proceed in arbitration only on an individual basis (or in small claims court).  It also required AT&T to make an initial settlement offer, pay the costs of all nonfrivolous claims submitted to arbitration, forego attorneys fees for itself, and pay a $7,500 minimum recovery and two times the plaintiff's attorneys fees if the plaintiff received an arbitration award that was more than AT&T's last settlement offer.

California's Supreme Court previously had held that including class action waivers in consumer arbitration contracts was unconscionable as a matter of California law. 

Section 2 of the FAA, however, provides that agreements to arbitrate are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."  9 U.S.C. sec. 2 (emphasis added).  In a 5-justice majority opinion (Roberts, Scalia, Kennedy, Thomas, and Alito) written by Justice Scalia, the court held that California's common law rule was preempted by the FAA because California's rule "'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'"  Slip op. at 18 (citation omitted).  Specifically, "[r]equiring the availability of classwide arbitration interferes with the fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA."  Slip op. at 9.

As Justice Scalia explained, "The point of affording parties discretion in designing arbitration processes is to allow for efficient, streamlined procedures tailored to the type of dispute."  Slip op. at 10.  But the California rule -- which would operate in consumer disputes where there is a "contract of adhesion" -- operated directly contrary to the goal of streamlining the resolution of disputes.  Indeed, by creating a mandatory right to class arbitration, that rule provided a disincentive to product suppliers to provide for arbitration at all.  Slip op. at 13. 

The majority had some interesting things to say about the difference between individual and class proceedings -- things that may portend a reversal in Wal-Mart v. Dukes.  Most notable is that the majority recognized that when a class is involved, more formal structural protections are necessary to preserve the due process rights of absent class members and defendants:

This is obvious as a structural matter:  Classwide arbitration includes absent parties, necessitating additional and different procedures and involving higher stakes.  Confidentiality becomes more difficult.  And . . . arbitrators are not generally knowledgeable in the often-dominant procedural aspects of certification, such as the protection of absent parties.  The conclusion follows that class arbitration, to the extent it is manufactured by [the California rule] rather than consensual, is inconsistent with the FAA.

First, the switch from bilateral to class arbitration sacrifices the principal advantage of arbitration -- its informality -- and makes the process slower, more costly, and more likely to generate procedural morass than final judgment. . . . [B]efore an arbitrator may decide the merits of a claim in classwide procedures, he must first decide, for example, whether the named parties are sufficiently representative and typical, and how discovery for the class should be conducted. . . .

Second, class arbitration requires formality.  If procedures are too informal, absent class members would not be bound by the arbitration.  For a class-action money judgment to bind absentees in litigation, class representatives must at all times adequately represent class members, and absent members must be afforded notice, an opportunity to be heard, and a right to opt out of the class. . . .

Third, class arbitration greatly increases the risk to defendants. . . .  Defendants are willing to accept the costs of . . . errors in arbitration, since their impact is limited to the size of individual disputes, and presumably outweighed by savings from avoiding the courts. . . . We find it hard to believe that defendants would bet the company with no effective means of review, and even harder to believe that Congress would have intended to allow state courts to force such a decision.

Slip op. at 13-17.

None of these statements are particularly groundbreaking.  And yet, as I've noted at Point of Law, these are issues -- adequacy of representation, opt-out rights where money damages are involved, predominance and the due process rights of defendants -- that are front and center in the Wal-Mart v. Dukes case that is expected to be decided later this year.  The opinion in Concepcion suggests that there are at least five Justices who may be willing to take some of these issues head-on in the Dukes opinion.

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If at first you don't succeed in getting an action dismissed, try, try again.  The Coca Cola Company proved the truth of this old addage last Thursday when it finally won a dismissal with prejudice in its "Diet Coke Plus" litigation.  See Mason v. The Coca-Cola Company, Civ. No. 09-0220, Slip op. (D.N.J. Mar. 31, 2011). 

In Mason, plaintiffs brought a putative nationwide class action against the defendant for allegedly misbranding its "Diet Coke Plus" product, which was Diet Coke fortified with 10% of the USRDA of a number of vitamins and minerals.  The amounts were listed with the Nutrition Facts on the label.

The FDA had sent a letter to the defendant, warning that it considered "Diet Coke Plus" to be in violation of its policy against fortifying snack food with vitamins and minerals, and labeling the product "plus" without providing a comparison product.  Plaintiffs attached the FDA's letter to their complaint, and complained that the term "Plus" had misled them to believe that the product was "healthy," causing them to spend more for the beverage than it was worth.

The defendant had previously moved to dismiss, although the court had rejected its arguments about primary jurisdiction and preemption, it had held that plaintiffs failed to properly plead fraud and ascertainable loss.  I had described this opinion in a prior post.  But that opinion had allowed plaintiffs another bite at the apple.

So the defendant moved again to dismiss the complaint, and this time the district court not only granted the motion, but made it stick.  It refused to revisit its conclusions on primary jurisdiction and preemption, but it analyzed (and ultimately dismissed) plaintiffs' causes of action.

In considering the claim pled under the New Jersey Consumer Fraud Act, the court first concluded that plaintiffs had failed to allege fraudulent or deceptive conduct by the defendant:

In order for these claims to amount to a NJCFA violation for an affirmative act of deception or fraud, plaintiffs must show that defendant's statements on its product are false. . . . [The FDA's warning letter itself] shows that it is not false that Diet Coke Plus contains vitamins and minerals, and plaintiffs have failed to allege with particularity what further expectations beyond these ingredients they had for the product or how it fell short of those expectations.  Instead, plaintiffs simply make a broad assumption that defendant intended for Diet Coke Plus's vitamin and mineral content to deceive plaintiffs into thinking that the beverage was "healthy."  Without more specificity as to how defendant made false or deceptive statements to plaintiffs regarding the healthiness or nutritional value of the soda, plaintiffs have failed to plead the "affirmative act" element with sufficient particularity to state a viable NJCFA claim.

Slip. op. at 7-8 (citations omitted).

The court also held that plaintiffs failed to plead the second element of an NJCFA claim:  ascertainable loss.  Citing New Jersey case law, the court noted that the loss must be "quantifiable or measurable."  And yet, all the plaintiffs pled was that they paid "money for a product that never should have been marketed to consumers in a misleading manner," and "money for a product that was of lesser value than what was represented."  Slip op. at 9.  The court held that this was hogwash:

When plaintiffs purchased Diet Coke Plus, they received a beverage that contained the ingredients listed on its label.  Plaintiffs have not explained how they experienced any out-of-pocket loss because of their purchases, or that the soda they bought was worth an amount of money less than the soda they consumed.  At most, plaintiffs simply claim that their expectations of the soda were disappointed.  Dissatisfaction with a product, however, is not quantifiable loss that can be remedied under the NJCFA.

Id. at 9-10 (citations omitted).

The court also dismissed plaintiffs' claims for negligent and intentional misrepresentation because they had not pled an ascertainable loss of money or property.  Id. at 12.

In a footnote, the court made this observation:

At its core, the complaint is an attempt to capitalize on an apparent and somewhat arcane violation of FDA food labeling regulations.  But not every regulatory violation amounts to an act of consumer fraud.  It is simply not plausible that consumers would be aware of FDA regulations regarding "nutrient content" and restrictions on the enhancement of snack foods.  The distinction is a fine but important one.  The complaint does not allege that consumers bought the product because they knew of and attributed something meaningful to the regulatory term "Plus" and therefore relied on it.  Rather, they allege merely that they thought they were buying a "healthy" product that happened to apparently run afoul of FDA regulations.

Id. at 12 n.4.  The latter, the court clearly implied, simply is not consumer fraud.

Mason is part of a growing trend of cases that take on consumer fraud allegations at the pleading stage, weeding out those complaints that ultimately fail to plead an actionable falsehood -- particularly in light of the disclosures made on the label of the product itself.

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In the wacky world that is Supreme Court preemption jurisprudence, I always liked Geier v. American Honda Motor Co., 529 U.S. 861 (2000).  It was the decision holding that one could have implied conflict preemption, even in the face a savings clause.  In Geier, the Department of Transportation had, in federal motor vehicle safety standard 208, preserved the ability of a manufacturer to choose whether to have seatbelts or airbags (or both).  Geier held that a state common law claim that effectively removed that choice conflicted with the federal standard and thus was preempted.

So today, along comes Williamson v. Mazda Motor of America, Inc., 562 U.S. ___ (2011).  It, too, involved manufacturer choice under a subsequent version of FMVSS 208, which left it to the manufacturer to decide whether to have merely lap belts or lap-and-shoulder belts for rear inner seats (i.e., seats that are not by the door).  In a decision written by Justice Breyer, the Court held that, as in Geier, the express preemption provision prohibiting conflicting state safety standards did not preempt state common law claims.  Slip op. at 4.  It also held that, as in Geier, the presence of a savings clause ("compliance with" a federal safety standard "does not exempt any person from any liability under common law") did not necessarily preclude a finding of conflict preemption.  Id.  The issue, according to the Court, thus was "whether, in fact, the state tort action conflicts with the federal regulation."  Slip op. at 5.

On this question, however, virtually the entire court differed with Geier.  The Williamson majority found that preserving the choice between a lap belt and a lap-and-shoulder restraint was not a major policy of the DOT.  It posited that the reason why FMVSS 208 gave the manfuacturer a choice was not to promote safety or the future development safety data; rather, it was simple economics and convenience:

We turn now to the present case.  Like the regulation in Geier, the regulation here leaves the manufacturer with a choice.  And, like the tort suit in Geier, the tort suit here would restrict that choice.  But unlike Geier, we do not believe here that choice is a significant regulatory objective.

. . .

. . .  But [DOT's] 1989 reasons for retaining that choice [in rear seat restraints] differed considerably from its 1984 reasons for permitting manufacturers choice in respect to airbags.  DOT here was not concerned about consumer acceptance; it was convinced that lap-and-shoulder belts would increase safety; it did not fear additional safety risks arising from use of those belts; it had no interest in assuring a mix of devices; and, though it was concerned about additional costs, that concern was diminishing.

Slip op. at 8.  The court concluded that although DOT had determined that it would be more expensive for manufacturers to include lap-and-shoulder seatbelts in the rear middle seats of their cars, the fact that DOT still allowed manufacturers to make the cheaper choice of lap belts did not mean that Congress had sought to preclude compensatory suits at common law.  Simply put, according to the Court, there was no important governent policy being advanced that a state common law suit could conflict with.

Just a few interesting asides.  First, this is a Breyer opinion.  He clearly gives deference to the agency's position, which agreed with the plaintiffs.  He also cites the legislative history.

Second, the majority opinion does not wield the "presumption against preemption" as justification for its position. 

Third, Justice Sotomayor's concurrence, like her dissenting opinion yesterday in Bruesewitz, relies heavily on the savings clause to narrow the possible scope of preemption:

Geier does not stand . . . for the proposition that any time an agency gives manufacturers a choice between two or more options, a tort suit that imposes liability on the basis of one of the options is an obstacle to the achievement of a federal regulatory objective and may be preempted. . . .  [C]ourts should only find preemption where evidence exists than an agency has a regulatory objective . . . whose achievement depends on manufacturers having a choice between options.  A link between a regulatory objective and the need for manufacturer choice to achieve that objective is the lynchpin of implied preemption when there is a savings clause.

Sotomayor's Concurrence at 2.

Fourth, Justice Thomas stakes out his position that the Savings Clause answers the question definitively and Geier thus was wrongly decided:

. . . Read independently of the express preemption clause, the saving clause simply means what it says:  FMVSS 208 does not preempt state common-law actions.

