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

In December I posted about Price v. Martin, in which the Louisiana Supreme Court expressly adopted the U.S. Supreme Court's analysis in Wal-Mart v. Dukes to reverse certification of a class of property owners who alleged that they were exposed to certain chemicals by a neighboring wood treatment facility.  In Price, the court recognized that there was no real commonality because establishing damages and causation would require individualized analysis.

Just last week, the Louisiana Supreme Court issued a per curiam opinion demonstrating that Price was not an anomaly.  In Alexander v. Norfolk Southern Corp., No. 11-C-2793, Slip op. (La. Mar. 9, 2012), the putative class action arose out of a chemical spill from a train in New Orleans in 2001.  The Fire Department investigation had established that ethyl acrylic fumes leaked from valves in two cars that were parked for less than an hour waiting for another train.  The firefighters tightened the valves, which solved the problem, and sent the trains on their way.  No evacuation was called.  Twenty people were treated at the scene for exposure and released.  Hundreds of other people complained of eye/nose/throat irritation and a noxious smell.  Naturally this spawned a class action, which was certified by the trial court and affirmed by the intermediate court of appeal.

The Louisiana Supreme Court, citing Price, reiterated that class certification requires a rigorous analysis and that there must be significant proof of a common question, the determination of which will "'resolve an issue that central to the validity of each one of the claims in one stroke.'"  Slip op. (quoting Price quoting Dukes).

The court ultimately premised its reversal on the lack of predominance of common issues, and the need for individual trials:

[T]he district court failed to take into account undisputed evidence in the record demonstrating that any determination of damages will be dependent upon proof of facts individual to each putative class member.  In particular, . . . plaintiffs' toxicologist testified that only those individuals with a unique susceptibility to ethyl acrylate would exhibit physical symptoms at the extremely low concentrations involved in the release, that this susceptibility would manifest itself in less than .1 percent of any given population, and determining whether any particular person was within this microcosm of the population would require an entirely individualized understanding of each person's health, medical history, records, and other variables impacting exposure.  In addition, [he] testified that the dose of exposure would be impacted by important individual variables, such as the specific location of the plaintiff at the time of exposure, and whether the plaintiff moved from location to location during the exposure.  Similarly, the defense toxicologist, . . . testified the symptoms complained of by the plaintiffs, such as irritation of the eyes and nose, respiratory irritation, coughing, nausea, and vomiting, are not specific or unique to ethyl acrylate exposure, but are common symptoms with a myriad of causes.

Given this testimony, it is clear that each member of the proposed class will necessarily have to offer different facts to establish liability and damages. . . . [T]he class would degenerate into a series of individual trials.

Slip op.

The decision in Alexander is a strong reminder that even in state court class actions, expert proof at the class certification stage is important because it can frame how the issues must be tried at trial.

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

Last week I read a short article in Law 360 that piqued my curiosity.  A state trial court in San Bernadino, California had certified a class of all purchasers in California of Lichi Super Fruit Weight Management Products.  The attached order was all of a page-and-a-half.  It merely parroted the language of the class action requirements.  And, strikingly, it foisted onto the defendant all of the notice costs:  "Defendant . . . is hereby ordered to pay costs that will be incurred by the Class administrator in giving notice to the Class and administration of any settlement."  Settlement?  Surely that was a bit cheeky, no?

I then looked at the date of the order:  February 7, 2012.  I scratched my head, reaching for the complaint, which was dated roughly two months before:  December 9, 2011.  I checked to make sure it wasn't merely an "amended" complaint.  But no, it was the initial filing.  So the suit had gone from filed to certified in less than 2 months.  How?

I remember the pre-CAFA days of drive-by certifications, when Southern courts would certify classes ex parte on the day the complaint was filed.  But this is 2012.  We employ "rigorous scrutiny" of the class certification requirements now.  Plaintiffs not only must plead a class action properly, they actually bear the burden of proving -- with evidence -- that the class certification prerequisites are met.

So I asked myself, was the Lichi defendant a victim of a run-by fruiting as Pierce Brosnan had been in the movie "Mrs. Doubtfire"?

Well, yes and no.  A docket search reflects that service of process was made on the defendant right before the holidays, on December 19.  Plaintiff filed her motion for class certification on January 9, 2012.  Plaintiff moved for a default judgment on January 23, which was entered that day.  The motion for class certification was heard on February 7 at 8:30 a.m., and no one showed up for the defendant.  Hence, the class certification motion was unopposed, and granted that same day.

