Monday, October 28, 2019

Heart of darkness: hedonic regression damages model allows certification in flushable wipes case

Kurtz v. Kimberly-Clark Corp., --- F.Supp.3d ----, 2019 WL 5483510, Nos. 14-CV-1142, 14-CV-4090 (E.D.N.Y. Oct. 25, 2019)

Here, the consumer class action concerns allegedly false advertising of “flushable” wipes that have generated municipal lawsuits around the country. After remand to address concerns about whether plaintiffs can establish injury and causation with common evidence, the court reaffirmed its conclusion that plaintiffs’ damages model could provide common evidence of harm, based on hedonic regression analysis.

Without going into too much detail, hedonic regression was acceptable and defendants’ criticisms, while deserving of consideration, went to weight rather than admissibility. “Regressions should not be excluded on the ground that they fail to meet arbitrary thresholds of statistical significance. In the current case, there are high degrees of statistical significance and any dispute about economic conclusions goes to weight not admissibility.” Developing a hedonic regression is “an art,” as one of defendants’ experts said, and none of defendants’ experts developed their own hedonic regression from scratch; “their second-guessing of [the expert’s] choices in attempting to demonstrate that the methodology is unreliable is unpersuasive.”

Under Comcast Corporation v. Behrend, 569 U.S. 27 (2013), it was sufficient that the model measured the damages according to plaintiffs’ theory of the case: consumers paid more because of the flushable label. “Disagreement about … judgments in developing and performing the model, as well as disagreement about whether [the expert’s] judgment about extrapolation of the results of his model to certain time periods or products, are questions answerable by admitted evidence. [The expert] made reasoned decisions about how to actually construct and run a model testing Plaintiffs’ theory of liability. The model fits the theory of Plaintiffs’ case.”  Individual issues, such as variations in the understanding of the term “flushable,” did not predominate.  [I believe that the reasonable consumer model is normative as well as descriptive, and a normative reasonable consumer should not think “it’s flushable if it won’t destroy my pipes but will destroy municipal infrastructure.” I can put pretty much anything I want into the recycling bin without suffering any individual consequences. That doesn’t make whatever I put in the bin “recyclable” and it would be specious for me to claim that I reasonably understood “recyclable” to mean “you can put it in the recycling bin without doing any harm to yourself.”]

Disputes about how many consumers bought the wipes for some other purpose than flushing didn’t weigh against predominance. Evidence about the average relationship between price and the flushable label was the point of the price inflation theory. Plaintiffs argued that there was “a marketwide inflation of price by a particular calculable percentage. For every flushable wipe product purchased, the consumer paid more because of the flushable misrepresentation. There is no need for individualized inquiry as to causation or injury.” And if liability was found, statutory damages could be awarded on a classwide basis (because of a prior Supreme Court case). “The single question of whether plaintiffs paid more than they would have for the good because of the deceptive practices of the defendants-sellers in labeling their products as ‘flushable’ predominates over any individualized damages inquiries.”

In closing, Judge Weinstein commented that nationwide resolution under some sort of government supervision would be a good idea; non-New York class claims have already been settled. A common market needs common labeling. Moreover, the weird situation in which $50 per incident is available classwide may well be a quirk of federal court/state procedure interaction. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010). “Complex Erie problems raising and intermingling substantive and procedural issues will need thorough consideration as this class action proceeds.” [Given the ruling on predominance, will they, though? Isn’t it now a question of what plaintiffs can prove? I read this more as exhortation to settle—in a way consistent with the non-NY settlement—than identification of specific troubling issues.]

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