Upset tummies at P&G: Sixth Circuit affirms class certification on “snake oil” theory

Rikos v. Procter & Gamble Co., — F.3d —-, 2015 WL
4978712 (6th Cir. June 16, 2015)
 
A court of appeals affirms the certification of a consumer
protection class action, a rarity worth noting.
 
Plaintiffs bought Align, P&G’s probiotic nutritional
supplement, and found that the product did not work as advertised—that is, it
did not promote their digestive health. They sued for violation of various
state unfair or deceptive practices statutes, and  the district court certified five single-state
classes from California, Illinois, Florida, New Hampshire, and North Carolina. “While
there is a consensus within the medical and scientific communities that
utilizing bacteria as a therapeutic measure in human disease is promising,
current knowledge of the use of bacteria for these purposes remains fairly
primitive.” Overall “[m]edical understanding of probiotics in humans is still in
its infancy.” Align is a nonprescription supplement sold in a capsule that is
“filled with bacteria and [otherwise] inert ingredients.”
 
P&G initially had trouble convincing consumers of
Align’s value, given its premium price point, though it eventually launched
Align nationwide through a comprehensive advertising campaign, which included
in-person physician visits, television and print advertisements, in-store
displays, and product packaging.
 
Commonality: P&G argued that there was no common injury,
only anecdotal evidence that Align didn’t work for the named plaintiffs.  Consumer satisfaction, and repeat purchases,
showed Align’s benefits—along with at least some studies that appeared to
concluded that Align was effective in promoting digestive health.  Dukes
doesn’t require plaintiffs to show that all class members were in fact injured
at the certification stage—rather that their claims depend on a common
contention capable of classwide resolution. 
The common question here was whether Align is “snake oil” and thus does
not yield benefits to anyone.  If true,
that would make P&G liable to the entire class “every class member was
injured in the sense that he or she spent money on a product that does not work
as advertised.”  Consumer satisfaction
isn’t the right way to think about injury in the false advertising
context.  It’s misleading to state that a
product is effective when that effectiveness rests solely on a placebo effect.
See, e.g., FTC v. Pantron I Corporation, 33 F.3d 1088 (9th Cir. 1994).
 
Typicality: basically the same, though P&G framed its
argument as being that “many of the unnamed class members have no interest in
pursuing restitution, nor in crippling the product. Indeed, this lawsuit may be
antithetical to their interests.” That didn’t make the named plaintiffs
atypical in the relevant sense.
 
Predominance:  P&G
alleged that some putative class members weren’t exposed to its marketing
campaign; they may have bought Align based on advice from a family member,
friend, or physician.  But the plaintiffs
all bought Align because it allegedly promoted digestive health. “That is the
only reason to buy Align.” And there was evidence showing that P & G
undertook “a comprehensive marketing strategy with a uniform core message, even
if its packaging has changed somewhat over time: buy Align because it will help
promote your digestive health.”  P&G
argued that doctors could recommend Align based on their independent judgment,
but P&G developed the probiotic and the campaign that promoted it to
doctors.
 
Reliance and causation: under each state’s laws, the
plaintiffs could prove what was necessary on a classwide basis as long as (1)
the alleged misrepresentation that Align promotes digestive health is material
or likely to deceive a reasonable consumer, and (2) P & G made that
misrepresentation in a generally uniform way to the entire class.  California is Tobacco II.  Illinois’ ICFA
requires a showing of damage to the plaintiff as a result of the deception—that
is, proximate cause from the false advertising. 
If the challenged representation was made to all putative class members
and was material, it’s capable of classwide proof.  Florida’s FDUTPA case law is divided, but
many courts have held that it doesn’t require proof of actual, individualized
reliance, only a showing that the practice was likely to deceive a reasonable
consumer, at least as long as there’s a generally uniform material
misrepresentation.  New Hampshire’s Consumer
Protection Act also doesn’t require proof of individual reliance or causation;
materiality is a proxy for causation and an objective question that can be
answered classwide.  North Carolina’s
UDTPA requires reliance, but reliance can be proved circumstantially, and a
consumer protection class action can be certified on those grounds, especially
since the alleged misrepresentation here was the reason to buy Align. 
Plaintiffs were prepared to show materiality and the existence of a
generally uniform misreprentation; that sufficed.
 
