Lesson: Match Your Class Definition to the Advertising Campaign

Posted on June 29, 2010 by Robert Drexler

On June 17, 2010, the California Supreme Court denied the petition for review and request for depublication in Pfizer, Inc. v. Superior Court, 182 Cal. App. 4th 622 (2d Dist., 2010). Accordingly, this important post-Tobacco II appellate opinion remains good authority.  Pfizer provides a cautionary tale of attempting to certify too broad a class. The lesson here is to tailor your proposed class definition to the scope and manner in which the alleged misrepresentations were made. 

In Pfizer, a consumer sued a mouthwash manufacturer pursuant to the unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.) and the false advertising law (Bus. & Prof. Code, § 17500 et seq.). The consumer alleged the manufacturer marketed its mouthwash in a misleading manner by representing the use of mouthwash could replace the use of dental floss in reducing plaque and gingivitis.

The trial court certified a class of "all persons who purchased Listerine, in California, from June 2004 through January 7, 2005." The Court of Appeal granted Pfizer's petition for writ of mandate, concluding the trial court's class definition was overbroad. The Supreme Court granted review. On August 19, 2009, the Supreme Court transferred the matter back to the Court of Appeal with directions to vacate the decision and reconsider the matter in light of In re Tobacco II Cases (2009) 46 Cal.4th 298 [93 Cal.Rptr.3d 559, 207 P.3d 20] (Tobacco II). Having done so, The Court of Appeal again concluded the class definition is overbroad and granted Pfizer's petition.  

In reaching its decision, the Court of Appeal noted that with respect to the remedy of restitutionary disgorgement, Tobacco II holds:

"[T]he language of section 17203 with respect to those entitled to restitution--'to restore to any person in interest any money or property, real or personal, which may have been acquired' (italics added) by means of the unfair practice--is patently less stringent than the standing requirement for the class representative--'a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.' (§ 17204, italics added.) This language, construed in light of the 'concern that wrongdoers not retain the benefits of their misconduct' [citation] has led courts repeatedly and consistently to hold that relief under the UCL is available without individualized proof of deception, reliance and injury. [***16] [Citations.]" (Tobacco II, supra, 46 Cal.4th at p. 320.)”

Nevertheless, the Court of Appeal found the class definition too broad because it included persons who were not entitled to restitution because they were never exposed to the “effective as floss’ representation. The appellate court wrote:

“Be that as it may, one who was not exposed to the alleged misrepresentations and therefore could not possibly have lost money or property as a result of the unfair competition is not entitled to restitution. Here, the class certified by the trial court, i.e., all purchasers of Listerine in California during a six-month period, is grossly overbroad because many class members, if not most, clearly are not entitled to restitutionary disgorgement. The record reflects that of 34 different Listerine mouthwash bottles, 19 never included any label that made any statement [*632] comparing Listerine mouthwash to floss. Further, even as to those flavors and sizes of Listerine mouthwash bottles to which Pfizer did affix the labels which are at issue herein, not every bottle shipped between June 2004 and January 2005 bore such a label. Also, although Pfizer ran four different television commercials with the "as effective as floss" campaign, the commercials did not run continuously and there is no evidence that a majority of Listerine consumers viewed any of those commercials. Thus, perhaps the majority of class members who purchased Listerine during [***17] the pertinent six-month period did so not because of any exposure to Pfizer's allegedly deceptive conduct, but rather, because they were brand-loyal customers or for other reasons.”

The Court contrasted the limited six-month Listerine marketing scheme with the extensive and lengthy campaign used by the tobacco industry to sell cigarettes.

“The circumstances herein stand in stark contrast to those in Tobacco II, where the tobacco industry defendants allegedly violated the UCL "by conducting a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease." (Tobacco II, supra, 46 Cal.4th at p. 306.) Tobacco II allows a class representative who actually relied on the defendants' misleading advertising campaign to represent other class members who may have lost money by means of the unfair practice. Tobacco II does not stand for the proposition that a consumer who was never exposed to an alleged false or misleading advertising or promotional campaign is entitled to restitution.”

“As Pfizer argues, it is one thing to say that restitution can be awarded to purchasers of cigarettes where the cigarettes were marketed as part of a massive, sustained, decades-long fraudulent advertising campaign on the grounds the tobacco industry defendants "may have ... acquired" [***18] (§ 17203) the purchase price as a [**804] result of such a pervasive fraudulent campaign. It is entirely another to say that restitution can be awarded to all purchasers of Listerine in California over a six-month period where the undisputed evidence shows many, if not most, class members were not exposed to the "as effective as floss" campaign and therefore did not purchase Listerine because of it.”

