As a refresher, Whirlpool v. Glazer involves a consumer class that sued Whirlpool for alleged defects in front-loading washing machines.  Whirlpool argued that the district court’s certification of the class and the Sixth Circuit’s subsequent affirmance of certification were inappropriate because the plaintiff class included many uninjured class members and because too many individualized questions existed among class members.  Whirlpool’s cert petition was before the Supreme Court until last month, when the Court issued a GVR order (granted the cert petition, vacated the judgment below, and remanded it for further consideration in light of Comcast).   Whirlpool has since filed a motion before the Sixth Circuit that the case be remanded to the district court for reconsideration.  As expected, heated debate remains over what Comcast‘s direct effect will be on the Whirlpool’s fate.  Is it too easy to assume that Comcast will demand an opposite result?  Has Comcast heightened the bar since Dukes or has it merely reaffirmed its requirement that the certifying court conduct a “rigorous analysis”?

Butler v. Sears, Roebuck & Co. is a very similar case out of the Seventh Circuit, currently before the Supreme Court on a cert petition.  As we discussed last year, the Seventh Circuit, in an opinion written by Judge Posner, overturned a district court’s denial of certification for a class of plaintiffs who alleged that they suffered injury due to a mold-causing defect in Whirlpool-manufactured washing machines.  Sears, like Whirlpool, raised the issue of predominance in class action litigation.  Judge Posner raised some eyebrows when he decided that the class should be certified for the sake of efficiency, despite arguments that not all plaintiffs actually suffered the mold problem at issue, and that the suit implicated twenty-seven different washer models.  Even more to the chagrin of those who were critical of the Sixth Circuit’s Whirlpool decision, Judge Posner explicitly expressed his agreement with the sister court’s holding.

The questions now before the Supreme Court in the Sears cert petition are (1) whether Rule 23(b)(3)’s predominance standard can be satisfied “solely on a determination that it would be ‘efficient’ to decide a single common question at trial,” without determining that common issues predominate over individual ones; and (2) whether a class may be certified on breach of warranty claims where most putative class members did not actually suffer the alleged injury.

Petitioner Sears argues that Judge Posner “effectively eliminated” Rule 23(b)(3)’s predominance requirement and instead replaced it with an “efficiency” standard, making the Seventh Circuit’s decision directly at odds with Supreme Court precedent in Dukes and Amchem.  In its response, counsel for the plaintiff class argues that the case is not even appropriate for High Court review, given its current procedural posture (i.e., because there is currently no operative order or judgment on the question of class certification of the mold claim).  Counsel for Sears forcefully argues in its reply brief that the circuit court’s opinion “makes a mockery of the constraints on class actions imposed by Rule 23′s drafters and [the Supreme Court],” and argues that “[t]here is plainly a reviewable judgment.”  Citing Comcast‘s admonition that courts should “take a close look at whether common questions predominate over individual ones,” Sears asserts that there are even more predominance problems in its case than in Whirlpool.  Moreover, Sears argues, “[t]he one supposedly common issue identified by the Seventh Circuit—whether the product was defective—is an abstraction, not a common issue.” The individuated issues, however, are overwhelming according to Sears: each separate model’s design, performance, and instructions; and purchaser-specific evidence regarding injury, causation, amount of damages, washer care, and warranty requests.

So we are left with various questions about issues of similarity in class actions that hopefully will be addressed in the wake of Comcast through the vehicle of the two cases discussed above.  Does the need for individualized damages calculations defeat class certification?  In the class treatment context, should efficiency trump similarity?  With respect to standing issues, what does a plaintiff need to show to prove injury?  Can a class be certified if at least a good portion of the members have not actually suffered the problem that forms the basis of the complaint?  We will keep you apprised of developments in Whirlpool and Sears to determine if Comcast‘s impact on class certification will be clarified in the coming months.

