The Demand Curve Problem for UCL Class Actions

A recent opinion from a California federal court, Mier v. CVS Pharmacy, Inc. et al., No. 8:20-cv-01979-DOC-ADS, slip op. (C.D. Cal. May 9, 2022), touches on an aspect of econometric modeling that class action defense counsel should understand, particularly in consumer fraud cases under California’s Unfair Competition Law (UCL) and similar laws with restitution as a remedy. This key principle is that consumer value is subjective and individual, as represented by the downward slope of a demand curve. That shape poses what normally should be an insurmountable problem for UCL class actions. It represents the range of values consumers place on a product. As price rises, quantity falls, because each incrementally higher price exceeds the willingness to pay of one or more additional consumers. Courts are just beginning to recognize this, although savvy defense counsel have understood and advocated it for a long time.

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BakerHostetler Releases Insurance Class Action Update

The Class Action Defense team released its Insurance Quarterly Report covering the fourth quarter of 2021 and the first quarter of 2022. Included in the report are updates and analyses about property and casualty class action lawsuits, which are keeping courts and lawyers very busy, class action certification decisions in total loss valuation cases, and various types of class actions regarding personal injury protection, storage fees and medical billing, among other things.

To view the report, click here.

The U.S. Supreme Court Agrees to Hear Case Regarding Whether State Business Registration Requirements Can Create General Personal Jurisdiction

The U.S. Supreme Court has agreed to consider whether the Due Process Clause of the Fourteenth Amendment prohibits a state from requiring a corporation to consent to personal jurisdiction as a condition to doing business in the state. Mallory v. Norfolk S. Ry. Co., U.S. Supreme Court, No. 21-1168, granted.

The plaintiff is a Virginia resident who sued the railroad, a Virginia company, in Pennsylvania state court for harm he allegedly suffered due to exposure to carcinogens while working in Ohio and Virginia. Pennsylvania has a statutory scheme, “consent-by-registration,” that requires foreign corporations to register to do business in the state, which also operates as consent to general personal jurisdiction. The plaintiff argued that Pennsylvania courts had general personal jurisdiction over the foreign corporation because it had registered to do business in the state.

The Pennsylvania Supreme Court disagreed, unanimously affirming the trial court’s holding and finding Pennsylvania’s statutory scheme unconstitutional to the extent it imposed jurisdiction on foreign corporations solely because they had registered to do business in Pennsylvania. The Court  held that a foreign corporation’s compliance with Pennsylvania’s mandatory registration statute did not operate as voluntary consent to Pennsylvania courts’ exercise of general personal jurisdiction.

In rendering its decision, the Pennsylvania Supreme Court considered the U.S. Supreme Court’s “recent directives,” including the High Court’s decisions in Daimler AG v. Bauman, 571 U.S. 117, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014) and Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 131 S.Ct. 2846, 180 L.Ed.2d 796 (2011).

The plaintiff petitioned the U.S. Supreme Court for review, arguing that a split existed amongst several state high courts regarding whether statutory schemes like Pennsylvania’s were constitutional.

The U.S. Supreme Court’s decision in Mallory could have a significant impact on where corporate defendants can be sued and forced to defend significant cases, including putative class actions. The case is scheduled for argument during the Court’s October 2022-2023 term.

Class Action Year In Review 2021

BakerHostetler has released its Class Action Year In Review, which presents a brief overview of the landscape for class actions in 2021 and a preview of what to expect for 2022. The report covers class action litigation in several areas:

  • Financial services
  • Advertising and marketing: food, beverage and product labeling
  • Privacy
  • Insurance
  • Employment
  • Appellate decisions impacting class actions

To view the report, click here.

Third Circuit Smacks Down Class Action Settlement in Google Cookie Placement Litigation

In a refreshingly plain-spoken opinion issued Aug. 6, a three-judge panel of the Third Circuit Court of Appeals criticized a multimillion-dollar class action settlement in litigation over Google’s unauthorized use of internet tracking “cookies,” remanding to the District Court for more detailed findings of fact. In re: Google Inc. Cookie Placement Consumer Privacy Litigation, No. 17-cv-1480 (3d Cir. Aug. 6, 2019).

