A Key Ruling for Food Labeling Class Action Defendants Issued on “Reasonable Consumer” Standard

Smith_JamesGuest Commentary

by James D. Smith, Bryan Cave LLP

In what seems likely to become a defining case on appeal, Northern District of California Judge Lucy Koh granted summary judgment this week in a long-running food labeling class action. The plaintiff in Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK (N.D. Cal.), alleges that 10 Dole products are misbranded because their labels say the products contain “All Natural Fruit.” Mr. Brazil contends this is false because the products contain ascorbic acid (commonly known as Vitamin C) and citric acid (found in citrus). Both of those ingredients, of course, are naturally occurring compounds; many food manufacturers add them because of their natural preservative effects. The 10 products include diced apples, pears, oranges, and grapefruit packed in juice. For the past two years, Mr. Brazil and his counsel have pressed this litigation, alleging that the product labels somehow deceived him because neither he nor any other reasonable consumer would believe that fruit packed in juice contains Vitamin C or citric acid.

The procedural history is long, but readers interested in food labeling class actions in the Northern District of California may want to review Judge Koh’s earlier substantive rulings. By the time she granted summary judgment on December 8, Judge Koh had narrowed the case to a single injunction class. As an aside, Judge Koh’s November 6, 2014, order decertifying the damages class nicely shows why a hedonic damages regression analysis—which many food labeling class action plaintiffs try to rely on to show class-wide damages—isn’t feasible in these types of cases. This most recent ruling in Brazil is noteworthy because it explains that a named plaintiff’s subjective interpretation of a label isn’t sufficient to meet the burden of proving that the label is likely to mislead consumers under California’s Unfair Competition Law (“UCL”).

Granting summary judgment, Judge Koh concluded “there is insufficient evidence that the ‘All Natural Fruit’ label statement on the challenged Dole products was likely to mislead reasonable consumers and that the label statements were therefore unlawful on that basis.” That plaintiff did not attempt to use consumer surveys to establish that the labeling statements could mislead a significant portion of the public or of targeted consumers. Instead, he relied on informal FDA statements that “natural” means nothing artificial or synthetic “has been included in, or has been added to, a food that would not normally be expected to be in the food.” (Emphasis added.) As we’ll see, that plaintiff’s failure to establish that consumers would not normally expect ascorbic acid or citric acid to be in the food doomed his claims. Continue reading

Ninth Circuit Thwarts Plaintiffs’ Efforts to Evade Removal Under CAFA

Cruz-Alvarez_FFeatured Expert Contributor – Civil Justice/Class Actions

Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. with Rachel A. Canfield,  Shook, Hardy & Bacon, L.L.P.

Addressing a question of first impression, the U.S. Court of Appeals for the Ninth Circuit Court of Appeals, sitting en banc, weighed into an issue that has split the circuit courts involving the invocation of federal mass-action jurisdiction. Corber v. Xanodyne Pharmaceuticals, Inc.¸ Nos.13-56306 & 13-56310, — F.3d —-, 2014 WL 6436154 (9th Cir. Nov. 18, 2014). This is just one in a series of recent federal decisions limiting plaintiffs’ efforts to avoid federal class or mass action jurisdiction.

To prevent class-action abuse, the Class Action Fairness Act of 2005 (“CAFA”) expands federal jurisdiction over certain class or mass actions that fall within its purview. Corber, 2014 WL 6436154, at *11. In pertinent part, CAFA defines mass actions as any civil action in which “monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiff’s claims involve common questions of law or fact.” 28 U.S.C. § 1332(d)(11)(B)(i).

Treated as companion cases, Romo v. Teva Pharmaceuticals USA, Inc., and Corber v. Xanodyne Pharmaceuticals, Inc., were two of twenty-six cases pending before the district court, and more than forty actions filed in California state courts, alleging injuries due to the ingestion of an ingredient found in certain pain relief drugs. Corber, 2014 WL 6436154, at *7. A number of the actions were brought by one group of plaintiffs’ attorneys who sought to obtain coordination of the actions pursuant to section 404 of the California Code of Civil Procedure, which permits coordination of civil actions containing a common question of fact or law if one judge hearing all of the actions for all purposes will promote the ends of justice. Id. at *8-9. In an attempt to obtain coordination in state court and evade federal jurisdiction, these plaintiffs’ attorneys superficially segmented the cases to involve fewer than 100 plaintiffs and crafted the petitions for coordination absent an express proposal that the actions be jointly tried. Continue reading

True, not False: SCOTUS “Omnicare” Case Highlights Need for Clarity on Key Securities Class Action Issue

greeneddavisjGuest Commentary

Douglas W. Greene and Claire Loebs Davis, Lane Powell LLP

On November 3, 2014, the U.S. Supreme Court will hear oral argument in Laborers District Counsel Construction Industry Pension Fund v. Omnicare, Inc., which concerns the standard for judging the falsity of an opinion challenged in an action under Section 11 of the Securities Act of 1933. In the U.S. Court of Appeals for the Sixth Circuit decision under review (“2013 Omnicare decision”), the court held that a statement of opinion can be “false” even if the speaker genuinely believed the stated opinion. This holding is contrary to the U.S. Supreme Court’s decision in Virginia Bankshares, Inc. v. Sandberg, which held that a statement of opinion is a factual statement as to what the speaker believes—meaning a statement of opinion is “true” as long as the speaker genuinely believes the opinion expressed, i.e., if it is “subjectively” true.

