NY class certified in “flushable” wipes case with statutory damages available

Kurtz v. Kimberly-Clark Corp., No. 14-CV-1142 et al., 2017
WL 1155398, — F.Supp.3d —- (E.D.N.Y. Mar. 27, 2017) (not effective until
April 10, 2017) (I suspect this is another way for the judge to say “get this
out of my courtroom already,” but I’ll take suggestions on what this means)
Judge Weinstein is a class action legend, and here he
expresses many of his current thoughts about the class action mechanism in the
course of certifying a New York class in this action against vendors and makers
of “flushable toilet wipes.”  Plaintiffs
alleged that, in fact, the products aren’t flushable because they clog
household plumbing.  The ideal was “to achieve a
single decision by a single court or administrative agency—preferably through a
global settlement—that fairly decides all pending disputes, forestalls future
similar disputes, and protects both consumers and suppliers.”  But the parties didn’t take that route, even
though the court indicated that this dispute “could have been readily settled
to the benefit of all parties and the public by relatively minor changes in
labeling.”
The central injury alleged here was payment of an unjustified
premium for a product misrepresented as “flushable.” Damages to plumbing
wouldn’t be covered by the class certification. 
Likewise, consumers didn’t argue that they could also bring
municipalities’ claims “as taxpayers because clogging at sewage plants
ultimately puts in danger the system to which their household disposal systems
are connected.”
The district court stayed the litigation to see if the FTC
could resolve the issue.  The FTC entered
into a final consent order with Nice-Pak, which also covered its retailers, including Costco and CVS.  The consent order had a “flexible and somewhat
amorphous definition of ‘flushability,’” to wit, “disperses in a sufficiently
short amount of time after flushing to avoid clogging, or other operational
problems in, household and municipal sewage lines, septic systems, and other
standard wastewater equipment.”  Still,
it was “a reasonable attempt to devise a national standard protective of
consumers, manufacturers and retailers.” Nonetheless, the FTC responded to the
court’s referral by stating that it would address flushability only on a case
by case basis; the FTC can’t engage in “aggregate adjudication” of claims and
didn’t intend to engage in rulemaking on this issue, though the parties could
look to the Nice-Pak consent order for the FTC’s views.  Judge Weinstein griped that consolidated
agency action with a uniform definition of flushability would have been
better.  A class-wide settlement could
also have done the job, or “industry-wide regulation through standards set by
the relevant industry association, through multidistrict litigation, or by
legislative action at the municipal, state, or federal level.”  But this has not happened, so state-by-state
litigation it is.
The court found all the requisites satisfied for injunctive
and damages classes.  Ascertainability
was satisfied even though many consumers might not have retained receipts; only
one product was at issue, and it was labeled uniformly as to the relevant
claim.  Costco had electronic records of
purchases, and anyway to require receipts would destroy most consumer
protection class actions.  Article III
standing for injunctive relief existed, despite the named plaintiff’s
unwillingness to buy again, because the product was still on sale and, “[i]f
defendant’s theory were to be accepted, it would effectively bar injunctive
classes in consumer deception cases …. That result is undesirable as a matter
of public and federal policy and practice.”
The court also approved hedonic regression as a measure of
classwide damages to show the premium for “flushable” wipes.  NY GBL §349 doesn’t require showing
individualized reliance.  Although
previously the court indicated that FTC proceedings would be “superior” to a
class action, that’s not going to happen. 
The court also previously indicated that “an award of statutory damages
could be excessive and in violation of New York State policy.”  The reason is that §349 allows statutory
damages of fifty dollars per event, but NY civil procedure bars statutory
damages in class actions unless that’s specifically authorized by the
underlying statute, which it is not for §349. 
The Supreme Court has explicitly held that Rule 23 conflicts with this
rule and prevails, making statutory damages available in federal class
actions.  On further reflection, the
court concluded that to weigh the policy conflict against certification would
“flout” the Supreme Court’s decision.  “While
disagreeing with the Supreme Court majority opinion, the district court is
bound by it.”  And the court’s initial
stay of the cases under the primary jurisdiction doctrine was no longer
supportable, given the FTC’s subsequent actions.  The Nice-Pak consent order provided “a solid
basis for settlement of all cases with but minor tweaking,” but the parties
resisted settlement.
[Scroll past the images of wipes]
Charmin label

