Wednesday, April 24, 2013

A Stale Roll and a Dismal Clean Sweep


People usually think it's a good thing to be "on a roll."  But that is not always the case.  We have defended client depositions where there was nothing worse than a witness on a roll, especially if that was a roll of Yeses ("Q:  You have worked at the company since 2002, right?  A:  Yes.  Q:  And you obtained a degree in biochemistry from Rollins College, right?  A:  Yes.  Q:  And you think puppies are adorable, don't you?  A:  Yes.  Q:  And your company has a responsibility to warn of all known risks, right?  A:  Yes.  Q:  And your IFU omits a number of key risks, doesn't it?  A:  Yes.  Q:  And don't you hate it when people talk during movies?  A:  Yes.  Q:  And the court ought to direct a verdict against your company, right?  A:  Yes.  Q:  And would it be fair to say that this is a splendid case for punitive damages?  A:  Yes.  Q:  And don't you agree that an Audemars Piguet Royal Oak watch would look great on my wrist, especially if that wrist was wrapped around the wheel of a Maserati Quattroporte?  A:  Yes."  Etc.)

 

Sometimes courts can get on a bad roll, too.  When a court is determined to deny a defense motion to dismiss claims, it will find a way to tube every argument in sight, even those oozing merit.  That's what happened in Hwang v. OHSO Clean, Inc., 2013 WL 1632697 (N.D. Cal. April 16, 2013).  In Hwang, the plaintiff brought a purported class action on behalf of a nationwide class of consumers who purchased the defendants’ sanitizing products.  The issue was whether the labels on the cleaners overstated the efficacy of the products – by saying, for example, that the cleaners “kill 99.9% of the harmful germs that can make you sick.” The legal claims sounded in various theories, including: 1) breach of express warranty; 2) deceit; 3) concealment; (4) False Advertising Law (“FAL”); 5) California's notorious Unfair Competition Law (“UCL”); 5) Consumers Legal Remedies Act ("CLRA"); and 6) the federal Magnuson Moss Act.

 

In their Motion to Dismiss, the defendants contended that all of the plaintiff’s claims were preempted under the Federal Food Drug and Cosmetic Act (our beloved "FDCA," the hook that permits us to discuss a case that is otherwise far afield from our usual stuff) and/or foreclosed by Pom Wonderful LLC v. v. Coca-Cola Co., 678 F.3d 1170 (9th Cir. 2012), a case that we have commented on (here, for example) at least as many times as we have enjoyed the fine beverages manufactured by either Pom Wonderful or the Coca-Cola Company.  Here is a little pause to refresh your memory of that case:  in Pom Wonderful the Ninth Circuit held that the plaintiff’s Lanham Act claim that the defendant’s juice product label was misleading was barred by the FDCA and the regulations promulgated thereunder by the FDA, because those regulations indicated that the FDA had already considered and spoken to what content a label must bear and had apparently authorized the defendant’s labeling. The Pom Wonderful decision was really about the doctrine of primary jurisdiction more than preemption.  It was still pretty wonderful.   

 

The Hwang defendants did not stop at preemption and Pom Wonderful.  They also argued that the plaintiff’s claims fail TwIqbal, do not establish materiality or reliance, fall short of the Rule 9(b) requirement that fraud claims be pled with specificity, and that nationwide classes do not have standing to assert claims under California consumer protection statutes. The Hwang defendants got very busy, because they also filed a Motion to Strike, asking the Court to strike the following categories of allegations from the plaintiff’s complaint: 1) all class allegations; 2) all allegations relating to punitive damages; 3) allegations seeking damages under the CLRA; and 4) allegations seeking nonrestitutionary monetary damages on the plaintiff’s UCL and FAL claims.

