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

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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On Wednesday the U.S. Senate's Judiciary Committee held a hearing to examine the effects of the U.S. Supreme Court's decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 244 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) on litigants' access to federal courts.  From all of the reports that I have read, most of the Committee members themselves -- other than Alabama Senator Jeff Sessions -- seem highly critical of the decisions and committed to changing the pleading standards to one in which a federal court cannot dismiss a case if it can conceive of any possible set of facts under which plaintiffs could state a claim.  That, of course, is a far cry from true notice pleading, in which a litigant with a Rule 11 obligation to have investigated his claim before filing it is required to plead the basic facts underlying his legal claim.

My colleague, John Beisner, recently circulated an update that explains three fundamental problems with the bills currently under consideration in the House and Senate.  First, although the bills' proponents talk wistfully of "returning" to Conley v. Gibson, 355 U.S. 41 (1957), courts never actually followed Conley's standard literally.  Second, the bills as drafted would override the heightened pleading standards previously imposed by Congress in statutes such as the Private Securities Litigation Reform Act.  Third, the bills also would nullify the particularity requirement that Federal Rule of Civil Procedure 9(b) has imposed on fraud claims since 1937.

The prepared remarks of the three witnesses from Wednesday's hearing are worth a read.  Professor Stephen Burbank of the University of Pennsylvania, an Iqbal critic, testified that legislation to "restore the status quo" is necessary now, followed by subsequent study regarding what the appropriate pleading standard should be.  Interestingly, Professor Burbank is of the opinion that it should be Congress -- and not the Supreme Court -- that makes this later decision:

Once legislation restoring the status quo is in place, it will be time to consider change after a thoughtful and deliberate study within more democratic processes. The Supreme Court, acting as such (that is, rather than as Congress’s delegate under the Enabling Act), is incapable of conducting or acting on such a study, because it lacks the information, experience and political legitimacy to make an informed judgment about either the procedural or the broader social costs and benefits of changing pleading law.

Testimony at 20.

Another Iqbal critic -- John Payton, President and Director-Counsel of the NAACP Legal Defense and Educational Fund -- reminded the Committee in his remarks that Conley was a civil rights case, and posited that if Iqbal had been the standard employed in 1957, the plaintiffs might not have prevailed.  He opined that in civil rights cases, the facts are mostly in the defendants' possession, and thus bare pleadings must be allowed in order to get access to the discovery necessary to substantiate the claim. 

One witness, however, supported the Iqbal/Twombly standard:  Gregory G. Garre, the former U.S. Solicitor General who had argued the Iqbal case on behalf of the government.  In his testimony, General Garre explained that Iqbal and Twombly are in line with decades of Supreme Court and Court of Appeals decisions that have required litigants to plead basic facts about their claims.  He also explained the enormous costs of allowing conclusory and implausible claims to proceed past the pleading stage to discovery.  In addition, he devoted considerable attention to explaining that the effect of Iqbal and Twombly to date has not been the wholesale dismissal of claims, citing to cases and the Advisory Committee on Civil Rules' report finding no evidence of a "drastic change" in dismissal rates. 

General Garre concluded that for Congress to revise the pleading standards at this time would only lead to more uncertainty and litigation.  Instead, he recommended allowing the Judicial Conference of the United States to do its job, studying the issue and recommending any necessary changes through the ordinary process for amending the civil rules.

To date, few Senators and Representatives have advocated this cautious and common-sense approach as eloquently as Gregory Garre.  But if we are to avoid reactionary legislation that muddies the water and results in uncertainty and an increase in frivolous and wasteful litigation, cooler heads on both sides of the aisle must stand up and quickly find their voice.

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Just when you thought it was safe to go back in the courtroom, word comes from BNA's U.S. Law Week that the plaintiffs' bar is supporting a new bill by New York Democrat Jerry Nadler (H.R. 4115) that not only would reverse Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), but would write Conley v. Gibson, 355 US. 41 (1957) into law and thereby reverse a number of statutes -- including, presumably, the Private Securities Litigation Reform Act -- that have self-contained pleading standards.  See 78 U.S.L.W. 2304.

HR 4115 -- the so-called "Open Access to Courts Act of 2009" -- has been referred to the House Committee on the Judiciary, which is set to take quick action on it.  John Conyers, the Committee chair, is a co-sponsor of the bill.  The bill provides:

Sec. 2078.  Limitation on dismissal of complaints

(a) A court shall not dismiss a complaint under subdivision (b)(6), (c) or (e) of Rule 12 of the Federal Rules of Civil Procedure unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim which would entitle the plaintiff to relief.  A court shall not dismiss a complaint under one of those subdivisions on the basis of a determination by the judge that the factual contents of the complaint do not show the plaintiff's claim to be plausible or are insufficient to warrant a reasonable inference that the defendant is liable for the misconduct alleged.

(b) The provisions of subsection (a) govern according to their terms except as otherwise expressly provided by an Act of Congress enacted after the date of the enactment of this section or by amendments made after such date to the Federal Rules of Civil Procedure pursuant to the procedures prescribed by the Judicial Conference under this chapter.

This bill, if passed, would fundamentally alter the burden of pleading (and, presumably, proof) so that the plaintiff apparently would no longer bear the burden of establishing his or her own entitlement to be in federal court.  Even where his or her pleading was obviously factually deficient -- in that it failed to plead facts supporting the basic elements of the legal claim -- the court would be forced to hypothesize if there might be some factual scenario that could support the cause of action and, if so, the court would be forced to keep the case and allow it to proceed to costly and burdensome discovery, even if such facts did not exist or were not ultimately true.

What is particularly troubling is the sneaky way in which the bill seeks to override all prior legislation that imposed special requirements on suit -- such as the PSLRA -- by making this new pleading rule apply across the board, except where subsequently preempted by statute.

No doubt there will be hearings conducted on H.R. 4115 and its potentially disastrous effects on the civil justice system in short order.  Let's hope the witness lists are more balanced than the last hearings conducted by the Senate on Senator Specter's draft bill.

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