Whirlpool Defeats Multi-State Certification Bid Reliant on “Kitchen Sink” Expert Report

Storm_Hurricane_iStock_000022250449XLargeBy Reena R. Bajowala 

Recently, a federal court in Chicago rejected an attempt to certify multi-state classes of consumers who purchased allegedly defective ovens manufactured by the Whirlpool Corporation.  The plaintiffs claimed that the ovens had a design defect rendering them inoperable after one or more self-cleaning cycles.  Plaintiff moved for class certification, relying almost exclusively on the opinion of proffered expert Albert de Richemond, a professional engineer with a master’s degree from Virginia Tech, as proof of a common defect in all ovens purchased by class members (i.e, as proof of commonality).  One of the key lessons from Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338, 350 (2011), was that commonality “is not the raising of common questions – even in droves – but rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.”

De Richemond’s report addressed a confluence of alleged defects relating to the thermostat, the thermo-regulator, lack of proper insulation, heat-resistance of component parts, excessive temperatures for the self-cleaning cycle, insufficient cooling fans and various ineffective fuses.  The class representatives’ class certification and Daubert briefing generally followed suit, referring to this “undifferentiated mass of potential problems” as the defect.  

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Class Action Goes “To The Dogs” When Plaintiff Fails to Sufficiently Allege Damages from “Made in the USA” Claim

By Reena R. Bajowala

Dog-foodA federal court in Chicago recently dismissed a lawsuit brought by Dale Sabo, an Illinois resident seeking to represent a multi-state class of consumers who bought defendant Wellpet LLC’s pet food products. Sabo alleged that the products were falsely labeled “Made in the USA,” but instead contain vitamins and minerals sourced from outside the United States in violation of Illinois, California, New York and six other state consumer fraud statutes.  Sabo alleged that he places a premium on American-made products and is willing to pay more for them.  In addition, he claims that a majority of Americans feel the same way, particularly given recent reports of recalls linked to foreign-sourced ingredients. 

To prevail on a consumer fraud claim, though, a plaintiff must plead actual damages, i.e., actual pecuniary loss.  The court found that plaintiff failed to do so. While Sabo alleged that he “paid more for the products than they were actually worth,” the court held that he failed to provide the factual foundation “to moor his subjective estimation of the products’ worth.”  Neither did he allege that products that lacked domestic-source designations were less expensive.  As a result, “while he alleges that he (and other consumers) are willing to pay a premium for goods made in the United States, he stops short of alleging that he in fact paid more for defendant’s . . . American-made” products.  Because the damages allegation was too speculative, the Court dismissed the lawsuit.

Sabo v. Wellpet, LLC, 2017 WL 1427057, ___ F. Supp. 3d ___ (N.D. Ill. Apr. 4, 2017). 

Cybersecurity Issues Influence World Events

Pexels-photo-326522By Mary Ellen Callahan

Two events affecting cybersecurity will have both immediate and lasting impact on cybersecurity, cyber policy and cyber requirements for companies for years to come.  

Wannacry Ransomware Attack

The event with the most immediate impact on companies and inter connectivity is the ransomware attack which started Friday May 12, and as of time of publication affected at least 230,000 servers in 150 countries. The WannaCry attack is the most widespread and simultaneous cyber attack, locking up servers and demanding payment of $300 per server (payable in bitcoin).

The WannaCry attack allegedly exploited vulnerabilities that were disclosed in March 2017.  The ransomware capitalized on certain exploits in standard Microsoft code.

The source of the exploit is less relevant than the direct impact on companies and servers that had not patched the vulnerability since Microsoft released an update in April.  Those companies were held captive, often shutting down communications and contact until a decision to pay was made. 

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Spate of Deceptive Luxury Outlet Pricing Suits Slows, But is its End in Sight?

New-Update-IconThe past few years have seen a dramatic increase in class actions against luxury fashion brands concerning the practice of affixing allegedly deceptive reference prices on goods sold in outlet stores.  According to the plaintiffs in these suits, certain brands mislead consumers by including a “Was,” “Manufacturer Suggested Retail Price,” or similar reference price on the tags of articles made exclusively for sale in outlet stores.  Since made-for-outlet goods were never actually sold at the reference price, plaintiffs allege that the reference prices convey fictitious price reductions to entice consumers in violation of various consumer protection statutes.  

There are indications that this line of cases is on the decline.  But is its end truly in sight?

