Alexander M. Smith

Supreme Court Hears Oral Argument in Microsoft Corp. v. Baker

By Alexander M. Smith

Supreme-court-546279_1920Today, the Supreme Court hears oral argument  in Microsoft Corp. v. Baker, which addresses the question of whether a plaintiff may render a denial of class certification appealable by voluntarily dismissing his or her claims with prejudice.  (The Consumer Law Roundup’s earlier post on Baker is available here.)   As SCOTUSBlog notes, the case pits Microsoft, which argues that this strategy is “a thinly veiled end-run” around both Rule 23(f) and the general rule prohibiting interlocutory appeals of denials of class certification, against the plaintiffs’ bar, which argues that this strategy satisfies the rule against interlocutory appeals by providing an order of dismissal, which is “the paradigmatic final order suitable for appellate review.” 

We will provide an update about oral argument shortly.    


House of Representatives Passes Class Action Reform Measure

By Alexander M. Smith

Washington-dcUpdating our previous report on the introduction of proposed class action reform, on March 9, the U.S. House of Representatives passed H.R. 985, the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2017, by a margin of 220-201.  The current version of H.R. 985 includes, among other things, the following provisions: 

  • R. 985 bars federal courts from certifying “a class action seeking monetary relief for personal injury or economic loss unless the party seeking to maintain such a class action affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives.” 
  • Additionally, H.R. 985 bars certification of “a class action seeking monetary relief unless the class is defined with reference to objective criteria and the party seeking to maintain such a class action affirmatively demonstrates that there is a reliable and administratively feasible mechanism (a) for the court to determine whether putative class members fall within the class definition and (b) for distributing directly to a substantial majority of class members any monetary relief secured for the class.” 
  • R. 985 also bars federal courts from certifying a class action “with respect to particular issues pursuant to Rule 23(c)(4) of the Federal Rules of Civil Procedure unless the entirety of the cause of action from which the particular issues arise satisfies all of the class certification prerequisites of Rule 23(a) and Rule 23(b)(1), Rule 23(b)(2), or Rule 23(b)(3).”
  • R. 985 requires that, “[i]n any class action, all discovery and all other proceedings shall be stayed during the pendency of any motion to transfer, motion to dismiss, motion to strike class allegations, or other motion to dispose of the class allegations, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party.” 
  • R. 985 would require disclosure of third-party litigation funding for any class action.
  • Finally, H.R. 985 provides that “[a] court of appeals shall permit an appeal from an order granting or denying class-action certification under Rule 23 of the Federal Rules of Civil Procedure.” 

The bill also includes other provisions relating to joinder of parties in personal injury and wrongful death claims removed to federal court, as well provisions affecting multidistrict litigation procedure. 

On March 13, the bill was referred to the Senate Committee on the Judiciary.  We will continue to monitor this legislation.

Law360, the National Law Journal , and JD Supra have additional coverage.  


Ninth Circuit Holds That Rule 23 Does Not Require an “Administratively Feasible” Method of Determining Class Membership

Supreme Court 35719-0001By Alexander M. Smith

In its first published opinion of 2017, the U.S. Court of Appeals for the Ninth Circuit held that Federal Rule of Civil Procedure 23 does not include a freestanding requirement of “an administratively feasible way to determine who is in the class.”  The Ninth Circuit’s decision further deepens a split between the First, Second, Third, and Fourth Circuits, which have imposed a freestanding “ascertainability”[1] requirement as a prerequisite for class certification, and the Sixth, Seventh, Eighth, and Ninth Circuits, which have held that Rule 23 does not impose either an “ascertainability” or “administrative feasibility” requirement separate from the requirements of Rule 23(a) or Rule 23(b)(3).  Compare In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015), Brecher v. Republic of Argentina, 806 F.3d 22 (2d Cir. 2015),  Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), and EQT Prod. Co. v. Adair, 764 F.3d 347 (4th Cir. 2014) with Rikos v. Procter & Gamble Co., 799 F.3d 497 (6th Cir. 2015), Mullins v. Direct Digital LLC, 795 F.3d 654 (7th Cir. 2015), and Sandusky Wellness Ctr. LLC v. Medtox Sci. Inc., 821 F.3d 992 (8th Cir. 2016).

Background

ConAgra produces Wesson-brand cooking oil, which is labeled “100% Natural.”  Plaintiffs filed putative class actions in eleven states alleging that alleged that the term “100% Natural” was false and misleading because Wesson oils are extracted from bioengineered crops and are therefore not “natural.”  Those cases were consolidated into a single case in the United States District Court for the Central District of California, and the plaintiffs sought to certify a set of classes consisting of all residents of California, Colorado, Florida, Illinois, Indiana, Nebraska, New York, Ohio, Oregon, South Dakota, or Texas who purchased Wesson cooking oils within the class period.  ConAgra opposed class certification on the basis, among others, that “there would be no administratively feasible way to identify members of the proposed classes because consumers would not be able to reliably identify themselves as class members.”   The district court certified the class notwithstanding ConAgra’s objections.

