Morrison Foerster’s Class Dismissed blog provides insights, recommendations, and timely reports on the latest defense news, developments, and trends in the most current class actions lawsuits and product liability issues that affect consumer-facing companies. Through Class Dismissed, attorneys from our nationally recognized Consumer Class Action and Products Liability practices offer a real-time assessment of the developments in matters that are shaping the industry. This blog examines the full spectrum of consumer-related class action and product liability lawsuits ranging from false advertising, privacy, consumer product safety, ADA, food misbranding, TCPA, environment, retail, and government actions as well as nationwide and multidistrict litigation class actions.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Partner

Julie Park protects her clients’ products no matter what kind of product issue they face—whether it is planning for new product development, recalling an existing product, or defending clients against product liability or consumer class actions. Drawing on her deep technical and legal expertise, Julie counsels clients on consumer product safety regulation and pharmaceutical and medical device preemption while also managing complex and multijurisdictional litigation both in state and federal court.

Julie Y. Park

<div class="videoWrapper"><iframe frameborder="0" class="sticky-video" allowfullscreen="1" title="Meet Penny Preovolos, Litigation Partner" src="https://www.youtube-nocookie.com/embed/hv7hYn-Bl7c?rel=0&showinfo=0;vq=hd1080" title="iframe"></iframe></div>Penelope has served as lead counsel in major consumer class actions and antitrust cases for more than 35 years, successfully representing high-profile defendants in antitrust, consumer fraud, and product defect matters. Her clients span a range of industries, including consumer electronics, technology, retail, publishing, food and beverage, cosmetics, and household products. According to Chambers USA, Penelope has a “great reputation for antitrust and product liability work” and is a “superb all-around antitrust lawyer.”Penelope was named the 2019 Antitrust Lawyer of the Year by the Antitrust, UCL, and Privacy Section of the California Lawyers Association. She was co-chair of MoFo’s antitrust practice for 14 years. She has served as chair of the Antitrust and Trade Regulation Section of the State Bar of California and as a member of the Ninth Circuit Advisory Committee on Local Rules and Operations. She is an editor of and frequent contributor to Morrison & Foerster’s <a href="https://classdismissed.mofo.com/">Class Dismissed blog</a>, as well as a frequent speaker about class action and antitrust issues.More About PenelopePenelope clerked for the Honorable Charles M. Merrill, United States Court of Appeals for the Ninth Circuit. She graduated cum laude from Harvard Law School, where she was executive editor of the Harvard Civil Rights – Civil Liberties Law Review. Penelope was a member of Phi Beta Kappa at the University of California, Berkeley. She was awarded the University Medal, the highest undergraduate honor at the university, as well as the English Departmental Citation (awarded to the outstanding graduate in that department).

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Senior Counsel

Penelope has served as lead counsel in major consumer class actions and antitrust cases for more than 35 years, successfully representing high-profile defendants in antitrust, consumer fraud, and product defect matters. Her clients span a range of industries, including consumer electronics, technology, retail, publishing, food and beverage, cosmetics, and household products.

Penelope A. Preovolos

Claudia focuses her practice on the defense of consumer class actions and on complex commercial litigation, including unfair business competition, false advertising, product liability, and privacy matters. She is currently representing numerous consumer goods manufacturers and retailers in false advertising and mislabeling class action lawsuits. Claudia also regularly counsels clients in the food, cosmetics, retail, and technology industries. She represents companies in false advertising disputes before the National Advertising Division (NAD) of the Council of Better Business Bureaus, Inc.<h5>More about Claudia</h5>Claudia is active in MoFo’s pro bono efforts, and recently traveled to El Paso, Texas, to work with families separated and detained at the border. She is also supervising a pro bono collaboration with Equal Rights Advocates, a nonprofit fighting for gender justice in work places and schools across the country. The initiative will help students who have been victims of sexual assault, attempted assault, or harassment find support and seek justice. Claudia is also a board member of Bay Area Legal Aid and a former board member of Equal Rights Advocates. Claudia is an editor and frequent contributor to MoFo’s <a href="https://classdismissed.mofo.com/">Class Dismissed</a> blog, which provides reports about the latest defense news, developments, and trends in class action lawsuits and product liability issues that affect consumer-facing companies. Her perspectives are also respected in the larger legal community: Claudia has published articles about class action and false advertising issues, and is a co-author of Chapter 7 — “Unfair Competition in California Business Litigation 2016” — of The Recorder. She also regularly speaks at conferences on class action and advertising trends. Claudia is currently serving as a Lawyer Representative for the Northern District of California. She received her J.D. degree in 2004 from Berkeley Law (Boalt Hall School of Law), where she was an associate editor of the Berkeley Technology Law Journal.

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Claudia focuses her practice on the defense of consumer class actions and on complex commercial litigation, including unfair business competition, false advertising, product liability, and privacy matters. She is currently representing numerous consumer goods manufacturers and retailers in false advertising and mislabeling class actions.

Claudia M. Vetesi

Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office.Alexandra litigates product liability matters involving medical devices, pharmaceuticals, consumer products, automobiles, and AI. Alexandra's litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.Alexandra has significant trial experience. She has first-chaired a one-week jury trial and second-chaired a five‑week jury trial, both involving multiple claims and witnesses. She also has extensive experience in alternative dispute resolution, representing clients at mediations, mandatory settlement conferences, and early neutral evaluations.Alexandra enjoys tracking developments and keeping her clients updated on product liability and personal injury claims, frequently writing or presenting on emerging areas such as autonomous vehicles and smart devices. Alexandra’s experience also extends to professional liability, warranty claims, eminent domain, and construction law.Alexandra earned her J.D. from the University of San Diego School of Law. While in law school, the San Diego Law Review published her comment on the recovery of damages by plaintiffs in a persistent vegetative state, and she also served as a comment editor. She received her B.A. from the University of California, Los Angeles, where she majored in Political Science and minored in Spanish. A San Diego native, she attended a Spanish immersion school through the eighth grade. Alexandra is active in the San Diego community, advising students at a local college. She is also a member of several legal organizations in San Diego, including Lawyer’s Club, the Association of Business Trial Lawyers, and Wallace Inn of Court.

