Posts belonging to Category Certification Rulings

In Fitzpatrick v. General Mills, No. 10-11064, 2011 U.S. App. LEXIS 6047 (11th Cir. 2011) (available here), the Eleventh Circuit applied the presumption of reliance among absent class members in a consumer class action case alleging affirmative misrepresentations , similar to the standard used in consumer class actions alleging material omissions. The presumption of reliance where material omissions are alleged is increasingly uncontroversial. See e.g., Cole v. Asurion Corp., 267 F.R.D. 322 (C.D. Cal. 2010) granting certification on omission-based liability theory); Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th Cir. 2010) (reversing denial of certification where district court abused discretion; common questions predominated as to defendant’s duty to disclose under consumer protection statutes). And while Fitzpatrick formally represents an application of Florida’s consumer protection statute, its broader significance could be in confirming that the presumption of reliance has the same utility in affirmative misrepresentation consumer class actions as in those alleging omissions.

In Fitzpatrick, the district court certified a class alleging that General Mills had materially misrepresented the digestive benefits of its YoPlus yogurt, sold under the popular Yoplait brand. Fitzpatrick, 10-11064 at *2-*3. Not only did the Court of Appeals reject the defendant’s contention on appeal that the district court had abused its discretion in certifying the class because individual issues predominate, the unanimous three-judge panel praised the certification ruling as “a scholarly work reflecting careful attention to the requirements of Federal Rule of Civil Procedure 23, existing precedent and the factual background of this matter.” Id. at *7.

The Eleventh Circuit’s lone quibble with the district court’s certification ruling was that it embodied a class definition that “seems to conflict with its earlier sound analysis.” Id. at *9-*10. Specifically, in limiting the class to those who purchased YoPlus to obtain its claimed digestive health benefit, the federal appellate court noted that the definition “takes into account individual reliance on the digestive health claims,” thereby contradicting the controlling presumed reliance standard. Id. at *10. Thus, although the opinion formally vacated the district court’s certification order, the case was remanded with instructions that the district court issue a certification order that properly reflects its own standard of presumed reliance. Id.

Securities class actions saw the first application of presumption of reliance as the fraud on the market theory to a narrow subset of cases. Now the fraud on the market version of presumed reliance applies virtually without exception in securities class actions. A similar common law evolution is evident in consumer class actions, as Fitzpatrick suggests that the same pragmatic logic by which the presumptions of reliance attach in consumer class actions alleging material omissions is equally applicable where affirmative misrepresentations are alleged.

Along with Dukes v. Wal-Mart and AT&T v. Concepcion, class action practitioners are closely watching another key case during this term of the United States Supreme Court: Smith v. Bayer, 593 F.3d 716 (8th Cir.), cert. granted, 131 S. Ct. 61 (U.S. Sept. 28, 2010) (No. 09-1205), in which the Court will decide whether federal courts have the authority to enjoin state class actions. Specifically, the justices are considering whether the denial of class certification in a federal district court can be res judicata as to a class action in state court making the same substantive allegations, with a different named plaintiff.

Smith v. Bayer arises from respondent Bayer’s distribution of Baycol, a prescription cholesterol drug that gave rise to multi-district proceedings, including McCollins v. Bayer Corp., in which a West Virginia resident who had taken Baycol moved to certify a class under West Virginia’s consumer protection law. Certification was denied because individual questions predominated. Thereafter, a different named plaintiff (now the Smith v. Bayer class representative) moved for certification in West Virginia state court, asserting the same theory of liability as had been denied certification in McCollins v. Bayer. However, the McCollins court issued an injunction, holding that the attempted certification in West Virginia state court fell within the re-litigation exception to the Anti-Injunction Act. The court reasoned that the proposed class was identical to that in McCollins, West Virginia’s class certification rules are identical to Rule 23, and petitioners’ interests had been adequately represented in McCollins. The Eighth Circuit affirmed and the Supreme Court granted certiorari.

The petitioners argue that a federal court’s denial of class certification cannot collaterally estop a state class action, irrespective of whether the theory of liability is substantively identical and the basis for the denial of class certification was not unique to the prior named plaintiff. In turn, Bayer argues that there is no due process violation, as the petitioners can still bring individual actions, and are simply precluded from re-litigating the identical class certification issue.

The parties’ Supreme Court briefs are available here: Brief for Petitioners, Brief for Respondent, Supplemental Brief of Respondent, and Petitioners’ Reply Brief.

With the proliferation of expensive cell phones, customers regularly buy insurance that will pay for a replacement phone in the event of loss, theft, or destruction, which typically includes a deductable. In Cole v. Asurion Corp., No. 06-6649 (C.D. Cal. filed Oct. 18, 2006), the plaintiff alleged that, as a result of a change in her cell phone insurance carrier, her deductable suddenly increased from $35 to $110. Her complaint included claims under California’s consumer protection statutes as well as common law claims for misrepresentation, breach of contract, and unjust enrichment. Significantly, in addition to alleging affirmative misrepresentations, the plaintiff also alleged material omissions which, if established, give rise to a class-wide presumption of reliance, obviating the most common and potent argument against class certification: that common questions of law or fact do not predominate.

Defendants made the familiar argument that variations in particular representations made to consumers precluded class certification altogether. Rejecting the defendants’ argument, the court granted certification on the omission-based theory of liability. Cole v. Asurion Corporation, 267 F.R.D. 322 (C.D. Cal. 2010). In so ruling, Central District Judge Phillip S. Gutierrez reinforced the trend of distinguishing misrepresentation- and omission-based theories of class-wide liability, and enforcing the presumption of reliance that attaches to material omissions. See, e.g., Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th Cir. 2010) (reversing denial of certification where district court abused discretion; common questions predominated as to defendant’s duty to disclose under consumer protection statutes).

It cannot be disputed that the eventual Dukes decision will remake the rules for federal district courts’ consideration of motions for class certification. And in light of the state courts’ practice of regularly consulting Rule 23 jurisprudence, Dukes will likely be a landmark class certification ruling from the Roberts Court. The Dukes decision is also likely to remake the strict divide between class certification analysis and merits analysis. Specifically, those who litigate class actions in federal court invariably invoke and confront the maxim set forth in Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), that, in ruling on a motion for class certification, trial courts must only determine whether the requisite class certification elements (numerosity, predominance, and so forth) have been satisfied, not whether the class is likely to prevail on the merits. Plaintiffs’ counsel frequently underscore the holding in Eisen with citation to Blackie v. Barack, 524 F.2d. 891 (9th Cir.) (1975), for the proposition that the allegations in the complaint must be presumed true throughout the class certification analysis. However, in Dukes, the Ninth Circuit noted a tension between Eisen and Blackie and the largely unarticulated mandate in General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147 (1982), requiring that trial courts conduct a “rigorous analysis” of each Rule 23 element.

While the Ninth Circuit’s opinion in Dukes purported its emphasis on the “rigorous analysis” standard to be a legal non-event, without circuit split implications, its rejection of the Blackie rule requiring that the operative class complaint’s allegations be presumed true has caused many observers to speculate that the Supreme Court will build on that and fashion a new rule for class certification jurisprudence interpreting the Falcon “rigorous analysis” requirement to entail a substantially greater consideration of the merits than that to which class action practitioners have grown accustomed over the first forty-plus years of Rule 23 jurisprudence.

Accordingly, whether the future of trial courts’ consideration of class certification motions will involve a more probing assessment of the merits is undoubtedly one of, if not the, most watched issues in connection with the Dukes case.