Gibbons Law Alert

Gibbons Law Alert

Gibbons Law Alert

Category: Class Action Defense

Federal Preemption of ‘Structure/Function’ Claims on Dietary Supplements

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Posted in Class Action Defense

On December 14, 2020

Congress amended the Federal Food, Drug, and Cosmetic Act (FDCA) with the Nutrition Labeling and Education Act (NLEA) in 1990 and, in 1994, with the Dietary Supplement Health and Education Act (DSHEA), which provided the Food and Drug Administration (FDA) with regulatory authority over dietary supplements and specifically established “standards with respect to dietary supplements.” Together, the NLEA and DSHEA established “a new category of food products—specifically, dietary supplements—that have unique safety, labeling, manufacturing, and other related standards.” Kroessler v. CVS Health Corp., 977 F.3d 803, 808 (9th Cir. 2020). With Congress finding consumers “should be empowered to make choices” about potential benefits of dietary supplements, DSHEA implemented major shifts in dietary supplement regulation, including exempting “dietary supplements” from FDA drug approval and FDA food additive approval, 21 U.S.C. §321(g)(1), and expressly permitting dietary supplement labels to make “structure/function claims.” 21 U.S.C. §343(r)(6)(A). By definition, a structure/function claim “describes the role of a nutrient or dietary ingredient intended to affect the structure or function in humans [or] characterizes the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function.” Id. at §343(r)(6). Federal law allows such label claims, provided: (1) the manufacturer “has substantiation that such statement is truthful and not misleading”; (2) the label contains a prominent disclaimer that the statement...

Sixth Circuit Holds Faxes Seeking Recipient’s Information Are a Pretext to Advertisement and Thus Within the Purview of the TCPA

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Posted in Class Action Defense

On October 26, 2020

The Sixth Circuit in Matthew N. Fulton, D.D.S., P.C. v. Enclarity, Inc., on remand from the Supreme Court, upheld its previous ruling that faxes seeking the recipient’s information are considered a “pretext” to an advertisement, and thus fall within the scope of the Telephone Consumer Protection Act (TCPA). The June 19, 2020 decision relies upon a 2006 Federal Communications Commission (FCC) Order stating that “any surveys that serve as a pretext to an advertisement are subject to the TCPA’s facsimile advertising rules.” The fax requested that the recipient verify or update its information with Defendant LexisNexis “for clinical summaries, prescription renewals, and other sensitive communications.” Plaintiff’s Complaint alleged that this constituted a pretext to send additional marketing materials to recipients, as well as obtain the recipient’s involvement in Defendant LexisNexis’s database. Plaintiff asserted that Defendants and third parties would use the recipient’s data to send information “regarding products, services, competitions, and promotions,” thereby constituting “a pretext to increase awareness and use of Defendants’ proprietary database service and increase traffic to Defendants’ website.” Defendants moved to dismiss, arguing that the fax did not constitute an advertisement as defined by the TCPA. The Michigan district court dismissed, finding that since the fax did not state that anything was available for purchase or sale, it “lack[ed] the commercial...

New Jersey Supreme Court Holds That CFA and PLA Claims Can Be Pleaded in the Same Action

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Posted in Class Action Defense

On October 21, 2020

In a recent decision answering a question certified to it by the Third Circuit, the New Jersey Supreme Court held that claims brought under New Jersey’s Consumer Fraud Act (CFA) may be brought in the same action as claims brought pursuant to the Products Liability Act (PLA), provided each claim is based on distinct conduct. In Sun Chemical Corporation v. Fike Corporation and Suppression Systems, Inc., the Court explained that it is the nature of the actions—not the resulting damages—that determines when claims may be brought under either the CFA or the PLA. The Court clarified that CFA claims may be brought in instances where a party alleges “express misrepresentations — deceptive, fraudulent, misleading, and other unconscionable commercial practices,” while PLA claims are reserved for claims based upon “product manufacturing, warning, or design defects.” The claims in Sun Chemical arose out of the plaintiff’s purchase of an explosion isolation and suppression system from the defendant to be used to “prevent and contain potential explosions” in the plaintiff’s new dust collection system. Plaintiff’s federal court complaint alleged that on the first day it used the suppression system, a fire broke out in the dust collection system and while the alarm in the suppression system was activated, it was inaudible. Plaintiff alleged that, as a result, several...

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

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Posted in Class Action Defense

On October 19, 2020

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...

Second Circuit Holds Injunctive Class of Past Purchasers Not Certifiable Under Rule 23(b)(2)

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Posted in Class Action Defense

On September 18, 2020

The Second Circuit recently resolved a conflict among district courts, holding that past purchasers of a product are ineligible for class certification under Rule 23(b)(2) because not all class members would benefit from injunctive relief. Specifically, explained the Court, it is unlikely a purchaser will buy the allegedly deceptive product again, and if they do, they do so with the knowledge of the alleged deception. In Berni v. Barilla S.p.A., plaintiffs initiated a class action alleging that defendant intentionally sold its pasta in misleading boxes that concealed non-functional “slack-fill,” i.e., excessive empty space in the box. The parties reached a settlement, agreeing that defendant would include a minimum “fill-line” on its boxes, to indicate how much pasta was in the container, and a disclaimer that the pasta is sold by weight and not by volume. Neither party challenged the settlement; however, an absent class member objected, arguing that the group of past purchasers could not be certified under Rule 23(b)(2) because past purchasers were ineligible for injunctive relief. The district court disagreed and certified the injunctive class and approved the settlement. The objector appealed. The Circuit Court vacated the district court’s order granting approval of the settlement class, reasoning that injunctive relief was not proper for the group of past purchasers and, thus, the group...