Now here's the question for you, dear readers.  Where a defendant has defaulted and the plaintiff seeks class certification, what are the court's responsibilities?  Remember that this is an "all purchasers" class alleging the product does not work.  Does the "rigorous analysis" requirement still apply?  Should the order reflect the fact that it was entered without the defendant posing an opposition?  Do the court's obligations to absent class members become more or less important where the defendant is absent from the class certification process?

Discuss.

Post Script:  My only time through San Bernadino County was during a 1993 drive of Route 66 from Chicago to Santa Monica.  In Victorville, I was honored to meet a Route 66 legend:  Miles Mahan.  Mr. Mahan, who was in his 90's at the time, had created "Hulaville," a wonderful "half acre" of kitsch carved out of the desert, the crowning glory of which was a hula girl that had been on the sign of a Hawaiian restaurant.  He had spirit trees covered with colored bottles, books of his own poetry, and a million stories of his life as a carney.  He's gone now, of course.  But I think of him every time I hear "Kingman, Barstow, San Bernadino . . ." 

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

My colleague, John Beisner, is involved in this case, so I'll merely report the decision here.

This morning the Kentucky Court of Appeals reversed a trial court's certification of a class of Vioxx users who asserted a diminished value theory of recovery under various consumer fraud causes of action.  See Merck & Co. v. Ratliff, No. 2011-CA-000234-MR, Slip op. (Ky. App. Feb. 10, 2012).

The court embraced the "rigorous analysis" standard and cited Dukes.

The court held that the fraudulent misrepresentation and negligent misrepresentation causes of action presented too many individual issues that predominated over any common issues, making class certification reversible error.

Plaintiffs also had asserted a fraud-on-the-market theory.  The court observed that such a theory has been employed by other courts in the securities context to create a presumption that class members relied on the defendant's alleged misrepresentations.  But the court refused to import such a concept into Kentucky law, particularly in a consumer products case:

In the present case we have a corporate defendant that has allegedly disseminated false, fraudulent, or misrepresentative information into the marketplace.  However, while we have sympathy for the users of Vioxx whose physicians may have relied upon such false or incomplete information, the "fraud-on-the-market" approach has never been recognized in this jurisdiction for a fraud or misrepresentation case.  Further, every other jurisdiction we found which has been confronted with the theory has rejected it outside the securities litigation context. . . .

For this reason, we decline to recognize a similar theory here.  Causation, reliance, and damages are required to be shown on an individual basis.  Thus, if the action were tried as a class, after the common questions of Merck's representations in its marketing campaign were decided, the case would essentially fragment into a series of amalgamated "mini-trials" on each of these individualized questions. . . .

Thus, we find that common questions do not predominate.  Further, because these individualized questions would substantially overtake the litigation, and would override any common questions of law or fact concerning Merck's conduct, we find that a class action is not the superior mechanism by which to try these cases. . . .

Slip op. at 15-16 (citations omitted).

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

As many of you recall, I've written a considerable amount about the anticipated opinion in Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (U.S.).  See, e.g., here, and here.  Indeed, in a roundtable discussion over at Point of Law, I even included a wish list of what I wanted the Supremes to bring me from Wal-Mart.

Today, Justice Scalia delivered the opinion.  And it's like an 8-year-old's Christmas morning in my office! 

Dukes was an employment discrimination case in which the Ninth Circuit had affirmed certification of a class of roughly 1.5 million women who worked or had worked for Wal-Mart (in positions from management to custodian) in any of its roughly 3,400 stores across the U.S.  The allegation was that despite Wal-Mart's written non-discrimination policy, its managers (including women) discriminated against women in the exercise of their roughly unfettered individual discretion of whom to promote, demote and fire, as well as how they were compensated.  The class sought injunctive relief, as well as back pay for all class members.  (It disclaimed consequential damages.)

The majority opinion was written by Justice Scalia.  The opinion has a five-justice majority for some parts, and is unanimous in other parts.  Here is what Scalia Claus brought me this morning:

1.  A Unanimous Conclusion That Rule 23 Cannot Eviscerate Individual Defenses:  All nine justices joined in the part of the opinion holding that certification under Rule 23(b)(2) was improper because it included individualized claims for back pay.  A unanimous Supreme Court rejected a common attempt to impose statistical proof to cure the problem of individual defenses:

The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula.  A sample set of the class members would be selected, as to whom liability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master.  The percentage of claims determined to be valid would then be applied to the remaining class, and the number of (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery -- without further individualized proceedings.  We disapprove that novel project.  Because the Rules Enabling Act forbids interpreting Rule 23 to "abridge, enlarge, or modify any substantive right," a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.

Slip op. at 27 (emphasis added; citations omitted).  This means that third-party-payor claims and consumer fraud class actions will not be able to prove causation or reliance using statistical proof like that proposed and rejected in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008) in order to facilitate class certification.  This is BIG NEWS!!!

