Category: Class Certification
Flushable Wipes, Take Three: The Second Circuit Gets Injunctive Standing Right, But Classwide Damages Models Wrong
As our readers know, we’ve kept a close eye on the “flushable wipes” litigation—known variously as Kurtz v. Costco and Belfiore v. Procter & Gamble—as it has bounced between Judge Weinstein’s courtroom in the Eastern District of New York and the Second Circuit. The cases raise several issues important to class-action defendants, including the necessity of a rigorous damages model at the class-certification stage; the availability of injunctive relief to customers who are already wise to the alleged deception; and the appropriateness of massively multiplied “statutory damages” in the class context. We (and others) had hoped that the Second Circuit would use the case to provide clear answers to these questions and to remedy the New York federal courts’ status as a hotbed for questionable class-action complaints. But with that court’s latest ruling—fortunately, an unpublished and non-precedential one—those hopes may have gone down the tubes.
Injunction Defunction: The Second Circuit Extinguishes Injunctive Relief as a Remedy for Consumer False Advertising Claims
Last week, the Second Circuit issued an important published decision holding that previously injured consumers who seek to challenge product labeling lack constitutional standing to pursue claims for injunctive relief, and cannot obtain certification of an injunctive relief class under Federal Rule of Civil Procedure 23(b)(2). See Berni v. Barilla S.P.A., 2020 U.S. App. LEXIS 21167 (2d Cir. July 8, 2020). Although the Second Circuit’s holding arose in the context of a settlement class, not a litigation class, the court’s reasoning was not dependent on or limited to that specific context; rather, the panel held, in unqualified terms, that “past purchasers of a product . . . are not likely to encounter future harm of the kind that makes injunctive relief appropriate.” The Berni decision appears to close the door to injunctive relief for consumers asserting mislabeling claims in the Second Circuit.
So Much For “Improved Memory”: Prevagen Class Decertified Post-Trial Due To Lead Plaintiff’s Forgetful Testimony
A California district court recently decertified, after a jury trial, a class of vitamin supplement purchasers in a false advertising case. As we detailed in a prior post, a federal judge declared a mistrial in the same case earlier this this year after the jury deadlocked. The case, Racies v. Quincy Bioscience, LLC, 15-cv-00292 (N.D. Cal.) (Gilliam, J.), was already interesting because certified class actions rarely make their way to trial. And it is rarer still for a district court to decertify a class following a trial. But setting those procedural quirks aside, the opinion may prove useful for defendants seeking to decertify or defeat putative classes on typicality and predominance grounds.
A few months ago, we wrote about the Second Circuit’s oral argument in the “flushable” hygienic wipes consumer class action cases. And now, the septic saga continues.
Joining the Trend: D.C. Circuit Latest Court of Appeals to Decline to Certify Class Containing Uninjured Members
A few weeks ago, the U.S. Court of Appeals for the D.C. Circuit weighed in on a recurring question in class action litigation: can a court certify a class where some class members—even if only a small fraction of the class—are uninjured? Joining a string of recent decisions on this subject, the circuit court held in In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619 (Aug. 30, 2019), that class certification was properly denied for lack of predominance because twelve percent of the proposed class—constituting thousands of proposed class members—were uninjured by the defendants’ alleged misconduct. This ruling follows a similar determination from the First Circuit last October, covered here. Although both cases involved antitrust allegations, their holdings are readily applicable to consumer product class actions, where there is often evidence—either from the defendants’ files or the plaintiffs’ own experts’ analysis—that a considerable number of proposed class members were uninjured by defendant’s alleged mislabeling.
Back in May, we wrote about a package of “extreme pro-plaintiff changes” that legislators had proposed to New York’s main consumer-protection statute, Gen. Bus. Law § 349. There have been some significant developments on this front, so we figured an update was in order.
A frequent target of consumer class actions are “structure/function” claims made in connection with dietary supplements. These claims describe a nutrient or dietary ingredient and its role in the body’s structure or function: for example, “glucosamine promotes healthy joints.” Plaintiffs may allege that a product’s labeling is misleading because the typical consumer already receives enough of the nutrient or ingredient from her diet. At the same time, those plaintiffs will seek a refund on behalf of everyone who bought the product—even if many in the class have received a benefit. A recent decision out of the Southern District of California, Alvarez v. NBTY, Inc., 2019 U.S. Dist. LEXIS 87420 (May 22, 2019), suggests that this disconnect between the proposed class and the plaintiffs’ theory of liability and damages may no longer be tolerated at the class-certification stage.
Last month, the Second Circuit heard oral argument in what had seemed like the most consequential consumer class-action appeal in that court in years: three consolidated cases involving “flushable” hygienic wipes. Both sides of the class-action bar were at the edge of their seat waiting for the Second Circuit’s guidance on several controversial issues of class-action law, including the appropriate standard for reviewing damages models at the class-certification stage. Earlier this week, however, the Second Circuit essentially punted, sending the cases back to the district court for “further factual development.” This is a frustrating result, but reading between the lines, class-action defendants may have reasons for cautious optimism.
It’s hard to argue that New York’s consumer-protection laws (Gen. Bus. Law §§ 349–350) are being underutilized by private plaintiffs. But, on that claimed basis, the state’s Legislature is considering a multifaceted amendment that would make those laws vastly more plaintiff-friendly—and business-unfriendly—than they already are. It’s hard to understate the impact these changes would have on the business community. We’re not sure what the bill’s odds of passage are, but given the extremity of the amendments, we’re a bit surprised they haven’t attracted more public attention.