More Charmin

Cottonelle label

Cottonelle sewer and septic safe

Cottonnelle SafeFlush technology

More Cottonelle claims

Kirkland flushable

Kirkland flushable-only one at a time claim
Kirkland “safe for well-maintained sewer and septics”

Kirkland “not recommended for motor homes/basement pumps”

A few specifics about particular brands: P&G offers full
reimbursements to consumers who claim that Freshmates caused a clog, including
a full refund of the purchase price and a “goodwill” reimbursement of up to
$250 if the consumer complains that Freshmates caused plumbing damage. Freshmates
packaging provides a toll-free customer service telephone number, but no
information about P&G’s refund policies. Costco also offers its customers a
full refund—no questions asked—if they are not 100% satisfied, but the phone
number provided on the packaging is the phone number for the manufacturer,
Nice-Pak. Nice-Pak sometimes reimburses a complainant for reasonable plumbing
costs upon receipt of documentation from the customer, but the packaging
doesn’t disclose this refund policy.  Kirkland’s
wipes are probably better labeled than the others in that, while other brands
suggest using up to two wipes before flushing, Kirkland states “NEVER FLUSH MORE
THAN 1 WIPE AT A TIME” and also claims “Safe for Well-Maintained Sewer &
Septics*” with a warning “*NOT RECOMMENDED FOR USE IN MOTOR HOMES OR WITH
BASEMENT PUMP SYSTEMS.”
Defendants argued that what “flushable” meant to consumers
couldn’t be decided on a classwide ebasis because of variability in the
definitions.  One of their experts deemed
a golf ball “flushable”; P&G committed to “it will not cause problems in
their home system.”  Kimberly-Clark and
Costco argued that “flushability” had to be determined individually. All
defendants followed the guidelines of the Association of the Nonwoven Fabrics
Industry in their labeling.
The court found that the meaning of flushability was subject
to classwide proof, but strongly suggested that a study of New York consumers
was warranted. Regardless, “[t]ypically … where the consumer protection
statute at issue supplies an objective test, such claims are considered ‘ideal
for class certification’ because they allow the court to adopt classwide
presumptions of reliance and do not require an investigation into ‘class
members’ individual interaction with the product.’ ”  Unlike a case in which the impact of the
phrase “The Better Vitamin C”—akin to puffery—couldn’t be disentangled from
other non-misleading representations on the label, flushability was
sufficiently distinctive that it could be isolated from other label claims.
The common questions:
(1) What do defendants’ “flushable”
representations mean to a reasonable consumer?
(2) Do defendants’ products currently
satisfy that meaning?
(3) Did previous iterations of
defendants’ products satisfy that meaning?
(4) Are defendants’ “flushable”
representations materially misleading?
(5) Did class members pay an
unsupported premium as a result of the “flushable” representation?
(6) Was that premium—to the extent
that it can be reasonably ascertained—relatively uniform?
Defendants argued that payment of a price premium “depends
on the purchaser’s individual experience with the product after purchase.”  But that’s not the right injury in a false
advertising case, which doesn’t depend on individual reliance or whether the
product met consumers’ personal, subjective expectations. The fact that some
“consumers were satisfied with the product is irrelevant” if the advertising
was likely to mislead a reasonable consumer.
The court also found typicality satisfied. Defendants argued
that Kurtz continued buying the wipes—and refrained from flushing them—after he
no longer believed the wipes were “flushable,” making him subject to a unique “voluntary
payment” defense. It was unclear whether his subjective belief that the wipes
should not be flushed constituted “full knowledge of the facts” so that this
defense applies. There was also no evidence that Kurtz’s purchases were ever
made with “full knowledge” that he was paying a premium price for the
“flushable” representation.  Even if the voluntary
payment defense applied to any person who purchased wipes and did not flush
them, typicality would still not be defeated, because, according to defendants,
many consumers who purchased wipes did not flush them. The individual
circumstances related to his plumbing also didn’t matter since his claims were
based on the price of the wipes.
As for Rule 23(b)(2) injunctive class status, plaintiffs wanted
the products to “either be relabeled or taken off the market.”  Some courts (including the Second Circuit)
require plaintiffs to demonstrate that a (b)(2) class is “cohesive” and
“necessary.” Cohesiveness is similar to commonality, and necessity reflects
that certification is not always required to get relief that runs to the
benefit of others similarly situated to the named plaintiff.  Judge Weinstein commented that “[t]hese
additional case law interpretive requirements to Rule 23 are unjustified in
light of the detailed legislative attention to Rule 23, which does not contain
