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

The Fourth Circuit recently issued an opinion reflecting the conservative approach that is required when federal courts sitting in diversity are called upon to predict how the state supreme court would rule on controlling issues of state tort law.

In Rhodes v. E.I.DuPont de Nemours & Co., 2011 WL 1335799 (4th Cir. Apr. 8, 2011), customers of the Parkersburg, West Virginia City Water Department sued the defendant in a putative class action for contaminating the public water supply with perfluorooctanoic acid (PFOA).  Thankfully, none of the class representatives had become ill, but their blood did reflect higher-than-normal levels of PFOA, which they alleged had been associated with an increased risk of liver disease, cholesterol abnormalities, and certain cancers.

The plaintiffs originally asserted a variety of causes of action:  negligence, gross negligence, battery, trespass, private nuisance, and the separate tort of medical monitoring.  The district court held that the medical monitoring claim was not susceptible to classwide proof.  It also denied class certification under the traditional common law tort claims.  Plaintiffs then amended their complaint to add a public nuisance claim. 

Subsequently, the district court granted summary judgment to the defendant on all of the traditional tort claims for lack of injury.  But it denied summary judgment on the individual claims for the "new" tort of medical monitoring.  So that they could appeal immediately, without having to wait for their remaining individual claims to be litigated, the plaintiffs voluntarily dismissed their individual medical monitoring claims.

On appeal, the Fourth Circuit dealt first with the class claims for negligence and gross negligence.   It concluded that they must be dismissed because they require a plaintiff to produce evidence of a health detriment that actually has occurred or "is reasonably certain to occur due to a present harm."  2011 WL 1335799 at *3 (citation omitted).

With respect to the claim for battery, the Fourth Circuit held that the mere presence of PFOA in the plaintiffs' blood was not a battery because it did not cause any "physical impairment."  Id.  Plaintiffs argued that the West Virginia Supreme Court would waive any impairment requirement in such a situation, but the Fourth Circuit refused to engage in such speculation:

The West Virginia Supreme Court of Appeals has not adopted this view and, in fact, expressly has required that a plaintiff alleging battery demonstrate "actual physical impairment."  Also, the West Virginia Supreme Court of Appeals has not embraced the alternative definition of battery embraced by the plaintiffs, battery based on "offensive contact," as provided in Section 18 of the Restatement.

In the absence of such action by the highest state court in West Virginia, our role in the exercise of our diversity jurisdiction is limited.  A federal court acting under its diversity jurisdiction should respond conservatively when asked to discern governing principles of state law.  Therefore, in a diversity case, a federal court should not interpret state law in a manner that may appear desirable to the federal court, but has not been approved by the state whose law is at issue.

Id. at *4 (citations omitted; emphasis added).

Analyzing the trespass claim, the Fourth Circuit concluded that the plaintiffs had failed to produce evidence showing the PFOA in the water had damaged or interfered with the plaintiffs' possession, use or enjoyment of the property.

The court also rejected the private nuisance claim, understanding that the legal interest asserted -- public access to clean drinking water -- was a pubic one, not a private one, and thus incapable of supporting a private nuisance claim.  Id. at *4-*5.

As for the public nuisance claim, the court held that plaintiffs lacked standing because they did not have a "special" injury that was different in both character and degree from the general public.  (Traditionally, the right to assert public nuisance claims was left to the sovereign.  Over time, it developed that individuals also could assert such claims on the public's behalf, but only where they had a "special" injury that could ensure that they would vigorously prosecute the claim.)  Plaintiffs argued that West Virginia would follow the Restatement, which would create an exception to the "special injury" requirement for class action plaintiffs.  The Fourth Circuit held that it was enough for them that the West Virginia Supreme Court had not adopted this approach:  "We decline to recognize such an exception in the first instance because, as we have stated, a federal court in the exercise of its diversity jurisdiction should act conservatively when asked to predict how a state court would proceed on a novel issue of state law."  2011 WL 1335799 at *6 (citation omitted).

