Class actions hold our interest, even though we do not see them all that often anymore in the drug and medical device space. Maybe we are the rubbernecking motorists who can’t resist slowing down to gaze at someone else’s fender bender.  Maybe we are the children at the zoo who rush to the reptile house to gawk at creatures charitably described as unsightly.  Or maybe it’s because class actions are such odd ducks.  Our civil litigation system is conceived around concepts of due process.  Yet, a class action defendant can be compelled under threat of state authority to pay money to people who have never proved a claim or an injury, and an absent class member can be bound to the result of a proceeding in which he or she has never appeared.  What could possibly go wrong?

We expect many of you are like us, so we have gathered here a trio of significant class action opinions that caught our eye over the last few weeks. All hail from California.  All are important for unique reasons.  None involves drugs or medical devices, but the opinions are relevant generally to class settlements, expert opinion, and standing to appeal—topics that readily cross over.  So, without further delay, here we go.

Nationwide Class Settlements and Choice of Law: In re Hyundai and Kia Fuel Economy Litig., No. 15-56014, 2018 WL 505343 (9th. Cir. Jan. 23, 2018).  We will start with the opinion that has received the most attention and is probably the most important—the Ninth Circuit’s opinion reversing a nationwide class settlement because the district court did not consider the impact of varying state law. Id. at **12-13.  The procedural history for these multiple class actions resulting in a nationwide settlement is long and dizzying.  The important point is that the district court certified a settlement class that offered benefits to class members (automobile purchasers allegedly defrauded by representations regarding fuel mileage) and substantial fees to class counsel.

However, in certifying the class, the district court overly relied on a well-worn principle—that the inquiry on whether common issues of law predominate is relaxed with a settlement class.  Because the district court was certifying a class for settlement only, it ruled that a choice-of-law analysis was unnecessary. Id. at *11.

That was the district court’s mistake. As the Ninth Circuit explained:

Because the Rule 23(b)(3) predominance inquiry focuses on “questions that preexist any settlement,” namely, “the legal or factual questions that qualify each class member’s case as a genuine controversy,” a district court may not relax its “rigorous” predominance inquiry when it considers certification of a settlement class.  To be sure, when “[c]onfronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, for the proposal is that there be no trial.” But “other specifications of the Rule—those designed to protect absentees by blocking unwarranted or overbroad class definitions—demand undiluted, even heightened, attention in the settlement context.

Id. at *5 (emphasis added, citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997)).  The district court’s error therefore was threefold.  First, it failed to conduct a choice-of-law analysis to determine the controlling substantive law. Id. at *12.  Second, the district court failed to acknowledge that laws in various states materially differed from California law.  Third, the district court did not consider whether material variations in state law defeated predominance under Rule 23(b)(3).

This is not to say that the district court lacks discretion on remand to certify another nationwide settlement class. We do know, however, that the district court will have to subject any newly proposed nationwide settlement to choice-of-law analysis and will have to decide whether state laws differ and whether any differences defeat the predominance of common legal issues.

Class Certification and Admissibility of Expert Opinions: Apple, Inc. v. Superior Court, No. D072287, 2018 WL 579858 (Cal. Ct. App. Jan. 29, 2018). Our second case held that a trial court can consider only admissible expert opinion evidence submitted in connection with a class certification motion and that California has only one standard for admissibility of expert opinion, Sargon Enterprises, Inc. v. University of So. Cal., 55 Cal. 4th 747 (2012).  In other words, Sargon applies at the class certification stage, a point about which we have often wondered, but for which we never had a clear answer.

Until now.  We wrote about Sargon here when it came out in 2012.  The opinion moved California away from its unique “Kelly/Leahy” test and toward a more Daubert-like standard.  In the new California Court of Appeal case, the trial court certified a class of consumers, but expressly refused to apply Sargon to the declarations of the plaintiffs’ experts. Id. at *1.  You will not be surprised to learn that the experts in question were damages experts who offered the opinions that damages could be calculated on a classwide basis.  Id. at **2-5.  Over multiple rounds of briefing, the defendant objected to the opinions and urged the trial court to apply Sargon.  The plaintiffs resisted.

In the end, the trial court ruled that “[t]he issues [the defendant] raises with respect to the materials Plaintiffs’ experts will rely upon in forming their opinions and whether Plaintiffs’ experts’ analyses rely on accepted methodologies and whether the analyses are correct are issues for trial.” Id. at *6.  The court therefore certified the class. Id.

In reversing, the California Court of Appeal issued a very straightforward holding:

[T]he court may consider only admissible expert opinion evidence at class certification.  The reasons for such a limitation are obvious.  A trial court cannot make an informed or reliable determination on the basis of inadmissible expert opinion evidence.  And certifying a proposed class based on inadmissible expert opinion evidence would merely lead to its exclusion at trial, imperiling continued certification of the class and wasting the time and resources of the parties and the court.

Id. at *8 (internal citations omitted). The Sargon case involved expert opinion presented at trial, but the Court of Appeal saw “no reason why Sargon should not apply equally in the context of class certification motions.” Id. at *9.

Moreover, although the plaintiffs argued that the result would have been the same even if the trial court had applied Sargon, the Court of Appeal disagreed.  The experts’ opinions were crucial to the trial court’s order, and there were significant individual issues for each consumer that the experts attempted to brush over. Id. at *11.  The Court of Appeal found that if the trial court had applied Sargon to these opinions, “there is a reasonable chance it would have excluded these declarations and found plaintiffs’ showing to be lacking.” Id. The Court of Appeal found similar deficiencies with the experts’ estimate of the size of the class, making it “difficult to see on the current record how plaintiffs’ formula could be found reliable.” Id. at *12.

Class Actions and Standing to Appeal: Hernandez v. Restoration Hardware, Inc., No. S233983, 2018 WL 577716 (Cal. Jan. 29, 2018). Our final class action opinion for today is Hernandez v. Restoration Hardware, where the issue was whether an unnamed class member has standing to appeal from a class action judgment under California procedure.  The California Supreme Court decided that an unnamed class member does not have standing to appeal without first intervening as a party in the trial court.  In Hernandez, the plaintiff sued a retailer for violating credit card laws, and after several years of litigation, the trial court certified a class and held a bench trial resulting in a substantial award.  An unnamed class member received notice of the class action, but she neither intervened as a party nor opted out.  Instead, her attorney filed a notice of appearance on her behalf. Id. at *1.

The controversy began when class counsel requested a 25 percent fee. Again the absent class member did not formally intervene, but instead appeared through counsel at the fairness hearing and argued mainly procedural points. Id. at *2.  The trial court nonetheless granted the fee request, and the unnamed class member appealed. Id. at *3.

In holding that the unnamed class member was not a “party aggrieved” and had no standing to appeal, a unanimous California Supreme Court followed Justice Traynor’s 75-year-old decision in Eggert v. Pacific Sales S&L Co., 20 Cal. 2d 199 (1942).  The Court’s main point was that absent class members have ample opportunity to become parties of record in class actions, either by filing a complaint in intervention or by filing an appealable motion to set aside and vacate a class judgment. Id. at *4.  This appellant did neither, making her neither a “party” nor “aggrieved.”  The Supreme Court also rejected the invitation to follow Rule 23 of the Federal Rules of Civil Procedure, which gives class members who informally object to settlement the right to appeal. Id. at *5.  The federal approach does not address California’s statutory requirement for appeal, and it cannot be reconciled with the controlling authority, Eggert.  As the California Supreme Court concluded,

Following Eggert and requiring intervention does not discourage unnamed class members from filing a meritorious appeal.  Rather, it continues a manageable process under a bright-line rule that promotes judicial economy by providing clear notice of a timely intent to challenge the class representative’s settlement action.  Formal intervention also enables the trial court to review the motion to intervene in a timely manner. . . .  By filing an appeal without first intervening in the action however, [the appellant] never became an “aggrieved party” of record to the action as our law requires.

Id. at *7. According to the California Supreme Court, this absent class member made the strategic decision to wait and see if she agreed with the result in the trial court, and that was not sufficient to perfect the right to appeal. Id. The Court also reasoned that the prevailing rule protects against wasteful and meritless objections, recognizes the fiduciary duties of class representatives and their counsel, and respects the doctrine of stare decisis. Id. at **7-8.

There you have it—all you need to know about three important decisions. Someday you might need them.

Speed. Some things move faster than others.  When we viewed last August’s solar eclipse, in Tennessee, the Moon’s shadow was moving along the Earth at a rate of about 1,450 miles per hour.  Depending mostly on latitude, your speed may be greater or less.  Indeed, totality was sufficiently exhilarating that we wondered when the would the next eclipse occur in Philadelphia.  These days, one can find practically any information on the Internet, and eclipse locations was no exception.  We found this page and simply typed in a date range, the type of eclipse we were interested in (total), and the decimalized GPS coordinates for Philadelphia (39.94 and -75.10).  Unfortunately, a reasonable date range (± 100 years) showed nothing.  So we used the maximum range available – the entire 5000 years between 1999 BCE and 3000 CE.  That produced 14 Philadelphia total eclipses, but again unfortunately, the last one took place fourteen years before Columbus’ first voyage.  Even more unfortunately, totality will not be visiting Philadelphia until October 26, 2144.  It’s a cool site, since the same page looks like it would work for anywhere in the world.  But for us in Philly, that means we have to keep going to totality; totality isn’t coming to us anytime soon.

Anyway, getting back to speed.  Some legal issues are evolving at breakneck speed right now.  A little over two months ago (11/20/2017) we published a post entitled, “BMS & Nationwide Class Actions” about – you guessed it the probable impact that the personal jurisdiction rulings in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (“BMS”), and Daimler AG v. Bauman, 134 S. Ct. 746 (2014) (“Bauman”), on attempts to bring multi-state class actions in fora other than where the targeted defendant was “at home” and therefore subject to general personal jurisdiction under Bauman.

That post discussed not quite a dozen cases, all decided since Bauman in 2014: McDonnell v. Nature’s Way Products, LLC, 2017 WL 4864910 (N.D. Ill. Oct. 26, 2017); Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017); In re Dental Supplies Antitrust Litigation, 2017 WL 4217115 (S.D.N.Y. Sept. 20, 2017); Spratley v. FCA US LLC, 2017 WL 4023348 (N.D.N.Y. Sept. 12, 2017); Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., 2017 WL 3129147 (E.D. Pa. July 24, 2017); Famular v. Whirlpool Corp., 2017 WL 2470844 (S.D.N.Y. June 7, 2017); Demedicis v. CVS Health Corp., 2017 WL 569157 (N.D. Ill. Feb. 13, 2017); Bauer v. Nortek Global HVAC LLC, 2016 WL 5724232 (M.D. Tenn. Sept. 30, 2016); Kincaid v. Synchrony Financial, 2016 WL 4245533 (N.D. Ill. Aug. 11, 2016); Matus v. Premium Nutraceuticals, LLC, 2016 WL 3078745 (C.D. Cal. May 31, 2016); Demaria v. Nissan N.A., Inc., 2016 WL 374145 (N.D. Ill. Feb. 1, 2016).  Of the eleven only one, Fitzhenry-Russell, allowed a nationwide class action to survive a post-BMS/Bauman personal jurisdiction challenge.

