Over at Lowering the Bar, Kevin Underhill reports on a lawsuit filed against Lambert’s Cafe in Sikeston, Missouri, a place known as the “home of the throwed rolls.” It seems a roll was “throwed” and a patron was injured, suffering “a lacerated cornea with a vitreous detachment.” Ouch.

Underhill raises a lot of good points about the case, with case law to boot. Initially, there’s the question of whether the patron assumed the risk of being hit in the face with a roll. As Underhill says,

The Missouri Supreme Court [has] held that the question is whether the plaintiff was “injured by a risk that is an inherent part of [the activity].” … Obviously, the problem—and the reason that assumption-of-risk cases are so inconsistent—is defining “the activity.” … Here, is “the activity” eating dinner—in which case you generally don’t expect to have things thrown at your head (except maybe at Thanksgiving)—or is it “eating dinner at Lambert’s Cafe, the Home of Throwed Rolls,” in which case you’d be stupid not to expect it?

I think we need to know more facts to really assess the role of assumption of risk here.

When I initially read the story, I pictured the patron asking for a roll and then being hit in the face with it when she failed to catch it — but what if the patron was just sitting at her table eating and an errant roll came flying at her? What if it came from outside of her peripheral vision?

In other words, when you’re at the “home of the throwed rolls,” do you assume the risk of rolls flying at you from all directions at all times? That strikes me as a dubious argument, like saying that everyone at a Chinese restaurant assumes the risk of a flaming pupu platter spilling on them as it is carried to another table.

As Underhill also notes, even if the patron assumed the risk in some fashion, the restaurant can still be liable if its employees “negligently altered or increased the risk and that caused the injury.” Did the employee throw it at her like a fastball? Did the employee check to see if she was looking? Was it an unusually large roll, or was it steaming-hot right out of the oven, or in some other unusually dangerous condition?  Continue Reading The “Home Of The Throwed Rolls” — A New Hot Coffee Case?

Tort reformer Ted Frank and I have had our disagreements over the years. (See here and here.) In recent years, he has focused his work on filing objections to class action settlements through the Center for Class Action Fairness. Some of his work has focused on getting a better deal for class action members who, he alleged, weren’t receiving fair portions of the proposed settlement, but the bulk of his objections — at least to my knowledge — have focused on reducing the attorney’s fees claimed by the class counsel.

 

As Alison Frankel reported yesterday, it seems that, in the course of his contingent-fee work on behalf of people objecting to class action settlements, Frank has found himself in a situation he himself describes as “lurid, complex and Grishamesque.” The situation seems to have arisen from his personal goals as a lawyer being different from one of his client’s goals, and from his fee-splitting relationship with another firm, the very same issues he so frequently raises in his objections.

 

It would seem like a perfect opportunity for schadenfreude, but, in fact, all I can feel for him is sympathy — and his misfortune in the In Re: Capital One Telephone Consumer Protection Act Litigation presents a tremendous opportunity for tort reformers, politicians, the press, and the public to see just how difficult class actions, mass tort, and other large-scale litigation can be. In that case, Frank filed an appeal on behalf of a class member objecting to the fee claimed by Lieff Cabraser, and then everything went south.  Continue Reading Ted Frank And The Real Risk Of Class Actions

One of the great things about being a lawyer is that, like a sports fan watching a play unfold, you can foresee lawsuits before they’re even filed.

Nutella is delicious, creamy, and chocolaty, but one thing it is not: healthy. That didn’t stop Ferrero, the makers of Nutella, from starting up a healthy-for-kids advertising campaign last year in Europe, as profiled by the nutrition researchers at Obesity Panacea:

Although this may surprise some of our readers, I really like junk food. I eat far too much pizza, I love chicken wings, and Nutella, the original chocolate hazelnut spread, is one of my favourite breakfast condiments (it’s tasty on a bagel, but its unbeatable inside a fresh crepe with whipped cream and bananas). The interesting thing about Nutella is that its commercials seem to suggest that it is some sort of health food.

Now that commercial implies several things. First off, it implies that Nutella is a great source of energy, especially for kids. Well it should be a great source of energy – the first ingredient is sugar. In fact, in a 19 gram serving of Nutella, 11 grams are sugar. Of course that energy won’t last very long before an insulin spike kicks in and makes the kids lethargic, so they are likely to need something more substantial if they plan to "discover the world" for more than an hour or so.

The commercial also implies that Nutella is mainly hazelnuts and milk. However, hazelnuts only make up 13% of Nutella, and skimmed milk makes up less than 7%. …

Many Nutella ads, including those on their American website which can be found here, suggest that Nutella is not only a great source of energy, but is also a nutritious way to start your day. What type of nutrients? After sugar, the second most common ingredient in Nutella is palm oil. The same palm oil which is high in palmitic acid, a fatty acid which the World Health Organization claims is convincingly linked to increased risk of cardiovascular disease (see the report here, and skip to page 98 for the info on palmitic acid). In fact, roughly half the calories in Nutella are from sugar, and the other half are from fat. Only about 4% of the calories are from protein. The Nutella website also suggests that Nutella is healthy because it "is made with hazelnuts which are a great source of vitamins." Note that they don’t say that Nutella is a great source of vitamins, because it’s not – a single serving has 0% of the recommended daily intake of Vitamins A and C, and just 10% of the recommended intake of Vitamin E.

 

It didn’t take long for the campaign to come to the United States. Sure enough, watching The Weather Channel one morning (admit it, that’s how you start the day, too), I saw one of these Nutella commercials, started laughing, and told my wife: "they’re going to get sued." Those sort of ridiculous claims are bread and butter — or should I say hazelnuts and milk sugar and palm oil? — to consumer class action attorneys.

