Industry: Other Consumer Products
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.
“Contains detectable levels of the weed-killer chemical glyphosate.”
“Contains limonene, which causes kidney toxicity and tumors, and linalool, a cockroach insecticide.”
“Contains a potent biocide and endocrine disruptor, with detrimental health effects that are still becoming known.”
These are the sorts of headline-grabbing allegations the plaintiffs’ bar has recently relied upon in claiming that products advertised or positioned as “natural” are deceptively marketed. At first blush, the presence of allegedly dangerous ingredients in foods, cosmetics, and other consumer products might seem like the basis of a strong false advertising case—especially when those substances are undisclosed. How could a company so deceive the public by promising a “good-for-you” product that contains such “bad” ingredients?
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?
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.
This is an exciting time for manufacturers on guard against compelled disclosures in their product labeling or advertising. Late last June, the Supreme Court decided National Institute of Family & Life Advocates v. Becerra, 138 S. Ct. 2361 (2018) (“NIFLA”), an abortion case with potentially far-reaching effects on the law of compelled commercial speech more generally. However, as lower courts begin to interpret and apply NIFLA in the context of product disclosures, major uncertainties remain.
In consumer cases alleging product mislabeling, one frequently litigated question is whether the plaintiff has standing to seek an injunction of the labeling practice that he or she claims is misleading. Over the past decade, consumer protection defendants have often won on this issue by demonstrating that the plaintiff is at no risk of future injury. But last year, in Davidson v. Kimberly-Clark Corp., 889 F.3d 956 (9th Cir. 2018), the Ninth Circuit made this issue tougher for defendants, adopting an exceptionally broad view of plaintiffs’ standing to seek injunctive relief in mislabeling cases. Below, we discuss the aberrant holding in Davidson, and how Ninth Circuit defendants may still be able to distinguish its facts to defeat a claim for injunctive relief.