. . .

Purposes-and-objectives preemption -- which by design roams beyond statutory or regulatory text -- is thus wholly illegitimate.  It instructs courts to preempt state laws based on judges' "conceptions of a policy which Congress has not expressed and which is not plainly to be inferred from the legislation which it has enacted." . . .

. . .

The dispositive difference between this case and Geier -- indeed, the only difference -- is the majority's "psychoanalysis" of the regulators.

Thomas's concurrence in the judgment at 4-5 (citations omitted).

Fifth, we still do not know what position Justice Kagan might take on these issues.  Once again, she sat this one out.

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Yesterday the SCOTUS handed down the long-awaited decision in Bruesewitz v. Wyeth LLC, No. 09-152 (U.S. Feb. 22, 2011).  In a 6-2 decision, the Court held that the National Childhood Vaccine Injury Act of 1986 preempts state law claims for design defect.  Justice Scalia wrote the majority opinion for Chief Justice Roberts and Justices Kennedy, Thomas, Breyer and Alito.  Justice Breyer wrote a concurrence.  And Justice Sotomayor wrote a dissent joined by Justice Ginsburg.  Justice Kagan took no part in the decision.

This opinion has and will have a lot of coverage, so I'm not going to give it the long-form analysis here.  I'll trust my colleagues at Drug & Device Law to do that better than I could.

But there are a few things I'd like to point out about this opinion.  First, the majority opinion is written in a very chatty style by Justice Scalia.  Second, nowhere in the majority opinion do you hear anything about the dreaded "presumption against preemption."  Grant it, this is an express preemption case.  The Vaccine Act provides that:

"No vaccine manufacturer shall be liable in a civil action for damages arising from a vaccine-related injury or death associated with the administration of a vaccine after October 1, 1988, if the injury or death resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by proper directions and warnings."

Slip op. at 7.

But as Justice Sotomayor points out in her well-written dissent, there also is a savings clause:

Section 22(a) expressly provides that the "[g]eneral rule" is that "State law shall apply to a civil action brought for damages for a vaccine-related injury or death.

Sotomayor's dissent at 18.

And yet there is no discussion in the majority opinion of narrowly construing the preemption provision as a result of any presumption against preemption.

Third, the majority looks exclusively to the text of the statute to conclude that design defect claims are categorically preempted.  It does not need legislative history to make that conclusion. 

The whole question posed in Bruesewitz was what do the clauses after the "if" mean in the preemption provision.  Looking solely to the text of the statute, the majority concluded that it meant that all design defect claims are preempted and did not impose additional prerequisites to establishing that preemption.  Justice Sotomayor argued forcefully in dissent that the provision did not even mention the terms "design defect," let alone preempt it, and that the provision set up three prerequisites for preemption upon which manufacturers bear the burden of proof:  (1) that the harm was "unavoidable," (2) that the vaccine was properly prepared (i.e., had no manufacturing defects), and (3) that the vaccine bore proper directions and warnings (i.e., there was no failure to warn).  The majority rejected this approach, arguing that the "even though" clause is a "concessive subordinate clause" that clarifies and describes the word that precedes it:  "unavoidable."  Slip op. at 7-11.

Justice Sotomayor, on the other hand, argues that "the 'even though' clause requires a vaccine manufacturer in each civil action to demonstrate that its vaccine is free from manufacturing and labeling defects to fall within the liability exemption of section 22(b)(1)."  Sotomayor's dissent at 3.  She supports this by saying that the conditional term, "if," is used in two other provisions of the Vaccine Act that require an inquiry to establish preemption.  Id. at 3-4.  She concludes that "[i]t would be highly anomalous for Congress to use a conditional 'if' clause in [these sections] to require a specific inquiry in each case while using the same conditional 'if' clause in section 22(b)(1) to denote a categorical exemption from liability."  Id. at 4.

To support her argument that another prerequisite to Vaccine Act preemption is the "unavoidable" nature of the harm, Justice Sotomayor cites Committee Reports describing the principle at issue in comment k to Section 402A of the Restatement (Second) of Torts.  Justice Sotomayor argues that in 1986 -- when the Vaccine Act was drafted -- it was generally held that to receive the protection of comment k, medicines had to be proven to be "unavoidably unsafe," and that this is the concept that was written into the Vaccine Act.  Justice Scalia points out, however, that many courts treated comment k as a categorical exemption from liability for prescription medicines.  He also argues that comment k is irrelevant here, as the word "unavoidable" is not a term of art and can be read -- given its ordinary meaning -- to be generally describing side effects of prescription medical products. 

A fourth thing that struck me about Bruesewitz is the majority's clear concession that the preemption provision could have been written more clearly to preempt design defect claims, but that this fact did not matter:

Petitioners and the dissent contend that the interpretation we propose would render part of [section 22(b)(1)] superfluous:  Congress could have more tersely and more clearly preempted design defect claims by barring liability "if . . . the vaccine was properly prepared and was accompanied by proper directions and warnings."  The intervening passage ("the injury or death resulted from side effects that were unavoidable even though") is unnecessary.  True enough.  But the rule against giving a portion of text an interpretation which renders it superfluous does not prescribe that a passage which could have been more terse does not mean what it says.  The rule applies only if verbosity and prolixity can be eliminated by giving the offending passage, or the remainder of the text, a competing interpretation.  That is not the case here.

Slip op. at 12.

The fifth thing that struck me about Bruesewitz was that much of what the Court relies on to find preemption also applies in the ordinary prescription medicine context, except for the Vaccine Act's unique compensation scheme:

. . . But the lack of guidance for design defects combined with the extensive guidance for the two grounds of liability specifically mentioned in the Act strongly suggests that design defects were not mentioned because they are not a basis for liability.

The mandates contained in the Act lead to the same conclusion.  Design-defect torts, broadly speaking, have two beneficial effects:  (1) prompting the development of improved designs, and (2) providing compensation for inflicted injuries. . . .  And the Act provides many means of improving vaccine design.  It directs the Secretary of Health and Human Services to promote "the development of childhood vaccines that result in fewer and less serious adverse reactions. . . . The [National Vaccine] Program is to set priorities for federal vaccine research, and to coordinate federal vaccine safety and efficacy testing.  The Act requires vaccine manufacturers and health-care providers to report adverse side effects, and provides for monitoring of vaccine safety through a collaboration with eight managed-care organizations.  And of course whenever the FDA concludes that a vaccine is unsafe, it may revoke the license.

These provisions for federal agency improvement of vaccine design, and for federally prescribed compensation, once again suggest that [section 22(b)(1)'s] silence regarding design-defect liability was not inadvertent.  It instead reflects a sensible choice to leave complex epidemiological judgments about vaccine design to the FDA and the National Vaccine Program rather than juries.

Slip op. at 14-15.

Justice Breyer's concurrence goes beyond the plain language and looks to legislative history and agency interpretation to conclude that the Vaccine Act preempts design defect claims.  See Breyer's Concurrence at 7.  Like the majority opinion, the concurrence exhibits a trust of agencies and scientists -- rather than juries -- with issues of promoting the optimal design of prescription medicines.

Does Bruesewitz represent a sea change in SCOTUS preemption jurisprudence?  Probably not, although it arguably is too early to tell.  It does, however, provide a tool for addressing some of the hyperbole from earlier preemption decisions, and for that, the defense bar can be grateful.

Bruesewitz also reveals Justice Sotomayor to be a strong advocate for state tort litigation who can be expected to narrowly construe even express preemption provisions to allow state law claims.

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Who says conflict preemption is dead?  On Friday, the Third Circuit -- in an excellent opinion by Judge Anthony Scirica -- held that the Federal Communication Commission's regulations preempt claims that sales of cell phones that emit radio frequency radiation are violations of state consumer protection statutes.  The decision comes in a litigation that has ping-ponged back and forth between federal and state courts for nearly ten years.

In Farina v. Nokia Inc., No. 08-4034, Slip op. (3d Cir. Oct. 22, 2010), plaintiff sued in Pennsylvania state court on behalf of Pennsylvania purchasers and lessees of cell phones who have not been diagnosed with a physical injury resulting from cell phone usage.  Plaintiff alleged that, because they emit RF radiation, cell phones are unsafe for use without headsets.  Accordingly, the sales of such cell phones without headsets amount to civil conspiracy, breach of implied and express warranties, violation of the Magnuson-Moss Warranty Act, and violation of Pennsylvania's Unfair Trade Practices Act.

This case initially was filed in state court in 2001.  It subsequently was removed to federal court and then transferred to an MDL transferee in Baltimore.  The MDL transferee had denied a motion to remand and then granted a Rule 12 dismissal of the litigaiton.  But the Fourth Circuit subsequently reversed, finding that there was no federal question jurisdiction because the issue of preemption did not arise on the face of a well-pleaded complaint.  See Slip op. at 22.  The Farina case was remanded to Pennsylvania state court, and in 2005, plaintiff filed a Second Amended Complaint, naming new parties.  One of the new defendants removed the complaint to federal court, asserting federal jurisdiction under the newly passed Class Action Fairness Act.  On renewed motions, the trial court found that it had federal jurisdiction under CAFA, and subsequently dismissed the case based on the preemptive effect of the FCC's regulations.

The Third Circuit has just affirmed in a thoughtful opinion.  First, the court concluded that it properly had jurisdiction under CAFA because the filing of a new complaint adding new defendants commenced a new action, making CAFA -- which applied to actions commenced after its enactment -- applicable.  Slip op at 33-34. 

As for preemption, the court first confronted the defendant's argument that the so-called "presumption against preemption" should not apply to this case because the regulation of the airwaves has historically been a federal -- not state -- function.  The court rejected this argument, explaining that states have historically acted to protect health and welfare.  Slip op. at 42.  But although the court applied the "presumption against preemption," it noted that such a presumption is "'overcome where a Congressional purpose to preempt or the existence of a conflict is "clear and manifest."'"  Id. (citation omitted).

Next, the court considered and rejected the defendants' argument that plaintiff's complaint is preempted by the statute's express preemption provision:

No State or local government or instrumentality thereof may regulate the placement, construction, and modification of personal wireless service facilities on the basis of the environmental effects of radio frequency emissions to the extent that such facilities comply with the Commission's regulations concerning such emissions.

Id. at 46 (citation omitted).  Defendants argued that each mobile phone is a wireless service "facility."  The court -- reading the rest of the statute in context -- rejected this approach, holding that, instead, it means the physical infrastructure of the wireless network, not individual mobile phones.  Id. at 48.  Accordingly, there was no express preemption.

Next, the court considered the argument that Congress preempted the field of RF emission regulation, i.e., whether the federal interest is "so dominant that the federal system will be assumed to precclude enforcement of state laws on the same subject."  Id. at 54.  The court rejected this argument as well, noting that the relevant statutes contain a savings provision and thus Congress envisioned some role for state law in this field.

Finally, the court considered whether conflict preemption applied to plaintiff's claims.  The court explained that conflict preemption exists where it is impossible for a party to comply with both federal and state regulation and the state law is an obstacle to the accomplishment of the federal law's objectives.  Id. at 55.

The FCC has determined that the evidence for human harm from the levels of RF emissions inherent in mobile phone use is "ambiguous," "unproven," and "unknown," and it has stated that "any cell phone legally sold in the United States is a 'safe' phone."  Id. at 14-15.  Indeed, the FCC's regulations reflect "a 'consensus view of the federal agencies responsible for matters relating to the public safety and health.'"  Id. at 18-19.  They set maximum exposure levels, and the FCC is committed to monitoring the science to ensure human safety in the use of mobile phones.  Id.