Sure enough, the consumer class action was just filed:

The maker of Nutella is the target of a consumer class action filed on Tuesday alleging the company falsely markets its hazelnut spread as healthy for children even though the product is loaded with saturated fat and processed sugar.

Filed in the U.S. District Court for the Southern District of California, the lawsuit alleges that Ferrero USA Inc. violates California consumer protection laws by representing that the spread is a healthy, nutritious and balanced breakfast for children. The name plaintiff, Athena Hohenberg, is the mother of a four-year-old child.

The lawsuit claims violations of California’s laws pertaining to unfair competition and false advertising. It also alleges breach of warranty and seeks injunctive relief and compensatory and punitive damages. The purported class comprises all consumers who purchased Nutella beginning in January 2000.

(The WSJ Law Blog also picks up on it here.) 

The key word is California. A quick review of some consumer fraud class action cases over the past few years show them being dismissed, time and time again, for one reason: "justifiable reliance."

Like Hunt v. US Tobacco Co., 538 F.3d 217 (3d Cir. 2008):

We believe the Pennsylvania Supreme Court has effectively answered the question presented in this case. That Court has categorically and repeatedly stated that, due to the causation requirement in the Consumer Protection Law’s standing provision, 73 Pa. Cons.Stat. § 201-9.2(a) (permitting suit by private plaintiffs who suffer loss "as a result of" the defendant’s deception), a private plaintiff pursuing a claim under the statute must prove justifiable reliance. See, e.g., Schwartz v. Rockey, 593 Pa. 536, 932 A.2d 885, 897 n. 16 (2007) (stating that "the justifiable reliance criterion derives from the causation requirement which is express on the face of section 9.2[, the statute’s private-plaintiff standing provision]"); Toy, 928 A.2d at 202 ("[A] plaintiff alleging violations of the Consumer Protection Law must prove justifiable reliance."); Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d 425, 438 (2004) ("To bring a private cause of action under the [Consumer Protection Law], a plaintiff must show that he justifiably relied on the defendant’s wrongful conduct or representation and that he suffered harm as a result of that reliance."). It has not recognized any exceptions, and has applied this rule in a variety of situations. These include, in Yocca, a claim— like Hunt’s claim here—under the post-1996 catch-all provision. See Plaintiffs[‘] Third Amended Class Action Complaint in Civil Action at 18-19, Yocca, No. GD XX-XXXXXX (Pa.Ct.C.P.2001) (accusing defendant of, inter alia, "[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding"). The Pennsylvania Superior Court has applied the Supreme 222*222 Court’s standing rule to the post-1996 catch-all provision, see Debbs v. Chrysler Corp., 810 A.2d 137, 156-58 (Pa.Super.Ct.2002); Sexton v. PNC Bank, 792 A.2d 602, 607-08 (Pa.Super.Ct.2002), and our Court has interpreted the rule to apply to all Consumer Protection Law subsections, see Santana Prods., Inc. v. Bobrick Washroom Equipment, Inc., 401 F.3d 123, 136 (3d Cir. 2005). Given this significant authority on statutory standing, we think the Pennsylvania Supreme Court would require justifiable reliance where a private plaintiff alleges deceptive conduct under the post-1996 catch-all provision.

That’s not a problem by itself, except that many courts have held that you simply can’t have a class action where the claims include justifiable reliance as an element. I think those rulings are crazy — of course you can show, by a preponderance of evidence, that members of a class relied on false advertising, it’s just a question of degree and thus a question for the jury — but it’s the law in a lot of places.

But not California, which has a lot of exceptions to the rule, including an exception that presumes consumers rely, to some extent, on written advertising. Hence the Nutella suit being brought in California first; California’s one of the best places to file it.

Which really makes you wonder about the quality of other state’s laws. Those state’s technically make false advertising illegal, but it’s a hollow remedy, since it’s never enforced. Without the ability to create a class action, no consumer class action lawyer would spend thousands of hours and dollars fighting a case worth no more than a single jar of Nutella.

Continue Reading Inevitable Consumer Class Action Lawsuit Filed Against Nutella’s “Healthy” False Advertising

Bormes v. U.S., 2009-1546 (Fed. Cir. November 16, 2010), isn’t the type of suit you see every day:

On August 9, 2008, Bormes, an attorney, filed a law-suit on behalf of one of his clients in the U.S. District Court for the Northern District of Illinois using its online document filing system. Bormes paid the filing fee using his credit card, and the transaction was processed through the government’s pay.gov system. The govern-ment then provided Bormes with a confirmation webpage that appeared on Bormes’ computer screen. The confir-mation page contained the expiration date of Bormes’ credit card.

That’s a problem. 15 U.S.C. § 1681c(g)(1), part of the Fair Credit Reporting Act, provides:

Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.

Thus, Bormes filed suit, just as he could against any other vendor which disclosed too much information on a receipt:

Alleging that the display of his and similarly situated plaintiffs’ credit card information violated section 1681c(g)(1) of FCRA, Bormes filed a class action lawsuit against the government. Bormes seeks, among other things, statutory damages, attorney’s fees, and costs.

But there’s a problem: the United States government isn’t just any other vendor. It’s the sovereign, so you have to come up with some specific basis authorization for suing it:

In his complaint, Bormes alleged jurisdiction under both 28 U.S.C. § 1346(a)(2), commonly referred to as the Little Tucker Act, and FCRA’s own jurisdictional provision, 15 U.S.C. § 1681p.

