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

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

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

<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

Zak is an associate in the Litigation Department in Morrison Foerster’s New York office.Zak’s practice focuses on class actions, commercial litigation, white collar defense, government investigations, and antitrust litigation and counseling. He has represented clients before federal and state courts in complex commercial matters, as well as in arbitration tribunals.Zak received his J.D. from New York University School of Law in 2018, where he was inducted into the Order of the Barristers. During law school, Zak also served as the Marden executive editor for the NYU Law Moot Court Board. In 2013, Zak received his B.A. and M.A. in political science from Yale University, receiving honors in his major and the Ellsworth Prize for Best Senior Essay in the Social Sciences.

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Associate

Zak Newman

Mitchell A. Hokanson is an associate in the Litigation Department of Morrison Foerster’s San Diego office.Mitchell’s practice focuses on commercial litigation and consumer class actions. He has extensive experience with civil litigation, including managing day-to-day strategy, propounding and responding to discovery, taking and defending depositions, and engaging in motion practice. He also has experience providing regulatory advice to clients, including pro bono partners and multinational corporations. Mitchell maintains an active pro bono practice.After law school, Mitchell worked as a judicial clerk for Justice Susan M. Carney of the Alaska Supreme Court, where he drafted bench memoranda and opinions on a wide range of state and federal law topics. Prior to joining MoFo, Mitchell worked for another international law firm, where he was a member of the Complex Civil Litigation practice group, in Los Angeles, California.Mitchell received his J.D. from Columbia Law School, where he was honored as a James Kent Scholar and Harlan Fiske Stone Scholar. While in law school he was the senior executive editor of the Columbia Journal of Environmental Law and worked as a judicial intern for Judge Sandra S. Ikuta of the United States Court of Appeals for the Ninth Circuit and Judge George B. Daniels of the United States District Court, Southern District of New York. Prior to that, Mitchell earned his B.A. from Stanford University.

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Mitchell Hokanson

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Morrison Foerster’s Class Dismissed blog provides insights and reports on the latest news, developments, and trends that affect consumer-facing companies. Subscribe to receive the latest updates by attorneys from our nationally recognized Consumer Class Action and Product Liability practices.