ConAgra filed an interlocutory appeal of the class certification order under Rule 23(f). The Ninth Circuit affirmed.  Its principal opinion focused exclusively on whether Rule 23 imposes a freestanding “administrative feasibility” requirement.  It also addressed ConAgra’s remaining arguments in an unpublished memorandum disposition. 

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Tenth Circuit Holds That Stamps.com Class Action Satisfies CAFA Amount In Controversy

Mailbox-595854_1920By Alexander M. Smith

The Tenth Circuit recently reaffirmed that the Class Action Fairness Act (“CAFA”), which authorizes federal jurisdiction over certain class actions where the amount in controversy exceeds $5 million, does not require a showing that class members are likely to recover that amount. 

In Hammond v. Stamps.com, Inc., a putative class of plaintiffs sued Stamps.com, which allows users to print their own postage from home without going to a post office, in New Mexico state court for allegedly failing to disclose that a monthly fee applies even in months where users did not print any postage.   Stamps.com removed to federal court and offered undisputed evidence that there were over 300,000 customers who called to cancel their subscriptions.  Although Stamps.com argued that the amount in controversy was between $10 and $93 million using the plaintiffs’ proposed measure of damages, the district court concluded that Stamps.com failed to show that there was over $5 million in controversy because it had not provided any evidence of the number of customers who cancelled their accounts because they discovered that they had been deceived by the recurring charges. 

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D.C. Circuit Hears Oral Argument on TCPA Opt-Out/Retroactive Waiver Appeals

Printer-958139_960_720By Alexander M. Smith

In October 2014, the FCC issued an order affirming its position that the Telephone Consumer Protection Act (TCPA) requires senders of fax advertisements to include an opt-out notice on those faxes, even if the recipient had previously consented to receive those faxes.  That order also acknowledged, however, that some parties who sent solicited faxes “may have been reasonably uncertain” about this requirement and granted a retroactive waiver of the opt-out requirement.   The FCC’s efforts to split the baby prompted appeals from both sides before the D.C. Circuit:  a group of class action plaintiffs appealed on the basis that the retroactive waiver was improper, and a separate group of class action defendants appealed on the basis that the TCPA only empowers the FCC to regulate unsolicited faxes.  This Tuesday, the court heard oral argument on both appeals.  As Law360 reports, the panel appeared “sympathetic” to the defendants’ position that the FCC “overstepped its authority” by regulating solicited faxes. 


FDA Issues New Guidance on “Healthy” Claims

Tree_iStock_000004633733LargeBy Alexander M. Smith

In May 2016, the FDA announced that it intended to re-evaluate its regulations concerning implied nutrient content claims, including the use of the term “healthy,” in light of evolving nutrition science.   As part of that process, the FDA issued guidance this Tuesday, September 27, in which it clarified its position on two types of nutrient content claims.  The FDA first announced that it will decline to require foods labeled as “healthy” to comply with the requirements for total fat content in 21 C.F.R. § 101.65(d), so long as the amounts of monounsaturated and polyunsaturated fats are declared on the label and the amounts declared constitute the majority of the product’s fat content.  The FDA reasoned that this rule is consistent with recent developments in nutrition science, which has “shifted away from limiting total fat intake to encouraging intakes of mono and polyunsaturated fats.”  The FDA also announced that it would no longer require foods labeled as “healthy” to contain at least ten percent of the daily value per reference amount customarily consumed of Vitamin A, Vitamin C, calcium, iron, protein, or fiber if the food instead contained at least ten percent of the daily value per reference amount of potassium and vitamin D, which the FDA characterized as “nutrients of public health concern.”  As Law360 notes, this guidance may have a significant impact on lawsuits arising out of food manufacturers’ use of the term “healthy.”