Speak of the Devil and he doth appear. Today, it’s just a figure of speech. In medieval England, by contrast, people meant it literally—as a warning that uttering the Prince of Darkness’s name would conjure his evil presence. Maybe those Anglo-Saxons had a point. A few weeks ago, we wrote a post about a remarkable string of defense victories in “slack-fill” cases—i.e., lawsuits complaining of too much empty space in product packaging. In particular, we noted that “every slack-fill case to reach the class-certification stage ha[d] flunked Rule 23’s rigorous test for certification,” and we wondered aloud “how a slack-fill class could ever be certified.” Well, speak of the Devil: just four days later, a California court certified a class in a slack-fill case for the first time ever. We apologize for any causal role we may have had in this truly diabolical development. The good news is that the decision may not stick—and even if it does, it’s likely to remain an outlier.
Proving Retail Sales Figures In Consumer Class Actions: Different Approaches Lead To Very Different Results
To prove damages in a consumer class action, the named plaintiff must show—among other things—how many units of the defendant’s product were purchased by consumers in the relevant state (or states). This is easier said than done. Manufacturers generally keep records of their own wholesale transactions—i.e., how much product they shipped to distributors or large retail chains. But they generally don’t have direct visibility into sales at the retail level, since they aren’t a party to those transactions. If not all of the product sold at wholesale ends up being purchased by consumers, manufacturers’ records may not reflect this. Likewise, if the product that a manufacturer ships to an address in State A (e.g., a regional distribution center) ends up being moved to State B before reaching store shelves, manufacturers’ records will not reflect this either. What, then, is a class-action plaintiff to do?
Court Certifies Class Action Over Gerber “Good Start Gentle” Baby Formula, Citing Consumers’ General Exposure to Ad Campaign
A recent decision from the Eastern District of New York, Hoth v. Gerber Prods. Co., 15-cv-2995 (E.D.N.Y.), granted class certification to purchasers of Gerber baby formula in Florida and New York who claimed to have been misled by representations that the formula reduced infants’ risk of developing allergies. The certified class is unusual, however, in that not all of its members actually purchased the product labeled with the alleged misrepresentation. Many courts have concluded that this lack of uniform exposure defeats certification by precluding a showing of classwide injury, but the Hoth court credited evidence that the general “advertising and labeling practice [regarding allergy prevention] allowed a price premium to be charged across the entire line of [challenged] products.” Op. at 41 (emphasis in original).
Unless you were born yesterday, you know that packaged goods usually contain some empty space in the box, bottle, or bag. This has been true for as long as there have been packaged goods. What is relatively new is that consumers—or, rather, a small cadre of specialized plaintiff’s lawyers—are suing over it. But as Newton said, for every action, there is an equal and opposite reaction. And the more that lawyers have inundated courts with these suits, the more aggressively courts have responded to shut the silliness down. This post examines the regulatory underpinnings of these so-called “slack-fill” suits and the many bases that courts have found for letting the air out of them.
All’s Not Well(er) in Pennsylvania: Court Sanctions Defendant For Contact With Putative Class Members
There is nothing inherently wrong with outreach to putative members of an uncertified class—whether by the named plaintiff’s counsel or by the defendant’s counsel. As the ABA has recognized, “[b]oth plaintiffs’ counsel and defense counsel have legitimate need to reach out to potential class members regarding … information that may be relevant to whether or not a class should be certified.” ABA Formal Op. 07-445 (2007); see also Austen v. Catterton Partners V, LP, 831 F. Supp. 2d 559, 567 (D. Conn. 2011) (“Both parties need to be able to communicate with putative class members … from the earliest stages of class litigation.”). Thus, as the Supreme Court has unanimously held, restrictions on pre-certification communication with putative class members must be justified by a “clear record and specific findings” of actual “abuses.” Gulf Oil v. Bernard, 452 U.S. 89, 101-04 (1981). And even then, any limitations must be “carefully drawn … [to] limit speech as little as possible.” Id.
In Comcast v. Behrend, 569 U.S. 27 (2013), the Supreme Court held that a plaintiff cannot obtain class certification with an inadequate damages model. In the years since, courts have diverged over how much a plaintiff must do to satisfy this requirement. Often, plaintiffs seek class certification with nothing more than a skeletal proposal to develop and perform an analysis at some future point, using information they do not—and might never—possess. While some courts have found such adumbrative “models” sufficient at the class certification stage, the better decisions require more. As Comcast recognizes, Rule 23 “does not set forth a mere pleading standard.” Rather, a plaintiff “must affirmatively demonstrate” through “evidentiary proof” that damages are measurable on a class-wide basis through a common methodology. Faithful application of that principle obligates plaintiffs and their experts to offer a detailed methodology that is tailored to the facts of the case, and to show that any data that the model requires in fact exists and can be obtained.
Over the last few years, “conjoint analysis” has become the methodology du jour for false advertising plaintiffs seeking to demonstrate they can calculate class-wide damages. Conjoint analysis is so named because it is used to study the joint effects of multiple product attributes on consumers’ choices. At bottom, conjoint analysis uses survey data to measure the strength of consumers’ preferences for particular product features. Or, put differently, it tries to isolate how much people care about an individual product attribute in a multi-feature product (in a more scientific manner than just asking them directly).