The United States’ controversial meat labeling regulations, which have been struck down by World Trade Organization (WTO) panels three times in three years, are continuing to cause serious problems with its neighbors to the North and South. Top trade officials from Canada and Mexico issued a joint statement this week urging repeal of the regulations, threatening substantial economic retaliation if the U.S. fails to bring the regulations into compliance with WTO rules or remove them altogether.

This threat came shortly after a WTO compliance panel declared last week that an amended version of the U.S.’s country-of-origin (“COOL”) meat labeling regulations were still having a discriminatory effect on imports of beef and pork. The U.S. sought to address its loss in earlier rounds of WTO litigation by amending the labeling regulations to include information about where each of the production steps – including slaughtering and packaging – takes place, a move that the panel said actually worsened the rules’ discriminatory effects in some instances.

In a summary of the panel’s findings, the WTO concluded that “the amended COOL measure increases the original COOL measure’s detrimental impact on the competitive opportunities of imported livestock in the U.S. market because it necessitates increased segregation of meat and livestock according to origin, entails a higher record-keeping burden, and increases the original COOL measure’s incentive to choose domestic over imported livestock.”

In its report, the compliance panel affirmed the U.S. government’s right to require country-of-origin labeling for meat products, but ruled that the regulations conflicted with the WTO’s Agreement on Technical Barriers to Trade and national treatment obligations by giving less favorable treatment to Canadian and Mexican imports than what is granted to domestic producers.

The U.S. has been under substantial pressure to bring the rules in line with the WTO’s decision, not only from Mexico and Canada, but from a growing number of domestic industry organizations and members of the U.S. Congress. In a joint statement filed this week, the American Meat Institute and North American Meat Association commended the compliance panel’s decision, calling on the U.S. Trade Representative and the U.S. Department of Agriculture to halt litigation and instead to bring its labeling rules into full compliance. This came after a USTR spokesperson announced that the U.S. was “disappointed” with the WTO’s decision and that it may pursue additional appeals.

Separate from the WTO battle, the meat labeling rules have created controversy in U.S. federal courts, with the USDA most recently urging the D.C. Circuit not to revisit its July decision upholding the rules despite protest from industry groups that it violates the First Amendment’s restrictions on compelled corporate speech.

In short, if the U.S. does not bring its labeling regulations into compliance, Canada and Mexico may strike back with tariffs or trade restrictions on certain U.S. goods that could reach into the billions of dollars. Although the U.S. government has hinted at appealing the WTO’s decision, at least some U.S. officials agree that a negotiated solution (not further litigation) is the best answer to the protracted dispute, particularly given heightened market uncertainty that has resulted from the meat labeling battle. With any luck, the parties will reach a mutually agreed resolution soon, ensuring our nation’s esteemed right to bacon – Canadian or otherwise.

Any time class certification is denied, defendants should pay close attention to what the defendant did to win the class certification battle and whether any lessons can be learned for application in other putative class actions.

Coe v. Philips Oral Healthcare Inc., No. C13-518 MJP (W.D. Wash. Oct. 10, 2014), is a recent example of a class certification denial worth discussing.  Defendant, instead of waiting for plaintiffs to file their certification motion, filed a preemptive motion to deny nationwide class certification.  This strategy paid off.  Defendant won not only its motion denial certification but also  won summary judgment based on the statute of limitations on a claim under New York’s General Business Law and dismissal of a claim under Connecticut’s Unfair Trade Practices Act for lack of subject matter jurisdiction.

The Coe plaintiffs are a putative class of purchasers of Sonicare brand electric toothbrushes.  According to the plaintiffs, the product packaging and website marketing contain false representations about the number of brushstrokes per minute and the level of cleaning that the toothbrushes provide.  Plaintiffs alleged in their consolidated complaint that certification of a nationwide class would be appropriate because Washington’s Consumer Protection Act (WCPA) should apply to all plaintiffs’ claims, even though none of the named plaintiffs were from Washington.  The defendant filed a preemptive motion against certification, arguing that Washington’s choice-of-law rules mandate that the laws of each plaintiff’s home state apply to their claims.

The court found that “[b]ecause a conflict exists between WCPA and the consumer protection laws of the various states where the [t]oothbrushes were purchased and used, the Court must apply Washington’s most significant relationship test in order to determine which law to apply.”  Under that test, the court determined which state had the most significant relationship to the cause of action and found that while “Washington has a significant relationship to alleged deceptive trade practices by a Washington corporation,” “the putative class members’ home states have significant relationships to allegedly deceptive trade practices resulting in injuries to their citizens within their borders,” as well.  The plaintiffs argued that defendant had attempted to fix the alleged problems with the toothbrushes in their Washington facilities, making Washington the state with the most significant relationship to plaintiffs’ claims.  Ultimately, though, the court agreed with the defendant that the plaintiffs’ home states had the most significant relationship to their causes of action.

