Class Action Trends Feed

Ninth Circuit Rejects Challenges to Conjoint Analysis in Consumer Class Action

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By: Alexander M. Smith

In recent years, conjoint analysis has proliferated as a methodology for calculating class-wide damages in consumer class actions. While conjoint analysis first emerged as a marketing tool for measuring consumers’ relative preferences for various product attributes, many plaintiffs (and their experts) have attempted to employ conjoint analysis as a tool for measuring the “price premium” attributable to a labeling statement or the effect that the disclosure of a product defect would have had on the product’s price. Defendants, in turn, have taken the position that conjoint analysis is only capable of measuring consumer preferences, cannot account for the array of competitive and supply-side factors that affect the price of a product, and that it is therefore incapable of measuring the price effect attributable to a labeling statement or a disclosure. Consistent with that position, defendants in consumer class actions frequently argue not only that conjoint analysis is unsuited to measuring class-wide damages consistent with Comcast Corp. v. Behrend, 569 U.S. 27 (2013), but also that it is inadmissible under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). But a recent Ninth Circuit decision, MacDougall v. American Honda Motor Co., --- F. App’x ---- (9th Cir. 2021) may threaten defendants’ ability to challenge conjoint analysis on Daubert grounds.

In MacDougall, the plaintiffs brought a consumer class action against Honda premised on Honda’s alleged failure to disclose the presence of a transmission defect in its vehicles. The plaintiffs attempted to quantify the damages attributable to this omission through a conjoint analysis, which purported to “measure the difference in economic value—and thus the damages owed—between Defendants’ vehicles with and without the alleged transmission defect giving rise to this action.” MacDougall v. Am. Honda Motor Co., No. 17-1079, 2020 WL 5583534, at *4 (C.D. Cal. Sept. 11, 2020). Honda argued that this conjoint analysis was flawed and inadmissible, both “because it only accounts for demand-side and not supply-side considerations” and “because it utilizes an invalid design that obtains mostly irrational results.” Id. at *5. The district court agreed with Honda, excluded the expert’s conjoint analysis, and entered summary judgment in Honda’s favor based on the plaintiffs’ failure to offer admissible evidence of class-wide damages. In so holding, the court concluded that the expert’s conjoint analysis “calculates an inflated measure of damages because it does not adequately account for supply-side considerations” and only measures a consumer’s willingness to pay for certain product features—not the market price that the product would command in the absence of the purported defect. Id. “[W]ithout the integration of accurate supply-side considerations,” the district court explained, “a choice-based conjoint analysis transforms into a formula missing half of the equation.” Id. And separate and apart from this central economic defect, the district court found that other errors in the expert’s methodology—including his failure to conduct a pretest survey and the limited number of product attributes tested in the conjoint survey—rendered his conjoint analysis unreliable and inadmissible. See id. at *7-9.

The Ninth Circuit reversed. Beginning from the premise that expert testimony is admissible so long as it is “relevant” and “conducted according to accepted principles,” the Ninth Circuit found that the admissibility of expert testimony was a “case-specific inquiry” and therefore rejected Honda’s argument that “conjoint analysis categorically fails as a matter of economic damages.” Slip Op. at 2-3. The Ninth Circuit then concluded that Honda’s methodological challenges based on “the absence of market considerations, specific attribute selection, and the use of averages to evaluate the survey data go to the weight given the survey, not its admissibility.” Id. at 3 (citations and internal quotation marks omitted). And while the Ninth Circuit acknowledged that the district court relied on numerous decisions that had rejected the use of conjoint analysis in consumer class actions, it held that these decisions did not concern the “admissibility of conjoint analysis under Rule 702 or Daubert” but instead its “substantive probity in the context of either class-wide damages under Comcast . . . or substantive state law.” Id. at 2.

In distinguishing between the question of whether conjoint analysis is admissible under Daubert and whether it is capable of measuring damages on a class-wide basis consistent with Comcast, the Ninth Circuit preserved an opening for defendants to challenge the use of conjoint analysis to measure class-wide damages at the class certification stage. Nonetheless, MacDougall undoubtedly weakens defendants’ ability to challenge the admissibility of conjoint analysis on methodological grounds, and it is possible that some district courts may read the Ninth Circuit’s opinion to stand for the broad proposition that juries, rather than judges, should decide whether conjoint analysis can properly measure economic damages.