The District Court dismissed, on the ground that FCRA did not waive the federal government’s sovereign immunity, and so jurisdiction under the Little Tucker Act was moot.

Normally, claims against the United States have to be filed in the United States Court of Federal Claims, but that’s quite a lot of work for people who have modest claims. The Little Tucker Act is, in essence, small claims court for claims against the United States:

The Little Tucker Act, 28 U.S.C. § 1346, gives the district courts jurisdiction, concurrent with the Court of Federal Claims, over “any other [than tax refund] civil action or claim against the United States, not exceeding $10,000 in amount, founded . . . upon any Act of Congress.” The Little Tucker Act is therefore a jurisdictional provision that also operates “to waive sovereign immunity for claims premised on other sources of law (e.g., statutes or contracts).” United States v. Navajo Nation, 129 S. Ct. 1547, 1551 (2009).

Which brings us to the issue at hand:

Because the Little Tucker Act operates to waive sovereign immunity, the district court erred in dismissing Bormes’ case without considering whether the Little Tucker Act provided an alternative basis for jurisdiction. If the Little Tucker Act authorizes the district court to hear this case, it also provides the waiver of sovereign immunity that the trial court found lacking in the FCRA itself. See United States v. Mitchell, 463 U.S. 206, 216 (1983) (“If a claim falls within the terms of the Tucker Act, the United States has presumptively consented to suit.”).

To support jurisdiction under the Little Tucker Act, the substantive law that provides the basis for the plaintiff’s claims must be “money-mandating.” Fisher v. United States, 402 F.3d 1167, 1172 (Fed. Cir. 2005). A source of law is money-mandating if it “can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained.” United States v. White Mountain Apache Tribe, 537 U.S. 465, 472 (2003) (quotation omitted). This “fair interpretation” rule demands a showing “demonstrably lower” than the initial waiver of sovereign immunity: “It is enough . . . that a statute creating a Tucker Act right be reasonably amenable to the reading that it mandates a right of recovery in damages. While the premise to a Tucker Act claim will not be ‘lightly inferred,’ . . . a fair inference will do.” Id.

And, indeed, the FCRP is about as money-mandating as it gets; the FRCP “unquestionably provides for money damages” and “expressly defines the term ‘person’ to include ‘any . . . government.'”

You don’t need anything more than that to establish the waiver of sovereign immunity and jurisdiction under the Little Tucker Act. Dismissal vacated and remanded back to the District Court.

[UPDATE: The Supreme Court has since granted certiorari on the case, which should be interesting. Based on my understanding of how many government jobs work, this could present a big problem if the United States is exposed to, for example, liability for illegal background checks.]

Those are the charming words of a vice president at Lundbeck, Inc., which claims to be "committed to providing innovative therapies that fulfill unmet medical needs of people with severe, and often rare, diseases for which few, if any, effective treatments are available."

By "these," he was, by way of an email to others at the company, referring to a small group of pharmaceutical drugs the rights to which Lundbeck was in the process of acquiring from Merck, including Indocin IV. Indocin IV was, at that time, the primary pharmaceutical treatment for patent ductus arteriosus, in which the shunt that connects a baby’s pulmonary artery to his or her aortic arch fails to close after birth. PDA is mostly found in very premature babies.

Ever seen a two pound preemie that can’t get enough oxygen hold out for a better deal? The vice president at Lundbeck hadn’t either, so Lundbeck came up with a plan: once they had the rights to Indocin IV, they would increase the price of each treatment course from $78 to $1,500.

Lundbeck didn’t actually do anything to earn themselves a twenty-fold raise, they just bought themselves a monopoly on the unmet medical need of certain people with a severe disease for which few other effective treatments were available. That’s their "commitment."

It gets better.

Lundbeck learned that two other companies, Farmacon-IL and Abbott Laboratories, had developed a competitor to Indocin IV, called NeoProfen, which could also treat PDA. Abbott Laboratories forecast NeoProfen could be sold for $450-500 per treatment course.

So Lundbeck bought the rights to NeoProfen, too. Once the FDA approved it, Lundbeck sold NeoProfen for $1450 per treatment course.

Despite preening over "innovation," Lundbeck invented nothing at all to treat the "severe disease" of PDA. Instead, Lundbeck bought the primary treatment and made it twenty times more expensive, then bought the drug’s new competitor and made the new drug three times more expensive than even its inventors thought it could be.

One would think there should be a law against that. In fact, there is such a law — really, more than one of them, like Section 5 of the FTC Act, Section 2 of the Sherman Act, Section 7 of the Clayton Act, and many state’s antitrust laws — but those laws do not always work the way they should:

The case looked like a slam-dunk for the Federal Trade Commission.

A drug company allegedly cornered the market on a medicine — not just any medicine, but one used to treat premature babies with life-threatening heart defects — then raised prices 1,300 percent.

The FTC sued the company, Ovation Pharma­ceuticals, now Lundbeck Inc., in Minneapolis federal court in December 2008, seeking the strongest civil antitrust penalties possible — divestiture and disgorgement of $105 million in profits. The state of Minnesota joined in as a plaintiff as well.

All the elements seemed to be in place: the most sympathetic victims one could ask for, clear-cut evidence of an astronomical price hike, no other drugs available to treat the condition. And yet, after a two-week bench trial, the government lost the case — lost across the board, on every claim.

For Ericksen, the case boiled down to one basic question: Are Indocin and NeoProfen in the same product market? Although both treat the same condition and have "functional substitutability," Ericksen found they are not in the same market.