California is known for its plaintiff-friendly consumer protection laws.  The State’s Unfair Competition Law (“UCL”) and Fair Advertising Law (“FAL”) both prohibit misleading advertising, and the FAL expressly prohibits false advertising whereby a product is advertised as being on sale when the alleged “former price” was not the prevailing market price during the three months immediately preceding the publication of the advertisement.  However, since Proposition 64 was passed in 2004, plaintiffs alleging claims under either the UCL or FAL must have suffered injury-in-fact and have “lost money or property” as a result of the defendants’ conduct.  Consequently, plaintiffs must demonstrate economic injury to have standing in a false advertising case in California. 

Here, plaintiff Antonio Hinojos’ putative class action complaint alleged that he purchased apparel and luggage at Kohl’s department store and relied upon the discount retailer’s advertisements, which noted that the products were substantially reduced in price from their “original” or “regular” prices, when making these purchases.  Further, plaintiff alleged that the Kohl’s advertisements he relied upon were deceptive, because (1) the items he purchased were routinely sold by Kohl’s at the advertised “sale” prices rather than the purported “original” or “regular” prices, and (2) the prices advertised as being “original” or “regular” were not the prevailing market prices during the three months immediately preceding the publication of the advertisements in question.  On December 1, 2010, the district court granted Kohl’s motion to dismiss plaintiff’s UCL and FAL claims for lack of standing.  Plaintiff filed a motion for reconsideration several months later in light of the California Supreme Court’s decision in Kwikset, but the court denied the motion, interpreting Kwikset to only apply to false advertisements regarding a product’s “composition, effects, origin, and substance.”  In that decision, the court also dismissed plaintiff’s Consumer Legal Remedies Act (“CLRA”) claim for lack of standing, finding that he failed to show he suffered “any damage.”  Plaintiff appealed.  The Ninth Circuit reversed the lower court’s rulings, finding that plaintiff sufficiently pled economic injury under Kwikset to establish standing for his UCL and FAL claims, and for the same reasons, had sufficiently pled “any damage” for CLRA standing.

In Kwikset, the misrepresentations at issue involved how the product at issue was manufactured; in that case, the defendant manufactured locksets that were falsely labeled as being “[m]ade in [the] USA,” which the Court found could matter to some consumers and cause them to part with “more money than [they] would otherwise have been willing to spend.”  That is, that extra money paid to the retailer is the “economic injury” that affords the consumer standing to sue.  The Ninth Circuit found this rationale to apply with equal force to Hinojos’ case and thus rejected the district court’s limitation of Kwikset to marketing practices involving “composition, effects, origin, and substance,” noting that such an interpretation “ignores the fact that . . . a product’s ‘regular’ or ‘original’ price matters” to some consumers as “it provides important information about the product’s worth and the prestige that ownership of that product conveys.” Indeed, a misimpression about a product’s “original” price could be as significant as the false labeling of a product, such as the false labeling of a knockoff watch as a Rolex (the example used by the Kwikset Court).  In addition, the panel found that limiting Kwikset as the district court suggested would “eliminate consumers’ ability to bring UCL and FAL claims for a vast array of other misleading marketing practices that have little or nothing to do with a product’s ‘composition, effects, origin, and substance.’” 

In sum, this decision illustrates how challenging it will be for retailers to toss false advertising claims on standing grounds in the Ninth Circuit.  Indeed, arguing that the purchaser got the “benefit of the bargain” or that the innate value of the product was the same (despite the allegedly false price discount advertising), as Kohl’s did here, will likely prove fruitless. 

We will continue to keep you posted on developments in the standing arena here at the Product Liability Monitor.

Two years ago, in June 2011, the FDA announced new labeling guidelines for sunscreen that included, among other things, the elimination of the word “waterproof” from labels.  These new rules go into effect this summer.  A rule that was not put into effect, however, may be the one to watch.  The FDA initially proposed limiting the maximum SPF value on sunscreen labels to “50 +,” however, it decided not to adopt the SPF “cap” at this time (though the FDA is still evaluating imposing a cap).  Nevertheless, the FDA and advocacy groups have publicly stated there is not sufficient data to show that products with SPF values higher than 50 provide greater protection for users than products with SPF values of 50.  Advocates have argued that some consumers mistakenly believe that “SPF 100” is twice as effective as “SPF 50,” while dermatological evidence suggests the higher SPF sunscreen is no more effective.

