false advertising consumer class actions: navigating

False Advertising Consumer Class Actions:

Navigating Complex Issues of Standing,

Damages, CAFA Removal and More Plaintiff and Defense Strategies for Class Certification, Summary Judgment, Settlement and Trial

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TUESDAY, JULY 8, 2014

Presenting a live 90-minute webinar with interactive Q&A

Wendy R. Fleishman, Partner, Lieff Cabraser Heimann & Bernstein, New York

Rachel Geman, Partner, Lieff Cabraser Heimann & Bernstein, New York

Robert J. Herrington, Co-Chair, National Products Liability and Mass Torts Practice,

Greenberg Traurig, Los Angeles

Katherine Murray, Of Counsel, Paul Hastings, Los Angeles

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Wendy R. Fleishman

[email protected]

Rachel Geman

[email protected]

Lieff Cabraser Heimann & Bernstein LLP

Developments in

Consumer Fraud Class Actions

July 8, 2014

mailto:[email protected]

mailto:[email protected]

6

Class Certification Update

Commonality/Predominance

One vital question under Fed. R. Civ. P. 23(b)(3) is whether “the questions of law or fact common to class members predominate over any questions affecting only individual members.”

Increased Scrutiny at Class Certification Stage

‒ Trend of increased scrutiny following the Supreme Court’s decision in

Wal-Mart, Inc. v. Dukes, 131 S. Ct. 2541(2011)

‒ Some opined or predicted that the Supreme Court’s decision in the Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) was another step in that direction.

‒ Certification required proof “that the plaintiffs will experience a common damage and that their claimed damages are not disparate.” In re: IKO Roofing Shingle Products Liab. Litig., MDL No., 2014 U.S. Dist. LEXIS 80243 at *9 (7th Cir. 2014).

One thing is relatively clear: It is no longer enough to identify common questions (even a lot of them). The focus is on whether there are common answers—or, more precisely, whether there are ways to answer the questions through common proof. In other words, what will a class trial look like?

‒ It should be noted that Courts have continued to reiterate, post-Dukes and post-Comcast, that not all questions need to be common. And that the presence of individual issues (or issues that require some individual proof) does not necessarily militate against class certification.

‒ Nevertheless, it is fair to say that Courts are looking more closely at commonality and predominance questions.

7

Seventh Circuit Addressed

Commonality

In In re IKO Roofing Shingles Products Liab. Litig., 2014 U.S.App. LEXIS 12684 (7th Cir. 2014), the Court clarified the issues.

If commonality of damages were required, it would be impossible to certify a class claim. Therefore, the Court explained that commonality of damages is not required.

Commonality of liability- must be demonstrated through common questions.

And, the district court should apply a central method of determining damages

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Comcast (2013)—Antitrust case. Supreme Court held that the predominance requirement of Rule 23(b)(3) was not satisfied.

The plaintiffs in Comcast had presented four theories of impact/harm from defendant’s alleged misconduct. The district court rejected three of the four theories, but found the plaintiffs could go forward on the fourth theory and certified the class.

The Supreme Court reversed. The plaintiff’s proposed damages methodology admittedly did not isolate the harm under the one theory that the district court permitted to go forward. Instead, it measured harm under all four of the theories (i.e., including the three that the district court rejected). Plaintiff presented no way to measure damages for the one theory that was going forward.

9



Some class practitioners predicted that Comcast would dramatically change the way courts analyze and apply the predominance requirement.

Are they correct? Too early to tell for sure, but the early returns in the past year or so provide some indications. ‒ Courts have been citing Comcast, like they cited Dukes, as a basis for

looking more closely at damages and other traditionally “merits” issues at the class certification stage.

‒ However, courts have generally been fairly reserved in interpreting the substantive reach of Comcast (distinguishing the somewhat unique circumstances of that case—a damages model that admittedly did not match the theory of liability). In many ways Comcast really just reflected the current state of the law, post-Dukes, rather than representing a significant shift in the law. The majority in Comcast appears to have viewed it that way

The minority in Comcast were concerned that it could be construed otherwise.

10


Commonality/Predominance Post-Comcast case law shows that:

‒ The pendulum may be swinging back, at least a little, in the direction of being more permissive on class certification; and

‒ Predominance is not becoming the big obstacle that some thought it would be post-Comcast

Washer cases in the Sixth and Seventh Circuit (cert denied in both):

‒ Butler v. Sears, Roebuck & Co., 727 F.3d 796 (7th Cir. 2013) (Posner, J.), cert. denied, 2014 U.S. LEXIS 1507 (Feb. 24, 2014) (reversing partial denial, affirming partial grant)

Predominance can be satisfied even where damages requires individualized analysis.

Predominance is not about “counting noses”---counting number of common and individual issues regardless of their relative importance.

If common liability issues predominate, that can be sufficient.

“If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, in settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification. Otherwise defendants would be able to escape liability for tortious harms of enormous aggregate magnitude but so widely distributed as not to be remediable in individual suits.”

‒ Glazer v. Whirlpool Corp., 722 F.3d 838 (6th Cir. 2013), cert. denied, 2014 U.S. LEXIS 1484 (Feb. 24, 2014) (affirming grant)

Cited the Supreme Court’s decision in Amgen (2013) to reiterate that, under the predominance requirement: “A plaintiff class need not prove that each element of a claim can be established by classwide proof: What the rule does require is that common questions 'predominate over any questions affecting only individual [class] members.”

Found that common liability questions predominated over any individual questions.

‒ Leyva v. Medline Indus., 716 F.3d 510, 514 (9th Cir. 2013)

Reiterates that at least in the Ninth Circuit, it is still the law that “the presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3).”

11


Ascertainability

Some recent case law regarding this de-facto requirement for class certification

In re POM Wonderful, LLC, 2014 U.S. Dist. LEXIS 40415 (C.D. Cal. Mar. 25, 2014)

‒ Plaintiff alleged false advertising regarding POM juice drinks. Ads asserted that the drinks had various health benefits and that research had been done to back that up. Plaintiff alleged that was false.

‒ Plaintiff did not purport to have a way to determine who specifically was in the class. Every consumer was a potential class member.

‒ Court noted that there was a split in the 9th Cir. on whether a case of this sort could be certified, and that the result depends in significant part on the facts of the case. In the case at hand, the court determined that that it fell on the “unascertainable” end of the spectrum because: Product at issue was inexpensive (couple of dollars) and customers not likely to have receipts.

The representations were not included on the product’s label, so no way to know who was exposed.

‒ Court decertified the class for this and other reasons.

‒ Probably has limited application outside of small consumer product context, since in most other instances, customers are identifiable through purchase records.

12


Ascertainability On the other end of the spectrum, from the same district, is Forcellati v. Hyland's, Inc., 2014 U.S.

Dist. LEXIS 50600 (C.D. Cal. Apr. 9, 2014) ‒ Involved, in many ways, similar circumstances as the POM case. Plaintiffs alleged defendants made false

representations in connection with their children’s cold and flu products. Claims brought on behalf of all purchasers of those products.

