Author: Michael R. McDonald

Eleventh Circuit Eliminates Incentive Awards for Named Plaintiffs in Class Action Settlements

The Eleventh Circuit Court of Appeals recently upended what has become common practice in class action settlements by ruling that “incentive” awards to named plaintiffs are unlawful. In Johnson v. NPAS Solutions, LLC, the plaintiff filed a class action lawsuit under the Telephone Consumer Protection Act (TCPA) alleging that the defendant used an automatic telephone dialing system to call cell phones without the proper consent. Less than eight months after the complaint was filed, the parties jointly filed a notice of settlement for an award of $1,432,000. The District Court preliminary approved the settlement and certified the class for settlement purposes. In addition, that order permitted the plaintiff to petition the court to receive an amount not to exceed $6,000 “as acknowledgement of this role in prosecuting this case on behalf of class members.” The court also set a date for class members to opt out of the class settlement and a date three weeks later for class counsel to submit their petition for attorneys’ fees and costs. One person objected to the settlement on the grounds that (1) the objection deadline was set before the deadline for class counsel to file their attorneys’ fee petition, which she contended violated Federal Rule of Civil Procedure 23 and the Due Process Clause; (2) the amount of...

Supreme Court to Finally Decide Definition of Autodialer in TCPA Litigation

On July 9, 2020, the U.S. Supreme Court granted a long-pending petition for certiorari in Facebook Inc. v. Duguid, Noah, et al. to address a hotly debated question in Telephone Consumer Protection Act (TCPA) litigation: “whether the definition of [automated telephone dialing system] encompasses any device that can ‘store’ and ‘automatically dial’ telephone numbers, even if the device does not ‘us[e] a random or sequential number generator.’” The grant of certiorari comes on the heels of the Court’s sweeping decision in Barr v. American Ass’n of Political Consultants, severing the government debt collection exception to the TCPA’s “autodialer” prohibition as a content-based restriction on free speech. The TCPA broadly prohibits most calls using any ATDS or autodialer, defined by statute as “equipment which has the capacity – (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Given the lack of clarity in the statutory language, courts have grappled with whether “a random or sequential number generator” must be used to only “store” the numbers, or only to “produce” the numbers, or to “dial” the numbers after having “randomly or sequentially” generated or produced them. Further complicating court interpretations is the FCC’s interpretations stating that a dialing system known as a “predictive...

Third Circuit Holds Solicitations to Purchase Products and for Participation in Surveys can be Advertisements Under the TCPA

On May 15, 2020, the Third Circuit in Fishbein v. Olson Research Group, Inc. held “that solicitations to buy products, goods, or services can be advertisements under the TCPA and that solicitations for participation in . . . surveys in exchange for [money] by the sender were for services within the TCPA” making such solicitations advertisements that fall within the TCPA’s ambit. This opinion comes just one year after the Third Circuit issued its precedential decision in Mauthe v. Optum, Inc., holding that, in order for a fax to be considered an advertisement under the TCPA, “there must be a nexus between the fax and the purchasing decision of an ultimate purchaser whether the recipient of the fax or a third party,” meaning that “the fax must promote goods or services to be bought or sold, and it should have profit as an aim.” The consolidated appeal in Fishbein arose from two District Court decisions, Fishbein v. Olson Research Group, Inc., which involved a fax offering the recipient money in exchange for participating in a medical study, and Mauthe v. ITC, Inc., which involved faxes that offered the recipient money in exchange for completing surveys. After applying the Third Circuit’s precedential opinion in Optum, the District Courts dismissed the plaintiffs’ cases under Federal Rule of...