In an article written for the Luxury Law Alliance Newsletter, Jenner & Block Partner Jeremy M. Creelan and Law Clerk Nicolas G. Keller investigate the answer to this question while providing recommendations to luxury brands that operate outlet stores. 

Continue to their article, “US Outlet Pricing Class Action Update – Another Dismissal but No Death Knell”

Central District of California Chips Away at Suit Alleging Defective Car Paint

Pexels-photo-26672By Sandra Hanian

On April 13, Judge Beverly Reid O’Connell of the Central District of California dismissed a putative class action lawsuit against Hyundai for selling cars with allegedly defective paint, but allowed most of the plaintiffs leave to amend the complaint.

Fifteen named plaintiffs from across the country alleged that certain 2006-2016 Hyundai Santa Fe, Sonata, and Elantra automobiles had defective “self-healing” paint that Hyundai fraudulently concealed from its customers.  Specifically, the plaintiffs claimed that Hyundai represented that it used “state-of-the-art paint” on its vehicles that would “stand the test of time” and “protect against corrosion, rust[,] and scratches,” when in fact Hyundai used “a coating with a short lifespan of three years” without providing “any warning or disclosure.”  The plaintiffs alleged that when they informed Hyundai about the peeling paint on their cars, they were told that Hyundai would not provide any repairs because the warranty period had already expired or that the condition was just “normal wear and tear,” or Hyundai otherwise refused to assist them. 

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Ninth Circuit Revives Suit Alleging Gerber Sold “Misbranded” Baby Food

8708982582_39f4d524c4_bBy Kelly M. Morrison

On Wednesday, April 19, 2017, the Ninth Circuit (with Judge O’Scannlain dissenting in part) issued an unpublished opinion reversing and remanding several of Judge Koh’s orders in Bruton v. Gerber Products Co. 

Plaintiff Natalia Bruton alleged that the labels of several Gerber baby food products were “misbranded” under the federal Food Drug & Cosmetic Act (“FDCA”) and the FDA regulations adopted pursuant to that Act, violating several federal and California statutes, including California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and Consumer Legal Remedies Act (“CLRA”), and supporting a claim for unjust enrichment.  For example, Plaintiff alleged that the labeling claims on the products at issue, such as “No Added Sugar” and “As Healthy as Fresh,” were impermissible because food manufacturers are allegedly “prohibited from making nutrient content claims with respect to food products intended to be consumed by children under two years old.”  Among other things, Plaintiff asserted a novel theory that, even if the labels were not false or misleading to a reasonable consumer, the labeling violations barred the products from being “legally sold or possessed,” rendering them “legally worthless.”  According to Plaintiff, the mere sale of a product bearing an improper label – “standing alone without any allegations of deception by Defendant, or review of or reliance on the labels by Plaintiff” – gives rise to a cause of action under California law.

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Supreme Court Determines that New York Law Governing Credit Card Surcharges Regulates Speech

Pexels-photoBy Leonard R. Powell

On March 29, 2017, the United States Supreme Court held that a New York law prohibiting sellers from “impos[ing] a surcharge on a holder who elects to use a credit card” was a regulation of speech—not conduct—but the Court remanded the case to the Second Circuit to determine whether the speech regulation survives First Amendment scrutiny.

Regulation of credit card “surcharges” and cash “discounts” dates back to the 1970s and 1980s. In 1974, Congress amended the Truth in Lending Act (TILA) to, inter alia, “prohibit[] card issuers from contractually preventing merchants from giving discounts to customers who paid in cash.” In 1976, Congress further added to TILA a ban on card surcharges. However, the existence of opposing bans demanded a method for distinguishing between them. By 1981, Congress had defined “discount” as “a reduction made from the regular price,” “surcharge” as “any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, or similar means,” and “regular price” as (1) the “tagged or posted” price when only a single price is posted, or (2) the price charged to card users when either no price is posted or two prices (both a cash price and a credit card price) are posted. Despite the complicated nature of this statutory framework, the bottom line was simple: “a merchant could violate the surcharge ban only by posting a single price and charging credit card users more than that posted price.”

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Senate Commerce Committee Clears Main Street Cybersecurity Act to Help Small Businesses

By Sati Harutyunyan

Hacking-2077124_1920The full Senate will consider a bill that seeks to equip small businesses with resources to shield against and manage cybersecurity risks, following the Senate Commerce Committee’s passage of the Making Available Information Now to Strengthen Trust and Resilience and Enhance Enterprise Technology (“Main Street”) Cybersecurity Act on April 5, 2017.  The crux of the bill is a requirement that the National Institute of Standards and Technology (NIST) provide resources to small business wishing to implement the voluntary NIST Cybersecurity Framework.  The term “resources” refers to guidelines, tools, best practices, standards, methodologies, and other ways of providing information, and does not indicate financial contributions.  S. 770, 115th Cong.  § 3(a)(2) (2017).

