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I. Agenda and Introduction II. Recent Significant Class Action Decisions III. Recent Trends and Hot Topics in Personal Care Products Actions and Consumer Class Actions IV. Strategic Considerations for Preventing, Preparing for, and Defending Class Actions V. Q&A 2
There have been several significant class action and CAFA decisions in 2015 and early 2016. From both the U.S. Supreme Court and circuit courts. Several others to watch this term. Increased class action activity in 2015 suggests even more activity in 2016. 4
Circuit courts are split over whether a statutory violation without concrete harm is sufficient to invoke Article III standing. In November 2015, the U.S. Supreme Court heard oral argument in Spokeo, Inc. v. Robins. Decision is pending. Issue before the Court: Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute. 5
CA Federal District Court Decision Plaintiff alleged Spokeo disseminated inaccurate information about his education and income, which made it harder for him to find employment. District court held plaintiff failed to allege Spokeo caused him actual or imminent harm District court held that allegations of future potential injury are insufficient to confer Article III standing to invoke jurisdiction of federal court 6
Ninth Circuit Decision Disagreed with lower court When Congress creates a private right of action to enforce a statute, it can be implied that Congress intended to create a statutory right Fair Credit Reporting Act does not require actual showing of harm to establish liability for willful violations A statutory cause of action does not require proof of actual damages, [plaintiff] can suffer a violation of the statutory right without suffering actual damages 7
Supreme Court s Spokeo decision will significantly impact the future of class action litigation FCRA, TCPA, Truth in Lending Act, Fair Debt Collection Practices Act, Video Privacy Protection Act, Copyright Act ebay, Google, Facebook, Yahoo all filed amici briefs If Supreme Court finds such statutes confer Article III standing where there is no concrete injury, class action litigation will increase. Justice Scalia held a narrow view on standing. A 4-4 outcome would leave Ninth Circuit s decision in place. 8
Justice Elena Kagan: wouldn t the dissemination of false information in a credit report be a concrete injury?...seems like a concrete injury to me. If someone did it to me, I would feel harmed. Justice Sonia Sotomayor: Supreme Court has always said that an injury in fact is the breach of a legal right. 9
In 2015, circuit courts weighed in on the Third Circuit s heightened ascertainability requirement for class action members. Federal Rule of Civil Procedure 23 requires that class members be feasibly identifiable to be ascertainable. Mullins v. Direct Digital LLC, 795 F.3d 654 (7th Cir. 2015) Rejected Third Circuit s ascertainability requirement Heightened requirement effectively bars low-value consumer class actions Declined requirement named plaintiffs to show that the class could be feasibly identified 10
Mullins v. Direct Digital LLC, 795 F.3d 654 (7th Cir. 2015) Administrative inconvenience is better addressed under Rule 23(b)(3) Dismissed unfairness argument protecting the interests of absent class members should not let the perfect become the enemy of the good Rejected due process argument concerns are protected by other procedural mechanisms such as bifurcation of liability and damages phases On February 29, 2016, Supreme Court denied a petition for writ of certiorari. This leaves a circuit split between the 3rd and 7th circuits. 11
U.S. Supreme Court reaffirmed AT&T Mobility, LLC v. Concepcion, 131 S. Ct. 1740 (2011) DirectTV, Inc. v. Imburgia, 136 S.Ct. 463 (2015) Class action waiver in consumer arbitration agreement stated it was unenforceable if the waiver was contrary to state law. California appellate court held such waivers were unconscionable. Supreme Court held class action waivers in arbitration agreements are enforceable under the FAA, despite contrary state law. 12
Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663 (Jan. 20, 2016) Supreme Court rejected argument that plaintiff s claims were mooted by defendant s Rule 68 offer of judgment. an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant s continuing denial of liability, adversity between the parties persists. This opinion settled a circuit split on the issue, which we discussed at prior conferences. The decision did leave open the question of whether mootness of a named plaintiff s claim also moots class action as a whole, or whether payment of complete relief is sufficient to moot a claim. 13