Well, the pace is picking up.  In little over two months, three more cases have been decided, addressing the issue whether class actions defined to include forum non-residents can be brought against non-resident defendants after BMS: DeBernardis v. NBTY, Inc., 2018 WL 461228 (N.D. Ill. Jan. 18, 2018); LDGP, LLC v. Cynosure, Inc., 2018 WL 439122 (N.D. Ill. Jan. 16, 2018); and In re Chinese-Manufactured Drywall Products Liability Litigation, 2017 WL 5971622 (E.D. La. Nov. 30, 2017).  We’ll address these new cases today.

The most recent decision, DeBernardis, involved a putative nationwide class action under a consumer protection statute.  The defendants moved to dismiss, inter alia, “claim[ing] that this Court does not have jurisdiction to hear the case involving non-resident class of plaintiffs” under BMS.  The court agreed.  The plaintiffs relied on the Fitzhenry-Russell decision we critiqued in our prior post, and the Chinese Drywall decision we’ll be examining below, to claim that personal jurisdiction in class actions was somehow exempt from the Due Process limits recognized in BMS.  2018 WL 461228, at *2.  The court in DeBernardis, however, found the reasoning in McDonnell and other decisions from the Northern District of Illinois more persuasive.  Id.  Although calling it a “close question,” the court in DeBernardis refused to distinguish class actions from mass torts for due process purposes.  It did not believe that the Supreme Court would do so:

The Court believes that it is more likely than not based on the Supreme Court’s comments about federalism that the courts will apply BMS to outlaw nationwide class actions in a form, such as in this case, where there is no general jurisdiction over the Defendants.  There is also the issue of forum shopping, which was mentioned in the Chinese DryWall case as a basis for distinguishing mass torts from class actions, but possible forum shopping is just as present in multi-state class actions.

DeBernardis, at 2018 WL 461228, at *2.  Consequently, those portions of the class action that sought to represent “out-of-state plaintiff classes” was dismissed.  Id.

The LDGP decision reached a similar result, but was somewhat less emphatic in its holdings.  Class action plaintiffs in LDGP sought to add new representative plaintiffs, including non-residents, who would serve as representatives of non-resident classes.  2018 WL 439122, at *1 n.1.  Since the amendment would create a situation of non-resident plaintiffs suing non-resident defendants, the defense opposed on BMS jurisdictional grounds.  LDGP held that, since the suit asserted state-law claims under diversity of citizenship, there was no occasion to consider the caveat (137 S. Ct. at 1784) in BMS concerning the Fifth Amendment and federal causes of action.  Id. at *2 n.2 (“the court is exercising diversity jurisdiction and looking to Illinois law”).  Plaintiffs’ other argument, “that because the claims of at least one plaintiff . . . arose out of events taking place in [the forum], defendant is also subject to personal jurisdiction for similar claims brought by other plaintiffs that have no other connection to [the forum],” id. at 3, ran straight into the BMS buzzsaw:

Plaintiffs’ arguments are unconvincing.  Though the nonresidents’ claims are similar to those of resident plaintiffs, the difference that plaintiffs point out is fundamental: the events that lead to the nonresidents’ claims took place outside of [the forum].  The number of would-be nonresident plaintiffs has no bearing on whether those plaintiffs’ claims arise from or relate to the defendant’s activity in the forum.  [quotations from BMS omitted]  Consequently, this court does not have personal jurisdiction over defendant with regard to the claims brought against it by the nonresident plaintiffs.


As already indicated, the Chinese Drywall decision goes the other way.  The defendants against whom a nationwide class action was asserted were not sympathetic – they had defaulted, thumbed their collective noses at the court, and were essentially daring the plaintiffs to try to come after them in China.  2017 WL 5971622, at *4.  The plaintiffs wanted the biggest cudgel they could get – a money judgment on behalf of a nationwide class action − and only weeks before BMS was decided, the MDL court had given it to them.  Id. at *5.  It was not inclined to let BMS take it away, so Chinese Drywall, held:

BMS would not affect the jurisdictional holding in the present case.  BMS was not a class action; it was a “mass tort action” in state court.  This factor materially distinguishes this action from [BMS] because in class actions, the citizenship of the unnamed plaintiffs is not taken into account for personal jurisdiction purposes.

2017 WL 5971622, at *12 (citations and quotation marks omitted).  For this proposition, the decision cited the Fitzhenry-Russell decision discussed in our prior post, and the same two cases that Fitzhenry-Russell had relied upon, AM Trust v. UBS AG, 78 F. Supp.3d 977, 986 (N.D. Cal. 2015), aff’d on other grounds, 681 Fed. Appx. 587 (9th Cir. 2017)); and Senne v. Kansas City Royals Baseball Corp., 105 F. Supp. 3d 981, 1022 (N.D. Cal. 2015).

Just as they were inadequate in Fitzhenry-Russell, these two district court citations, simply don’t suffice to limit a subsequent Supreme Court decision based on Due Process principles.  AM Trust involved the reverse situation – an attempt to assert the residence of class members in favor of personal jurisdiction.  78 F. Supp. at 986. AM Trust dismissed for lack of personal jurisdiction, which hardly supports the massive extension of personal jurisdiction to a nationwide class that Chinese Drywall permitted.  Moreover, the only support AM Trust cited for the proposition, Ambriz v. Coca Cola Co., 2014 WL 296159 at *46 (N.D. Cal. Jan. 27, 2014), was a venue, not a jurisdiction, case.  The same thing is true of Senne:  the court granted a motion to dismiss for lack of personal jurisdiction and relied solely on AM Trust.  105 F. Supp. at 1022.

In short, Chinese Drywall, like Fitzhenry-Russell, could not find any precedent that actually allowed personal jurisdiction based on totally ignoring the “citizenship of the unnamed plaintiffs” in whose favor judgment would eventually be entered.  Ignoring the non-resident class members seems like an extremely slender reed for holding that a brand-new 8-1 United States Supreme Court “straightforward application . . . of settled principles of personal jurisdiction,” BMS, 137 S. Ct. at 1783, does not apply to class actions.

Conscious of its weak precedential basis, Chinese Drywall, 2017 WL 5971622, at *14 (“This Court is cognizant of the superficial similarities between mass tort actions (like in BMS) and a class action”), the opinion seeks to buttress its jurisdiction-expanding result in several ways.  Id. at *14-21.

First – class actions and mass torts are different, the chief basis being that “a class action has different due process safeguards” arising from Fed. R. Civ. P. 23.  Id. at *14 (citing “numerosity, commonality, typicality, adequacy of representation, predominance and superiority”).  Sorry, but those Rule 23 requirements are almost solely to protect the absent plaintiffs’ Due Process rights.  Personal jurisdiction is different.  As BMS concisely put it, “the primary concern is the burden on the defendant.”  137 S. Ct. at 1780.  It is a fallacy to justify denigration of a class action defendant’s Due Process rights by citing Due Process protections intended to protect plaintiffs.  Unfortunately, in MDLs and class actions, it still seems to be a radical proposition that defendants have Due Process rights, too.

Second – “fairness” is “the fundamental purpose of due process.” Chinese Drywall, 2017 WL 5971622, at *15.  In a word, no – not in personal jurisdiction.  Once again, BMS answers this question:

[R]estrictions on personal jurisdiction are more than a guarantee of immunity from inconvenient or distant litigation. They are a consequence of territorial limitations on the power of the respective States. . . .  The sovereignty of each State implies a limitation on the sovereignty of all its sister States. . . .  [E]ven if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

137 S. Ct. 1780-81 (numerous citations and quotation marks omitted).  Fairness may play a role, but fundamentally Due Process restrictions on personal jurisdiction exist because the Constitution created a federal system of government.  Chinese Drywall involved plaintiffs from three states – Louisiana, Florida, and Virginia, 2017 WL 5971622, at *9-11 – and defendants from China.  There is simply no Due Process basis for adjudicating in Louisiana claims involving harm to persons in California, Texas, or New York.  BMS declared the era of that kind of big litigation to be over.

ThirdPhillips Petroleum Co. v. Shutts.  Like plaintiffs in BMS, Chinese Drywall invokes Shutts.  2017 WL 5971622, at *15-16.  Once again, BMS supplies the answer.  “Shutts, which concerned the due process rights of plaintiffs, has no bearing on the question presented here.”  137 S. Ct. at 1777 (citing Id. at 1783-84).  “[T]he [Shutts] Court stated specifically that its ‘discussion of personal jurisdiction [did not] address class actions where the jurisdiction is asserted against a defendant class.’”  Id. at 1783 (quoting Shutts, 472 U.S. at 812 n.3.

Fourth – Congress, in creating Rule 23 (and secondarily Rule 4), permitted nationwide class actions.  2017 WL 5971622, at *17, *18.  Maybe Congress could, under the cited U.S. Const. art. III §2, but it hasn’t.  Rule 23 (and Rule 4) is not a statute, it is only a rule of civil procedure.  As we discussed at length in our prior post, rules of civil procedure are enacted under the Rules Enabling Act, which prohibits any federal rule, even Rule 23, from “abridg[ing], enlarg[ing] or modify[ing] any substantive right.”  28 U.S.C. §2072(b).  The mass creation of personal jurisdiction – personal jurisdiction that the Supreme Court just reiterated was unconstitutional under the Due Process Clause − where none otherwise exists, can only be substantive.  Look at the federal rules.  They don’t even impose pre- or post-judgment interest.  Why?  Because “[p]rejudgment interest in a diversity action is . . . a substantive matter governed by state law.”  In re Exxon Valdez, 484 F.3d 1098, 1101 (9th Cir. 2007).  The federal rules can’t even add interest to a judgment.  They certainly cannot create the personal jurisdiction needed to enter the judgment itself.

Fifth −  The Multidistrict Litigation Act.  Chinese Drywall claims that 28 U.S.C. §1407 is “another example” of the “principle” that congressional action can create personal jurisdiction.  However, §1407 expressly addressed personal jurisdiction in only one provision.  An MDL judge “may exercise the powers of a district judge in any district for the purpose of conducting pretrial depositions in such coordinated or consolidated pretrial proceedings.”  §1407(b) (emphasis added).  Thus the only expansion of jurisdictional power that Congress chose to confer on MDL judges is explicitly limited to facilitating depositions.  The express terms of the MDL Act thus affirmatively refute the jurisdiction asserted in Chinese Drywall.  An MDL judge simply does not “ha[ve] the same pre-trial jurisdiction as the transferor courts where the cases were initially filed.”  2017 WL 5971622, at *20.  The statute confers no additional personal jurisdiction over anyone save with respect to depositions.  The statute “speaks not in terms of imbuing transferred [MDL] actions with some new and distinctive venue character.”  Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 37 (1998); cf. Gelboim v. Bank of America Corp., 135 S. Ct. 897, 904 (2015) (removing “venue” limitation from Lexecon quotation).