Numerous consumer advocacy groups have taken notice.  For example, yesterday, the Environmental Working Group reported the results of a survey of 1,400 sunscreen products to determine which were adhering to the FDA’s new rules.  According to the survey, one in seven products reviewed by the watchdog group boasted a sun protection factor, or SPF, rating above 50.  In other words, while manufacturers are entitled to label the sunscreen in that fashion, consumer watchdogs are closely monitoring this issue.  With no shortage of scientific and regulatory skepticism regarding the labeling, and consumer watchdogs on notice, sunscreen industry watchers, as well as labeling experts, are bracing for the heat that may be coming. 

The plaintiffs previously sought an injunction to prohibit the production of RRA pending investigation by the USDA’s Animal Plant and Health Inspection Service (“APHIS”).  APHIS, however, has refused to regulate RRA since it is not a  plant pest, and plaintiffs appealed on the grounds that APHIS did not follow proper administrative procedure in examining all potential adverse effects of RRA or consdering the option of partial deregulation.  The Ninth Circuit affirmed summary judgment on behalf of defendants (who included APHIS as well as the producers of RRA and other industry members with interests in the outcome who had intervened in the case) on the grounds that neither APHIS, nor the FDA or EPA are actually required to address the types of environmental and economic harms at interest in this case.  Specifically, the Ninth Circuit explained that the FDA is authorized only to remove “adulterated” food from the the national food supply, a category that could potentially include genetically modified foods if they are found unsafe for consumption, but right now the FDA does not have any guidelines for reviewing these types of foods; the EPA is authorized to regulate genetically modified plants only indirectly, through its regulation of herbicides which are evaluated only for “unreasonable environmental risks;” and APHIS regulates only plant pests, which are defined as plants that cause injury, damage, or disease to other plants, and noxious weeds which are defined as aggressive and invasive weeds that have significant negative impacts and are difficult to control.  APHIS investigated RRA and f0und that it could not injure or damage other plants in a way that would qualify it as a plant pest and therefore deregulated alfalfa; the Ninth Circuit opinion holds that this was proper and also that APHIS need not have consulted further with other organizations about RRA’s potential threats.

This is a very interesting ruling in that it does not say that the federal regulatory agencies actually evaluated RRA for the types of adverse effects cited by the plaintiffs, namely those stemming from cross-contamination, but rather that there is really no such federal oversight of these issues at all at this time.  As domestic and international concerns about genetically modified foods rise alongside with the demand for and growth of the U.S. organic food industry, this may become an area for new legislation, with the field ripe for lobbying on both sides.   And the issues at stake, which include individual consumers, public health, the economy, the environment, and international trade, are wide enough to reach all interest groups.  We will continue to monitor.

Plaintiffs have had the most success in California where the state Unfair Competition Law permits causes of action for false, or deceptive, labeling and the courts have been fairly receptive to putative classes.  Indeed, the Ninth Circuit previously noted that, as a general matter, deceptive labeling claims should not be decided at the motion to dismiss stage.  See Williams v. Gerber Products, 552 F.3d 934 (9th Cir. 2009).  But the Ninth Circuit’s decision in Pom Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (2012), made California less friendly to would-be plaintiffs.

In Pom Wonderful, plaintiff Pom Wonderful had alleged that its competitor, defendant Coca-Cola Co., had violated California state law as well as the Lanham Act by using the word “pomegranate” and a picture of a pomegranate on the label of a beverage that contained less than 1% pomegranate juice.  The district court granted summary judgment in favor of Coca-Cola Co. and the Ninth Circuit affirmed.  The Ninth Circuit held that Pom Wonderful’s claims were preempted because the FDCA comprehensively regulates food and beverage labeling and the FDA could act if it determined that Coca-Cola Co.’s labeling did not comply with its regulations.  Thus, the Ninth Circuit deferred to the FDA’s decision whether to act or not with respect to the label in question.

