Today Mark Herrmann and Jim Beck have an excellent post replete with lots of good citations on why no-injury classes present insuperable class certification obstacles. Check it out.
One of my all-time favorite bartenders, Howie, just can't believe what I do for a living. "You mean you defend cases brought by a bunch of people who weren't hurt and didn't have their product break on them," he asks incredulously.
"For a lot of my cases, that's pretty much it." I respond.
"So what kindof money do they think they're going to get outta these class actions?"
"Well, Howie, sometimes they want everybody who bought the product to get all of their money back. And sometimes they just want the difference between the value of what they thought they were buying and the so-called "diminished value" of what they actually bought. And again, they want this for everybody who bought the product, which can be a lot of money."
"Aww, that's ridiculous," Howie says. Shaking his head and pouring another round, he consoles me: "Well, Cuz, with cases like that out there for you to defend, at least you ought to win a lot!"
I'll enjoy telling Howie this weekend about Williams v. Nidek Co., Ltd., 2009 WL 226024 (Cal. App. -- 4th Dist. Feb. 2, 2009). Fortunately, the court in Williams got it right, affirming the denial of class certification. But the claims in Williams go a long way toward demonstrating everything that is wrong with consumer class action practice today.
The plaintiffs in Williams had undergone Lasik surgery on their eyes to achieve hyperopic corrections (i.e., corrections for far-sightedness). The Nidek laser that had been used during their surgeries had not yet been approved by the FDA for hyperopic correction. (It subsequently was in 2006.) Plaintiffs claimed that Nidek and plaintiff's doctors violated a host of statutes by "concealing" from plaintiffs that the Nidek laser was not approved by the FDA for this particular kind of Lasik surgery. But plaintiffs admitted that they had not relied on any representations from the doctors about FDA approval, and they conceded that they "do not contend they were disappointed in the results of the surgery." Id. at *6. Indeed, plaintiffs defined a California residents class and a nationwide class, both consisting of people who had had the surgery, but who had not suffered personal injuries. Id. at n.8.
Yes, you read that right: the putative class members were perfectly satisfied with the results of their surgeries and had not been physically injured. Still, they wanted money back: either "the entire cost of the surgery (because they did not receive what they had been promised) or, alternatively, the difference between the value of what they had been promised (surgery on an approved Laser) and what they received (surgery on a nonapproved Laser)." Id. at n.14.
Of course the reason consumer class actions like Williams are pled to exclude the very people, if any, who may have been injured is that including them in the class would present too many individual issues, making class certification inappropriate. So instead, plaintiffs plead it as a straightforward fraudulent concealment claim for economic harm, thinking that doing so will make it seem like there are fewer individual issues that would predominate a trial of the action.
California's class action rule doesn't mirror the federal Rule 23 exactly, but as it has been interpreted by California's courts, its elements are similar. In particular, the common issues to be tried on a classwide basis need to predominate over the issues that require individual determination for each class member. The trial court in Williams concluded that they did not, and the Court of Appeal affirmed.
As the court observed, the bulk of plaintiffs' claims were misrepresentation claims; they "turned on the assertion that the physicians misrepresented the Lasers as appropriate or approved for hyperopic procedures, or intentionally concealed (or negligently failed to disclose) that the Lasers were not approved for such treatments, and/or conspired to engage in such conduct." Id. at *9.
But as the Court of Appeal recognized, "plaintiffs' misrepresentation/concealment/nondisclosure claims would have required a mini-trial to assess each permutation of the representations made to each class member by 60 to 70 doctors or their staff . . . and required an examination of the informed consent forms signed by the patient, and/or each patient's discussion with his or her doctor or staff, and whether [Nidek's Patient Information Booklet] had been given to some patients by some physicians." Id. (emphasis in original). Nidek had distributed, as required by the FDA, a booklet explicitly advising patients that the Laser was not approved for hyperopia. Id. at n.13. Moreover, even the named plaintiff's doctor had a patient's informed consent form disclosing that the FDA had not yet approved the Laser for hyperopia.