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Courts scrutinize class action settlements to ensure they result from arms-length negotiations and are fair and reasonable to absent class members. Applying that standard to a nationwide settlement of a privacy lawsuit against Facebook, on March 3, 2020, the Ninth Circuit provided a helpful roadmap for parties seeking approval of class action settlements where the primary benefit afforded to the class is injunctive relief, not money damages. See Campbell v. Facebook, Inc., No. 17-16873 (9th Cir. Mar. 3, 2020). The Court also held that a violation of the Electronic Communications Privacy Act (“ECPA”), 18 U.S.C. § 2510 et seq., and California Invasion of Privacy Act (“CIPA”), Cal. Penal Code § 630 et seq., may be sufficient to confer Article III standing without further allegations of harm.Case BackgroundIn December 2013, two Facebook users filed a class action alleging that the company captured, read, and used website links (URLs) in users’ private messages without consent in violation of the ECPA and CIPA, among other laws. The plaintiffs moved for certification of both a damages class under FRCP 23(b)(3) and an injunctive relief class under FRCP 23(b)(2). The district court certified an injunctive relief class but refused to certify a damages class. Thereafter, the parties reached a classwide settlement through mediation.In the settlement agreement, Facebook acknowledged that it had already made several changes to its practices and agreed for one year to add a 22-word disclosure regarding its collection and use of URLs to a Help Center page on its website. The agreement provided no monetary benefit to absent class members. Class counsel was permitted to seek an award of $3.89 million in fees and costs, which Facebook agreed not to oppose.Over an objector’s challenge, the district court found the settlement to be fair and reasonable and awarded class counsel the full $3.89 million in fees and costs requested. The objector appealed the decision to the Ninth Circuit. The appeal raised primarily two issues:  (1) whether the plaintiffs had standing; and (2) whether the district court abused its discretion in approving the settlement.Violation of ECPA and CIPA Is a “Concrete” InjuryThe Ninth Circuit held that the plaintiffs had Article III standing to assert claims under the ECPA and CIPA based on the allegedly unconsented to interception, cataloguing, and use of URLs the plaintiffs had shared in private messages.First, the Court concluded that the plaintiffs’ alleged injury – an intangible harm linked to a statutory violation – was sufficiently “concrete” to confer standing. It reasoned that the ECPA and CIPA expressly provide a private right of action and protect against the viewing or using of private communications, which are analogous to harms traditionally covered by the tort of intrusion upon seclusion. It further reasoned that the plaintiffs need not allege any further harm to have standing because, historically, under common law privacy torts, the intrusion itself was sufficient to render the defendant liable. And by creating private rights of action, the legislatures indicated that the ECPA and CIPA are modernizations of the privacy protections available at common law. Joining the Third Circuit, the Ninth Circuit held that those statutes codify a substantive extension of the right to privacy and the alleged violations constitute a “concrete” injury.Second, the Court concluded the plaintiffs had standing to seek injunctive relief and post-filing developments did not moot the case. At the time the plaintiffs filed their complaint, the company had ended some, but not all, of the challenged uses of private message URL data. In addition, the company continued to retain the data collected and thus could have resumed the discontinued uses of the data. That “combination of continuing harm plus likelihood of future harm” conferred standing upon the plaintiffs to seek injunctive relief. The case was not moot for similar reasons, since it was not absolutely clear the allegedly wrongful practices would not recur. The Court thus had jurisdiction and moved on to the merits.Ninth Circuit Affirms the Approval of Injunctive Relief-Only SettlementThe Ninth Circuit affirmed the district court’s approval of the settlement as “fair, reasonable, and adequate” under FRCP 23(e)(2), but along the way articulated useful guidance regarding several factors that impact the approval of classwide settlements that provide only injunctive relief.First, the Court rejected the contention that the settlement provided only “worthless” injunctive relief. It found that the year-long disclosure Facebook agreed to add to its website provided real value to class members in the form of “information to users about Facebook’s message monitoring practices, making it less likely that users will unwittingly divulge private information to Facebook or third parties in the course