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Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office. Alexandra litigates product liability matters involving medical devices, pharmaceuticals, consumer products, automobiles, and AI. Alexandra’s litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.

Alexandra Barlow is a partner in the Litigation Department of Morrison Foerster’s San Diego office. Alexandra litigates product liability matters involving medical devices, pharmaceuticals, automobiles, AI, and robotics. Alexandra's litigation expertise spans the entire case life cycle in both state and federal courts. She handles all phases of discovery, including fact investigation and expert discovery. Alexandra has taken over twenty-five depositions, including experts, plaintiffs, treating physicians, and third-party witnesses. She drafts and argues motions of all types, including motions for summary judgment, motions to quash, and motions for preliminary injunction.

Alexandra Barlow

Adam J. Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.Mr. Hunt has extensive experience representing consumer products companies, financial institutions, and technology firms in class action cases and complex commercial disputes before state and federal trial courts, as well as in arbitrations. Clients seek Mr. Hunt’s counsel for his creative, strategic thinking in high-stakes, high-profile matters. He has represented clients facing claims under false advertising, antitrust, and privacy laws throughout the country, securing wins at the pleading stage, summary judgment, and trial, in addition to negotiating favorable settlements, often early in the case. Representative experience includes successfully securing rulings dismissing two putative false advertising class action cases against one of the best-known consumer electronics companies in the world; obtaining a complete win on summary judgment for a major shipping and logistics company in a multimillion-dollar commercial dispute; appearing as counsel at trial for a leading financial institution in a $100 million commercial dispute, winning a bench trial verdict; and prevailing on motions to dismiss false advertising class actions against a leading Greek yogurt company.Mr. Hunt is also an editor of the firm’s <a href="https://classdismissed.mofo.com/" target="_self">Class Dismissed blog</a>, which provides insights, recommendations, and timely reports on the latest defense news, developments, and trends in the most current class action lawsuits that affect consumer-facing companies.Mr. Hunt maintains an active pro bono practice and is the recipient of the New York State Bar Association’s 2017 President’s Pro Bono Service Award for the First Judicial Department, the 2018 Public Service Award from New York University School of Law, and Morrison Foerster’s Kathi Pugh Award for Pro Bono Services.Mr. Hunt received his B.A. with honors from Swarthmore College and his J.D. cum laude from New York University.

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Adam Hunt is a partner in the Litigation Department of Morrison Foerster’s New York office. His practice focuses on complex litigation, with an emphasis on class action and commercial litigation.

Adam Hunt

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Alexandra Preece Barlow

Adam J. Hunt

Right-to-Repair Laws: The Trend Continues

The Future of Section 230: Protection Against Product Liability Claims?

New Wave of PFAS Legislation Aimed at Consumer Products

CPSC Releases Annual Report on Deaths and Injuries Involving Nursery Products

CPSC Proposes New Safety Rules for Infant Rockers

Navigating FDA’s regulatory enforcement strategies is paramount to successfully marketing health and medical products for COVID‑19—especially since the pandemic has dominated FDA’s enforcement activity this year. Understanding the patterns and principles behind FDA’s efforts can provide the insight product manufacturers need to avoid FDA enforcement and let companies know what to expect if they do become the target of enforcement action. To do just that, MoFo’s product regulatory team has tracked and analyzed these enforcement efforts against COVID-19 products to bring you this year‑end guide.Triggering FDA EnforcementThe COVID-19 pandemic has not significantly changed the scope of FDA’s regulatory authority. The agency regulates drugs and medical devices: instruments or substances intended for use in the diagnosis, cure, mitigation, treatment, or prevention of a disease or condition. Any product that makes these drug or device claims is subject to FDA’s regulatory authority.Indeed, product manufacturers most commonly trigger FDA scrutiny by making an unauthorized COVID-19 claim in product advertising or labeling. For example, FDA has taken enforcement action against products claiming to:<ul><li>Provide any type of COVID-19 testing;</li><li>“Treat” or “fight” COVID-19 or “inhibit” the virus;</li><li>“Prevent” or “reduce the risk” of contracting COVID-19; or</li><li>Treat or reverse bodily symptoms caused by COVID-19.</li></ul>Even suggesting these claims, such as using a “#coronavirus” hashtag on social media for a disinfectant spray, can trigger enforcement.Common Enforcement ActionsFDA generally uses one of two regulatory devices to remove dangerous or unauthorized COVID-19 products from the market.Warning LettersIn most circumstances, FDA takes enforcement action by issuing a warning letter to the manufacturer detailing violations of the Food, Drug, and Cosmetics Act. To date, FDA has issued over 140 warning letters to manufacturers of products like test kits, homeopathic drug products, disinfectant sprays, and various devices that claim to test for or treat COVID-19. FDA publishes these letters and maintains them in a list of “fraudulent” COVID-19 products. The Federal Trade Commission may also sign onto these letters because claiming that a product can prevent, treat, or cure disease without competent and reliable scientific evidence also violates the FTC Act.Warning letters may require that a manufacturer remove impermissible product claims or take an unapproved product off the market altogether. FDA also demands expedited corrective action for COVID-19 products. Whereas general warning letter recipients typically have 15 business days to respond, COVID-19 product manufacturers have only 48 hours to describe the corrective steps they have taken to correct violations.Failure to comply with a warning letter can lead to swift judicial intervention. In April, FDA and FTC issued a warning letter to a seller of “Miracle Mineral Solution,” a dangerous chlorine dioxide product touted as a COVID-19 cure. The seller refused to remove the product from the market. Within 10 days of the warning letter, a federal court issued a temporary restraining order against the seller, and later a permanent injunction against selling or distributing the misbranded products. The individual defendants have been charged with conspiracy to defraud the United States, conspiracy to violate the FDCA, and criminal contempt.Product RecallsWhen a defective or potentially harmful product has already been sold to consumers and patients, FDA may ask a manufacturer to recall the product. A great example of this is FDA’s activity on hand sanitizers. Since shortages began early in 2020, hand sanitizer products have flooded the market to keep up with soaring demand. Some of these products include dangerous, prohibited ingredients like methanol and 1‑propanol instead of or in addition to the generally permitted ethanol or isopropyl alcohol. FDA has been working extensively to test the many sanitizers on the market and remove those that pose harm to consumers.FDA has identified over 220 products on a do-not-use list of hand sanitizers, but has faced difficulty getting manufacturers to comply with its efforts to recall these products. While it has authority to issue mandatory recalls for dangerous biologics and medical devices, FDA does not have authority to forcibly recall over-the-counter drugs like hand sanitizer. Newly proposed legislation would vest FDA with that power so it would not need to rely on manufacturer cooperation to get dangerous drugs off store shelves.FDA is currently able to prevent some these products, many of which are imported from Mexico, from entering the country by issuing an import alert for certain brands of sanitizers. Products on this list imported from abroad cannot pass through customs into the U.S., a restriction that serves as a reminder of FDA’s leverage over manufacturers that import goods from abroad.ConclusionWe have reported on FDA’s unique abbreviated approval pathways for various COVID-19 products designed to encourage production and decrease time-to-market. In contrast to the innovative solutions the agency has deployed in product review and approval, the agency has continued to use its tried‑and‑true methods on the enforcement side. Warning letters and product recalls remain the primary weapons in FDA’s arsenal for unapproved treatment claims for COVID-19, but FDA is enforcing its policies more aggressively in relation to COVID‑19. Companies must take swifter compliance measures, and FDA will turn to more drastic actions like judicial intervention and import detention if those measures are inadequate.

