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Consumer Law Round-Up

March 19, 2020 COVID-19 / Coronavirus Resources

We continue our efforts to do everything we can to support our clients as they navigate these times.  Our lawyers have provided practical insight into the legal and strategic challenges companies are facing.  To stay abreast of the quickly changing landscape, Jenner & Block has assembled a multi-disciplinary team, drawn from a variety of our practice areas and sector gro Noun_virus_1772453ups, to support clients as they navigate these uncharted waters.  We also continue to update our COVID-19 / Coronavirus Resource Center.  It provides helpful and timely information on the legal and strategic challenges companies are facing. Following is a list of some of those pieces.


First COVID-19 Securities Class Action Lawsuits Hit Cruise Line and Pharmaceutical Company

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders.  Over the last few days, shareholders have filed the first suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations.  If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow.  Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

To read more, please click here.

COVID-19: "Employer Guidance for Addressing Possible Layoffs and Closures"

As employers grapple with staffing while dealing with the current COVID-19 crisis, they need to be mindful of their obligations under federal and state legislation addressing certain closures and layoffs.

Under the federal Work Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. §2101, covered employers must provide at 60 calendar days written notice of a covered “plant closing” or “mass layoff.”  WARN contains various definitions that establish:

  • Which employers must give notice;
  • When such notice must be given;
  • Who must receive notice;
  • What must the notice contain; and
  • When notice may be excused.

To read more, please click here.

COVID-19: Issues Facing the Airline Industry

As the novel coronavirus / COVID-19 continues to cause economic and social turmoil across the globe, the airline industry is suffering particularly acute hardships.  US carriers, including Delta, American, United and Southwest, have announced plans to cut their international routes by as much as 80% to 90% over the next several months, and domestic capacity is now being reduced by 20%-40%.  Foreign carriers have been impacted even more harshly.  Ryanair has announced it may have to ground its entire fleet, Air France has announced cuts into its flight schedule of up to 90% and British Airways has made similar cuts of up to 75%.  Furthermore, the aircraft that continue to fly are far from full.  Along with these flight reductions, airlines have grounded fleets of their larger aircraft, instituted hiring freezes and in some cases commenced layoffs, and US airlines are actively seeking ways to preserve cash on hand and obtain relief from the federal government.

To read more, please click here.

To stay abreast of developments through this unprecedented situation, continue to monitor the Consumer Law Round-Up blog and visit the resource library for helpful reference materials.

CATEGORIES: Class Action Trends, Employment, Securities

March 13, 2020 Ninth Circuit Sharply Limits Pre-Certification Discovery Into the Identity of Other Class Members

By:  Alexander M. Smith

CaliforniaWhile the Ninth Circuit’s decision reflects a welcome concern about the use of pre-certification discovery to identify potential clients, it further exacerbates the stark contrasts between class action practice in California state courts and California federal courts.

In class actions, named plaintiffs frequently seek discovery from the defendant regarding the identities and contact information of other putative class members. While some view this practice as a normal method of obtaining information about other similarly situated consumers, others view it as a way for plaintiffs’ lawyers to fish for potential plaintiffs—either in new lawsuits, or as a “backup” in the event the court finds the original named plaintiff atypical or inadequate.

In spite of these concerns about fishing expeditions, California state courts have consistently permitted named plaintiffs in class actions to obtain pre-certification discovery regarding the names and contact information of other putative class members. Indeed, the California Supreme Court has repeatedly blessed this practice, holding that the interests of named plaintiffs in seeking relief on behalf of similarly situated consumers—and the broad scope of discovery under California law—weighed in favor of requiring defendants to identify other potential members of the class. See Pioneer Elecs. (USA) v. Superior Court, 40 Cal. 4th 360, 373-74 (2007); Williams v. Superior Court, 3 Cal. 5th 531, 547 (2017).

In a sharp divergence from this line of cases, however, the Ninth Circuit held earlier this year that a named plaintiff in a class action is not entitled to pre-certification discovery regarding the identities of other putative class members. See In re Williams-Sonoma, 947 F.3d 535 (9th Cir. 2020). While the Ninth Circuit’s decision reflects a welcome concern about the use of pre-certification discovery to identify potential clients, it further exacerbates the stark contrasts between class action practice in California state courts and California federal courts.