of using Facebook’s messaging platform.” The Court balanced the value of that relief against the likelihood plaintiffs may have obtained no benefit for the class had the case proceeded because the district court had refused to certify a damages class and plaintiffs faced numerous “doctrinal hurdles” to obtaining any other classwide relief. Accordingly, “[g]iven how little the class could have expected to obtain if it had pursued claims further . . . (and, correspondingly, how little it gave up in the release),” the “modest value” of the settlement was not “unreasonable.”Second, the Ninth Circuit rejected the objector’s argument, based on In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011), that the settlement unfairly prioritized class counsel’s interests over those of the class. In so doing, the Court addressed the “warning signs” that allegedly may indicate class counsel colluded with defense counsel to settle a case improperly and dismissed each of them. It first rejected the notion that class counsel received a disproportionate share of the settlement. Although absent class members received no monetary relief, the Court explained that that was a function of the district court’s certification of an injunctive relief only class and affirmed the finding that the class’s interests were vindicated by the non-monetary relief obtained through the settlement. The Court emphasized that “[t]here is no blanket rule foreclosing parties from agreeing that the class will receive only injunctive relief.”Next, the Court explained that where the benefits to the class are difficult to quantify (e.g., in an injunctive-relief only settlement), “district courts have discretion to award fees based on how much time counsel spent and the value of that time” without needing to estimate how the amount compares to the value of the recovery for the class. The Court found that the district court reasonably exercised that discretion because class counsel received a fee award of just over half of what would have fully compensated them for their time on the case; the district court had already declined to certify a damages class; the settlement agreement did not release the absent class members’ potential rights to damages; and the district court had an understanding of the injunctive relief’s value as a result of the hard-fought litigation prior to settlement. On that basis, “the district court did not abuse its discretion by concluding that the value of what the class received was reasonable not only in proportion to what the class gave up . . . but also in proportion to what class counsel received.”Finally, the Ninth Circuit rejected the contention that the fact the settlement agreement did not contemplate any formal notice to the class proved the settlement was unfair, noting that the district court required the parties to provide notice by posting information about the settlement on class counsel’s websites before final approval.Key TakeawaysAlthough the Ninth Circuit ultimately gave the stamp of approval to the settlement at issue in Campbell, it provided several warnings that parties should keep in mind in the course of negotiating and seeking approval of class settlements that confer primarily injunctive relief:The benefit obtained for absent class members should be commensurate with the release of claims by which absent class members will be bound. Settlements where class members receive no or very little monetary relief but release all money damages claims are subject to the highest scrutiny.Injunctive relief value should be proportional to the fee award. “[I]n a case where the class primarily receives non-monetary relief, but class counsel obtain millions of dollars, it may be an abuse of discretion not to at least attempt to approximate the value of injunctive relief and use that valuation in an assessment of disproportionality.”Consider some form of class notice for a Rule 23(b)(2) class settlement. Although the settlement in Campbell provided only injunctive relief and did not release claims for damages, the Court found it “odd that the parties repeatedly emphasized the informational value of the settlement while simultaneously arguing that it was unnecessary to provide class members formal notice that this information exists.”Settlements reached before a class is certified are subject to a higher standard of fairness. Campbell involved a post-certification settlement. As the Ninth Circuit reaffirmed, a “higher standard of fairness” applies when parties settle a case before certification, which places a premium on the proportionality of the fees requested by plaintiffs’ counsel to the benefit conferred on the class.Parties settling class actions affording primarily injunctive relief should take heed of the Ninth Circuit’s guidance in Campbell. It could mean the difference between a district court approving a classwide settlement or rejecting it and sending the parties back to the drawing board.

