Monday, September 21, 2020

Second Circuit affirms flushable wipes damages class certification, disallows injunctive class

Kurtz v. Costco Wholesale Corporation, 818 Fed.Appx. 57, Nos. 17-1856-cv, 17-1858-cv (2d Cir. Jun. 26, 2020)

This is a “flushable” wipes consumer protection class action. The district court previously certified damages and injunctive relief classes. On appeal, the Second Circuit required further clarification on the predominance argument and remanded.  The district court received additional evidence, including supplemental expert reports, and conducted a hearing. On that basis, it reaffirmed its prior certification decision, determining that Kurtz had demonstrated that he could prove injury and causation with common evidence, satisfying Rule 23(b)(3)’s predominance requirement. The court of appeals found no abuse of discretion, though not on an injunctive relief class.

Kurtz showed adequacy and typicality, despite Kimberly-Clark’s argument that he sacrificed potentially higher-value plumbing damages claims in order to advance lower-value, but more easily certifiable, claims based on a price premium theory. Given that the cost of litigating such plumbing damages claims likely would have outweighed any recovery, the district court held that the strategic decision to forgo plumbing damages and pursue statutory damages of $50 per purchase under NY’s GBL §349 wasn’t a fundamental conflict of interest. This was not an abuse of discretion. Nor was it a typicality problem that Kurtz continued to buy the wipes after he learned that they were not flushable; his theory of injury was predicated on the existence of a price premium, so the harm he suffered occurred at the time of purchase. “Accordingly, his purchasing history is largely irrelevant to typicality and does not warrant setting aside the court’s certification order.”

Standing to represent an injunctive relief class: no, because there was no likelihood of future injury. Kurtz made no assertion that he intended to purchase additional flushable wipes products—from Costco, Kimberly-Clark, or any other company.

Predominance: The court of appeals initial decision expressed “specific concern with the Plaintiffs’ proof that they can establish the injury and causation elements of their claims at trial with common evidence.” On remand, plaintiff’s expert “developed and performed hedonic regression analyses” indicating “that there is a marketwide price premium for wipes labeled as flushable,” rather than merely speculating that such a regression could be run. Though defendants’ experts critiqued this expert report, the district court deemed the testimony and analysis admissible, and found that his regression satisfied the obligation to demonstrate predominance.

The “litany” of purported failings in the methodology was unpersuasive. For example, defendants argued that the model “fails to account for major variables, including attributes that consumers value most.” Though some regressions may be “so incomplete as to be inadmissible as irrelevant,” this model accounted for “a wide range of variables, some of which are substantial drivers of consumer purchases.” The omitted variables were “arguably significant,” but that went to weight rather than admissibility. So too with defendants’ argument that there was no price premium “if the time frame is shifted or if additional products are included in the underlying dataset.” While cherry-picking data can render a model so unreliable that it is inadmissible, the expert here testified that changing the timeframe of his model while making appropriate adjustments to other variables still yielded a price premium, and the district court found that he used a sufficiently wide range of sources to render the end-result “statistically reliable.” There was no abuse of discretion in relying on his testimony.

Comcast Corp. v. Behrend, 569 U.S. 27 (2014), held that “a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to that theory.” That’s exactly what this model purports to measure: the price premium attributable to the “flushable” label. Although plaintiffs’ claim might still fail, the model worked as “common evidence of plaintiffs’ theory of injury.”

Ultimately, none of Defendants’ critiques demonstrates that there exists “some fatal dissimilarity among class members that would make use of the class-action device inefficient or unfair. Instead, what [Defendants] allege[ ] is a fatal similarity—an alleged failure of proof as to an element of the plaintiffs’ cause of action.” A factfinder might ultimately agree with defendants’ critiques of the model, but that would make the class claims fail as a unit.

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