Fertility Center Litigation

Fitbit

MicroPort

Leading Healthcare, Pharmaceutical, and Medical Device Company

Lethal Injection Matters – Major Pharmaceutical Company

Pain Pump Matters – Large Pharmaceutical Company

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Leading Chemical Company

Security Device Company

In re Air Crash Near Peixoto de Azevedo, Brazil

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Erin Bosman is chair of MoFo’s Class Actions and Mass Torts Practice Group and is a founder and co-head of the Artificial Intelligence Group. Clients value her business strategy, seeking her comprehensive counsel throughout the product life cycle, especially in high-stakes litigation and product recalls.

Erin M. Bosman

Erin Bosman is chair of MoFo’s Class Actions and Mass Torts Practice Group and is a founder and co-head of the Artificial Intelligence Group. Clients value her business strategy, seeking her comprehensive counsel throughout the product life cycle, especially in high-stakes litigation and product recalls.

Erin Bosman

An orthopedic implant company

A children&rsquo;s monthly subscription service product

A fertility company

A major technology company

A smart fitness equipment company

Julie Park provides analytic and strategic counsel for issues in product life cycle, product liability and defective products, consumer class actions, and more.

Julie Park

Julie Park | Product Liability Lawyer

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FDA’s COVID-19 Product Regulation Enforcement Roadmap

FDA’s COVID-19 Product Regulation Enforcement Roadmap

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Navigating FDA’s regulatory enforcement strategies is paramount to successfully marketing health and medical products for COVID‑19—especially since the pandemic

David McDowell and Nancy Thomas authored an article for Law360 where they share five things in-house counsel can do when facing data breach class actions.First on the list is creating a strong foundation. “Depending on the nature and scope of the breach, companies can expect dozens if not hundreds of class actions in the days and weeks after announcing a breach,” the authors wrote. “This flurry of action can seem like chaos of the worst kind – the kind with no end in sight. At this early stage, companies need outside counsel who can scale up and handle dozens or hundreds of lawsuits until the filings slow and steer the lawsuits into a manageable posture.”

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5 Tips For In-House Counsel Anticipating Cyber Class Actions

5 Tips For In-House Counsel Anticipating Cyber Class Actions

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David McDowell and Nancy Thomas authored an article for Law360 where they share five things in-house counsel can do when facing data breach class actions.
First

MoFo is a proud sponsor of the American Conference Institute’s <a target="_blank" href="https://www.americanconference.com/drug-medical-device-litigation/">Drug & Medical Device Litigation Conference</a>, the premier products liability litigation event for the pharmaceutical and medical device industries for the past 24 years, to be held virtually on December 8 – 9, 2020.<a href="https://www.mofo.com/people/erin-bosman.html">Erin Bosman</a>, co-chair of the Class Actions + Mass Torts Practice Group, will lead a session entitled, “Analyzing the Implications of Prep Act Immunity on Future Drug and Device Litigation and Assessing Potential Covid-19 Related MDLs.” She will examine the impact of COVID-19 on existing and future litigation, discuss PREP Act immunity, consider what types of drug and device product liability claims stemming from COVID 19 are likely to turn into MDLs, and identify specific considerations for PPE product liability claims. Join Erin on Tuesday, December 8, from 10:30-11:30 a.m. ET.Partner <a href="https://www.mofo.com/people/julie-park.html">Julie Park</a> will speak on a breakout session entitled, “Strengthening Your Future Crisis Management Capabilities: Lessons Learned from Covid-19 on Combatting Business Disruption and Enhancing Your Crisis Management Response.” This panel will discuss how an organization can most effectively focus its response to a crisis while minimizing business disruption. Join Julie on Tuesday, December 8, from 3:15-4:15 p.m. ET.<a target="_blank" href="https://www.americanconference.com/drug-medical-device-litigation/pricing/">Register</a> for the Drug & Medical Device Litigation Conference and save 15% off your fees by entering MoFo’s discount code (P15-999-MORR21) during checkout.<a target="_blank" href="https://www.americanconference.com/drug-medical-device-litigation/agenda/">View the full agenda of the conference</a>.