Williams-Sonoma

In Williams-Sonoma, the named plaintiff—a Kentucky resident—allegedly purchased bedding from Williams-Sonoma in reliance on the advertised thread count of 600 threads per square inch. When the plaintiff allegedly discovered that this representation was false, he filed a class action in the Northern District of California on behalf of a putative class of consumers who bought bedding from Williams-Sonoma based on the same thread count representations. Before a class was certified, the district court determined that the plaintiff could not assert his claim on a class-wide basis, as Kentucky consumer law governed his individual claims and barred class actions. The named plaintiff informed the district court that he would pursue his individual claims in Kentucky, but sought discovery from Williams-Sonoma to identify a California purchaser who might be willing to serve as a named plaintiff in his stead.

Over Williams-Sonoma’s objections, the district court ordered Williams-Sonoma to produce a list of all California consumers who had purchased the bedding at issue since January 2012. Williams-Sonoma then filed a petition for a writ of mandamus, and the Ninth Circuit—in a divided opinion—granted that petition. Relying primarily on Oppenheimer Fund v. Sanders, 437 U.S. 340 (1978), the court held that the district court clearly erred in permitting pre-certification discovery into the identities of absent class members, as the names of absent class members were not “relevant to any party’s claim or defense” under Federal Rule of Civil Procedure 26(b)(1). As in Oppenheimer, the court reasoned, “using discovery to find a client to be the named plaintiff before a class action is certified is not within the scope of Rule 26(b)(1).”

Notably, the court did not make any effort to square its holding with the rule embraced by the California Supreme Court. Instead, it emphasized that the district court erred by relying on California discovery rules to justify its order compelling Williams-Sonoma to produce the names of other purchasers, as these rules are not binding in federal court.

Judge Paez dissented. He rejected the majority’s reading of Oppenheimer to preclude discovery into the identities of putative class members and held that it “stands for a much narrower proposition”—namely, that class counsel must rely on the procedures set forth in Federal Rule of Civil Procedure 23, rather than the discovery rules set forth in Rule 26 through 37, to identify and notify absent class members that a class had been certified. In fact, Judge Paez explained, the Supreme Court had expressly left open the possibility that Rule 26 would authorize discovery into the identity of absent class members so long as it was “relevant to other issues in the case.”

Moreover, aside from Oppenheimer, Judge Paez noted that no federal court had clearly addressed whether Rule 26 could be used to obtain discovery for the purpose of identifying a substitute plaintiff, and he accordingly refused to conclude that the district court’s discovery was erroneous—let alone so clearly erroneous as to warrant the extraordinary remedy of mandamus.

And in any event, even if Rule 26 did not authorize discovery into the identities of absent class members, he explained that Rule 23(d) provided an alternative source of authority for that order, as it permits district courts to order the plaintiff to provide notice to putative class members and empowers them to force defendants (such as Williams-Sonoma) to cooperate in this process.

Implications of Williams-Sonoma for Federal Court Practitioners

As the competing opinions illustrate, it is possible to read Williams-Sonoma in any number of ways. For instance, one might read Williams-Sonoma to stand for the broad proposition that the federal discovery rules simply do not permit discovery into the identity of absent class members and that this information is categorically not relevant to the parties’ claims or defenses. Indeed, given that the Ninth Circuit found the district court’s order so clearly erroneous as to warrant the extraordinary remedy of mandamus, one might conclude that this information is now strictly off-limits.
On the other hand, one could also read Williams-Sonoma much more narrowly. Unusually, the plaintiffs in Williams-Sonoma expressly admitted that their discovery requests were aimed at finding a new plaintiff, rather than discovering information relevant to the merits of the class’s claims. Thus, a plaintiff could argue that Williams-Sonoma simply stands for the uncontroversial proposition that discovery must be related to the parties’ claims and defenses. And in a similar vein, a plaintiff might argue that Williams-Sonoma no longer applies once a class has been certified: if the court has already concluded that the named plaintiff is an adequate class representative, there is no reason to believe that discovery into the identity of absent class members is aimed at identifying substitute plaintiffs.

At this stage, it is unclear which of these readings courts will adopt. The Ninth Circuit issued its decision in Williams-Sonoma less than two months ago, and no federal court has had occasion to apply that decision since then. But regardless of how broadly or narrowly federal courts read Williams-Sonoma, it adds yet another checkmark to the long list of distinctions between federal and state court class action practice.

