Early this year, a Ninth Circuit panel upended a major nationwide class action settlement because it found that the District Court had not sufficiently considered material differences among the 50 states’ relevant laws.  I called that decision—now likely headed for en banc review–“Regrettable But Forgettable” because the district court should be able to correct the error the Ninth Circuit identified.  The district court had not conducted any predominance analysis at all, which always is required, even for settlement classes.  Had it done so, it very likely could have found that for settlement purposes, with no questions for a jury to try, variations in state law would not have been material.

Yesterday, the Second Circuit reminded us that for litigation classes, variations in state laws absolutely can and should tank class certification.  Langan v. Johnson & Johnson Consumer Cos., No. 17-1605 (2d Cir. July 24, 2018) is a “natural” case, challenging that label on two several baby-oriented bath products.  The plaintiff allegedly purchased some in Connecticut and contended that 20 other states have similar consumer fraud laws.  The district court certified a 21-state class, after which J&J successfully petitioned the Second Circuit, under Rule 23(f), to hear an interlocutory appeal. 

J&J tried to argue that the plaintiff lacked Article III (constitutional “case or controversy”) standing to sue on behalf of purchasers in other states, but the Second Circuit rejected that contention.  “[A]s long as the named plaintiffs have standing to sue the named defendants, any concern about whether it is proper for a class to include out-of-state, nonparty class members with claims subject to different state laws is a question of predominance under Rule 23(b)(3), not a question of ‘adjudicatory competence’ under Article III.”  The court recognized some tension in case law over this question, but thought that Supreme Court guidance counseled treating “modest variations between class members’ claims as substantive questions, not jurisdictional ones.”
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When class actions have a low settlement value relative to the size of the class, it is normal for defendants to pay out money to non-profit groups that advocate for issues relevant to the case rather than directly to class members. Last July, in “Give the Money to One Percenters, Not to Non-Profits,” I reported that 11 state Attorneys General had decided to buck this ongoing trend, asking the Third Circuit to reject a class action settlement in which Google would have paid $3 million to non-profit groups advocating for privacy rights.  The Third Circuit has not ruled on that appeal, but with a new brief to the U.S. Supreme Court, the number of state AGs advocating for this change now has grown to a bipartisan group of 20.

Courts approve these “cy pres” distributions to non-profits where they find it “infeasible” to distribute money directly to class members.  The Circuits are slightly split on what it means to be “feasible,” however, and in the new brief, the AGs chastise the Ninth Circuit for approving cy pres “whenever there is a large class.”  The AGs prefer “feasible” to be synonymous with “possible,” and whenever possible, they want money to be distributed, somehow, at least to a subset of affected class members.

In the new case, In re Google Referrer Header Privacy Litigation (captioned at the Supreme Court as Frank v. Gaos, with “Frank” being Ted Frank, head of the Competitive Enterprise Institute’s Center for Class Action Fairness), Google would pay out $8.5 million to settle claims that it inappropriately shared user searches with third party marketers.  The Ninth Circuit “quickly disposed of the argument that the district court erred by approving a cy pres-only settlement.”  Because “[o]bjectors do not contest the value of the settlement” or plead that they suffered any out-of-pocket injury from Google’s conduct, the only question was whether it was “feasible” to distribute $8.5 million to a class with 129 million estimated members who performed searches through Google.
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This week, by a 2-1 vote, a Ninth Circuit panel reversed a district court’s approval of a massive class action settlement involving Hyundai’s and Kia’s allegedly inflated statements of fuel efficiency.  The majority’s long decision, over a vigorous dissent, amounted only to a “greatest hits” collection of Ninth Circuit class action and settlement skepticism.  Nothing in it was new, and importantly, the panel majority Court said explicitly that the district court could approve the settlement anew upon remand.   

Put another way:  Settlement proponents in Ninth Circuit cases are going to have to deal with this decision in In re: Hyundai and Kia Fuel Econ. Litig. for the foreseeable future, but the case really did not erect any hurdles to approval that weren’t already there.