2.  A Unanimous Conclusion that Individualized Monetary Damages Claims Cannot Be Included in a Rule 23(b)(2) Class:  The Supreme Court brushed aside the whole question of whether money damages are "incidental" to the claims or "predominate," instead instructing that if monetary damages require individualized determinations, they do not belong in a 23(b)(2) class, but instead require the opt-out and notice rights inherent in a Rule 23(b)(3) class.  Slip op. at 21-23.  It refused to decide "whether there are any forms of 'incidental' monetary relief that are consistent with the interpretation of Rule 23(b)(2) we have announced and that comply with the Due Process Clause."  Slip op. at 26.  But this holding will make it very difficult for plaintiffs to continue the practice of attempting to plead cases about money as cases for so-called "equitable relief" with incidental damages.  Indeed, the court made it plain that Rule 23(b)(2) talks about injunctions and declarations, not "equitable relief."  As such, attempts to couch "disgorgement" or other so-called equitable remedies involving money as 23(b)(2) classes should be rejected from this point forward.

3.  Unanimous Dicta on Claim Splitting and the Potential for Issue Preclusion:  In discussing why it was improper for individualized back pay claims to be included in a Rule 23(b)(2) class, the Court observed that doing so "created the possibility . . . that individual class members' compensatory-damage claims would be precluded by litigation they had no power to hold themselves apart from."  Slip op. at 24.  Such as if the class received a judgment that there was no discrimination.  This part of the Dukes opinion will provide strong support for attacking (b)(2) classes that may impact monetary claims as lacking due process protections, and should strengthen classic adequacy-of-representation arguments based on claim-splitting.

4.  A Reinvigorated Commonality Standard:  Many courts had pretty much read commonality out of the Rule 23(a) analysis, concluding that if any common questions existed, the commonality standard was met.  No more.  The Court adopted the late Professor Richard Nagareda's characterization of commonality as the capacity of the class proceeding to generate common answers.  Slip op. at 9.  The Court instructed:

Commonality requires the plaintiff to demonstrate that the class members 'have suffered the same injury.'  This does not mean merely that they have all suffered a violation of the same provision of law. . . .  Their claims must depend upon a common contention -- for example, the assertion of discriminatory bias on the part of the same supervisor.  That common contention, moreover, must be of such a nature that it is capable of classwide resolution -- which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.

Id. (citation omitted).

5.  A Strong "Rigorous Analysis" Standard:  Stick a fork in Eisen v. Carlisle & Jacquelin.  It's done!  The majority once again declared that the class action proponent must actually prove each element of Rule 23, and embraced the Falcon "rigorous analysis" standard that courts must use to evaluate that proof.  Moreover, the Court explained:  "[f]requently that 'rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim.  That cannot be helped."  Slip op. at 10.  Finally, the Court interred the long-dead (but often resurrected) canard that Eisen somehow precludes a look beyond the pleadings when deciding whether certification is proper.  Id. at n.6.

6.  A Strong Hint That Daubert Applies at the Class Certification Stage:  Plaintiffs had proffered testimony from a "corporate culture" expert who opined that there was a general policy of discrimination at Wal-Mart, although "he could not calculate whether 0.5 percent or 95 percent of [its] employment decisions . . . might be determined by stereotyped thinking."  Slip op.at 13.  As the Court observed, the "District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings."  Slip op. at 14.  The Court opined:  "We doubt that this is so."  But it did not need to reach the question because the testimony, even if fully credited, was "worlds away from 'significant proof' that Wal-Mart 'operated under a general policy of discrimination.'"  Id.  Below, the Ninth Circuit had refused to apply Daubert to expert testimony on class certification.  It seems unlikely that a court can ignore Daubert principles at class certification now.

So let's see what I had listed at Point of Law prior to the issuance of the Dukes opinion.  It looks like Scalia Claus brought me a majority of what was on my initial list.  Everything that is in Dukes from the original list is marked with an asterisk:

*1. District courts must give rigorous scrutiny to whether the class action prerequisites are met.

*2. Rule 23 is a procedural rule that cannot alter the substantive claims or defenses.

*3. You can’t use a mandatory class to elude the prerequisites for an opt-out class.

4. Money is not an available remedy under Rule 23(b)(2).

5. The canard that the need for individualized damages determinations cannot preclude class certification should be shot.

6. Intra-class conflicts fail the adequacy of representation requirement.

*7. Expert testimony merits particularly close scrutiny at the class certification stage. 

*8. Although courts should not reach to judge the merits at the class certification stage, they must decide merits issues where necessary to determine whether the class action prerequisites are met.

