Trends in Consumer Class Actions: How You (Yes, You) Can Avoid Becoming a Target January 17, 2016 Universal City, California Sponsored by Akin Gump Strauss Hauer & Feld LLP Panelists: Neal Marder, Akin Gump, Head of Consumer Class Action Practice Hyongsoon Kim, Akin Gump, Senior Counsel Rachael Jeck, VCA Inc., Co-General Counsel #IHCC17 2017 ACC-SoCal In-House Counsel Conference
090701_1 Recent Trends in False Advertising Class Actions Presented by Neal Marder Head of Consumer Class Action Practice Akin Gump Strauss Hauer & Feld 2017 ACC-SoCal In-House Counsel Conference #IHCC17 1
090701_2 False Advertising Class Actions on the Rise False advertising filings are steadily increasing 300 in California State and Federal Courts 250 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 ACC-SoCal In-House Counsel Conference #IHCC17 2
090701_3 False Advertising Litigation by State Five states accounted for almost 75 percent of all cases California (~ 50 percent) New Jersey Florida New York Source: Number of Cases Settled by State, Consumer Class Action Settlements: 2010 2013, NERA ECON. CONSULTING (July 22, 2014) Illinois 2017 ACC-SoCal In-House Counsel Conference #IHCC17 3
090701_4 California s False Advertising Statutes False Advertising Law (FAL) (Cal. Bus. & Prof. Code 17500) Any untrue or misleading statements made in connection with sale of goods or services. Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code 17200) Any business activity (not limited to just advertising) that is allegedly unfair, unlawful, or fraudulent. Consumer Legal Remedies Act (CLRA) (Cal. Civ. Code 1750) Any consumer transaction involving the sale/lease of goods/services that is allegedly unfair/deceptive. Remedies are cumulative (plaintiffs can sue under all three statutes) Other states moving in same direction as California (e.g., New Jersey) 2017 ACC-SoCal In-House Counsel Conference #IHCC17 4
Industries at Risk for False Advertising Litigation 090701_5 Food & Beverage Cosmetics Electronics Credit Cards Pharmaceuticals Finance Telecommunications Construction Apparel Insurance 2017 ACC-SoCal In-House Counsel Conference #IHCC17 5
Recent Patterns in False Advertising Claims 090701_6 Alleged Misrepresentations: All Natural or Healthy Slack-Fill Green / Eco-Friendly Craft or Handmade Compare At Pricing Types of Products: Food & Beverage Cosmetics & Personal Care Products Household Products Apparel Electronics 2017 ACC-SoCal In-House Counsel Conference #IHCC17 6
Courts Have Provided Several Tools for Defending False Advertising Class Actions 090701_7 Dismissing class actions where plaintiffs lack standing Dismissing false advertising claims under the reasonable consumer standard Limiting nationwide class actions on choice-of-law and reliance grounds Denying class certification based on plaintiffs damages model Applying a heightened ascertainability standard at the class certification stage 2017 ACC-SoCal In-House Counsel Conference #IHCC17 7
Limiting Nationwide Class Actions on Choice-of-Law and Reliance Grounds 090701_8 Mazza v. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) The plaintiffs purchased Acura vehicles equipped with a Collision Mitigation Braking System (CMBS). The plaintiffs alleged that Honda s advertisements misrepresented the characteristics of the CMBS and omitted material information on its limitations in violation of the UCL, FAL and CLRA. Applying California s three step choice-of-law analysis, the Ninth Circuit found that a nationwide class could not be certified. The court also held that even a California class could not be certified because Honda s advertising campaign was not extensive enough to presume reliance by the class as a whole. o Distinguishing In re Tobacco II Cases, 46 Cal. 4th 298 (2009), in which the California Supreme Court found that plaintiffs were not required to demonstrate reliance for individual class members where there was a long-term, massive advertising campaign, the Ninth Circuit held that individual class members' reliance could not be presumed where it is likely that many class members were never exposed to the allegedly misleading advertisements. 2017 ACC-SoCal In-House Counsel Conference #IHCC17 8
090701_9 Applying a Heightened Ascertainability Standard at the Class Certification Stage The Second, Third, Fourth, and Eleventh Circuits apply a heightened ascertainability standard requiring that: The class is defined with reference to objective criteria, and There is a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition. The First Circuit has adopted a hybrid approach. Other circuits have either adopted a less rigorous standard at the certification stage, requiring only an objectively defined class, or have expressly declined to adopt any ascertainability standard. E.g., Briseno v. ConAgra Foods, Inc., 2017 WL 24618 (9th Cir. Jan. 3, 2017) o Plaintiffs brought false advertising class action against ConAgra alleging 100% natural label on vegetable oil was misleading because the product was made from GMO ingredients. o The Ninth Circuit affirmed the district court's class certification decision, but expressly stated that the Ninth Circuit has not adopted an ascertainability requirement. 2017 ACC-SoCal In-House Counsel Conference #IHCC17 9