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Ninth Circuit Weighs In on Standing Requirements for Privacy Claims and Approval of Injunctive Relief-Only Class Settlements

Ninth Circuit Weighs In on Standing Requirements for Privacy Claims and Approval of Injunctive Relief-Only Class Settlements

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Courts scrutinize class action settlements to ensure they result from arms-length negotiations and are fair and reasonable to absent class members. Applying tha

On June 7, 2019, an en banc Ninth Circuit panel affirmed certification of a nationwide settlement class and held, 8-3, that class certification criteria are applied less strictly in a settlement context.[1]  Hyundai II preserves the ability to certify nationwide settlement classes while maintaining more demanding requirements for litigation classes.  As noted in our earlier post, the prior panel decision,[2] which denied certification, sent class action lawyers into a tizzy, creating concerns about the viability of nationwide class settlements.  Hyundai II reversed course, holding that the predominance requirement differs in a settlement context because there is no need to consider the manageability of individual issues at trial.Case BackgroundAs we discussed in our previous post, a flurry of class actions were filed nationwide after the EPA launched an investigation regarding complaints that Hyundai and Kia had overstated the fuel efficiency of some of their vehicles.  The MDL panel consolidated the cases before Judge Wu in the Central District of California, and Judge Wu granted plaintiffs’ motion for certification of the settlement class.  The three-judge panel in Hyundai I vacated the trial court’s decision, holding that the Rule 23(b)(3) predominance inquiry required a choice-of-law analysis, as well as proof of classwide deception, essentially identical to what is required for certification of a litigation class.On July 27, 2018, the Ninth Circuit granted en banc review of the panel decision.Predominance Analysis  Hyundai II held that Rule 23(b)(3) predominance factors must be considered in light of the reason for which certification is sought—litigation or settlement.  Citing the Supreme Court’s decision in Amchem,[3] the Ninth Circuit held that in the settlement context, manageability problems created by the need to resolve individual issues at trial are not a concern because no trial will occur.  Instead, the focus is on the Rule 23 provisions intended to protect absent class members by blocking “unwarranted or overbroad class definitions.”Individual Issues Regarding Exposure and Reliance Did Not Defeat Predominance for a Settlement ClassIn Hyundai II, the Ninth Circuit concluded that common issues predominated regarding exposure and reliance, because so-called “Monroney stickers” containing the alleged fuel efficiency misrepresentations were present on every new car.  The Objectors-Appellants argued that the class of used-car purchasers may not have seen the “Monroney stickers” because they were not required to be displayed on used cars.  The trial court had rejected this argument on the basis that the alleged misrepresentations were part of a nationwide, concerted marketing effort.  The Hyundai II panel, however, did not decide whether Hyundai’s and Kia’s advertising was substantial enough to support an inference of reliance under the Tobacco II standard in a litigation context.<a name="_ftnref4" href="#4033971-v3-Hyundai_-_Ninth_Circuit_Article.docx">[4]</a>  Rather, the court limited its decision to the settlement context and concluded that the potential individual issues would apply only to a subset of the class and thus did not defeat predominance for the settlement class overall.  Moreover, the potential individual issues would “primarily implicate trial management issues, which we do not consider when conducting a predominance analysis for a settlement class.”Variations in State Law Did Not Defeat Predominance for a Settlement ClassHyundai II rejected the objectors’ argument that, in the settlement context presented, Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), required the district court to address variations in state law affecting claims by used car purchasers.  While a party litigant could “timely invoke the law of a foreign state,” here, no objector had presented an adequate choice-of-law analysis, or argued that differences between the consumer protection laws of all fifty states precluded certification of a settlement class.  As such, the district court was not obligated to address choice-of-law issues, and the Ninth Circuit would not decertify the class for lack of such an analysis.Moreover, the Ninth Circuit held that Mazza was “readily distinguishable.”  There, unlike in the case before the court, the foreign law proponent had “exhaustively detailed the ways in which California law differs from the laws of the 43 other jurisdictions,” and showed how applying the facts to those disparate state laws made “a difference in this litigation.”  The en banc panel emphasized that:  “Importantly, the Mazza class was certified for litigation purposes.  The prospect of having to apply the separate laws of dozens of jurisdictions presented a significant issue for trial manageability, weighing against a predominance finding.”Finally, Hyundai II concluded that application of California law did not violate due process notwithstanding that, under Virginia law, Virginia residents’ claims might be time-barred if they opted out.  Significantly, the Ninth Circuit held that the Virginia objector was free to opt out, but “could not opt out on behalf of anyone else.”  The decision thus eliminates the threat sometimes made by objectors to opt out an entire subclass.Settlement Approval Was Otherwise ProperUnlike a number of recent Ninth Circuit decisions that have been notably critical of the details of class settlements, the en banc panel in Hyundai II rejected a variety of challenges to the settlement and settlement procedures.  It held that both the long form and short form notices were proper.  The long form notice adequately described the terms of the settlement and informed settlement class members that additional compensation could be received.  The short form notice “was designed to be, as the name suggests, short.”  It satisfied its “primary purpose” of alerting class members to the settlement; it provided a high-level overview of the process (including critical dates), and explained where class members could obtain additional information and claim forms.Hyundai II also rejected the argument that claim forms were not necessary and that the claim forms were overly burdensome.  Although the participation rate of lump sum claimants was only 23 percent, the Ninth Circuit noted that it had approved class action settlements “where less than five percent of class members filed claims.”  Finally, the Ninth Circuit found no evidence of collusion between class counsel and the automakers, noting that there was no “clear sailing” provision, no reversion of unclaimed funds to the defendants, and no disproportionate distribution of settlement funds to class counsel.DissentIn her dissent, Judge Ikuta, who authored the original panel decision, largely adopted the analysis contained in that decision.  The dissent argues that settlement classes are not different, and that the trial court should have done a full choice-of-law analysis, as would have been required for a litigation class.TakeawaysHyundai II reaffirms that, in appropriate cases, nationwide settlement classes can be certified under a less stringent standard than litigation classes.  At the same time, the decision is cabined to the settlement context and preserves intact the far more demanding predominance analysis required for certification of a litigation class.________________________________________________________________[1] In re Hyundai and Kia Fuel Economy Litig., 2019 WL 2376831 (June 6, 2019) (“Hyundai II”).[2] In re Hyundai and Kia Fuel Economy Litig., 897 F.3d 1003 (9th Cir. 2018) (“Hyundai I”).[3] Amchem Products Inc. v. Windsor, 521 U.S. 591 (1997).[4] In re Tobacco II Cases. 46 Cal. 4th 298 (2009).

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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 pro

Penelope Preovolos

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Ninth Circuit’s En Banc Hyundai Decision: Less Strict Standard For Settlement Classes

Start Your Engines: The U.S. Supreme Court Will Yet Again Review the Constitutional Limits of Personal Jurisdiction in a Pair of Cases Involving Ford Motor Company

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On June 7, 2019, an en banc Ninth Circuit panel affirmed certification of a nationwide settlement class and held, 8-3, that class certification criteria are app

Ninth Circuit’s En Banc Hyundai Decision: Less Strict Standard For Settlement Classes