Not surprisingly, though, plaintiffs have not given up and are trying to keep their cases alive in California.  And they recently made some headway steering away from Pom Wonderful in Janney v. General Mills, No. C 12-3919 (N.D. Cal. 2013).  The plaintiffs in Janney are a putative consumer class alleging that General Mills’ Nature Valley brand food products’ “natural” labels are deceptive because the products contain high fructose corn syrup and other processed sweeteners.  The plaintiffs’ complaint includes various counts of California law violations as well as unjust enrichment.  According to the plaintiffs, “natural” labels should only be applied to products that contain no artificial or synthetic ingredients and consist of ingredients that are only minimally processed.

The district court recently issued an opinion denying General Mills’ motion to dismiss based on the primary jurisdiction doctrine.   Under this doctrine, courts may determine that certain decisions should be made by the relevant federal agency (as opposed to the courts).  General Mills argued that the FDA should determine the meaning and proper use of the label “natural.”  Although finding that the “question is a close one,” the court disagreed.  The court concluded that the deceptive labeling claims should not be dismissed because “the FDA has signaled a relative lack of interest” with respect to the use of “natural” in food and beverage labels.  According to the opinion, the FDA’s failure to define “natural” in any regulation or formal policy statement is telling.  The FDA has only issued “informal” guidance stating that “natural” means that “nothing artificial or synthetic [ ] has been included in, or has been added to, a food that would not normally be expected to be in the food.”  Although the FDA has issued numerous warning letters to food and beverage manufacturers for uses in contravention of this definition, the court determined that the FDA “has taken little action against companies who have used the term ‘natural’ in labels for food products that contain various preservatives.”

The court’s decision is surprising given that it “agree[d] that the Syntek factors [for the primary jurisdiction doctrine] favor the resolution of this issue by the FDA.”  Moreover, the court’s decision is inconsistent with the Ninth Circuit’s Pom Wonderful decision.  The district court itself acknowledged that the Ninth Circuit in Pom Wonderful had “found that when a plaintiff’s cause of action requires a court to decide an issue committed to the FDA’s expertise, dismissal in deference to that agency is the proper result – even if no formal regulation has been adopted.” (emphasis added).  Nevertheless, the court did not follow the Ninth Circuit’s lead and found “little reason to stay or dismiss the case to allow the FDA the opportunity to take action.”

The issue will likely eventually be before the Ninth Circuit, but in the meantime plaintiffs will surely rely on the district court’s opinion in Janney v. General Mills in an effort to sidestep Pom Wonderful and support their false labeling claims.

As part of the settlement, Ranbaxy pled guilty to three felony Food, Drug and Cosmetic Act counts and four felony counts of knowingly making material false statements to the FDA, according to the DOJ press release.  According to Rod J. Rosenstein, U.S. Attorney for the District of Maryland, “This is the largest false claims case ever prosecuted in the District of Maryland, and the nation’s largest financial penalty paid by a generic pharmaceutical company for FDCA violations.”  As we highlighted in our previous post, the international component of this investigation — all manufacturing facilities at issue were located in India — seem particularly noteworthy and suggest a more aggressive international stance on the part of the FDA.  As acting assistant attorney general for the DOJ Civil Division, Stuart F. Delery, stated, “We will continue to work with our law-enforcement partners to ensure that all manufacturers of drugs approved by the FDA for sale in the United States, both domestic and foreign, follow the FDA guidelines that protect all of us.” 

