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? 
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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. 
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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.


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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

[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.


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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.  

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