In April, a New York federal court denied certification for a purported class alleging that Johnson & Johnson misled customers by placing the words “no trans fat” on labels for its Benecol buttery spreads. See Bowling v. Johnson & Johnson, et al., 1:17-cv-03892, S.D.N.Y. 2017. The court’s order focused on issues highly specific to the lead plaintiff, showing the benefits of carefully investigating the lead plaintiff in class actions.Case BackgroundIn 2017, Suzanna Bowling brought suit against Johnson & Johnson alleging that the labeling for its Benecol buttery spreads was misleading. According to the complaint, the labeling includes text reading “No Trans Fat” and “No Trans Fatty Acids,” some of which is in “all capitalized, bolded letters.” It was these statements that the complaint alleged misled a New York class of customers to purchase, and overpay for, the product.Court Denies Plaintiff’s Motion for Class CertificationThe United States District Judge Alison J. Nathan denied Ms. Bowling’s motion to certify the New York class, finding that Ms. Bowling was not a suitable class representative for a couple of reasons.First, Ms. Bowling had previously settled with Johnson & Johnson, and as a part of that settlement, there was a “covenant not to sue” in place. This covenant, among other aspects of the settlement, could potentially impede the current case were it to proceed. Judge Nathan stated, “It may be that the covenant not to sue is not binding or is inapplicable to Bowling’s claims here, but … the court concludes she will be required to ‘devote considerable time’ to rebutting its applicability.” As a result of this potentially binding covenant, Ms. Bowling was certainly an atypical—and arguably an inadequate—class representative.Second, Ms. Bowling’s credibility suffered “on key issues.” In fact, key allegations in her complaint were demonstrably false. Ms. Bowling stated in the complaint that she purchased Benecol at a particular location and time, but Johnson & Johnson’s internal records showed that Benecol was never sold at that particular location and time. Ms. Bowling also alleged that, after she came to believe that Benecol actually contained trans fats, she immediately wrote Johnson & Johnson requesting a refund. However, Johnson & Johnson’s customer service department found no record of such a refund request.In conclusion, Judge Nathan stated, “Here, defendants have presented unrebutted evidence that Bowling could not have purchased Benecol Light in the manner in which she has testified; she is therefore ‘vulnerable to serious attacks’ on her credibility.” Accordingly, Ms. Bowling’s motion for class certification was denied.TakeawayThis case reinforces that it is imperative for defendants to always carefully investigate the lead plaintiffs, whether by running a background check or asking questions about their prior litigation history during depositions. All too often, as was the case here, the lead plaintiff is an inadequate class representative for personal reasons that are not apparent at first glance. And while the plaintiff’s unsuitability to represent the class may not end the entire litigation, it can certainly stall the proceedings and create leverage for defendants during settlement negotiations.

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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 mat

Claudia Vetesi

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

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Lead Plaintiff Spreads Her Misleading Butter Case a Little Too Thin

Lead Plaintiff Spreads Her Misleading Butter Case a Little Too Thin

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In April, a New York federal court denied certification for a purported class alleging that Johnson & Johnson misled customers by placing the words “no trans fa