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Join Us: Drug & Medical Device Litigation Conference

Join Us: Drug & Medical Device Litigation Conference 

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MoFo is a proud sponsor of the American Conference Institute’s Drug & Medical Device Litigation Conference, the premier products liability litigation event for 

Join Us: Drug & Medical Device Litigation Conference

In the sprawling National Prescription Opiate Litigation (MDL 2804), proponents of a “negotiation class” recently asked the Sixth Circuit for en banc review of a September 2020 decision that struck down the novel class mechanism. Arguing that the 2-1 panel decision imposed an impermissibly rigid “top-down” interpretation of the Federal Rules, in conflict with Sixth Circuit and Supreme Court precedent, class proponents urged the full court to review and allow the negotiation class to proceed.Case BackgroundThe opioid MDL is possibly one of the most complex cases in U.S. history. Pending in the Northern District of Ohio before Judge Dan A. Polster, the MDL encompasses over 2,000 cases filed by 33,000 city and county governments against drug manufacturers, distributors, and pharmacies to recoup costs of addressing the opioid crisis.From the MDL’s outset, Judge Polster encouraged settlement. To that end, the court appointed the late Duke Law Professor Francis McGovern as special master to oversee settlement negotiations. Professor McGovern quickly found that settlement of such sprawling litigation presented intractable problems: How could defendants achieve “global peace”? And in a case with “heterogeneous” class members—some with big claims and many with small claims—how could the court encourage cooperation among plaintiffs and avoid hold-outs? Out of this came a novel idea: the negotiation class.The Novel Negotiation ClassWorking with Harvard Law Professor William Rubenstein, a court-appointed expert on class-certification issues, Professor McGovern developed and explained his idea for negotiation-class certification in a law review article and pitched the approach to a group of opioid MDL plaintiffs.[1] Under the new negotiation class mechanism, plaintiffs would develop: (1) a plan to allocate any lump-sum settlement among class members; and (2) a plan to vote on settlement offers they might receive. They then would ask the court to certify a “negotiation class” according to the normal Rule 23 factors and to issue a class notice to explain the distribution and voting plans, giving class members the opportunity to opt out. After certification, plaintiffs would negotiate with defendants, and any settlement would be put to a binding vote by class members who had not opted out.As Professor Rubenstein explains it, the proposition to plaintiffs is this: “We can’t tell you exactly how much you’re going to get. But we can tell you what percentage of the settlement you’ll get. And we can safeguard your rights by making sure when a settlement is finally achieved every class member will get to vote on the settlement.”[2] Meanwhile, for defendants, the negotiation class sets the scope of the settling class prior to discussing settlement amounts, letting the defendants know how much peace a settlement actually buys them.A group of opioid MDL plaintiffs pursued the idea and, in the summer of 2019, asked Judge Polster to approve a negotiation class, which he did in a September 2019 order.[3] Judge Polster recognized that the negotiation class was novel. But he reasoned that Rule 23 does not explicitly limit the uses of class actions and “neither specifies that the class to be certified [must be] for ‘trial’ or ‘settlement’ purposes.”[4] Rule 23’s history also supported new uses of the class mechanism, because, as Judge Polster explained, certification of settlement classes was itself a novel practice shortly after Rule 23 was adopted in 1966.[5] In fact, Rule 23 contained no explicit reference to settlement classes until 2018, when amendments fleshed out settlement class procedures to better capture existing practices.[6] And the Supreme Court had long accepted settlement classes as a “stock device” well before the 2018 amendments.[7]Judge Polster noted that, as a practical matter, the settlement class would only provide an option to facilitate settlement discussions, and would not stop any parties from continuing to litigate or pursuing their own settlement discussions, if they preferred. He found that “there is nothing coercive about this process” because “no Defendant has to employ it.”[8] To be fair, however, defendants might have reasonably feared that even this novel form of certification could strengthen plaintiffs’ hand by laying groundwork for any eventual motion to certify classes for trial, should negotiations fall through.Panel Review at the Sixth CircuitThe Sixth Circuit panel reviewing Judge Polster’s order had a less sanguine view of Rule 23’s flexibility. In September 2020, a 2-1 panel majority applied a textualist approach to reverse the certification order.[9] The majority treated Rule 23 effectively as a statute (because the Rules are promulgated pursuant to the Rules Enabling Act) and purported to enforce it according to its plain terms. This, the court held, required striking down the negotiation class because the new form of class action was “untethered” to any express authorizing language in Rule 23.[10] As for the argument that settlement class certification arose—and was judicially blessed—before Rule 23 ever said anything to authorize settlement classes, the majority disagreed. Prior to the 2018 amendments, Rule 23(e) had read:A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class. . . .Therefore, the Rule contemplated courts overseeing “compromised” class actions. And, for the majority, authority over “compromised” class actions implicitly authorized courts to certify classes for the purpose of settling them.