Sixth – The Class Action Fairness Act.  2017 WL 5971622, at *18.  CAFA expanded the scope of federal diversity jurisdiction.  It has nothing to do with personal jurisdiction.  CAFA did not purport to create nationwide personal jurisdiction over persons sued by classes subject to its provisions.  E.g., Burgess v. Religious Technology Center, Inc., 600 Fed. Appx. 657, 660-61 (11th Cir. 2015) (affirming dismissal of defendant in CAFA case for lack of personal jurisdiction).  Perhaps Congress could have expanded personal jurisdiction, too, or perhaps not.  Either way, nothing in CAFA purports to grant federal courts personal jurisdiction over non-resident defendants being sued by non-resident plaintiffs, as with the absent class members in Chinese Drywall.

Seventh – Settlement classes.  Chinese Drywall states, accurately, that “courts have often approved national classes in mass tort cases in the settlement context.”  2017 WL 5971622, at *18.  That fact is neither here nor there.  Settlement is consensual, and personal jurisdiction is waivable.  If a non-resident defendant is agreeable to a nationwide settlement, encompassing non-resident plaintiffs, and so are the plaintiffs, personal jurisdiction is not a stumbling block, not even after BMS.

Eighth − Lack of federalism concerns.  Relying primarily on the dissent in BMS, Chinese Drywall denies that these concerns exist in class actions.  2017 WL 5971622, at *19-20 (this case “involves Defendants that have made enough contacts to the forum states to hold them liable there in nationwide class actions”).  This final proposition stuffs the rabbit way down in the hat.  Yes, the defendants have sufficient jurisdictional contacts with the three “forum states” because each one has a resident plaintiff, also a class representative, claiming damages.  But if BMS means anything, it means that the existence of personal jurisdiction over claims by other resident plaintiffs (three transferred plaintiffs from three states) does not support personal jurisdiction over similar claims by non-residents (everybody from everywhere else):

The mere fact that other plaintiffs were prescribed, obtained, and ingested [the product] in [the forum state] − and allegedly sustained the same injuries as did the nonresidents − does not allow the State to assert specific jurisdiction over the nonresidents’ claims.

137 S. Ct. at 1781. This last rationale is, to us, the worst, because it simply tells the world that Supreme Court precedent be damned, these obnoxious defendants are going to get theirs.

Thus, right now the scorecard stands at 12-2 in favor of the proposition that BMS precludes nationwide class actions to the extent that they result in non-resident plaintiffs suing non-resident defendants.  While Chinese Drywall certainly threw against the drywall all the mud it could find, ultimately we don’t think anything sticks.  Fittingly, the critical passage – “an MDL transferee court . . . has personal jurisdiction over nonresident class members and has the power to . . . approve a nationwide class,” 2017 WL 5971622, at *14, has no citation at all.  Moreover, as the steady decisional drumbeat described in this and our prior post indicates, the issue of BMS and nationwide class actions under state law is surely headed for the appellate courts, and we expect the first decisions by the end of 2018.

We like our chances.

You don’t see class actions going to trial very often, but that is what happened in Patricia A. Murray Dental Corp. v. Dentsply International, Inc., and the defendant device manufacturer came away with a defense verdict that binds the class.  The California Court of Appeal’s opinion affirming that result is the topic of today’s post, and it is a nice bookend to a Pennsylvania case we wrote on just a few months ago, Center City Periodontists v. Dentsply International, Inc. Both are class actions alleging that Cavitron ultrasonic dental scalers are not worth what dentists paid for them.

Same devices. Similar allegations.  Somewhat different outcomes.  The Pennsylvania class action bit the dust when the court denied class certification, a result we lauded here.  The California plaintiffs met a similar fate on their first try, but the California Court of Appeal reversed the order denying class certification and remanded for further proceedings.  So the plaintiffs returned to the trial court and got their class certified.  They probably wish now that they had ended it there, or at least accepted whatever class settlement the defendant might have offered.

Why? Because they took their certified class action to trial and lost.

Here is what happened. The class representatives alleged that the Cavitron’s directions say it can be used in “[p]eriodontal debridement for all types of periodontal diseases,” but in fact they cannot because the devices accumulate biofilm in their waterlines and are incapable of delivering sterile water during surgical procedures.  According to the plaintiffs, this was a deceptive business practice under a California consumer statute and a breach of express warranty. Patricia A. Murray Dental Corp. v. Dentsply International, Inc., No. A141377, 2018 WL 345049, at *1 (Cal. Ct. App. Jan. 10, 2018).

Let’s focus on these allegations. Dentists have widely used Cavitron ultrasonic scalers for more than 40 years, and the statement that they can be used in “debridement for all types of periodontal diseases” is likely to deceive consumers only if dentists do not already know that biofilms can accumulate and that the systems cannot dispense sterile water.  That is one of the reasons why the certification of this class was questionable in the first place:  Surely each dentist’s knowledge regarding biofilms and his or her clinical judgment on when to use sterile versus nonsterile water is unique to each class member.

But plaintiffs also surely argued on class certification that all dentists are the same, so the trial court and Court of Appeal hoisted plaintiffs on their own petard. If dentists are all the same, they are the same in that they are all highly trained and already understand that biofilms and related water quality issues are dental facts of life.  For the Court of Appeal, the dentists’ knowledge base was a critical consideration.  That is to say, the Cavitron’s directions as presented “to the general public, could be viewed as representing that the Cavitron is suitable for surgical use. However, the fatal flaw in this reasoning is that the targeted consumers of this product are licensed dental professionals.Id. at *8.

As the Court further explained, the “knowledge base of the targeted consumer” is relevant in determining whether the allegedly deceptive conduct or advertising is “likely to deceive,” which is the standard under California’s statute. Id. On that score, the evidence was overwhelming that the Cavitron’s directions were not likely to deceive a significant portion of licensed dentists because they already knew about biofilms and water quality.  Biofilm contamination of dental unit waterlines was first documented in the 1960s, and as early as 1978 the American Dental Association was suggesting countermeasures. Id. at *3.  The ADA has issued publications on the topic, including a “Statement on Dental Unit Waterlines” in 1995 (and don’t you wish you had that scintillating article to read over a cup of coffee).  California dentists are required to take continuing education classes on infection control every two years.  The plaintiffs’ expert admitted that water quality was a “hot subject” starting in the mid-1990s.  The CDC released recommendations, and then updated them.  The Dental Board of California adopted minimum standards. Id. at **4-6.

You can read the opinion to get the details, but the gist is clear—dentists knew about this stuff and were not “likely to be deceived.” As the California Court of Appeal put it:

Plaintiffs already knew the facts they contend should have been disclosed. They know all dental waterlines contain biofilm and that Cavitrons do not deliver sterile water. [¶]  In sum, plaintiffs failed to carry their burden of proof.

Id. at *10 (emphasis added). This disposed of the deceptive practices claim and also breach of warranty because “[u]nlike the state of the evidence during class certification, the record on appeal establishes substantial evidence that plaintiffs were aware of the biofilm risk posed by Cavitron usage, but they purchased and used it anyway.” Id. (emphasis added).  That’s what it came down to:  The dentists knew, but purchased and used the devices anyway.  They got what they paid for, with their eyes wide open.

We have not been shy in predicting that Bristol-Myers Squibb Co. v. Superior Court, 137 S.Ct. 1773 (2017) (“BMS”), and Daimler AG v. Bauman, 134 S. Ct. 746 (2014) (“Bauman”), should restrain certain abusive class action practices – specifically those involving attempts to bring multi-state class actions in any location other than where the defendant is “at home” and therefore subject to general personal jurisdiction under Bauman.  Note use of “the.”  A nationwide class purporting to sue multiple defendants “at home” in different states shouldn’t be possible at all, as BMS makes crystal clear that each defendant’s personal jurisdiction must be determined separately.

For this reason, we have been careful to note the class action nature of any case that appears on our original post-Bauman and our current post-BMS cheat sheets.  The first of these cases is Demaria v. Nissan N.A., Inc., 2016 WL 374145 (N.D. Ill. Feb. 1, 2016), an automotive consumer fraud case with eighteen class representatives from sixteen states.  Id. at *1.  Following Bauman, the court found no general jurisdiction, also rejecting a claim of consent to general jurisdiction by registering to do business in the forum state.  Id. at *6.  Specific jurisdiction failed as to every would-be class representative except the one resident of the forum state. Id. at *7.  Plaintiffs also raised a “pendent personal jurisdiction” claim similar to that later rejected in BMS:

Under the circumstances of this case, where each plaintiff’s claim is predicated on the law of the particular state where he or she purchased a car and the claims of the other plaintiffs as alleged remain unrelated to anything that transpired in [the forum state], imposing personal jurisdiction for all of the claims because specific jurisdiction may lie as to this one plaintiff’s claims would run afoul of the traditional notions of fair play and substantial justice.

Id. at *8.  The multi-state class action was no more.  “The consumer protection claims for violation of the laws of states other than [the forum state] . . . are dismissed for lack of personal jurisdiction.”  Id. at *14.

Then came Matus v. Premium Nutraceuticals, LLC, 2016 WL 3078745 (C.D. Cal. May 31, 2016), which involved a California consumer fraud class action brought by an in-state resident.  After finding no general jurisdiction under Bauman, id. at *2, the court also found no specific jurisdiction.  The defendant’s website was not oriented towards any particular state, nor did plaintiff claim to have used it to purchase anything from the defendant.  Id. at *3.  Simply “purchas[ing the product] through an unnamed reseller” – that is to say, stream of commerce − was insufficient, notwithstanding other product sales to other in-state residents.  Id. at *4.

Back in Illinois, Bauman also did in a multi-state junk fax class action in Kincaid v. Synchrony Financial, 2016 WL 4245533 (N.D. Ill. Aug. 11, 2016).  Anticipating BMS, the court refused to find specific jurisdiction based on forum contacts with the “putative class members” in the forum state counting as “suit-related contacts.”  Id. at *2.  Plaintiffs’ general jurisdiction claims fell far short of the “outsized proportion” of forum contacts required to establish an exceptional case under Bauman.  Id. at *3.  Nor did the defendant’s initiation (as a plaintiff) of unrelated litigation in the forum state create general jurisdiction.  Id.