The Fourth Circuit next considered the plaintiffs' arguments that they could obtain medical monitoring as an element of relief on their traditional tort claims even if they did not meet the "injury" requirement.  The Fourth Circuit rejected this approach outright, pointing to the West Virginia Supreme Court's decision that created a separate tort of medical monitoring.  In that decision, the court had held that the "injury" necessary to support an independent medical monitoring claim was "a 'significantly increased risk of contracting a particular disease relative to what would be the case in the absence of exposure.'"  Id. at *7 (citation omitted).  It did not re-define "injury" as something less for the traditional torts and, in fact, if it had done so, it would not have needed to create a separate, independent tort of "medical monitoring" in the first place.

The Fourth Circuit then dealt with the final issue on appeal:  whether the plaintiffs' voluntary dismissal of their individual medical monitoring claims precluded them from challenging the district court's decision that the independent "medical monitoring" claim could not be certified as a class action.  After surveying the variety of approaches courts have taken to the question of voluntary dismissals designed to elude the problem of  interlocutory appeals, the court followed basic standing principles to hold that voluntary dismissal of a cause of action barred appeal of the decision not to certify a class on that cause of action:

Applying the principles set forth by the Supreme Court, we conclude that when a  putative class plaintiff voluntarily dimsisses the individual claims underlying a request for class certification, as happened in this case, there is no longer a "self-interested party advocating" for class treatment in the manner necessary to satisfy Article III standing requirements.  Thus, we hold that we lack jurisdiction to decide the issue whether the district court abused its discretion in denying the plaintiff's request for class certification of their medical monitoring claims.

Id. at *9 (citation omitted).

The Fourth Circuit's decision in Rhodes is a strong example of a federal court showing deference to state sovereignty by refusing to invent new tort rules and causes of action that have not been recognized by the state's high court, and by declining to allow people who have surrendered their claims for strategic reasons to continue to assert the aggregated claims of a large number of the state's citizens.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A number of commentators, including the UCL Practitioner and Bailey Class Action Dailey, were quick to report the California Supreme Court's recent decision holding that a plaintiff who pleads that he read a misrepresentation, relied on it in buying a product, and would not have bought the product but for the misrepresentation, has pled sufficient facts to establish standing to bring a claim under California's Unfair Competition Law.  See Kwikset Corp. v. Superior Ct., No. S171845 (Cal. Jan. 27, 2011).  A number of defense firms have issued client alerts, some of which sound like the sky is falling.

Although I obviously don't agree with the California Supreme Court's statutory analysis, I am a "glass-half-full" kind of guy, and there are some details of the opinion that give me some encouragement on the issue of UCL class actions for restitution.

In Kwikset, the plaintiff had bought a lock labelled "Made in the USA."  Some of the screws or pins had been made in Taiwan.  And for some of defendant's products, the latch subassembly had been performed in Mexico.  But the lock itself had been assembled in the good ole US of A.  This is the stuff of class actions, you ask?  It is in California.

In 2004 the trial court had conducted a bench trial and entered judgment against the defendant.  It found that the defendant violated California's Made in the USA statute (yes, there's a statute for that in California), it's "Geographic Origin" statute (ditto), the UCL, and the False Advertising Law.  The trial court enjoined the defendant "from labeling any lockset intended for sale in the State of California 'All American Made,' or 'Made in the USA,' or similar unqualified language, if such lockset contains any article, unit, or part that is made, manufactured, or produced outside of the United States."  Slip op. at 3.  Using its equitable powers, the trial court also ordered the defendant to notify its retailers and distributors about the falsely labeled products and give them a chance to return them for refund or replacement.

Interestingly, the trial court denied the plaintiff's request for restitution to consumers/end purchasers.  The trial court:

concluded restitution "would likely be very expensive to administer, and the balance of the equities weighs heavily against such a program" where the violations had ceased and "the misrepresentations, even to those for whom the 'Made in the USA' designation is an extremely important consideration, were not so deceptive or false as to warrant a return and/or refund program or other restitutionary relief to those who have been using their locksets without other complaint.

Slip op. at 4.