[11]The rest of the majority opinion focused on the structure of Rule 23 and ways that the negotiation class did not fit the traditional analyses lower courts must apply to certify trial, settlement, or issue classes. In effect, Judge Polster had tried to shoehorn something new into existing federal common law rules that simply were not made for it.The Panel DissentSixth Circuit Judge Karen Nelson Moore dissented, presenting a dramatically different view of how the Federal Rules work by arguing that judges are not and have never been bound to strict textualist interpretations of the Rules, in large part because the Rules are not statutes and are not issued by Congress.Walking through the “origin story [and] life cycle” of the Rules, the dissent highlighted instances where courts “drew on traditions of equity practice” and flexibly applied the Rules by “placing substance over form.”[12] For instance, the Rules don’t expressly authorize courts to recall a jury for further deliberations, to hear a motion in limine, or to dismiss cases for forum non conveniens. But the Supreme Court blessed each of these practices as they arose through “district court creativity.”[13]  Other Rules were interpreted contrary to plain text and altered through court practice. For example, the Court fashioned the attorney work-product exception to Rule 26 discovery in opposition to the Rule’s plain text, until the Rule was amended in 1970.[14] The Court modified Rule 56’s summary judgment standards in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), to avoid a plain-text interpretation that guaranteed summary judgment rarely would be granted. (The modified summary-judgment standard would not be incorporated into Rule 56’s text until amendments in 2009).[15]Judge Moore argued that the same was true of Rule 23. She recited a host of articles and cases acknowledging that Rule 23, when adopted, “lacked any mention of ‘settlement,’ delineated no procedures to be followed for different kinds of class actions, and ‘contain[ed] no standards at all governing judicial approval of class action settlements.’”[16] But, Judge Moore explained, “[a]s settlement class actions flooded the dockets” the courts of appeal quickly “recognize[d] that settlement classes had ‘utility,’ . . . ‘afford[ed] considerable economies to both the litigants and the judiciary[,] and [are] also fully consistent with the flexibility integral to Rule 23.’”[17] According to Judge Moore, the creation and certification of a novel negotiation class, particularly in a complex MDL, “simply follows the incremental development of settlement class actions” and is no less authorized under Rule 23 than settlement classes ever were.En Banc ApplicationIn October 2020, a group of plaintiffs filed for en banc review. Relying heavily on Judge Moore’s dissent, they argued that the panel majority had misconstrued both the history of Rule 23 and the flexibility district courts arguably enjoy in applying the Federal Rules. Plaintiffs questioned how the majority could use a strict textualist interpretation to find that a single use of the word “compromised” in the old version of Rule 23—a thin textual reed—had authorized settlement class certification. This was particularly notable when, as Judge Moore had explained in dissent, every prior court to have addressed the question found no textual authorization for settlement classes.[18] Moreover, even if the majority was right, and settlement class certification could be derived from the term “compromise,” surely negotiation class certification could be derived similarly from the term “settlement,” because negotiation is always a critical part of settlement.Whether the Sixth Circuit will take up the en banc petition remains to be seen. Given the size and complexity of the opioid MDL, and the novelty of the negotiation class issue, the petition likely meets the Sixth Circuit’s standard for rehearing matters of exceptional importance. En banc rehearing, however, is rare. Negotiation class certification could prove to be an inventive and useful tool in complex litigation, though it may have to wait for other litigants to try in another circuit.[1] The Negotiation Class: A Cooperative Approach to Class Actions Involving Large Stakeholders, 99 TEX. L. REV. (forthcoming 2020), <a href="https://ssrn.com/abstract=3403834">https://ssrn.com/abstract=3403834</a>.[2] Francis McGovern, Elizabeth Burch, and William Rubenstein, The Negotiation Class, Judicature, vol. 104 no. 1 (Spring 2020), <a href="https://judicature.duke.edu/articles/the-negotiation-class/">https://judicature.duke.edu/articles/the-negotiation-class/</a>.[3] In re Nat’l Prescription Opiate Litig., 332 F.R.D. 532 (N.D. Ohio 2019).[4] Id. at 539.[5] Id. at 539–540.[6] Id.[7] Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 618 (1997).[8] 332 F.R.D. at 537.[9] No. 19-4097, 2020 WL 5701916 (6th Cir. Sept. 24, 2020).[10] Id. at *5 (citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 363 (2011) (mere negative inference in Rule 23’s text did not allow certification of (b)(2) class for money damages in addition to injunctive relief) and Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) (“Courts are not free to amend a rule outside the process Congress ordered.”)).[11] Id. at *6.[12] No. 19-4097, 2020 WL 5701916, at *9 (6th Cir. Sept. 24, 2020) (Moore, J. dissenting).[13] Id. at *10.[14] Id. (citing Hickman v. Taylor, 329 U.S. 495, 505 (1947)).[15] Id.[16] Id. at *13 (quoting William W Schwarzer, Settlement of Mass Tort Class Actions: Order Out of Chaos, 80 Cornell L. Rev. 837, 841 (1995)).[17] Id. (quoting Amchem, 521 U.S. at 618 and In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 794 (3d Cir. 1995)).[18] Petition for Rehearing En Banc at 10–11, Nos. 19-4097/19-4099 (6th Cir.), ECF No. 97.

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A Rule 23 Negotiation Class? Not So Fast!

A Rule 23 Negotiation Class? Not So Fast!

