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September 2017

For Whom Rule 23(f) Tolls

NewupdateBy Kate T. Spelman

In a matter of first impression for the court, a three-judge panel of the Ninth Circuit recently held in Lambert v. Nutraceutical Corp. that the fourteen-day deadline to file a petition for interlocutory review of an order granting or denying class certification under Federal Rule of Civil Procedure 23(f) is not jurisdictional, and thus equitable exceptions apply to toll the deadline.  While other circuits have come to this same conclusion, the Ninth Circuit went one step further in holding that Rule 23(f)’s fourteen-day deadline was tolled in this case by the plaintiff’s filing of a motion for reconsideration, even though the motion itself was filed more than fourteen days after the court’s decertification order.  In so holding, the Ninth Circuit has created a circuit split that may require resolution by the U.S. Supreme Court.        

In Lambert, the plaintiff challenged the efficacy of Cobra Sexual Energy, an alleged aphrodisiac dietary supplement, under California’s consumer protection laws.  The district court initially certified a damages class under Rule 23(b)(3) based on the plaintiff’s full refund damages model, which was properly tied to the plaintiff’s theory that the product was entirely worthless.  However, the district court later decertified the class because the plaintiff had provided only the suggested retail price of the product, and not the actual average retail price necessary to calculate the full refund amount.  The plaintiff filed a motion for reconsideration twenty days after the court’s decertification order, which the court denied.  The plaintiff filed a Rule 23(f) petition less than fourteen days after that. 

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Insurance and Regulatory Hurdles to Blockchain Adoption

BlockchainJenner & Block Partners Brian S. Scarbrough and Justin C. Steffen wrote an article for Law360 explaining the basics of blockchain – a database that is shared across a network – as well as potential insurance and regulatory issues raised by the technology.  The authors detail the background of blockchain and its rise from Bitcoin and describe the advantages of blockchain technology. They then analyze the current regulatory state surrounding blockchain and highlight potential areas on which regulators will focus in the future. Brian and Justin then address insurance issues those seeking to utilize the technology should consider.

To read the full article, please click here

Pop Quiz! An Inch, 3% Or 10 Calories: Which One Is Material?

Sub Sandwich 2By Reena R. Bajowala 

Class plaintiffs often accuse food manufacturers of misrepresenting some aspect of their product offerings.  There are countless examples where the discrepancies latched onto by the plaintiffs’ bar between what the manufacturer advertised and what the consumer received are small.  But how small is too small to matter?  Lawyers have a name for this question:  materiality.  A claim for fraudulent misrepresentation can only go forward if the alleged misrepresentation is material.  

The Seventh Circuit recently rejected a proposed settlement involving Subway, citing materiality as one reason.  In In re Subway Footlong Sandwich Marketing & Sales Practices Litig., ___ F.3d ___, 2017 WL 3666635 (7th Cir. Aug. 25, 2017), class members sued Subway for marketing its trademark sandwich as a “footlong” when some sandwiches fell a little short.  The parties presented a settlement to the district court that involved injunctive relief and up to $525,000 in attorney’s fees.  The Seventh Circuit Court of Appeals rejected the settlement, calling it “utterly worthless.”  Discovery established that the vast majority of sandwiches are 12-inches; minor variations in length were attributable to unpreventable vagaries in the baking process.  Importantly, even if the sandwich was slightly shorter, each customer received the same amount of food.  The court noted that “the element of materiality – a requirement for a damages claim under most state consumer-protection statutes – was an insurmountable obstacle to class certification” because “[i]ndividualized hearings would be necessary to identify which customers, if any deemed the minor variation in bread length material to the decision to purchase.”  Because there was no compensable injury, the parties shifted to an injunctive relief class, which the court said “d[id] not benefit the class in any meaningful way.” 

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Lenovo Data Security Settlement with FTC and 32 State Attorneys General Shows Importance of Vendor Management

Pexels-photo-239898By Nancy C. Libin

On September 5, 2017, the Federal Trade Commission (“FTC”) announced that Lenovo, the personal computer manufacturer, settled charges brought by the FTC and 32 state attorneys general that Lenovo had harmed consumers by selling computers preinstalled with an ad-injecting software known as VisualDiscovery.  VisualDiscovery was developed by a software company called Superfish, Inc. (“Superfish”). 


According to the complaint, when Lenovo users shopped for products online, VisualDiscovery would display pop-up ads with the image of similar-looking products offered by Superfish’s retail partners.  In addition, by substituting its own certificates for those of websites that users visited, VisualDiscovery was able to operate as a “man-in-the-middle” between the Lenovo user’s browser and any websites the user visited.  This gave VisualDiscovery visibility into all information that a user transmitted – including financial information and Social Security Numbers on encrypted websites.  VisualDiscovery also was configured to send certain user information – such as IP address, URLs of websites visited, and unique identifiers assigned by Superfish – to Superfish servers.  VisualDiscovery’s substitution of its own digital certificates made Lenovo users vulnerable to hackers, who could easily exploit the configuration to access users’ sensitive information.

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