Consumer Law & Policy Blog

Texas Supreme Court: Putting the Squeeze on Class Actions?

by Steve Gardner

  Last Thursday, the Texas Supreme Court drove another nail in the class action coffin.

Justifiably, Texas is now considered by most class action lawyers (on both sides of the aisle) to be the state most hostile to class actions. One judge commented to the author, “I don’t know why anyone would bring a class action in state court in Texas because as far as I can tell, the Texas Supreme Court has abolished class actions — it just hasn’t said so.”

In Citizens Insurance Company of America v. Daccach, --- S.W.3d ----, 2007 WL 623799 (Tex. Mar. 2, 2007), Texas's High Court tightened the class action noose a bit further.  (Citations to the opinion will use Westlaw star system, e.g., “Daccach *8”.)

But, first, some history.  Starting at the beginning of this Millennium, the court has repeatedly applied excessively strict criteria to various aspects of class action litigation, running the gamut from making it almost impossible to bring a class action when reliance might be at issue, Schein v. Stromboe, 102 S.W.3d 675, 695 (Tex. 2002), to requiring a detailed trial plan.  Southwestern Refining Co., Inc. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000). The court has faulted trial plans that did not contain a rigorous analysis of (1) all causes of action, (2) how those claims will be tried, (3) every controlling substantive issue, (4) whether or how individual issues related to limitations will be determined, (5) how it would dispose of issues of reliance, (6) how it would try damages, both actual and punitive, (7) why individual issues did not predominate, and (8) why a class action is superior to other methods of resolving the dispute. State Farm Mutual Automobile Ins. Co. v. Lopez, 156 S.W.3d 550, 557 (Tex. 2004) [first three points]; Nat’l Western Life Ins. Co. v. Rowe, 164 S.W.3d 389 (Tex. 2005) [remaining points].

Fourth Circuit on Fees for TILA Litigation

by Allison Zieve

Last week, the Fourth Circuit issued a decision upholding an award of attorney fees in a Truth in Lending Act (TILA) case, Nigh v. Koons Buick. Two aspects of the decision are noteworthy.

First, although Mr. Nigh won the case, the amount of damages that he had originally been awarded ($24,192) was reduced by the Supreme Court in 2004. The Court held that TILA capped damages at $1,000.  On remand, the district court had affirmed its prior attorney fee award and also awarded Mr. Nigh attorney fees for work done on the successful appeal and the unsuccessful trip to the Supreme Court.  In its February 21 decision, the Fourth Circuit upheld the fee award in its entirety. The appellate court explained that TILA requires a fee award to an person who brings a "successful action" and that Mr. Nigh’s action was successful (he proved a TILA violation). Although the fee covered work for parts of the case as to which Mr. Nigh was unsuccessful, the appellate court held that the district court did not abuse its discretion and that the amount of the award was reasonable.

Second, the court strongly rejected Koons Buick’s argument that Mr. Nigh’s degree of success—as measured by $1,000 in statutory damages—did not merit a full fee award. The court wrote that Mr. Nigh had received not minimal damages, but the statutory maximum. "Koons contention that this recovery is somehow de minimis betrays a profound misunderstanding of either the expression or the facts of the case."  Nicely put.

[Disclosure: I was co-counsel for Mr. Nigh in the Supreme Court proceedings but have not been involved in the fee proceedings on remand.]

New Ninth Circuit CAFA Ruling on Burden of Proof

By Brian Wolfman

In Serrano v. 100 Connect, Inc., No. 06-17366 (Feb. 22, 2007), the Ninth Circuit has held that in assessing whether a federal district court should or must decline jurisdiction under the "exceptions" to jurisdiction of the Class Action Fairness Act, the burden is on the party resisting a federal forum to show that jurisdiction is lacking. Three other circuits had earlier come to the same conclusion.

As I discussed in an an earlier post, under CAFA, some cases just don’t meet CAFA’s basic jurisdictional requirements: $5 million in controversy, 100 class members, and minimal diversity. 28 U.S.C. 1332(d)(2), (d)(5)(B). Then there are 28 U.S.C. 1332(d)(3) and (d)(4), the supposed "exceptions" to jurisdiction.  Both have been called exceptions because they allow for remand or dismissal even where the basic prerequisites have been met.  Under (d)(3), the court "may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction" based on an evaluation of six factors.  Subsection (d)(4) sets out circumstances in which a district court "shall decline" to exercise jurisdiction. The circumstances in which this category is triggered are complicated and not worth exploring in detail here, but they focus on controversies that are highly localized. To me, the (d)(4) category does not comprise an "exception" to CAFA; it’s just a further, albeit unusual, limit on jurisdiction akin to the $5 million, 100-class-member, and minimal diversity limits.

California Supreme Court Issues Major Tobacco Ruling

by Brian Wolfman   

Yesterday, the California Supreme Court issued its decision in Grisham v. Philip Morris U.S.A., Inc., No. S132772 (12/15/07).  Answering certified questions from the U.S. Court of Appeals for the Ninth Circuit, the court held that the statute of limitations for tobacco physical-injury cases runs from when the plaintiff 's physical injuries were, or reasonably could have been, discovered.  The decision is a very important victory for California tobacco plaintiffs, who previously were effectively barred, at least in federal court actions.  That's because, in 2002, the Ninth Circuit, construing California law, had held that the statute of limitations runs from the date the plaintiff knew or should have known that she was addicted to tobacco.  The San Francisco Chronicle reports on the unanimous decison here.