Next, in Bauer v. Nortek Global HVAC LLC, 2016 WL 5724232 (M.D. Tenn. Sept. 30, 2016), “five Plaintiffs from four different states” brought a panoply of product liability-related claims against a non-resident defendant, purportedly as a class action.  Id. at *1. Bauman killed the out-of-state class representative’s claims, since there was nothing approaching exceptional case facts.  Id. at *6.  Specific jurisdiction failed because “units [that] were purchased and installed in [the class representatives’] respective . . . Home States” could not possibly “arise out of or relate to” any actions by the defendant in the forum state.  Id. at *6.  “[T]he Amended Complaint does not offer any factual allegations that the out-of-state Plaintiffs had any dealings with the Defendants in the” forum state.  Id. Therefore, “those Plaintiffs and the classes they represent will be dismissed.”  Id.

A third Illinois multi-state class action likewise failed in Demedicis v. CVS Health Corp., 2017 WL 569157 (N.D. Ill. Feb. 13, 2017).  This time, a forum plaintiff sought to assert “purely class-based claim[s] on behalf of others for violations of similar state consumer fraud statutes in other states.”  Id. at *3.  While that claim could have been decided on the basis of non-extraterritoriality (see our post here), Demedicis disposed of them on personal jurisdiction grounds:

Because specific personal jurisdiction is based on claims arising out of a defendant’s conduct within the forum state, this Court has no jurisdiction over claims based on out-of-state consumer fraud laws. . . .  As Defendants argue, “[p]ersonal jurisdiction over the defendant must be established as to each claim asserted.”  Here, Plaintiff has not established personal jurisdiction over the out-of-state claims as he is the sole connection between Defendants and Illinois.

Id. at 4-5 (citations omitted).

In Famular v. Whirlpool Corp., 2017 WL 2470844 (S.D.N.Y. June 7, 2017), nine would-be class representatives from nine states brought consumer protection claims against non-resident defendants.  Decided less than two weeks before BMS, Famular threw out all of the claims by non-resident class representatives against the non-resident defendants for lack of personal jurisdiction.  Anticipating BMS, Famular held that “the Court must determine whether there is general personal jurisdiction over each defendant” individually.  Id. at *3.  By then plaintiffs had given up arguing “exceptional case” general jurisdiction, and the court rejected their consent by virtue of registration to do business argument.  “[T]he Court agrees with defendants that . . . a foreign defendant is not subject to the general personal jurisdiction of the forum state merely by registering to do business with the state, whether that be through a theory of consent by registration or otherwise.”  Id. at *4.  Famular also rejected specific jurisdiction under a “pendent personal jurisdiction” rationale.  Relying in part on Demaria, Famular recognized that “neither specific personal jurisdiction nor pendent personal jurisdiction allow[s a court] to hear plaintiffs’ claims against the foreign defendant based on defendant’s actions occurring solely outside the forum state.  Id. at *7.  Good by non-forum-state class action allegations.

BMS, of course expressly held that specific personal jurisdiction must be decided as to each plaintiff and each defendant separately, so that neither the presence of other, in-state plaintiffs making similar claims, nor the presence of an in-state defendant against which personal jurisdiction could properly be asserted permitted the assertion of personal jurisdiction by non-resident plaintiffs against non-resident defendants.  137 S. Ct. at 1781 (lack of specific jurisdiction “remains true even when third parties (here, the plaintiffs who reside in California) can bring claims similar to those brought by the nonresidents”), 1783 (personal jurisdiction requirements “must be met as to each defendant over whom a state court exercises jurisdiction”; the “bare fact” of a “contract[] with” an in-state resident “is not enough”).  We discussed BMS at length here.

After BMS, a consumer protection class action alleging “violations of the consumer protection laws of forty-eight additional [to the forum] states and two territories” was trimmed to just the forum state.  Plumbers’ Local Union No. 690 Health Plan v. Apotex Corp., 2017 WL 3129147, at *1 (E.D. Pa. July 24, 2017).  There was no general jurisdiction against defendants not “at home” in the forum.  Id. at *4.  Nor could defendants that did not sell in the forum be subject to specific jurisdiction.  Id. at *7-8 (even if stream of commerce jurisdiction is viable, it cannot lie without in-state sales).  All of the claims asserted under the laws of the 50 non-forum jurisdictions likewise bit the dust.

Only [plaintiffs’] Pennsylvania Claims arise out of or relate to Selling Defendants’ sales of generic drugs in Pennsylvania. . . .  [T]he Non-Pennsylvania Claims do not arise out of or relate to any of Selling Defendants’ conduct within the forum state.  Accordingly, the Court cannot exercise specific jurisdiction over the Non-Pennsylvania Claims brought against Jurisdiction Defendants.

Id. at *9 (following Demaria and Demedicis).

Another multi-state (four non-forum jurisdictions) consumer class action was trimmed in Spratley v. FCA US LLC, 2017 WL 4023348, at *1 (N.D.N.Y. Sept. 12, 2017).  General jurisdiction by consent based the non-forum defendant’s registration to do business was rejected.  Id. at *3-4.  BMS precluded adjudication of claims asserted by the non-resident classes.  “[T]he out-of-state Plaintiffs have shown no connection between their claims and [defendant’s] contacts with the forum state.  Therefore, the Court lacks specific jurisdiction over the out-of-state Plaintiffs’ claims.”  Id. at *7.  For similar reasons, plaintiffs’ “different” assertion of “pendent jurisdiction” was also rejected.  Id. (following Famular and Demaria).

In an anti-trust case, In re Dental Supplies Antitrust Litigation, 2017 WL 4217115 (S.D.N.Y. Sept. 20, 2017), non-forum class action allegations based on sales made by a defendant’s independent intermediate sellers were dismissed under Bauman and BMS.  General jurisdiction, by this time was not even argued.  Id. at *3.  The would-be class representatives did not buy any of the defendant’s products in the forum state.  Id. at *6.  BMS precluded assertion of personal jurisdiction based merely on the defendant’s contract with an independent distributor, which in turn sold into the forum state.  Id. at *9. Most significantly, Dental Supplies firmly rejected plaintiffs’ argument that personal jurisdiction requirements should be loosened in the class action context.  “A putative class representative seeking to hale a defendant into court to answer to the class must have personal jurisdiction over that defendant just like any individual litigant must.”  Id. at *6 (quoting Newberg on Class Actions §6:25 (5th ed. 2011)).

Plaintiffs attempt to side-step the due process holdings in [BMS] by arguing that the case has no effect on the law in class actions because the case before the Supreme Court was not a class action.  This argument is flawed.  The constitutional requirements of due process does not wax and wane when the complaint is individual or on behalf of a class.  Personal jurisdiction in class actions must comport with due process just the same as any other case.

Id. at *9 (citation omitted).

Most recently, in McDonnell v. Nature’s Way Products, LLC, 2017 WL 4864910 (N.D. Ill. Oct. 26, 2017), the plaintiffs brought class action claims under “seven states’ consumer fraud laws” in addition to the forum state, against a non-resident defendant.  Id. at *1. Bauman and BMS killed the non-forum claims:

[A]ny injury [that non-resident plaintiffs] suffered occurred in the state where they purchased the products. Because the only connection to [the forum] is that provided by [resident plaintiff’s] purchase . . ., which cannot provide a basis for the Court to exercise personal jurisdiction over the claims of nonresidents where [defendant] has no other connection to this forum, the Court dismisses all claims . . . brought on behalf of non-[forum]residents or for violations of [other states’ consumer protection] law without prejudice.

Id. at *4.

Thus, we are now running out of fingers for the cases that have refused, on post-Bauman personal jurisdictional grounds to allow class actions where the effect would be to allow non-resident class members to sue a non-resident corporate defendant.  There is good reason for this.  The Federal Rules of Civil Procedure, and in particular Rule 23, being “rules” are prohibited by the Rules Enabling Act from “abridg[ing], enlarg[ing] or modify[ing] any substantive right.”  28 U.S.C. §2072(b).  See, e.g., Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 367 (2011) (“[b]ecause the Rules Enabling Act forbids interpreting Rule 23 to ‘abridge, enlarge or modify any substantive right,’ a class cannot be certified on the premise that [a defendant] will not be entitled to litigate its statutory defenses to individual claims”) (citations omitted).  Jurisdiction is, if anything, even more “substantive” than the defenses in Dukes.  Without jurisdiction, a plaintiff cannot litigate anything at all.  Nothing could be more “substantive” than to create jurisdiction where none would otherwise exist.

Fundamentally, this is why we disagree with the one decision, Fitzhenry-Russell v. Dr. Pepper Snapple Group, Inc., 2017 WL 4224723 (N.D. Cal. Sept. 22, 2017) that goes the other way.  Plaintiffs in Fitzhenry-Russell purported to bring a “nationwide” class action, even though all of them were California residents and all the causes of action were under California law . Id. at *1, 5.  The court held that because “citizenship of the unnamed plaintiffs is not taken into account for personal jurisdiction purposes,” it was perfectly all right for the action to adjudicate claims by non-resident class members – who made up a “lopsided” 88% of the class – against a non-resident corporation.  Id. at *5.  Fitzhenry-Russell refused an “extension of [BMS] to class actions” by supposing that “this may be one of the those contexts” in which “[n]onnamed class members . . . may be parties for some purposes and not for others” to jurisdiction.  Id.  That’s all there is – a “may be.”  Moreover, the case quoted for that proposition, Devlin v. Scardelletti, 536 U.S. 1, 9-10 (2002), dealt with intervention, not any form of jurisdiction.

Fitzhenry-Russell cited no class action case – let alone one since Bauman (cf. In re Chinese Manufactured Drywall Products Liability Litigation, 894 F. Supp. 2d 819, 858 (E.D. La. 2012) (severing non-resident class member claims in identical situation pre-Bauman), aff’d, 742 F.3d 576 & 753 F.3d 521 (5th Cir. 2014)) – that had permitted personal jurisdiction in a litigation tourist situation, where non-resident absent class members were suing a non-resident corporation.  It found Plumbers’ Local. 690 “unpersuasive” because it supposedly contained “no analysis” of BMS.  2017 WL 4224723, at *5 n.4.  That is a misleading characterization because Plumbers’ Local. 690 devotes four full paragraphs to the issue, although discussing Demaria and Demedicis rather than BMS.  2017 WL 3129147, at *9.  Moreover, other than the footnote reference to Plumbers’ Local. 690, Fitzhenry-Russell addresses neither the other class action personal jurisdiction cases we have discussed in this post (although it must have been aware of at least Demaria and Demedicis) nor the Rules Enabling Act.  We think that the adjective “unpersuasive” more properly applies to Fitzhenry-Russell itself.

Thus, based on what our research has found, we think that our prediction, made shortly after Bauman, that personal jurisdiction would become a major obstacle to nationwide class actions based on state laws is accurate and has even more force after BMS.  Whenever faced with a state-law class action that is structured so that a non-resident (that is, not “at home” under Bauman) corporate defendant would be facing claims brought by non-resident class members (whether named or unnamed), the defendant should strongly consider moving to dismiss that non-resident claims for lack of personal jurisdiction.