Three Strikes, You’re Out! New York Federal Courts Reject Three Implausible Mislabeling Actions

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By: Lindsey A. Lusk

New York federal courts have recently shown a willingness to dismiss implausible mislabeling claims on the pleadings. The recent dismissal of three consumer class actions—all filed by the same plaintiff’s counsel—suggests that these federal courts are increasingly skeptical of lawyer-driven claims regarding alleged confusion over the labeling of popular food products.

On November 4, 2021, in Boswell v Bimbo Bakeries USA, Inc., Judge Furman of the Southern District of New York dismissed a putative class action alleging that Entenmann’s “All Butter Loaf Cake” was misleadingly labeled because it contained not only butter, but also soybean oil and artificial flavors.[1] In reaching this conclusion, the court specifically called out the plaintiff’s attorney for bringing “a long string of putative class actions . . . alleging that the packaging on a popular food item is false and misleading.”[2] Notably, the court took judicial notice not only of the labeling of the challenged Entenmann’s product, but also the labeling of other butter cake products—which the court deemed probative of the context in which consumers purchase these products.[3]

On November 9, 2021, in Kamara v. Pepperidge Farm Inc., Judge Castel of the Southern District of New York dismissed with prejudice a putative class action alleging that the term “Golden Butter Crackers” was misleading because the crackers also contained vegetable oil.[4] In so holding, the court noted that “a reasonable consumer could believe the phrase ‘Golden Butter’ refers to the product’s flavor and wasn’t a representation about the ingredients’ proportions.”[5] But even if a consumer did believe as much, “[t]he packaging accurately indicated that the product contained butter,” which was prominently featured on the ingredient list—second only to flour.[6] The court found that “[t]he complaint [did] not plausibly allege why a reasonable consumer would understand the phrase ‘Golden Butter’ to mean that ‘wherever butter could be used in the product, it would be used instead of using its synthetic substitute, vegetable oil.’”[7]

Even more recently, on December 3, 2021, in Warren v. Whole Foods Market Group Inc., Judge Kovner of the Eastern District of New York dismissed a putative class action alleging that the label of Whole Foods Market’s instant oatmeal misled consumers into thinking the product was sugar-free or low in sugar.[8] The court reasoned that “even if a reasonable consumer was unaware of sugar’s many names, or of the nutrition label’s purpose, the fact remains that the words ‘Sugar 11g’ are prominently displayed immediately next to the ingredient list.” As the court noted, “[t]hose words are hard to miss.”[9]

These rulings may signal that federal courts—at least in New York—are increasingly inclined to take a harder look at the pleadings in food mislabeling cases, as well as the broader context in which the products are sold, and grant motions to dismiss where the allegations come up short of plausible. While it is unlikely that these rulings will completely deter other plaintiffs’ lawyers from filing these lawsuits, they undoubtedly provide ammunition for defendants faced with similar food labeling lawsuits in New York federal courts.

 

[1] Boswell v. Bimbo Bakeries USA, Inc., No. 20-CV-8923 (JMF), 2021 WL 5144552, at *1 (S.D.N.Y. Nov. 4, 2021).

[2] Id.

[3] Id. at *4.

[4] Kamara v. Pepperidge Farm, Inc., No. 20-CV-9012 (PKC), 2021 WL 5234882, at *2 (S.D.N.Y. Nov. 9, 2021).

[5] Id.

[6] Id. at 5.

[7] Id.

[8] Warren et al. v. Whole Foods Market Group, Inc., No. 19CV6448RPKLB, 2021 WL 5759702, at *1 (E.D.N.Y. Dec. 3, 2021).

[9] Id.


Seventh Circuit Offers Useful Reminders about Removal

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By: Gabriel K. Gillett, Kelsey L. Stimple, and Howard S. Suskin

In Railey v. Sunset Food Mart, Inc., -- F.4th --, No. 21-2533, 2021 WL 4808222 (7th Cir. Oct. 15, 2021), the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s order remanding a class action asserting claims under the Illinois Biometric Information Privacy Act because the removal was untimely. Beyond the specific holding, the Court’s opinion serves as a useful reminder about some of the contours around removal of class actions, including under the Class Action Fairness Act (CAFA). We discuss some of those key principles below, through the lens of the Court’s decision.