The court recognized that plaintiff's lawsuit is a fundamental conflict with the FCC's regulations:

But although he disavows any challenge to the FCC's RF standards, that is the essence of his complaint.  The representations in the advertising and instructional literature that Farina has identified as false or misleading are warranties that the phones are 'safe to operate without the use of a headset and that they were and would be free from defects.'  In order for Farina to succeed, he necessarily must establish that cell phones abiding by the FCC's SAR guidelines are unsafe to operate without a headset.  In other words, Farina must show that these standards are inadequate--that they are insufficiently protective of public health and safety.  Whether or not Farina intends to expressly challenge the FCC standards at trial, the inescapable effect of his complaint is to do so. 

Id. at 57-58.

The court explained the reasoning behind conflict preemption:

The reason why state law conflicts with federal law in these balancing situations is plain.  When Congress charges an agency with balancing competing objectives, it intends the agency to use its reasoned judgment to weigh the relevant considerations and determine how best to prioritize between these objectives.  Allowing state law to impose a different standard permits a re-balancing of those considerations.  A state law standard that is more protective of one objective may result in a standard that is less protective of others.

Id. at 59.

After describing how the FCC has engaged in a balancing of policy objectives with respect to RF emissions, it then analyzed how plaintiff's claims would impact the choices the FCC made as a result of that balancing:

Allowing juries to impose liability on cell phone companies for claims like Farina's would conflict ith the FCC's regulations.  A jury determination that cell phones in compliance with the FCC's SAR guidelines were still unreasonably dangerous would, in essence, permit a jury to second guess the FCC's conclusion on how to balance its objectives.  Were the FCC's standards to constitute only a regulatory floor upon which state law can build, juries could rebalance the FCC's statutory objectives and inhibit the provision of quality nationwide service.  Because the intensity of RF emission levels and the strength and range of cell phone signals are positively correlated, allowing additional state law restrictions on these levels could impair the efficiency of the wireless market. . . .  As an agency engaged in rulemaking, the FCC is well positioned to solicit expert opinions and marshal the scientific data to ensure its standards both protect the public and provide for an efficient wireless network.  Allowing juries to perform their own risk-utility analysis and second-guess the FCC's conclusion would disrupt the expert balancing underlying the federal scheme.

Id. at 64-65.  The court also noted that allowing standards to vary state to state would eradicate the uniformity necessary to regulate a nationwide wireless network.  And it gave deference to the FCC's stated position in its rulemaking that its regulations preempt state law.

The court rejected plaintiff's argument that the US Supreme Court's decision in Wyeth v. Levine requires a different result.  First, it noted that there was no evidence that Congress viewed state regulation of RF emissions as a complement to federal regulation, unlike in Wyeth, where state liability laws were seen as complementing federal regulation.  Slip op. at 74.  Moreover:

We do not read Wyeth's reference to Congress's decision not to enact an express preemption provision . . . as standing for the proposition that conflict preemption should not be found absent an express preemption provision.  Such a reading would come too close to subsuming conflict preemption into express preemption analysis, and is inconsistent with the axiom that an express preemption provision does not 'bar the ordinary working of conflict preemption principles.'

Id. at 75.

Finally -- and perhaps most important -- Wyeth was not a balancing case where the agency was charged with advancing public policy by balancing conflicting objectives.  Id. at 76.  As the court noted:

The inexorable effect of allowing suits like Farina's to continue is to permit juries to second-guess the FCC's balance of its competing objectives.  The FCC is in a better position to monitor and assess the science behind RF radiation than juries in individual cases.

Id. at 84.

Judge Scirica's opinion in Farina is a strong argument for why conflict preemption still exists, even in situations where there are express preemption provisions and statutory savings clauses. 

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Thanks largely to the Hydra-headed jurisprudence that has emanated in recent years from the U.S. Supreme Court, decisions about federal preemption get harder and harder to follow.  Take, for example, In re Aurora Dairy Corp. Organic Milk Marketing and Sales Practices Litig., No. 09-2762, Slip op. (8th Cir. Sept. 15, 2010).

Aurora Dairy forced the Eighth Circuit to consider the preemptive scope of the federal laws governing organic foods, namely the Organic Foods Production Act of 1990 ("OFPA"), 7 U.S.C. sec. 6501 et seq., and its implementing regulations, the National Organic Program ("NOP"), 7 C.F.R. pt. 205.  OFPA sets national standards for the sale and labeling of organically-produced agricultural products, and provides for the accreditation of certification agents who inspect producers and can make recommendations to the US Department of Agriculture about the producers' certification.

Aurora Dairy is a certified organic milk producer that sold its own "High Meadow" brand and also packaged house brands of organic milk for Wal-Mart, Target, Costco, Safeway, and Wild Oats Markets.  At all times, Aurora was a certified organic producer, having been inspected and certified by QAI, Inc.  In early 2007, however, the USDA proposed revoking Aurora's certification as an organic producer because of fourteen alleged violations, including using nonorganic cows to produce organic milk, failure to notify its certifying agent of certain facts, and failing to report and keep records as required by statute and regulation.  In August 2007, Aurora entered into a consent agreement with the USDA requiring it to take a number of remedial actions, including removing non-organic cows from its herds, reducing the size of its herds, and removing the certification of one of its facilities. 

This sparked a flood of nineteen class actions filed around the country, which were consolidated for pretrial purposes into an MDL in the Eastern District of Missouri.  The district court ordered the plaintiffs to file a consolidated complaint.  The defendants moved to dismiss, and the district court granted the motion, finding that the state law causes of action -- including alleged violations of state consumer protection statutes -- were preempted by OFPA.  Specifically, the district court held that both field preemption and conflict preemption applied to preempt plaintiffs' state law claims.

The Eighth Circuit reversed, in large part.  Its preemption analysis ultimately is as confusing as it is instructive.  The court began by applying the "presumption against preemption" recently resurrected in Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008).  (This, even though the OFPA statute itself has an express preemption provision, evincing that Congress clearly intended some form of preemptive effect.)  The court then looked to the statute's express preemption provision, concluding that although it expressly preempted state certification laws, it did not preempt state common law or statutory claims by private litigants.  Moreover, the court concluded that the fact that Congress included a narrow preemption provision should generally weigh against finding any implied preemption.  Slip op. at 20.

The trial court had held that OFPA preempted the entire field of certification, labeling and marketing of organic agriculture, likening OFPA's broad scope to that of the Occupational Health and Safety Act of 1970.  The Eighth Circuit, however, rejected this analysis, finding that OFPA's scope was not nearly as comprehensive as OSHA's.  Thus, field preemption did not apply, either.

The Eighth Circuit then analyzed whether conflict preemption applied.  It observed that Congress had intended to "replace the patchwork of existing state regulations with a national standard for defining organic food" and reasoned that "State law that poses an obstacle to the establishment of the national standard should therefore be preempted."  Id. at 23.  The court held that state consumer protection suits against QAI, which was the certifying inspector for Aurora, would directly interfere with and contradict the federal laws governing how QAI was to do its job, so conflict preemption required dismissal of the suits against QAI.  Id. at 24-25 ("it would be impossible, on the one hand, for QAI to comply with the OFPA and its regulations, which detail the process for revoking certifications, and, on the other hand, to comply with any additional state law duty and process to revoke certifications").

The Eighth Circuit also held that the claims against Aurora and the retailers that amounted to imposing liability on them for selling product as certified organic that was not, in fact, organic (or did not comply with federal regulations) was preempted under conflict preemption principles:

Aurora maintained its certification at all times relevant to this appeal.  Therefore, any attempt to hold Aurora or the retailers liable under state law based upon its products supposedly not being organic directly conflicts with the role of the certifying agent . . .  To the extent the class plaintiffs, relying on state consumer protection or tort law, seek to set aside Aurora's certification, or seek damages from any party for Aurora's milk being labeled as organic in accordance with the certification, we hold that state tort law conflicts with federal law and should be preempted.  

Id. at 27-28.

But the Eighth Circuit held that conflict preemption did not require the dismissal of state law claims against Aurora or the retailers based on the so-called "facts" underlying the organic certification.  Id. at 30.  Thus, the court held that the following would state a cause of action that would not be preempted:

"misrepresenting the manner in which its dairy cows were raised and fed," and "suppressing or omitting material facts regarding the production of its 'organic' milk or milk products, specifically that . . . the dairy cows were not raised at pasture."

Id. at 32.  Accordingly, the court remanded the case to the district court to determine what claims survived against Aurora and the retailers.

To me, this is a distinction without a difference.  If you can be held liable for not "disclosing" that your cows were raised in a barn -- rather than in a field, as the organic laws apparently require -- then it's the same exact thing as being liable for marketing a certified organic product that is out of compliance with the federal laws (which claim the court held would be preempted).

I continue to hope for a day when there is a synthesized preemption jurisprudence that courts (and laywers like me) can easily apply.

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Every once and a while you come across a class action in which a lawyer seems to have found a technical violation of a statute and made a federal case of it, even though no one has been injured.  Loreto v. Procter & Gamble Co., 2010 WL 347152 (S.D. Ohio Sept. 3, 2010) is one of those cases.

In Loreto the defendant loaded its NyQuil and DayQuil cold and flu products with 150% of the recommended daily allowance of Vitamin C, using an ad campaign with famous TV moms (Mrs. Cunningham from Happy Days, Shirley Partridge from the Partridge Family, and Mrs. Brady from the Brady Bunch) touting the fact that the products help "replenish" the Vitamin C that the body needs and may help blunt the effects of the cold or flu. 

The FDA, apparently, was not amused.  Long ago, it had convened an advisory committee and issued a monograph that "does not allow for the combination of vitamin C with any of the other active ingredients" in cold and flu products.  Id. at *4.  The committee had found some evidence that vitamin C might be effective in mitigating cold or flu symptoms, but there was no evidence to suggest effective dosing.  In response to the defendant's advertising campaign, the FDA sent a warning letter stating that the vitamin C-laden products "'do not comply with the final monograph for OTC Cough-Cold'" medicines and thus, the FDA did not recognize them as safe and effective.

That's all some plaintiffs' lawyers needed to file a putative nationwide class on behalf of all purchasers, alleging violation of every state's consumer protection statute, as well as unjust enrichment.  They alleged that class members would have bought other, cheaper products if they had known the facts set forth in the FDA Warning letter.

Judge Timothy Black dismissed the complaint with prejudice.  To begin with, he noted that the named plaintiffs were New Jersey residents.  Thus, he analyzed the state consumer protection statute claim solely under New Jersey's statute.  Id. at *5-*6.  In doing so, he considered the defendant's argument that the NJCPA claim was barred by 21 U.S.C. sec. 337(a), which has been interpreted to mean that there is no private cause of action to enforce the provisions of the Food, Drug, and Cosmetics Act.  The court explained that plaintiffs could not "'use other federal statutes or state unfair competition laws as a vehicle to bring a private cause of action that is based on violations of the FDCA,'" or, in other words, they could not assert a claim that would not exist if the FDCA did not exist.  Id. at *7 (citation omitted).

The court held that plaintiffs failed this standard, because the only facts they pled to establish that the NyQuil and DayQuil products were ineffective was the FDA's warning letter.  That letter, as the court noted, only said FDA didn't recognize the safety and effectiveness of the products.  In fact, there was no evidence that vitamin C counteracts or inhibits the other ingredients in the products, and there was even evidence to suggest that vitamin C itself may be effective -- even if FDA does not formally recognize it.  Most important, plaintiffs did not plead that the products didn't work for them.  Thus, plaintiffs' cause of action under the NJCPA really was just asserting a technical violation of the FDCA, not that the defendant's products failed to actually work.  As such, the claim was one to enforce the FDCA in violation of 21 U.S.C. sec. 337(a).  Id. at *9-*10.