Twenty years ago, when the asbestos bar proposed a multibillion-dollar, highly creative settlement of tens of thousands of asbestos cases, the Supreme Court bounced the settlement because the proposed class raised too many individual issues.  The Supreme Court’s holding in that case—Amchem Prods. Inc. v. Windsor—was that although federal judges need not consider the manageability of a class action trial when a settlement is proposed, a settlement class still has to satisfy Rule 23(b)(3)’s requirement that common questions “predominate” over questions that are purely individual to each class member.  That a settlement would resolve a matter on fair terms is not enough if the settlement glosses over too many individualized issues. 
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Most Popular Ad Law Access Posts of 2017

As reported in our Ad Law News and Views newsletter, Kelley Drye’s Advertising Law practice posted 106 updates on consumer protection trends, issues, and developments to this blog in 2017. Here are some of the most popular:

On October 25, the U.S. District Court for the District of Massachusetts dismissed a consumer class action under Massachusetts law, contending that Wesson vegetable oil is falsely labeled “100% natural” because it allegedly is extracted from genetically modified corn, soybean and rapeseed.  Lee v. Conagra Brands., Inc., 1:17-cv-11042 (D. Mass Oct. 25, 2017).  This

In a review of new class action cases filed against in 2017, we counted at least 11 actions in the food industry alone alleging that a product was not “natural” or “all-natural” as claimed in its advertising or labeling. “Natural” is, by a healthy margin, the most contested single word in food and personal care products class action litigation.  Why do class action cases around “natural” continue unabated?

  1. “Natural” Doesn’t Mean Much …

There is no generic, official definition of “natural.” In November 2015, after being prodded by almost every stakeholder, the FDA put out a request for information and comments regarding the use of “natural” in foods.  Since then, the FDA has done nothing.  It hasn’t even closed the web page for submitting comments, which were supposed to end in May 2016 – you can still leave a comment if you want to.  This doesn’t mean we have no idea what the FDA thinks “natural” means.  There is enough guidance on narrower definitions, such as the FDA’s definition of “natural flavor” and its opposite, “artificial flavor,” and the USDA’s general definition of “natural,” that we can guess with some confidence what the FDA’s definition of “natural” would look like if it were issued tomorrow.  But a guess doesn’t carry much authority, and isn’t much use in stopping litigation.

  1. … but Some Consumers Think It Means a Lot …

In advertising law, however, neither the advertiser nor even the government is the final arbiter of what an advertising claim means. It is the consumer audience that gets to interpret advertising claims, and regardless of what was intended, the advertiser is responsible for any reasonable interpretation of its advertising.  In private cases, the proxy that is used for a “reasonable consumer” is a significant proportion of consumers who report receiving a particular meaning in a competent consumer perception survey, that proportion sometimes being as low as 15%.  The implicit assumption is that at least 85% of consumers are reasonable, so that any slice of 15% of consumers must include some reasonable ones.  It may seem like a debatable premise these days, but it’s one we have to live with.
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What should a corporation do when a class action lawsuit claims it broke the law, the group of allegedly affected people is massive, but the real-world “harm” is effectively nil?

If the lawsuit fails to state a valid claim, obviously you move to dismiss it. But what if your best arguments require expensive discovery, you can’t be certain of a victory even then, and the downside risk—such as from statutory minimum damages—is intolerable to you?

One good strategy for corporate defendants facing these situations is to settle by making corrective changes to address the alleged problem and, in lieu of what would be tiny damages payments to affected class members, contribute a palatable amount of money to non-profit groups working to protect the interests of those consumers.
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Yesterday, a panel of the Third Circuit Court of Appeals took another step back from a circuit split over the extent to which aspiring class plaintiffs must show a “reliable and administratively feasible means of determining whether putative class members fall within the class definition,” and one judge called for scrapping that requirement altogether.

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On August 2, 2017, the U.S. District Court for the Central District of California dismissed a putative class action lawsuit against Ross Stores that accused the discount retailer of misleading promotional pricing practices. The lawsuit stemmed from February and May 2015 purchases by the two lead plaintiffs of items bearing price tags with a selling

For the first 28 weeks of 2017, the most frequently alleged claims in new food and beverage false-advertising class actions have related to featured product ingredients that allegedly are absent, or present only in small quantities, in the food at issue.

We reviewed news reports and other mentions of newly-filed food advertising class actions for