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In the sprawling National Prescription Opiate Litigation (MDL 2804), proponents of a “negotiation class” recently asked the Sixth Circuit for en banc review of 

This summer, we <a href="https://classdismissed.mofo.com/consumer-products/schein-on-supreme-court-to-decide-key-arbitration-delegation-question/">discussed</a> that the Supreme Court is reviewing whether an arbitration agreement’s clear delegation of the question of arbitrability to the arbitrator can be negated by a provision that exempts certain claims from arbitration. Henry Schein, Inc. v. Archer & White Sales, Inc., 207 L. Ed. 2d 1050 (2019). Since the Supreme Court granted certiorari in that case, three notable appellate decisions, two in the Ninth Circuit and one in the Third Circuit, have confronted related delegation questions. These cases all underscore the importance of paying careful attention to the drafting and presentation of arbitration provisions. Even seemingly minor differences in drafting and approach can result in disputes being heard outside their intended fora.NINTH CIRCUITShivkov v. Artex Risk Solutions, Inc.On September 9, 2020, the Ninth Circuit issued a ruling in Shivkov v. Artex Risk Solutions, Inc. that addressed an issue of first impression in the circuit.[1] A large group of individuals and related business entities involved in the insurance industry filed a putative class action lawsuit alleging that the captive insurance companies that the defendants had formed and managed were illegal and abusive tax shelters. The relevant agreements between the parties contained an arbitration clause governed by the FAA, and the defendants moved to compel arbitration based on those terms. One of the key issues that the court addressed was whether the determination of the availability of class arbitration was presumptively for the court (rather than an arbitrator) to decide. The Shivkov court ruled definitively that “class arbitration is a gateway issue for a court to presumptively decide.”This did not end the court’s analysis, though. The Shivkov court still needed to address the plaintiffs’ contention that the relevant arbitration provision evidenced “a clear and unmistakable intent to delegate the issue to the arbitrator.” The plaintiffs relied on the Ninth Circuit’s 2015 decision in Brennan v. Opus Bank, where the court held that “incorporation of the AAA Rules constitutes clear and unmistakable evidence that contracting parties agreed to arbitrate arbitrability.”[2] But, unlike in Brennan, in Shivkov the relevant arbitration provisions did not incorporate the AAA rules, but rather merely required that any arbitration, if necessary, be conducted before AAA. Accordingly, the Shivkov court did not “find clear and unmistakable evidence that the parties intended to delegate the gateway issue of class arbitration to the arbitrator by virtue of the AAA Rules . . . .”  And “[b]ecause Plaintiffs d[id] not claim that any other provision demonstrate[d] a clear and unmistakable intent to delegate the availability of class arbitration to the arbitrator,” the Shivkov court determined that the availability of class arbitration remain[ed] a gateway issue” for the court to decide.[3] Ultimately, because the arbitration agreement was silent as to the availability of class arbitration, the Shivkov court easily found that the agreements did not permit class arbitration pursuant to the Supreme Court’s recent ruling in Lamps Plus. But, importantly, it was the court, not the arbitrator, that made this determination.SEIU Local 121RN v. Los Robles Regional Medical CenterEven more recently, SEIU Local 121RN v. Los Robles Regional Medical Center addressed whether the issue of the delegation of arbitrability should be treated differently in the labor context.[4] In 1996, the Ninth Circuit had determined that labor cases are different and that an arbitrator (rather than a court) should decide arbitrability as long as the agreement included a broad arbitration clause.[5] In 2010, however, the Supreme Court rejected the notion that labor arbitration disputes should be analyzed differently than commercial arbitration disputes.[6] As a result, the Los Robles court overruled the Ninth Circuit’s earlier ruling and now held that questions regarding the delegation of issues of arbitrability must be analyzed in the same way in both the labor and commercial contexts. With this new framework in place, the Los Robles court relied on the “well-settled principles ‘that whether parties have agreed to submit a particular dispute to arbitration is typically an issue for judicial determination,’” absent “‘clear and unmistakable’ evidence of the parties’ intent to have an arbitrator—rather than the court—decide whether the grievance is arbitrable.” Because the CBA at issue in Los Robles was silent as to the arbitrator’s authority to determine its own jurisdiction, the Ninth Circuit held that the district court was responsible for determining whether the grievance filed by SEIU was arbitrable.THIRD CIRCUITMZM Construction Co. v. New Jersey Building Laborers Statewide Benefit FundsOn September 14, 2020, the Third Circuit also issued a ruling regarding the delegation of questions of arbitrability to arbitrators.[7] In MZM Construction Co. v. New Jersey Building Laborers Statewide Benefit Funds, the court was confronted with an arbitration agreement that explicitly stated that the parties agree to arbitrate “questions or grievances involving the interpretation and application of this Agreement” and that “[t]he Arbitrator shall have the authority to decide whether an Agreement exists, where that is in dispute.” Despite this clear and unmistakable language, MZM argued that the entire agreement was unenforceable due to fraud in the execution of the contract containing these arbitration provisions. MZM’s president had signed a one-page short-form agreement that incorporated by reference, but did not attach, an unsigned collective bargaining agreement that contained the relevant arbitration and delegation provisions. MZM argued that the entire agreement—the short-form agreement incorporating the collective bargaining agreement that contained the arbitration and delegation provisions—could not be enforced because the company’s president had felt pressured to sign the short-form agreement due to a threatened work stoppage and there was no evidence that MZM’s president ever saw the collective bargaining agreement containing the relevant provisions. As described by the court, the “critical question” was “who decides MZM’s contract defense.”After summarizing several earlier Supreme Court and Third Circuit decisions, the MZM court recognized that none of them “dealt with a contract-formation dispute involving a delegation provision assigning that task to the arbitrator.” Relying on Section 4 of the FAA—which mandates that a court be “satisfied” that an arbitration agreement exists—the MZM court settled this open question in the Third Circuit. In line with the Fourth, Fifth, and Eighth Circuits, and district courts in the Seventh Circuit, the Third Circuit held that, “under section 4 of the FAA, courts retain the primary power to decide questions of whether the parties mutually assented to a contract containing or incorporating a delegation provision.” Therefore, because the plaintiff had stated a claim for fraud in the execution of the contract containing the delegation provision, the plaintiff had “put the formation of the delegation provision in issue and thus triggered the District Court’s power to adjudicate that claim.”The Third Circuit explained “that nothing in our decision today precludes parties from delegating issues of contract formation.”  However, “the legal effect of the delegation must come from an ‘independent source’ outside the contract whose formation or existence is being disputed,” such as a “pre-negotiation contract in which the [parties] agree to arbitrate all arbitrability issues pertaining to future contracts between them.” Ultimately, the Third Circuit held that “unless the parties clearly and unmistakably agreed to arbitrate questions of contract formation in a contract whose formation is not in issue, those gateway questions are for the courts to decide.”TAKEAWAYSShivkov and Los Robles are reminders that if a company wants an arbitrator (not the court) to determine arbitrability and treatment of class claims, it should make sure that its arbitration agreement says so in “clear and unmistakable” language. Otherwise, courts in the Ninth Circuit and elsewhere may default to the court deciding these gateway issues. The Third Circuit’s decision in MZM also shows that, even if clear and unmistakable delegation language exists, the way a company presents the agreements to the other party could result in those agreements (and the arbitration provisions within them) being interpreted by a court rather than the intended arbitrator, and even ultimately being found unenforceable. Morrison & Foerster’s <a href="https://www.mofo.com/capabilities/class-actions-mass-torts.html">Class Actions and Mass Torts</a> attorneys have advised companies on a variety of arbitration-related issues. They can provide further insights on these recent court decisions, share best practices, and help draft and present arbitration provisions based on the needs of your business.[1] 974 F.3d 1051 (9th Cir. 2020). In 2014, the Ninth Circuit issued an unpublished and nonprecedential opinion that was consistent with the ruling in Shivkov.  The Supreme Court has never taken up this gateway issue.   [2] 796 F.3d 1125, 1130 (9th Cir. 2015).[3] The Ninth Circuit rejected several other arguments offered by the plaintiffs in their attempt to escape arbitration, including their contentions that the arbitration provisions were unconscionable on fiduciary duty related grounds, the arbitration obligations did not survive termination, the parties had not agreed to arbitrate all of the plaintiffs’ claims, and non-signatories to the agreements could not compel arbitration. [4] No. 19-55185, 2020 WL 5583677 (9th Cir. Sept. 18, 2020).[5] United Bhd. of Carpenters & Joiners of Am., Local No. 1780 v. Desert Palace, Inc., 94 F.3d 1308 (9th Cir. 1996).[6] Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 300–01 (2010).[7] 974 F.3d 386 (3d Cir. 2020).