We authored an amicus brief on a pro bono basis for Washington Legal Foundation (“WLF”) in Omnicare that emphasizes the importance of clarifying the standard for challenging “false” statements of opinion under all the federal securities laws, not just Section 11. WLF’s view that such clarification is needed was reinforced by an October 10, 2014 decision in a subsequently filed securities class action against Omnicare under Section 10(b) of the Securities Exchange Act of 1934. In re Omnicare, Inc. Sec. Litig. (“2014 Omnicare decision”). In the 2014 Omnicare decision, the Sixth Circuit appeared to embrace the proposition that a statement of opinion is not actionable if it is subjectively true—at least under Section 10(b)—but then held that the subjective falsity inquiry should be analyzed within the element of scienter. The opinion reflects the continued confusion that pervades analysis of this issue, jumbling subjective falsity with other concepts, and conflating the separate elements of falsity and scienter.

As part of its scienter analysis, the Sixth Circuit also grappled with another important question: whose state of mind counts for purposes of determining a corporation’s scienter? Although the Sixth Circuit believes the standard it enunciated constitutes a “middle ground” between restrictive and liberal tests among the federal circuit courts, its ruling misunderstands the nature of the scienter inquiry and conflicts with the Supreme Court’s 2011 ruling in Janus Capital Group, Inc. v. First Derivative Traders, and thus risks expanding corporate liability beyond the proper reach of Section 10(b).

After discussing the proper analysis of statements of opinion, and explaining errors in the 2013 Omnicare decision, we explain and analyze both holdings in the 2014 Omnicare decision. Continue reading

Ebola Vaccine and Treatment Makers Need Liability Protection

670px-ebola_virus_virionU.S. politicians and regulators, many of whom ordinarily trend toward hyper-caution on new drug reviews and approvals, are rushing forward with policies aimed at speeding up development of Ebola vaccines and treatments. These measures include coordinated research among public health officials and drug makers, Food and Drug Administration (FDA) pledges of regulatory assistance, and congressional interest in legislation to qualify Ebola-targeted products for an FDA priority-review program. Such cooperation is encouraging, but government also needs to take action on another R&D disincentive which, if left unaddressed, could completely undermine current efforts on Ebola and frustrate future cooperative management of unforeseen pandemics. Ebola vaccine and treatment manufacturers need to have protection from tort liability exposure.

Any medical procedure, pharmaceutical product, or vaccine may have adverse health risks in some instances. Drug manufacturers must consider those risks when deciding whether to invest millions of dollars for product R&D, and the Food and Drug Administration (FDA) must weigh those risks against the benefits when approving a treatment. Such risks, along with the high regulatory barriers and low economic incentives attendant to investing in rare diseases, likely have been factors that explain the dearth of Ebola vaccines and treatments.

The United States government has the motivation and the means to minimize or eliminate such liability risks. Federal health agencies are already directly involved in vaccine development, and they will no doubt also be the major purchasers of the resulting drugs. Those federal entities could include a provision in the R&D agreements or purchasing contracts that would substitute the government as a defendant in any resulting lawsuits against private businesses, or indemnify companies from tort liability. The former option is certainly superior to indemnification, which could require the vaccine and treatment producers to litigate cases and then seek reimbursement for the losses or settlements. The companies would also have to negotiate with the government over whether the indemnification would cover litigation costs, such as attorneys’ fees.

The federal government indemnified manufacturers in contracts for a smallpox vaccine after the September 11, 2001 terrorist attacks. The companies argued that the proposed indemnification was insufficient, and in April 2003, Congress added expanded liability protections to the Homeland Security Act of 2002. For the one-year period of the national smallpox vaccination program (2003-2004), individuals allegedly harmed by a government-purchased smallpox vaccine could only sue the federal government under the Federal Tort Claims Act. Congress could consider the passage of a similar law for Ebola vaccines. Continue reading

Delaware Federal Court Sanction Rulings Offer Lessons for Patent Plaintiffs and Defendants

Kaminski_Jeffri_LRFeatured Expert Contributor – Intellectual Property (Patents)

Jeffri A. Kaminski, Venable LLP, with Briana Rizzo,* Venable LLP

*Editor’s Note: With this post we welcome the participation in The WLF Legal Pulse of Featured Expert Contributor on patent litigation and policy issues, Jeffri Kaminski.