‒ Court found the class sufficiently ascertainable because the definition was objective.

‒ Court found that Defendants’ due process interest was limited to its total liability, which was based on its total sales, which was known. Defendants had no due process interest in how any judgment would be allocated among class members.

“While it is undeniable that there is no surefire method to confirm on a class-wide basis whether class members actually purchased one of Defendants' products, this ascertainability problem is of no material relevance to Defendants, as it does not affect their bottom-line in any cognizable way, and there is no reason it should inure to Defendants' benefit.”

‒ Court rejected many of the same arguments that were accepted in POM. Court found that “the fact that particular persons may make false claims of membership does not invalidate the objective criteria used to determine inclusion.”

‒ Court cited other cases that have gone the same way: L'Oreal, 2013 U.S. Dist. LEXIS 94031, 2013 WL 3353857, at *18; Astiana v. Kashi Co., 291 F.R.D. 493, 500 (S.D. Cal. July 30, 2013)

Kristensen v. Credit Payment Servs., 2014 U.S. Dist. LEXIS 41696 (D. Nev. Mar. 26, 2014) ‒ “Here, objective criteria determine who are class members—all those whom were sent a text message from one

of three phone numbers during an approximately one-month period. Data from T-Mobile calling lists can be used to identify the individual class members. Prospective plaintiffs can readily identify themselves as class members based on receipt of the text message. “

‒ Two considerations: (1) Can the class members be identified?; and (2) Can class members identify themselves?

13


FJC Checklist

Judges’ Class Action Notice and Claims Process Checklist and

Plain Language Guide—latest updated was in 2010.

We’re seeing Courts increasingly referencing and using the

checklist.

Class practitioners should be referencing the checklist when

they design notice programs and claims processes.

Not only will these issues come up in terms of settlement

approval, but for the most part the items on the checklist make

good logical sense. Use this as a roadmap!

The checklist is publically available on the FJC’s website.

14


FJC Checklist

Areas of specific focus in recent cases:

‒ Balance between cost effectiveness of a notice program and the

reach of notice.

Checklist and courts focused on ensuring that the notice plan isn’t being

driven primarily by cost concerns, while still recognizing that class

members’ interests are not served by spending lots of money on forms of

notice that only marginally increase reach.

Geographic reach of notice.

Need for alternative languages? Depends on class.

Lesson: More important than ever to make sure you are hiring a reputable

administrator who can not only get the job done, but can serve as a trusted

authority regarding the effectiveness of your proposed program (e.g., file a

declaration explaining and supporting the program)

15


FJC Checklist

Areas of Specific Court focus in recent cases:

‒ Language of Notice—should be easy to understand, avoid

leagalese.

More and more, we’re seeing Courts going through the notices,

literally, line-by-line.

Huge benefit to both parties because it gets everyone on the same page

and reduces any risk of valid objections regarding the notice language

and methods.

16


FJC Checklist

Areas of Specific Court focus in recent cases:

‒ Claims Processes

First item on this section of checklist: Is a claims process necessary?

Courts now typically ask this question when there is a claims process.

Answer is usually some combination of: (a) realities of negotiation;

and (b) direct payment impractical b/c of lack of info or for another

reason.

Still rare for a Court to reject claims process outright, particularly in

cases that have been litigated for some time.

Nevertheless, be prepared to explain why a claims process is

necessary.

17

Comments re Increased Scrutiny Definitely seeing increased scrutiny, particularly at the preliminary approval

stage. No rubber stamping. Courts increasingly holding preliminary approval hearings, which did not used to be the case. ‒ Recent Citibank case

‒ A false advertising case where the court held multiple hearings and required tweaks before granting approval.

Overall, this is probably a good thing from the Class Counsel perspective b/c it allows parties to fix any problems before notice goes out ($$$). Better to find out the Court has an issue with something at preliminary approval than final approval.

Good for notice, claims and other procedural stuff, since the Court has in large part signed off on the process at prelim approval.

Modern procedure—prelim approval hearings—allow you to get insight into Court’s thinking about the case and the settlement at earlier stage.

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Comments re Increased Scrutiny

Proliferation of professional objectors is affecting both preliminary and final approval. ‒ Parties using the Court’s increased scrutiny at preliminary approval to get

a more bullet-proof notice process and to be more comfortable that the Court is generally comfortable with your settlement, making adjustments that the Court may think are necessary.

‒ Requiring the Court to spend time at final approval considering objections and establishing a record regarding that consideration for appeal purposes.

‒ Overall, professional objectors are a bad thing and contribute little that is constructive.

‒ Right to object is an important right and keeps the parties and Court in check and focused on the right things.

‒ Ability of professional objectors to hold up settlements on appeal a problem with no obvious solution.

Increased Focus on Good Faith

and Fair Dealing Claims

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Overview of Topics

Increased Focus on Implied Covenant of Good Faith and

Fair Dealing Claims.

Recent Decisions Affecting the Use of Cy Pres

Distributions.

(If Time) Direction of Practice Following Concepcion

21

Background and Context

Very old common law principle, been around for

centuries: Implied in every contract is the obligation to

perform in good faith.

Minor Variation in Application Under Various States’

Laws.

‒ Party to contract cannot exercise contractual discretion in a

manner that would frustrate the reasonable expectations of

the other party.

‒ Party to contract cannot perform in a manner that would

deny the other party the fruits of the bargain.

‒ Party may not perform in “bad faith”

22

Background and Context

(cont’d)

The implied covenant has traditionally been utilized outside of the class context—i.e., in individual contract disputes.

However, class practitioners are increasingly bringing class claims under the implied covenant, particularly in consumer class actions.

Two things have driven this trend:

‒ Increased judicial recognition that the implied covenant is an appropriate tool for class cases, because the fundamental question for these claims is often subject to common evaluation.

Courts have generally applied an objective standard for determining the reasonable expectations of the parties to a contract.

‒ Increased use by businesses, over the past several years, of form consumer contracts (T&Cs) that provide the business with considerable discretion to perform and/or change the terms of the contract.

23

Examples

In re Chase Bank “Check Loans” Litigation

Overdraft Fee Litigation

24

Chase “Check Loans”

Overview

Several federal actions coordinated in a Multi-District Litigation before Judge Chesney of ND Cal.

Nationwide class consisting of approximately 1 million Chase credit cardholders who accepted balance transfer offers whereby low APRs fixed for “life of the loan” (“LOL”)

Allegation was that Chase acted improperly when it selected certain of these LOL cardholders for a Change-in-Terms that involved increasing their minimum monthly payment requirement from 2% to 5% of balance.

Claims initially alleged included breach of contract, breach of implied covenant, unjust enrichment, unconscionability, TILA, and state statutory claims.

All claims dismissed besides implied covenant claim

25

Chase “Check Loans”

Why the Implied Covenant ?

Form Cardholder Agreement provided Chase with broad discretion to change the terms of the loans, essentially for any reason.

Court interpreted that express broad discretion as foreclosing a straight breach of contract claim.

But, the Court still found that the implied covenant applied, and limited Chase’s discretion.

