trends in consumer class actions: how you (yes, you) … · trends in consumer class actions: how...

2017 ACC-SoCal In-House Counsel Conference #IHCC17

Trends in Consumer Class Actions: How You (Yes, You) Can Avoid

Becoming a Target

January 17, 2016

Universal City, California

Sponsored by Akin Gump Strauss Hauer & Feld LLP

Panelists: Neal Marder, Akin Gump, Head of Consumer Class Action Practice

Hyongsoon Kim, Akin Gump, Senior Counsel

Rachael Jeck, VCA Inc., Co-General Counsel

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2017 ACC-SoCal In-House Counsel Conference 1#IHCC17

Presented by Neal Marder

Head of Consumer Class Action Practice

Akin Gump Strauss Hauer & Feld

Recent Trends in False Advertising Class Actions

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False advertising filings are steadily increasing

in California State and Federal Courts

False Advertising Class Actions on the Rise

0

50

100

150

200

250

300

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

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Five states accounted for

almost 75 percent of all

cases

California (~ 50 percent)

New Jersey

Florida

New York

Illinois

False Advertising Litigation by State

Source: Number of Cases Settled by State, Consumer Class Action Settlements: 2010 – 2013, NERA ECON. CONSULTING (July 22, 2014)

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False Advertising Law (FAL) (Cal. Bus. & Prof. Code § 17500)

Any untrue or misleading statements made in connection with sale

of goods or services.

Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200)

Any business activity (not limited to just advertising) that is allegedly

unfair, unlawful, or fraudulent.

Consumer Legal Remedies Act (CLRA) (Cal. Civ. Code § 1750)

Any consumer transaction involving the sale/lease of goods/services

that is allegedly unfair/deceptive.

Remedies are cumulative (plaintiffs can sue under all three statutes)

Other states moving in same direction as California (e.g., New Jersey)

California’s False Advertising Statutes

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Food & Beverage

Electronics

Credit Cards

Pharmaceuticals

Finance

Cosmetics

Telecommunications

Construction

Apparel

Insurance

Industries at Risk for False Advertising Litigation

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Alleged Misrepresentations:

• “All Natural” or “Healthy”

• Slack-Fill

• “Green” / “Eco-Friendly”

• “Craft” or “Handmade”

• “Compare At” Pricing

Types of Products:

• Food & Beverage

• Cosmetics &

Personal Care Products

• Household Products

• Apparel

• Electronics

Recent Patterns in False Advertising Claims

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Dismissing class actions

where plaintiffs lack standing

Limiting nationwide class

actions on choice-of-law and

reliance grounds

Applying a heightened

ascertainability standard at the

class certification stage

Dismissing false advertising

claims under the “reasonable

consumer” standard

Denying class certification

based on plaintiffs’ damages

model

Courts Have Provided Several Tools forDefending False Advertising Class Actions

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Mazza v. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012)

• The plaintiffs purchased Acura vehicles equipped with a Collision Mitigation

Braking System (CMBS). The plaintiffs alleged that Honda’s “advertisements

misrepresented the characteristics of the CMBS and omitted material

information on its limitations” in violation of the UCL, FAL and CLRA.

• Applying California’s three‐step choice-of-law analysis, the Ninth Circuit found

that a nationwide class could not be certified.

• The court also held that even a California class could not be certified because

Honda’s advertising campaign was not extensive enough to presume reliance

by the class as a whole.

o Distinguishing In re Tobacco II Cases, 46 Cal. 4th 298 (2009), in which the California

Supreme Court found that plaintiffs were not required to demonstrate reliance for individual

class members where there was a long-term, “massive” advertising campaign, the Ninth

Circuit held that individual class members' reliance could not be presumed where “it is likely

that many class members were never exposed to the allegedly misleading advertisements.”

Limiting Nationwide Class Actions on

Choice-of-Law and Reliance Grounds

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Applying a Heightened Ascertainability Standard at the Class Certification Stage

The Second, Third, Fourth, and Eleventh Circuits apply a

“heightened” ascertainability standard requiring that:

• The class is “defined with reference to objective criteria,” and

• There is a “reliable and administratively feasible mechanism for determining

whether putative class members fall within the class definition.”

The First Circuit has adopted a hybrid approach.

Other circuits have either adopted a less rigorous standard at the

certification stage, requiring only an objectively defined class, or

have expressly declined to adopt any ascertainability standard.

E.g., Briseno v. ConAgra Foods, Inc., 2017 WL 24618 (9th Cir. Jan. 3, 2017)

o Plaintiffs brought false advertising class action against ConAgra alleging “100% natural” label

on vegetable oil was misleading because the product was made from GMO ingredients.

o The Ninth Circuit affirmed the district court's class certification decision, but expressly stated

that the Ninth Circuit has not adopted an ascertainability requirement.