Appellate courts can review remand orders in some situations. Though appellate courts typically lack jurisdiction to review remand orders, they have the discretion to do so for orders remanding a case removed under CAFA, 28 U.S.C. § 1453(c)(1), and are “free to consider any potential error in the district court’s decision.” Slip op. 4-5, 9 (quoting Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451 (7th Cir. 2005)).

Removal may be permitted based on “complete preemption.” The defendant in Railey first argued that removal to federal court was appropriate because the named plaintiff—an employee at one of the defendant’s grocery stores—was represented by a union, and her claims were therefore preempted by the Labor Management Relations Act. See Slip op. 2. The court acknowledged that removal is appropriate if the plaintiff’s claims are “completely preempted” by federal law and that one of its recent decisions indicated that the plaintiff’s claims “may, in fact, be preempted by the Labor Management Relations Act.” Slip op. 9 (citing Fernandez v. Kerry, Inc., No. 21-1067, 2021 WL 4260667, at *1–2 (7th Cir. 2021)).

A defendant’s time to remove may be triggered by its own subjective knowledge or ability to learn key facts related to removal. The court held, however, that the defendant’s November 2020 notice of removal was untimely because it was not filed within 30 days of the plaintiff serving her complaint in February 2019. Slip op. 11. Defendants can remove a class action within 30 days after the case is filed, or 30 days after “the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present.” Walker v. Trailer Transit, Inc., 727 F.3d 819, 824 (7th Cir. 2013) Though the defendant claimed that the 30-day clock was triggered by the plaintiff confirming her union membership in an October 2020 interrogatory, it had acknowledged in oral argument that the complaint supplied enough information—the plaintiff’s name, dates of employment, job title, and job location—to ascertain that she was represented by a union. Slip op. 10. “Based on this information, diligent counsel had everything necessary to recognize that the Labor Management Relations Act may preempt [the plaintiff’s] or the class’s claims.” Slip op. 11.

The court was careful to caution that its opinion should not be read “to impose any meaningful burden on defendants” and it stood “fully by [its] prior determination that district courts are not required to engage in a ‘fact-intensive inquiry about what the defendant subjectively knew or should have discovered’ about the plaintiff’s case to assess the timeliness of a defendant’s removal.” Slip op. 11 (quoting Walker, 727 F.3d at 825. The court pointed out that the plaintiff was a union member working at the defendant’s store and “a defendant can be held to information about its own operations that it knows or can discern with ease.” Id. “That reality mean[t] that the 30-day removal clock in § 1446(b)(1) began to tick when [the plaintiff] served her complaint in February 2019” and the November 2020 notice of removal was therefore untimely. Id.

Still, the Seventh Circuit’s statement seems to be in at least some tension with the First Circuit’s categorical statement that “[t]he defendant has no duty, however, to investigate or to supply facts outside of those provided by the plaintiff.” Romulus v. CVS Pharmacy, Inc., 770 F.3d 67, 75 (1st Cir. 2014). The First Circuit explained its view as follows: “The district court reasoned that information on damages is not ‘new’ if the defendant could have discovered it earlier through its own investigation. This is not how the statute reads and would produce a difficult-to-manage test. … Determining what the defendant should have investigated, or what the defendant should have discovered through that investigation, rather than analyzing what was apparent on (or easily ascertainable from) the face of the plaintiff's pleadings, will not be efficient, but will result in fact-intensive mini-trials.” Id. at 73-76 (surveying somewhat different approaches the circuits have adopted). According to the First Circuit, “[e]very circuit to have addressed this issue has ... adopted some form of a bright-line rule that limits the court's inquiry to the clock-triggering pleading or other paper” provided by the plaintiff to the defendant. Id. at 74 (internal quotations omitted).

The 30-day deadline to remove is triggered (or not) based on the particular removal theory and related facts; “separate removal attempts are governed by separate removal clocks.” In January 2021, the defendant raised CAFA’s minimal diversity requirements as a second basis for removal to federal court. The court emphasized that the timeliness of this basis was unaffected by the timeliness of the earlier preemption argument because “[a] defendant may remove even a previously remanded case if subsequent pleadings or litigation events reveal a new basis for removal.” Slip op. 6. If they attempt to do so, “separate removal attempts are governed by separate removal clocks.” Id.