It was Ericksen’s first antitrust trial decision, according to a review of court records by The National Law Journal, although during her eight years on the federal bench, she has presided over private antitrust cases that were dismissed, transferred or otherwise resolved before trial.

The finding destroyed the FTC’s case. It meant there was no monopoly, no substantially lessened competition and indeed no antitrust wrongdoing at all.

The opinion is here.

In many ways, it’s surprising that the Federal Trade Commission and the State of Minnesota were able to pursue the lawsuit in the first place, given the efforts undertaken by the Supreme Court to dismantle the century-old antitrust laws in this country. For example, just because several products or services are being sold in a manner that demonstrates collusion among the suppliers doesn’t make it "plausible" there is such collusion, said the Supreme Court in Twombly v. Bell Atlantic. Once you say that judges can deem every case they don’t like as "implausible" by arbitrarily re-classifying factual allegations as "legal conclusions," there’s no telling how many meritorious cases won’t even be allowed into the courthouse.

But pursue they did, all the way through trial, just to have a judge rule that two drugs used to treat the same condition are somehow not in the same market, but are rather in some undefined, theoretical other market in which the massive price increases by a holding company which neither invented nor manufactured the drug were the result of a free, fair and competitive market.

I would bet that the FTC will appeal the ruling and it will be reversed and remanded. Even if that happens, however, the point is been made: our antitrust laws are so weak that they cannot be reliably enforced against a company that cornered the market for treatments of a severe condition and then used its monopoly position to raise the price of both to "anywhere they wanted."

[UPDATE: Drug and Device Law goes Jersey Shore on me and "creates a situation," as they say. I replied in the comments there, although my comment seems to disappear at times. Perhaps their commenting/moderating software is as frustrating and difficult as mine. I’ve cut and pasted my comment below the fold here.]

I’ve discussed the problems with the Illinois Brick decision before. In short, since "indirect purchasers" cannot bring federal antitrust claims — even if they were injured by antitrust violations — "indirect purchasers" like third-party payors and retailers have to resort to state law. It is not uncommon to see lawsuits filed in a single federal district court that allege violations of the antitrust and unfair trade practices laws in dozens of states, sometimes all 50 states.

Which brings us to Sheet Metal Workers Local 441 Health & Welfare Plan et al. v. GlaxoSmithKline, PLC, et al., 2010 U.S. Dist. Lexis 93520 (E.D. Pa. Sept. 8, 2010). The pension plans have an interesting theory of the case:

In this putative class action, the End-Payor Plaintiffs allege that: (1) GSK unlawfully extended its monopoly over Wellbutrin SR by making fraudulent assertions to the United States Patent and Trademark Office and by engaging in "sham" litigation against generic drug manufacturers seeking to market less expensive versions of the drug; and (2) because the litigation delayed the market entry of generic versions of Wellbutrin SR, the class members were forced to pay unnecessarily  high prices for the drug because no generic alternatives were available for nearly two years after GSK’s patent monopoly would have expired.

Since the pension plans are indirect purchasers of the drugs, they can’t bring monopolization claims under Illinois Brick, and so instead have brought a single suit (in Pennsylvania, where GSK is headquartered) alleging a variety of state law claims, including violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (PUTPCPL), 73 Pa. Stat. Ann. §§ 201-1, et seq.

As the defense lawyers at Drug and Device Law note, while blasting Judge Stengel’s opinion denying dismissal of those claims, when a federal court interprets a question of state law,

[F]ederal courts may not engage in judicial activism.  Federalism concerns require that we permit state courts to decide whether and to what extent they will expand state common law.  Our role is to apply the current law of the appropriate jurisdiction, and leave it undisturbed. . . .  Absent some authoritative signal from the legislature or the state courts, we see no basis for even considering the pros and cons of innovative theories.  We must apply the law of the forum as we infer it presently to be, not as it might come to be.

City of Philadelphia v. Lead Industries Ass’n, 994 F.2d 112, 123 (3d Cir. 1993).

Frankly, I’ve never known what to make of that dictum; it sounds suspiciously similar to "keep your eye on the ball." Of course the federal courts are bound to apply the current law of the state, but, outside of express rulings by a state supreme court, one lawyer’s "extension of the law" is their opponent’s "current law." I’m sure the Sheet Metal Workers’ lawyers take the position that they can recover under "current law."

The folks at Drug and Device Law confidently assert that the dictum means that federal courts should bend over backwards to dismiss state law claims whenever possible — nevermind that the federal appellate courts have never described the principle that way.

To the extent that dictum means something more than "don’t overrule the state’s supreme court," it is an instruction that federal district courts apply the rule of parsimony when interpreting questions of state law. Since Drug and Device Law brought scientific maxims into the case, I will cite one in return: Occam’s Razor. The federal district court should make their analysis of state law "as simple as possible, but not simpler."

If we do that, the PUTPCPL question at issue in Sheet Metal Workers is simple: did the plaintiffs appropriately allege "deceptive conduct" that caused an "ascertainable loss of money or property" to a "person who purchase[d] or lease[d] goods or services primarily for personal, family or household purposes?"

Even if we simply read the word "deceptive" right out of the act — as D&D Law says we should — Pennsylvania uses a broad definition of "fraud," a definition that includes deception. See Moser v. DeSetta, 589 A. 2d 679 (Pa. 1991)("It is well established that fraud consists of anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture."). The Sheet Metal Workers opinion is thus right on the money: the plaintiffs are "persons" who were "deceived" into "purchase[ing] or lease[ing] goods or services primarily for personal, family or household purposes," thereby causing them an "ascertainable loss of money or property."