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Dismissing False Advertising Claims

Under the “Reasonable Consumer” Standard

Ebner v. Fresh, Inc., No. 13-cv-56644 (9th Cir. Mar. 17, 2016)

• The Ninth Circuit affirmed dismissal of “slack fill” false advertising class action, holding

that a reasonable consumer would not be misled by lip balm packaging that allows only

75 percent of the product to advance up the tube.

Galanis v. Starbucks Corp., No. 16-4705 (N.D. Ill. Oct. 14, 2016)

• The Northern District of Illinois dismissed a putative false advertising class action alleging

that Starbucks misrepresents the amount of liquid in its iced drinks because they also

contain ice. The court held that a reasonable consumer who purchases an iced drink

expects ice to be included.

Popejoy v. Sharp Electronics Corp., No. 14-6426 (D.N.J. June 9, 2016)

• The District of New Jersey dismissed with prejudice a putative nationwide class action

alleging that Sharp misled consumers by advertising LCD TVs as LED TVs. The court

held that a reasonable consumer would not be deceived by Sharp’s marketing because

the product packaging stated that the TV was both an LCD TV and an LED TV.

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Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013)• The Supreme Court held that the plaintiffs’ proposed damages model fell “far short of establishing that

damages are capable of measurement on a class-wide basis.”

• The Court reasoned that “a model purporting to serve as evidence of damages in [a] class action

must measure only those damages attributable to that theory. If the model does not even attempt to

do that, it cannot possibly establish that damages are susceptible of measurement across the entire

class for purposes of Rule 23(b)(3).”

But see Pulaski & Middleman v. Google, Inc., No. 12-16752 (9th Cir. 2015) The Ninth Circuit reversed an order denying class certification of UCL and FAL claims, holding that

“differences in damage calculations do not defeat class certification,” even after Comcast.

Brazil v. Dole, No. 5:12-cv-01831 (9th Cir. 2016)• The Ninth Circuit affirmed the district court’s order decertifying the 23(b)(3) damages class “[b]ecause

Brazil did not explain how this premium could be calculated with proof common to the class.”

But see Briseno v. ConAgra Foods, Inc., 2017 WL 24618 (9th Cir. Jan. 3, 2017)• Plaintiffs’ damages model combined a regression analysis with a study that purported to isolate the

price premium attributable to the alleged misrepresentations.

• The Ninth Circuit held that requiring a methodology for class-wide damages was not the same as

imposing an ascertainability requirement, and held that individual damages issues did not preclude

certification.

Denying Class CertificationBased on Plaintiffs’ Damages Model

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Work with outside counsel to review advertising claims

Use language that would make sense to a reasonable

consumer

Consider including a mandatory arbitration provision with a

class action waiver in all consumer contracts

Catch the problem early – pay attention to consumer

complaints and correspondence

Consider implementing a voluntary refund program or

other administrative remedies

Best Practices

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Presented by Hyongsoon Kim

Akin Gump Strauss Hauer & Feld

Recent Trends in Statutory Class Actions

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Statutory Damages Class Actions on the Rise

Fair Credit

Reporting

Act (FCRA)

50%increase from

2014 to 2015

Video Privacy

Protection Act (VPPA)

Fair Debt

Collection

Practices

Act (FDCPA)

50%increase in

past four years

Telephone

Consumer

Protection

Act (TCPA)

Tripledincrease from

2012 to 2015

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Minimum Statutory Damages

Plus actual damages(if any), fees, costs,

and possible punitive damages

FCRA$100 to $1,000 per violation

VPPAAt least $2,500 per

violation

TCPA $500 per violation

Plus actual damages (if any),

Fees, costs, and possible punitive damages

FDCPAUp to $1,000 per person

Plus treble damages (3x) for a “willful

or knowing” violation

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Approximately 2,270 complaints filed under these common

statutes in 2015 and 2016 were reviewed:

These statutes relate to the treatment and protection of

consumer’s personal information, including credit and debt

information, and information related to video and other forms

of communication.

Common Privacy Statutes

FDCPA

TCPA

FCRA

VPPA

ECPA

FACTA

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Three states (California, New York and New Jersey) account for over 50 percent of cases

California accounts for over 23 percent of cases

Followed by New York, which accounts for over 17 percent of cases

New Jersey and Illinois account for 23 percent of cases

California, 23.20%

Florida, 7.11%

Illinois, 9.08%

New Jersey, 14.12%

New York, 17.74%

Pennsylvania, 3.32%

Wisconsin, 8.58%

Other, 16.84%

Favored Courts – By District Court (2015-2016)

FACTA, FDCPA, FCRA, ECPA, TCPA and VPPA:

*as of September 23, 2016

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Outdated/Antiquated Laws

Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227

Passed in 1991

What violates: automated phone calls, text messages and faxes without consent

Damages: plaintiffs’ actual losses OR $500 statutory damages per violation, whichever is greater; treble damages available for “willful” violations

Expansive interpretation of “autodialer”

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Plaintiffs’ Expansive Arguments

Video Privacy Protection Act (VPPA), 18 U.S.C. § 2710

Passed in 1988

What violates: knowing disclosure by “video tape service providers” of “personally identifiable information.”