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Arbitrating Arbitrability: Three Recent Appellate Decisions on Delegation Clauses in Arbitration Agreements

U.S. Supreme Court’s Decision to Review a Pair of FTCA Cases Could Spell a Sea Change in FTC’s Enforcement Authority

This summer, we discussed that the Supreme Court is reviewing whether an arbitration agreement’s clear delegation of the question of arbitrability to the arbitr

Arbitrating Arbitrability: Three Recent Appellate Decisions on Delegation Clauses in Arbitration Agreements

If a company enters an arbitration agreement with a consumer, can its future affiliate companies enforce the arbitration agreement even though the affiliate relationship did not exist at the time the consumer signed the agreement? The Ninth Circuit recently answered “no” in Revitch v. DIRECTV, LLC, __ F.3d __, 2020 WL 5814095 (9th Cir. Sept. 30, 2020), creating a split with the Fourth Circuit. The plaintiff, Jeremy Revitch, alleged that DIRECTV, a satellite television services company, placed prerecorded telemarketing calls to his mobile phone without his consent and in violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”). He filed a class action complaint against DIRECTV in 2018. Revitch did not have a service agreement with DIRECTV. He did, however, have a contract for mobile phone wireless services with AT&T Mobility LLC (“AT&T Mobility”) that contained an arbitration agreement, which he entered in 2011. The arbitration agreement provided that “AT&T [Mobility] and you agree to arbitrate all disputes and claims between us. This agreement to arbitrate is intended to be broadly interpreted. It includes, but is not limited to . . . claims arising out of . . . any aspect of the relationship between us, whether based in . . . statute . . . or any other legal theory.”  2020 WL 5814095, at *11. The contract’s definition of AT&T Mobility included all “affiliates.” Id. at *2. AT&T Mobility and DIRECTV became “affiliates” (i.e., companies under common ownership) in 2015 when AT&T Mobility’s parent company, AT&T, Inc., acquired DIRECTV. Accordingly, DIRECTV moved to compel arbitration of Revitch’s complaint pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1–16 (“FAA”). The district court denied the motion on the ground that the arbitration agreement between Revitch and AT&T Mobility did not reflect the parties’ intent to arbitrate his claim against DIRECTV. DIRECTV appealed.The Ninth Circuit affirmed, holding that a valid agreement to arbitrate did not exist between Revitch and DIRECTV, a satellite television company that became an affiliate of AT&T Mobility three years after Revitch signed the wireless services contract containing the arbitration agreement. 2020 WL 5814095, at *5. The court reasoned that “absurd results follow from DIRECTV’s preferred interpretation,” which would require Revitch “to arbitrate any dispute with any corporate entity that happens to be acquired by AT&T, Inc., even if neither the entity nor the dispute has anything to do with providing wireless services to Revitch—and even if the entity becomes an affiliate years or even decades in the future.” Id. at *4. It thus affirmed based on its application of California’s “absurd results” canon of contract construction.   Judge O’Scannlain penned a concurring opinion, suggesting that even if the court analyzed the issue in terms of whether the arbitration clause in Revitch’s contract with AT&T Mobility encompassed his TCPA claim against DIRECTV, rather than asking whether a valid agreement to arbitrate exists between Revitch and DIRECTV, the court still would deny DIRECTV’s motion to compel arbitration. Judge O’Scannlain reasoned that, under the FAA, the claim to be settled by arbitration “must be one ‘arising out of’ the contract or transaction. By negative implication, the FAA does not require the enforcement of an arbitration clause to settle a controversy that does not arise out of the contract or transaction.” 2020 WL 5814095, at *7. Because, in his view, Revitch’s TCPA suit based on allegedly unsolicited advertisements for DIRECTV’s satellite television services is unrelated to Revitch’s contract for wireless services with AT&T Mobility, the suit does not “aris[e] out of” the contract and is not subject to the FAA. Id. at *10.Judge Bennett dissented, explaining that because “[n]either party disputes the existence and validity of the arbitration clause on which DIRECTV . . . relies,” the issue before the court is not one of contract formation, but one of scope: “‘whether the agreement encompasses the dispute at issue.’” Id. (citation omitted). In his view, “affiliates” includes DIRECTV because “[n]othing in the arbitration clause or in the dictionary definition of the word ‘affiliate’ confers any type of temporal scope to the term so that ‘affiliates’ should be read to refer only to present affiliates.” Id. at *11. “Because Revitch agreed to arbitrate ‘all disputes and claims,’” DIRECTV may compel arbitration under the agreement. Judge Bennett further noted that, “[e]ven if some ambiguity exists,” Supreme Court precedent would require the court to construe the agreement to apply to future affiliates and enforce the arbitration clause. Id. at *10 (citing Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1418 (2019) (“[A]mbiguities about the scope of an arbitration agreement must be resolved in favor of arbitration.”)). He further reasoned that the majority’s application of California’s “absurd results” canon disfavors arbitration agreements compared to other contracts and, therefore, contravenes the Supreme Court’s precedent in AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 341–42 (2011). 