Second Circuit Affirms Expansive Reach of Preemption Provision of Food Drug and Cosmetic Act, Defeating False Labeling Class Action Premised Upon Consumer Protection Statutes

On May 11, 2020, the Second Circuit in Critcher v. L’Oréal USA, Inc., affirmed the dismissal of a putative class action, holding that the broad preemption clause of the Food Drug and Cosmetic Act (“FDCA”), 21 U.S.C. § 379s, barred plaintiffs from seeking to impose additional or different labeling requirements through their state consumer protection law claims, where Congress and the FDA already had provided for specific labeling requirements. In Critcher, purchasers of the defendant’s “liquid cosmetics” products claimed that while the net-quantities on the products’ labels were accurate, the product packaging was misleading because it omitted critical information that the creams could not be fully dispensed from the containers. Because they could not utilize the represented quantity of product, the plaintiffs claimed that they were deceived into buying more of the cosmetics than they could use. The District Court dismissed the complaint, concluding, among other things, that the claims were expressly preempted by the FDCA, and alternatively, preempted by the Federal Packaging Labeling Act (FPLA), 15 U.S.C. § 1451, et seq. On appeal, the plaintiffs argued that mere compliance with that net quantity disclosure requirement was not enough because it had the effect of making the packaging misleading in that a consumer would think the amount identified on the label is the amount accessible....

Does “100% Natural” Mean “No GMOs”? First Circuit Holds That Deceptive Label Claim Not Barred Where FDA Leaves Question Unresolved

On May 7, 2020, the First Circuit in Lee v. Conagra Brands, Inc., reversed the dismissal of a consumer fraud class action on the ground that the complaint plausibly stated that the product’s “100% Natural” statement may be deceptive to a consumer where the product contains genetically modified organisms (GMOs). In Lee, the plaintiff claimed that a “100% Natural” representation on the product label for Wesson Oil enticed her to buy the product because it indicated to her that the oil was GMO-free, when in fact it was not. She filed a class action alleging unfair or deceptive trade practices in violation of the Massachusetts consumer fraud law, Chapter 93A. The district court granted Conagra’s motion to dismiss, finding that the “100% Natural” language was “consistent with the FDA’s longstanding policy for the use of the term ‘natural’ on the labels of human food.” Additionally, the district court held that the FDA does not require a product to disclose on its label the use of GMOs. An act or practice violates Chapter 93A if it is “either unfair or deceptive.” The First Circuit’s decision addressed only the “deceptive” prong as plaintiff failed to raise, and thus waived, any argument that the label was “unfair.” Noting that its “analysis begins and ends with the allegations in...

Third Circuit Reverses Class Certification in In re Lamictal Direct Purchaser & Antitrust Consumer Litig.; Next up, In re Suboxone

On April 22, 2020, the Third Circuit in In re Lamictal Direct Purchaser & Antitrust Consumer Litig., reversed class certification, concluding that the evidence did not establish that common proofs could be used to prove class-wide injury. The circuit court faulted the district court’s predominance analysis for failing to resolve factual disputes, weigh competing expert evidence, and make a prediction as to how these issues would play out at trial. Central to the ruling was the issue of antitrust impact. After brand and generic pharmaceutical manufacturers of the prescription drug Lamictal, or generic lamotrigine, settled a patent litigation, direct purchasers of these drugs sued claiming the settlement violated the antitrust laws as an impermissible “reverse payment agreement.” The brand manufacturer was alleged to have “paid” the generic to stay out of the market by promising not to launch an authorized generic (“AG”). The direct payor plaintiffs argued that they paid more for the drugs than they would have otherwise based on the theory that, on average, the price of a generic is lower when there are two generics rather than just one. The Third Circuit granted the manufacturer-defendants’ petition for leave to appeal under Rule 23(f). First, the Third Circuit rejected direct purchasers’ argument that certification was controlled by a comment in Tyson Foods v....

District of New Jersey Further Clarifies TCPA’s Reach For Text-Marketing Campaigns

In a recent decision, Chief Judge Freda L. Wolfson of the District of New Jersey further clarified the reach of the Telephone Consumer Protection Act (TCPA) as it relates to certain text marketing campaigns by businesses. In Eisenband v. Pine Belt Automotive d/b/a Pine Belt Nissan, Eisenband filed a putative class action lawsuit against an automotive dealership, Pine Belt, claiming that Pine Belt had violated the TCPA by using an Automated Telephone Dialing System (ATDS), otherwise known as an autodialer, to send a text message to his cell phone. Eisenband had telephoned Pine Belt in 2017 requesting information about the cost of leasing a specific vehicle and instructed Pine Belt to call him back on his cell phone with the requested pricing information. Pine Belt’s sales representative obtained the cost estimate data and returned the call, as requested, but Eisenband decided not to enter into a lease for the vehicle. A few days later, Pine Belt sent Eisenband a promotional text message concerning lease options on other vehicles, which prompted him, about one week later, to file a class action lawsuit seeking statutory damages of up to $1,500 per text message, for himself and for every person in the putative class who received such text messages. Discovery revealed that Pine Belt had sent the text...