The court held that this minimal diversity basis for removal was not untimely. Slip op. 8. Though the plaintiff had moved out of Illinois and changed her domicile to Georgia in February 2020, the defendant only discovered this fact through its own investigation in January 2021. Slip op. 7; see 28 U.S.C. § 1453(b) (eliminating § 1446’s one-year limitation on diversity-based removal for class actions); cf. id. § 1332(d)(7) (evaluating diversity when case is filed or when diversity becomes apparent later based on “an amended pleading, motion, or other paper”). The court noted that “[a] plaintiff may trigger a removal clock—and protect itself against a defendant’s strategic maneuvering—by affirmatively and unambiguously disclosing facts establishing federal jurisdiction in an initial pleading or subsequent litigation document.” Slip op. 7 (internal quotations omitted). But because the plaintiff had not done so here and the defendant discovered the federal jurisdiction basis independently, the defendant could “remove the case at whatever point it deems appropriate, regardless of whether the window for removal on another basis already opened and closed.” Slip op. 7.

CAFA’s exception for “home-state controversies” may bar even timely removals. The case still had to be remanded to state court, however, because the minimal diversity exception faced a different barrier. CAFA removal is subject to an exception for “home-state controversies,” where “two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.” 28 U.S.C. § 1332(d)(4)(B); see Slip op. 8. “By limiting the class to Illinois citizens, [the plaintiff] eliminated any concern that any [defendant] employees domiciled outside the state comprise greater than one-third of the class and all but ‘guaranteed that the suit would remain in state court.’” Slip op. 8 (quoting In re Sprint Nextel Corp., 593 F.3d 669, 676 (7th Cir. 2010)).


A Benefytt or a Curse: Ninth Circuit Holds That Bristol-Myers Does Not Apply Before Class Certification

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By: Alexander M. Smith

In 2017, the Supreme Court held in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), that a defendant in a mass tort action is not subject to specific personal jurisdiction as to the claims of non-resident plaintiffs whose injuries lack a sufficient connection to the forum state. The Court did not decide, however, whether its holding applied to nationwide class actions. And in the four years following Bristol-Myers, district courts in the Ninth Circuit have reached highly divergent results:

  • Some district courts have “agree[d] . . . that Bristol-Myers Squibb applies in the nationwide class action context” and have dismissed claims brought on behalf of putative nationwide classes, reasoning that “a state cannot assert specific personal jurisdiction for the claims of unnamed class members that would not be subject to specific personal jurisdiction if asserted as individual claims.” Carpenter v. PetSmart, Inc., 441 F. Supp. 3d 1028, 1035 (S.D. Cal. 2020); see also, e.g., Wenokur v. AXA Equitable Life Ins. Co., No. 17-165, 2017 WL 4357916, at *4 (D. Ariz. Oct. 2, 2017) (“The Court notes that it lacks personal jurisdiction over the claims of putative class members with no connection to Arizona and therefore would not be able to certify a nationwide class.”).

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Supreme Court Limits Article III Standing for Class Action Plaintiffs: Implications for Data Breach Class Actions

   

By: Clifford W. BerlowAlexander E. Cottingham, and Lindsay C. Harrison

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On June 25, 2021, the US Supreme Court in TransUnion LLC v. Ramirez[1] narrowed the scope of Article III standing for plaintiffs who allege the violation of a statute but cannot show they otherwise suffered harm. Though decided in the context of a Fair Credit Reporting Act (FCRA) class action, the decision has major implications for parties litigating state and federal statutory claims of all varieties in federal courts. In particular, TransUnion seems poised to limit the viability of class actions arising from data breaches. The decision likely means, for example, that plaintiffs lack Article III standing when their information may have been accessed but was not misused in a manner causing concrete harm—a subject on which the courts of appeals previously had split. The decision also will limit plaintiffs’ ability to assert Article III standing merely based on the violation of privacy statutes alone without any resulting harm. 

Defendants litigating data breach class actions can take advantage of this new precedent in federal court to seek dismissal of data breach class actions for lack of Article III standing. But doing so is not without consequence. If federal courts are not available to adjudicate these claims, plaintiffs likely will pursue them in state courts, where standing precedent may be more lenient for plaintiffs. Defendants thus will need to be strategic about how aggressively they pursue TransUnion-based dismissals.