During the appeals process, California's voters passed Proposition 64, which requires a UCL claimant to have an "injury in fact" and have "lost money or property" as a result of the alleged unfair business practice.  (My problem with the majority's opinion in Kwikset is that it equates the two separate requirements and does not give the phrase "lost money or property" its ordinary meaning.  Instead, the majority assumes money or property is lost when a claimant buys a product that she otherwise would not have bought.  But what if the product she bought performs perfectly and is cheaper than what she would have bought had she known about the Taiwanese screws?  I would argue -- as Justice Chin did in the dissent -- that there is no loss of money or property, even though there may otherwise be an injury in fact that might meet the first element.)

Having passed Prop 64, there was lots of wrangling in California over whether it applied to pending cases.  Ultimately, the Supreme Court held that it did, and that for such cases plaintiffs should be given leave to replead.

In Kwikset, the plaintiff was allowed on remand to add plaintiffs and replead the complaint to state that plaintiffs saw the misrepresentations, relied upon them in buying the products, and would not have bought the products but for the misrepresentations.  The defendant demurred, arguing that plaintiffs had no standing under Prop. 64 because they did not adequately plead that they lost money or property.  The trial court rejected that demurrer.  But on appeal, the Court of Appeal reversed.  Plaintiffs' "patriotic desire to buy fully-American-made products was frustrated," but they otherwise got what they paid for and thus did not experience a loss of money or property as the UCL now requires, the Court of Appeal held.  This was the conclusion that the California Supremes reversed.

But in finding that the plaintiffs had pled standing, the California Supremes were clear that reliance and causation were factual issues that plaintiffs would still bear the burden of proving in order to recover under the UCL.  Citing their earlier decision in In re Tobacco II Cases, the Kwikset Court reiterated that a UCL plaintiff relying on the fraud prong of the statute "must demonstrate actual reliance on the allegedly deceptive or misleading statements."  Slip op. at 16; see also id. at n.11 ("At succeeding stages, it will be plaintiffs' obligation to produce evidence to support, and eventually to prove, their bare standing allegations.  If they cannot, their action will be dismissed.").

Interestingly, the California Supremes never once in the Kwikset opinion criticize the trial court's refusal to grant a restitution remedy or its reasoning therefor.  Indeed, much of what the Supreme Court says seems to indicate that the proof for restitution would need to be individual.  For example:  "For each consumer who relies on the truth and accuracy of a label and is deceived by misrepresentations into making a purchase, the economic harm is the same."  Slip op. at 20.  Of course, the inverse would be that consumers who do not rely on the label or who are not deceived by the representations do not suffer the economic harm, which the court describes as making a purchase they otherwise would not have made. 

Put differently, by affirmatively stating that the harm must flow from actual deception that causes the consumer to enter a transaction she otherwise would not enter (slip op. at 21), the court makes it plain that any entitlement to restitution is going to be subject to individualized inquiries into whether any putative class member saw the alleged misrepresentation, actually relied on it, and wouldn't have entered the transaction without it.  Otherwise, there is no economic harm, under the Kwikset Court's own reasoning.

Notably, the Court instructs in a footnote that once the threshold issue of standing is addressed,

it will remain the plaintiff's burden thereafter to prove the elements of standing and of each alleged act of unfair competition, and the trial court's role to exercise its considerable discretion to determine which, if any, of the various equitable and injunctive remedies provided for by sections 17203 and 17535 may actually be warranted in a given case.

Slip op. at 22 n.15.

In rejecting the standards for restitution as the standard for standing (slip op. at 29-31), the Court made it plain that "[r]estitution under section 17203 is confined to restoration of any interest in 'money or property, real or personal, which may have been acquired by means of such unfair competition.'"  Slip op. at 30 (citation omitted).  Without proof of loss of money or property caused by the alleged deception, a claimant is not entitled to restitution.

In sum, although the Kwikset decision may have held that "ineligibility for restitution is not a basis for denying standing" under the UCL, it certainly did not change California's restitution prerequisites or the UCL to make it easier to certify a class action for restitution under the UCL.  In fact, if anything, Kwikset highlights that entitlement to restitution is still a highly fact-specific, individualized inquiry into what claimants saw, relied upon, and what they would have done absent the challenged conduct.