Ranbaxy will pay a criminal fine and forfeiture totaling $150 million and civil settlement of $350 million, $231.8 million of which will go to the federal government, $118.2 million to the participating states, and approximately $48.6 to the qui tam whistleblower, a former Ranbaxy executive.  Whether the Ranbaxy settlement indicates a growing trend in broad-reaching international enforcement of FDA violations remains to be seen, but it is likely that the DOJ and FDA will continue to work together if these are the results they can achieve.  Companies thus should be ever more vigilant in their risk management assessments and consider proactive measures to eliminate, or at least reduce, their exposure to aggressive government FCA actions.

In his putative class action complaint, the named plaintiff, Thomas Young, argued that J&J falsely advertised its Benecol line of spreads as containing “no trans fats” even though they contained small amounts of partially hydrogenated oils.  The plaintiff also argued that his claims were not preempted because U.S. Food & Drug Administration guidelines prohibit false claims outside the nutritional box on the product.  Judge Pisano held that J&J had been up front about the presence of partially hydrogenated oils in its Benecol spreads because they were listed on the ingredient list and Benecol’s packaging included a disclaimer stating that the product included a small amount of partially hydrogenated oil.  Judge Pisano also held that the plaintiff’s claims were preempted by the NLEA, which allows for products containing fewer than 0.5 grams of trans fat per serving to be labeled as having 0 grams of trans fat.  Judge Pisano ruled that the “[p]laintiff’s complaint amounts to no more than subjective allegations that the presence of any amount of trans fat and partially hydrogenated oils renders defendant’s health claims misleading and Benecol unhealthy.  Such allegations, however, are insufficient to establish injury-in-fact.”

On appeal, the attorney for the plaintiff argued that it was misleading for the defendant to advertise its product as containing “no trans fat” even if it contained 0 grams per serving under NLEA guidelines.  He further argued that J&J’s claim that Benecol was “proven to reduce cholesterol” was untrue given that trans fats are known to actually raise cholesterol.  The Third Circuit disagreed, however, choosing not to accept a distinction between a claim that a product contains zero grams of trans fat per serving and “no trans fats.”  Because anything less than 0.5 grams of trans fat per serving is considered to be insignificant under the NLEA and FDA guidelines, the statement that the product contained “no trans fats” was not misleading.  This was particularly true, the Court noted, where the product packaging included information identifying small amounts of trans fats in the form of partially hydrogenated oils.  With respect to the choloesterol-reducing claim, the Court held that the claims were authorized based on the presence of plant stanol ester in Benecol.  According to FDA regulations, a food product that contains at least 1.7 grams of plant stanol esters – which Benecol did – can make a health claim such as the one included by J&J.  As a result, the Third Circuit held that the plaintiff’s claims were preempted by the NLEA.

The Benecol suit is another example of plaintiffs trying to gain some traction in the space of false or misleading labeling claims.  Thus far companies have largely been able to stave off these claims, both in the courtroom and in the political and regulatory arena.  However, we will continue to monitor the efforts of the plaintiffs’ bar and report on any significant developments.

In fact, just two days after the Supreme Court decided Kiobel, the Southern District of Texas dismissed a case brought under the ATS, the Torture Victim Protection Act (“TVPA”), and other legal theories, that involved alleged actions taken by the Honduran army.  Murillo v. Bain, 2013 WL 1718915 (S.D. Tex. Apr. 19, 2013).  In holding that “American Laws like the [ATS and TVPA] are presumed not [to] apply beyond the borders of the United States,” the District Court naturally cited to Kiobel.

In other district courts, litigants are avidly briefing the issue of Kiobel’s application.  In one such case in the District of Massachusetts, the plaintiff, who resides in the Republic of Moldova, brought suit against the defendant, a United States resident, under the ATS and the Optional Protocol to the Convention on the Rights of the Child on the Sale of Children, Prostitution, and Child Pornography of the United Nations General Assembly.  V.D. v. Nikolayev (No. 10673).  On May 1, 2013, the defendant filed a motion to dismiss, based almost entirely on the premise that, per the Supreme Court’s decision in Kiobel, the District Court lacks jurisdiction under the ATS.   