The court also held that plaintiffs lacked any injury that would give them standing to bring an NJCPA claim or an unjust enrichment claim.  Importantly, the court observed that:

Ascertainable loss is insufficiently pled where a plaintiff simply contends that the price charged for the misrepresented product 'was higher than it should have been as a result of defendant's fraudulent marketing campaign.'

Id. at *11.  The court noted that the complaint had no factual allegations that the medicines were ineffective in relieving the symptoms of plaintiffs' colds or flu.  Accordingly, plaintiffs got what they bargained for:  cold and flu medicine.  Thus, the unjust enrichment claim had to be dismissed.  Id. at *12.  

The court concluded that its dismissal should be with prejudice because plaintiffs had been given three opportunities to plead injury, including one attempt at re-pleading after the defendant had first filed its motion to dismiss.  (One might wonder why plaintiffs would not have pled personal facts about their experience with the products.  Other than the fact that the products probably worked just fine, the answer is simple:   if personal facts about the effectiveness of the products are necessary, then class certification clearly would be inappropriate because such individual inquiries would fail the predominance requirement of Rule 23(b)(3).  Plaintiffs often avoid personalizing pleadings precisely to avoid creating problems for themselves at the class certification stage.)

Loreto is an excellent example of how the "no private right of enforcement" argument can be used to dismiss specious class actions alleging technical statutory violations, but no real harm.

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Today is a first for this blog:  a guest post.  While I am laboring away on a couple of projects, I asked my good friend and colleague Rob Herrington to step in and keep you folks entertained.  Or at least educated.  Rob hails from the Left Coast, is a Counsel at my firm, and defends companies in consumer class actions.  Today he updates us on some of the aftermath from the Supreme Court's recent Shady Grove decision.  Take it away, Rob:

They say that “he who laughs last, laughs loudest.”  In a recent decision, the Second Circuit appears to be the one left chuckling (at least for now), notwithstanding the Supreme Court’s recent decision in Shady Grove holding that FRCP 23 trumps a state law barring certain types of class actions. 

You remember Shady Grove, right?  It pitted a New York state law that barred class actions seeking statutory damages (C.P.L.R. 901(b)) against FRCP 23.  In the end, FRCP 23 won.  The Court held that “Rule 23 provides a one-size-fits-all formula for deciding the class-action question,” and thus generally preempts a state law that bars use of the class action procedure. Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 130 S. Ct. 1431, 1437 (2010).

Several cases were caught up in the wake of this decision, including Holster v. Gartco, Inc., 2008 U.S.App. Lexis 23203 (2d Cir. Oct. 31, 2008). Holster was a case brought under the federal Telephone Consumer Protection Act (“TCPA”)—that lovely statute providing a statutory penalty of $500 for each instance of an unsolicited, commercial fax transmission.

Before Shady Grove, the Second Circuit ruled that a TCPA class action could not be brought in New York for two reasons:  (i) C.P.L.R. 901(b)’s bar on class actions seeking statutory damages; and (ii) specific language in the TCPA that allows a person to sue only “if otherwise permitted by the laws or rules of court of a state.”  Id.  The court held that C.P.L.R. 901(b) was just such a law or “rule of court” and thus a class action was unavailable.  Id.

After Shady Grove, the Supreme Court vacated Holster and remanded for further consideration.  Justice Scalia penned a concurrence to the remand order, taking at shot at Holster’s second reason for not allowing the class action.  The concurrence asserted that the second reason was untenable because it would create the absurd result of a litigant losing his putative federal right under the TCPA for failing to follow trivial state court rules about “the color and size of the paper.”  Holster v. Gatco, Inc., 130 S. Ct. 1575, 1576 (2010) (Scalia, J., concurring).

On remand, the Second Circuit agreed that Shady Grove abrogated its first ground for not allowing a class action.  Holster v. Gatco, Inc., 2010 WL 3307468 (2d Cir. Aug. 24, 2010) (“Shady Grove’s holding that Rule 23 generally preempts C.P.L.R. 901(b) abrogates our holding.”). 

But notwithstanding Justice Scalia’s concurrence, the court reaffirmed its decision that a class action could not be brought in New York under the TCPA.  In language sure to make strict-constructionists’ skin crawl, the Second Circuit started with the proposition that “there exists no rule prohibiting courts from reading a law with an eye to the legislature’s goals in enacting the statute.”  Id. at *2.  The court reasoned that, in “light of this principle, nothing prevents us from saying that Congress intended some, but not necessarily all, the state ‘rules of court’ to define what causes of action could lie under the TCPA.”  Id. at *3.

Thus, the court held that, notwithstanding Shady Grove and notwithstanding Justice Scalia’s concurrence, the TCPA should be read to incorporate state laws that limit substantive relief, including C.P.L.R. 901(b).  Answering Justice Scalia, the court noted that, whether “Congress intended to let a TCPA suit be barred by a state due to the particulars of the paper used in filing seems unlikely, but that is a question for another day.”  Id.

Although the argument between Justice Scalia and the Second Circuit certainly is entertaining, the Holster decision is notable for another reason.  It provides defense counsel with a potential tool (albeit a limited one) for attacking class actions.  If you are facing a class action asserting claims under a federal statute and that federal statute incorporates state law limitations (like the TCPA), it may be worth investigating whether state law could be used to limit the scope of the case, as in Holster.

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The Nattering Nutrition Nannies scored a victory last week in the Eastern District of New York -- a victory against beverage giant The Coca-Cola Company and, more important, a victory against common sense and personal responsibility.  Last Wednesday, the Center for Science in the Public Interest and its co-counsel persuaded a federal court to deny Coca-Cola's motion to dismiss a putative nationwide consumer fraud class action challenging the beverage "vitaminwater" made by Coca-Cola's subsidiary, Glaceau.  See Ackerman v. The Coca-Cola Company, No. CV-09-0395 (JG) (RML), Slip op. (E.D.N.Y. July 21, 2010).

In Ackerman, Plaintiffs allege that the name, "vitaminwater," along with a description of the vitamins in the water and slogans about health are deceptive because they mislead people to believe that the beverages do not have sugar or calories in them.  As the court described plaintiffs' theory:

The plaintiffs have sufficiently alleged that the collective effect of the challenged statements was to mislead a reasonable consumer into believing that vitaminwater is either composed solely of vitamins and water, or that it is a beneficial source of nutrients rather than a "food of little or no nutritional value [which has been fortified] for the sole purpose of" claiming or implying that it is "healthy."  58 Fed. Reg. 2478, 2522.

Slip op. at 32.

Of course, there's one major problem with that theory:  the nutrition facts label on every bottle of vitaminwater discloses that there are a certain number of grams of sugar in the product, and that an 8 ounce serving of the drink contains a certain number of calories.  So the fact that there is an ingredient other than vitamins and water -- namely, sugar -- is plain to anyone who can read.  Nevertheless, the court allowed this claim to survive the pleading stage, so now there will be lots of expensive discovery and motion practice on a theory that is patently ridiculous.

(An additional sign to the consumer that there is something besides vitamins and water in the product is the fact that it is sweet -- some might even complain that it is cloyingly sweet.  This has led Glaceau to release "vitaminwater 10," which has ten calories per serving, and now  "vitaminwater zero," which has -- you guessed it -- zero calories per serving.  The court ducked the sweetness argument by stating that "there is no evidence before me concerning vitaminwater's taste."  Slip op. at 35.)

The court's response to the fact that sugar is listed as an ingredient right on the label was to declare that "the presence of a nutritional panel, though relevant, does not as a matter of law extinguish the possibility that reasonable consumers could be misled by vitaminwater's labeling and marketing."  Slip op. at 34.  The court relied heavily on Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008), in which the Ninth Circuit had held that the packaging of a product called "Fruit Juice Snacks" could be misleading where it pictured various fruits on the label, but did not actually contain the juice of any of the pictured fruits, and only revealed this fact on the product label.

But Ackerman is no Williams.  There were no allegations that the packaging or marketing for vitaminwater contained any false statements or pictures.  Unlike the "Fruit Juice Snacks" at issue in Williams, which did not contain the juice of the pictured fruits, vitaminwater actually contains the vitamins the marketing discusses.  And the fact that it also contains sugar is stated right on the Nutrition Facts label in close proximity to the disclosures of the percentages of the vitamins and minerals that would surely interest vitaminwater's consumers.

This complaint is as deficient on its face as the Crunchberries complaint that I discussed earlier this month.  Reasonable people should not, as a matter of law, be allowed to claim surprise at the presence of an ingredient that is clearly disclosed on the Nutrition Facts label.

Although the court in Ackerman gave lip service to the pleading requirements of Twombly and Iqbal, it ultimately held that conclusory allegations met the pleading standard.  Indeed, it credited the following as adequately pleading the fact of reliance:

Each plaintiff relied on Defendants' . . . misrepresentations that VitaminWater is a beneficial dietary supplement beverage including, but not limited to, "vitamins + water = all you need" and the name of the product itself -- "VitaminWater" -- in deciding to purchase vitaminwater.  Had Plaintiffs known the truth that the statements they relied on were false, misleading, deceptive, and unfair, they would have neither purchased VitaminWater nor paid the premium price Defendants charged for it.

Slip op. at 40. 

The court refused to dismiss causes of action under California's Unfair Competition Law, False Advertising Law, and the Consumer Legal Remedies Act, as well as under New York's General Business Law sections 349 and 350.  It also refused to dismiss plaintiffs' common law misrepresentation claims for NY and CA plaintiffs and the unjust enrichment claims for all plaintiffs. 

Notably, the court was forced to conclude that plaintiffs' claims under the New Jersey Consumer Fraud Act failed to state a claim because they failed to plead enough specifics as required by Federal Rule of Civil Procedure 9(b). 

The court also held that plaintiffs failed to plead a claim for breach of express warranty because they failed to set forth any statement made about the product that the product failed to meet.  In addition, the court dismissed the implied warranty claims because -- even crediting the complaint as true -- "plaintiffs cannot establish that vitaminwater failed to constitute a merchantable product."  This, of course, begs the question:  if, as a matter of law, everything the defendant said was true (such that it did not constitute a breached warranty), and the sugar content was listed on the product itself and did not make the product unmerchantable, how could the packaging and marketing be "fraudulent"? 

The first half of the court's opinion is comprised of a recitation of the regulatory history regarding adding nutrients to foods and beverages.  Ultimately, the court rejected the defendants' arguments that the lawsuit was expressly and/or impliedly preempted by statutes and regulations preventing states from imposing labeling requirements that are different from those imposed by the FDA.  See, e.g., Slip op. at 27.  The court concluded that although plaintiffs' claims were premised on violations of the federal statutes and regulations, they were not preempted because they sought to impose "identical" requirements under state law as those imposed by the federal scheme.  The court also rejected the defendants' primary jurisdiction argument, stating that the question of what could mislead a reasonable consumer is one courts typically handle, and reasoning that the "FDA is aware of plaintiffs' concerns but lacks the resources to take enforcement action in every instance in which its policies are violated."  Slip op. at 30.