In Hadley v. Kellogg Sales Company, Plaintiff Stephen Hadley, who has filed at least two additional lawsuits alleging the mislabeling of breakfast foods, sought certification of four California subclasses of purchasers of Kellogg’s cereal and cereal bar products.  On August 17, 2018, Judge Koh issued an order that carefully dissected Plaintiff’s request.  The court concluded that Plaintiff had established the requirements for class certification for several of his proposed subclasses challenging health claims on the labels of the products at issue.  Significantly, however, Judge Koh rejected Plaintiff’s attempts to certify a subclass challenging a representation made on the back of packaging of cereal bars.  She also concluded that Plaintiff had not established Rule 23(b)(3)’s predominance requirement as to his deceptive omission theory of liability due to his failure to present a viable damages model.Background. Plaintiff alleges that Kellogg’s use of statements containing terms such as “healthy,” “nutritious,” or “wholesome” on its cereal and cereal bar products misled consumers into believing that those products are healthy, when they are not because of the amount of added sugar they contain.  On this basis, Plaintiff alleges violations of the FAL, CLRA, and UCL, and asserts a claim for breach of warranty.  Plaintiff also predicates his consumer-protection claims on his allegations that Kellogg deceptively failed to disclose to consumers the products’ high sugar content, and that certain of the challenged statements violate FDA regulations.Narrowly Defined Subclasses Prevent Predominance Challenge Based on Lack of Exposure, But Back-of-the-Package Statements Do Not. Kellogg argued that many of the allegedly deceptive statements did not appear on the packaging of the cereal products for a substantial portion of the class period, and that this lack of uniform exposure created significant differences regarding the legal viability of class members’ claims.  The court disagreed.  Judge Koh reasoned that Plaintiff sidestepped this potential problem by narrowly defining the subclasses to include only those individuals who purchased products that actually displayed the challenged statements on their packaging.  Nevertheless, the court agreed with Kellogg that it could not infer class-wide exposure to the “wholesome goodness” statement that only appeared on the back panel of cereal bar packaging.  The court therefore declined to certify a subclass of purchasers of the cereal bar because it would have to conduct individualized inquiries to determine which class members saw the challenged statements.Advantage Realized Model Flunks Comcast for Omission Claims.  Comcast Corp. v. Behrend, 569 U.S. 27 (2013), requires a plaintiff to establish a damages model that matches his or her theory of liability and measures damages across the entire class.  Plaintiff claimed that his expert’s proposed “advantage realized model” satisfied the Comcast requirement for his theory that Kellogg deceptively failed to inform consumers about the allegedly high sugar content of its breakfast products.  Under the advantage realized model, Plaintiff’s expert proposed to measure the market advantage that Kellogg obtained by omitting that information.  The court concluded, however, that this model only provided a measure of nonrestitutionary disgorgement (Kellogg’s unjust enrichment), rather than restitutionary disgorgement (Plaintiff’s loss).  The court explained that nonrestitutionary disgorgement is not a permissible class-wide remedy under the FAL, CLRA, or UCL, and therefore Plaintiff’s damages model was not consistent with his omission theory of liability.Takeaway. Judge Koh’s decision in Hadley emphasizes that plaintiffs challenging multiple statements on multiple products in a single action are not excused from establishing the requirements for class certification for each product at issue and each theory of liability.  Even where defendants cannot entirely defeat class certification, they should parse plaintiffs’ broad requests and direct pointed attacks to particular products or theories of liability that are susceptible to challenge on any class certification requirement.  In particular, Judge Koh’s denial of class certification as to back-of-the-package statements and omission-based claims demonstrates that predominance and damages model requirements remain fruitful areas for opposing class certification.

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Mixed Results on Class Certification for “Cereal” Plaintiff

Mixed Results on Class Certification for “Cereal” Plaintiff

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In Hadley v. Kellogg Sales Company, Plaintiff Stephen Hadley, who has filed at least two additional lawsuits alleging the mislabeling of breakfast foods, sought

On July 27, 2018, the Ninth Circuit issued an order granting en banc review of its decision in Hyundai and Kia Fuel Econ. Litig., No. 15-56067, 2018 U.S. App. LEXIS 1626 (Jan. 23, 2018). The Ninth Circuit also set oral argument for the week of September 24, 2018, in a separate ruling.As we noted in our February 12, 2018 post, the Ninth Circuit’s January 23 decision denying certification of a settlement class had provided defendants with a power tool in defending against class certification. While the panel is reviewing the decision, however, the Ninth Circuit made clear that the case may not be cited as precedent in any case before the Ninth Circuit.  We will provide relevant updates following the issuance of an opinion.

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Update: Ninth Circuit to Review Hyundai Pro-Defense Decision

Update: Ninth Circuit to Review Hyundai Pro-Defense Decision

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On July 27, 2018, the Ninth Circuit issued an order granting en banc review of its decision in Hyundai and Kia Fuel Econ. Litig., No. 15-56067, 2018 U.S. App. L