Simple, right? "Don’t be a pioneer" and all that.

But D&D Law doesn’t like simplicity. Instead, they argue a federal district court is bound to exceed the plain meaning of a state statute and perform a several steps of analytical gymnastics to divine that the Pennsylvania Supreme Court would somehow find that a party which was deceived into purchasing a consumer good nonetheless cannot bring a claim under the state’s consumer deception statute.

There is just one problem: neither of the Pennsylvania Supreme Court decisions they referenced held anything of the sort.

Weinberg v. Sun Co., Inc., 777 A. 2d 442 (Pa. 2001) held that it was not error for a trial court to deny, as is its discretion, to certify a class action.

We’re not at certification yet: the District Court expressly said that it would reserve class certification issues for a later date. The issue here wasn’t if the plaintiffs could certify a class — the actual issue in Weinberg — but if the named plaintiffs themselves adequately alleged individual violations. The District Court held they did, consistent with the elements laid out by the statute and by Weinberg.

Simple.

Toy v. Metropolitan Life Ins. Co., 928 A. 2d 186 (Pa. 2007) is similarly irrelevant; Toy merely held that "justifiable reliance" was an element of PUTPCPL claims. Here, that’s indisputable; the plaintiffs alleged that specifically.

Simple.

But let’s dive deeper into that as-yet-undecided class certification issue. Drug and Device Law claims that the judge "violated fundamental principles of federalism" by not following state court precedent in considering the certification of class claims in this federal litigation.

Put aside that Weinberg didn’t say plaintiffs could never certify a consumer fraud class action, but rather affirmed a trial court holding it couldn’t certify that particular consumer fraud class action. See anything wrong with the claimed federalism issue?

How about Shady Grove v. Allstate, in which the United States Supreme Court expressly held that Federal Rule of Civil Procedure 23 — which provides the standards for class certification in federal district courts — trumps state law, even state law specific to class certification of state claims.

Sure, prior to Shady Grove, some federal courts have looked to state law (e.g., Iorio v. Allianz Life Ins. Co. of N. Am., 2008 U.S. Dist. LEXIS 118344, at *87 (S.D. Cal. July 8, 2008)("the California Supreme Court has applied a presumption of reliance where the misrepresentation appeared in a document that class members were required to sign."), but other courts — including the Third Circuit — have established their own precedent in interpreting the propriety of class action certification, like so:

As the Supreme Court noted in Amchem, "[p]redominance is a test readily met in certain cases alleging consumer or securities fraud or violations of the antitrust laws …. [e]ven mass tort cases arising from a common cause or disaster may, depending upon the circumstances, satisfy the predominance requirement." [Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997)], 117 S.Ct. at 2250 (citing Adv. Comm. Notes, 28 U.S.C.App., p. 697). This case, involving a common scheme to defraud millions of life insurance policy holders, falls within that category. The district court’s opinion sets forth a litany of common issues which the class must demonstrate in order to prevail. See supra § IV.B.1 and n. 47-48. While individual questions may arise during the course of this litigation, we agree with the district court that the presence of individual questions does not per se rule out a finding of predominance. In particular, the "presence of individual questions as to the reliance of each investor does not mean that the common questions of law and fact do not predominate." Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir.1985).

In re Prudential Ins. Co. America Sales Litigation, 148 F.3d 283, 314-315 (1998).

Thus, when the District Court gets around to the class certification issue, there is indeed a "fundamental principle of federalism" at stake — if the District Court expressly chooses Weinberg over Shady Grove and In re Prudential, it just might violate the Supremacy Clause, the same Supremacy Clause defense lawyers trot out every time they want to assert implied preemption of state law claims.

Let’s hope that the District Court continues to apply Pennsylvania consumer deception law as it currently stands, rather than "expanding" it into an unenforceable nullity to suit the defense bar.

Continue Reading Sheet Metal Workers v. GlaxoSmithKline: How To Use State Consumer Fraud Laws To Bring Indirect Purchaser Antitrust Class Actions

If you suspect your employer has violated securities, tax, or government contract laws, you can contact our firm for a free, confidential, no-obligation consultation using this form.  

Corporate Counsel reported yesterday:

The new federal whistleblower law is proving a hot item for many plaintiff law firms. Attorneys say that tipsters with visions of becoming millionaires are flooding their offices with calls.

"In the last three weeks, I’ve had many, many more whistleblowing calls than I had in the last three years," said Rebecca Katz, a partner at Bernstein Liebhard in New York. Katz is a former senior counsel in the enforcement division of the Securities and Exchange Commission, where she served from 1990 to 1998.

"Will the complaints come to anything?" Katz asked. "Some will. But the number is just unbelievable."

The new law, the Dodd-Frank Wall Street Reform and Consumer Protection Act (pdf), went into effect in July. It authorizes the SEC to reward those who expose fraud at public companies with from 10 to 30 percent of the amount it recovers over $1 million.

No law firms wanted to divulge specific numbers about callers. But Erika Kelton, partner at the plaintiffs’ powerhouse Phillips & Cohen in Washington, D.C., agreed that the outpouring is huge.

"We’re inundated with calls," Kelton said, adding that many of the tips "appear to be good cases" and not bogus reports.

Kelton was the lead attorney for a whistleblower suit against Pfizer Inc., which paid a record-setting $2.3 billion in mid-2009 to settle civil and criminal charges for using illegal sales tactics. Of that amount, $70 million went to Kelton’s whistleblowing client, a former Pfizer salesman.