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

Regular readers will recall that last year Michael Reese and his colleagues at Reese Richman earned the title of Torts Twit of the Month for their suit against the chocolaty beverage Yoo-hoo for its alleged failure to disclose the presence of partially-hydrogenated soybean oil -- even though it was printed right on the label. 

Well, they are at it again with another ridiculous food-based lawsuit in which they hope to ring the class action bell.  This time they have sued Quaker Oats, once again complaining about the presence of partially hydrogenated oil in food.  According to the complaint, Quaker Oats committed fraud by calling its foods "low fat," a "good source of calcium," "heart healthy," "made with whole grain oats," and containing "no high fructose corn syrup."  Compl. para. 3.  Reese does not allege that these statements are untrue individually.  Rather, he alleges that the manufacturer's failure to disclose on the front of the packaging the presence of trace amounts of partially hydrogenated oil -- which he compares to poison and alleges causes "cancer, birth defects, heart disease, diabetes, and many other fatal diseases" (Compl. para. 4) -- makes any statement about health misleading.

Of course, the FDA allows the use of partially hydrogenated oils -- or so-called "trans fats" -- in food, and has established regulations and guidance for how trans fats should be disclosed on product labeling.   Moreover, Quaker Oats places required nutritional information on the product label itself.  For example, the label for Quaker Chewy Granola Bars discloses that a 1-bar serving has 0 grams of trans fats.  Plaintiff does not plead that Quaker Oats fails to comply with FDA rules and regulations in listing the amount of trans fat at 0 grams per serving.  Rather, he complains that, under the FDA rules, there could be "nearly 5 [grams] of trans fat overall" in a 10-serving box.  But this is plainly consistent with FDA regulations, which talk of nutrition information in terms of individual servings.

Surprisingly, plaintiff -- a New York resident -- had his New York lawyers sue Quaker Oats at its headquarters in Chicago, seeking to apply the Illinois Consumer Fraud Act to the claims of a nationwide class customers who bought Quaker Oats products.  Of course, if counsel had read the decisions of the Illinois Supreme Court from Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill.2d 100 (2005) through Barbara's Sales, Inc. v. Intel Corp. (Ill. 2007) and beyond, they would know that the Illinois Supreme Court has definitively held that Illinois's Consumer Fraud Act cannot be used by nonresidents to recover in consumer fraud actions, even against defendants domiciled in Illinois.  Simply put, Illinois has no interest in the extraterritorial application of its law to sales transactions in other states.  Quaker Oats ought to be awarded its costs for even having to move to dismiss that count.

Similarly, the express warranty and implied warranty claims should be dismissed on the pleadings as well.  FDA regulations allow much more trans fats than Quaker Oats has in its products.  The fact that there may be some trace amounts does not make the goods unmerchantable in the trade or unfit for human consumption.  Moreover, plaintiff cannot plead or prove that the express statements made about the goods are untrue.  And they comply with FDA rules and regulations.  Put simply, there is no reasonable ground for a breach of warranty action.

Plaintiff's "unjust enrichment" theory is equally flawed.  Although the complaint pleads that plaintiff paid an inflated or "premium" price for the foodstuffs because he believed they contained no trans fats, he will be just as unable to establish any sort of "premium" price for such products as the plaintiffs were in Weiner v. Snapple Beverage Corp. (S.D.N.Y. 2010), in which Judge Denise Cote dismissed similar claims for failure to establish any pricing differential and, thus, any injury.

In the end, this is yet another attempt by the plaintiffs' bar to achieve regulation through financially lucrative litigation.  Let's hope the courts in the Northern District of Illinois are as quick as other courts have been in deeming such misuse of the class action mechanism impermissible.

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

Cases brought by public water authorities often present special challenges, particularly where the party sued is not a neighboring landowner, but instead is a product manufacturer that stands far removed from any alleged contamination.  Federal preemption sometimes can be an issue.  Proximate causation is often problematic, since the presence of any alleged contaminant can only have occurred through the conduct of independent third parties, like neighboring farmers, who may or may not have followed the manufacturer's instructions and warnings.