On July 19, 2018, United States Magistrate Judge Mark Lane issued a Report and Recommendation recommending that United States District Judge Robert Pitman for the Western District of Texas grant a motion to compel arbitration and dismiss a putative class action on the grounds that the Plaintiff agreed to the Defendants’ website’s Terms and Conditions, which contained a mandatory arbitration clause. May, et al. v. Expedia Inc., et al., No. 1:16-cv-01211-RP, Dkt. No. 24.HomeAway User Files Putative Class Action. HomeAway is an online marketplace for vacation rental properties where property owners can list their properties for rent and “travelers” can book rental properties.  HomeAway’s original business model was to charge owners a fee to list their properties (either on a one-year subscription or pay-per-booking basis) and to allow travelers to search and book rentals for free.  HomeAway was acquired by Expedia in 2015 and changed its business model to charge travelers a fee to book rentals in mid-2016.  Plaintiff James May had been a property owner who used HomeAway since 2013.In November 2016, Plaintiff filed a putative class action against Expedia and HomeAway for breach of contract, fraud, fraudulent concealment, and Oregon and Texas state law claims based on HomeAway’s imposition of a “traveler fee” and its negative effect on owners who used HomeAway to rent properties. Defendants moved to compel Plaintiff to arbitrate his claims based on HomeAway’s 2016 Terms and Conditions, which contained a mandatory arbitration clause.  Defendants argued that Plaintiff agreed to the Terms and Conditions twice:  (1) when he renewed his HomeAway subscription in September 2016 and (2) when he booked his property through HomeAway’s website in October 2016.  Plaintiff argued he did not agree to the Terms and Conditions because (1) he renewed his HomeAway subscription in his wife’s name, (2) he did not receive actual or constructive notice that he agreed to the Terms and Conditions when he clicked “Continue” during the booking process, and (3) any agreement to arbitrate is illusory and unenforceable.  Following the Fifth Circuit’s decision in Arnold v. HomeAway, Inc., 890 F.3d 546 (5th Cir. 2018), the parties agreed that Plaintiff’s argument that the arbitration agreement is illusory is precluded and that the only issue before the court was whether the parties entered an arbitration agreement.  Magistrate Judge Lane then issued his Report and Recommendation finding Plaintiff contractually bound to the 2016 Terms and Conditions based on his subscription renewal and booking his property through HomeAway.HomeAway User’s Assignment of Account Not Enforceable. First, Magistrate Judge rejected Plaintiff’s argument that he did not agree to the 2016 Terms and Conditions on his own behalf because he purchased the renewal subscription in his wife’s name on her behalf and with her authorization.  Although the Plaintiff specifically renewed the subscription in his wife’s name to avoid being bound by the 2016 Terms and Conditions, he offered no legal argument or basis to show that this had any legal effect.  The 2015 Terms and Conditions expressly did not allow Plaintiff to assign the Terms and Conditions without HomeAway’s consent, and there was no evidence that HomeAway consented to the purported assignment from Plaintiff to his wife.HomeAway User Was on Notice of Agreement to Terms and Conditions. Second, Magistrate Judge Lane rejected Plaintiff’s argument that he was not aware that he was agreeing to the 2016 Terms and Conditions when he booked his property through HomeAway’s website because the placement and typeface of the hyperlink were not sufficient to put him on notice.  Magistrate Judge Lane distinguished Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, which involved a hyperlink to the terms at the bottom of a webpage and did not require any affirmative action to demonstrate the user’s agreement to the terms.  In contrast, HomeAway’s website presented the user with a notice directly above the “Continue” button that informed the user that he was agreeing to the hyperlinked Terms and Conditions by clicking the button to continue.  A user could not complete the transaction without clicking the “Continue” button.  This was sufficient to put Plaintiff on notice that he was agreeing to the hyperlinked Terms and Conditions by continuing the transaction.HomeAway User Equitably Estopped From Arguing Not Bound. Finally, Magistrate Judge Lane noted that if Plaintiff was not bound by the Terms and Conditions, Plaintiff could gain all of the benefits of his HomeAway account without being bound to terms he did not want to accept.  Such a result dictates that even if Plaintiff was not contractually bound, he should be equitably estopped from contending that he is not bound by the Terms and Conditions.HomeAway Takeaway. Although Judge Pitman has not issued a final order granting or denying the motion to compel arbitration, Magistrate Judge Lane’s Report and Recommendation provides a roadmap for how companies can hold users to their agreement to terms even where the user attempts to avoid being bound.