them,” but regardless, cohesiveness and necessity were present. 
Defendants argued that injunctive relief would be “prudentially
moot” because the FTC has already provided the plaintiffs with all the relief
they could be accorded through an injunction, given the FTC’s decisions to
enter into a consent order with Nice-Pak and to close its investigation of
Kimberly-Clark. The FTC’s actions allegedly established that the products now
on the market as packaged definitely do not contravene law, and Costco’s
agreement with the FTC meant that it “voluntarily ceased” any past illicit
conduct. “Prudential mootness doctrine often makes its appearance in cases
where a plaintiff starts off with a vital complaint but then a coordinate
branch of government steps in to promise the relief she seeks.” However, the
mere promulgation of an informal definition of “flushable” wasn’t adequate
relief. The FTC’s investigation of P&G was ongoing, so it was too soon to
say whether Freshmates even met that vague definition. The FTC’s letter on the
closed investigation on Kimberly-Clark no expressly stated that the closure “is
not to be construed as a determination that no violation has occurred.” Costco,
whose wipes were subject to the Nice-Pak Final Consent Order, had the strongest
mootness argument, but a promise made to an administrative agency to do
something—or to refrain from doing something—didn’t assure that no violation
occurred or will occur or that the effects of any past violation had been
completely and irrevocably eradicated. “There is too much money at stake for
plaintiffs to assume defendants will do ‘the right thing’ in a relabeling that
might reduce sales and profits.” Moreover, the consent order didn’t provide the
relief Kurtz was actually seeking: a change in the label or removal of the
product from the market.
Turning to Rule 23(b)(3), this too was satisfied.  On predominance, defendents argued that some
consumers “consistently flushed without problem” and therefore could not “have
been deceived” by the “flushable” label. But there’s the price premium issue
again. The question of whether the products didn’t disintegrate “for some
individuals goes solely to the merits; it has no relevance to the class
certification issue.” Nor did materiality require individual proof, because “individualized
proof of reliance is not necessary” for § 349 claims. Materiality to a
reasonable consumer’s decision to purchase “is an objective inquiry that
focuses on that packaging.”
It was also common sense that “flushability” was “a valuable
characteristic that producers include on their labels with the expectation that
it will allow them to extract a higher price for the product. Internal company
documents make it clear that flushability is the raison d’être for this market
niche.” Testimony from company executives confirmed this importance.  All three companies expended significant
resources to improve “dispersibility” of the wipes once flushed.  “It is impossible to accept the argument that
these companies would make this investment to gain or improve flushability
without expecting a reasonable financial return.”
The single question of whether plaintiffs paid more than
they would have for the good because of the deceptive flushability label
predominated over any individualized damages inquiries. This was especially
true because the battle of experts on the magnitude of any price differential
was “largely beside the point,” because once the fact of injury was
established, statutory damages could be calculated classwide: $50 to each class
member for each time defendant violated the statute by a sale.  Individualized issues of physical plumbing
damages would be tried on an individual basis, not as part of the class action,
and any such potential recoveries were likely to be de minimis as compared to
the class recovery.
Superiority: defendants argued that their refund programs
were superior, providing faster compensation with lower transaction costs than
a class action. But statutory damages were a more effective remedy for most
class members than a simple refund. “[T]he uncertain prospect of some class
members recovering money for plumbing damages—which is likely to be a de
minimis sum—does not make the refund program superior to a class action.” Also,
given the failure to advertise that the companies were willing to reimburse
consumers for plumbing expenses incurred allegedly due to use of their
products, any potential recovery of plumbing damages that could inure to class
members through a refund program was “somewhat illusory,” as compared to a
class action remedy. A remedy that consumers don’t know about can’t be
superior.  Nor was FTC action superior,
given the limited possibility of further action.

As for Kurtz’s common law claims of negligent
misrepresentation, breach of warranty, and unjust enrichment, though, common
questions of law or fact didn’t predominate because individualized proof would
be necessary to demonstrate each purchaser’s reliance on defendants’ alleged
misrepresentations.

from Blogger http://ift.tt/2n42tO9

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