The Delaware District Court, historically known as a venue friendly to patent holders, appears ready to fight back against the litigation strategies of Patent Assertion Entities (PAEs), or “patent trolls.” While the court has traditionally disfavored imposing fees and sanctions on unsuccessful Plaintiffs [1], several recent cases signal a major shift in the judicial perspective on what District Court Judge Richard G. Andrews calls “misleading and prejudicial” tactics. [2] Most notably, Parallel Iron LLC v. NetApp Inc. and Summit Data Systems, LLC v. EMC Corporation et al solidify a growing trend in the Delaware Circuit of both judicial discontent with PAE litigation tactics and a willingness to sanction such behavior.

A trend on the rise

The U.S. Supreme Court released its groundbreaking Octane Fitness, LLC v. Icon Health & Fitness, Inc. decision on April 29, 2014, lowering the standard of 35 U.S.C. § 285 “exceptional” behavior and enabling prevailing parties to obtain attorneys’ fees for behavior that merely “stands out from others with respect to the substantive strength of a party’s litigating position […] or the unreasonable manner in which the case was litigated.” While several cases immediately following Octane Fitness retained a traditional refusal to award fees, on September 12, 2014, Judge Andrews released three pro-defendant opinions on the matter, the most significant being Parallel Iron LLC v. NetApp Inc. Continue reading

Federal Circuit Orders Eastern District of Texas Patent Suit Stayed

The WLF Legal Pufederal circuitlse has addressed the U.S. Court of Appeals for the Federal Circuit’s patent litigation venue jurisprudence in several posts (here and here). That court issued two rulings this past March (In re Apple Inc. and In re Barnes & Noble, Inc.) that, in our opinion, incorrectly applied factors the Federal Circuit had previously relied upon to order patent suits transferred to more appropriate venues. On October 9, a unanimous three-judge panel added another twist to the Federal Circuit’s venue case law with In re Google Inc.

Background. Last October, non-practicing entity Rockstar Consortium filed a patent infringement suit in the Eastern District of Texas (EDTX) against five companies whose technology utilized Google’s Android operating system. At the end of 2013, Google filed a declaratory judgment action against Rockstar in the Northern District of California (NDCA) that involved the same patents that Rockstar was suing to enforce in Texas. Rockstar countersued Google in the NDCA and concurrently added Google as a defendant in the EDTX action. Rockstar then moved to transfer or dismiss the California action, which the NDCA denied. Google and its five customers petitioned the EDTX to stay Rockstar’s infringement action pending an outcome in the NDCA, or to transfer the case to California. EDTX Judge James Rodney Gilstrap denied the order, and the six companies appealed. Continue reading

Jurisdiction Still on Target for Supreme Court “Dart” Case

supreme courtAlthough the Supreme Court is scheduled to hear oral arguments on October 7 in a case addressing the scope of removal jurisdiction under the Class Action Fairness Act (CAFA)—Dart Cherokee Basin Operating Co. v. Owens—Public Citizen has urged the Court to dismiss the case as improvidently granted based on what it views as procedural roadblocks to reaching the merits. Last Friday, Columbia Law Professor Ronald Mann’s column for SCOTUSblog spotlighted Public Citizen’s amicus argument and stated, “[M]y sense is that the jurisdictional question [raised by Public Citizen] will seem a lot more contestable to the Justices than the issue on the merits,” adding that the Court might even consider dismissing the petition. Mann is probably correct that the Court is likely to be unimpressed by the lower courts’ merits decision—that a removal petition is deficient unless accompanied by documentary evidence supporting the petition’s allegations that the prerequisites for removal have been met. But the Court is likely to be equally unimpressed by Public Citizen’s “jurisdictional” argument, which has not been raised by the parties at any stage of these proceedings.

Public Citizen bases its argument on the fact that the Tenth Circuit did not directly address the district court’s decision to remand a case removed from state court by the Petitioners under CAFA. CAFA permits defendants in class actions to appeal remand decisions, but they first must petition the appeals court for an order accepting the appeal. In this case, the Tenth Circuit (by an equally divided 4-4 vote) denied the defendants’ petition for permission to appeal. Public Citizen contends that the only issue properly before the Supreme Court is whether the Tenth Circuit abused its discretion in denying permission for an appeal, not whether the district court erred in remanding the case.

That contention is without merit. First, the issue raised by Public Citizen cannot even remotely be deemed “jurisdictional” in nature. The Supreme Court has appellate jurisdiction over any case that has come before a federal appeals court, whether “before or after rendition of judgment or decree.” 28 U.S.C. § 1254(1). Supreme Court jurisdiction does not depend on whether the appeals court has rendered a judgment on the merits of the trial court’s determination. Because this appeal came before the Tenth Circuit, the Supreme Court has jurisdiction to review it. Continue reading