The recent opinion in City of Greenville v. Syngenta Crop Protection, Inc., 2010 WL 4791674 (S.D. Ill. Nov. 18, 2010) raises different issues, including the adequacy of pleadings.  The plaintiffs in the case are public water authorities from various states.  They sued to recover the cost of testing and monitoring their water for atrazine, a chemical used in Syngenta's herbicide.  They also want the cost of installing a carbon-based filtration system to remove atrazine from the water, as well as punitive damages.  

Plaintiffs assert four causes of action:  (i) trespass onto plaintiffs' rights to possess raw water; (ii) public nuisance for interfering with the use and enjoyment of the raw water; (iii) strict liability, and (iv) negligence for breaching duties to avoid contaminating plaintiffs' water sources.  

The defendant moved to dismiss, and the court ultimately mostly denied the motion.  The court began its analysis by considering the defendant's argument that the plaintiffs had not properly pled any injury -- and thus lacked standing -- because they did not plead that their "finished water" (or post-treatment water) contained atrazine at maximum contaminant levels ("MCLs") higher than the EPA's set limit of 3 parts per billion on an average annualized basis.  Without contamination at such levels, the defendant argued, the plaintiffs had not demonstrated that they were impaired in their ability to provide potable water to the public.

The court rejected this argument and sided with plaintiffs, who had cited an opinion from the MTBE Products Liability Litigation.  The court reasoned that where the presence of atrazine at any level makes the plaintiffs' job of providing potable water more difficult and costly, the plaintiffs have suffered an injury regardless of whether the MCL threshhold has been reached.  The court remarked:

[I]t seems an extremely bad rule to require a public water supplier to provide overly contaminated water to the public before it can seek redress from one responsible for the contamination.  Thus, the Court agrees with the In re:  MTBE court that a water provider may demonstrate an injury in fact even if its finished water does not exceed an MCL if its use of the water to meet its statutory obligations to the public becomes more costly because of a defendant's conduct.

Id. at *4.  The court warned, however, that on summary judgment, the plaintiffs will have to show a specific, immediate threat of atrazine in excess of the MCL to maintain standing to sue.  Id. at *5.

Next, the court considered the defendant's challenge to the strict liability claim of the Indiana plaintiffs.  It summarily dismissed the strict liability claim because Indiana law does not allow strict liability in design defect cases; design defect is measured by a negligence standard.  Thus, the court granted the defendant's motion on that count against the claims of the Indiana plaintiffs.  Id. at *6.

The court next analyzed whether the economic loss doctrine barred the tort claims of the remaining plaintiffs under Ohio, Iowa, Kansas, Missouri and Indiana law.  The court concluded that it did not.  The court recited a basic description of the economic loss doctrine, and then concluded that the "economic loss rule simply does not apply in this case because the plaintiffs have alleged that the defendants are responsible for damages to their property rights in their raw water sources by causing those sources to be contaminated by atrazine."  Id. at *8 (citing MTBE).

Finally, the court refused to dismiss the plaintiffs' claims for future damages and refused to apply the statute of limitations at the motion to dismiss stage.

So, the City of Greenville plaintiffs live to fight another day.  But there are many, many more legal defenses that they must surmount, and it remains to be seen whether the claims can be tried together as a class action.  This is a litigation worth monitoring, and we'll report on further developments as they arise.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This is the way an MDL ends:  not with a bang, but a whimper.

My apologies to Eliot, but this bastardization of The Hollow Men seemed appropriate in this instance.  Today we feature two decisions that -- although they are marked "not for publication" -- clearly demonstrate the hollowness of consumer and third party actions based on the "diminished value" theory. 