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Website User Held to Arbitration Provision Despite Renewing Subscription in Wife’s Name

Website User Held to Arbitration Provision Despite Renewing Subscription in Wife’s Name

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On July 19, 2018, United States Magistrate Judge Mark Lane issued a Report and Recommendation recommending that United States District Judge Robert Pitman for t

German consumers will be able to sue manufacturers and service providers by way of representative action starting on 1 November 2018 – just in time to suspend the statute of limitations of consumer claims based on the exhaust emissions scandal. This new law won’t be the last step Germany will take towards allowing “consumer class actions” because it is by no means enough to implement the planned EU Directive on representative actions (2018/089 (COD)).While large claims are already being aggregated by different law firms and claims vehicles, this new representative action structure may lead to more small claims being filed. Consumers will still need to file individually for damages because the new representative action will only establish liability, not damages.

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Counsel

Jakob conducts litigation and arbitration in both German and English. Together with the Litigation Department, Jakob regularly explores new legal fields with a private law component. Such interdisciplinary matters include, for example, tax liability issues in connection with so-called cum-ex transactions, sanctions as obstacles to performance in supply contracts, and the valuation of licenses when challenging license fees. 

Jakob Schellmann

Jakob Schellmann is counsel at Morrison Foerster’s German office in Berlin and a member of the Litigation Department. His practice focuses on complex high-value commercial disputes, often in a cross-border setting relating to international business transactions. He also has expertise in both international commercial arbitration and mediation.

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Collective Actions in Europe: Another Small Step in Germany

Collective Actions in Europe: Another Small Step in Germany

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German consumers will be able to sue manufacturers and service providers by way of representative action starting on 1 November 2018 – just in time to suspend t

Last week, the Federal Communications Commission (“FCC”) issued a public notice (the “Notice”) seeking comment on key aspects of the Telephone Consumer Protection Act (“TCPA”) that were addressed in the recent decision in ACA International, et al. v. FCC, 885 F.3d 687 (D.C. Cir. 2018).  As we noted in our Client Alert on the decision, the court in ACA set aside portions of the FCC’s 2015 Order interpreting, among other things, the definition of an automatic telephone dialing system (“ATDS”) and the applicability of the TCPA to reassigned numbers.More specifically, the Notice seeks comment on:<ul><li>What constitutes an “automatic telephone dialing system”? Under the TCPA, an ATDS is defined as equipment with the capacity to store or produce telephone numbers to be called. In ACA, the Court found that the FCC significantly overreached in its interpretation of “capacity.” The Notice thus seeks comment on how to interpret “capacity,” including how much user effort should be required to enable the device to function as an ATDS. The notice also seeks comment on what functions a device must be able to perform to qualify as an ATDS. For instance, to be “automatic,” must an ATDS dial numbers without human intervention? Must the ATDS dial thousands of numbers in a short period of time? What if a system has ATDS functionality, but the caller does not use the ATDS functionality when making a call?</li></ul><ul><li>How should calls to reassigned wireless numbers be treated? The TCPA exempts from liability certain calls made with prior express consent of the called party. A key issue in the ACA decision was interpretation of the term “called party” and how it applies to reassigned numbers. For instance, what happens if a business has obtained consent from the caller it is trying to call, but the wireless number associated with the person who provided consent is “reassigned,” and the business calls someone who did not consent to be called? The FCC’s answer to this issue in its 2015 Order was a “one-call safe harbor” for callers to detect reassignments. The Court in ACA, however, struck down this approach as arbitrary and capricious. The FCC’s notice thus seeks comment on how to interpret the term “called party” for reassigned numbers. For instance, does “called party” refer to “the person the caller expected to reach” or “the person actually reached”?</li></ul><ul><li>How may a called party revoke consent? In its 2015 Order, the FCC determined that consent may be revoked “at any time and through any reasonable means,” including orally or in writing, that “clearly expresses a desire not to receive further messages.” The Court in ACA left the ruling in place but suggested that a business could avoid TCPA liability by making available “clearly-defined and easy-to-use opt-out methods.” The FCC notice thus seeks comment on what opt-out methods would be sufficiently clear such that opt-outs outside of those methods would not constitute a “reasonable means.”</li></ul><ul><li>Pending petitions: The FCC notice also seeks comment regarding pending petitions for reconsideration, including the FCC’s Broadnet Declaratory Ruling as well as the 2016 Federal Debt Collection Rules.</li></ul>Comments on the FCC’s notice are due on June 13, 2018, with reply comments due on June 28, 2018. In the meantime, and as we noted in our Client Alert, businesses should continue to evaluate whether particular devices may be considered an ATDS as well as whether they have processes in place to provide a reasonable means of revoking consent.