Posts belonging to Category Certification Rulings

The Sixth Circuit has issued a counterweight to the recent spate of anti-class-action decisions coming from federal courts. In In re: Vertrue Inc., a three-judge panel held that the statute of limitations for the claims of putative class members may be tolled in a subsequent class action when there was no ruling on class certification in a prior class action. See In re: Vertrue Inc. Marketing and Sales Practices Litig., No. 10-3928 (6th Cir. Apr. 16, 2013) (slip opinion available here).

This case and numerous related cases had a long, meandering decade-plus procedural history before arriving in the Sixth Circuit, which has appellate jurisdiction over federal trial-level courts in Kentucky, Michigan, Ohio, and Tennessee. The plaintiff first filed the action in the Southern District of California in 2002, seeking to represent a national class who bought membership programs purporting to provide discounts on purchases, but that in fact functioned to lure consumers with “bait” products. Slip op. at 2-4. The plaintiff alleged that when customers called the company to buy the bait product, they were deceived into believing that free materials would be sent to them in the mail. Id. Vertrue would then mail a membership card and place a recurring annual charge of $60-$170 on the customer’s credit card, which would only be removed if the customer navigated hard-to-follow procedures for cancellation. Id.

The California district court dismissed the action without having ruled on class certification. Slip op. at 3-4. In response, plaintiffs filed 13 state court actions across multiple jurisdictions, which were consolidated in the Northern District of Ohio. Slip op. at 4-5. The Ohio federal court held that the claims were tolled as a result of the Southern District of California proceeding and that the state court claims therefore were timely filed, which occasioned the appeal to the Sixth Circuit. Slip op. at 5. The Sixth Circuit affirmed the tolling, relying on Supreme Court authority allowing for unnamed plaintiffs to preserve their individual claims while class action lawsuits are pending. The court explained that refusing to recognize the claims of unnamed class members would lead to inefficiency because the class members would then be forced to file individual actions to preserve any state law claims whose statutes of limitations might otherwise expire while a federal class action is pending. See slip op. at 11-12.

The unanimous three-judge panel affirmed the district court’s holding that both the plaintiffs’ federal and state law claims were timely asserted, and that the plaintiffs’ claims were tolled under American Pipe & Constr. Co. v. Utah, 414 U.S. 538, (1974). Circuit Judge Julia Smith Gibbons reasoned that “Vertrue has failed to explain how the efficiencies sought by American Pipe tolling would be advanced if putative class members were forced to file individual state law actions to preserve any state law claims whose statutes of limitations might run during the course of class proceedings.” Slip op. at 11.

In sensibly preserving the rights of consumers whose claims have never been adjudicated or denied class certification, the decision marks a clear victory for consumers, and, in contrast to some recent decisions affecting class actions, one grounded in Supreme Court precedent.

The First Circuit has issued a critical decision both in its ultimate ruling and its reasoning. See In re: Neurontin Marketing & Sales Practices Litig., No. 11-1806 (1st Cir. Apr. 3, 2013) (slip opinion available here). In a decision written by Chief Judge Sandra Lynch, the unanimous three-judge panel reversed the district court’s grant of summary judgment and denial of class certification. See slip op. at 24-25.

In the underlying case, plaintiffs alleged that doctors prescribing the anti-seizure drug Neurontin were deceived by the defendant, pharmaceutical giant Pfizer, with respect to “off-label” uses for which Neurontin is not formally approved. The district court repeatedly rejected the plaintiffs’ use of widely-accepted statistical methods, including multiple regression, to prove causation. The First Circuit panel rejected the defendants’ argument that the plaintiffs’ use of aggregate evidence precluded class treatment. See slip op. at 20-22.

The plaintiffs’ expert had shown by regression analysis that essentially all Neurontin prescriptions for bipolar disorder were the result of Pfizer’s off-label marketing. In denying the plaintiffs’ second class certification motion, the district court adopted reasoning typically invoked by class action defendants, holding that the plaintiffs’ expert could not offer class-wide causation evidence because the regression analysis did not take account of doctors’ individual prescribing decisions, and only focused on Pfizer’s off-label marketing. See slip op. at 8.

While the second class certification motion was pending, Pfizer filed a summary judgment motion premised on the same causation argument, arguing that the doctor-by-doctor inquiry purportedly required to augment the regression analysis would be “unmanageable.” Slip op. at 13. The district court denied the second class certification motion and granted Pfizer’s summary judgment motion.

The First Circuit reversed both the district court’s entry of summary judgment and denial of class certification, with the centerpiece of the appellate ruling being the panel’s endorsement of the rigorous statistical methods that the district court had rejected. Recognizing that regression analysis is capable of distinguishing the relative causation effects among multiple independent variables, Judge Lynch’s decision noted that the plaintiffs had not relied exclusively on the regression analysis: “[I]n addition to the aggregate statistical evidence, . . . plaintiffs also presented circumstantial evidence that supported an inference of causation”, such as “documents showing that psychiatrists had almost never prescribed Neurontin for bipolar disorder until after Pfizer began its marketing campaign, at which point prescriptions jumped by 1700% in two years.” Slip op. at 20.