As the Court of Appeal recognized, these patient-specific mini-trials "would be further complicated by the fact that the physicians making (and the patients receiving) the representations spanned an approximately seven-year period," making "mini-mini-trials" on statute of limitations and tolling issues necessary for each class member. Id. at *10. Also, issues inherent to the 60-70 doctors potentially would be added to the mix.
Moreover, by adding the distributor, Nidek -- which had had interactions with many of the doctors, informed them that the hyperopic use was unapproved, and asked them to install software that would prevent use of the Laser to treat hyperopic conditions -- mini-trials also would be necessary addressing Nidek's dealings with each physician.
Even the damages inquiry would require individual mini-trials because the measure of damages required comparing the amounts paid and the value actually received by each patient. Id. at *11.
The Court of Appeal in Williams clearly reached the right result by affirming the denial of class certification. And yet it's disappointing that such a frivolous lawsuit had to go even that far: through costly discovery, dispositive motion practice, and ultimately a class certification hearing.
Just try explaining to Howie why this suit wasn't easily dismissed at the outset. If you can do that, the next one's on me.
A recent decision from a federal district court in Massachusetts raises interesting issues regarding the effect of rulings in competing class actions. In Gintis v. Bouchard Transportation Co., 2009 WL 95661 (D. Mass. Jan. 15, 2009), a tugboat and barge had strayed off course while navigating a shipping canal. They collided with a reef, resulting in up to 98,000 gallons of oil being spilled into Buzzards Bay, contaminating real property all along the bay and requiring cleanup.
Buzzards Bay property owners had sued the defendants in both state and federal court in Massachusetts. The state court had declined to certify a class of propertyowners from across the bay, finding that the named representatives from the town of Mattapoisett could not adequately represent the interests of a baywide class. The state court ultimately did, however, certify a class of Mattapoisett residents.
In federal court, both the plaintiffs and defendants sought to use the state court decision offensively, urging that the order merited collateral estoppel effect. The defendants sought to hold plaintiffs to the state court's determination that a baywide class was not certifiable. The plaintiffs sought to hold defendants to the state court's determinations on the individual elements of Rule 23.
The court in Gintis rejected both assertions of collateral estoppel. The court acknowledged that the Seventh Circuit has held that a court's denial of certification can be conclusive against absent proposed class members. Id. at *2 (citing In re Bridgestone/Firestone, Inc. Tires Prods. Liab. Litig., 333 F.3d 763, 768 (7th Cir. 2003)). But that can only be the case where the absent class members were adequately represented by class counsel. Because the state court had held that the named plaintiffs there could not adequately represent other bay propertyowners, the state court's decision denying certification of a baywide class could not have collateral estoppel effect.
The court in Gintis similarly rejected the plaintiffs' attempt to give nonmutual offensive collateral estoppel effect to the state court's conclusions about predominance, superiority, and other elements of Rule 23. It reasoned that plaintiffs could not easily have joined the earlier state court action, and further it would be fundamentally unfair to apply collateral estsoppel to defendants because the state court's determinations on the elements of Rule 23 were made based on assumptions about a much smaller and manageable Mattapoisett-only class.
Having dispensed with the collateral estoppel arguments, the district court proceeded to analyze whether the proposed class of more than 1,000 property owners from around the bay should be certified. The plaintiffs argued that there were good grounds to certify the class for at least liability and causation determinations, leaving the calculation of damages to be determined subsequently on an individual basis.
The court ultimately held that the predominance and superiority requirements were not satisfied because determining liability and causation on the public nuisance theory would require the same kind of individualized inquiry that a damages determination would require:
[T]he proposed class members would have to show that there has been an "unreasonable interference with a right common to the general public" and some "special injury of a direct and substantial character." A showing of "unreasonable" interference and "special," "direct," and "substantial" injury would require an examination into the individual characteristics of the proposed class members' properties and the extent of contamination.
Id. at *5. In reaching this conclusion, the court relied heavily on the decision in Church v. General Electric Co., 138 F. Supp. 2d 169 (D. Mass. 2001), in which a court refused to certify a class to determine whether PCB contamination constituted public nuisance and trespass for riparian landowners.
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