The deciding factor in the significant relationship test appeared to be that “the crux of [p]laintiffs’ action involves the marketing and sale of the [t]oothbrushes, which took place in other states.”  In support of this conclusion, the court cited to the Restatement (Second) of Law on Conflicts of Laws § 148 which has been adopted by Washington in the fraud and misrepresentation context.  The court explained that “Section 148 of the Restatement and its comments make clear that the alleged misrepresentation to consumers and the consumers’ pecuniary injuries, both of which occurred in consumers’ home states and not in Washington, should be considered the most significant contacts in this particular case.”  In addition, the court cited to Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012), where the Ninth Circuit “recognized the strong interest of each state in determining the optimum level of consumer protection balanced against a more favorable business environment, and to calibrate its consumer protection laws to reflect their chosen balance.”

Once the court determined that it would apply the laws of the plaintiffs’ home states, it was inevitable that plaintiffs would be “unable to demonstrate the predominance or manageability required for class certification” under Rule 23(b)(3).  And, as the court found, “[m]aterial differences between the consumer protection laws of the relevant states overwhelm common questions.” Accordingly, nationwide class certification was preemptively denied.

Of course, a preemptive motion to deny class certification will not be appropriate in every case, but it is an interesting and creative strategy that paid off in Coe and can really help narrow the scope of liability in a putative class action.

On October 8, the Supreme Court heard oral argument in Warger v. Shauers, No. 13-517, a case that the Products Liability Monitor has been watching.  The case involves the ability of a party to introduce juror testimony about statements made during jury deliberations that tend to show the alleged dishonesty of a juror during voir dire.

The admissibility of juror testimony is governed by Federal Rule of Evidence 606(b), which prohibits testimony from jurors about “any statement made or incident that occurred during the jury’s deliberations; the effect of anything on that juror’s or another juror’s vote; or any juror’s mental processes concerning the verdict or indictment.”  Few exceptions to this rule are granted, including testimony about extraneous prejudicial information that was improperly brought to a juror’s attention; an outside influence improperly brought to bear on any juror; or a mistake made in entering the verdict.  Thus, as an established matter, juror testimony that purports to impeach the verdict is not allowed.  Indeed, the Supreme Court previously spoke on the permissibility of juror testimony in a decision issued over a quarter of a century ago; in that case, the Court barred an evidentiary hearing in which jurors would be able to testify on juror alcohol and drug use during trial, finding that the Sixth Amendment right to trial by a competent jury did not require permitting such testimony.  See Tanner v. United States, 483 U.S. 107 (1987).

The Warger case involves a jury foreperson who, after a defense verdict in an automobile accident case and after answering in the negative in response to a standard voir dire question addressing potential biases, revealed that her own daughter had been at fault in an auto accident.  In support of his position that testimony from that juror should be admitted, Warger argued in the briefing that because he was making a motion for a new trial, the juror testimony is not proscribed under Rule 606(b) because it is not being offered as an inquiry into the validity of a verdict or settlement.  In response, Shauers posited that a motion for a new trial is, in actuality, an attack upon the validity of the verdict and that the juror testimony is thereby forbidden.

At oral argument, counsel for Warger started by noting that the Supreme Court had previously held in McDonough v. Greenwood, 464 U.S. 548 (1984), “that a party is entitled to a new trial where it can show that a juror was materially dishonest at voir dire, regardless of whether the juror’s dishonesty actually infected the verdict.”  Counsel proceeded by arguing that a McDonough claim—that is, an inquiry into the composition of the jury—is thus permitted under Rule 606(b). In response, counsel for Shauers asserted that the fact that this case involves juror dishonesty does not change the Court’s holding in Tanner, and that McDonough does not change the nature of Rule 606(b).

The Justices focused their questioning largely on the Petitioner’s position, with Justice Ginsburg indicating her skepticism at the very outset of oral argument when commenting that “the whole rationale behind this is we don’t want to invade the jury province with information about what went on in the jury room.  And that’s a pretty old rule. . . . So this, what’s involved here is a juror reporting what she heard during the deliberations.  And it seems to me that’s exactly the kind of thing that is not permitted.”  Other Justices, including Justice Alito and Chief Justice Roberts, expressed a concern that permitting such testimony would create an untoward incentive for lawyers to approach jurors after trial, in a presumed effort to use the evidence to get a new trial.  This concern is reflective of the values promoted by Rule 606(b) in the first place:  freedom of deliberation, stability and finality of verdicts, and protection of jurors against annoyance and embarrassment.  Given the Court’s previous decision against allowing juror testimony in Tanner, it is possible that the Court in this case will exhibit a similar reluctance to invade the respected boundaries of the jury.  The Products Liability Monitor will continue to follow this case and provide updates.

New Twist in Litigation Against States Dragging Their Feet On Fracking Regulation

October 17, 2014

Over the past year, the fight to authorize fracking has taken different forms in various states across the country, including lawsuits challenging the legality of local fracking bans in both New York and Colorado, and a lawsuit in New York seeking to compel the state government to complete its nearly six-year-long review of fracking.  This past […]

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Another SCOTUS Case To Keep An Eye On This Term

October 15, 2014

My colleague Lisa Sokolowski recently discussed some of the cases we are watching during this year’s Supreme Court term. Let’s add another to the list: Perez v. Mortgage Bankers Association, 2014 U.S. LEXIS 4275 (U.S. June 16, 2014).  Although the dispute technically concerns a reinterpretation by the Department of Labor of an existing regulation, in practical terms SCOTUS’s ruling could impact the regulatory […]

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