Indeed, the Supreme Court itself has addressed the impact of Kiobel in two cases.  In the first—Rio Tinto PLC, et al. v. Sarei, et al. (No. 11-649), also a corporate ATS case—the Supreme Court on April 22, 2013, granted the petition, vacated the judgment, and remanded the case to the Ninth Circuit for further consideration in light of Kiobel.  In the second, also decided on April 22, 2013, the Supreme Court granted certiorari in yet another corporate ATS case involving claims brought by Argentinian residents against a German Corporation for alleged human rights abuses by the corporation’s Argentinian subsidiary.  DaimlerChrysler Corp. v. Bauman (No. 11-965).  The Supreme Court granted certiorari to decide whether it violates due process for a court to exercise general personal jurisdiction over a foreign corporation based solely on the fact that an indirect corporate subsidiary performs services on behalf of the defendant in the forum state.  Interestingly, the case could allow the Supreme Court to further clarify one of the key issues it left open in Kiobel—that is, the exact extent to which claims brought under the ATS must “touch and concern” the United States in order to displace the presumption against extraterritoriality.

We will continue to keep an eye on these cases, as well as any future cases further clarifying the new reach of the ATS after Kiobel.

Consider this statistic: FDA has pursued more enforcement actions in the first four months of 2013 than in the previous five years combined.  Thus far this year, FDA has issued almost four dozen inspectional observations, which are often referred to as “Form 483s”  or “483s,” compared with approximately two dozen 483s and warning letters from 2008 through 2012.   FDA is authorized to perform inspections of compounding pharmacies under the Federal Food, Drug, and Cosmetic Act, SEC. 704 (21 USC §374) and uses 483s to document and communicate concerns discovered during these inspections.  Although Form 483s are not a final agency determination, they are often a precursor to regulatory action, which can include a formal warning letter, withholding of product approval, or plant shut down.  And 483s yield results: FDA’s stepped up oversight has lead to six voluntary recalls by compounders so far in 2013. 

There are questions about how long FDA can sustain its recent enforcement action pace, since focusing on compound pharmacies requires FDA to shift resources from other areas.  What is clear, though, is that regardless of pace, FDA is now very much engaged on the issue of regulatory oversight of compounding pharmacies and will continue to pay particular attention to this issue.  Whether that will result in more litigation remains to be seen but FDA tighter regulation often brings more private lawsuits in its wake.  We will continue to monitor developments in this area.

Now comes news from the EPA that one of the controversies relating to fracking — air pollution from the release of the “greenhouse gas” methane during natural gas production – may be of less concern than originally estimated.

As recently reported by U.S. News & World Report and the Associated Press, EPA announced last month in a report that leaks of methane gas from wells, pipelines and other infrastructure are significantly lower than previously thought.  Indeed, the EPA’s data reflects that methane emissions between 1990 and 2010 are 20 percent lower than prior estimates, even though natural gas production grew by nearly 40 percent during the same time.  Specifically, the EPA’s revised estimates reflect an average annual decrease of 41.6 million metric tons of methane emissions from 1990 through 2010.  To review the EPA’s full report, entitled “Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2011,” please click here.  To review the Executive Summary, please click here.

Notably, the EPA credits tighter pollution controls instituted by the industry as the basis for the revised estimates.  These controls include better gaskets, maintenance and monitoring.

This recent EPA announcement could play a role in the ongoing “debate” over fracking.  According to the Associated Press, there may even be international implications as the EPA submitted its report to the U.N. Framework Convention on Climate Change.  And, as the Associated Press also notes, oil and gas industry representatives have cited the EPA revisions to show that emissions from fracking can be effectively managed. 

The EPA’s new data is not without its detractors, however.  As reported by the Associated Press, some scientists are  criticizing the EPA’s estimates as “wrong” and not based on independent field tests of actual emissions. 

This criticism underscores the fact that the debate over fracking is far from over.  We will, of course, continue to monitor future developments.