‒ Chase is not permitted to exercise its discretion to change terms in a manner that would frustrate the reasonable expectations of the cardholders.

‒ Chase is not permitted to exercise its discretion in a manner that would deprive cardholders of the benefit of the bargain.

Big fight at class certification was whether the standard of determining cardholders’ expectations was a subjective or objective standard. Court determined that an objective standard applied, and certified the class.

Expert battle focused on what cardholders could reasonably expect under the circumstances, with the parties obviously disagreeing.

Case settled on the eve of trial.

26

Overdraft Cases

Overview

MDL--Cases filed against more than 40 banks.

Cases generally challenged banks’ practices regarding the order in which they posted debit card transactions, and the representations they made to customers about the same.

Allegation was that the banks abused their discretion under their form account agreements to determine the posting order, when they posted transactions in high-to-low order, resulting in an inflated number of overdrafts (account drained more quickly)

Some cases also included separate allegation that the banks misrepresented to customers that their debit card transactions would be posted chronologically rather than high-to-low.

27

Overdraft Cases

Why the Implied Covenant?

Again, as in the Chase “Check Loans” case, you had standardized consumer agreements that provided one party with discretion and control over how things would work—here how transactions would be posted.

In most cases, the way the banks posted transactions was not a literal breach of contract, since the contract said the bank had discretion to do it any way they wanted to do it.

But the courts have generally found that the banks’ discretion was, again, subject to the implied covenant.

Again, the questions are: (a) what were the reasonable expectations of the customers; and (b) did the bank act in a manner that was inconsistent with that.

Note: Some of the cases involved separate claims of misrepresentations about the posting order, in addition to the good faith and fair dealing claims

28

Implied Covenant claims

I’m not going to go into every case, but there have been a

number of other cases filed in the past couple of years—

not just in the banking and finance context—that have

drawn on these same principles.

‒ Consumer products cases

‒ Telecommunications and mobile devices

‒ Basically, any time there is a form contract with discretion

provided to a party.

I would expect this trend to continue.

Lessons re Cy Pres

30

Cy Pres Distribution

Overview

What do we do with all of this leftover money? ‒ Residuals from settlements (e.g., uncashed checks, unclaimed funds)

‒ Class Judgments that can’t be entirely distributed to class members (e.g., because they cannot be located)

Not unique to consumer class actions, but something that definitely comes up more there than in any other context, due to the nature of the classes and potential size of the recoveries. (There can be millions of dollars left over)

One of the ways that parties have traditionally dealt with this issue is by agreeing to a cy pres distribution of leftover funds.

Common recipients have historically been, e.g., ‒ Legal Services and similar organizations that help those with limited

resources get legal assistance.

‒ Non-Profit Organizations like the BASF

31

Cy Pres

Be Careful

Class practitioners need to be aware of recent case law—

particularly in the Ninth Circuit—regarding the use of cy

pres distributions.

Failure to be mindful of these developments could cause

an otherwise good settlement to be compromised.

32

Cy Pres

Basic Principles

The cases in this area generally start from the non-

controversial principle that class settlement proceeds

should benefit the class members.

Courts are increasingly relying on this principle in

evaluating how to deal with leftover funds.

The concept: residual funds should be directed in a

manner that benefits the class.

In practice: what that means, and how that principle is

applied, varies by circumstances and, to some extent,

jurisdiction.

33

Cy Pres

Basic Principles (cont’d)

Several courts have cited favorably ALI guidelines

regarding this issue, which generally suggest that:

‒ Residual funds should presumptively be distributed to class

members as part of a secondary distribution, unless the

residual amount is too small to make a secondary distribution

practicable or there are other reasons that a secondary

distribution would be unfair.

‒ Courts citing the guidelines include the First Circuit (Lupron

Marketing) and Fifth Circuit (Klier v. ELF).

34

Cy Pres

Basic Principles (contd’)

Some other courts have declined to adopt the ALI

Guidelines as a one-size-fits-all approach:

‒ E.g., Third Circuit in Baby Products Antitrust Litigation (3d

Cir. Feb. 19, 2013)

Agreeing with general principle that “distributions to the class are

preferred to cy pres distributions.”

But finding that ALI Guidelines do not dictate the only circumstances

when a cy pres distribution may be appropriate.

Finding that the reasonableness of a cy pres distribution should be

evaluated under the same standard as other settlement terms—fair,

reasonable, and adequate under the circumstances.

35

Cy Pres

Lessons

While there has not been total consistency on this issue across the federal court system, certain things are clear: ‒ First, courts are scrutinizing cy pres provisions (and the use of

residual funds generally) in a way they have never done in the past.

‒ Second, there can be very bad consequences if the cy pres provisions in your settlement are found to be inappropriate or even less than ideal. So you need to give these provisions great attention. Both: in structuring the distribution of residual funds, generally; and

Identifying any cy pres recipients and even the purposes such recipients can use the money for.

‒ Third, there are some fairly consistent themes and lessons that can be taken from recent case law that will help you avoid the biggest pitfalls:

36

Cy Pres

Lesson 1

Your settlement should at least contemplate the possibility of a secondary distribution, no matter what you expect the residual to be. ‒ Best not to just say all residual will go to cy pres no matter what (even

though the parties, of course, would be able to go to the court and propose a secondary distribution if the residual ends up being higher than expected).

‒ Can provide for alternative scenarios in advance based on residual amount—e.g., secondary distribution if there is more than $X, cy pres if there is less than $X.

‒ Or, can provide for procedure for parties and court to evaluate, later, whether the actual residual amount is sufficient to justify a secondary distribution.

‒ What residual amount is sufficient will depend on the circumstances, but: If everyone would get $1, no make sense.

If cost of administering second distribution disproportionate to amounts that would be distributed, no make sense.

37

Cy Pres

Lesson 2

You need to consider whether the initial distribution to class members will already fully compensate class members for their injuries. ‒ Not generally the case, since most consumer class settlements

represent some kind of compromise.

‒ Strange as it sounds, even though secondary distribution means more money for class members, several courts (and the ALI Guidelines) seem to favor cy pres over secondary distribution where a second dist. would result in a windfall to some class members. First Circuit (Lupron Marketing)—approved cy pres where all class

claimants received a “reasonable estimate” of alleged damages.

‒ Open question as to whether “full value” means full amount of alleged damages or the value of the release provided, as determined by the parties in the settlement (Baby Products)

38

Cy Pres

Lesson 3

You should identify the potential cy pres recipients in the

settlement agreement and, if possible, in the class notice.

‒ Arguably, the Ninth Circuit in Kellogg (2012) created a new rule

in this Circuit that the cy pres recipients need to be identified in

advance of the class member objection deadline.

‒ But see Third Circuit in Baby Products (2013)—rejecting the

argument that the notice was insufficient, raising the possibility

that class members could object, later, when the recipients were

identified to the Court.

‒ Either way, the smart and safe play is to identify the recipients at

the front end.

39

Cy Pres

Lesson 4

Be careful in selecting the cy pres recipients. ‒ Courts are increasingly evaluating the “nexus” between the claims

in the case and the recipient. Idea is that there needs to be a sufficient “nexus” to ensure that cy pres

distributions are “benefiting” the class. [Some critics say it’s a fiction?]

