Class Action Defense Strategies

Consumer products companies that face class action litigation in California most often see two causes of action: (i) claims that the company violated California’s infamous Unfair Competition Law (UCL); and (ii) claims that the company has violated the Consumer Legal Remedies Act (CLRA).

These statutes are similar in some ways, but they have an important difference. A UCL claim is equitable, providing only for restitution and injunctive relief. Gardner v. Safeco Ins. Co. of Am., No. 14-CV-02024-JCS, 2014 WL 2568895, at *7 (N.D. Cal. June 6, 2014) (“The remedies available under the UCL are generally limited to the equitable remedies of restitution and injunctive relief.”) In contrast, the CLRA allows for damages.Continue Reading Class Action Defense Tip – Don’t Forget that UCL Claims Are Equitable

I attended the ABA’s National Institute on Class Actions last week in Chicago, and one theme was clear. Plaintiffs’ lawyers are increasingly fond of asking courts to certify cases so-called “issue classes,” invoking Rule 23(c)(4). They believe that they can pressure companies to settle cases by defining a relatively narrow, yet critical, issue for certification and pushing for trial on that “class issue.” This article takes a closer look at issue classes and potential arguments consumer products companies can use to fend them off.

Before we begin, let me put in a plug for the ABA’s National Institute on Class Actions. This is an outstanding program, with numerous federal judges attending, as well as the entire Advisory Committee on Rule 23. The program was in Chicago this year, but New Orleans looks to be the location for 2015. It’s usually in October, so mark your calendars and plan to attend.

Background on Issue Classes

When appropriate, an action may be brought or maintained as a class action with respect to particular issues. Fed. R. Civ. Proc. 23(c)(4).

The text of Rule 23(c)(4) raises more questions than it answers. The subsection appears in the part of the Rule entitled “Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses,” and is separate from subsections (a) and (b), which delineate the “Prerequisites” of class certification and the “Types of Class Actions” that can be maintained. The Rule does not explain what “when appropriate” means. Nor does it explain what “with respect to particular issues” means.
Continue Reading Growing Risk for Consumer Products Companies – Issue Classes

GavelRecently, a District Court approved a class action settlement of an action against a manufacturer of allegedly defective windows.  The class representative was lead class counsel’s father-in-law; class counsel was embroiled in separate litigation and a state bar investigation over misappropriation of fees; the proposed settlement awarded class counsel $11 million in attorney’s fees without any reliable valuation of the class’s claims; and the claim procedure built into the settlement was so burdensome and prohibitive that the likelihood of any real class recovery was minimal at best.  On June 2, 2014, the Seventh Circuit emphatically rejected the settlement, which may seem unremarkable based on these facts.  What is noteworthy is the Court’s specific recognition of the risks of abuse associated with class actions and emphasis of the importance of close judicial scrutiny of class action settlements, which too often is undermined where both parties — the plaintiffs and their lawyers who want attorneys’ fees, and the defendant who just wants to cut its losses and avoid risk — jointly urge the court to approve a settlement and get a case off its docket.  The case is Eubank v. Pella Corporation, Seventh Circuit Case Nos. 12-2091, -2133, -2136, -2165 and -2202 (7th Cir. June 2, 2014).
Continue Reading Wary of Class Action Abuses, Seventh Circuit Slams ‘Scandalous’ Settlement Over Allegedly Defective Windows

a href=””>GavelAs the Supreme Court has tightened the requirements for certifying a damages class action, some in the plaintiff’s bar have responded by focusing on class actions seeking injunctive relief, particularly in cases against consumer products companies.  To certify a class under Rule 23(b)(2), a plaintiff does not have to demonstrate predominance or superiority, and thus an injunctive class should, at least in theory, be easier to certify.  But a class action seeking injunctive relief has its own challenges, one of which is establishing that the named plaintiff has standing.

Standing to seek an injunction

In the context of a consumer fraud class action, standing can be a particular challenge.  A plaintiff seeking injunctive relief “must demonstrate that he has suffered or is threatened with a ‘concrete and particularized’ legal harm, coupled with ‘a sufficient likelihood that he will again be wronged in a similar way.’” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). The plaintiff must “establish a ‘real and immediate threat of repeated injury’ ” that “must be likely to be redressed by the prospective injunctive relief.” Id. “Unless the named plaintiffs are themselves entitled to seek injunctive relief, they may not represent a class seeking that relief.” Hodgers–Durgin v. de la Vina, 199 F.3d 1037, 1045 (9th Cir. 1999).  Thus, without a threat of future harm, injunctive relief is not available.
Continue Reading The Injunction Conundrum – When Can a Class Action Plaintiff Sue for Injunctive Relief?