Guidance for Consumer Product Manufacturers, Distributors, and Sellers

Wide-ranging issues are arising in the aftermath of the COVID-19 crisis and will continue to impact our clients in a growing number of ways. The Gibbons Consumer Class Action Defense Team is here to help and can work with you to address these critical concerns. Communication with consumers is critically important for consumer product manufacturers, distributors, and sellers, whether in the form of product labeling, advertising, or direct communications through telephone, text, and email. These communications are fraught with class action hazards that should be addressed in advance. Particularly in our present environment, product statements or advertising that, for example, promote the ability to stave off infection, increase the body’s immune system functions, or disinfect surfaces, may become subject to challenge in class action lawsuits by entrepreneurial class action attorneys. Sellers that contact their customers using text messaging platforms or dialing systems need to be particularly wary given the proliferation of TCPA class actions which cause great harm to small and large business alike. Also, companies seeking to recoup losses may over-aggressively promote their own products in a manner that is illegal and anti-competitive. Franchisors and franchisees may be faced with economic circumstances that make their current arrangements impractical. If you have any questions or would like more information about potential class actions in connection...

Supreme Court Further Restricts Class Arbitration Finding It Must be Unambiguously Authorized

In a 5-4 decision authored by Chief Justice Roberts, joined by Justices Thomas, Alito, Gorsuch, and Kavanaugh, the U.S. Supreme Court in Lamps Plus Inc. v. Varella held that courts may not infer from an ambiguous agreement that parties have consented to arbitrate on a classwide basis. Lamps Plus Inc. v. Varella involved an employee who had filed a class action against his employer. Lamps Plus responded by seeking to compel arbitration on an individual rather than a classwide basis. The district court dismissed the case and compelled arbitration, but on a class basis. Lamps Plus appealed, and the Ninth Circuit upheld the district court’s decision. The Ninth Circuit’s reasoning hinged on the fact that the arbitration agreement was ambiguous about the availability of class arbitration. The Ninth Circuit thus distinguished Stolt-Nielsen S. A. v. AnimalFeeds Int’l Corp., 559 U. S. 662 (2010), arguing that in Stolt-Nielsen the parties had stipulated that the agreement was silent about class arbitration, whereas the parties had no such stipulation in Lamps Plus. Because the Ninth Circuit held that the agreement was ambiguous, the appellate court turned to California’s contra proferentem rule and held that this state law contract principle required the court to interpret the ambiguous language against the drafter—here, Lamps Plus. The Supreme Court reversed because the principle...

Accepting the Risks of Arbitration Clauses: The Southern District of New York Upholds Arbitrator’s Decision Allowing Class-Wide Arbitration

On January 2, 2019, the Southern District of New York (SDNY) in Wells Fargo Advisors LLC v. Tucker, declined to vacate an arbitrator’s clause construction award, which construed the parties’ arbitration agreement as permitting class-wide arbitration. Importantly, prior decisions from the SDNY and Second Circuit concluded the parties’ arbitration agreement clearly and unmistakably expressed the parties’ intent that an arbitrator should decide the gateway issue of whether the agreement permitted class arbitration. Having delegated that authority to the arbitrator, the District Court found no basis in law to overturn that clause construction award. The two prior decisions in this matter, addressing the issue of who should decide whether an agreement permits class arbitration, align well with the United States Supreme Court’s January 9, 2019 holding in Henry Schein, Inc. v. Archer & White Sales, Inc. There—resolving a circuit split—the High Court held that when the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract, and possesses no power to decide the arbitrability issue, even if the court believes the argument that the arbitration agreement applies to a particular dispute is “wholly groundless.” The clause construction award in Wells Fargo Advisors LLC arose out of a claim by Wells Fargo financial advisors that Wells Fargo, through policy, did not...