SDNY Rules in Favor of Food Manufacturer in KIND MDL

Wheat_iStock_000006511878MediumBy Alexander M. Smith

In 2015, following an FDA warning letter asserting that KIND LLC violated FDA regulations by advertising its signature KIND bars as "healthy and tasty," plaintiffs around the country filed lawsuits alleging that KIND misleadingly advertised its products as "healthy," "all natural, and "non GMO."  Once the cases were consolidated into an MDL before Judge William Pauley of the Southern District of New York, the claims began to narrow.  After the FDA declared in April 2016  that it would "reevaluate" its regulations concerning nutrient content claims in light of "evolving nutrition research," the plaintiffs dismissed their "healthy" claims but continued to maintain that KIND falsely labeled its products as "all natural" and "non GMO."  Last week, however, the court issued an order disposing of both of those claims.  The court first stayed the "all natural" claims under the “primary jurisdiction” doctrine.  Relying primarily on a recent line of Ninth Circuit cases, the court concluded that the case should be stayed in deference to the FDA's discretion and superior technical expertise and emphasized the benefit of "harmoniz[ing] court rulings" about the meaning of the term "natural."   The court then dismissed the plaintiffs’ claims that KIND falsely labeled its products as “non-GMO.”   Although the court acknowledged that “non-GMO” claims were “potentially cognizable,” it held that the plaintiffs’ claims were insufficiently pled:  while the plaintiffs alleged that some KIND products had tested positive for GMOs and that the presence of certain ingredients (such as corn) made it likely that the products contained GMOs, the court concluded that the plaintiffs’ “failure to specify which products included GMOs and whether they actually purchased those products renders their allegations insufficient.” 

In re:  KIND LLC “Healthy & All Natural” Litigation, --- F. Supp. 3d ----, 2016 WL 4991471 (S.D.N.Y. Sept. 15, 2016). 


Gulf Coast Flood Update: Insurance Coverage Considerations

Flood_337x220By Brian S. Scarbrough and Jan A. Larson

As reports concerning the nature and extent of the flood-related damage along the Gulf Coast continue to develop, commercial property damage and business interruption insurance will be critical to the effort to recover and rebuild.  Our insurance work in connection with other disasters, including the 2011 Japanese earthquake and tsunami; Thai floods; Hurricanes Katrina and Ike; and Superstorm Sandy can help companies implement strategies now that increase their ability to later maximize their insurance recoveries.

As you look to protect your business interests, the details below should help you to assess and address the implications and coverage considerations related to the ongoing and historic flooding along the Gulf Coast.    

Identify potentially applicable types of coverage.

  • Commercial property policies are designed to cover both (1) property damage losses and (2) business interruption losses, including specialized coverages related to lost business income:
    • Ingress/Egress (e.g., shipments or employees unable to reach facility due to storm-related damage)
    • Civil Authority (e.g., access to facility or operations of facility prohibited by order of a civil authority)
    • Service Interruption (e.g., a power outage that prevents normal operations)
    • Extra Expense (e.g., additional costs in excess of normal operating expenses incurred to continue operations while damaged property is repaired or replaced)
    • Debris Removal (e.g., costs to clean up storm-related damage)
    • Contingent Business Interruption (e.g., lost income/profits resulting from an interruption to the business of a direct or indirect supplier or customer)

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FCC Clarifies Application of TCPA to Government Contractors

Fashion-person-woman-handBy Alexander M. Smith

In response to a petition filed by Broadnet Teleservices LLC and two other government contractors, the FCC issued a ruling on July 5, 2016 clarifying that “the TCPA does not apply to calls made by or on behalf of the federal government.”  Drawing upon a longstanding presumption that the statutory term “person” does not apply to governmental entities, the FCC first concluded that the TCPA’s prohibitions on automated phone calls—which apply only to “persons”—do not apply to the federal government itself.  Acknowledging that the Supreme Court rejected categorical TCPA immunity for government contractors this year in Campbell-Ewald Co. v. Gomez, the FCC nonetheless concluded that federal contractors “enjoy derivative immunity to the extent they act under authority ‘validly conferred’ by the federal government and in accord with the government’s instructions.”   

As Law360 reports, some consumer advocates have urged the FCC to reconsider its position.  The National Consumer Law Center filed a brief last month on behalf of dozens of legal aid and consumer advocacy organization urging the FCC to stay and reconsider its ruling.  Consumers Union (the advocacy arm of Consumer Reports) submitted a letter to the FCC last week in which it argued that this ruling “will lead to an increase in unwanted calls to consumers from federal government contractors,” which are “costly for many consumers” and “compromise their privacy.”  The FCC has not yet responded.


Last Call for “Craft Beer” Lawsuit

Beer2By Alexander M. Smith

Last week, Judge Gonzalo Curiel of the Southern District of California dismissed a lawsuit alleging that MillerCoors falsely marketed Blue Moon as “craft beer” and denied the plaintiffs leave to amend.  The plaintiffs alleged that Blue Moon was not a “craft beer” because it did not satisfy either the dictionary definition of a “craft beer” or the definition used by the Brewers Association, a trade association of independent brewers.  The plaintiffs then alleged that MillerCoors deceived consumers into believing Blue Moon was a craft beer by concealing that it was manufactured by MillerCoors, creating advertisements that suggested that it was brewed in a small brewery, requiring that it be stocked with other “craft beers” in stores and restaurants, and charging a premium price to suggest that it was of higher quality than MillerCoors’ other offerings.  

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