It’s March Madness time, and the language of basketball fills the air. One expression that has moved from the basketball courts to everyday language is “no harm, no foul.” “No harm, no foul” (in tougher games, no blood, no foul) is the response to a claim that a foul should be called for an allegedly improper act. If the act did not hurt anyone or affect the play of the game, then the referee should not call a foul. The recent decision in Watkins v. Omni Life Science, Inc., No. 09-10857-RGS (D. Mass. March 9, 2010) applied this rule to dismiss a class action.
The plaintiffs in Watkins sought to bring a class action on behalf of recipients of the Apex Model Replacement Hip. According to the complaint, the Apex Hip failed more often than other replacement hips. But the plaintiffs’ Apex Hips had not malfunctioned, and their proposed class specifically excluded people whose Apex Hips had actually failed or malfunctioned.
Plaintiffs claimed that the relatively high failure rate of Apex Hips put them at serious risk of future harm, and they brought a litany of claims, including breach of implied warranty, breach of contract, unjust enrichment, and violations of the consumer protection laws of Massachusetts and all other states. The defendant moved to dismiss this nonsense, based on that well-known rule followed in all kinds of courts, and the court agreed.
Before reaching the merits, the court decided to apply the law of Massachusetts, Omni’s principal place of business, because that is the only state with a substantive tie to all class members. Id. at 5. We have written before that courts usually apply the law of the place where the plaintiff received the product and allegedly was injured, which usually means that the laws of 50 states apply to claims by a nationwide class of plaintiffs and that class certification therefore should be denied. We don’t approve of the Watkins court’s considering the pendency of a class action claim in choosing which state’s law applies, as the same state’s law should apply to a plaintiff’s claim whether the plaintiff brings a claim individually or as part of a class action. Normally we would hit the court with a full-court press on its choice of law ruling, but since the court ultimately dismissed the complaint, we’ll call no harm, no foul.
The court then considered Omni’s argument that all claims should be dismissed because plaintiffs did not plead a legally cognizable injury. Massachusetts follows the economic loss rule, under which purely economic losses can’t be recovered in tort actions absent personal injury or property damage, and applies that rule to tort claims dressed up as contract claims and consumer protection claims. Id. at 6-7. The court cited this rule in rejecting plaintiffs’ claim that they were injured by paying extra money for their supposedly overvalued Apex Hips. Id. at 8.
Plaintiffs also claimed that their replacement hips had a “diminished market value,” but no one took that claim seriously. Maybe we should check eBay before saying this, but we doubt that there is much of a market for used replacement hips or that the plaintiffs were going to pluck their hips out and sell them on the open market.
Plaintiffs maintained that they were really injured because they had “the apprehension caused by the prospect of an increased risk of hip failure.” Id. at 7. Nonsense, the court said. “Apprehension of a heightened risk stemming from an allegedly defective product that has not failed or caused harm is insufficient as a matter of law to support a claim.” Id. at 8. Of course that makes perfect sense: you can’t ask the ref to call a foul just because you are worried that another player will foul you. You have to wait for actual harm before asking referees or courts to take action.
We understand how this happens: a plaintiffs’ lawyer reads about a problem and advertises on the internet, saying that anyone with an Apex Hip should contact the lawyer. Inevitably some people contact the lawyer with Apex Hips that are working just fine. The better plaintiffs’ lawyers will understand the “no harm, no foul” rule and turn those potential clients away. But some plaintiffs’ lawyers will see all potential clients as potential revenue streams and will try to figure out a way to turn that inventory into money – for the plaintiffs’ lawyer. The lawyer may have visions of a class action resulting in a settlement giving the plaintiffs’ lawyer millions of dollars in fees and the clients coupons for 10% off replacement hips. But our no injury scorecard, which is filled with similar unsuccessful class action claims, shows that judges who know what they are doing will dismiss those claims. Hungry plaintiffs’ lawyers might take a look at that scorecard before wasting their time on claims without real injuries.
Omni also argued in the alternative that the fraud claims should be dismissed under Fed. R. Civ. P. 9(b), which requires plaintiffs to plead detailed facts if they want to bring fraud claims. Plaintiffs made the formulaic misrepresentation claim that Omni knew about and concealed an alleged design defect in the Apex Hip, but then the facts got in the way. The court found that the complaint’s allegations by themselves might have survived a post-Twombly motion to dismiss, but dismissed the fraud claims because the exhibits plaintiffs attached to the complaint showed that Omni actually had publicly disclosed test results suggesting problems with the Apex Hip. Op. at 11-12. In other words, the alleged misrepresentations caused no harm, because the true facts were disclosed to consumers, and therefore no foul fraud claim could survive dismissal.