Just two days ago, Bexis lowered the boom on the Third Circuit’s recent decision in Cottrell v. Alcon Labs, ___ F.3d ___, 2017 WL 4657402 (3d Cir. Oct. 18, 2017).   In a 2-1 decision, the Cottrell court permitted the plaintiffs to proceed on the notion that making eye drop drips bigger than they have to be is a consumer protection violation.  To Bexis’s eyes, that decision was blind to the lack of standing, the absence of any “substantial economic injury,”  and the FDA’s non-approval of eye drop drips of the “smaller” size plaintiffs claim it is somehow illegal not to make under state law.  It turns out that there is someone else out there even more unhappy with the Cottrell decision than Bexis: the defendant.  Now we have the defendant’s Petition for Rehearing and Rehearing En Banc, which makes an insightful and compelling case for undoing the panel’s decision.


Two preliminary matters are worthy of comment before we tell you what the Petition said. First, we have been so unkind about the Third Circuit’s error in the Fosamax case that we managed to attract the attention of the excellent CA3 blog.   In that blog, the author wondered whether our dissection of Fosamax was perhaps a bit more violent than necessary.  The author also wondered whether we were coming close to accusing the court of bad faith.  Yes to the former, but definitely No to the latter.  As we told the CA3 blog, we took issue with what we saw as bad reasoning, but never-ever thought there was any bad faith.  (The CA3 blog was generous enough to print our disclaimer.  Thanks for that.)  By and large, we are mighty proud of our home circuit.  We know several of the judges, and every one of them is honorable, hard-working, and much smarter than we are.  Sometimes we are not going to agree with the court’s decisions.  Luckily for us we work in a profession and live in a country where debate and criticism are allowed.  Second, succeeding on a petition for rehearing and rehearing en banc is not easy.  When we clerked for Ninth Circuit Judge William Norris, it seemed there was a presumption against such petitions.  Who wants to admit they were wrong?  And yet we remember one time our judge was on a panel where things strayed from the norm.  Another member of the panel (who will remain unnamed) loved to decide cases before oral argument and draft a memorandum disposition rather than a bench memorandum.  This judge prided himself on having almost no backlog.  He pushed for deciding a particular contract dispute via a mere memorandum disposition, not a published opinion, because he saw the issues as being too obvious and insignificant for the Federal Reporter.  And so a memo dispo issued.  But then the losing party filed a petition for rehearing that was not only insistent, but it made a lot of sense.  We met with our Judge in his chambers to talk it over.  The telephone rang.  It was the third member of the panel, who began by saying, “Bill, I think maybe we got one wrong.”  The two judges confabbed, and then set about persuading the third to change his mind and change the outcome.  It took some arm-twisting, but in the end, justice was done.  A mistake led to a proud moment.  By the way, the Ninth Circuit Judge who called our Judge was Anthony Kennedy.  He is now on the U.S. Supreme Court.  So whenever we hear criticisms of Justice Kennedy for fence-sitting, or for grounding some of his opinions in “the right to define one’s own concept of existence, of meaning, of the universe, and of the mystery of human life” or, much worse, international law, we recall his extraordinary integrity and modesty, and how he was supremely interested in getting things right.


Back to the Cottrell Petition. The main points in favor of revisiting the Third Circuit’s decision are that it is contrary to Finkelman v. National Football League, 810 F.3d 187 (3d Cir. 2016), it “radically expands Article III standing,” and that it directly conflicts with Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017).  Moreover, the plaintiff’s inherently speculative theory of injury in fact was rejected by federal courts in Massachusetts and Missouri.  (When a court comes out with a more pro-plaintiffy position than courts in Massachusetts and Missouri, that’s really saying something.)  That theory was also rejected by the district court in Cottrell.  And then the Third Circuit reversed that rejection.  


Remember that the Cottrell plaintiffs did not claim that the medications caused them physical harm or were ineffective in treating their eye conditions, or that the defendants misrepresented or omitted any information about the medications or the number of doses expected.  Rather, the plaintiffs simply insist that smaller eye drops would have cost them less.  How is that any different from the Third Circuit’s earlier, controlling Finkelman case, where the plaintiffs had purchased two Super Bowl tickets on the resale market for $2,000 each, and contended that the National Football League had violated New Jersey’s ticket law by not offering at least 95% of tickets to the general public and instead withholding most tickets for league insiders?  The plaintiff in Finkelman alleged that the NFL’s conduct had caused him injury by reducing the supply of tickets, thereby driving up the cost of tickets on the resale market.  The Third Circuit in Finkelman held that the plaintiff lacked standing because the injury was wholly speculative.  Sure, maybe the NFL’s withholding of tickets increased prices on the resale market, but “it might also be the case that it had no effect on the resale market,” and indeed tickets might even have been more expensive in plaintiff’s hypothetical resale market, as members of the general public may have greater incentives than league insiders to resell at high prices.  (We have to admit that, as residents of Philadelphia, where the local team has the best record in the entire NFL, the availability of Super Bowl tickets is a much, much bigger issue to us right now than the size of eye drops.)

The Petition makes the point that, just as in Finkelman, other market effects might have produced a result very different from what the plaintiffs theorized.  In Cottrell, the plaintiffs essentially presumed that the defendants price their products solely according to volume, such that “changing the eyedropper size would not change the price of the medicine, while extending the useful lifespan of each bottle, driving down [the plaintiffs’] aggregate costs.” But it is just as likely that use of smaller drops would prompt use of different sized containers, or that smaller drops would result in a higher price – because of more doses – for the same container.  Who knows?  All we do know is that the allegations of the complaint do not “affirmatively and plausibly” add up to an “injury” caused by the defendant’s conduct.  

The Petition nicely captures the absurdity of the Third Circuit’s analysis, under which consumers suffer Article III injury from “unfairness” whenever they “walk into a supermarket and buy a product — from toothpaste, to ketchup, to deodorant, to hairspray — so long as they can then conceive of a way that the product might be dispensed more efficiently.”  The Petition also nicely exposes the weakness in the Third Circuit’s effort to distinguish away the Seventh Circuit decision in Eike.  According to the Cottrell majority, Eike “seemed to begin its standing analysis with a determination that the plaintiffs had ‘no cause of action.’” But while it is true that the Seventh Circuit did (correctly) conclude that the plaintiffs had “no cause of action,” the Seventh Circuit also separately held that there was no Article III injury, without ever suggesting a causal connection between the two.  Eike, 850 F.3d at 318.  The Seventh Circuit got it fundamentally right when it held that the fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; “it is just a regret or disappointment.” 

As residents in, and fans of, the Third Circuit, the Cottrell decision certainly is cause for “regret and disappointment.” We called this post a “second look” at the eye-drop litigation.  It is the second look we have taken at the Cottrell case.  We hope that the Third Circuit takes a second look.      



Last month we brought you word of an excellent result (preemption) in a ridiculous case − a class action claiming that the drops in eye-drops are too big.  That decision was in accord with an earlier decision likewise dismissing such claims on preemption grounds. See Thompson v. Allergan USA, Inc., 993 F. Supp.2d 1007 (E.D. Mo. 2014) (discussed here).

However, there is another ground on which these bottom-feeding actions have been dismissed – lack of sufficient injury to support standing.  After all, the concept of some sort of ideal “price” for a product, above which it is improper to charge is a will-o-wisp, apparently knowable only to plaintiff-side experts (just ask them, they’ll tell you).  This is called “benefit of the bargain” by such experts.  Courts tend to use a different description – “absurd.”

[Plaintiff] received the drug she was prescribed, the drug did the job it was meant to do . . ., and it caused no apparent physical injuries. Under such circumstances, there could be no ascertainable loss. . . .  The Court believes Plaintiffs’ proposed liability theory, which requires no demonstrable loss of any benefit, would lead to absurd results and holds that Plaintiffs fail to state a claim as a matter of law.

In re Avandia Marketing Sales Practices & Products Liability Litigation, 639 F. Appx. 866, 869 (3d Cir. 2016) (citations and quotation marks omitted), affirming, 100 F.Supp.3d 441, 446 (E.D. Pa. 2015), also holding  “absurdity is inherent in the nature of Plaintiff’s claimed loss” because it was “based only on the idea that [the product] is inherently worth some unspecified amount less than whatever Plaintiff might have paid for it”).

That was essentially how the Seventh Circuit reacted to these same eye drop allegations in Eike v. Allergan, Inc., 850 F.3d 315 (7th Cir. 2017) (discussed here).  We described the absurd theory that the plaintiffs were pursuing in our Eike post, and because we’re lazy, we’ll simply repeat that here:

The plaintiffs sued pharmaceutical manufacturers of eye drops used for the treatment of glaucoma because the drops were bigger than they needed to be.  The theory is that the plaintiffs were paying more than they would have if the drops were smaller.  The plaintiffs alleged no conspiracy among the defendants.  This was not an antitrust case. . . .  Nor did the plaintiffs allege any misrepresentations.  Rather, the plaintiffs simply sought, because they thought it would be less expensive, a smaller dose product that nobody made.

The Seventh Circuit essentially agreed: “The fact that a seller does not sell the product that you want, or at the price you’d like to pay, is not an actionable injury; it is just a regret or disappointment − which is all we have here, the class having failed to allege ‘an invasion of a legally protected interest.’”  850 F.3d at 318 (citations omitted).  Accord Carter v. Alcon Laboratories, Inc., 2014 WL 989002, at *4-5 (E.D. Mo. March 13, 2014) (also dismissing identical claim for lack of any cognizable injury).

Apparently, however, the inherent triviality of that claim is no deterrent to today’s class action lawyers, who seem to have nothing better to do than measure the comparative value of eye drop drips.  After several attempts, they seem to have found a couple of judges credulous enough to allow one of these non-injury cases to survive – at least on the standing/injury issue.  That’s today’s case, Cottrell v. Alcon Labs, ___ F.3d ___, 2017 WL 4657402 (3d Cir. Oct. 18, 2017).   Looking to the “scientific consensus on eye drop size,” the majority is willing to let plaintiffs proceed on the notion that making eye drop drips bigger than they have to be is a consumer protection violation.  Id. at *2.  They may proceed even though “no defendant has reduced their products’ drop sizes,” and thus there is no competing product, priced at any price, against which to ascertain the plaintiffs’ purportedly “substantial economic injury.”  Id.  Nor does it appear that the FDA has ever approved – or even had submitted to it – eye drop drips of the “smaller” size plaintiffs claim it is somehow illegal not to make under state law.