New Jersey Supreme Court Issues Important FDCPA Decision

    By Brian Wolfman

    In Hodges v. Feinstein, Raiss, Kelin & Booker LLC, No. A-113 (1/31/07), the New Jersey Supreme Court held, by a vote of 4 to 2, that lawyers who regularly file summary dispossess (eviction) proceedings are “debt collectors” subject to the Fair Debt Collection Practices Act.  The majority opinion is worth reading for a number of reasons.  The key holding rejected the defendant law firm’s argument that the firm was not an FDCPA “debt collector” because “the sole remedy available in a summary dispossess proceeding is possession, not money damages.”  The court agreed that possession was the sole statutory remedy, but responded by relying, of all things, on reality: “We do not question the legislative intent to provide landlords a remedy of expedited possession. However, in practice, the summary dispossess action is also a powerful debt collection mechanism.”  Two justices dissented, agreeing with the law firm that because the only remedy sought was possession, the firm was not a “debt collector” under the FDCPA.

First Circuit Holds That Class Actions Are Unavailable For TILA Rescission Claims

    By Brian Wolfman

     As many of you know, rescission can be an important remedy in Truth in Lending Act cases.  Well, according to the First Circuit, not all that important.  In McKenna v. First Horizon Home Loan Corp., No. 06-8018 (1/29/07), the First Circuit has held that a class action is never available for litigating rescission claims under TILA on the ground "that Congress did not intend rescission suits to receive class-action treatment."  In reaching this conclusion, the First Circuit followed a Fifth Circuit ruling to the same effect, but rejected various district court rulings certifying TILA rescission claims.  The First Circuit also held that the plaintiffs' rescission claims could not go forward as a class action under the Massachusetts version of TILA, the Massachusetts Consumer Credit Cost Disclosure Act (MCCCDA), on the ground that the MCCCDA is to be interpreted the same as TILA.  One wonders whether the Massachusetts courts will see it the same way.

    If you really want to understand the opinion, you will have to read it with a dictionary by your side.  The opinion was written by the Honorable Bruce M. Selya and, thus, uses obscure or archaic words where ordinary words would have worked just fine.  Actually, I have never heard of one word used in the opinion, which I did not bother looking up, so it is possible that an ordinary word would have not worked there.  Happy reading!

CSPI Sues Coke and Nestle Over Claims That Their Diet Soda Helps Achieve Weight Loss

   

The Center for Science in the Public Interest sued Coca-Cola and Nestlé today in federal court in New Jersey.  CSPI says that the companies are fraudulently claiming that their new, artificially sweetened green tea soft drink, Enviga, helps consumers lose weight.   The companies assert that the drink is a “calorie burner” that “keep[s] those extra calories from building up.”   CSPI counters that its scientists have reviewed studies cited by Coke and Nestlé and have determined that Enviga is "exactly the kind of faddy, phony diet aid it claims not to be."

    CSPI's press release on the case is available here.  The complaint in the lawsuit is available here.

Exxon Valdez Oil Spill Litigation: Exxon Seeks Rehearing En Banc

    An earlier post discussed the Ninth Circuit's December 22 decision halving the plaintiffs' punitive damages award in the long-running Exxon Valdez oil spill litigation.  The Ninth Circuit's $2.5 billion award was still far more than the $25 million Exxon claims is the maximum permissible award.  Last week, Exxon filed its petition for rehearing en banc, which you can read here.

CSPI’s Litigation Project Forces Change By Two Major Food Companies

By Steve Gardner

    Consumers can breathe, or at least eat, a little easier. This past week two major food companies stopped a deceptive practice — claiming that their drinks were “natural” when they were sweetened with high-fructose corn syrup (HFCS). Both companies acted after legal action by the DC-based nutrition and health advocacy group Center for Science in the Public Interest (CSPI).  I’m Litigation Director for CSPI.

    On Monday, January 8, CSPI sued Kraft Foods for claiming that Capri Sun drinks were “natural,” when in fact HFCS was the second ingredient after water. The company immediately announced that it was completely getting rid of the “natural” claim.  The same day, Kraft announced that it was getting rid of the “natural” claim.

    Then, on Friday, January 12, Cadbury Schweppes announced that it, too, would stop calling HFCS-filled 7UP “all natural.”  This announcement culminated several months of negotiations between Cadbury and CSPI.

U.S. Agrees: Tobacco Companies Aren't Federal Officers

by Deepak Gupta

Several months ago, I posted an overview of consumer cases with a reasonable chance of being granted for review by the U.S. Supreme Court.  Among them was Watson v. Philip Morris, a truly remarkable case in which the Eighth Circuit held that a tobacco company was entitled to remove a case to federal court under the federal officer removal statute--a statute designed to protect federal officers and employees.   The Justices will take up the matter at their private conference this Friday.

Watson may be one of those relatively rare cases in which a federal appellate court's decision on an important and recurring issue is so outrageously wrong that the Court concludes it can't be allowed to stand, regardless of how long the issue has percolated in the courts below.  The court's reasoning--that Philip Morris was heavily regulated by the Federal Trade Commission such that it was effectively "acting under" federal officials when it promoted and sold its "light cigarettes"--is simply indefensible.  Indeed, the absurdity of the decision is heightened when you consider that the federal government actually sued Philip Morris for the very same conduct that the Eighth Circuit concluded was carried out "under" federal direction.

Last May, the Supreme Court invited the Solicitor General to present the views of the United States. That's usually a very strong sign that the Court is interested in a case.  And in Watson, it was particularly welcome news becuase it was hard to see how the government could defend the decision.  Well, the SG's recently-filed amicus brief takes the view that the Eighth Circuit's decision was not only wrong, but fell "substantially wide of the mark."  The SG nevertheless recommends denying cert because a sufficient split of authority hasn't developed.