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Supreme Court Gives More Tools for Defendants to Challenge Class Certification in Securities Fraud Cases

   

By: Ali M. Arain, Stephen L. Ascher, Howard S. Suskin, and Reanne Zheng

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On June 21, 2021, the US Supreme Court issued its decision in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System,[1] providing guidance to lower courts regarding class certification in securities fraud class actions. On balance, the opinion favors defendants, and potentially signals a backlash against the tide of securities fraud class actions based on vague and generic misstatements. Importantly, the Court instructed that all relevant evidence should be considered when making the class certification decision, sending a message that lower courts must grapple with and cannot ignore relevant evidence at the class certification stage simply because it overlaps with the merits-related evidence. The Court also stressed that the generic nature of a misrepresentation is often important evidence of lack of price impact, which lower courts should consider when deciding whether to grant or deny a class certification motion. 

Although the Supreme Court’s decision was not as sweeping as the defendants wanted, it does signal the Supreme Court’s concern that companies are too frequently held liable for securities fraud as a result of adverse legal or business developments, even where the company had never made any specific statements about the matters in question.

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Kang v. PF Chang’s, Inc.: Reasonable Consumer Deception, or Just a “Crabby” Plaintiff?

 

By: Alexander M. Smith

SushiOn February 9, 2021, the Ninth Circuit—in a split decision with a spirited dissent—reversed the dismissal of a consumer class action challenging P.F. Chang’s’s use of the phrase “krab mix” to describe sushi rolls that contain no real crab. Although Kang is an unpublished case and breaks little new legal ground, the two opinions offer a useful glimpse into how both defendants and plaintiffs frame their positions in false advertising lawsuits, and they highlight how easily judges can come to radically different conclusions in consumer class actions, even when faced with the same facts and law.

In Kang, the plaintiff alleged that P.F. Chang’s’s sushi rolls were deceptively labeled because they purported to contain “krab mix,” but did not include any crab at all. Judge Anderson of the Central District of California dismissed the plaintiff’s lawsuit, holding that no reasonable consumer would be deceived into believing that “krab mix” contained crab. The Ninth Circuit reversed. Judge Friedland and Judge Watford—writing for the panel majority—emphasized that “determining whether reasonable consumers are likely to be deceived will usually be a question of fact not appropriate on a motion to dismiss.” Applying this standard, the panel majority concluded that the plaintiff had plausibly alleged that the “inclusion of the term ‘krab mix’ in the ingredient list for certain of its sushi rolls is likely to deceive reasonable consumers into thinking that the sushi rolls contain at least some real crab meat when in fact they contain none.” Although P.F. Chang’s offered several reasons that this interpretation was implausible, the panel majority rejected them all:

  • The panel majority rejected P.F. Chang’s’s argument that the “fanciful” term “krab mix” suggested the absence of real crab. Although the panel majority agreed that “reasonable consumers confronted with the fanciful spelling of ‘krab’ on the menu would not assume they were purchasing a sushi roll with 100% real crab meat,” it nonetheless concluded that the plaintiff had plausibly alleged that the term “krab mix” suggests that the product contains “a mixture of imitation and real crab.” In contrast to cases where the challenged term has a specific, widely-understood meaning (such as “diet” soft drinks), the panel majority held that “there is no prevailing understanding that listing ‘krab mix’ as an ingredient in a sushi roll signifies that the item contains no real crab meat.” And in contrast to a case where the “fanciful” term appears in the name of the product (such as “Froot Loops”), the panel majority concluded that the term was at least plausibly misleading because it appeared in the ingredient list.

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COVID-19 / Coronavirus Resources

We continue our efforts to do everything we can to support our clients as they navigate these times.  Our lawyers have provided practical insight into the legal and strategic challenges companies are facing.  To stay abreast of the quickly changing landscape, Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector gro Noun_virus_1772453ups, to support clients as they navigate these uncharted waters.  We also continue to update our COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing. Following is a list of some of those pieces.


First COVID-19 Securities Class Action Lawsuits Hit Cruise Line and Pharmaceutical Company

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders.  Over the last few days, shareholders have filed the first suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations.  If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow.  Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

To read more, please click here.