The standing question focused on “injury in fact,” and as the party bringing the claim, plaintiffs had the burden of proving standing.  Id. at *4.  To find standing here, the majority (conceding that the district court’s no-standing analysis had “some persuasive appeal”) went deep into the weeds – breaking “injury in fact” into various “components.”  Id. at *5.  The first was a “legally protected interest.”  Conveniently, this allowed the Cottrell majority to base their result on something that prior precedent had “not defined” or even “clarified whether [it] does any independent work in the standing analysis.”  Id.  Presto!  A clean slate on which to build a standing castle in the air.  “[W]hether a plaintiff has alleged an invasion of a ‘legally protected interest’ does not hinge on whether the conduct alleged to violate a statute does, as a matter of law, violate the statute.” Id.  Impressive – this is a holding that the merits don’t matter. We’ll come back to that.

The second aspect of Cottrell’s drawing on a clean slate is “that financial or economic interests are ‘legally protected interests’ for purposes of the standing doctrine.”  Id. at *6.  Well, duh.  That seems like a platitude.  Third, “legally protected interests” can be created by statute, including a state statute.  Id.  That also sounds platitudinous – except Cottrell separates that proposition from any injury.  That comes in the fourth factor – that “interest must be related to the injury in fact” as opposed to being “a byproduct of the suit itself.”  Id.

Having set up this thicket on its clean slate, the court’s actual analysis of the injury requirement’s application to overly large eye drop drips takes only a paragraph:

Plaintiffs claim economic interests: interests in the money they had to spend on medication that was impossible for them to use.  They seek monetary compensation for Defendants’ conduct that they allege caused harm to these interests.  Plaintiffs’ claimed interests arise from state consumer protection statutes that provide monetary relief to private individuals who are damaged by business practices that violate those statutes.  These claims fit comfortably in categories of “legally protected interests” readily recognized by federal courts.

Id. (citing Cantrell v. City of Long Beach, 241 F.3d 674, 684 (9th Cir. 2001)).  Wow!  At that level of generality, any claim that anything for any reason should have been made differently or priced differently confers standing.  That no such alternative product exists is of no bearing.  This breathtakingly broad holding means that the amount of harm to the “economic interest” being undefinable has no bearing.  That the “business practices” at issue were a consequence of the FDA-approved design of the product has no bearing.  These are presumably “merits questions” that court already divorced from standing by putting that rabbit in the hat in its “first” stroke on the blank slate – that merits don’t matter.

We’ve seen this sort of credulous avoidance of merits questions before in class actions before.  Remember how courts for decades misinterpreted Eisen v. Carlyle & Jacqueline, 417 U.S. 156 (1974), to find that class certification can’t look at the merits?  That was finally interred once and for all in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 & n.6 (2011), but now we see it popping up again on this supposed standing blank slate.

It’s not really a blank slate, however.  The Third Circuit, and many other courts, have held that TwIqbal “plausibility” requirements apply to the analysis of standing questions.  “With respect to 12(b)(1) motions in particular, the plaintiff must assert facts that affirmatively and plausibly suggest that the pleader has the right he claims.”  In re Schering Plough Corp. Intron/Temodar Consumer Class Action, 678 F.3d 235, 244 (3d Cir. 2012) (applying TwIqbal pleading requirements to standing analysis in RICO drug pricing class action).  TwIqbal “teach that standing cannot rest on mere ‘legal conclusions’ or ‘naked assertions.’”  Finkelman v. National Football League, 810 F.3d 187, 194 n. 55 (3d Cir. 2016) (citation and quotation marks omitted).

Because Lujan mandates that standing “must be supported in the same way as any other matter on which the plaintiff bears the burden of proof,” it follows that the TwomblyIqbal facial plausibility requirement for pleading a claim is incorporated into the standard for pleading subject matter jurisdiction.  Lujan, 504 U.S. at 561.  Therefore, we join many of our sister circuits and hold that when evaluating a facial challenge to subject matter jurisdiction under Rule 12(b)(1), a court should use TwomblyIqbal’s “plausibility” requirement, which is the same standard used to evaluate facial challenges to claims under Rule 12(b)(6).

Silha v. ACT, Inc., 807 F.3d 169, 174 (7th Cir. 2015) (citing Schering Plough along with many other cases).  “Just as the plaintiff bears the burden of plausibly alleging a viable cause of action, so too the plaintiff bears the burden of pleading facts necessary to demonstrate standing.”  Hochendoner v. Genzyme Corp., 823 F.3d 724, 730 (1st Cir. 2016) (Iqbal citation omitted) (also providing string citation of TwIqbal standing cases).

Along these lines, we also point out that the sole citation in Cottrell supporting its one-paragraph injury in fact analysis, Cantrell, supra, is a Ninth Circuit case, and the Ninth Circuit is the only circuit that does not follow TwIqbal in standing cases. See Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th Cir. 2011) (cited as lone exception in Silha).

Having thus improperly insulated the inherently ridiculous nature of the alleged injury from TwIqbal inspection on standing questions – without even mentioning TwIqbalCottrell then disagrees with Eike for precisely that reason.  To do so, Cottrell splits another hair – distinguishing business practices that are “unfair” under a consumer protection statute from those “that are fraudulent, deceptive, or misleading.”  2017 WL 4657402, at *6.

The plaintiffs in Eike explicitly alleged that the defendants’ practices in manufacturing and selling eye medication were “unfair”. . . .  The Court was obliged to take these allegations as true for purposes of the standing inquiry.


That is, to be charitable, garbage. “Unfair” by itself is your classic legal conclusion.  Under TwIqbal, legal conclusions have to be accompanied by some factual basis to survive dismissal.  Eike rightly pointed out that, in the absence of any allegation of anything false or misleading about how these products were marketed, an “unfairness” allegation amounted to mere “dissatisfaction with the defendants’ products or their prices.”  2017 WL 4657402, at *6 (describing Eike).

Having thus improperly given the plaintiffs’ inherently implausible theory on “legally protected interest a TwIqbal free pass, Cottrell also waved it through the other injury in fact factors it created.  Most interestingly – because of the dissent – Cottrell attempted to distinguish a prior standing precedent, Finkelman, supra.

[Plaintiffs’] pricing theory is far less speculative than . . . the theory of financial harm we rejected in Finkelman . . ., [where t]he plaintiff claimed that this policy reduced the number of tickets available in the resale market.  Under the basic economic principle of supply and demand then, the policy resulted in an inflated ticket price in the resale market, according to the plaintiff.  We rejected plaintiff’s theory, as the plaintiff pled no facts to support their assertion that [defendant’s] policy would actually reduce the number of tickets in the resale market.

Id. at *9.  Since a “reduced size” of the eye drop drip (produced by a different sized hole in the tip) was the “only change from the status quo” that plaintiffs’ theory in Cottrell required in the majorities eyes, it was less “speculative” than the too-remote theory in Finkleman, and thus “sufficient to satisfy the injury-in-fact requirement.”  Id. at *10.

The dissent saw things differently.  Finkleman was dispositive (“I believe that Finkelman all but decides this case”).  Cottrell, 2017 WL 4657402, at *12 (dissenting opinion).  “We properly recognized that markets operate in complex ways.”  The market forces in Finkleman “made clear that any potentially unlawful conduct by the [defendant] did not necessarily result in higher prices to the plaintiff” and “concluded that we have no way of knowing whether [defendant’s] withholding of tickets would have had the effect of increasing or decreasing prices on the secondary market.”  Id.

[F]or purposes of analyzing economic injuries in the context of marketwide effects, we cannot do precisely what the plaintiffs here ask of us:  isolate and change one variable while assuming that no downstream changes would also occur.  These cases . . . reflect courts’ skepticism about plaintiffs’ ability to satisfy the case or controversy requirement of Article III by relying on such imaginative economic theories.  Thus, contrary to the Majority’s assertion, the plaintiffs’ pricing theory does in fact depend on exactly the sort of presumption rejected by us and by other courts − namely, the presumption that no other aspects of the market would change once the defendants’ conduct did. . . .  Finkelman makes clear that [standing analysis] distinguishes “between allegations that stand on well-pleaded facts and allegations that stand on nothing more than supposition.” . . .  The plaintiffs . . . ask us to assume certain facts about other actors’ behavior − exactly the sort of assumption that cannot be proven at trial. Accordingly, I would reject the plaintiffs’ alleged economic injury as overly speculative and untenable under existing precedent.

Id. at *13 (multiple citation footnotes omitted).

The Cottrell dissent goes on to discuss multiple reasons why plaintiffs’ attenuated economic assumptions are “a particularly bad fit for the market for pharmaceuticals.”  Id.

  • Pharmaceuticals are not priced “by volume;” “unit-based pricing is too one-dimensional for the [pharmaceutical] marketplace.”
  • Pharmaceutical pricing is “value-based”; “measured in part by effective doses.”
  • This pricing “shift . . . sever[s] the link between volume and price upon which the plaintiffs’ alleged injury depends.”
  • “[T]he price of each bottle could actually increase if each bottle provided more doses.”
  • Because plaintiffs’ assumption “does not reflect market conditions and pressures in the pharmaceutical industry,” it would “draw an unreasonable inference about the downstream consequences of” the design change they are demanding.
  • “[U]nreasonable” inferences cannot be accepted “at face value.”

Id. at *13-14 (dissenting opinion).

The dissent is of the view that the majority’s decision conflicts with Finkleman.  We agree, but go further.  We think the entire construct in Cottrell conflicts with prior Third Circuit precedent applying TwIqbal in standing cases because of its holding that the merits – and thus the facts that must be pleaded to establish the “plausibility” of the claim on the merits – don’t matter in standing cases.  Cottrell thus represents, with In re Fosamax (Alendronate Sodium) Products Liability Litigation, 852 F.3d 268 (3d Cir. 2017), the second abrupt pro-plaintiff lurch by the Third Circuit this year, which is less surprising than it might seem, considering the both of the judges in the majority in Cottrell also decided Fosamax.

About the only good thing that can be said about Cottrell is that it did not purport to decide that preemption issue that has also defeated these half-baked dropper drip size allegations.  Id. at *11.  That argument is that design changes affecting the dosage of medication delivered – which is necessarily what plaintiffs’ drop size allegations depend on – are “major” changes that require prior FDA approval, and thus are “impossible” to carry out with the immediacy that state law demands. See Gustavesen v. Alcon Laboratories, Inc., ___ F. Supp.3d ___, 2017 WL 4374384, at *5 (D. Mass. Sep. 29, 2017), and Thompson, 993 F. Supp.2d at 1013-13, as discussed in our prior posts.


Normally, when we think of decisions relating to medical monitoring, the issue is whether a state will recognize medical monitoring for uninjured people as a separate claim or relief that can be sought under an existing theory of recovery.  Just last month, we noted that it looked like the issue had been largely resolved against allowing such claims or relief.  Sometimes, the issue is whether the plaintiff sufficiently pleads the elements of a medical monitoring claim in a jurisdiction that recognizes it.   Today’s case involves a different consideration of medical monitoring, looking at whether the requirements of Fed. R. Civ. 23 are met and a medical monitoring class can be certified.  There is quite a bit to Barraza v. C.R. Bard Inc., No. CV16-01374-PHX-DGC, 2017 WL 3976720 (D. Ariz. Sept. 11, 2017), and we are only going to focus we find most interesting.