The SEC has made corporate fraud whistleblowing surprisingly easy to do. In a few short clicks you can get the process going. The SEC’s website even helpfully divides out the types of reportable fraud under Dodd-Frank, with direct links to the specific complaints:

(In contrast, the IRS requires you mail in a form to be a whistleblower under their new program for tax fraud. And let’s not even mention the onerous requirements of the False Claims Act.)

If you’re a whistleblower out there, Googling around for information about the process, and you only take one piece of advice to heart, make it this one:

Call a lawyer as soon as you can — certainly before you file a complaint with the government, and preferrably before you file a formal complaint with your employer.

I am by no means a dispassionate observer. I make money representing whistleblowers. They don’t necessarily need my, or any attorney’s, help — they could, in theory, go it alone and pin their hopes on the SEC (or the IRS) taking the claim, pursuing the claim to the bitter end, ensuring the whistleblower gets their fair share, and then protecting the whistleblower from retaliation.

But hear me out for a minute.

The prospect of being a successful whistleblower carries with it an intoxicating allure for plaintiffs and lawyers alike – what could be better than getting paid millions of dollars to be a crusader for justice?

The reality, though, is a bit more complicated:

"Basically, [whistle-blowing] ruins your life," says Luigi Zingales, a professor at the University of Chicago Booth School of Business who has studied the issue of whistle-blowers. "What is worth your life getting ruined? It’s pretty expensive."

It’s not assured that whistleblowing will ruin your life — there are certain circumstances in which the retaliation won’t be much worse than normal business, like when a self-employed person reports fraud by a particularly aggressive competitor — but make no mistake: if you report fraud by someone else, even if it ends up going nowhere, there’s a good chance that someone else is going to be, shall we say, very upset with you.

That’s where a whistleblower lawyer – who is typically paid on a contingent fee, and so has no interest in pursuing losing cases – first comes in. As obvious to you as the case may be, the case could be riddled with problems, problems that would either be apparent to an attorney upon their initial review or would be revealed during the attorney’s investigation. We, like most contingent fee firms, reject more than 90% of the cases we review, and everyone – including the potential clients and the potential defendants – is better off for it.

Put another way, if a potentially life-altering surgery is worth a second opinion from another physician, isn’t a potentially life-altering lawsuit worth a first opinion from an attorney?

But what if your claim does have merit? Why share a substantial portion of it – often 40%, plus costs – with a private attorney? Aren’t the government lawyers are going to do most of the work?

Not quite. Government civil attorneys are, as a rule, understaffed and overworked. They also have a tendency to take only cases they are certain they can win, and years of a symbiotic relationship with the private bar has trained them to expect not just prepackaged evidence and theories, but also substantial assistance in the prosecution of the claim — a big factor in their decision to pursue cases, considering that whistleblower cases are, as I’ve written before, among the most intense and prolonged claims out there.

There’s nothing wrong or inappropriate with that; the government has to work with the resources they have, not the resources they wish they had, and the whole point of whistleblower statutes is to encourage people outside the government to help out with enforcement efforts.

At the same time, though, it puts unrepresented parties at a significant disadvantage. They don’t have the resources or experience to navigate the nascent stages of the investigation and to put the case together for the government. Moreover, even once the case gets going, the government lawyers represent only the government itself; their interest in the whistleblower extends only to prosecuting a successful case on the government’s behalf. They don’t have an interest in sharing the eventual recovery with the whistleblower, and they only have a limited interest in protecting the whistleblower from retaliation.

I try to stay far away from "if you or a loved one…" faux-blogging here, but the influx of callers following Dodd-Frank is likely only the tip of the iceberg. I’ve seen way too many potential whistleblowers make mistakes in those crucial early stages, such as by disclosing the fraud in the wrong way, thereby tripping over issues like the "public disclosure" bar of the False Claims Act or the "original source" requirements for whistleblower recovery.

So, "if you or a loved one" is considering being a whistleblower, you certainly don’t have to call me for a free consultation, but you really should call someone. The earlier in the process a whistleblower can obtain an attorney, the better.

The internet has not been pleased with the proposed settlement reached between Lowe’s — which denies ever selling any tainted Chinese drywall — and the plaintiff’s attorneys in a Georgia state court class action.

There’s two problems with the proposed settlement, which has not yet been approved by a judge. First, the settlement is a dreaded coupon settlement (i.e., a settlement in which the plaintiffs get only coupons or vouchers to buy more stuff from the defendant), one that will use particularly unreliable notice procedures for letting potential class members know about the settlement. For more, see ProPublica and the Fulton County Daily Report.

Second, there’s already a federal multi-district litigation (“MDL”) case ongoing in the Eastern District of Louisiana designed to consolidate all of the Chinese drywall cases into a single MDL case.

I was going to write more about the case, with an emphasis on the interplay between the overlapping state and federal court cases and the interesting issues of federalism they raise, when I came to this part of a motion filed by the MDL plaintiff’s lawyers in opposition to the Georgia settlement:

The Georgia class action includes all of the plaintiffs within this Court’s jurisdiction in MDL 2047 and serves as an interference with and a roadblock to the Court’s management of and supervision over the resolution of Chinese Drywall cases. This Court has authority under the All Writs Act , 28 U.S.C. § 1651, to enjoin the Georgia proceedings as well as counsel associated with that conflicting case. Congress granted this MDL Court the power to enjoin state court proceedings where “necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” Id.; 28 U.S.C. §2283. Courts liberally invoke the “necessary in aid of its jurisdiction” exception to the Anti-Injunction Act “to prevent a state court from so interfering with a federal court’s consideration or disposition of a case as to seriously impair the federal court’s flexibility and authority to decide that case.” Atlantic Coast Line R.R. v. Brotherhood of Locomotive Eng’rs, 398 U.S. 281, 295 (1970); In re Baldwin-United Corp., 770 F.2d 328, 337 (2nd Cir. 1985) (same); In re Corrugated Container Antitrust Litigation, 659 F.2d 1332, 1334 (5th Cir. 1981), cert. denied, 456 U.S. 936 (1982) (same); In re Joint E. & S. Dist. Asbestos Litig., 134 F.R.D. 32, 37 (E.&S.D.N.Y. 1990) (same); Martin H. Redish, The Anti-Injunction Statute Reconsidered, 44 U. Chi. L. Rev. 717, 754 (1977); In re Diet Drugs, 282 F.3d 220, 235 (3rd Cir. 2002) (recognizing “a category of federal cases for which state court actions present a special threat to the jurisdiction of the federal court”—namely, where “a federal court [is] entertaining complex litigation, especially when it involves a substantial class of persons from multiple states, or represents a consolidation of cases from multiple districts….”).

An injunction against the competing Georgia state court proceedings is appropriate here to allow this Court to “legitimately assert comprehensive control over [this] complex litigation.” United States v. International Brotherhood of Teamsters, 907 F.2d 277, 281 (2nd Cir. 1990); Standard Microsystems Corp. v. Texas Instruments Inc., 916 F.2d 58, 60 (2nd Cir. 1990); Carlough v. Amchem Prods., Inc., 10 F.3d 189, 204 (3rd Cir. 1993); Diet Drugs, 282 F.3d at 235; Corrugated Container, 659 F.2d at 1334; Newbe v. Enron Corp., 338 F.3d 467, 474-75 (5th Cir. 2003); Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1202 (7th Cir. 1996); Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9th Cir.), cert. denied, 506 U.S. 953 (1992); White v. National Football League, 41 F.3d 402, 409 (8th Cir. 1994), cert. denied, 515 U.S.1137 (1995); James v. Bellotti, 733 F.2d 989, 994 (1st Cir. 1984); Battle v. Liberty National Life Ins. Co., 877 F.2d 877, 882 (11th Cir. 1989); In re Granada Partnership Sec. Litig., 803 F.Supp. 1236, 1246 (S.D. Tex. 1992); Joint E. & S. Dist. Asbestos Litig., 134 F.R.D. at 37.

Seriously?

It’s almost like the lawyers didn’t realize that Writing Bad Briefs: How To Lose a Case in 100 Pages or More, by Judge Gerald Lebovits, was satire:

String cite whenever possible. If you have 20 cases for the same proposition, add them all. To show that you’re smarter than the judge — a losing and therefore effective strategy — cite after every proposition in your brief, even for obvious statements. But don’t cite the record below. Pointless.

If you cite, don’t explain why your citations are relevant. Mention that the
cases are on point, but don’t say why. If you try to explain the case, make the case
more complicated than it is. If you want to be analytical and fancy, start every
paragraph with “My adversary’s argument is mendacious and ridiculous.” And never use parenthetical explanations after citations. Parentheticals just throw judges a curve.

What were those lawyers thinking?

Did they think Judge Fallon genuinely didn’t know that he could invoke the Anti-Injunction Act “to prevent a state court from so interfering with a federal court’s consideration or disposition of a case” or that he should “legitimately assert comprehensive control over [this] complex litigation,” and so needed a dozen-and-a-half cases as a reminder of those basic principles of federalism and MDL litigation?

If not, then what’s the point of all those string cites without even the slighest indication as to their relevance? Did they just cut-and-paste every arguably useful case, presuming that Judge Fallon would ask his clerks to fish through all eighteen cases (and one law review article) to find which one of them might actually pertain to this situation? Did they not realize that, since the docket in the MDL case had 5,156 entries, Judge Fallon and his clerks might have more pressing tasks than figuring out what relevance a law review article from 1977 — before most of the clerks were born — had to this situation?

There’s an old saying they taught me at Temple Law School: make it easy for the judge to rule in your favor. A long list of unexplained string cites doesn’t do that.

 

The Blog of the Legal Times reported yesterday:

David Leitch, the general counsel of Ford Motor Co., is the new chairman of the board of directors of the National Chamber Litigation Center. Leitch succeeds James Comey, who until recently was senior vice president and general counsel of Lockheed Martin Corp.

And what is "the National Chamber Litigation Center," you ask? It’s the litigation arm of the U.S. Chamber of Commerce, one of the most loathsome enterprises in the nation:

I asked [U.S. Chamber of Commerce President and CEO Tom] Donohue what, exactly, the Chamber does. “Two fundamental things,” he replied. “We’re advocates. Sure we do studies, sure we do events, sure we do meetings, sure we have all kinds of stuff, but we’re advocates.” And then he surprised me again with his candor. “The second thing we do is really more interesting,” he said. “We’re the reinsurance industry for individual industry associations and state chambers of commerce and people of that nature.” An example, said Donohue, was when Wall Street found itself on the defensive in opposing new banking regulations. “They can’t move forward, they can’t move back, or maybe they’re being overrun, and they’ll come to us and say, ‘Can we collect our reinsurance?’” he explained. “And then we build coalitions and go out and help them.”

In other words, a large part of what the Chamber sells is political cover. For multibillion-dollar insurers, drug makers, and medical device manufacturers who are too smart and image conscious to make public attacks of their own, the Chamber of Commerce is a friend who will do the dirty work. “I want to give them all the deniability they need,” says Donohue. That deniability is evidently worth a lot. According to a January article in the National Journal, six insurers alone—Aetna, Cigna, Humana, Kaiser Foundation Health Plans, UnitedHealth Group, and Wellpoint—pumped up to $20 million into the Chamber last year.