COVID-19: "Employer Guidance for Addressing Possible Layoffs and Closures"

As employers grapple with staffing while dealing with the current COVID-19 crisis, they need to be mindful of their obligations under federal and state legislation addressing certain closures and layoffs.

Under the federal Work Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. §2101, covered employers must provide at 60 calendar days written notice of a covered “plant closing” or “mass layoff.”  WARN contains various definitions that establish:

  • Which employers must give notice;
  • When such notice must be given;
  • Who must receive notice;
  • What must the notice contain; and
  • When notice may be excused.

To read more, please click here.

COVID-19: Issues Facing the Airline Industry

As the novel coronavirus / COVID-19 continues to cause economic and social turmoil across the globe, the airline industry is suffering particularly acute hardships.  US carriers, including Delta, American, United and Southwest, have announced plans to cut their international routes by as much as 80% to 90% over the next several months, and domestic capacity is now being reduced by 20%-40%.  Foreign carriers have been impacted even more harshly.  Ryanair has announced it may have to ground its entire fleet, Air France has announced cuts into its flight schedule of up to 90% and British Airways has made similar cuts of up to 75%.  Furthermore, the aircraft that continue to fly are far from full.  Along with these flight reductions, airlines have grounded fleets of their larger aircraft, instituted hiring freezes and in some cases commenced layoffs, and US airlines are actively seeking ways to preserve cash on hand and obtain relief from the federal government.

To read more, please click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.


Ninth Circuit Sharply Limits Pre-Certification Discovery Into the Identity of Other Class Members

By:  Alexander M. Smith 

CaliforniaWhile the Ninth Circuit’s decision reflects a welcome concern about the use of pre-certification discovery to identify potential clients, it further exacerbates the stark contrasts between class action practice in California state courts and California federal courts.

In class actions, named plaintiffs frequently seek discovery from the defendant regarding the identities and contact information of other putative class members. While some view this practice as a normal method of obtaining information about other similarly situated consumers, others view it as a way for plaintiffs’ lawyers to fish for potential plaintiffs—either in new lawsuits, or as a “backup” in the event the court finds the original named plaintiff atypical or inadequate.

In spite of these concerns about fishing expeditions, California state courts have consistently permitted named plaintiffs in class actions to obtain pre-certification discovery regarding the names and contact information of other putative class members. Indeed, the California Supreme Court has repeatedly blessed this practice, holding that the interests of named plaintiffs in seeking relief on behalf of similarly situated consumers—and the broad scope of discovery under California law—weighed in favor of requiring defendants to identify other potential members of the class. See Pioneer Elecs. (USA) v. Superior Court, 40 Cal. 4th 360, 373-74 (2007); Williams v. Superior Court, 3 Cal. 5th 531, 547 (2017).

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Seventh and DC Circuits Allow Nationwide Class Actions with Claims of Out-of-State Plaintiffs after Bristol-Myers Squibb

   

By: Michael T. Brody, Gabriel K. Gillett, Howard S. Suskin and Brenna J. Field

New-Development-IconThis week, the Seventh and DC Circuits issued long-awaited and major decisions addressing a critical issue in class action litigation explicitly left unresolved in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017)—whether a federal court has jurisdiction to hear claims by out-of-state members of a putative nationwide class action whose claims lack a connection to the forum. Both courts said yes, albeit for different reasons. As other circuit courts weigh in, and possibly disagree, the Supreme Court will likely be called upon to resolve the issue.

In Bristol-Myers Squibb, 600 plaintiffs brought a coordinated mass tort action asserting California state law claims in California state court using a California rule for consolidating individual suits. But only 86 plaintiffs were California residents. The defendant argued that it was not subject to specific personal jurisdiction as to the non-resident plaintiffs’ claims because they and their claims lacked a sufficient connection to the forum. The Supreme Court agreed, but stated that it did not decide whether its holding applied to federal courts or to class actions. Since then, some federal district courts have taken this to mean that federal courts have specific personal jurisdiction over defendants facing claims by absent non-resident putative class members in any type of aggregated litigation while others have taken the opposite view, that this ruling limits the court’s jurisdiction to claims by plaintiffs (named and unnamed) with a connection to the forum.

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