Third Circuit Reverses Denial of Class Certification: Holds Ascertainability Satisfied Even with Gaps in Records

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Posted in Class Action Defense

On September 17, 2020

On September 9, 2020, a split panel of the Third Circuit issued a precedential opinion in Hargrove v. Sleepy’s LLC, reversing the denial of class certification because the district court “misapplied” the Circuit’s ascertainability case law and was “too exacting” when it “essentially demanded” that plaintiffs identify the class members at the certification stage. The circuit court also determined that the district court erroneously applied the motion-for-reconsideration standard to plaintiffs’ renewed motion for class certification, and held that courts should apply “the usual Rule 23 standard.” In Hargrove, the plaintiffs, delivery drivers, brought an employee misclassification suit alleging that defendant misclassified them as independent contractors, rather than employees, and thus violated several New Jersey labor laws. The district court denied class certification, twice, on the ground that the ascertainability requirement was not satisfied. In denying plaintiffs’ renewed motion for certification, the Court held that plaintiffs’ proposed class was “not ascertainable because the records kept by Sleepy’s regarding the identity of the drivers lacked critical information.” The plaintiffs sought leave to appeal pursuant to Rule 23(f), and the Third Circuit granted their request. First, the circuit court addressed the split among the district courts, both in and out of the Third Circuit, on the issue of the standard that applies to renewed motions for class certification....

Supreme Court to Finally Decide Definition of Autodialer in TCPA Litigation

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Posted in Class Action Defense

On August 11, 2020

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 Affirms Class Certification in In re Suboxone Antirust Litigation

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Posted in Class Action Defense

On August 10, 2020

On July 28, 2020, the Third Circuit in In re Suboxone (Buprenorphine Hydrochloride & Nalaxone) Antitrust Litigation, affirmed certification of a direct purchaser class, concluding that common evidence existed to prove the plaintiffs’ antitrust theory and resulting injury and that the proposed class representative, Burlington Drug Company, Inc., was an adequate class representative. The direct-purchaser plaintiffs alleged that the defendant drug manufacturer of the opioid-treatment drug, Suboxone, engaged in anticompetitive conduct that impeded the entry of generic versions of the drug into the market. Specifically, plaintiffs asserted that defendant “shifted the market” from Suboxone tablets to Suboxone film by the time generic tablets entered the market, thereby maintaining a monopoly and suppressing competition. According to plaintiffs, the defendant’s transition from tablets to film was coupled with six tactics to “eliminate demand for Suboxone tablets and to coerce prescribers to prefer film,” including making false statements about the safety of the tablets and withdrawing brand-name Suboxone tablets from the market. The plaintiffs argued that due to defendant’s anticompetitive conduct, they paid more for brand Suboxone products than they would have for generic tablets. The district court certified the class, and the Third Circuit granted the defendant’s petition for leave to appeal under Rule 23(f). First, the Third Circuit addressed defendant’s argument that plaintiffs did not provide...

Supreme Court Severs TCPA’s Government Debt-Collection Exception as Content-Based Restriction on Free Speech, but Leaves Autodialer Restriction

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Posted in Class Action Defense

On July 16, 2020

The Supreme Court of the United States recently analyzed the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, et seq., highlighting the importance of the Act’s ban on “robocalls,” (i.e., calls placed using an “automatic telephone dialing system” or “autodialer”), but leaving key questions unanswered. In Barr v. American Association of Political Consultants, Inc., the Court upheld the TCPA but severed Congress’s 2015 amendment that allowed entities to make robocalls to collect government-backed debt. Enacted in 1991, the TCPA generally prohibits robocalls to cell phones and home phones. At the heart of the Court’s opinion here was the decision whether to uphold Congress’s 2015 amendment which allowed an exception to the general ban on robocalls for entities collecting government-backed debt. The plaintiffs, organizations that participate in the political system, make calls to citizens for a multitude of purposes, such as discussing political issues, soliciting donations, and conducting polls. If robocalls to cellphones were allowed for political outreach, the plaintiffs believe that their efforts would be more effective and efficient. The plaintiffs filed a declaratory judgment action against the U.S. Attorney General and the Federal Communications Commission to invalidate the TCPA’s entire 1991 autodialer restriction, arguing that allowing certain entities to make robocalls to collect government-backed debt, but prohibiting other robocalls, was a content-based restriction...

New Jersey Supreme Court Holds That Individualized Proof of Damages Is Required Absent a Basis for Presumption of Class-Wide Damages Capable of Reliable Mathematical Calculation

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Posted in Class Action Defense

On July 2, 2020

In Little v. Kia Motors America, Inc., a litigation spanning nearly two decades, the New Jersey Supreme Court held that, although aggregate proof of damages can be appropriate in some settings, individualized proof of damages based on the actual costs incurred by the class members was required in the case before it. Class members had to show they incurred “actual costs” as a result of an alleged defect in order to recover damages. In 2001, plaintiff filed a putative class action asserting breach of warranty and other claims on her behalf and on behalf of other New Jersey owners and lessees of certain Kia models. Plaintiff alleged that the vehicles had a defective brake system which rendered the vehicles’ front brakes susceptible to premature wear. After a four-week trial, the jury returned a verdict in favor of plaintiff and the class on the class-wide warranty claim, awarding zero damages for alleged diminution-in-value but $750 per class member on the out-of-pocket loss theory, which had been premised on an expert’s estimate of the amount of money an average owner would pay for brake repairs over the vehicles’ lives as a result of the alleged defect. On defendant’s motion for a new trial and to decertify for purposes of repair damages, the trial court decertified the class...

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