P&G argued that Align actually works, at least for some
consumers, which is to say that the scientific evidence might show that Align provides
benefits for some purchasers, but not all, requiring individualized proof of
injury.  But this is a factual dispute;
plaintiffs argued that P&G’s studies were flawed and that Align didn’t
work, at least not any more than placebo. 
Plaintiffs’ theory was not that the effectiveness of Align was variable,
but that it hadn’t been shown that Align worked for anyone.  P&G’s
effectiveness argument went solely to the merits, and plaintiffs provided
enough evidence to support plaintiffs’ theory of liability. The fact that the
common answer might be that Align does work for some people doesn’t transform
the classwide issue into one precluding certification.  If there’s an identifiable subclass of people
for whom it works or doesn’t work, the district court could even revisit the
issue of certification.
 
The court’s holding was is consistent with the Supreme
Court’s recent decision in Halliburton
Co. v. Erica P. John Fund, Inc.
, ––– U.S. –––– (2014), which held that, at
the class-certification stage, defendants in private securities fraud class
actions must be able to present evidence rebutting a particular presumption of
classwide reliance available in these kinds of cases. “The Halliburton Court’s holding is limited to allowing rebuttal
evidence on issues that affect predominance, not evidence that affects only the
merits of a case,” and P&G’s evidence went only to the merits; in any
event, P&G was allowed to put forth its evidence, so Halliburton was satisfied.
 
Relatedly, P&G argued that plaintiffs failed to present
a viable theory of classwide damages under Comcast
Corp. v. Behrend
, ––– U.S.–––– (2013). 
If Align is snake oil, then there’s no problem with the damages theory;
a full refund of the purchase price would satisfy Comcast, since “there is no reason to buy Align except for its
purported digestive benefits—‘[i]t is a capsule filled with bacteria and inert
ingredients. If, as alleged, the bacteria does nothing, then the capsule is
worthless.’” Even if some customers were satisfied, for whatever reason, “either
0% or 100% of the proposed class members were defrauded. There is no evidence
that some proposed class members knew of the alleged falsity of Defendant’s
advertising yet purchased Align anyway.”
 
P&G also contested class standing, on similar grounds
(Align may have worked for some of them). 
There was no need to enter a circuit split over whether it’s sufficient
for a named class plaintiff to have standing, given the snake oil theory of the
case.
 
Further, the proposed class was sufficiently
ascertainable.  Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), is not the law
of the Sixth Circuit, and there was no reason to follow Carrera, given the strong criticism to which that decision has been
subject and the Third Circuit’s subsequent caution against a broad reading of
that case.  Ascertainability requires the
court to be able to resolve the question of class membership with reasonable
accuracy by reference to objective criteria. 
Purchases of Align in California, New Hampshire, Illinois, North
Carolina, or Florida could be determined with reasonable—but not
perfect—accuracy. “Doing so would require substantial review, likely of
internal P & G data. But as the district court pointed out, such review
could be supplemented through the use of receipts, affidavits, and a special
master to review individual claims.” 
Here, customer membership cards and records of online sales—more than
half of Align’s sales—could be used; also, P&G’s studies showed that “an
overwhelming number of customers learned about Align through their physicians,”
so verification could be accomplished through a signed statement from a
customer’s physician.
 
A concurrence by Judge Cohn suggested bifurcating the
proceedings and first looking for whether there was scientific evidence that
Align promotes digestive heath for anyone, which might allow early dismissal of
the case.
 
A dissent by Judge Cook would have found that the district
court abused its discretion by failing to conduct a rigorous inquiry into
certification.  Plaintiffs didn’t offer
proof in support of their argument that Align was “snake oil” that produces
nothing more than a placebo effect.”[A]ll the available evidence tends to show
the opposite: that consumers benefit more or less from Align based on their
individual gastrointestinal health. P & G’s scientific studies and
anecdotal evidence tend to show, at the very least, that patients suffering
from irritable bowel syndrome (IBS) benefit from Align.”  The certified class included both IBS patients
and healthy consumers, so plaintiffs failed to show that their theory of
liability lends itself to common investigation and resolution.  Whether Align works similarly for each class
member “is relevant to certification and therefore not beyond the scope of the
court’s rigorous analysis.” Also, the majority therefore affirmed a class
definition that included a “clutch” of members without standing.  Plaintiffs’ “promise to conduct the
definitive trial of Align that accounts for all variables of human physiology”
was insufficient under Dukes and its
progeny.

from Blogger http://ift.tt/1VhEzpP

Advertisements
This entry was posted in Uncategorized and tagged , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s