But plaintiffs legal assault on the fortified beverage industry ignores one important fact:  the public wants nutritionally-enhanced foods and beverages.  Indeed, fortified beverages are one of the fastest-growing market segments.  Consumers are capable of reading nutrition labels and ingredients and making dietary choices for themselves, and they do not need the FDA or self-appointed nutrition nannies like CSPI to limit the products from which they can legitimately choose.  Although the FDA has articulated policies about adding nutrients to foods and beverages, it has not acted to eliminate the category of nutritionally-enhanced products from the market.  One benefit of limited regulatory resources is prioritization, and instances of actual fraud should take (and generally have taken) enforcement priority. 

The Ackerman court's opinion on express and implied warranties makes it clear that there is no real fraud or misrepresentation in the marketing or packaging of vitaminwater.  The label clearly discloses the product's sugar content.  As such, CSPI should move on to lawsuits that fight actual fraud, rather than trying to co-opt the courts into doing what the FDA to date has refused to do.

To read CSPI Litigation Project Director Steve Gardner's take on the decision, click here.

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On Monday the Fourth Circuit issued an opinion in a public nuisance suit that contains important legal reasoning that is likely to impact global warming litigation.  See State of North Carolina v. Tennessee Valley Authority, No. 90-1623, Slip op. (4th Cir. Jul. 26, 2010).  To be clear, the suit against the TVA was not a global warming case.  Rather, it was a public nuisance case in which the State of North Carolina sought to use public nuisance theory to impose restrictions on Alabama and Tennessee energy plants to reduce the amount of sulfur dioxide and nitrous oxides that they emitted, even though the plants were operating within their state and federal permits.

The trial court had entered judgment for North Carolina, declaring the emissions a public nuisance and issuing an injunction requiring the Tennessee and Alabama plants to install expensive scrubber plants to remove sulfur dioxide and nitrous oxide from their emissions.

The Fourth Circuit Court of Appeals -- in a unanimous panel opinion -- reversed the trial court.  The court premised its opinion on some fundamental precepts that should discourage other courts from using public nuisance theory to regulate air pollution.

First, the court held that there is a strong presumption that a common-law public nuisance theory is preempted by the complex framework of federal and state statutes and regulations governing air pollution.  The court explained that comprehensive framework, and then observed:

The system of statutes and regulations addressing the problem [of air pollution] represents decades of thought by legislative bodies and agencies and the vast array of interests seeking to press upon them a variety of air pollution policies.  To say this regulatory and permitting regime is comprehensive would be an understatement.  To say it embodies carefully wrought compromises states the obvious.  But it is the work of many, many people, and it is in place.

. . . [The district court's] decision threatens to scuttle the extensive system of anti-pollution mandates that promote clean air in this country.  If courts across the nation were to use the vagaries of the public nuisance doctrine to overturn the carefully enacted rules governing airborne emissions, it would be increasingly difficult for anyone to determine what standards would govern.  Energy policy cannot be set, and the environment cannot prosper, in this way.

Slip op. at 10-11.  The court continued:

It ill behooves the judiciary to set aside a congressionally sanctioned scheme of many years' duration -- a scheme, moreover, that reflects the extensive application of scientific expertise and has set in motion reliance interests and expectations on the part of those states and enterprises that have complied with its requirements.  To replace duly promulgated ambient air quality standards with standards whose content must await the uncertain twists and turns of litigation will leave whole states and industries at sea and potentially expose them to a welter of conflicting court orders across the country.

Slip op. at 16.

As the court recognized, public nuisance standards are blunt tools that are often vague and indeterminate.  This is, in part, due to the fact that public nuisance is the Swiss Army knife of the common law, being pressed into service in a pinch to address loud parties, prostitution, obstacles in highways, bullfights, and smells from pig farms.  Applying International Paper Co. v. Ouellette, 479 U.S. 481 (1987), the court reasoned:

We can state . . . with assurance that Ouellette recognized the considerable potential mischief in those nuisance actions seeking to establish emissions standards different from federal and state regulatory law and created the strongest cautionary presumption against them.

Slip op. at 19.  Thus, where Congress has granted states a role in the federal regulatory regime and permitting process, both field and conflict preemption principles come into play, and at a minimum they prevent the use of common law public nuisance to create a wholly different role for states (like North Carolina).  As the court explained, the fact that the federal statute has a generic savings clause does not change this analysis.  Slip op. at 20.

The Fourth Circuit's opinion has an entire section devoted to the difference between the branches of government and their institutional capabilities.  It recognizes that agencies -- with the notice and comment process -- are better equipped to regulate in a forward-looking mode and to digest an entire body of science to create empirically-based regulations.  See slip op. at 21-23 ("[W]e doubt seriously that Congress thought that a judge holding a twelve-day bench trial could evaluate more than a mere fraction of the information that regulatory bodies can consider.").  The court instructed:

It is crucial therefore that courts in this highly technical arena respect the strengths of the agency processes on which Congress has placed its imprimatur.  Regulations and permits, while hardly perfect, provide an opportunity for predictable standards that are scientifically grounded and thus give rise to broad reliance interests.

Slip op. at 23-24.

These fundamental principles articulated by the Fourth Circuit are not limited to cases involving sulfur dioxide or nitrous oxide.  They would apply equally to global warming litigation, and they highlight the inherent inadequacy of the judicial branch and the common law to provide the sort of empirical, forward-looking regulations that would promote stability and predictability in this important area of public policy.

The Fourth Circuit's opinion also articulated a basic principle of public nuisance law that is an independent reason why the TVA could not be held liable for creating a public nuisance:  where the conduct complained of has been expressly approved by the applicable federal and/or state authorities, it cannot be a public nuisance as a matter of law.  Slip op. at 29-30, 32 ("If TVA is in compliance with the more demanding federal EPA requirements and state law SIPs, it cannot be in violation of less-stringent state law nuisance standards.").

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This seems to be turning into food and beverage week at Ye Olde Consumer Class Actions Blogge.  First, we had our Tort Twits suing Yoo-hoo out the ying-yang.  And now these two decisions, which demonstrate a judicial willingness -- even on a motion to dismiss -- to employ some common sense and dismiss claims that obviously fail to plead a plausible fraud.

The first decision -- Werberl v. Pepsico, Inc., 2010 WL 2673860 (N.D. Cal. July 2, 2010) -- was covered earlier this week by Sean Wajert over at Mass Tort Defense.  I won't completely rehash the case here, other than to note that Werberl is an excellent example of a jurist who does not feel compelled to check her brain at the door when adjudicating Rule 12 motions.  In Werberl, plaintiff alleged that the packaging for Cap'n Crunch's Crunch Berries cereal -- which is delicious and was a favorite of mine growing up -- is deceptive because the name and the pictures lead one to believe that it has actual berries in it when it does not.  Of course, anyone who has ever seen a box of Crunch Berries knows that this allegation is pure horse puckey.  (As does anyone who has actually tasted the cereal.)

Many judges faced with such a ridiculous theory still might hesitate to dismiss such claims pled under California's pro-plaintiff Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law.  They might be tempted to allow some discovery, or say the theory presents a jury question.  But not Judge Saundra Brown Armstrong!  She began her analysis by noting that although the question whether a business practice is deceptive is generally a question of fact not suitable for resolution in a motion to dismiss, "where a court can conclude as a matter of law that members of the public are not likely to be deceived by the product packaging, dismissal is appropriate."  Id. at *3.

She then looked to the facts pled in the putative class action to conclude as a matter of law that there was no deception here:

[T[here are no pictures or images of any berries or any other fruit depicted on the Cap'n Crunch cereal box.  Nor are there any representations that the cereal is made with real fruit or is nutritious.  Rather, the Crunch Berries -- which are not fruit -- are described as a "SWEETENED CORN & OAT CEREAL" and shown as brightly-colored balls of cereal that no reasonable consumer would believe are made from real berries. . . . [T]here simply is nothing in the Cap'n Crunch packaging that would lead a reasonable consumer to believe that the brightly-colored cereal balls depicted on the product cover and described as Crunch Berries are, in fact, made or derived from berries or fruit.

Id. at *4.  Accordingly, the court dismissed the UCL, CLRA, and FAL claims.  It also dismissed the intentional misrepresentation claims for lack of a misrepresentation and because any reliance by the consumer to conclude that the cereal had real berries would be unreasonable per se.  The court also dismissed the breach of express and implied warranties as frivolous because there was no express or implied representation on the packaging that Crunch Berries contain real fruit.  The court even refused to grant leave to amend the complaint because no amendment could cure the fact that the packaging was not deceptive as a matter of law.

Judge Armstrong's analysis is an excellent example of a court that -- faced with a motion to dismiss a ridiculous claim -- was not hamstrung by the rules to avoid applying basic common sense to a consumer fraud claim.  We need more judges like that.

The second opinion I wanted to share in today's post was Mason v. The Coca-Cola Co., 2010 WL 2674445 (D.N.J. June 30, 2010).  In Mason, the plaintiffs brought a putative nationwide class action against Coca-Cola alleging that Diet Coke Plus was misleading under federal and state law because "'the term "Plus" connotes a more robust amount of vitamins and minerals in the product when, in fact, that was not the case at all.'"  Id. at *1.

The defendant began by invoking the primary jurisdiction doctrine and federal preemption to dismiss the claims.  The court wasn't buying it.  As for primary jurisdiction, the court concluded that the lawsuit asked the court to do what courts routinely do:  apply federal regulations.  Indeed, the court said that "[a]t its heart, this case calls for the determination of whether Plaintiffs received what they bargained for."  Id. at *2. 

The court also rejected the defendant's express preemption and conflict preemption arguments.  It quickly dispatched the express preemption argument, reasoning that plaintiffs were simply seeking a state law remedy for a violation of federal labeling requirements, and this was not expressly preempted by the Food, Drug and Cosmetics Act.  As for conflict preemption, the defendant argued that the FDA had established a regulation defining use of the term "Plus," and if the state law claim were allowed to proceed, it might result in a conflicting definition.  The court strongly rejected this argument, reasoning:

Were the Court to permit the application of implied conflict preemption in this case, it would turn regulatory definitions such as 21 C.F.R. sec. 101.54(e) into suits of armor capable of immunizing parties who mislead the public from any potential civil liability, even before it is determined whether the party complied with the definition.  Congress could not have intended such a perverse result when it granted the FDA authority to regulate in this area.

Id. at *4.

But once the court moved to an analysis of plaintiffs' causes of action, it applied basic common sense to conclude that plaintiffs had failed to plead consumer fraud.  In analyzing the claim under the New Jersey Consumer Fraud Act, the court noted that plaintiffs must plead:  (1) unlawful conduct, (2) an ascertainable loss, and (3) a causal relationship between the two.  The court began its analysis by observing that although plaintiffs say that the term "Plus" connoted more vitamins and minerals than were actually in the product, the actual amount of added vitamins and minerals were listed on the product itself.  Indeed, a warning letter sent by the FDA to defendant, which was attached to the complaint, indicated that:

the ingredient list includes the following added vitamins and minerals:  magnesium sulfate (declared at 10% of the Daily Value (DV) for magnesium in the Nutrition Facts panel), zinc gluconate (declared at 10% of the DV for zinc), niacinamide (declared at 15% of the DV for niacin), pyridoxine hydrochloride (declared at 15% of the DV for vitamin B6), and cyanocobalamine (declared at 15% of the DV for vitamin B12).

Id. at *6.  In light of these disclosures right on the product, the court held that plaintiffs had failed to allege with particularity what further expectations they had for the product or how it fell short of such expectations.  Thus, they had failed to plead the first element of an NJCFA claim. 