Marshall v. Nat l Football League, 787 F.3d 503 (8th Cir. 2015) Settlement did not award money directly to class members Established a licensing agency and provided up to $42m to create Common Good Entity Plaintiffs argued distribution of settlement funds directly to third parties without first attempting to compensate class members violates fundamental principles of aggregate litigation 8th affirmed the settlement 14
On February 29, 2016, the Supreme Court denied a petition for writ of certiorari. 15
Poertner v. Gillette Co., 618 Fed. App x 624 (11th Cir. 2015) Settlement to give $50m in direct benefits to class members who bought Duracell batteries. Actual recovery was less than $350,000. Duracell also agreed to donate $6m of batteries to charities. Class counsel was awarded $5.6m in fees. 11th Circuit affirmed the settlement. On March 21, 2016, the Supreme Court denied a petition for writ of certiorari. 16
Briggs v. Merck Sharp & Dohme, 796 F.3d 1038 (9th Cir.) Whether plaintiffs in 5 consolidated cases ever proposed to try jointly the claims of one hundred or more persons, to constitute a mass action under CAFA. Court held that none of the plaintiffs actions qualified as a proposal. Remark to federal court of plaintiffs intent to join Byetta JCCP if remanded did not qualify as a proposal federal court lacked any authority to join the cases to JCCP. Plaintiffs filing of their cases in CA state court while defendant-initiated Byetta JCCP was pending, did not constitute a proposal to jointly try cases and not a mass action under CAFA. Add-on petition that stated plaintiffs did not seek joint trial did not trigger CAFA mass action jurisdiction.. 17
Briggs v. Merck Sharp & Dohme (cont d) Corber v. Xanodyne Pharmaceuticals, Inc., 771 F.3d 1218 (9th Cir. 2014) Court held plaintiffs petition for coordinated proceeding for all purposes amounted to proposal for joint trial and triggered mass action jurisdiction under CAFA. Briggs and Corber focused on wording of plaintiffs petition. CAFA mass action jurisdiction in 9th Circuit will be a case-by-case analysis. 18
Eagle US 2 LLC v. Abraham, 627 Fed.Appx. 351 (5 th Cir. 2015) Whether the district court s application of a presumption against removal in Class Action Fairness Act (CAFA) cases in direct defiance of a decision of this Court can be allowed to go uncorrected; (2) whether these Louisiana cumulation complaints comprise an action similar to a class action under 28 U.S.C. 1332(d)(1)(B); and (3) whether the Fifth Circuit also erred by rejecting Eagle s argument in the alternative that the purportedly separate complaints qualified as a CAFA mass action under 28 U.S.C. 1332(d)(11)(B)(i) because those complaints together included 100 or more persons. 19
Justice Scalia applied a strict view on class uniformity and class standing. A more liberal replacement could result in the loosening of such restrictions on plaintiffs in class actions. 20
Eckler and Engel v. Neutrogena Corp., 238 Cal. App. 4 th 433 (Cal. App. 2d Dist. 2015) Allegations: sunscreen labeling was misleading and deceptive advertising under CA consumer protection laws Terms sunblock waterproof sweatproof - FDA prohibited on June 17, 2011 with a compliance date of Dec. 17, 2012 Plaintiffs argued defendant should have removed those terms even before FDA compliance date Plaintiffs also argued SPF 50 was misleading as to the efficacy of SPF50+ sunscreen Court held claims were entirely preempted 18 month safe harbor reflected FDA cost-benefit analysis 22
Bimont v. Unilever United States, Inc., 2015 WL 5256988 (S.D.N.Y. Sept. 9, 2015) Allegations: misstating actual weight of usable product in each deodorant stick, misstating total net weight of each stick, and failing to state amount of slack fill in each stick Deodorants at issue were both cosmetics and OTC drugs, subject to FDCA and FDA regulations Court held claims were preempted FDA was given authority to regulate slack-fill in cosmetics, drugs, and food but only chose to regulate food tantamount to a conscious decision by the agency to permit slack-fill Federal law does not explicitly require that usable net weight be disclosed Federal law permits net weight variation - intentional underfilling does not change the outcome 23
Lip balm litigation Alleging product caused dry and blistered lips Parmesan cheese litigation Alleging misleading label/name because the product also contains cellulose/wood pulp Cellulite Cream litigation Alleging misleading advertising because creams did not combat cellulite Honest Tea litigation Alleging misleading labels touting antioxidants Talc Litigation Alleging talc in body powder can cause cancer 24