That’s right: if you’re a multi-billion-dollar business trying to attack your own consumers, but you don’t want to get caught, call up the U.S. Chamber of Commerce. Dirty deeds, done dirt cheap.

Just today, contemporaneously with Leitch’s elevation, the National Chamber Litigation Center filed a brief with the Supreme Court (in AT&T v. Concepcion) arguing that large corporations should be allowed to slip class-action waivers into everyday consumer contracts, in spite of state laws and court decisions prohibiting the practice.

Why would they want such a thing?

As their own brief admits — while disingenuously claiming that class-action waivers are good for consumers — it’s well-known that:

[I]n small-stakes cases, other than those amenable to litigation in small claims court, such litigation is also a dead end. As one court colorfully put it, “only a lunatic or a fanatic sues for $30.” Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004).

Precisely. The Chamber of Commerce wants to bend the rules for large corporations so that those large corporations can adopt practices that harm millions of consumers in small amounts, amounts small enough that it’s simply not worth it to each individual consumer to bring a lawsuit, like when Wells Fargo fraudulently manipulated the order of debit transactions to increase the overdraft fees charged. (Small businesses generally don’t try this nonsense: their customers aren’t as captive, reputation is more important, and the money just isn’t there if you’ve only got a few hundred or thousand regular customers.)

That’s why class actions are so important — they tip the scales a back towards the consumers, making viable claims out of these cases involving a multitude of small harms — and why the Chamber of Commerce is fighting so hard to get rid of them.

That’s just one example of the the National Chamber Litigation Center’s work, an example plucked from the very same day that Leitch’s elevation was announced.

Which raises two important questions: why is Ford closely associating itself with an anti-consumer lobbying group? and why should consumers buy a product from a company secretly fighting to take away their rights?

Hindsight is 20–20, or so defense lawyers like to say when their clients are caught poisoning thousands, sometimes millions, of people.

Such will almost certainly be the case once the class-action litigation over BPA finally heats up. The latest product to be found guilty of leeching the toxic pseudo-hormone into unknowing customers is ordinary point-of-sale receipts:

Cash register and other receipts may expose consumers to substantial amounts of bisphenol A, a hormone-mimicking chemical that has been linked with a host of potential health risks, according to a trio of recent studies.

On July 28, Warner and his colleagues at the Warner Babcock Institute for Green Chemistry in Wilmington, Mass., formally published their first data based on 10 receipts recently collected in the Boston area. Six contained 1.09 to 1.70 percent BPA by mass. Another two contained 0.30 to 0.83 percent BPA; the final pair had no measurable amounts. Their findings appear online in Green Chemistry Letters and Reviews.

A Swiss study published online July 11 in Analytical and Bioanalytical Chemistry assayed 13 European sales receipts. Eleven contained BPA in quantities ranging from 0.8 to 1.7 percent of the paper’s mass.

And that BPA rubbed off easily, notes study coauthor Koni Grob, an analytical chemist with the Official Food Control Authority of the Canton of Zurich. Just holding receipt paper deposited substantial BPA onto dry fingers.

Thankfully, it’s a minor problem:

Indeed, Grob says, “I think it’s a scandal that you can have people touching thermal paper all day long,” since the concentration of BPA in its surface coating could approach 10 percent pure BPA.

Frederick vom Saal of the University of Missouri in Columbia, who performed the BPA assays for a recent study by the Washington, D.C–based nonprofit Environmental Working Group, agrees with Grob.

“I won’t touch receipts now,” vom Saal says.

Or not.

So what are we supposed to do now, go about our daily lives wearing disposable latex gloves? Frankly, I wouldn’t mind that during cold and flu season, but something tells me cashiers are a bit suspicious of customers who don’t leave behind any fingerprints.

Hindsight, as they say, is 20–20. All of this research connecting BPA on receipts only came out last month, right?

Appleton Papers of Appleton, Wis., switched to one of them — bisphenol sulfonate — in 2006, notes Kent Willetts, a company vice president. As a steady stream of toxicity reports and research papers began pointing to potential health threats posed by BPA, “We decided that’s not a chemical we want to use.” EPA’s new partnership program lists the sulfonate as a potentially acceptable substitute, he notes.

Apparently not. Apparently some of the receipt manufacturers — for convenience, let’s call them the responsible manufacturers — recognized the danger more than four years ago, and so chose to make their receipts with a less toxic and less dangerous substitute.

And what was everyone else — for convenience, we’ll call them the irresponsible manufacturers — doing?

Attendees suggested using fear tactics (e.g. “Do you want to have access to baby food anymore?”) as well as giving control back to consumers (e.g. you have a choice between the more expensive product that is frozen or fresh or foods packaged in cans) as ways to dissuade people from choosing BPA-free packaging.

The committee doubts social media outlets, such as Facebook or Twitter, will work for positive BPA outreach. The committee wants to focus on quality instead of quantity in disseminating messages (e.g. a young kid or pregnant mother providing a positive quote about BPA, a testimonial from an outside expert, providing positive video, advice from third party experts, and relevant messaging on the GMA website). Members noted traditional media outreach has become too expensive (they have already spent hundreds of thousands of dollars) and the media is starting to ignore their side. The committee doubts obtaining a scientific spokesperson is attainable. Their “holy grail” spokesperson would be a “pregnant young mother who would be willing to speak around the country about the benefits of BPA.”

I see.

And they wonder why people want to sue them.