2020 WL 5814095, at *13.The Ninth Circuit’s decision creates a circuit split on this issue. Just two months ago, in a case involving substantially similar facts and the same arbitration clause, the Fourth Circuit concluded that the consumer-plaintiff formed an agreement to arbitrate with DIRECTV and that her TCPA claim “fit within the broad scope of that agreement, construed, as it must be, to favor arbitration.” Mey v. DIRECTV, LLC, 971 F.3d 284, 286 (4th Cir. 2020). Like Judge Bennett’s dissent, the Fourth Circuit concluded that the arbitration agreement “contains no explicit limitation on the term [affiliates],” and the term’s ordinary meaning includes present and future affiliates. Id. The Fourth Circuit thus concluded that plaintiff Mey formed an agreement to arbitrate with DIRECTV. Further, considering the arbitration agreement’s broad language (i.e., requiring arbitration of “all disputes and claims between us”), and applying the presumption in favor of arbitrability, the court concluded it must enforce the arbitration agreement. Id.Practice Pointers to Takeaway<ul><li>A company’s ability to rely on an arbitration clause in a later-acquired affiliate’s service agreement with a consumer will depend on the jurisdiction. Courts within the Fourth Circuit may enforce such arbitration agreements where the companies did not become affiliates until after the agreement was entered, while courts within the Ninth Circuit may not. It remains to be seen how other circuits will come out. </li></ul><ul><li>Companies should consider drafting arbitration clauses to cover future affiliates and subsidiaries expressly, since the Ninth Circuit opined that “[h]ad the wireless services agreement stated that ‘AT&T’ refers to ‘any affiliates, both present and future,’ we might arrive at a different conclusion.” Revitch, 2020 WL 5814095, at *4 (emphasis added).</li></ul><ul><li>In courts within the Ninth Circuit, all things being equal, a company’s future “successors” or “assignees” likely would have an easier time enforcing an arbitration agreement than a future “affiliate” would since an arbitration agreement’s reference to a “successor” or “assignee” necessarily contemplates an unknown future event. This is something to keep in mind when structuring acquisitions.</li></ul><ul><li>Finally, the court may have reached a different outcome if either DIRECTV or its dispute with Revitch had been materially related to the services provided under Revitch’s wireless services agreement with AT&T Mobility. In that regard, the enforcement of an arbitration agreement by an after-acquired affiliate likely is not entirely foreclosed in the Ninth Circuit.</li></ul>

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Does a Consumer Arbitration Agreement Apply to a Company’s Future Affiliates? The Ninth and Fourth Circuits Disagree

Does a Consumer Arbitration Agreement Apply to a Company’s Future Affiliates? The Ninth and Fourth Circuits Disagree

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If a company enters an arbitration agreement with a consumer, can its future affiliate companies enforce the arbitration agreement even though the affiliate rel

The Supreme Court heard roughly an hour of oral argument on Wednesday in a pair of cases against Ford Motor Company raising important questions about the scope of personal jurisdiction. In Ford Motor Co. v. Montana Eighth Judicial District Court and Ford Motor Co. v. Bandemer, the Court must decide whether the car manufacturer was properly subjected to specific personal jurisdiction in two states where plaintiffs alleged they were injured by manufacturing defects in Ford vehicles originally made and sold elsewhere. State courts in Minnesota and Montana had said that it was enough that Ford marketed and sold the same type of cars in those states, while Ford insisted that a defendant’s in-state activities must bear a closer causal relationship to a plaintiff’s particular claims.Read our <a href="https://www.mofo.com/resources/insights/201007-supreme-court-specific-jurisdiction-ford-cases.html">client alert</a>.

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Brian Matsui co-chairs Morrison Foerster’s Appellate and Supreme Court practice. Brian is a go-to appellate advocate for sophisticated clients in complex appeals nationwide. 