Barraza comes from an IVC Filter MDL, which has been the source of some other decisions that drew our interest, and ultimately focused on the question of whether class certification was appropriate for eleven separate classes, each for the residents of a state that has recognized medical monitoring and had a resident proposed class representative.  Each class sought medical monitoring for people with one of seven of the defendant’s IVC filter devices in-place (after being implanted at any time) who had not brought a case alleging personal injury.  In other words, these were to be classes of uninjured plaintiffs with on-going use of the allegedly defective devices.  (Note that the proposed class definition does not expressly exclude all patients claiming current complications, but the court addresses the case as though it presents a “no injury” class, so we will too.)  Keep in mind that a common reason for rejecting medical monitoring has been that the tort system is predicating on an actual injury, giving rise to accrual of claims, damages that can be determined by somewhat predictable rules, a duty to mitigate, etc., and people who have not have an actual injury do not fit well within the existing tort system.  Someone with an actual injury, however, may be entitled to compensation for on-going medical care to minimize the progression or sequelae of the injury.  With that in mind, we turn to the evaluation of whether individual considerations or common issues predominate in trying to decide the elements of medical monitoring—as identified by the plaintiffs based on an amalgam of the law of the eleven states.

We will focus on the elements that mattered to the outcome.  While plaintiffs argued that negligent design and failure to warn could be decided on common evidence, the court disagreed.  The seven devices were designed and launched over a more than ten year period and exhibited different design features, manufacturing specifications, and testing.  Similarly, the labeling for the devices differed depending on the date and product, but seemed to address the risks that plaintiffs claim required monitoring.  “Trial of a single class representative’s claim would not suffice because the representative would have received a different filter with different warnings than many members of the class.”  Similarly, the application of affirmative defenses like assumption of the risk and contributory negligence would also turn on individual evidence about what the plaintiff and her doctor knew and did.  The court noted how some of the named plaintiffs—putative class representatives—had ignored recommendations for medical follow up and removal of the device they claim subjects them to an increased risk of harm requiring monitoring.  Thus, individual considerations in evaluating liability predominated and “the classes cannot be certified simply because Plaintiffs allegedly face a common risk and need medical monitoring.”

The related issues of whether the proposed monitoring was necessary and different from the treatment the plaintiffs would otherwise receive also turned on individual considerations.

Here, the amount of monitoring a class member would require in a normal course of her treatment and illness, without the monitoring sought in this case, is an individualized inquiry into the medical needs and ongoing course of treatment for each class member.

For instance, some named plaintiffs were already undergoing monitoring of their own doctor’s devising with different levels of compliance.

Even what law would apply to classes defined by the state of residency involved individual considerations as the state where each plaintiff’s implant surgery occurred, the state where the injury occurred, and the state where the defendant designed the products and drafted labeling could affect the law that would apply.

Put it all together and plaintiff did not come particularly close to satisfying the predominance requirement and class certification under Fed. R. Civ. P. 23(a).  (The plaintiffs also tried for certification of a 23(b)(2) class, but that was pretty much a non-starter as the relief sought—paying for monitoring—is not injunctive.)  Some of the result here is likely due to the plaintiffs’ insistence on broad classes and the selection of putative class representatives with warts, but Barraza also illustrates how class treatment of medical monitoring claims should be a long shot even when state law allows monitoring for uninjured people.

We’ve never liked the “cy pres” concept in the context of class actions. We opposed it (not terribly successfully) when the ALI was considering it.  We believe that taking money supposedly representing “damages” owed to class members and giving it to strangers is inherently substantive and thus not allowed by Fed. R. Civ. P. 23.  We also have yet to see any substantive source of court authority to do that.  To us, a cy pres settlement is an indicator of a lawsuit that should never have been brought, as it is an admission that even without any opposition the plaintiff is unable to prove damages or causation.  Cy pres is merely a dodge to make settlements look larger so that class counsel fees can likewise be inflated.

We have also noted the complete dearth of United States Supreme Court precedent supporting the use of cy pres in class actions, and further that the concurring opinion in the certiorari denial in Marek v. Lane, 134 S.Ct. 8 (2013), indicated interest on (at least) the part of Chief Justice Roberts in examining the validity of this doctrine.

We think that the split Ninth Circuit decision in In re Google Referrer Header Privacy Litigation, ___ F.3d ___, 2017 WL 3601250 (9th Cir. Aug. 22, 2017) (“GRHPL”), might just be the appropriate vehicle for seeking the Supreme Court review suggested in Marek.  Here’s why.

GRHPL had nothing to do with drugs or medical devices, but everything to do with cy pres abuse.  It was a privacy action that challenged the defendant’s storage and use of the search history of persons who had voluntarily used its free web searching algorithms.  Substantively this is, of course, complete garbage, since the quid pro quo of Google (and virtually every one of its chief competitors) making these search websites available for free is its ability to monetize the consumer preference data thereby created.

Would you rather pay to search the Internet?

We didn’t think so.

Enough on the merits. GRHPL was a privacy class action.  Those are never tried.  They are either dismissed or they settle.  This one settled, early, “before formal class certification.”  Id. at *3  The total settlement amount was $8.5 million – in return for a “release of the claims of the approximately 129 million people” who had used the defendant’s search capabilities over a period of almost eight years.  2017 WL 3601250, at *2.  The only other “benefit” for the class, if one could call it that, was the defendant “provide information on its website disclosing how users’ search terms are shared with third parties.”  Id.  As far as what the defendant actually did, the alleged violation that supposedly spawned the litigation, the GRHPL opinion mentioned no changes at all.  “Of the $8.5 million settlement fund, approximately $3.2 million was set aside for attorneys’ fees, administration costs, and incentive payments to the named plaintiffs.” Id. That’s right, class counsel and their hangers-on stood to receive 38% of a recovery that never came close to going to trial.  See id. at *3 (referring to settlement “at this early stage of litigation”).

That outcome was perfectly OK with the majority in GRHPL, which rejected the “view that the settlement should have been valued at a lower amount for the purposes of calculating attorneys’ fees simply because it was cy pres–only.”  Id. at *8.  This holding is, of course, in direct conflict with Judge Posner’s decision (discussed in our earlier post) that cy pres awards should be “excluded” altogether from counsel fee calculations because they “d[o] not benefit the class.” Pearson v. NBTY, Inc., 772 F.3d 778, 781, 784 (7th Cir. 2014).  Circuit conflicts such as this are the stuff of which Supreme Court review is made.

Having settled the litigation, what did the representative plaintiffs and class counsel do to provide recovery to the class itself?  Nothing.  Another thing that makes GRHPL an excellent candidate for Supreme Court review is the absence of other issues besides cy pres.  In this case 100% of the settlement went to “cy pres recipients” and 0% to the purported class:

The remaining $5.3 million or so was allocated to six cy pres recipients, each of which would receive anywhere from 15 to 21% of the money, provided that they agreed “to devote the funds to promote public awareness and education, and/or to support research, development, and initiatives, related to protecting privacy on the Internet.


The entire panoply of extreme cy pres abuse is present in GRHPL.  As we mentioned above, use of cy pres is an admission that even when the defendants cease to oppose the litigation, plaintiffs are unable to prove basic elements of any cause of action – causation and damages.  If this case were not a class action, it would have been dismissed.  Here, however, “the district court found . . . the settlement fund was non-distributable.” Id. at *3.  The Ninth Circuit however was perfectly willing to allow “cy pres-only settlement[s]”:

because the proof of individual claims would be burdensome or distribution of damages costly.  We have never imposed a categorical ban on a settlement that does not include direct payments to class members.

Id. (citation and quotation marks omitted).

We support such a “categorical ban.”  The inability of even unopposed plaintiffs to figure out who was injured and how much is a strong indicator that litigation is not the answer to the alleged problem.  In GRHPL, “each class member was entitled to a paltry 4 cents in recovery − a de minimis amount if ever there was one.” Id. at *4.  As to that situation, however, the United States Supreme Court has held:

[T]he venerable maxim de minimis non curat lex (“the law cares not for trifles”) is part of the established background of legal principles against which all enactments are adopted, and which all enactments (absent contrary indication) are deemed to accept.

Wisconsin Dept. of Revenue v. William Wrigley, Jr. Co., 505 U.S. 214, 231 (1992) (string citation to five earlier Supreme Court cases omitted).  The kinds of cases epitomized by GRHPL should be the province of government regulators, not private attorneys pocketing almost 40% of the settlement proceeds and giving the rest of it away to their friendly third parties.  We agree with the objectors, whose position was “if the settlement fund was non-distributable, then a class action cannot be the superior means of adjudicating this controversy.” Id. at *4.  The Ninth Circuit contrary position implicitly assumed, however, that litigation is always “superior” to non-litigation.  That is judicial triumphalism of the worst sort.  Lawyers and judges are not indispensable.  Disputes can be resolved in other ways.  There are some things that regulators are better at, and situations where would-be litigants can’t show causation or damages – what ordinary litigants must  prove – are one such example.

Then there were the cy pres recipients themselves – particularly the law schools, described as the “usual suspects” – given money for “promoting privacy protection on the Internet” and “educat[ing] the class about online privacy risks.” Id. at *5.  In other words, this all-cy pres settlement is a classic example of another form of litigation abuse, specifically the litigation industry using money supposedly belonging to “victims” (whose damages can’t be proven) to perpetuate itself.  Here, the cy pres awards would fund advocacy organizations (AARP and the World Privacy Forum), which turn around and file pro-plaintiff amicus briefs in other litigation (search for their names within the same paragraph as “amicus” and you’ll see we’re right).  They also fund specialty clinics at law schools to train still more lawyers and invent more expansive liability theories, all for the purpose of pursuing still more unprovable class actions.

Beyond that, all three of the law schools just happened to have pre-existing relationships with both class counsel and the defendant.  Specifically:

[Defendant] has in the past donated to at least some of the cy pres recipients, three of the cy pres recipients previously received [its] settlement funds, and three of the cy pres recipients are organizations housed at class counsel’s alma maters.

Id. at *5.  Such favoritism is precisely the kind of abuse that the ALI cautioned against when (over our objections) it chose to open the door to cy pres, despite the utter lack of recognized judicial power to give absent class members’ money to non-litigants.  “A cy pres remedy should not be ordered if the court or any party has any significant prior affiliation with the intended recipient that would raise substantial questions about whether the selection of the recipient was made on the merits.”  Principles of the Law of Aggregate Litigation §3.07, comment b (ALI 2010) (cited at 2017 WL 3601250, at *5).