Law360 reported yesterday (subscription required) that Judge Stanley R. Chesler of the District of New Jersey finally pulled the plug on an MDL begun in 2006 involving claims that Schering-Plough Corp. engaged in unlawful off-label promotion of its medicines Intron-A and Temodar.  In one opinion, he dismissed a putative consumer class action involving the medicines.  In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, No. 2:06-cv-5774 (SRC) (D.N.J. June 9, 2010) (the "Consumer Slip Op.").   In the other, he dismissed a putative class action involving third party payors -- various insurers and union health benefit plans.  In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, No. 2:06-cv-5774 (SRC) (D.N.J. June 9, 2010) (the "TPP Slip Op.").

Last summer, Judge Chesler had dismissed the complaint in these actions, giving the plaintiffs leave to amend.  See In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 2009 WL 2043604 (D.N.J. July 10, 2009).  The opinion was a lengthy discussion of why neither the consumer class action nor the TPP class action pled viable claims.  Last week's opinions reiterate that analysis and formally pronounce the death of the litigation.

In the consumer class action, the named plaintiff had suffered from Hepatitis C, but was asymptomatic.  Her doctor originally recommended against treatment with Schering's medicines.  Subsequently, however, the doctor changed his mind and recommended treatment with a combined prescription of Schering's medicines.  Plaintiff alleged in the complaint that she suffered from some of the medicines' side effects and lost weeks of work.  The medical records reflected that the doctor discussed with plaintiff the risk of side effects.

Plaintiff's complaint had all sorts of allegations of off-label promotion of the medicines.  Schering had pled guilty to a criminal information involving off-label promotion of the medicines, and plaintiff incorporated the whole criminal information in her complaint by reference.  She also incorporated by reference the entire complaint in a civil qui tam action. 

Applying Iqbal, the court held that plaintiff did not have Article III standing to sue because she did not plead any facts to support the notion that Schering's conduct actually caused her injury.  The court held that general allegations of off-label promotion don't cut it, since doctors may lawfully prescribe medicines for off-label purposes and, although off-label promotion may violate an FDA regulation, it is not inherently false.  In any event, there were no facts pled suggesting that plaintiff's doctor relied on false statements made by Schering in prescribing the medicines.

Similarly, the court observed that although there were generic allegations that Schering paid kickbacks to doctors to prescribe its medicines, there were no allegations that it did so to plaintiff's doctor or that such kickbacks made him change his mind on prescribing the medicine.  Consumer Slip Op. at 14-15.  The court reiterated that it need not credit bald assertions or legal conclusions, but need only look at facts pled in the complaint, and those were sorely lacking.

The court also instructed that because the complaint referred to plaintiff's medical records, the court could properly look to the medical records on a motion to dismiss.  Those records suggested other plausible reasons besides fraud why plaintiff's doctor made the prescription.  Accordingly, the plaintiff had failed to meet her burden under Iqbal, and the court dismissed the consumer class action for lack of jurisdiction.

The Third Party Payor action was particularly interesting, because there the plaintiffs had whittled their claims down from nine causes of action to just four:  RICO, New Jersey's mini-RICO statute, a common-law claim for tortious interference with contract, and unjust enrichment. 

In its opinion last summer, the court had rejected the TPP plaintiffs' RICO pleading because it basically pled that the TPPs had suffered injury by paying for medicines that were used off label.  The court explained that off-label use is not necessarily false or non-beneficial, even if it was done as a result of a promotion that violated FDA regulation.  It had established what TPP plaintiffs must plead to state a viable claim for diminished value:  "that Named Plaintiff TPPs paid for Subject Drugs that were inferior and/or worth less than what Plaintiffs paid."  TPP Slip. Op. at 9 (referring to earlier opinion).  The court had explained that "[t]he inferiority of the product could be alleged, for example, by pleading facts asserting that the drug was either ineffective for the indication for which it was prescribed or [that it was] unsafe."  Id.

The TPP plaintiffs did not plead this, however.  At best they pled that Schering did not have the science to prove the effectiveness of the medicines for off-label uses.  That is tantamount, the court said, to giving a private right of action to enforce the Food, Drug and Cosmetics Act, which is something that courts cannot do.  Id. 

The court also rejected the invitation to adopt a "fraud on the market" theory, i.e., that by promoting its medicines for off-label use, Schering drove up the demand for the products and thus inflated the prices that TPPs paid. 