 

To steal a line uttered by the great Abba Eban about Middle East diplomacy, the Hwang court lost no opportunity to lose an opportunity.  Perhaps not all of the defense arguments were especially robust (and perhaps the Hwang case is an example where weak arguments furnished the court with a license to wave away strong arguments), but several look pretty solid to us.  They deserved a better fate than the court's legal Bataan death march.  This is not to say that the court's ruling was perfunctory or cursory.  We've received plenty of denials of motions to dismiss or for summary judgment where the court did little more than affix "Denied" and postage stamps to a card.  No, the Hwang opinion is rather lengthy.  The claims, the arguments against the claims, and the legal standards are laid out in dreary detail.  We are halfway through the opinion before anything happens.  It's like reading Middlemarch, or driving through certain stretches of Texas, where the highlight is not quite finishing off that stringy 64 ounce steak (and thus not quite getting a free meal).  You end up dazed and a little sick. 

 

The Hwang court eventually gets to the subhead called "Application" and makes it clear that we defense hacks can abandon all hope of a good outcome.  The court begins by rejecting the preemption defense, holding that the claims “are based on parallel state laws that mirror the relevant sections of the FDCA."  Hwang, 2013 WL 1632697 at *17.  The plaintiff’s claims "only require the court to make a factual determination as to whether the statements on the labels of Defendants Sanitizing Products are false.” Id.  First, isn't that "only" in the wrong place?  Second, isn't the court missing the point as to whether the FDA has already suggested an answer?  The court also concluded that Pom Wonderful and the doctrine of primary jurisdiction did not apply here, because the “Pom holding does not extend to state law consumer protection claims that are based on the allegations that statements made by the defendant are factually incorrect, at least where, as here, there are no regulations suggesting the FDA has adopted a contrary position. “ Id. at *18.  So apparently the agency has to say something very specific, such as "when Hwang files a complaint sometime in the future it will be wrong."  

 

The Hwang court saw no problem with materiality. The plaintiff essentially argued that it did not matter whether the claimed percent of germs killed might be a little off the mark.  The court thought this argument was off the mark, and simply did not see materiality as a question suitable for determination on a motion to dismiss, especially insofar as the “statements at issue are directed at what is undisputedly the primary purpose at issue, namely, to kill germs, giving rise to a plausible inference that a reasonable consumer would consider them material.” Id. at *19.  As for reliance, the court concluded that the plaintiff clearly alleged that “had Plaintiff and the Class members known that Defendants’ assertion was untrue, Plaintiff and the Class members would not have purchased Defendants’ Sanitizing Products.”  Id. at *20. 

 

We have to admit that the court's disposal of the reliance point does not seem absolutely unhinged.  But the defendants took that reliance point to another level and crafted a sound argument that individual questions of reliance would necessarily predominate, thus precluding class certification under Rule 23. The Hwang court did not so much analyze this issue as dodge it: “the Court here does not find the issue of standing to be sufficiently clear at this stage of the case to warrant dismissing the class claims as to the class members.” Id.  Huh?  (That's what we're saying, and it also seems like what the court is saying.)  Similarly, the unworkability of certifying a nationwide class to apply California law did not trouble the court: “The Court finds the choice of law question raised by Defendants to be premature and therefore declines Defendants’ invitation to engage in such an analysis at this early stage of the case.” Id. at *21.  Are you starting to get the feeling that this is one of those courts that just does not want to decide -- or certainly dismiss -- anything?

 

The court conclusorily concludes that the plaintiff adequately pled “the who, what, when, where and how” of the alleged fraud by “identifying specific products and statements at issue, as well as when and where she purchased one of Defendants’ products.”   Id.   Maybe the court is right about that, but it is actually sort of hard to tell from the decision.  In all its girth, the Hwang decision does not tell us exactly how the plaintiffs alleged any deceit with particularity.  And given the tone of the rest of the opinion, plus our native scurvy disposition, we are skeptical.

 

The court dumped pretty much all of the motion to strike in one fell swoop by deeming such motions inappropriate if they are simply seeking to “strike claims for damages on the ground that such claims are precluded as a matter of law.” Id. at *22.  But -- and here’s a hearty surprise -- the court actually did see merit in one part of the motion to strike the CLRA damages claims because the plaintiff had failed to comply with a prefiling notice requirement. Nice, right?  Not so fast.  The plaintiff would still be “permitted to amend her complaint to assert a claim for damages when she has satisfied the CLRA’s notice requirement.”  Id. at *24. 

 

It's almost as if the court was saying it did not like it when parties filed pesky motions.   Almost.  

 

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