By Alexander M. Smith

This morning, the Supreme Court held 8-0 in Microsoft Corp. v. Baker that the named plaintiffs in a class action cannot appeal a denial of class certification (or the granting of a motion to strike class allegations) by voluntarily dismissing their claims.  A five-Justice majority held that this tactic was barred because a voluntary dismissal under these circumstances does not constitute a “final order” under 28 U.S.C. § 1291, while three Justices concurred in the judgment on the basis that such a voluntary dismissal extinguishes the adversity necessary to give rise to Article III standing.  (The Consumer Law Roundup has covered Baker in three previous posts.) 

In Baker, the plaintiffs had filed a putative class action against Microsoft alleging that a defect in the Xbox 360 resulted in scratched discs.  After the district court granted Microsoft’s motion to strike the plaintiffs’ class allegations, the named plaintiffs voluntarily dismissed their claims against Microsoft so that there would be a “final decision” from which they could appeal the denial of class certification.  The Ninth Circuit held, inter alia, that a stipulated dismissal of an individual claim is an adverse and appealable final judgment.  The Supreme Court granted certiorari to address this jurisdictional issue and subsequently reversed.

By Reena R. Bajowala

A 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). 

By 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.”

By Jill M. Hutchison

The Supreme Court recently declined to wade into a developing circuit split on the question of just what constitutes an ascertainable class under Fed. R. Civ. P. 23(b)(3) class. In the case of many consumer products, particularly those that are consumable, like food, cosmetics, and supplements, the defendant is unlikely to have records to document individual customers’ purchases, and the consumers are unlikely to have kept receipts. In such cases, some court have permitted class members to self-identify by affidavit and have held that this identification method is acceptable to create an ascertainable class.

By Jeremy M. Creelan

On January 29, 2016, U.S. District Judge David Hurd in the Northern District of New York ordered Greek Yogurt maker Chobani to end its recent advertisements negatively referencing the products of its biggest competitors, Yoplait (General Mills) and Dannon.

Chobani’s series of advertisements that began running in early January 2016 advertised their “Chobani Simply 100 Greek Yogurt,” which has “100 calories per serving with no preservatives or artificial ingredients.” In one of the advertisements, a woman reads the ingredients on a cup of Yoplait Greek 100 Yogurt while a voice is heard saying, "Potassium sorbate? Really? That stuff is used to kill bugs." In another advertisement, a woman throws a container of Dannon’s Light and Fit into a trash can as a voiceover questions, "Sucralose? Why? That stuff has chlorine added to it."  As found by the court, sucralose is an artificial sweetener and potassium sorbate is preservative that prevents yeast and mold growth; both are used in many food products and they have been found safe by the federal government.

By Mara Ludmer and Kelly M. Morrison

The Ninth Circuit’s decision in Mazza v. American Honda appeared to be an instant game changer, providing defendants across the Circuit with an easy way to oppose certification of nationwide classes seeking remedies under California consumer protection laws.  The plaintiffs in Mazza alleged that Honda had misrepresented the safety features of its Acura vehicles in brochures, television commercials, and print advertisements.  On appeal, the Ninth Circuit held that the district court had “erroneously concluded that California law could be applied to the entire nationwide class.”  And “[b]ecause the law of multiple jurisdictions” would apply to “any nationwide class of purchasers,” the Ninth Circuit held that “variances in state law [would] overwhelm common issues and preclude predominance for a single nationwide class.” 

By Howard S. Suskin

The U.S. Supreme Court has granted certiorari to address whether a federal court of appeals has jurisdiction under both Article III and 28 U.S.C. §1291 to review an order denying class certification after the named plaintiffs voluntarily dismiss their individual claims with prejudice.   Microsoft Corp. v. Baker, No. 15-457 (cert. granted Jan. 15, 2016).  In the proceedings below, the Ninth Circuit held that a stipulated dismissal of an individual claim is an adverse and appealable final judgment and that the plaintiffs did not lose their ability to appeal from a stipulated dismissal with prejudice of their lawsuit and from the order striking their class allegations.  A link to the Ninth Circuit’s opinion is available here.

By Jeremy M. Creelan

During its next term, the Supreme Court will consider whether class action defendants can end the cases against them simply by offering complete relief to individually named plaintiffs and offering nothing to the classes those plaintiffs purport to represent.[1]

The legal issue involves the intersection of two Federal Rules of Civil Procedure, namely the effect that Rule 68—which allows defendants to serve offers of judgment on specified terms and requires plaintiffs to respond to them—has on Rule 23, which governs class actions.  Some circuit courts have held that when a Rule 68 offer of judgment offers a plaintiff all the relief available to him, he can have no further interest in litigation and his legal claims are moot.  In the class action context, at least one circuit has further held that when a defendant makes a complete offer of judgment under Rule 68 before the plaintiff has moved for class certification, the plaintiff can have no interest in representing the class.  Under this analysis, the plaintiff’s class claims are moot in addition to his or her individual claims. 

By Steven M. Siros

Read the latest about the Study that Purports to Find Carbon Nanotubes in Children's Lungs on Jenner & Block's Corporate Environmental Lawyer blog.

By Howard S. Suskin

A contract provision stating that the parties expressly agreed not to challenge the validity of their arbitration or an arbitration award was held to be contrary to public policy and void and unenforceable.  Atlanta Flooring Design Centers, Inc. v. R.G. Williams Construction, Inc., A15A0664 (Ga. Ct. App., 2d Div., July 16, 2015).  The contract stated: “The award rendered by the arbitrator(s) shall be final and binding on the parties and judgment upon the award may be entered in any court of competent jurisdiction.  Contractor and Subcontractor hereby expressly agree not to challenge the validity of the arbitration or the award.”  Applying Georgia law, and relying on cases decided under the Federal Arbitration Act, the court concluded that the statutory grounds for vacating an arbitration award may not be waived or eliminated by contract.  The court reasoned that the statutory grounds for a court to review and vacate an award demonstrate Congressional intent to provide a minimum level of due process for parties to an arbitration.