Tuesday, December 28, 2010

No certification in light cigarettes case

In re Light Cigarettes Marketing Sales Practices Litigation, --- F.Supp.2d ----, 2010 WL 4901785 (D. Me.)

Each side in this putative class action picked two jurisdictions under which to examine whether certification was appropriate, and ended up with classes of smokers of light cigarettes inCalifornia, Illinois, Maine, and the District of Columbia. The court found that common issues did not predominate and denied certification for all classes based on their consumer protection law and unjust enrichment claims.

The arguments most interesting to me concerned the idea that smokers of light cigarettes unconsciously compensate for the lightness by smoking more heavily in various ways. Because this is an unconscious response, plaintiffs argued, individual testimony about conscious decisions to smoke would be unhelpful and even misleading. Defendants countered that not every light cigarette smoker fully compensated (for example, people who never smoked regular cigarettes would have nothing to compensate for).

Eleven of 13 previous class actions on behalf of purchasers of light cigarettes failed to get certification, while two succeeded. The courts in the majority emphasized differences among smokers, including their beliefs about health risks and motivations for smoking, concluding that these individual issues defeated commonality, typicality, predominance of common issues, and superiority of class treatment.

The court found typicality, and also rejected a challenge to adequacy that the class representatives waived potentially more lucrative personal injury claims on behalf of certain absent class members. But the causes of action here allege economic injury, not physical harm; future claims for personal injury would remain available in individual cases (and likely couldn’t be treated on a class basis anyway).

The problem was predominance. The court found that the fact of damage would require an individual inquiry: how much smokers compensate when smoking light cigarettes varies, and has to be assessed individually. “If smokers did not fully compensate, they were not injured by the misrepresentations because they received lower levels of tar and nicotine.” There was also significant record evidence that many smokers didn’t believe defendants’ lower tar and nicotine claims and smoked light cigarettes for other reasons, including flavor. Given this, it was inappropriate to infer damage or reliance. Nor was it unjust for defendants to retain money from purchasers who didn’t believe their misrepresentations when purchasing, didn’t purchase because of their misrepresentations, or received the benefit promised.

California’s UCL requires class representatives to prove injury and reliance but excuses the requirement for class members. Thus, the economic harm the law is designed to prevent and redress is “deception in the marketplace.” But Article III standing limits the jurisdiction of federal courts, requiring plaintiffs to have suffered an injury in fact. Though class members ened not make individual showings of standing, federal courts can’t certify a class that contains members lacking Article III standing. “Here, the proposed classes include class members without standing. Each state's class effectively includes everyone who purchased light cigarettes in the respective limitations periods, and this group necessarily includes class members who knew light cigarettes were not healthier than other cigarettes, notwithstanding Defendants’ alleged representations to the contrary. Those class members were not injured by the Defendants' misconduct and thus do not have standing. Furthermore, in view of the proliferation of information decrying the health risks of all cigarettes, there is no telling how many potential class members are similarly situated.”

The court considered another argument: by treating purchase of a misrepresented product as injury, state legislatures have created a legal right that confers standing. Statutes may create legal rights, the invasion of which creates standing. But the state statutes at issue here “purport to excuse injury, not redefine it”—they apply whether or not any consumer is in fact misled, deceived, or damaged thereby. This is not redefining injury but eliminating it as an element. (Compare Greenwood v. Compucredit Corporation, 2010 WL 4807095 (N.D. Cal.), discussed yesterday.)

Even assuming that California (and Washington, DC) recognize an injury for having been exposed to misrepresentations, plaintiffs still needed to prove that each class member bought a misrepresented product, but they couldn’t prove that misrepresentations were made to each class member.

The court also held that the available affirmative defenses, which couldn’t be decided on a class-wide basis, weighed against certification. The statute of limitation and the voluntary payment doctrine were individual inquiries. “Certain class members may have actually known the truth about light cigarettes well before other class members reasonably should have known it,” and whether an individual class member should have known of the misrepresentation would vary by age, level of sophistication, and other specific circumstances. Individual issues surrounding damages further undermined the superiority of class certification, because class members would find it difficult to prove how many cigarettes they bought.

Plaintiff’s claim for injunctive relief barring false or misleading terms such as “light” was moot because of the 2009 Family Smoking Prevention and Tobacco Control Act, which prohibits descriptors that imply a tobacco product is "less harmful" than other tobacco products or has a "reduced level [,] ... presents a reduced exposure to[,] ... or is free of a substance" unless specifically approved by the government. This was broader than the relief plaintiffs sought.

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