The court held that they also failed to plead the ascertainable loss element of such a claim because they do not plead how what they received was of a lesser value than what they were promised.  They bought a tasty beverage, they drank a tasty beverage.  They don't allege that they paid more for it than other beverages.  And they don't allege that they would not have bought the Diet Coke Plus but for the allegedly fraudulent misrepresentations.  Thus, they failed to plead an ascertainable loss under the NJCFA.  Id. at *6-*7. 

The court held that, for the same reasons, plaintiffs failed to state a claim for negligent or intentional misrepresentation.  Id. at *7.  And it dismissed plaintiffs' unjust enrichment claim because New Jersey does not recognize unjust enrichment as a separate tort cause of action, and where the underlying tort claims fail, the unjust enrichment claim should be dismissed as well.  Id.

Unlike the court in Werberl, the court in Mason gave plaintiffs an opportunity to re-plead their claims.  But given the fact that the added vitamins and minerals were fully disclosed on the Nutrition Facts section of the product label, plaintiffs will have a very difficult time pleading anything that could give rise to a fraud or misrepresentation claim.

Taken together, Werberl and Mason provide strong encouragement for courts to throw out consumer fraud claims where the contents of the food or beverage product are apparent from the product's packaging and labeling.

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In order to help you meet your recommended daily allowance of defense-related information, today I'm serving up three heaping helpings of cases where consumer fraud claims involving food were dismissed on the pleadings.

In Ciszewski v. Denny's Corp., Case No. 09 C 5355, Slip op. (N.D. Ill. Apr. 7, 2010) (subscription to Law360 required), plaintiff had brought a class action against Denny's, claiming that the restaurant's classic dishes like "Moons over My Hammy" (a personal favorite of mine), "SuperBird Sandwich," and the "Meat Lover's Scramble" contain from double to almost five times the CDC's recommended daily sodium intake of 1,500 milligrams per day.  Plaintiff has high blood pressure, for which he must take medication and limit his salt intake.  He alleged that Denny's knew the amounts of sodium in its dishes were excessive and that it concealed the sodium levels because consumers would not eat the dishes otherwise.

Plaintiff sued under Illinois's Consumer Fraud Act ("ICFA").  Denny's first argued that plaintiffs' claims were precluded by ICFA's provision that "full compliance with applicable disclosure requirements is a defense . . . to a claim of fraud based on failure to make additional disclosures."  The court rejected this argument, because the defendant was arguing that it did not have to make any disclosures under the federal Nutritional Labeling and Education Act because its food was served in restaurants.  The court reasoned:  "Denny's argument amounts to a contention that because federal disclosure requirements do not apply, the ICFA cannot impose a disclosure requirement.  Nothing in the ICFA or the law under it supports this contention."  Slip op. at 4.  The court also rejected Denny's argument that plaintiff failed to allege intent with sufficient particularity.

But the court accepted Denny's argument that plaintiff failed to meet the Rule 9(b) requirements applying to allegations of deception.  The court explained that plaintiff's complaint relied solely upon deceptive omissions, and yet it failed to allege with any particularity any communication from Denny's that omitted the allegedly crucial information.  Citing a case previously noted in this blog, the court recognized that "[a] consumer cannot maintain an action under the Illinois Consumer Fraud Act when the plaintiff does not receive, directly or indirectly, communication or advertising from the defendant.'"  Slip op. at 6 (quoting DeBouse v. Bayer AG, 235 Ill. 2d 544, 550 (2009)).  The court explained:

In short, a deceptive communication is a critical element of an ICFA deception claim.  Because [plaintiff] identifies no communication that he received that was generated by Denny's, he has failed to plead the circumstances constituting the fraud with the particularity required by Rule 9(b).

Slip op. at 6-7.

The court also dismissed the unjust enrichment claim, holding that it could not be maintained absent fraud.  It also dismissed plaintiff's implied contract claim, which was premised on an implied duty to provide meals that are safe for human consumption.  The court explained that "[Plaintiff] does not allege, however, that any given Denny's meal is unsafe in and of itself.  To put it another way, he does not allege that exceeding the CDC-recommended maximum for a day, or several days, in a single meal is by itself unsafe."  The court also dismissed plaintiff's request for an accounting, as it must be grounded on fraud under Illinois law.

Our second special serving today is Shepard v. Applebee's Int'l, Inc. (D. Kan. Apr. 7, 2010) (subscription to Law360 required).  In Shepard, plaintiff had sued Applebee's and Weight Watchers, among others, because the calorie and nutritional information on the menus were allegedly false.  The trial court previously had dismissed the state-law claims brought under the Kansas Consumer Protection Act, civil conspiracy, and unjust enrichment, holding that they were preempted to the extent they failed to incorporate the federal standards of the Nutrition Labeling and Education Act -- namely, the requirement that the alleged fraudulent representations lacked a "reasonable basis."  The court had, however, allowed certain RICO claims to stand.  Defendants then brought a motion for judgment on the pleadings directed at the remaining RICO claims.

Defendants argued in support of their motion for judgment on the pleadings that plaintiffs could not establish a predicate act under RICO unless they could meet the NLEA standard, i.e., unless they could allege that the representations had no "reasonable basis" under NELA.  Plaintiffs responded that although the NLEA might preempt state law claims, it could not "preempt" federal claims like RICO.

In analyzing the issue, the court determined that in the Tenth Circuit, when looking to what constitutes a predicate act of wire or mail fraud, the courts look to underlying state law to determine what constitutes fraud.  Slip op. at 5.  The court previously had held that the NLEA preempts all state law claims that impose a nutrition labeling standard higher than the NLEA's "reasonable basis" standard.  Because that same standard must govern the determination of whether there has been a predicate RICO violation, the court concluded that judgment on the pleadings was appropriate because plaintiffs had not pled a violation of the NLEA's "reasonable basis" standard.

The third case in our trio of food decisions is:  O'Donnell v. Kraft Foods, Inc., Civ. A. No. 09-4448, Slip op. (D.N.J. Mar. 18, 2010).  In O'Donnell, plaintiffs brought suit under New Jersey's Consumer Fraud Act, alleging that hot dogs and other processed meats cause cancer and demanding that a special cancer warning be put on the product.

The court failed to reach the defendant's primary jurisdiction and federal preemption arguments.  For the court, it was enough that this was a product liability action masquerading in consumer fraud attire.  The New Jersey Supreme Court has been clear that where the subject of the case is really product liability, the state's Product Liability Act -- rather than its Consumer Fraud Act -- applies.  Slip op. at 4-6.  Plaintiff's case -- although expertly pled as a claim for economic harm -- was clearly one based on physical harm that allegedly could result from hot dogs.  Accordingly, the case was really a product liability case and, as such, was properly dismissed.

These three cases today demonstrate the range of creativity that plaintiffs are using to attempt to impose liability on the food industry, as well as the clear-eyed view that courts from around the country are taking of such tactics.

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When I teach Product Safety and Liability, I often find that one of the most difficult questions to answer is who -- or really, what branch of government -- should be making a decision on a particular issue.  Institutionally, courts have inherent limitations.  They work within the confines of actual disputes between individuals; they are not legislators and have no broad factfinding powers.  They often have limited capabilities when it comes to questions of science and require expert testimony.  And when the causes of action at issue allow for a jury trial, a group of individuals who are "scientifically challenged" may be the ones actually charged with finding the facts. 

Regulatory agencies, too, have their limitations.  But often when the question is one of pure science, I often find myself advocating that the question is better left to regulators to decide.  You can make that argument in a number of ways.  For example, you may in certain circumstances be able to argue that Congress itself made that determination by preempting state law claims.  But where preemption is not an option, one can appeal to the judge's inherent discretion under doctrines such as equitable abstention or primary jurisdiction. 

Usually, my colleagues give such arguments about a snowball's chance in Hell of prevailing.  But a decision reported by Law360 today demonstrates that climate change occasionally affects Hades as well.

In Gordon v. Church & Dwight Co., No. C 09-5585 PJH, Slip op. (N.D. Cal. Apr. 2, 2010) (Law360 subscription required), plaintiffs sued the makers of Trojan-Enz condoms, alleging that the spermicidal lubricant Nonoxynol-9 (which is used in some condoms) can increase the risk of HIV infection.  Plaintiffs sued to impose warnings on the products under California's False Advertising Law, its Unfair Competition Law, and its Consumer Legal Remedies Act. 

As U.S. District Judge Phyllis J. Hamilton explained, the Food and Drug Administration has been considering the issue of whether to alter the FDA-required warnings on N-9 lubricated condoms to account address this issue.  Slip op. at 3.  Indeed, FDA already has required that labeling for over-the-counter vaginal contraceptives containing N-9 include the following warnings:

Studies have raised safety concerns that products containing the spermicide nonoxynol 9 can irritate the vagina and rectum.  Sometimes this irritation has no symptoms.  This irritation may increase the risk of getting HIV/AIDS from an infected partner.

. . .

Use a latex condom without nonoxynol 9 if you or your sex partner has HIV/AIDS, multiple sex partners, or other HIV risk factors.

73 Fed. Reg. 66522 at n.1.

Judge Hamilton ultimately concluded that it was the FDA -- rather than a court -- that should be making the determination at issue in plaintiffs' suit, and thus she granted the defendant's motion for dismissal without prejudice under the "primary jurisdiction" doctrine.  As Judge Hamilton explained, primary jurisdiction is a prudential doctrine in which a court may defer initial decisionmaking where a regulatory agency is considering the question.  Courts apply 4 factors in determining whether to apply the doctrine:  "'(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.'"  Slip op. at 2 (citation omitted).

The court noted that FDA has exerted regulatory authority over condoms as medical devices, including regulating the substance of the warnings, instructions, and statements of use.  Judge Hamilton concluded that the primary jurisdiction doctrine was appropriate here:

The issue of medical device labeling requires expertise as well as uniformity in administration.  The plaintiffs' claims involve a technical area over which the FDA has more expertise than the courts; and, while the claims are based on state law, their effect is to challenge the wording in the warnings that are required to be included in the latex condom packaging pursuant to federal law.

The court notes in particular that the FDA has stated that it is still considering public comments and other data in connection with warnings similar to those that plaintiffs seek to have the court impose on C&D.  Thus, this issue remains under review.  It would be inappropriate for this court to assume the FDA's regulatory role, and to interpret scientific studies or other evidence to determine whether the labeling of the N9 latex condoms should be changed to include an additional warning . . .

Slip op. at 3.

The Gordon decision is an excellent example of a court taking stock of its inherent capabilities and limitations and deferring to a regulatory agency to make a decision in the first instance where the agency is better able than the court to do so.  It remains to be seen how influential Judge Hamilton's decision will be in other courts.

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We defense lawyers have grown so accustomed to plaintiffs trying to repackage a products liability claim as one for consumer fraud that we sometimes forget to check a state's products liability statute for potential defenses when the complaint fails to mention it and instead cites the state's consumer fraud act.  But by failing to look at the product liability statute, we may be passing up an important defense, as was demonstrated in Mitchell v. Proctor & Gamble, 2010 WL 728222 (S.D. Ohio Mar. 1, 2010).

The plaintiff in Mitchell brought a putative class action against the maker of an over-the-counter heartburn medicine, Prilosec OTC.  The plaintiff, who said he was the only one who became ill after a buffet-style dinner party, claimed that taking Prilosec OTC predisposed consumers to contracting food-borne illnesses.  His class was defined as all consumers of Prilosec OTC from 2004 to the present.  He asserted causes of action for strict liability failure to warn, negligent failure to warn, violations of Ohio's Consumer Sales Practices Act, breach of express warranty, and breach of implied warranty.