E.g. Ninth Circuit in Kellogg (2012)(rejecting provision directing funds to unknown charities for use in “feeding the hungry” as insufficiently related to false labeling claims).

E.g., Ninth Circuit in Nahhsin v. AOL (2012) (rejecting two local charities where class members were spread across the country, and rejecting a third charity that lacked a sufficient substantive nexus).

‒ Need to give thought to both: (a) the nature of the charity and how it relates to the substantive claims in the case; and (b) the geographic scope of the class and the geographic nature of the potential recipient.

40

Cy Pres

Lesson 5

You should also consider specifying what the recipient

must use the funds for.

‒ This is best way to ensure a sufficient “nexus”

‒ Without this, the cy pres award could be vulnerable even if

you have seemingly selected a recipient with a strong fit to

the claims.

www.paulhastings.com ©2014 Paul Hastings LLP

False Advertising Class Actions

July 8, 2014

Katherine F. Murray

[email protected]


Defeating Class Certification

Class certification in false advertising cases can be defeated in several ways:

Challenge consumers’ exposure:

• Solomon v. Bell Atl. Corp., 777 N.Y.S.2d 50, 53 (2004) (reversing class certification of NY GBL Section

350 claim because, inter alia, individual issues would predominate regarding which, if any,

advertisements the class members saw and whether they were reasonably misled by such

advertisements).

• Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014) (“Because the contracts used by

Home Depot at different times contained distinct terms, the question of whether a material

misrepresentation was made to the entire class requires an individualized determination that in our

view the district court reasonably found predominates over any common questions, thereby compelling

us to affirm its dismissal of the CLRA claim for the primary class.”).

Challenge consumers’ purchasing behavior/decisions:

• Caldera v. J.M. Smucker Co., 2014 U.S. Dist. LEXIS 53912 (C.D. Cal. Apr. 15, 2014) (finding no

predominance where, “[i]n reality, the true value of the products to consumers likely varies depending

on individual consumer’s motivation for purchasing the products at issue.”).

• Algarin v. Maybelline, LLC, 2014 U.S. Dist. LEXIS 65173 (S.D. Cal. May 12, 2014) (holding, as to

commonality under Rule 23(a)(2), that “given the persuasive evidence presented on consumer

expectations, the varying factors that influence purchasing decision[s], and consumer satisfaction, the

Court finds that Plaintiffs have also failed to demonstrate that the elements of materiality and reliance

are subject to common proof.”).

• Ackerman v. Coca-Cola Co., 2013 U.S. Dist. LEXIS 184232 (E.D.N.Y. July 18, 2013) (denying class

certification under NY GBL Section 349 where plaintiffs failed to offer “a suitable methodology or

formula for establishing causation and injury on a class-wide basis.”).

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Challenge typicality. The named plaintiff may have experiences or unique

defenses that are not typical of the class she or he seeks to represent:

• “‘The purpose of the typicality requirement is to assure that the interest of the named representative

aligns with the interests of the class.’” Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1171

(9th Cir. 2010).

• Jones v. ConAgra Foods, Inc., 2014 U.S. Dist. LEXIS 81292 (N.D. Cal. June 13, 2014) (plaintiff was

atypical of class of consumers who purchased product based on ingredient list where she testified at

deposition that she had not read the ingredient list; another plaintiff was atypical where she testified

that the statement she relied on was not misleading).

• However, the fact that the named plaintiff did not purchase every product at issue may not defeat

typicality if the alleged misrepresentations or omissions apply uniformly across the different product

types, and plaintiff purchased at least one of those products. See, e.g., Khoday v. Symantec Corp.,

2014 U.S. Dist. LEXIS 43315 (D. Minn. Mar. 31, 2014).

Challenge the named plaintiff. She or he may be inadequate because:

• She or he threw away the product at issue. See, e.g., Falcon v. Phillips Elecs. N. Am. Corp., 304 Fed.

App’x 896 (2d Cir. 2008);

• She or he did not sign all of the contracts he wants to put at issue. See, e.g., Berger v. Home Depot

USA, Inc., 741 F.3d 1061 (9th Cir. Feb. 3, 2014); or

• The class representative has too close a relationship with class counsel. See, e.g., Drimmer v. WD-40

Co., 343 Fed. App’x 219, 221 (9th Cir. 2009).

• The class representative delayed in moving for class certification. See, e.g., Grandson v. Univ. of

Minn., 272 F.3d 568, 574 (8th Cir. 2001) (holding that the district court did not abuse its discretion in

striking plaintiffs’ class allegations because they provided no credible excuse for their failure to timely

file a class certification motion or request for an extension before the deadline).

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Challenge ascertainability. How are Plaintiffs going to show who is in their class?

• Carrera v. Bayer Corp., 727 F.3d 300, 307 (3d Cir. 2013) (“[a]scertainability provides due process by

requiring that a defendant be able to test the reliability of the evidence submitted to prove class

membership.”).

• Karhu v. Vital Pharms., Inc., 2014 U.S. Dist. LEXIS 26756 (S.D. Fla. Mar. 3, 2014) (a bottle of

Meltdown is a relatively small purchase compared with, for example, a car or a major appliance.

Because purchasers are less likely to retain receipts or other records of minor purchases, courts have

been reluctant to rely on those proofs to ascertain the identities of class members. . . . Nor will the

Court trust individuals to identify themselves as class members through the submission of affidavits.

Accepting affidavits of Meltdown purchases without verification would deprive [Defendant] of its due

process rights to challenge the claims of each putative class member”).

• In re POM Wonderful LLC Mktg. & Sales Practices Litig., 2014 U.S. Dist. LEXIS 40415

(C.D. Cal. Mar. 25, 2014) (“In situations where purported class members purchase an inexpensive

product for a variety of reasons, and are unlikely to retain receipts or other transaction records, class

actions may present such daunting administrative challenges that class treatment is not feasible.”).

• Sethavanish v. ZonePerfect Nutrition Co., 2014 U.S. Dist. LEXIS 18600, at *17-18 (N.D. Cal. Feb. 13,

2014) (denying class certification where plaintiff failed to present any method for determining who

purchased ZonePerfect bars).

• Jones v. ConAgra Foods, Inc., 2014 U.S. Dist. LEXIS 81292 (N.D. Cal. June 13, 2014) (“[t]he variety

of products and of labels, combined with the lack of receipts and the low cost of the purchases, means

that consumers are unlikely to accurately self-identify.”).

44



However, some courts have deemed self-identification to be sufficient to render a

class ascertainable:

• Bush v. Calloway Consol. Grp. River City, Inc., 2012 U.S. Dist. LEXIS 40450 (M.D. Fla.

Mar. 26, 2012) (where defendant maintained an online database and credit card log listing

customer receipts).

• Parkinson v. Hyundai Motor Am., 258 F.R.D. 580 (C.D. Cal. 2008) (where the product at

issue was a memorable big-ticket item).