090701_10 Dismissing False Advertising Claims Under the Reasonable Consumer Standard Ebner v. Fresh, Inc., No. 13-cv-56644 (9th Cir. Mar. 17, 2016) The Ninth Circuit affirmed dismissal of slack fill false advertising class action, holding that a reasonable consumer would not be misled by lip balm packaging that allows only 75 percent of the product to advance up the tube. Galanis v. Starbucks Corp., No. 16-4705 (N.D. Ill. Oct. 14, 2016) The Northern District of Illinois dismissed a putative false advertising class action alleging that Starbucks misrepresents the amount of liquid in its iced drinks because they also contain ice. The court held that a reasonable consumer who purchases an iced drink expects ice to be included. Popejoy v. Sharp Electronics Corp., No. 14-6426 (D.N.J. June 9, 2016) The District of New Jersey dismissed with prejudice a putative nationwide class action alleging that Sharp misled consumers by advertising LCD TVs as LED TVs. The court held that a reasonable consumer would not be deceived by Sharp s marketing because the product packaging stated that the TV was both an LCD TV and an LED TV. 2017 ACC-SoCal In-House Counsel Conference #IHCC17 10
Denying Class Certification Based on Plaintiffs Damages Model 090701_11 Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) The Supreme Court held that the plaintiffs proposed damages model fell far short of establishing that damages are capable of measurement on a class-wide basis. The Court reasoned that a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3). But see Pulaski & Middleman v. Google, Inc., No. 12-16752 (9th Cir. 2015) The Ninth Circuit reversed an order denying class certification of UCL and FAL claims, holding that differences in damage calculations do not defeat class certification, even after Comcast. Brazil v. Dole, No. 5:12-cv-01831 (9th Cir. 2016) The Ninth Circuit affirmed the district court s order decertifying the 23(b)(3) damages class [b]ecause Brazil did not explain how this premium could be calculated with proof common to the class. But see Briseno v. ConAgra Foods, Inc., 2017 WL 24618 (9th Cir. Jan. 3, 2017) Plaintiffs damages model combined a regression analysis with a study that purported to isolate the price premium attributable to the alleged misrepresentations. The Ninth Circuit held that requiring a methodology for class-wide damages was not the same as imposing an ascertainability requirement, and held that individual damages issues did not preclude certification. 2017 ACC-SoCal In-House Counsel Conference #IHCC17 11
090701_12 Best Practices Work with outside counsel to review advertising claims Use language that would make sense to a reasonable consumer Consider including a mandatory arbitration provision with a class action waiver in all consumer contracts Catch the problem early pay attention to consumer complaints and correspondence Consider implementing a voluntary refund program or other administrative remedies 2017 ACC-SoCal In-House Counsel Conference #IHCC17 12
090701_13 Recent Trends in Statutory Class Actions Presented by Hyongsoon Kim Akin Gump Strauss Hauer & Feld 2017 ACC-SoCal In-House Counsel Conference #IHCC17 13
090701_14 Statutory Damages Class Actions on the Rise Fair Credit Reporting Act (FCRA) 50% increase from 2014 to 2015 Telephone Consumer Protection Act (TCPA) Tripled increase from 2012 to 2015 Fair Debt Collection Practices Act (FDCPA) 50% increase in past four years Video Privacy Protection Act (VPPA) 2017 ACC-SoCal In-House Counsel Conference #IHCC17 14
090701_15 Minimum Statutory Damages FCRA $100 to $1,000 per violation Plus actual damages(if any), fees, costs, and possible punitive damages TCPA $500 per violation Plus treble damages (3x) for a willful or knowing violation FDCPA Up to $1,000 per person Plus actual damages (if any), Fees, costs, and possible punitive damages VPPA At least $2,500 per violation 2017 ACC-SoCal In-House Counsel Conference #IHCC17 15
090701_16 Common Privacy Statutes Approximately 2,270 complaints filed under these common statutes in 2015 and 2016 were reviewed: FDCPA TCPA FCRA VPPA ECPA FACTA These statutes relate to the treatment and protection of consumer s personal information, including credit and debt information, and information related to video and other forms of communication. 2017 ACC-SoCal In-House Counsel Conference #IHCC17 16
Favored Courts By District Court (2015-2016) 090701_17 FACTA, FDCPA, FCRA, ECPA, TCPA and VPPA: Pennsylvania, 3.32% Other, 16.84% Wisconsin, 8.58% New York, 17.74% New Jersey, 14.12% California, 23.20% Florida, 7.11% Illinois, 9.08% Three states (California, New York and New Jersey) account for over 50 percent of cases California accounts for over 23 percent of cases Followed by New York, which accounts for over 17 percent of cases New Jersey and Illinois account for 23 percent of cases *as of September 23, 2016 2017 ACC-SoCal In-House Counsel Conference #IHCC17 17