Aside from not having an injury, the TPP plaintiffs had no causation -- i.e., they could not attribute any harm they received as being caused by the actions of Schering.  The TPP plaintiffs asked the court to assume that there was such causation:

Named Plaintiffs, in short, allege that the deliberately widespread nature of Defendants' marketing scheme supports the inference that some portion of prescriptions for the Subject Drugs paid for by the TPPs were written for off-label indications as a result of Schering's unlawful marketing.

TPP Slip Op. at 13.  But the court noted that none of the named TPPs linked a single prescription that it paid for to a single instance of alleged misconduct by Schering.  Not one doctor was identified who prescribed because of alleged kickbacks, or as a result of fraudulent misrepresentations.  Moreover, the amended complaint failed to plead that the medicines were actually unsafe or ineffective for the off-label purposes for which they were prescribed.  As a result, the court held that the TPPs failed to plead facts to establish standing to bring a federal or New Jersey RICO claim.  TPP Slip Op. at 21-22. 

The court made quick work of the TPP plaintiffs' common law claims.  First, it noted that the TPP plaintiffs failed to allege that their contracts with their plan members were actually breached.  As a result, they could allege no interference with contractual relations.  Similarly, there could be no "unjust enrichment" where there was no other underlying cause of action. 

Once again, Judge Chesler's opinions demonstrate that "diminished value" claims lack substance, particularly in the context of the alleged overpromotion of medicines for off-label use.  Plaintiffs deliberately plead these claims vaguely, and for good reason:  if they actually acknowledged that they must show injury and causation on a prescription-by-prescription basis, it would be obvious that these claims never could be tried as class actions.  Thus, for the sake of attempting to reach a class action jackpot, plaintiffs refuse to plead any facts that might possibly establish the individual's standing to bring a claim.

Judge Chesler's opinions suffer from only one apparent flaw:  they should be designated for publication.  This is particularly true for opinions that mark the end of a multi-year class action pleading battle. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

A recent tobacco decision out of the Northern District of Illinois highlights the importance of challenging the class definition in the defense of consumer fraud cases.  in Cleary v. Philip Morris USA, Inc., 2010 WL 680957 (N.D. Ill. Feb. 22, 2010), plaintiffs had brought three different class actions against the tobacco industry.  One was for illegal underage smoking, one was for nicotene addiction, and one was for allegedly deceptively marketing "low tar," "light," and "ultra light" cigarettes as safer than other cigarettes.

Because of summary judgments that previously had been granted, the first two classes failed for lack of a representative plaintiff.  But the court considered the class certification motion for the "light" cigarettes case.

The class was defined expansively:  "persons who purchased and consumed Marlboro Lights in Illinois 'from the time such cigarettes were placed into the stream of commerce until the date that the defendant publicly and adequately disclosed to consumers the true nature and effect of these cigarettes."  Id. at *1. 

The court found that the complaint met the numerosity and commonality requirements of Rule 23(a), but it failed to meet the typicality requirement for two reasons.  First, the plaintiff did not explain how he intended to demonstrate that he suffered an injury from defendant's alleged fraud and how that was typical of the class members.  Second -- and more important -- the court focused on the overbreadth of plaintiff's class definition.

As the court explained:

Class C is defined so broadly that it is likely to include persons who suffered no detriment at all due to Philip Morris's conduct.  Some class members may have purchased Marlboro Lights for reasons wholly unrelated to its purportedly less-unhealthy qualities--for example, because they preferred the flavor of other brands.  And other class members may have purchased Marlboro Lights despite being completely unaware of claimed differences between the adverse effects of "light" cigarettes and other, non-"light" brands.   It is not entirely clear where Cleary fits in along this spectrum.  Though it is true, as Cleary points out, that factual differences among the claims of class members do not necessarily defeat typicality, the likelihood that some significant proportion of class members experienced no injury at all does, at least in a case like this one in which proof of detriment is a necessary element of the claim. 

Id. at *4 (citation omitted).