• Galvan v. KDI Distribution Inc., 2011 U.S. Dist. LEXIS 127602 (C.D. Cal. Oct. 25, 2011)

(where the defendant would have access to a master list of consumers or retailers who dealt

with the items at issue).

Other courts have held that the ascertainability requirement is met as long as the

class can be defined through objective criteria, reasoning that to hold otherwise would

render a vast number of consumer class actions dead on arrival:

• McCrary v. Elations Co., LLC, 2014 U.S. Dist. LEXIS 8443 (C.D. Cal. Jan. 13, 2014)

(“pursuant to Carerra in any case where the consumer does not have a verifiable record of its

purchase, such as a receipt, and the manufacturer or seller does not keep a record of

buyers, Carerra prohibits certification of the class. While this may now be the law in the

Third Circuit, it is not currently the law in the Ninth Circuit.”).

• Ries v. Ariz. Bevs. United States Llc, Hornell Brewing Co., 287 F.R.D. 523, 535 (N.D. Cal.

2012) (concluding that lack of receipts for iced tea purchases cannot be dispositive, or “there

would be no such thing as a consumer class action.”).

45



Challenge Plaintiff’s proposed method for calculating classwide damages under

Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013):

• Supreme Court considered whether class certification was appropriate under Rule 23(b)(3) where the district

court had accepted only one of plaintiffs’ four theories of antitrust injury, but plaintiffs’ method of computing

damages did not differentiate between harm caused by the four forms of injury asserted by plaintiffs.

• The lower courts believed that this computation of damages was acceptable because there was no need for

the plaintiffs “to tie each theory of antitrust impact to a calculation of damages.” Id. at 1433.

• The Supreme Court rejected this reasoning because it ignored the principle that “[t]he first step in a

damages study is the translation of the legal theory of the harmful event into an analysis of the economic

impact of that event.” Id. at 1435.

• “Calculations need not be exact, but at the class-certification stage (as at trial), any model supporting a

plaintiff’s damages case must be consistent with its liability case, particularly with respect to the alleged

anticompetitive effect of the violation.” Id. at 1433.

• “[A] model purporting to serve as evidence of damages in this class action must measure only those

damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly

establish that damages are susceptible of measurement across the entire class for purposes of Rule

23(b)(3).” Id. at 1433.

• Justices Ginsburg and Breyer dissented, noting that the majority opinion “breaks no new ground on the

standard of certifying a class action under [Rule] 23(b)(3). . . . the decision should not be read to require, as

a prerequisite to certification, that damages attributable to a class-wide injury be measurable ‘on a class-

wide basis.’” Id. at 1433.

46



Post-Comcast, courts have denied class certification where there is no common

formula for determining damages:

• Guido v. L’Oréal USA, Inc., 2013 U.S. Dist. Lexis 94031 (C.D. Cal. July 1, 2013) ( “A

classwide method of awarding relief exists in this case if, in fact, the false advertising at issue

had a measurable impact on the market price of Serum. If it did, then common questions

regarding classwide relief predominate, because the critical inquiry is attaching a dollar value

to the impact of the false advertising.”).

• Lanovaz v. Twinings N. Am., 2014 U.S. Dist. LEXIS 57535 (N.D. Cal. Apr. 24, 2014) (denying

certification under Rule 23(b)(3) where plaintiff failed to “provide substantial evidence

showing the price premium attributable to [defendant’s] use of the [allegedly improper]

label.).

• In re POM Wonderful LLC Mktg. & Sales Practices Litig., 2014 U.S. Dist. LEXIS 40415 (C.D.

Cal. Mar. 25, 2014) (decertifying class where plaintiff’s price premium model simply

calculated what the price difference was, without tying that amount to a legal theory . . . .”).

• In re: Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244, 252 (D.C. Cir. Aug. 9, 2013)

“It is now indisputably the role of the district court to scrutinize the evidence before granting

certification, even when doing so ‘requires inquiry into the merits of the claim.’ [Comcast Corp.,] 133

S. Ct. at 1433. If the damages model cannot withstand this scrutiny then, that is not just a merits

issue. [Plaintiffs’ damages theories] are essential to the . . . claim [that] they can offer common

evidence of classwide injury. . . . No damages model, no predominance, no class certification.”

“The plaintiffs must also show that they can prove, through common evidence, that all class members

were in fact injured by the alleged conspiracy.”

47


However, Some Courts Have Turned To Rule

23(c)(4) To Limit The Application Of Comcast

Rule 23(c)(4): “Particular Issues. When appropriate, an action may be brought or maintained as

a class action with respect to particular issues.”

In re Motor Fuel, 292 F.R.D. 652, 674 (D. Kan. 2013):

• Consumers sought damages against motor fuel retailers who sold fuel without disclosing or adjusting for

effects of temperature on fuel. On class certification, Chevron argued that “plaintiffs’ claims require[d]

individualized proof based on the circumstances of each fill-up, including the temperature of the fuel,

whether the class member would have paid less or received more fuel for the same price . . . and whether

Chevron purchased fuel at wholesale on a temperature-adjusted basis at the time of each transaction.”

• The Court disagreed and certified a liability-only class under Rule 23(c)(4), thus “avoid[ing] any actual or

perceived conflict with Dukes [and Comcast].” Id. at 675.

Jacob v. Duane Reade, Inc., 293 F.R.D. 578, 589 (S.D.N.Y. 2013):

• “Nothing in Comcast, however, vitiates the longstanding principle in this Circuit that courts may certify a

class as to liability, but not damages, utilizing Rule 23(c)(4), so long as the proposed liability class meets the

requirements of Rule 23(a) and (b).”

The Supreme Court weighs in (kind of):

• Whirlpool Corp. v. Glazer, 133 S. Ct. 1722 (2013): Supreme Court remanded the Sixth Circuit’s certification

of a liability-only class in light of Comcast. On remand, the Sixth Circuit held its ground: “Where

determinations on liability and damages have been bifurcated, see Fed. R. Civ. P. 23(c)(4), the decision in

Comcast ‒– to reject certification of a liability and damages class because plaintiffs failed to establish that

damages could be measured on a classwide basis — has limited application.” Glazer v. Whirlpool Corp.,

722 F.3d. 838, 861 (6th Cir. 2013). In Whirlpool Corp. v. Glazer, 134 S. Ct. 1277 (Feb. 24, 2014), the

Supreme Court denied petition for writ of certiorari, suggesting that liability-only classes may stick around for

a while. See also Sears, Roebuck & Co. v. Butler, 134 S. Ct. 1277 (2014).

48


Puffery As A Defense

What is Puffery? A statement regarding a product’s characteristics that is general,

unverifiable, and unlikely to induce consumer reliance.

• “Ultimately, the difference between a statement of fact and mere puffery rests in the

specificity or generality of the claim. ‘The common theme that seems to run through cases

considering puffery in a variety of contexts is that consumer reliance will be induced by

specific rather than general assertions.’” Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d

1038, 1053 (9th Cir. 2008), quoting Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv.,

911 F.2d at 245-46.

A puffery defense is usually asserted on a motion to dismiss. Defendant will argue

that the alleged misrepresentations are not actionable because they are mere puffery

as opposed to a statement of fact upon which a consumer would rely.

• Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 245 (9th Cir. 1990)

(“Advertising which merely states in general terms that one product is superior is not

actionable. However, misdescriptions of specific or absolute characteristics of a product are

actionable.”).

Courts analyzing whether a statement constitutes puffery examine whether the

statements are general assertions that say nothing about the specific characteristics

or components of the products or whether they are specific factual assertions.

49



Examples of puffery:

• “[N]o reasonable consumer would conclude, based on the presence of the word ‘essential’ in the

name ‘Splenda Essentials,’ that the Splenda products were essential to their diet.” Bronson v.

Johnson & Johnson, Inc., 2013 U.S. Dist. LEXIS 54029 (N.D. Cal. Apr. 16, 2013).

• “The company’s statements that expound its ‘commitment to . . . transparency,’ ‘supporting healthy

lifestyles,’ belief in ‘empowering consumers to support healthy lifestyles,’ or communicating

‘important details of our products’ . . . are better characterized as general goals and platitudes . . .

They provide no objective measure from which a reasonable person can gauge their truth or falsity.”

Lateef v. Pharmavite LLC, 2013 U.S. Dist. LEXIS 51457 (N.D. Ill. Apr. 10, 2013).

• “Statements that Clenbutrx is ‘the world’s fastest, hardest hitting fat incinerator’ and that Clenbutrx

contains an ‘authentic synergistic blend of ingredients . . . [that] leave[s] scientists wondering how

amazing this stuff is’ . . . are the epitome of vague and highly subjective claims of superiority. . . .

While Defendants use the buzz words ‘authentic’ or ‘scientists,’ that is not sufficient to bring the

statements out of the realm of puffery because these statements are not making a specific claim as

to the product.” Hammer v. Vital Pharms., Inc., 2012 U.S. Dist. LEXIS 40632 (D.N.J. Mar. 26, 2012).

• “Statements that the iMac is designed to ‘last’ or to have a ‘long productive life’ are equivalent to

representations that a product was ‘built to last’ that courts have found to be non-actionable.”

Rasmussen v. Apple Inc., 2014 U.S. Dist. LEXIS 35352 (N.D. Cal. Mar. 14, 2014).

• “[S]tatement that Hydroxycut Regular Drink Packets are ‘one of the #1 products for weight loss,’ is

puffery with respect to the ‘#’ portion.” In Re Hydroxycut Marketing and Sales Practices Litig., 2014

U.S. Dist. LEXIS 11750 (S.D. Cal. Jan. 27, 2014).

50



Not puffery:

• “100% Natural” and “Natural” are not merely general in nature, but “convey the affirmative

and specific factual representation that the products are made entirely of natural ingredients.”

Janney v. Gen. Mills, 2014 U.S. Dist. LEXIS 41452 (N.D. Cal. Mar. 26, 2014).

• In Re Hydroxycut Marketing and Sales Practices Litig., 2014 U.S. Dist. LEXIS 11750 (S.D.

Cal. Jan. 27, 2014) (“Representations that Hydroxycut helps weight loss are statements

regarding a specific characteristic of a product and would be actionable.”).

• Laughlin v. Target Corp., 2012 U.S. Dist. LEXIS 104526 (D. Minn. July 27, 2012) (“The

statements that TrimStep® shoes ‘help promote muscle toning in the legs,’ ‘help improve

your posture,’ and ‘help relieve stress on your feet and joints’ are not ‘exaggerated

statements of bluster or boast upon which no reasonable consumer would rely,’ nor are they

‘vague or highly subjective claims of product superiority.’”).

Why argue puffery?

• It can narrow the representations and claims at issue in your case, and thus help defeat

class certification down the road.

• If you knock out puffery claims appearing on the label and plaintiff is left with only off-label

claims, you strengthen your predominance argument on class certification by showing that

exposure to the remaining claims at issue was not consistent across the class, or you can

defeat typicality/adequacy by showing that the named plaintiff did not rely on the remaining

claims.

51


Succeeding On The Merits Before

Certification

Procedurally, it can be done:

• Federal Rule of Civil Procedure 23(c)(1)(A) requires certification as soon as practicable,

which will usually be before the case is ripe for summary judgment.

• However, that doesn’t mean summary judgment must wait until after class certification.

• See, e.g., Ince v. Aetna Health Mgmt., Inc., 173 F.3d 672, 674 (8th Cir. 1999); Wright v.

Schock, 742 F.2d 541, 542-44 (9th Cir. 1984) (district courts have discretion to rule on

summary judgment before deciding class certification); Wiesmueller v. Kosobucki, 513 F.3d

784, 787 (7th Cir. 2008) (in certain circumstances a district court may “dismiss a case on

summary judgment without first ruling on the plaintiff’s motion to certify a class”).

• Rule 23’s Advisory Committee Notes similarly permit summary judgment rulings before class

certification. See Fed. R. Civ. P. 23(c)(1)(A) 2003 Amendments (“Other considerations may

affect the timing of the certification decision. The party opposing the class may prefer to win

dismissal or summary judgment as to the individual plaintiffs without certification and without

binding the class that might have been certified.”).

Why do it?

• Class actions are expensive to defend.

• When early resolution of a motion for summary judgment is likely to protect both the parties

and the court from needless and costly litigation, it is reasonable to consider such a motion

before class certification. Wright v. Schock, 742 F.2d 541, 544 (9th Cir. 1984).

52



Certification

What are the benefits?

• If a defendant succeeds on summary judgment prior to class certification, the named plaintiff

is effectively disqualified as a proper class representative, forcing plaintiff’s counsel to find a

new plaintiff.

• Even better, if the grounds on which the court grants summary judgment would apply equally

to any other member of the class, then plaintiff’s counsel is unlikely to bring a new case with

a new plaintiff.

What are the risks?

• If it wins, the defendant loses the preclusive effect on subsequent suits against it, so putative

class members can bring their own suits.

• If it loses on summary judgment, it fuels the plaintiff and plaintiff’s counsel’s confidence in the

case, which could drive up settlement costs.

• It also may make a court unlikely to render a different ruling post-certification, even if the

facts are more developed.

• Some courts allow only one summary judgment motion.

53



Certification

How about the “one-way intervention” rule?

• “One-way intervention” occurs when the potential members of a class action are allowed to “await

. . . final judgment on the merits in order to determine whether participation [in the class] would be

favorable to their interests.” Am. Pipe & Constr. Co. v. State of Utah, 414 U.S. 538, 547 (1974).

• The doctrine is “one-way” because a plaintiff would not be bound by a decision that favors

defendant, but could decide to benefit from a decision favoring the class.

• Federal Rule of Civil Procedure 23(c)(2)’s requirement that, in opt-out class actions, notice be given

to all class members as soon as practicable, was intended by Congress to prevent one-way

intervention, so that an absent class member does not wait to intervene in a class action suit until

after an adjudication favoring the class has taken place. See Schwarzschild v. Tse, 69 F.3d 293,

295 (9th Cir. 1995); see also Amati v. City of Woodstock, 176 F.3d 952, 957 (7th Cir. 1999) (“The

rule against one-way intervention bars potential class members from waiting on the sidelines to see

how the lawsuit turns out and, if a judgment for the class is entered, intervening to take advantage

of the judgment.”).