The first Circuit’s decision serves as essential guidance for plaintiffs’ counsel in complex litigation requiring sophisticated and rigorous scientific methods in order to confront facile arguments like those advanced by Pfizer, and adopted, repeatedly and emphatically, by the trial court.

Earlier this week, a distinguished Seventh Circuit panel, consisting of Judges Richard A. Posner, Daniel A. Manion and David F. Hamilton, rejected a defendant’s petition to appeal an Illinois district court’s class certification ruling. Clark v. Honey-Jam Café, LLC, No. 13-8006 (7th Cir. April 22, 2013) (order denying petition to appeal class cert., available here).

In the underlying case, a class of tipped employees being paid a sub-minimum hourly wage alleged that they were required to perform non-tipped tasks for which they were not paid minimum wage as dictated by the FLSA. The Honey-Jam class was certified last month, a few days prior to the issuance of the Comcast v. Behrend ruling, where the Supreme Court found class certification inappropriate because individualized damages analyses would create a predominance of individual issues. The defendant argued that the Honey-Jam certification must be reviewed in light of Comcast, and that the district court failed to properly determine the predominance of collective issues over individual ones, specifically whether damages could be calculated class-wide.

The Honey-Jam order reinforces the contention of the dissenting justices in Comcast that the latter is a very narrow ruling, “good for this day and case only,” and that “the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3).” Comcast v. Behrend, 569 U.S. ___ (2013), slip op. dissent at 5, 3 (Ginsburg and Breyer, JJ., dissenting).

A detailed analysis of the arguments and counterarguments around a plaintiff’s motion to certify a class alleging meal and rest break violations has been published in the Federal Rules of Decision. See Avilez v. Pinkerton Gov’t Servs., 286 F.R.D. 450 (2012). The ruling, by Central District of California Judge David O. Carter, methodically works through the Rule 23 certification elements, and in doing so provides unusually broad guidance as to the more rigorous procedural requirements implied by the U.S. Supreme Court’s Dukes decision as well as the substantive aspects of California’s meal break statute set forth by the California Supreme Court in Brinker v. Superior Court, 53 Cal. 4th 1004 (2012).

While Pinkerton did not contest the easily-established numerosity requirement, the company did challenge typicality, the cited reason being that “some unstated number of putative class members signed a document purporting to waive their right to participate in a class action against Defendant, whereas Plaintiff signed no such document.” However, Judge Carter concluded that the defendant’s argument merely postulated that the plaintiff had a stronger claim than some other putative class members, and that there is no authority holding that such a circumstance precludes certification. Avilez at 456-7.

Judge Carter also rebuffed the defendant’s challenge to the named plaintiff’s adequacy, which was premised on a survey purporting to show that a majority of Pinkerton employees prefer the “present arrangement” with respect to meal breaks, seemingly irrespective of whether that arrangement complies with Brinker. See Avilez at 457-58. Judge Carter methodically deconstructed Lanzarone v. Guardsmark Holdings, Inc., 2006 U.S. Dist. LEXIS 95785 (C.D. Cal. Sept. 7, 2006), the defendant’s main authority supporting this point, finding that it “betrays a deep naïveté” about incumbent employees’ motivations and incentives. See Avilez at 458. Moreover, the survey that was the basis for the defendant’s adequacy argument covered only 30 employees, and the defendant failed to disclose the identity of the person who conducted the survey. Judge Carter thus struck the survey evidence, vitiating the defendant’s adequacy challenge. Avilez at 458-60.

Beyond providing plaintiffs with a favorable adequacy ruling, this analysis also offers useful benchmarks for contrasting the truly rigorous surveys that class action plaintiffs will often proffer in support of class certification. See id. For instance, the survey altogether excluded former employees, even though the defendant’s own deponent testified that former employees constituted at least half, and perhaps nearly three-quarters, of the class members. Id. Judge Carter also noted his skepticism with respect to “the motivations behind and credibility of current employees’ responses to employer-elicited questions regarding employees’ contentment with their employer’s policy.” Id. at 458.

Finally, as to the often pivotal question of whether common questions of law and fact predominate, Judge Carter’s analysis brought to bear the procedural and substantive mandates of Dukes and Brinker, and concluded that the plaintiff’s prima facie case is subject to common proof, “which is all that is necessary to meet the predominance requirement of Rule 23(b)(3).” Avilez at 469. Thus, the defendant’s challenges to predominance not focused on the prima facie case are not relevant, a finding that is in keeping with “courts ‘traditionally be[ing] reluctant to deny class action status’ under predominance requirement of Rule 23(b)(3) ‘simply because affirmative defenses may be available against individual members.’” Avilez at 469, citing Lorber v. Beebe, 407 F. Supp. 279, 294 (S.D.N.Y. 1975).