Since January 2015, FDA has issued: 10 Warning Letters addressing drug claims made for products marketed as cosmetics 7 Warning Letters highlighting the difference between cosmetics and medical devices 2 Warning Letters related to microbial contamination 1 Warning Letter related to safety and labeling violation We frequently see these sorts of FDA actions cited in follow-on lawsuits Evidence of non-compliance/negligence per se Seeking to use FDA determination of misleading advertising as de facto determination of fault by manufacturer 25
Conducted by Joanna M. Shepherd, professor at Emory University School of Law All class action settlements from 2005-2015 (located on Westlaw or Lexis) 2,158 cases Applied 4 criteria to identify no-injury cases resulted in 432 cases Results: 2.5% of 432 were tried Rest were settled for a total of approximately $4 billion 37.9% went to class action lawyer fees Of the remaining 63.1% (over $2.4 billion), at most 15% went to actual class members Result is only 9% (at best) of available funds went to those for whom they were intended 26
Defendants should work to incorporate the findings from this study into briefing and oral argument opposing cy pres proposals and no-injury class actions. Use these statistics to show harm and unfairness imposed in allowing no-injury class actions to proceed. Costs of no-injury class actions are passed on to consumers in the form of higher prices, lower product quality, and reduced innovation. Recent eye drop litigation handled by GT: Dismissed on lack of standing because plaintiff could not show an injury-in-fact On appeal to Third Circuit, where this study may be a powerful tool to show what is really driving these cases (the LAWYER$) 27
Hain Celestial settlement In January 2016, consumer objected to $9.4m settlement Alleges settlement provides excessive attorneys fees while class member only get partial refunds and coupons Alleges class counsel will receive $4m in fees $2 coupons can t be combined, so class members have to pay additional cash to use the coupons Both the plaintiffs attorneys and the corporate defendant may understandably just want the litigation to be over. Increased scrutiny from courts and the public may scuttle proposed resolutions of consumer class actions and prevent swift resolution. 28
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There has been a general trend of increasing consumerbased class actions in the U.S. Consumer fraud claims have become a staple of litigation brought by both government and private plaintiffs across industries and in venues across the country. Class actions are often filed soon after a major regulatory action such as warning letters or recalls Consumer class actions can also be the basis for a Citizens Petition to the FDA or other catalyst for regulatory scrutiny. 30
Consumer fraud claims may be instituted under both state and federal consumer fraud statutes They can be asserted by private citizens and State Attorneys General Money-making venture for many states, and law firms they hire. Plaintiffs generally pursue actions under state consumer fraud statutes Certain states consumer fraud statutes may be attractive to plaintiffs: Legal standards vary from state to state Standing requirements may be lower May not require evidence of reliance May permit attorneys fees and punitive damages 31
Monitor your industry and regulatory agencies Monitor plaintiffs website and blogs and social media Assess emerging threats Avoid litigation through preparation and preemption Do not be an easy target 33
1. Remove to federal court if not already there CAFA removability assess mass action jurisdiction Diversity, federal question? Consider removal before service if you are a home state defendant. 2. Push for Early Motions: Assess grounds for Motions to Dismiss including insufficient pleadings (Twombly/Iqbal) Where applicable, file early motion to dismiss based on lack of standing No injury-in-fact Preemption motion Early Motion for Summary Judgment Motion to Strike Class Allegations 34
3. Class certification Educate Judge From the Outset Hit key themes early Ascertainability push for the heightened standard No commonality of injury/claims Class is not actually numerous No basis for membership of representatives in the proposed class is proof of purchase likely to be difficult or impossible to verify? 35
4. Post-Certification Targeted, efficient discovery File motion for summary judgment File Daubert motion(s) File decertification motion after discovery Consider making offer of judgment to individual plaintiff to potentially moot class action Object to cy pres settlements in no-injury actions Try the case 36
Goals: Discourage the Opposition Early Case Assessment Develop case themes and company story Formulate early, targeted discovery Balance business and litigation objectives Consider alternative fee structures Be efficient/economical Being prepared to try the case 37