GavelOn April 27, 2011, the Supreme Court in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), cleared the way for consumer products companies and other businesses to incorporate class action waivers into their arbitration agreements with customers.  On April 7, 2014, the Second District Court of Appeal in California affirmed the denial of a motion to compel arbitration despite Concepcion, relying on language in the arbitration clause that rendered the clause invalid if state law would find the class action waiver unenforceable.  The decision appears to contradict a recent Ninth Circuit decision, calling into question Concepcion’s scope and ensuring further litigation of the issue.

In Imburgia v. DirecTV, Inc., 170 Cal. Rptr. 3d 190 (2014), Plaintiffs accused DirecTV of improperly charging early termination fees and brought a class action against the company for false advertising, violation of California’s Consumer Legal Remedies Act (CLRA) and related claims.  After the trial court granted in part Plaintiffs’ motion for class certification, Concepcion came down and DirecTV moved to decertify the class and compel arbitration.  DirecTV’s arbitration clause included a class action waiver and provided generally that the Federal Arbitration Act (FAA) applied, but also provided:  “If, however, the law of your state would find this agreement to dispense with class arbitration procedures unenforceable, then this entire Section … is unenforceable.”  Id. at 193.
Continue Reading Recent California Appellate Opinion Raises Issue of Concepcion’s Scope

Consumer products companies are frequently the targets of nationwide class actions, and a common defense strategy includes removing these cases to federal court under the Class Action Fairness Act of 2005. “CAFA” provides federal jurisdiction over certain class actions where the amount in controversy  exceeds $5 million. See 28 U.S.C.  §§ 1332(d)(2), (5). On April 7, 2014, the Supreme Court granted review of a 10th Circuit case that was removed under CAFA and then remanded based on a lack of evidence supporting the amount in controversy. The Supreme Court, thus, appears poised to clarify what is required of a defendant removing a case under CAFA (or on other grounds for that matter).Supreme Court

The case is Dart Cherokee Basin Operating Co., LLC v. Owens, 730 F.3d 1234 (10th Cir. 2013), in which the Tenth Circuit declined to overturn a Kansas District Court opinion granting a motion to remand a case removed to federal court by Dart Cherokee Basin Operating Co. under CAFA. Although Dart’s Notice of Removal explained why the Plaintiff’s royalty claims raised the amount in controversy above $5 million, the District Court granted the Plaintiff’s motion to remand because the Notice of Removal was not supported by evidence, “such as an economic analysis … or settlement estimates” supporting Dart’s amount in controversy estimate.  Id. at 1234. When Dart proffered supporting evidence in opposition to the motion to remand, the Court held that it was too late based on the requirement that removal papers are generally due within 30 days of the filing of the complaint.
Continue Reading Supreme Court to Address Requirements for Class Action Removal

GMO FoodsWe frequently address issues relating to litigation over products advertised as “all natural” or containing genetically modified organisms, or GMOs. As interest in GMOs has grown (along with related litigation), an initiative known as GMO Answers has published new survey results identifying consumers’ top 10 questions about GMOs. GMO Answers is funded by the members of The Council for Biotechnology Information, which includes several major consumer products companies.

A global market research company conducted a random, national telephone survey of over 1,000 Americans, in which those surveyed were given a list of 23 questions, then asked:  “The following are questions some people have asked about GMOs.  Which of the following questions around the use of GMOs would you be most interested in having answered?
Continue Reading National Survey Identifies Top Consumer Questions on GMOs

Consumer products companies increasingly do business online, which means they frequently collect, and sometimes share, customers’ personal information.  That practice makes Company Privacy Commitmentcompanies potential class action targets under various privacy laws.  Recently, the Ninth Circuit rejected three similar putative class actions under California’s “Shine the Light” law (STL), Cal. Civ. Code §§ 1798.83-1798.84, and Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200, et seq.  In three unpublished opinions, Baxter v. Rodale, No. 12-56925, 2014 WL 667474 (9th Cir. Feb. 21, 2014), King v. Conde Naste Publications, No. 12-57209, 2014 WL 607385 (9th Cir. Feb. 18, 2014) and a companion case, the same three-judge panel affirmed dismissal of class actions under these statutes because the plaintiffs lacked standing to sue, since they failed to plead that they asked the defendants whether their information had been shared with third parties.  Therefore, the plaintiffs did not sufficiently plead injury.
Continue Reading Ninth Circuit Rejects ‘Gotcha’ Class Actions Under California Privacy Law