090701_18 Outdated/Antiquated Laws Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227 Passed in 1991 What violates: automated phone calls, text messages and faxes without consent Damages: plaintiffs actual losses OR $500 statutory damages per violation, whichever is greater; treble damages available for willful violations Expansive interpretation of autodialer 2017 ACC-SoCal In-House Counsel Conference #IHCC17 18
090701_19 Plaintiffs Expansive Arguments Video Privacy Protection Act (VPPA), 18 U.S.C. 2710 Passed in 1988 What violates: knowing disclosure by video tape service providers of personally identifiable information. Damages: $2,500 liquidated damages 2017 ACC-SoCal In-House Counsel Conference #IHCC17 19
090701_20 Plaintiffs Expansive Arguments Expanding the definition of: VTSP Personally Identifiable Information ( PII ) Consumer Establishing bases for more intangible harms Extending the pool of liability to recipients of data, not just those who disclose data Sample Case Law: In re Nickelodeon Consumer Privacy Litig., 827 F.3d 262 (3d. Cir. June 27, 2016): Static digital identifiers such as IP addresses (did not identify a specific person) Yershov v. Gannett Satellite Info. Network, Inc., 820 F.3d 482 (1st Cir. Apr. 29, 2016): GPS coordinates were PII; PII is not limited to information that explicity names a person 2017 ACC-SoCal In-House Counsel Conference #IHCC17 20
090701_21 Why Statutory Claims Are Attractive to Plaintiffs: Damages Potential for large damages awards in class action context TCPA: purpose was to enable plaintiffs to file without lawyer in small claims court In re Capital One Tel. Consumer Prot. Act Litig., 80 F. Supp. 3d 781 (N.D. Ill. 2015) Settlement of $75 million approved by court Class of 17 million members Attorneys fees of $15 million 2017 ACC-SoCal In-House Counsel Conference #IHCC17 21
Why Statutory Claims Are Attractive to Plaintiffs: Class Certification 090701_22 Easier for plaintiffs to prove how much harm was suffered by putative class members Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013): damages methodology must be tied to theory of liability Can require expert testimony Can lead to denial of class certification 2017 ACC-SoCal In-House Counsel Conference #IHCC17 22
090701_23 Why Statutory Claims Are Attractive to Plaintiffs: Class Certification Aranda v. Caribbean Cruise Line, No. 12-cv-4069 (N.D. Ill. Aug. 23, 2016) Violations of TCPA Alleged injury = common to class Statutory damages = common issues predominate Fewer individualized issues Certified class Ramirex v. Trans Union, LLC, No. 12-cv-00632 (N.D. Cal. June 22, 2016) Similar holdings under FCRA Actual injury = common issues predominate 2017 ACC-SoCal In-House Counsel Conference #IHCC17 23
090701_24 Spokeo and Article III Standing Spokeo, Inc. v. Robins, 136 S. Ct. (2016) False information about age, job status, and employment Violation of FCRA 9th Circuit: injury sufficient for standing Supreme Court (6-2): harm must be concrete and particularized o Concrete injury = de facto (must actually exist) o Congress may elevate concrete, de facto injuries o Violation of procedural statutory right may be sufficient Remanded to 9th Circuit 2017 ACC-SoCal In-House Counsel Conference #IHCC17 24
090701_25 What Is Clear After Spokeo? Courts are grappling with how to interpret Spokeo. Romero v. Dept. Stores Nat l Bank, No. 15-cv-193 (S.D. Cal. Aug. 5, 2016) o One unanswered telephone call is not sufficient injury to confer standing. Ung v. Universal Acceptance Corp., No. 15-cv-127 (D. Minn. Aug. 3, 2016) o The fact that the call happened is injury sufficiently concrete to confer standing. Gubala v. Time Warner Cable, Inc., No. 16-2613 (7th Cir. 2017) o Class action regarding Time Warner s alleged storage of former customers information. The district court granted Time Warner s motion to dismiss, finding that the suit claimed no concrete injury. Plaintiffs appealed to the Seventh Circuit. o The Seventh Circuit heard oral arguments on January 4, 2017. o Judges Richard Posner and Frank Easterbrook were very critical of plaintiffs claims. Judge Posner stated There s no harm. Nobody cares. 2017 ACC-SoCal In-House Counsel Conference #IHCC17 25
090701_26 Concluding Thoughts Statutory damages class actions are on the rise They can expose companies to massive potential liability and can be expensive to defend Develop and implement best practices to ensure your compliance department is familiar with the technical requirements of these statutes Partner with counsel both in-house and outside 2017 ACC-SoCal In-House Counsel Conference #IHCC17 26
090701_27 Questions? 2017 ACC-SoCal In-House Counsel Conference #IHCC17 27
Panelists Neal Marder Partner Akin Gump Los Angeles nmarder@akingump.com T+1 310.728.3740 Hyongsoon Kim Senior Counsel Akin Gump Irvine kimh@akingump.com T+1 949.885.4218 Rachael Jeck Co-General Counsel VCA Inc. rachael.jeck@vca.com T+1 310.571.6577 2017 ACC-SoCal In-House Counsel Conference #IHCC17 28 090701_28