Whether the court treats it as part of the element of typicality, as the Cleary court did here, or whether it treats it as a fundamental problem with the class definition, "overbreadth" (i.e., including within the class people who were uninjured by the product) presents serious problems that go to the core of who is going to be bound by the verdict and how the proof is going to establish classwide truths.  That is why courts increasingly are denying class certification to overbroad classes. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Reading National Consumers League v. General Mills, Inc., Civ. A. No. 09-10881 (HHK), Slip op. (D.D.C.  Jan 15, 2010) will make you feel as if you have fallen through the looking glass.  In this case, the National Consumers League ("NCL") sued General Mills for alleged misrepresentations about the cholesterol-lowering properties of Cheerios.  The NCL brought suit under DC's Consumer Protection Procedures Act ("CPPA") for declaratory relief, injunctive relief, the "greater of 'treble damages or statutory damages in the amount of $1,500 per violation,'" and attorneys' fees, expenses and costs.  Id. at 2.  General Mills removed the case to federal court pursuant to the Class Action Fairness Act. 

So far, so good.  Sounds positively ordinary, right?  Hang on.

The NCL made an emergency motion to remand, arguing that it had suffered no injury and thus lacked the Article III standing necessary to pursue a claim in federal court.

Yes, that's right.  Plaintiff stipulated that it had suffered no injury and lacked standing.

How can a plaintiff do that and avoid ruining its prospects of pursuing its claim in "state" court, too?  Indeed, don't state courts have standing rules that prevent the adjudication of "hypothetical" disputes and require a plaintiff to have injury and causation in order to establish a justiciable case or controversy?  Nearly all do.  Indeed, most people would have thought that DC courts, which are statutorily authorized to adjudicate only "cases or controversies" (D.C. Code sec. 11-705), have standing requirements as well.  See, e.g., Speyer v. Barry, 588 A.2d 1147, 1160 (D.C. 1991); Cmty. Credit Union Servs . v. Fed. Express Servs. Corp., 534 A.2d 331, 333 (D.C. 1987).

Unfortunately, however, the District of Columbia held last year that the District's courts are "not required to abide by any of the constitutional or traditional standing principles that apply in federal courts 'when the [D.C.] Council has provided the cause of action.'"  Archis A. Parasharami and Kevin Ranlett, The Nation's New Lawsuit Capital?  D.C. High Court Eliminates Standing Requirements for Consumer Protection Lawsuits, Threatening Flood of Abusive Litigation, vol. 9, no. 20, Mealey's Litigation Report:  Class Actions (Dec. 17, 2009) (discussing Grayson v. AT&T Corp.., 980 A.2d 1137 (D.C. 2009)).  The DC Council had amended the CPPA in 2000 to allow any person to bring an action on behalf of the general public.  Accordingly, the NCL was free to escape federal court by arguing that it had no injury because the District appears not require an injury for private attorneys general asserting CPPA claims.

The federal court in National Consumers League could have stopped there, but it didn't.  It also opined that the case was not removable as a "mass action" under CAFA because it fell into the exception of being a non-removable suit "brought on behalf of the general public."  Slip. op. at 8-9.  This conclusion seems suspect, however, given that the suit seeks -- in addition to injunctive and declaratory relief -- damages, which the court stated were not payable to the uninjured plaintiff, but instead only to those consumers who had been actually harmed.  Id. at 9-10.  At least with the damages portion of the suit, then, the plaintiff (NCL) is representing a subset of the general public:   Cheerios consumers who were actually injured by the defendant's alleged misconduct and can collect damages.  That sounds much more like a "mass action" or "class action" than a suit on behalf of the "general public."  Nevertheless, the court mandated remand to DC Superior Court.

The result in National Consumers League highlights the potential for a disturbing trend:  unscrupulous litigants may file CPPA claims in DC Superior Court seeking damages for other people and, by disclaiming any injury themselves, effectively avoid CAFA's clear purpose of having such suits adjudicated in federal courts.  That can hardly be what Congress intended when it enacted CAFA.  And I continue to find it difficult to believe that it really is the law in the District of Columbia.

• Email This
• Print
• Comments
• Trackbacks
• Share Link