Reprinted with permission from the March 12 issue of The Recorder. © [2020] ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved. The original article can be viewed here.

CATEGORIES: Class Action Trends

March 13, 2020 Seventh and DC Circuits Allow Nationwide Class Actions with Claims of Out-of-State Plaintiffs after Bristol-Myers Squibb

By: Michael T. Brody, Gabriel K. Gillett, Howard S. Suskin and Brenna J. Field

New-Development-IconThis week, the Seventh and DC Circuits issued long-awaited and major decisions addressing a critical issue in class action litigation explicitly left unresolved in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017)—whether a federal court has jurisdiction to hear claims by out-of-state members of a putative nationwide class action whose claims lack a connection to the forum. Both courts said yes, albeit for different reasons. As other circuit courts weigh in, and possibly disagree, the Supreme Court will likely be called upon to resolve the issue.

In Bristol-Myers Squibb, 600 plaintiffs brought a coordinated mass tort action asserting California state law claims in California state court using a California rule for consolidating individual suits. But only 86 plaintiffs were California residents. The defendant argued that it was not subject to specific personal jurisdiction as to the non-resident plaintiffs’ claims because they and their claims lacked a sufficient connection to the forum. The Supreme Court agreed, but stated that it did not decide whether its holding applied to federal courts or to class actions. Since then, some federal district courts have taken this to mean that federal courts have specific personal jurisdiction over defendants facing claims by absent non-resident putative class members in any type of aggregated litigation while others have taken the opposite view, that this ruling limits the court’s jurisdiction to claims by plaintiffs (named and unnamed) with a connection to the forum.

On March 11, the Seventh Circuit became the first appellate court to decide whether Bristol-Myers Squibb applies to federal class actions. In Mussat v. IQVIA, Inc., No. 19-1204, the court sided with plaintiffs and held that a federal court has jurisdiction to hear federal claims by unnamed class members in a putative nationwide class action even if they lack a connection to the forum. In this Telephone Consumer Protection Act suit, defendant moved to strike the class definition, which included out-of-state plaintiffs. The Court held that Bristol-Myers Squibb did not bar federal courts from hearing these claims, reasoning that absent class members are not “parties” to a class action for purposes of jurisdiction, whereas due process required a due process result for the consolidated mass action plaintiffs in Bristol-Myers Squibb. A day earlier, the DC Circuit reached a similar conclusion, at least temporarily, without taking on Bristol-Myers Squibb. In Molock v. Whole Foods Market Group, Inc., No. 18-7162, an employment discrimination case arising from the denial of the defendant’s motion to dismiss, the court held that the defendant could not challenge personal jurisdiction over claims by absent class members until after the class is certified. The Court reasoned that it would be premature to dismiss absent class members until they are full parties to the action.

IQVIA and Whole Foods will not be the last words on federal court jurisdiction over class actions after Bristol-Myers Squibb. The Fifth and Ninth Circuits are each considering cases that raise the issue. See Tredinnick v. Jackson National Life Ins., No. 18-40605 (5th Cir.); Moser v. Health Insurance Innovations, No. 19-56224 (9th Cir.). Meanwhile, district courts likely will continue to reach divergent results. Litigants are therefore well-advised to continue raising and preserving the issue for further review, as these decisions hardly bring clarity or certainty on the important issue of whether a defendant is subject to claims in federal court asserted by a putative class of plaintiffs with no tie to the forum. That clarity and certainty may only arrive when the Supreme Court interprets how its decision in Bristol-Myers Squibb applies in the class action context once and for all.