In other words, large numbers of persons in the class defined by the trial court were never exposed to the “effective as floss” representations and, accordingly, there is zero likelihood they were deceived by the claimed misrepresentation or that Pfizer obtained money from them by the alleged UCL violation. Had the class definition been limited to persons exposed to the “effective as floss” representation (as opposed to all purchasers) the definition might have withstood appellate scrutiny
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Can Class Certification Be "Preemptively" Denied?

Posted on January 18, 2010 by Abi Gnanadesigan

A recent decision in Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, (9th Cir. 2009) provides defendants an important tool in the battle for class certification; the ability to set the timeline in class cases and preemptively move to deny class certification. The general scheme in class action lawsuits is well-known: plaintiffs move for class certification, and in doing so, have the right to put the class certification issue before the court. Defendants, in turn, then oppose. The Ninth Circuit in Vinole turned this general practice upside down by deeming a preemptive motion to deny certification proper under Federal Rule of Civil Procedure 23.

Rule 23(c)(1)(A) discusses the time limitations for a court’s determination of class certification. Rule 23 specifically states, “Time to Issue: At an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action.” The Ninth Circuit held that the literal language of Rule 23 does not preclude defendants from seeking resolution of the class certification issue early in the case, and before plaintiffs have the opportunity to confront the issue. In Vinole, the motion to deny class certification was brought ten months after the filing of the lawsuit.

Plaintiffs, in opposing defendant’s tactics, attempted to argue that the preemptive motion to deny class certification was not only per se improper because it preceded the motion for class certification, but also because it was filed prior to discovery and pretrial motion cutoff dates. The court of appeals rejected plaintiffs argument, reasoning that plaintiffs had adequate time to conduct class related discovery and that the district court did not abuse its discretion by considering the issue of certification before the pretrial motion deadline. 

Although the court deemed defendant’s preemptive motion to deny class certification proper in Vinole, there are undoubtedly times when such motions should be denied. For example, and as the Ninth Circuit discusses, had plaintiffs shown the need for additional discovery, defendant’s motion would have been denied as premature. Plaintiffs should not make the mistake of relying on a “per se improper” argument as plaintiffs did in Vinole, and should instead be prepared to make a showing of why additional time is needed when confronting a motion to deny class certification. 

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Class Action Waivers - Big Business' Attempts to Get Away with Fraudulent Behavior

Posted on August 3, 2009 by Bevin Allen

In a creative attempt to avoid class action litigation, big companies have been including class action waivers in the arbitration clauses of their agreements. These companies include these class action waivers in the multitude of fine print that they send their clients (think of those long agreements you get every time you apply for a new service, loan, or account). 

For years, we have seen arbitration clauses in these contracts – requiring all disputes to be settled in arbitration and not before a court or a jury. Most recently, these contracts have included a “class action waiver” in the arbitration clause which state that consumers may only arbitrate claims individually, not in a representative capacity or on behalf of the general public. Basically, these companies are trying to avoid liability by requiring individual claims, claims that they know are often too small to justify individual arbitration (and the costs associated with it). 

California law states that class action waivers in consumer contracts may be unenforceable, especially where they violate public policy (such as including the waiver in that multitude of fine print). Discover Bank v. Superior Court (Boehr) 36 Cal.4th 148, 158-160 (2005). The Supreme Judicial Court of Massachusetts recently became another state to agree with California’s holding, and held that arbitration clauses precluding class action lawsuits were contrary to the fundamental public policy of Massachusetts favoring consumer class actions. Feeney v. Dell, Inc., 454 Mass. 192, 205 (Mass. 2009) (“Allowing companies that do business in Massachusetts, with its strong commitment to consumer protection legislation, to insulate themselves from small value consumer claims creates the potential for countless customers to be without an effective method to vindicate their statutory rights, a result clearly at odds with our public policy.”)

What does this mean for you? Most significantly, it means a growing number of states are seeing through big businesses’ attempts to escape liability for their wrongs. If these waivers were deemed acceptable, it would effectively get rid of the class action procedure. All companies would include these waivers in their contracts, and the class action mechanism may die out. 

While you may not think that class actions are that helpful, think again. For example, when a credit card company receives a customer’s payment on time, but still charges that customer a late payment penalty, it is unlikely that any one individual would file a lawsuit or an arbitration claim for a late payment penalty of under $50. It’s also unlikely that a company would stop charging their thousands or millions of other customers that fee if only a few individuals filed a claim. The class action mechanism, however, provides an avenue to allow customers to stop the company’s practice of fraudulently charging these fines - not only to themselves but to all of the company’s customers. It’s a matter of principle in many instances, and making sure that the company doesn’t get away with these fraudulent practices. As more states hold that class action waivers are unenforceable, consumers’ rights are protected. 

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