The court first analyzed the defendants' argument that the entire action was preempted by Ohio's Products Liability Act.  The OPLA defined a "products liability claim" as a civil claim seeking recovery for compensatory damages from a manufacturer for death, personal injury, emotional distress, or property damage arising from the product's design, any warning or instruction, or the product's failure to conform to a warranty.  Id. at *2-*3.  The OPLA had eliminated all common-law product liability causes of action.

The plaintiff sought recovery for "treatments for food-borne illnesses," "the purchase price of the product," and the difference between the market value of the product and its actual value.  But the court held that "[plaintiff] cannot separate out his claims from the purview of the OPLA simply by claiming only economic losses.  His claims . . . are products liability claims.  And the injury he is alleged to have suffered relates directly to that product."  Id. at *4.

The court also noted that there was a long line of authority holding that where a plaintiff used the consumer fraud statute (the OCSPA) to assert claims that were primarily rooted in products liability claims, the OPLA preempted those claims, too.  Id.  Accordingly, the court dismissed all of plaintiff's claims without prejudice for him to plead a proper claim under the OPLA, which he had not previously cited.  Thus, an unpled product liability statute proved to be the Defendant's best weapon to defeat a host of consumer fraud claims. 

In dicta, the court also commented on the inadequacy of the factual pleadings under the Rule 8 standard of Twombly/Iqbal.  Plaintiff alleged that he attended a dinner, that he had been taking Prilosec, and that he was the only one who became sick.  That, the court held was not enough:

Nowhere in [plaintiff's] factual allegations does he connect his assertion that Prilosec OTC increase the risk of foodborne illness with the circumstances surrounding his illness.  Thus, his Amended Complaint is full of "naked assertions" that are lacking "further factual enhancement."  This Court cannot make inference upon inferences to provide the factual enhancement to [plaintiff's] claims.

Id. at *5 (citations omitted).

Ultimately, the court held that plaintiff should have another chance to plead an OPLA claim with sufficient factual particularity.  But it was clear from Mitchell that both the common law and OCSPA claims were preempted -- proving once again that it pays to check statutes that are not cited in the complaint when making decisions about motions to dismiss and affirmative defenses.

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In Levinson v. Johnson & Johnson Consumer Cos., 2010 WL 421091 (D.N.J. Feb. 1, 2010), Judge Dennis Cavanaugh was confronted with yet another attempt to turn a product liability action into a consumer fraud class action by carefully pleading only economic harm and a failure to disclose the risk of harm.  Faced with motion to dismiss, Judge Cavanaugh significantly narrowed the class, but he allowed certain limited claims to go forward.

In Levinson, some Missouri plaintiffs brought a putative nationwide class action against J&J and Wal-mart, alleging that J&J's Baby Shampoo and Wal-mart's Equate Tearless Baby Wash contained trace amounts of chemicals that increase the risk of cancer, cause skin irritation, and can lead to asthma and hypersensitivity.  Plaintiffs allegedly had independent lab tests conducted that identified trace amounts of methylene chloride (which FDA has banned from use in cosmetics), 1,4-dioxane and formaldehyde.  Plaintiffs alleged that the defendants' failure to disclose the presence of these chemicals -- as well as statements such as "Ultra Mild," "Hypoallergenic," and "gentle enough even for newborns" -- constituted a violation of state consumer fraud statutes, a breach of the implied warranty of merchantability and implied warranties of fitness for a particular purpose, and unjust enrichment.

The defendants moved to dismiss for lack of standing and for failure to state a claim as a matter of law.  In analyzing their standing argument, the court relied heavily on Koronthaly v. L'Oreal, 2008 U.S. Dist. LEXIS 59024 (D.N.J. July 25, 2008), a case involving the purchase of lipstick containing lead.  Judge Cavanaugh described the holding in Koronthaly as "[i]n the absence of an FDA regulation concerning lead content in lipstick, or other legal prohibition, the plaintiff could not 'seek a remedy for a harm that she had not actually or allegedly suffered.'"  Levinson, 2010 WL 421091 at *4 (citation omitted).  Accordingly, the court held that plaintiffs lacked standing to assert purely economic harm from the chemicals that were unregulated by the FDA in soap or cosmetics (formaldehyde and 1,4-dioxane), but they could assert a claim for purely economic harm involving the substance that had been banned by the FDA for use in cosmetics (methylene chloride).  As the court explained:

While the Court agrees that the assertion of an economic injury is not an automatic bar to standing, Koronthaly demonstrates that an exception has been recognized in the context of claims concerning defective products, absent a specific legal prohibition precluding particular ingredients or usages.  Insofar as Plaintiffs' claims pertain to allegedly toxic chemicals that have not been banned by the FDA for use in cosmetics . . . this Court concludes that any potential injury is too remote, hypothetical and/or conjectural to establish standing in this matter.  However, insofar as Plaintiffs' claims pertain to methylene chloride, a chemical explicitly banned for use by the FDA in any cosmetic, this Court declines to dismiss Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(1) for lack of standing.

Id. at *4.

The court then proceeded to analyze whether the individual causes of action stated a claim under Rule 12(b)(6).  The parties apparently had represented to the court that regardless of whether New Jersey law or Missouri law were applied, the result would be the same, and thus there was no conflict of laws issue.  Id. at *5.  The court disagreed, holding that New Jersey's Product Liability Act preempted plaintiffs' other claims.  The court relied upon Sinclair v. Merck & Co., 948 A.2d 587 (N.J. 2008), in which the New Jersey Supreme Court held that consumer fraud claims for economic harm allegedly caused by prescriptions for Vioxx were preempted by the Product Liability Act.  Judge Cavanaugh concluded:

Similarly, at the heart of this matter is the potential for harm caused by the defective products, J&J Baby Shampoo and Wal-Mart Equate Tearless Baby Wash, containing allegedly "toxic chemicals linked to increased cancer risk, adverse skin reactions, and other serious health problems." (See Pl. Compl. para. 2). . . .  [C]onsistent with the Sinclair decision, this court concludes that the PLA subsumes all of Plaintiffs' claims, effectively precluding Plaintiffs' claims with respect to the CFA, and otherwise, in the absence of "harm" as defined by the PLA.  The Court does not agree that articulating a claim in terms of pure economic harm where the core issue is the potential injury arising as a consequence of the products' allegedly harmful chemicals converts the underlying defective product claim into an independent and unrelated consumer fraud issue.  Limiting a claim to economic injury and the remedy sought to economic loss cannot be used to obviate the PLA.

Id. at *6. 

Accordingly, because New Jersey's Product Liability Act would preempt all claims, but Missouri's would not, the court concluded there was a conflict of laws requiring it to determine which law would apply.  Because the plaintiffs were from Missouri and bought and used the product there, the court concluded that Missouri law would apply to these plaintiffs' claims.

Missouri's Consumer Fraud Act requires a causal connection between the allegedly unfair practice and the plaintiff's harm.  Where the harm allegedly results from a failure to disclose, "'there must be a showing that the [product] in fact suffered that defect, or evidence from which the defect reasonably could be inferred, in order to demonstrate an ascertainable loss as a result of [defendant]'s failure to disclose the defect.'"  Id. at *7 (citation omitted).  The court concluded that as to methylene chloride, which the FDA had banned for use in cosmetics, plaintiffs had sufficiently pled a Consumer Fraud Act claim.

Similarly, the court concluded that, with respect to methylene chloride, plaintiffs had sufficiently pled claims for breach of implied warranties under Missouri law.  Id. at *9.

However, the court held that plaintiffs had failed to plead a cause of action for unjust enrichment under Missouri law because they had not sufficiently pled that there was irreparable injury or the lack of an adequate remedy at law.  Id.  The loss was economic, and could be remedied by the payment of money, which could be recovered by an action at law.  Thus, there could be no unjust enrichment.

For those keeping a tally, the court whittled the Missouri plaintiffs' claims down to the violation of Missouri's Consumer Fraud Act and breach of implied warranties solely for the inclusion of methylene chloride -- not the other substances.  In concluding that New Jersey law would preclude all claims because of its Product Liability Act, the court also went a long way toward establishing why a nationwide class could not be certified.  It remains to be seen where this action will go from here, but we will attempt to monitor it for you.

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The Oklahoma Supremes recently held that a group of defendants who had no statutory duty to reveal the presence of additives in their products could not be sued in a class action for breach of warranty, breach of contract, and violation of the state's Consumer Protection Act for not posting the amount of ethanol in their gasoline.  See Rogers v. QuickTrip Corp., 2010 WL 175073 (Okla. Jan 19, 2010).

The defendants in Rogers sold gas at retail.  They initially moved to dismiss, challenging the court's jurisdiction to hear the case.  The Oklahoma Corporation Commission is charged with setting public energy policy and regulating the sale of gas, the defendants argued, and thus a court could not, in a class action, take actions that effectively impose upon the entire retail gas industry a duty contrary to what the Commission had decided.  The court rejected this argument, noting that the Corporation Commission has no ability to award damages to individuals in private disputes.  Accordingly, the court was unwilling to dismiss for lack of jurisdiction. 

But the court held that the trial court erred in failing to grant the defendant's motion to dismiss on the merits.  The court began by observing that a statute in effect when the suit was filed expressly stated that "retail facilities that sell motor fuel shall not be required to post information regarding fuel additives . . ."  A subsequent regulation had allowed retailers to post such information about ethanol content if they wanted to.

Subsequent to plaintiffs' filing of the lawsuit, a statute required retailers to post a sign indicating "contains Ethanol" for gasolines containing more than one percent ethanol. 

The Oklahoma Supremes determined that because the statutory scheme expressly allowed retailers to sell gasoline without posting its ethanol content prior to the lawsuit's filing, there could be no legal duty -- not in contract, warranty law, or in connection with the Consumer Protection Act -- that required such disclosure.  The Oklahoma statute effectively preempted Oklahoma common law.

Consumer fraud claims often are premised on a failure to inform consumers of a particular fact about a product.  The decision in Rogers demonstrates that where a statute gives a seller the freedom to refrain from disclosing that particular fact, the statute can trump disclosure duties that plaintiffs may assert arise from the common law or consumer protection statutes.

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Arkansas has never enjoyed a reputation as a haven for corporate defendants.  Far from it.  Indeed, after Razorback football, class actions appear to be the state’s favorite sport.

It’s precisely because of these facts that you could have bowled me over with a feather when I read the Arkansas Supreme Court’s recent decision affirming – yes, I said affirming – a trial court’s dismissal of a putative class action in its entirety.  Has there been a sea change in this landlocked litigation forum?  Who knows?  But this decision has some far-reaching pronouncements that may offer some comfort to consumer product manufacturers that find themselves ensnared in consumer fraud litigation there.  My friends Beck and Herrmann at Drug and Device Law covered this opinion yesterday, before I could get this post up.  But because this decision has implications beyond just drugs and devices, I'm also covering it here.

The facts in DePriest v. AstraZeneca Pharmaceuticals, L.P., 2009 WL 3681868 (Ark. Nov. 5, 2009) are relatively straightforward.  As AstraZeneca’s heartburn medicine, Prilosec, was going off patent, the company released another prescription heartburn medicine, Nexium, in the same class as Prilosec, "proton pump inhibitors."  Plaintiffs claimed that the defendant falsely marketed Nexium as “new” and “better” than Prilosec, when it was basically the same thing as Prilosec and had similar results.  The result of this conduct, plaintiffs alleged, was that the defendant was able to sell more Nexium at higher prices than it otherwise would have been able to do.  Plaintiffs alleged a host of theories, including breach of the Arkansas Deceptive Trade Practices Act, the Arkansas Unfair Practices Act, and the Arkansas Medicare Fraud False Claims Act, as well as common law fraud, breach of contract, promissory estoppel and unjust enrichment. 