• However, by seeking summary judgment prior to a ruling on class certification, a defendant waives

the protections of the rule against one-way intervention.

• This means that, even if a defendant prevails on summary judgment, putative class members

remain free to file their own suits against the defendant.

• Defendants will “lose[] the preclusive effect on subsequent suits against [them] of class certification

but save[] the added expense of defending a class action and may be content to oppose the

members of the class one by one . . . by moving for summary judgment, every time [they are] sued,

before the judge presiding over the suit decides whether to certify it as a class action.” Cowen v.

Bank United of Tex., FSB, 70 F.3d 937, 941-42 (7th Cir. 1995).

54



Certification

Recent example: Khasin v. The Hershey Co., 2014 U.S. Dist. LEXIS 62070 (N.D.

Cal. May 5, 2014)

• Plaintiff alleged that representations made on packaging for Hershey’s Special Dark

Chocolate, Milk Chocolate, Special Dark Kisses, Special Dark Cocoa, Natural Unsweetened

Cocoa, and Sugar Free Coolmint IceBreaker Mints were unlawful and/or misleading.

• Plaintiff alleged that he read the labels on the products, relied on these claims when making

purchasing decisions, and was misled by these claims.

• Hershey moved for summary judgment as to Plaintiff’s claims against Hershey’s website,

advertising, and labeling statements on which Plaintiff did not actually rely.

• Plaintiff responded that a dispositive motion cannot be decided prior to a ruling on class

certification and that Plaintiff need not prove reliance under California’s UCL.

• The Court agreed to hear the motion for summary judgment, noting that the one way

intervention rule did not apply where it was the defendant who was moving for summary

judgment, and thus defendant was choosing to waive the protections afforded by an early

ruling on class certification.

• The Court granted Hershey’s motion for summary judgment as to all claims relating to

Hershey’s website and off-label advertising, as Plaintiff testified in deposition that he did not

view Hershey’s website or off-label advertising.

• In addition, the Court held that because Plaintiff testified during deposition that he did not

purchase any of Defendant’s products as a result of, or in reliance on, misrepresentations or

deceptive advertising (except for claims regarding antioxidant labels), those claims cannot go

forward. Thus, the Court granted in favor of Defendant as to Plaintiff’s claims, except for

UCL claims relating to antioxidant labels.

55



Certification

What should a defendant consider when deciding whether to move for summary

judgment prior to class certification?

• Whether material facts are in dispute

• The strength of its liability case – product test results, consumer surveys

• Timing for discovery – will defendant be able to produce witnesses and documents, and

obtain discovery from plaintiff in advance of the class certification schedule?

• Is it worth it?

Khasin v. The Hershey Co. example – it may just be better to challenge the named

plaintiff’s adequacy and typicality on class certification and defeat class certification,

rather than win partial summary judgment that applies only against the named plaintiff.

56

G R E E N B E R G T R A U R I G , L L P | A T T O R N E Y S A T L A W | W W W . G T L A W . C O M

©2014 Greenberg Traurig, LLP. All rights reserved.

False Advertising Class Actions

July 8, 2014

Robert J. Herrington| [email protected] | (310) 586-7816

False Advertising Class Actions Greenberg Traurig, LLP | gtlaw.com

Topics

> CAFA

> Burden of Proof

> Discovery Strategies

> Settlement Strategies

58


Class Action Fairness Act – 28 U.S.C. § 1332(d)

– Basic Requirements:

> Original or removal jurisdiction

> Must show:

– More than 100 putative class members

– Minimal diversity

– More than $5mm “in controversy”

59


CAFA Exceptions: “Home State Controversy”

Section 1332(d)(4)(A) – mandatory abstention

> More than two-thirds of putative class members citizens of forum state

> One defendant citizen of forum state

– That defendant’s conduct forms significant basis for the claims

– Class seeking significant relief from that defendant

> Principal injuries occurred in forum state

> No other class actions filed in last 3 years against these same defendants alleging similar facts

60


CAFA Exceptions: “Home State” Exception

Section 1332(d)(4)(B) – mandatory abstention

> More than two-thirds of putative class members citizens of forum state

> Primary defendants citizens of forum state

61


CAFA Exceptions: “permissive”

Section 1332(d)(3) > More than one-third, but less than two-thirds, of

putative class members citizens of forum state

> Primary defendants citizens of forum state

> Court may decline jurisdiction based on:

– Whether claims involve matters of national interest

– Governing law

– Whether class pled in a way to avoid federal jurisdiction

– Whether forum citizens substantially outnumber citizens of other states

– Whether similar class action filed in last three years

62


CAFA – Burden of Proof

> Party seeking federal jurisdiction has burden of proof

– Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 685 (9th Cir. 2006) (“We therefore hold that under CAFA the burden of establishing removal jurisdiction remains, as before, on the proponent of federal jurisdiction.”)

> Party asserting an exception has the burden of proof

– Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1024 (9th Cir. 2007) (“The well-established rule that the party seeking remand must prove the applicability of such exception governs with equal force in the context of CAFA as with the general removal statute.”)

63


CAFA – Burden of Proof

> Preponderance of the evidence

– Lewis v. Verizon Commc'ns, Inc., 627 F.3d 395, 397 (9th Cir. 2010) (“when the complaint does not contain any specific amount of damages sought, the party seeking removal under diversity bears the burden of showing, by a preponderance of the evidence, that the amount in controversy exceeds the statutory amount”)

> Must defendant submit evidence with removal petition?

– Dart Cherokee Basin Operating Co. v. Owens, No. 13-719

> “Creative” pleading no longer impacts burden of proof

– Rodriguez v. AT & T Mobility Servs. LLC, 728 F.3d 975, 977 (9th Cir. 2013) (“we hold that Lowdermilk has been effectively overruled, and that the proper burden of proof imposed upon a defendant to establish the amount in controversy is the preponderance of the evidence standard”)

64

http://www.supremecourt.gov/Search.aspx?FileName=/docketfiles/13-719.htm




CAFA – Burden of proof

> Availability of jurisdictional discovery

– Mondragon v. Capital One Auto Fin., 736 F.3d 880, 885 (9th Cir. 2013) (“We instruct the district court to allow Mondragon an opportunity, if he chooses to do so, to renew his motion to remand and to take jurisdictional discovery tailored to proving that more than two-thirds of the putative class are citizens of California.”)

65


CAFA – Timing of Removal

> First 30-day period: Service of complaint

– 28 U.S.C. § 1446(b)(1)

> Second 30-day period: Receipt of amended pleading, motion, order or other paper

– § 1446(b)(3)

> If removal indeterminate from complaint, defendant may investigate and remove

– Roth v. CHA Hollywood Med. Ctr., L.P., 720 F.3d 1121, 1125 (9th Cir. 2013)(“We conclude that §§ 1441 and 1446, read together, permit a defendant to remove outside the two thirty-day periods on the basis of its own information, provided that it has not run afoul of either of the thirty-day deadlines.”)

