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

Once again, my friend Andrew Trask has beaten me to the punch with a post -- this time about Judge Richard Posner's decision in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 2012 WL 592745 (7th Cir. 2012). In McReynolds, the court held that, in a class of 700 people, an issues class could have been certified on the question whether two facially-benign company-wide policies nevertheless had a discriminatory effect in practice.

You've gotta get up early in the morning to put up a post before Andrew.  Given that he has described the opinion already, I won't say much here, other than offer a few thoughts.

First, the Seventh Circuit is one of the few circuits to hold that an issues class may be certified under Rule 23(c)(4) without a prior determination that certification is appropriate under some subdivision of Rule 23(b).

Second, the McReynolds court was not deciding that a class could be certified that would provide monetary relief to the plaintiffs.  Rather, the court expressly recognized that "the only issue of relief at present is whether to allow the plaintiffs to seek class-wide injunctive relief."  Id. at *9.  That is why the court reversed the denial of certification under Rule 23(c)(4) and 23(b)(2).

Third, the court understood that the claims for monetary damages could not be tried as a class action:

Obviously a single proceeding, while it might result in an injunction, could not resolve class members' claims.  Each class member would have to prove that his compensation had been adversely affected by the corporate policies, and by how much.  So should the claim of disparate impact prevail in the class-wide proceeding, hundreds of separate trials may be necessary to determine which class members were actually adversely affected by one or both of the practices and if so what loss he sustained--and remember that the class has 700 members.

Id. at *8.

Fourth, and what I view as particularly important, the court invoked the decisions in Rhone Poulenc and Bridgestone/Firestone outside of a negligence -- or even a tort -- context to recognize that using a class action to achieve "consistency" of judgments on a particular issue may be unfair, and that -- particularly in the context of multiple claims for monetary damages -- it may be better for a series of trials to occur before different triers of fact so that some sort of pattern or consensus of judgments may emerge.  As the court explained:

The Mejdrech decision, and Bridgestone/Firestone and Rhone-Poulenc more fully, discuss the danger that resolving an issue common to hundreds of different claimants in a single proceeding may make too much turn on the decision of a single fallible judge or jury.  The alternative is multiple proceedings before different triers of fact, from which a consensus might emerge; a larger sample provides a more robust basis for an inference.  But that is an argument for separate trials on pecuniary relief . . .

Id. at *9.  In the mass tort context, we have the concept of what Francis McGovern has labeled "immature" and "mature" mass torts.  "Immature" mass torts are those where few, if any, trials have occurred.  "Mature" mass torts are those where scores of trials have played out in different geographic locations over enough time that plaintiffs and defendants have had the opportunity to adjust their claims and defenses, such that patterns have emerged and some predictability is inherent in the trial process.  

McReynolds does not abandon the notion that, in cases for monetary damages -- which can bankrupt a company in an all-or-nothing class action trial -- a "larger sample" of smaller judgments (even those that conflict) is necessary to build a "more robust basis" for a conclusion.

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In late October, McDonald's finally got the break it deserved when the federal court presiding over the so-called obesity litigation against it refused to certify a class in the case.  See Pelman v. McDonald's Corp., 02 Civ. 07821 (DCP) (S.D.N.Y. Oct. 27, 2010).  A number of bloggers have already covered the subject admirably, including Sean Wajert.  I won't try to rework the ground they've already tilled.  But I did think there were a couple of things worth noting about the opinion.  

First, although the court began and ended its analysis on the predominance requirement of Rule 23(b)(3), this whole issue could have been decided -- and, arguably, decided more decisively -- on the class definition, which applied to the class period 1985 through 2002.  As the court noted, the class was defined as follows: 

New York State residents, infants, and consumers, who were exposed to Defendant's deceptive business practices, and as a result thereof, purchased and consumed the Defendant['s] products in New York State stores/franchises, directly causing economic losses in the form of financial costs of the Defendant's goods, causing significant or substantial factors in the development of diabetes, coronary heart disease, high blood pressure, obesity, elevated levels of [LDL cholesterol], and or other detrimental and adverse health effects and/or diseases as medically determined to have been causally connected to the prolonged use of Defendant's certain products."

Slip op. at 15-16 (emphases added).

That, my friends, is a failsafe class.  It requires a determination of both causation and the type(s) of injury before class membership can be determined.  As I have explained many times on this blog, membership in a class must be objectively determinable at the outset, and a class definition that requires merits determinations to determine whether a person is a member of the class is an impermissible failsafe class.  Indeed, if McDonald's were to have won at trial, who would have been bound by the judgment under this definition? 

These defects in the class definition are hardly curable.  As the court noted, New York's consumer protection statute (Section 349 of the General Business Law) gives a private right of action only to those who have been "injured by reason of" the challenged practices.  See id. at 5 n.4, 21, 22-24, 29-30; see also id. at 25 ("no necessary generalizable causal connection is manifest between the consumption of Defendant's products and the development of certain medical conditions"), 28 ("whether or not Plaintiffs' claims -- that they ate McDonald's food because they believed it to be healthier than it was in fact -- are true for any particular person is an inquiry which also requires individualized proof").  Thus, as Judge Denise Cote recently recognized in the Snapple litigation, establishing membership in a Section 349 class would still require individual proof the the representation caused the alleged harm.

The second point that I thought was worth noting is that, although the court correctly decided that this case was not suitable for certification of an issues class, it appears to rely on a numerosity argument to do so.  See Slip op. at 40-42.  That seems particularly odd to me, given how much of the rest of the opinion is devoted to a discussion of how many issues there are that will need to be proved individually for each class member.  Even the Second Circuit -- which previously had approved an issues class in the Nassau County Strip Search case -- has recognized in the consumer fraud/product liability context that the certification of an issues class does not sufficiently advance the ball toward liability to justify certification of those common issues that may exist.  See McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008) ("Certifying, for example, the issue of defendants' scheme to defraud, would not materially advance the litigation because it would not dispose of the larger issues such as reliance, injury, and damages."); accord In re St. Jude Medical, Inc., 522 F.3d 836 (8th Cir. 2008).

McDonald's certainly deserves kudos for prevailing in this bogus class action.  But there are many other strong grounds for denying certification in this case besides those that were cited by the court in its opinion. 

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

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

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

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

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

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

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

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

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

Id. at 19.

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

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