Again, the majority in GRHPL sped right through the flashing yellow light.  Repeated receipt of cy pres money from the same defendant was excused because better education of lawyers (to bring more lawsuits) was viewed positively.  Id. at *6 (“Given that, over time, major players such as [defendant] may be involved in more than one cy pres settlement, it is not an abuse of discretion for a court to bless a strong nexus between the cy pres recipient and the interests of the class over a desire to diversify the pick via novel beneficiaries that are less relevant or less qualified”).  Giving away money that supposedly belongs to the class to the law schools counsel attended was also OK because, what the hey, everybody does it:

The claim that counsel’s receipt of a degree from one of these schools taints the settlement can’t be entertained with a straight face. Each of these schools graduates thousands of students each year. . . .  The court affirmatively analyzed the issue and was cognizant of the claim of a potential conflict.  All class counsel swore that they have no affiliations with the specific research centers.  Class counsel repeated that attestation at the final settlement approval hearing. . . .  The district court found “no indication that counsel’s allegiance to a particular alma mater factored into the selection process.”

Id. at *6.  And if you really believe that. . . .  Well, a number of courts (including the Ninth Circuit) have pointed out “[w]hat we know as men and women we must not forget as judges.” Larson v. Dumke, 900 F.2d 1363, 1369 (9th Cir. 1990); see also United States v. Blackburn, 461 F.3d 259, 264 (2d Cir. 2006); Henderson v. Frank, 155 F.3d 159, 164 (3d Cir. 1998); United States v. Jefferson, 925 F.2d 1242, 1253 n.13 (10th Cir. 1991). Not one, but all three, of the law school cy pres recipients just happened to be the alma maters of class counsel.  That strains credibility past the breaking point.

We’re not the only ones. In the words of the dissent in GRHPL:

Our precedent requires that district courts must be particularly vigilant not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations. In our case, we have a cy pres-only settlement.  That alone raises a yellow flag.  Furthermore, we have a class settlement before formal class certification.  That raises another yellow flag.  Lastly, we have almost half of the settlement fund, several million dollars, being given to class counsel’s alma maters. To me, that raises a red flag.

2017 WL 3601250, at *10.

The only members of the class who received any payment at all were – you guessed it – the named class representative. The settlement paid “$15,000 in incentive awards to the three named plaintiffs.” Id. at *3.  The remaining 129 million or so class members received zilch.

We think this is a case that should go to the United States Supreme Court.  One problem with the Ninth Circuit is precedent.  “Objectors would also have us ignore our prior endorsement of cy pres awards.”  GRHPL, 2017 WL 3601250, at *4.  The Supreme Court doesn’t have that problem.  Justice Roberts is already looking for a case to consider whether cy pres should be allowed at all.  We don’t think it should, and further believe that courts have no substantive power to take money from litigants and hand it out to uninjured third party bystanders, charitable or otherwise.  GRHPL created a circuit split (unacknowledged), and if the Court takes a look at GRHPL, it will see the full spectrum of abuse that cy pres awards allow to occur.  Given that background, the chances are good that a majority of the justices be willing to inter cy pres once and for all.  Bad facts can sometimes make good law, and we hope GRHPL might be one of those instances.

This is our second post in three weeks on class actions, owing to the filing of two really interesting class action opinions within a couple of weeks of each other. We posted two weeks ago on the Eleventh Circuit’s rejection of a medical monitoring class action—a class action where the plaintiffs and putative class members have not experienced any injury, but still want the defendant to pay for their future medical care.

A recent order from the Eastern District of Pennsylvania rejecting another class action got us to thinking about class actions more generally. We used to see “personal injury” class actions, where the plaintiffs were claiming relief for an entire class of individuals claiming to be harmed by a product.  But a class action like that obviously cannot work because of the multiple individualized issues that need to be adjudicated.  Cases like Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997), pretty much put an end to them.  (You can see this for yourself in our state and federal class action denial cheat sheets, here and here.)  Then we saw the aforementioned “medical monitoring” class actions.  The plaintiffs’ hoped there that their affirmative allegations of no injury would avoid class-defeating individualized issues.  But that did not work either because proving an entitlement to “medical monitoring” invokes individualized factors too, such as whether any patient requires future medical care above and beyond what he or she otherwise would have required.  The Eighth Circuit’s opinion in In re Silzone Heart Valve Products Liability Litigation, 425 F.3d 1116 (8th Cir. 2005), is as good a place as any to start on why medical monitoring claims are not certifiable as class actions.

That leaves class actions like Center City Periodontists v. Dentsply International, Inc., No. 10-774, 2017 WL 3142119 (E.D. Pa. July 24, 2017).  You might call cases like this “economic loss” class actions, where a product’s user is claiming neither a particular injury nor a right to future benefits, but rather claims that the value of what he or she bought is impaired because of a product defect.  “Aha!”, say the plaintiffs.  We’ve done away with all those pesky individual issues, and it now boils down only to damages, which we can prove on a classwide basis with our experts.

Alas, it is not so easy. In Center City, the plaintiffs purported to represent a class of dentists and periodontists claiming that the “Cavitron ultrasonic scalers” that they purchased were defective because they were prone to biofilm growth and thus not worth what they paid for them.  The next time we go to the dentist, we will look around for a device labeled “scaler.”  We do not like the sound of it, and it reminds us of the time when we were law students in need of a cleaning, but with little cash to spare.  We went to the low-cost student clinic at our university’s dental school, which was conveniently located in the building next to the law school.  If you take one point away from this post, remember this—do not seek dental care at a student clinic.  It was like our own personal retelling of the Marathon Man, starring Dustin Hoffman in his post-The Graduate and pre-Kramer v. Kramer days.  (In Marathon Man, Hoffman plays a hapless soul who finds himself being tortured while bound to a stiff-back reclining chair by a . . . .  Well, you will have to see the film.  As an aside, people often remember Dustin Hoffman in this role, but fewer recall that the torturer was played by none other than Sir Laurence Olivier.  For our part, we prefer to remember Olivier as Henry V or as the warm-hearted doctor in A Bridge Too Far, which is a terrific movie but an even better book.  But we digress.)

The district court’s order denying class certification is interesting for two reasons. First, the court entertained full-blown Daubert challenges to the plaintiffs’ experts’ opinions.  The court excluded the opinions of the plaintiffs’ regulatory expert, not because his qualifications or opinions were lacking, but because his opinions did not “fit” the case.  In a case claiming economic loss and breach of warranties, the court did not see how opinions on the “regulatory regime” were helpful. Id. at **5-6.

More importantly, the court excluded the opinions of the plaintiffs’ accountant, who opined that the class could recover damages based on three remedies—reimbursement, retrofit, and replacement. Id. at *7.  The experts’ damages opinion was unreliable because he did not take into account the economic value that each class member derived from using his or her Cavitron scaler without incident.  The applicable laws (New Jersey and Pennsylvania) allow credits for “the value of the goods accepted.” Id.  Thus, according to the district court,

Hazel’s methodology fails to account for any revenue generated by class member from successfully using their allegedly non-conforming Cavitrons . . . . Failure to do so rendered his model unreliable and ill-fitting under the facts of this case.  Because individualized inquiries will be necessary to identify any value obtained by each class member from using the Cavitron as accepted, Hazel’s approach is also unhelpful for computing damages on a class-wide basis.

Id. The expert also could not link his model directly to the alleged breach of warranty, which is required under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).  Rather, he conceded that he could not distinguish between damages attributable to the alleged breach and those attributable to “something else.” Id. at *8.

Second, after excluding the plaintiffs’ experts, the court ruled that the plaintiffs had not met their burden of proving the class certification requirements under Rule 23. The plaintiffs’ claims were not typical because, for among other reasons, some of the product’s users were aware of the risk of biofilm formation and had even taken precautions.  None of the plaintiffs had read the product’s directions for use, which included relevant information. Id. at **10.  These issues—which are directly reminiscent of issues we deal with every day in product liability claims—are unique to each product user and require individualized inquiries. Id. at **10-11.

The plaintiffs were not adequate class representatives because their claims were arguably time barred, placing them in a conflict with class members whose claims would be timely and arguable more valuable. Id. at *11.  Oddly, the plaintiffs did not prove numerosity, an element that is usually uncontested.  Maybe the plaintiffs mistakenly thought it would be uncontested here too, because they submitted no evidence beyond speculation as to how many Cavitron devices were actually purchased and used. Id. at **12-13.

Finally, the proposed class did not meet the requirements of Rule 23(b)(3): Common questions did not predominate because whether certain representations were made and whether anyone relied on them are inherently individualized issues—again directly reminiscent of arguments we have made vigorously in product liability cases.  Proving damages on a classwide basis was impossible too because, as prefaced above, each user could have derived different value from the product as accepted.

This class action bit the dust, and it is significant to us because it highlights issues with “economic loss” class actions that make them as untenable in the drug and medical device space as other kinds of class actions that are now history. With the current prevalence of inventory-dominated mass tort proceedings, we may never see a class action again.  But if we do, we will drill down, don our lead vests, and expect to prevail.

We’ve seen it before.  The Southern District of Illinois will certify class actions with no real cause of action and no real damages.  While not as bad as the drive-through-class-certification state courts in southern Illinois, the nearby federal court will also perform doctrinal somersaults to benefit the local plaintiffs’ bar.  With both the lower state and federal courts in that otherwise lovely corner of the Midwest, an out of state corporate defendant must tough out absurd hijinks, then cross its corporate fingers and seek relief from the (usually) more rational appellate courts.  The Seventh Circuit, in particular, makes a full-time job out of spotting and reversing errors.

That not only happened in Eike  v. Allergan, Inc., 2017 WL 881834 (7th Cir. March 6, 2017), it happened courtesy of the pen of Judge Richard Posner.  In nine short paragraphs, with his typical absence of footnotes, Judge Posner exposes the purported class actions for the exercises in silliness they were.  So devastating is the reversal, so sharp is his prose, that Judge Posner’s miniature masterpiece must be viewed as a judicial thumb in the eye of the lower court.  The Seventh Circuit not only reversed the district court’s certification of the classes, it also ordered the case dismissed with prejudice for lack of standing.

Illinois calls itself the Land of Lincoln.  Lincoln said a lot of famous things.  One was, “Never stir up litigation.  A worse man can scarcely be found than one who does this.”  Imagine what Lincoln would have said if he had a look at a claim as batty as the one in Eike.  The plaintiffs sued pharmaceutical manufacturers of eye drops used for the treatment of glaucoma because the drops were bigger than they needed to be.  The theory is that the plaintiffs were paying more than they would have if the drops were smaller.  The plaintiffs alleged no conspiracy among the defendants.  This was not an antitrust case.   (Woe unto the plaintiffs if it were, and then they drew Judge Posner on the panel!) Nor did the plaintiffs allege any misrepresentations.  Rather, the plaintiffs simply sought, because they thought it would be less expensive, a smaller dose product that nobody made.

Continue Reading There’ll Always Be Posner: Reversal of Class Certification in the Blink of an Eye