All in all, this was an extraordinarily useful opinion for class action defense counsel -- beyond even employment discrimination lawyers.

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

I finally got around to reading Judge Denise Cote's opinion in case that sounds like the daily menu special at Gray's Papaya:  Weiner v. Snapple Beverage Corp., No. 07 Civ. 8742 (DLC), Slip op. (S.D.N.Y. Aug. 5, 2010).  It's a doozy.  Judge Cote articulates the rigorous analysis standard, uses Daubert to exclude unreliable expert testimony on plaintiffs' damages and loss causation, analyzes the predominance of common issues, and discusses the class definition and the problem of ascertainability of class membership. 

In Weiner, the plaintiffs sued Snapple for violation of New York's consumer fraud statute (General Business Law section 349), unjust enrichment, and breach of express and implied warranties.  The class was defined as "[a]ll persons or entities who, within the State of New York, purchased for personal consumption and not for resale or assignment, a Snapple beverage marketed, advertised, and promoted as 'All Natural,' but that contained [high fructose corn syrup] from October 10, 2001 to January 1, 2009."  Plaintiffs' theory of the case was that they were defrauded into paying a premium for Snapple beverages because they were represented as "All Natural," but contained HFCS, which plaintiffs argue is not natural, although it is derived from corn and contains the sugars found in table sugar and honey.

Judge Cote does a good job of setting forth the Second Circuit authorities supporting the rigorous analysis standard, explaining that a district court may not avoid looking into the merits of plaintiffs' claim where they intersect with the class certification elements.  See slip op. at 11-13.

Then, rather than attacking the plaintiffs' fundamental premise that HFCS is not natural or the adequacy or typicality of the named plaintiffs, Judge Cote begins her analysis by considering the element of predominance.  As the court described it, the predominance requirement asks the court to "consider whether the putative class members 'could establish each of the . . . required elements of [their] claim[s] . . . using common evidence.'"  Id. at 13 (citation omitted).  Then, looking at GBL section 349, the court concludes that plaintiffs cannot establish the fact of injury or that such injury was caused by the challenged conduct on a classwide basis. 

Judge Cote acknowledged that section 349 has been held to apply an "objective" standard for whether conduct is misleading, but it still requires injury caused by the challenged conduct:  "Only by showing that plaintiffs in fact paid more for Snapple beverages as a result of Snapple's 'All Natural' labeling can plaintiffs establish the requisite elements of causation and actual injury under section 349."  Id. at 15.  As Judge Cote noted, plaintiffs cannot do that on a classwide basis.  Even the named plaintiffs testified that they bought Snapple for reasons other than the "All Natural" representation, and that they would have bought Snapple regardless.

Plaintiffs proffered the testimony of an expert economist who testified that he could develop a model that would apply to all class members under one of two theories.  But the expert had not yet developed the model, surveyed the literature, or even reviewed most of the relevant documents produced in the case.  He did not consider that Snapple did not set retail prices, that class members had no documents to prove retail prices paid, and that Snapple did not vary the wholesale cost of its beverages based on whether the flavor was "All Natural" or not marked "All Natural."  In short, his testimony was nothing more than a promise or prediction that he could come up with a valid model in the future.  The court held that this was not enough under Daubert, and thus excluded his testimony as unreliable.  Id. at 21.  As the court explained:

At a minimum, [the expert] would need to determine what 'standard economic methodologies' he will employ, identify the relevant 'class wide economic data' and 'studies and market research,' and build an actual algorithm before it could be determined whether [his] proposed methodology can reliably prove injury and causation on a classwide basis.

Id. at 23.  Interestingly, the defense expert's testimony revealed that the price consumers paid for Snapple over the class period varied significantly based on a variety of factors, including where they bought it, the quantity they bought, when they bought it.  Id. at 25-26.

In looking at the unjust enrichment claim, the court also questioned how plaintiffs would prove that they received less than what they had contractually bargained for.  Especially troubling to the court was plaintiffs' testimony that they continued to buy Snapple even after they knew that it contained HFCS.  Id. at 29.

The same issues precluded a classwide mode of proof for breach of express warranty (id. at 31), and New York law requires direct privity with plaintiffs (id. at 32).

The court went on to express serious doubts about the superiority requirement -- in particular noting how unmanageable plaintiff's class definition was.  It included people from around the world who bought Snapple in New York, regardless of where they live.  And given that none of these people can be expected to have retained reciepts, "Plaintiffs have failed to show how the potentially millions of putative class members could be ascertained using objective criteria that are administratively feasible.  Id. at 34, 35-36.

Overall, the decision in Weiner is instructive on a variety of issues, and is a must-read opinion for those who regularly oppose the certification of fraud class actions in suits involving consumer products.

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