Damages: $2,500 liquidated damages

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Expanding the definition of:

• VTSP

• Personally Identifiable Information (“PII”)

• Consumer

Establishing bases for more intangible harms

Extending the pool of liability to recipients of data, not just

those who disclose data

Sample Case Law:• In re Nickelodeon Consumer Privacy Litig., 827 F.3d 262 (3d. Cir. June 27, 2016):

Static digital identifiers such as IP addresses (did not identify a specific person)

• Yershov v. Gannett Satellite Info. Network, Inc., 820 F.3d 482 (1st Cir. Apr. 29, 2016):

GPS coordinates were PII; “PII is not limited to information that explicity names a

person”

Plaintiffs’ Expansive Arguments

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Potential for large damages awards in class action context

• TCPA: purpose was to enable plaintiffs

to file without lawyer in small claims court

In re Capital One Tel. Consumer Prot. Act Litig.,

80 F. Supp. 3d 781 (N.D. Ill. 2015)

• Settlement of $75 million approved by court

• Class of 17 million members

• Attorneys’ fees of $15 million

Why Statutory Claims Are Attractive to Plaintiffs: Damages

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Easier for plaintiffs to prove how much harm

was suffered by putative class members

Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013):

damages methodology must be tied to theory of liability

• Can require expert testimony

• Can lead to denial of class certification

Why Statutory Claims Are Attractive to Plaintiffs: Class Certification

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Aranda v. Caribbean Cruise Line, No. 12-cv-4069 (N.D. Ill. Aug. 23, 2016)

• Violations of TCPA

• Alleged injury = common to class

• Statutory damages = common issues predominate

• Fewer individualized issues

• Certified class

Ramirex v. Trans Union, LLC, No. 12-cv-00632 (N.D. Cal. June 22, 2016)

• Similar holdings under FCRA

• Actual injury = common issues predominate

Why Statutory Claims Are Attractive to Plaintiffs: Class Certification

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Spokeo, Inc. v. Robins, 136 S. Ct. ___ (2016)

• False information about age, job status, and employment

• Violation of FCRA

• 9th Circuit: injury sufficient for standing

• Supreme Court (6-2): harm must be “concrete” and “particularized”

o “Concrete” injury = “de facto” (must actually exist)

o Congress may elevate concrete, de facto injuries

o Violation of procedural statutory right may be sufficient

• Remanded to 9th Circuit

Spokeo and Article III Standing

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Romero v. Dept. Stores Nat’l Bank, No. 15-cv-193 (S.D. Cal. Aug. 5, 2016)

o One unanswered telephone call is not sufficient injury to confer standing.

Ung v. Universal Acceptance Corp., No. 15-cv-127 (D. Minn. Aug. 3, 2016)

o The fact that the call happened is injury sufficiently concrete to confer standing.

Gubala v. Time Warner Cable, Inc., No. 16-2613 (7th Cir. 2017)

o Class action regarding Time Warner’s alleged storage of former customers’

information. The district court granted Time Warner’s motion to dismiss, finding

that the suit claimed no concrete injury. Plaintiffs appealed to the Seventh Circuit.

o The Seventh Circuit heard oral arguments on January 4, 2017.

o Judges Richard Posner and Frank Easterbrook were very critical of plaintiffs’

claims. Judge Posner stated “There’s no harm. Nobody cares.”

What Is Clear After Spokeo?

Courts are grappling with how to interpret Spokeo.

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Concluding Thoughts

Statutory damages class actions are on the rise

They can expose companies to massive potential liability

and can be expensive to defend

Develop and implement best practices to ensure your

compliance department is familiar with the technical

requirements of these statutes

Partner with counsel — both in-house and outside

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Questions?

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Panelists

Neal Marder

Partner

Akin Gump – Los Angeles

[email protected]

T+1 310.728.3740

Hyongsoon Kim

Senior Counsel

Akin Gump – Irvine

[email protected]

T+1 949.885.4218

Rachael Jeck

Co-General Counsel

VCA Inc.

[email protected]

T+1 310.571.6577

trends in consumer class actions: how you (yes, you) … · trends in consumer class actions: how...

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