The case arose from allegations that Google created a web browser cookie, which tracks an internet user’s browsing activity even if the user tries to configure privacy settings to block it. The parties reached a settlement that would require Google to “stop using the cookies for Safari browsers and to pay $5.5 million to cover class counsel’s fees and costs, incentive awards for the named class representatives, and cy pres distributions, without directly compensating any class members.” The District Court certified an injunctive relief-only settlement class under Rule 23(b)(2), notwithstanding the fact that the settlement purported to release all class members’ potential claims for money damages. The only monetary benefit to the class was tangential: Google was to pay $3 million to organizations devoted to advocating for online privacy – a mechanism commonly referred to as cy pres, meaning a distribution that is supposed to be “as near as possible” to direct monetary relief.

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Standing in Uncertainty: Spokeo Three Years Later

In 2016, the Supreme Court issued its decision in Spokeo Inc. v. Robins, holding that even when Congress has granted parties a statutory right, a procedural violation of that right will not by itself satisfy the “concrete harm” requirement for Article III standing. The Court explained that while harm must be “concrete,” it need not be “tangible.” With little guidance on what this distinction actually means, the Court sent the case back to the Ninth Circuit, then denied a petition for writ of certiorari when the petitioners sought clarification on what constitutes a concrete, “intangible” harm.

Three years later, we are no closer to truly understanding what is required for Spokeo standing. Indeed, the recent decision in Frank v. Gaos, 139 S. Ct. 1041 (2019) not only demonstrates the Supreme Court’s present unwillingness to substantively address standing under Spokeo, but also serves as a sobering example of how a lack of clarity on the issue can derail nearly a decade’s worth of litigation and settlement efforts.  Continue Reading

Supreme Court: Express Consent Required for Class Arbitration

On April 24, 2019, the U.S. Supreme Court ruled that an ambiguous arbitration agreement does not provide a sufficient basis to conclude that parties agreed to class arbitration.

In Lamps Plus, Inc. v. Varela, the Supreme Court voted 5-4 to overturn the Ninth Circuit’s decision that the arbitration agreement between Lamps Plus and one of its employees allowed the employee to pursue class claims even though the agreement was vague as to class arbitration. Continue Reading

Caution: Precertification Communications with Absent Class Members

Are absent members of an uncertified class or Fair Labor Standards Act (FLSA) collective action “parties” and thus “represented” by plaintiff’s counsel? If so, is defense counsel prohibited from speaking with absent class members? At first glance, the answer would appear to be no, for two reasons. First, “a nonnamed class member is [not] a party to the class-action litigation before the class is certified.” Standard Fire Ins. Co. v. Knowles, 568 U.S. 588, 593 (2013). And “[u]nder the FLSA, employees become parties to a collective action only by filing written consent” with the court after receiving court-approved notice. Genesis HealthCare Corp. v. Symczyk, 569 U.S. 66, 75 (2013). Second, district courts cannot restrict parties or counsel in an alleged class action from communicating with putative class members unless the speech restriction is “justified,” generally because of abuse or other misconduct. See Gulf Oil Co. v. Bernard, 452 U.S. 89, 101, 104 (1981). Continue Reading

Trial Courts Wrestle with Expert Testimony and Daubert at Class Certification

Expert testimony plays a critical role in nearly all putative class actions, including at the class certification stage where parties rely on expert evidence to address the requirements of Federal Rule of Civil Procedure 23. The Supreme Court has repeatedly held that trial courts must look beyond the pleadings and conduct a searching inquiry to resolve factual disputes about Rule 23’s requirements. But the Supreme Court has not explicitly held whether that searching inquiry requires expert testimony to satisfy the Daubert requirements before being considered in deciding a motion to certify. In Wal-Mart Stores, Inc. v. Dukes, the Supreme Court noted that “the District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings.” 564 U.S. 338, 354 (2011). The Supreme Court expressed skepticism about that holding but did not reject it outright: “We doubt that is so.” Id. As we wrote here, the Supreme Court again addressed expert testimony at the class certification stage in Comcast v. Behrend, 569 U.S. 27 (2013), but deferred the specific question of whether that evidence must satisfy Daubert in order to be considered. Id. at 35 (Ginsburg, J., dissenting). Continue Reading

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