CATEGORIES: Class Action Trends

January 2, 2020 Zero Calories, Zero Plausibility: Ninth Circuit Affirms Dismissal of “Diet” Soda Class Action

By: Alexander M. Smith

SodaIn 2017, several plaintiffs began bringing lawsuits in California and New York premised on the theory that “diet” sodas — i.e., sodas sweetened with zero-calorie artificial sweeteners rather than sugar — were mislabeled because the sodas falsely suggested they would help consumers lose weight, even though aspartame and other artificial sweeteners are supposedly associated with weight gain.  Courts have routinely dismissed these lawsuits on one of two grounds:

  • Some courts have concluded that this theory of deception is implausible because reasonable consumers understand the term “diet” to mean that the soda has zero calories, not that it will help them lose weight.  See, e.g., Geffner v. Coca-Cola Co., 928 F.3d 198, 200 (2d Cir. 2019) (“[T]he “diet” label refers specifically to the drink’s low caloric content; it does not convey a more general weight loss promise.”); Becerra v. Coca-Cola Co., No. 17-5916, 2018 WL 1070823, at *3 (N.D. Cal. Feb. 27, 2018) (“Reasonable consumers would understand that Diet Coke merely deletes the calories usually present in regular Coke, and that the caloric reduction will lead to weight loss only as part of an overall sensible diet and exercise regimen dependent on individual metabolism.”). 
  • Other courts have dismissed these lawsuits on the basis that the scientific literature cited by the plaintiffs does not support a causal relationship between zero-calorie sweeteners and weight gain.  See, e.g., Excevarria v. Dr. Pepper Snapple Grp., Inc., 764 F. App’x 108, 110 (2d Cir. 2019) (affirming dismissal of lawsuit challenging labeling of Diet Dr. Pepper, as “[n]one of the studies cited . . . establish a causal relationship between aspartame and weight gain”).

The Ninth Circuit recently joined the chorus of courts that have rejected this theory of deception.  In Becerra v. Dr. Pepper/Seven Up, Inc., the district court dismissed a lawsuit alleging that Diet Dr. Pepper was mislabeled as a “diet” soda, both because the plaintiff had not alleged that consumers construed the term “diet” as a representation about weight loss and because the plaintiff had not sufficiently alleged that aspartame is associated with weight gain.  On December 30, 2019, the Ninth Circuit issued a published decision affirming the dismissal of this lawsuit.  Becerra v. Dr. Pepper/Seven Up, Inc. --- F.3d ----, 2019 WL 7287554 (9th Cir. 2019).

The Ninth Circuit began by explaining that California’s consumer protection statutes require the plaintiff to allege that consumers are “likely to be deceived” — not simply a “mere possibility that Diet Dr. Pepper’s labeling might conceivably be misunderstood by some few consumers viewing it in an unreasonable manner.”  Id. at *3.  Applying this standard, the Ninth Circuit agreed that the term “diet” was not likely to mislead a reasonable consumer.  In so holding, the Ninth Circuit rejected the plaintiff’s reliance on dictionary definitions of the term “diet”; even though this term may imply weight loss when used as a noun, the court explained, it clearly implied that a product was “reduced in or free from calories” when used as an adjective.  Id.  And while the plaintiff argued that consumers could nonetheless “misunderstand” the term “diet” to suggest weight loss benefits when used in this context, the Ninth Circuit made clear that such “unreasonable assumptions” would not give rise to a plausible claim of deception.  Id. at *4. (“Just because some consumers may unreasonably interpret the term differently does not render the use of ‘diet’ in a soda’s brand name false or deceptive.”).

The Ninth Circuit also rejected the plaintiff’s remaining arguments about why consumers might interpret the term “diet” as a representation about weight loss.  It held that the use of “attractive, fit models” in its advertisements did not suggest to consumers that drinking Diet Dr. Pepper would “help its consumers achieve those bodies.”  Id.  It also rejected the plaintiff’s reliance on American Beverage Association blog posts suggesting that consumers associate diet soft drinks with weight loss, as those blog posts “emphasize that other lifestyle changes beyond merely drinking diet soft drinks are necessary to see weight-loss results.”  And it likewise rejected the plaintiff’s reliance on a survey showing that consumers expected diet soft drinks to help them lose weight or maintain their current weight: even accepting the survey’s findings at true, the Ninth Circuit nonetheless held that “a reasonable consumer would still understand ‘diet’ in this context to be a relative claim about the calorie or sugar content of the product.”  Id. at *4-5.  Because the survey “does not address this understanding or the equally reasonable understanding that consuming low-calorie products will impact one’s weight only to the extent that weight loss relies on consuming fewer calories overall,” the Ninth Circuit concluded that it did not support the plaintiff’s claims of deception.  Id. at *5.

CATEGORIES: Class Action Trends

PEOPLE: Alexander M. Smith