The bill proposes that that NIST must, under the Cybersecurity Enhancement Act of 2014, facilitate and support a voluntary public-private partnership that is crucial to reducing cybersecurity risk and making U.S. cyberspace safer.  Id. at § 2.  In an apparent effort to promote that partnership, the bill requires NIST to consult with heads of federal agencies and disseminate clear and concise resources for small businesses to help reduce their cybersecurity risks.  Id. at § 3(c)(1) (2017).  In designing the resources, NIST must tailor them to fit the nature and size of the small business implementing the Cybersecurity Framework.  Id. at § 3 (c)(2)(B) (2017).  Moreover, NIST must ensure that all resources are technologically neutral and implementable using commercial and off-the-shelf technologies.  Id. at § 3 (c)(2)(D) (2017).  Finally, the bill clarifies that the use of the disseminated resources by small businesses is to be voluntary.  Essentially, the bill is designed to help small businesses help themselves, and to ensure that the NIST Framework evolves to incorporate the needs of small businesses.  Previous cybersecurity legislation (including the Cybersecurity Act of 2015) have focused on owners and operators of critical infrastructure industries, given their heightened obligations for security.  This bill’s focus on small business demonstrates that cybersecurity should be a priority for all companies, and that there should be improved ways to assist small businesses in increasing their own cybersecurity. 

A date for full consideration has not yet been scheduled.

D.C. Circuit Strikes Down FCC Rule Requiring Opt-Out Notices on Solicited Faxes

By Alexander M. Smith

Printer-2178752_1920In November 2016, this blog reported that the D.C. Circuit appeared “sympathetic” to the position that the Telephone Consumer Protection Act (“TCPA”), which regulates “unsolicited” fax advertisements, did not empower the FCC to require opt-out notices on solicited fax advertisements.  Last Friday, a divided panel of the D.C. Circuit issued an opinion striking down the FCC’s 2006 rule requiring opt-out notices on solicited fax advertisements. 

In 2010, a group of businesses facing class action lawsuits involving solicited faxes without opt-out notices sought a declaratory ruling from the FCC clarifying that the TCPA does not require an opt-out notice on solicited fax advertisements.  The FCC responded to their petition by reiterating its position that the TCPA authorized it to require opt-out notices on solicited faxes, but it stated that it would waive application of this rule to businesses that sent solicited faxes before April 30, 2015.  The petitioners then sought review from the D.C. Circuit.  (A separate group of class action plaintiffs also appealed the FCC’s decision to grant a retroactive waiver.) 

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Southern District of California Dismisses Serial Plaintiff’s Suit Challenging Discount Prices

930660427_f9b535e230_oBy Sandra Hanian

On March 22, Judge John A. Houston of the Southern District of California dismissed one of the latest in a long line of putative class action lawsuits against retailers for allegedly deceptive pricing practices at outlet and factory stores, but allowed the plaintiff leave to amend the complaint.

The plaintiff Randy Nunez — who had previously filed putative consumer class actions against Best Buy, Microsoft, ConAgra, and others — alleged that Saks Incorporated advertised false comparable prices and false price discounts for the retailer’s branded merchandise sold at Saks Fifth Avenue OFF 5th stores and on the saksoff5th.com website.  Specifically, he claimed that he purchased a pair of Saks-branded shoes advertised with a “market price” of $145.00 and sold at a discounted sale price of $79.00, but that this and advertised discounts for other products were “nothing more than mere phantom markdowns because the represented market prices were artificially inflated and were never the original prices” for the items sold.  Amended Complaint at ¶¶ 2, 10, Nunez v. Saks Inc., No. 15-02717 (S.D. Cal. Jan. 15, 2016), ECF No. 8.  Further, the plaintiff asserted that the represented “market” prices were not the prevailing market retail prices within 90 days preceding the publication of the advertised former prices, as required by California law.  Nunez alleged that Saks’ pricing practices violated California’s Unfair Competition Law (“UCL”) False Advertising Law (“FAL”), and Consumer Legal Remedies Act (“CLRA”), as well as the Federal Trade Commission Act.

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