– Cutrone v. Mortgage Elec. Registration Sys., Inc., 749 F.3d 137, 148 (2d Cir. 2014) (agreeing with Roth)

66


CAFA – Strategic Considerations > Evaluation of state court

– E.g., Los Angeles County Complex Court (CCW)

> Evaluate which law/procedure preferable

> Availability of coordination/consolidation procedure

– JPML v. JCCP

> Judicial approach to pleadings challenges and class certification

> Arguments not available in state court

– Class member harm; FRCP 9(b)

> Discovery standards pre-certification

> Discovery from putative class members

> Availability of multi-state class

> Standard of class certification and availability of appeal

> Enhanced settlement scrutiny under CAFA

67


Burden of Proof

> Class Certification – Plaintiff has burden of proof on all elements

– Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551, 180 L. Ed. 2d 374 (2011) (“A party seeking class certification must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc. “)

– Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432, 185 L. Ed. 2d 515 (2013) (“The party must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b).”)

68


Burden of Proof

> Merits of false advertising claim – Plaintiff has the burden

– Reasonable consumer test

Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 2008) (“Under the reasonable consumer standard, Appellants must show that ‘members of the public are likely to be deceived.’”)

– Cannot be based on lack of substantiation

Stanley v. Bayer Healthcare LLC, 11CV862-IEG BLM, 2012 WL 1132920 (S.D. Cal. Apr. 3, 2012), appeal dismissed (June 19, 2012) (“Private individuals may not bring an action demanding substantiation for advertising claims.”)

– False or misleading, but standard of proof unclear

Johns v. Bayer Corp., 09CV1935 AJB DHB, 2013 WL 1498965 (S.D. Cal. Apr. 10, 2013), appeal dismissed (Sept. 19, 2013) (“Although Plaintiffs are correct that the UCL and CLRA prohibit both false and misleading claims, case law is less than clear as to what a private plaintiff needs to prove to successfully litigate a cause of action alleging misleading or deceptive practices.”)

69


Burden of Proof

> Choice of law – defendant has burden

– Wolph v. Acer Am. Corp., 272 F.R.D. 477, 485 (N.D. Cal. 2011) (“Acer bears the burden of proof that the law of a jurisdiction other than California should apply.”)

> Preemption – defendant has burden, as with other defenses

– Hendricks v. StarKist Co., 13-CV-729 YGR, 2014 WL 1244770 (N.D. Cal. Mar. 25, 2014)

> Materiality – defendant can refute

– Webb v. Carter's Inc., 272 F.R.D. 489, 502 (C.D. Cal. 2011) (“if the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action.”)

– Algarin v. Maybelline, LLC, 12CV3000 AJB DHB, 2014 WL 1883772 (S.D. Cal. May 12, 2014) (“Expert evidence shows that materiality and reliance varies from consumer to consumer. Accordingly, the Court finds that these elements are not an issue subject to common proof.”)

70


Discovery Strategies

> Merits v. class bifurcation – an outdated strategy?

– Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551, 180 L. Ed. 2d 374 (2011) (“Frequently that ‘rigorous analysis’ will entail some overlap with the merits of the plaintiff's underlying claim.”)

> Combating asymmetrical and disproportionate discovery

– Bowers v. Nat'l Collegiate Athletic Ass'n, CIV. A. 97-2600 JBS, 2008 WL 1757929 (D.N.J. Feb. 27, 2008) (rule of proportionality “is intended to guard against redundant or disproportionate discovery by giving the court authority to reduce the amount of discovery that may be directed to matters that are otherwise proper subjects of inquiry.”)

> Class member contact information

– Often not available from manufacturer or advertiser defendant

– Where it is available, defendant often must provide

Stone v. Advance Am., 08CV1549 WQH (WMC), 2009 WL 4722924 (S.D. Cal. Dec. 4, 2009) objections overruled, 08CV1549 WQH (WMC), 2010 WL 1433540 (S.D. Cal. Apr. 8, 2010)

71


Discovery strategies

> Survey evidence to defeat class certification

– Algarin v. Maybelline, LLC, 12CV3000 AJB DHB, 2014 WL 1883772 (S.D. Cal. May 12, 2014) (“In light of the objective evidence showing that there was a substantial number of class members who were not misled by the 24 hour claim, whether Maybelline's conduct was false or misleading or likely to deceive is not subject to common proof on a classwide basis. According to survey results, purchasers had a variety of duration expectations. Indeed, more purchasers expected the product to last less than 24 hours or had no specific duration expectations.”)

> Standing to obtain injunctive relief

– See, e.g., Rahman v. Mott’s LLP, No. 13–cv–3482–SI, 2014 WL 325241, at *10 & n.9 (N.D. Cal. Jan. 29, 2014) (“to establish standing, plaintiff must allege that he intends to purchase the products at issue in the future.”)

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Discovery strategies > Focus on the plaintiff

– Search for conflicts of interest

See, e.g., Radcliffe v. Experian Info., 715 F.3d 1157, 1164–65 (9th Cir. 2013) (class counsel and named plaintiffs inadequate where fee agreement created conflict between the named plaintiffs, who would receive incentive awards)

– Test plaintiff’s credibility

See, e.g., Jamison v. First Credit Servs., 290 F.R.D. 92, 104–5 (N.D. Ill. Mar. 28, 2013) (finding plaintiff inadequate based on his prior felony conviction for fraud))

– Ask if plaintiff understands his role

See, e.g., Price v. United Servs. Auto. Ass’n, 2012 U.S. Dist. LEXIS 97179, at *23 (W.D. Ark. Mar. 16, 2012) (“Plaintiff’s own testimony demonstrates that he does not understand or appear to care about his duty as a class representative to vigorously pursue the interests of potential class members.”)

– Expose “puppet” plaintiffs

See, e.g., Alberghetti v. Corbis Corp., 263 F.R.D. 571, 580 (C.D. Cal. 2010) (“One of this Court’s duties is to ensure that the parties are not simply lending their names to a suit controlled entirely by the class attorney.”)

– Test whether plaintiff saw the alleged misrepresentation

See, e.g., Cattie v. Wal-Mart Stores, Inc., 504 F. Supp. 2d 939, 946 (S.D. Cal. 2007) (“Because Plaintiff's claims are based on allegations of false advertising, Plaintiff must allege she relied on the false advertising.”)

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Settlement Strategies – short of class settlement

> “Pick-off” settlements

– Depends on jurisdiction

Diaz v. First Am. Home Buyers Protection Corp., 732 F.3d 948 (9th Cir. 2013)

– But pre-litigation offer may work

Luman v. Theismann, 2014 WL 443960 (E.D. Cal. Feb. 4, 2014)

> Explosion of “individual” settlements

> Beware the catalyst fee

– Henderson v. J.M. Smucker Co., 2013 WL 3146774 (C.D. Cal. June 19, 2013)

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false advertising consumer class actions: navigating

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