The trial court had dismissed the plaintiffs' third amended complaint, observing that while it "would perhaps make an excellent article in a scientific magazine, . . . it fails as a legal pleading."  Undeterred, the plaintiffs twice amended their complaint, which ballooned up to 290 pages.  They also moved to recuse the judge -- twice -- for bias, citing the language of his ruling.  (My Grandaddy always said not to take a hoe to a snake unless you know you can cut it's head off, or you just might get bitten instead.  The idea that lawyers would twice move to recuse a judge on such an obviously flimsy record is nothing short of remarkable.)

The Unfair Practices Act and Medicare False Claims Act do not provide a private right of action, and plaintiffs did not challenge that dismissal on appeal.  The real news is the Arkansas Supreme Court's analysis of the DTPA's "safe harbor" provision, which states that the DTPA does not apply to "[a]dvertising or practices which are subject to and which comply with any rule, order, or statute administered by the Federal Trade Commission," as well as "[a]ctions or transactions permitted under laws administered by . . . [a] regulatory body or officer acting under authority of this state or the United States."  Ark. Code Ann. sec. 4-88-101(1) & (3).

The court looked to the FDA's approved label for Nexium, which had an analysis of clinical studies showing that the healing rates of Nexium 40 mg were higher than the healing rates of Prilosec 20 mg, and the heartburn resolution rates of Nexium 40 mg were higher than Prilosec 20 mg.  The court thus concluded that advertising which summarized this information from the FDA-approved label was squarely within the Arkansas DTPA's safe harbor:

The information included in the labeling of a new drug reflects a determination by FDA that the information is not "false or misleading."  By approving information to be included in the drug labeling, the FDA has determined that the information complies with its rules and regulations.  Therefore, if the FDA labeling supports the statements made in advertising for an FDA-approved drug, the statements are not actionable under the DTPA.

(Citation omitted.)

The Arkansas Supreme Court carried this analysis over to the common law fraud count, holding that "because AstraZeneca's advertisements were in accordance with that labeling, they were thus not false or misleading as a matter of law."  Similarly, the court agreed that "'[t]here cannot be any "unjust" enrichment where AstraZeneca's alleged conduct falls within what is permitted by federal law and Nexium's labeling,'" because "[o]ne who is free from fault cannot be held to be unjustly enriched merely because he or she has chosen to exercise a legal or contractual right."

The court also affirmed the dismissal of the promissory estoppel claim because "Appellants cite no authority that a product advertisement constitutes a quasi-contractual 'promise.'"

The real takeaway from DePriest is that Arkansas has now made it clear that where a regulatory agency has approved a factual statement -- even for purposes other than advertising -- that agency's conclusion that the statement is not false or misleading cannot be second-guessed by Arkansas courts in cases challenging the product's advertising.  Not under the DTPA, which explicitly provides a safe harbor, but also not under common law fraud or equitable theories like unjust enrichment or promissory estoppel.

This is an important holding, particularly at a time when the federal preemption defense is seen by many commentators to be at its nadir.  I never thought I'd say it, but one can only hope that other states with safe harbor provisions in their consumer fraud statutes will follow Arkansas' lead.

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As consumer fraud claims go, the high fructose corn syrup ("HFCS") claims really are scraping the bottom of the barrel.  Some activists and class action lawyers attempt to blame HFCS for the so-called "obesity epidemic," but even the activist group the Center for Science in the Public Interest has counseled that this is an "urban myth" and that "[t]here isn't a shred of evidence that HFCS is any more harmful (or healthier) than sugar."

That is why it was so satisfying to see a federal court recently use the recent U.S. Supreme Court decision in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) to dismiss (without prejudice) an HFCS class action brought under California's Unfair Competition Law, False Advertising Act, and Consumer Legal Remedies Act.  See Wright v. General Mills, Inc., Civ. A. No. 08cv1532 L(NLS), Slip op. (S.D. Cal. Sept. 30, 2009).

In Wright, plaintiffs alleged that the defendant had defrauded the public by using the term "100% Natural" on its Nature Valley crunchy granola bars and chewy trail mix bars at a time in the past when they had contained HFCS.  Applying Iqbal, the court held that the following allegation from the complaint was too conclusory and speculative to meet the Rule 8 pleading standard:

As a direct result of its misleading, deceptive, untrue advertising and its unlawful, unfair and fraudulent business practices related to the "100% Natural" products listed above, Defendant caused Plaintiff and other members of the class to purchase, purchase more of, or pay more for, these Nature Valley products.

Slip op. at 8.  The plaintiff failed to plead facts supporting the elements of her statutory claims and, to the extent that she alleged fraud, failed to meet the requirements of Federal Rule of Civil Procedure 9(b) that she aver "'the who, what, when, where, and how' of the misconduct charged."  Slip op. at 9.  The court, however, gave plaintiff leave to replead.

The court also held that plaintiff's claim for injunctive relief failed because the defendant already had stopped using HFCS in its Nature Valley products and there were no facts pled indicating that a recurrence of the use of HFCS was likely.  Slip op. at 8.  Again, plaintiff was given leave to replead.

Interestingly, the defendant's use of the term "natural" was perfectly consistent with federal law.  As the court noted, "[t]he FDA follows a policy of not taking enforcement action charging that a product labeled as 'natural' is misbranded, as long as the product has no 'added color, synthetic substances, and flavors.'"  Slip op at 5 (citation omitted).  HFCS is not synthetic, of course.  Rather, it is made from corn.

Nevertheless, the court denied the defendant's motion to dismiss based on federal preemption.  In doing so, the court relied, in large part, on the savings clause in the Nutrition Labeling and Education Act of 1990:  "Congress stated that '[t]he [NLEA] shall not be construed to preempt any provision of State law, unless such provision is expressly preempted under section 403A of the Federal Food, Drug, and Cosmetic Act.'"  Slip op. at 3 (citation omitted).  The court reasoned that the inclusion of this clause negated any intention to occupy the field of food labeling.  Id. at 4.  The court also rejected the defendant's conflict preemption argument, finding no conflict where the FDA has deferred taking action to specifically define the term "natural."  Id.  The defendant also had asserted the defense of primary jurisdiction, asking the court to stay proceedings pending action by the FDA.  But the court concluded that the issue did not meet the criteria for invoking this prudential doctrine.

Although the court in Wright gave plaintiffs another bite at the apple, it remains to be seen whether they can truthfully plead their statutory and fraud claims with the specificity required by Iqbal.

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On Wednesday, April 8, Strafford Publications will host a 90-minute teleconference entitled "FEDERAL PREEMPTION AFTER WYETH v. LEVINE:  Analyzing the Supreme Court's Sweeping New Decision; Implications for Product Liability Litigation."  The program begins at 1 p.m. EDT, and you can register here.  CLE credit is available.

The event will feature analysis from Scott Angstreich (who was on the brief for Plaintiff Diana Levine in the Supreme Court), Steven Weisburd (noted product liability and class action defense counsel), and me.  We will be considering not only the impact of Levine on the pharmaceutical industry, but its impacts on other regulatory schemes and the effects, if any, its analysis may have on claims of express or implied conflict preemption.

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Yesterday I attended a program where two Manhattan Institute scholars presented the findings from their report:  IN THE WAKE OF WYETH V. LEVINE:  Making the Case for FDA Preemption and Administrative Compensation.  The report was written by James R. Copeland, Director of the MI's Center for Policy Research, and Paul Howard, Director of the MI's Center for Medical Progress.  The report is the first in a series of reports that will be issued by the MI's "Project FDA," a committee of physician-scientists, economists, medical ethicists, and policy experts working to show how 21st Century technologies can better inform FDA regulations and accelerate the drug development and drug approval processes, while still maintaining drug safety.  The report was touted as a timely response to Wyeth v. Levine and the current congressional proposals to undo Riegel and remove preemption from medical devices.

The report provides good background on the history of FDA regulation, and how the FDA is better equipped than the tort system to balance the risks and utilities of new drugs.  It also provides a useful description of Wyeth v. Levine and makes the normative case for preemption, looking at examples of how the tort system has led to the unavailability of drugs that have actual benefits.

The report goes on to recommend that in exchange for broad field preemption of state law claims for FDA-approved medicines and devices, there should be an "administrative review process that more quickly, fairly, and cheaply provides redress to injured consumers" (Report at 11), modeled on the federal Vaccine Injury Compensation Program.  

But here's the catch:  no one in Congress would ever vote for Copeland and Howard's compensation program, because unlike the vaccine program, their program would not compensate for all injuries caused by a drug.  Rather, it would compensate for all injuries caused by a drug that were not warned about on the FDA-approved label.  Put differently, Diana Levine would not receive compensation under their plan, because the risk of gangrene resulting from IV push was warned about in six places on the product label.

Don't get me wrong:  I personally do not believe Diana Levine was entitled to compensation from a drug company where her medical professionals committed malpractice resulting in a well-known and well-warned-about side effect.  And I could get behind an administrative compensation system that did not overcompensate claimants by paying them for foreseeable risks that were already known and should have been evaluated by their physicians.  But the idea that in the current political environment key lawmakers would even consider such a proposal seems farfetched to me. 

Copeland and Howard theorize that by limiting compensation to unanticipated adverse events, drug companies would have incentives to disclose adverse events quickly and include them in warning labels.  They also explained why their proposal differed from the vaccine program, which compensates for any injury caused by a vaccine:

Attributing adverse events to drugs, however, poses unique challenges.  Since vaccines are given primarily to healthy individuals, it is usually possible to link a severe side effect to an administered vaccine and not an underlying health condition.  Drugs, particularly those used to control chronic illnesses such as diabetes and heart disease, by contrast, are taken by individuals whose health is already substantially compromised, making it more difficult to say definitively that the root cause of an adverse event was drug treatment.  Thus, policymakers would have to consider carefully the classes of individuals and injuries to be covered under any compensation program.  If they did not, the program would overcompensate some individuals, and thus discourage pharmaceutical companies from developing treatments for certain diseases.

Report at 13.

Copeland and Howard would fund their program with a tax on drugs and devices based, at least initially, on market share, but later perhaps on the size of payouts to the users of the respective products.  They also advocate a rigorous post-market review process that would be conducted by FDA personnel separate from those who were responsible for the original drug approval and labeling.  They also would leave claimants with state law tort causes of action against their health care providers.

Philip Howard of Covington & Burling and John O'Quinn of Kirkland & Ellis each responded to the report.  They reiterated their agreement with the presenters that Levine was wrongly decided on its facts, and that state tort law is simply not equipped to handle the risk-benefit balancing that goes into bringing medical products to market.

O'Quinn noted his belief that Copeland and Howard's program could not be adopted in the current political climate.  He also wondered whether engaging in the sort of claim-splitting that precluded state law tort claims against the drug company, but allowed them against the medical providers might create undue pressure to sue the medical providers in most instances.

Ultimately, O'Quinn concluded that Copeland and Howard's proposal was one that should lead to a broader discussion of other potential compensation systems, such as a true no-fault system (although that would be extraordinarily expensive), or even a system in which failure-to-warn claims are not preempted, but merely channeled into a federal system for review by expert tribunals.

Copeland and Howard's report is a good resource for lawyers interested in FDA preemption issues.  It will be interesting to see in the months to come whether it can spark renewed Congressional interest in preemption in exchange for a simplified system to compensate claimants.

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