2017 ACC-SoCal In-House Counsel Conference #IHCC17
Trends in Consumer Class Actions: How You (Yes, You) Can Avoid
Becoming a Target
January 17, 2016
Universal City, California
Sponsored by Akin Gump Strauss Hauer & Feld LLP
Panelists: Neal Marder, Akin Gump, Head of Consumer Class Action Practice
Hyongsoon Kim, Akin Gump, Senior Counsel
Rachael Jeck, VCA Inc., Co-General Counsel
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Presented by Neal Marder
Head of Consumer Class Action Practice
Akin Gump Strauss Hauer & Feld
Recent Trends in False Advertising Class Actions
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False advertising filings are steadily increasing
in California State and Federal Courts
False Advertising Class Actions on the Rise
0
50
100
150
200
250
300
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Five states accounted for
almost 75 percent of all
cases
California (~ 50 percent)
New Jersey
Florida
New York
Illinois
False Advertising Litigation by State
Source: Number of Cases Settled by State, Consumer Class Action Settlements: 2010 – 2013, NERA ECON. CONSULTING (July 22, 2014)
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False Advertising Law (FAL) (Cal. Bus. & Prof. Code § 17500)
Any untrue or misleading statements made in connection with sale
of goods or services.
Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200)
Any business activity (not limited to just advertising) that is allegedly
unfair, unlawful, or fraudulent.
Consumer Legal Remedies Act (CLRA) (Cal. Civ. Code § 1750)
Any consumer transaction involving the sale/lease of goods/services
that is allegedly unfair/deceptive.
Remedies are cumulative (plaintiffs can sue under all three statutes)
Other states moving in same direction as California (e.g., New Jersey)
California’s False Advertising Statutes
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Food & Beverage
Electronics
Credit Cards
Pharmaceuticals
Finance
Cosmetics
Telecommunications
Construction
Apparel
Insurance
Industries at Risk for False Advertising Litigation
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Alleged Misrepresentations:
• “All Natural” or “Healthy”
• Slack-Fill
• “Green” / “Eco-Friendly”
• “Craft” or “Handmade”
• “Compare At” Pricing
Types of Products:
• Food & Beverage
• Cosmetics &
Personal Care Products
• Household Products
• Apparel
• Electronics
Recent Patterns in False Advertising Claims
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Dismissing class actions
where plaintiffs lack standing
Limiting nationwide class
actions on choice-of-law and
reliance grounds
Applying a heightened
ascertainability standard at the
class certification stage
Dismissing false advertising
claims under the “reasonable
consumer” standard
Denying class certification
based on plaintiffs’ damages
model
Courts Have Provided Several Tools forDefending False Advertising Class Actions
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Mazza v. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012)
• The plaintiffs purchased Acura vehicles equipped with a Collision Mitigation
Braking System (CMBS). The plaintiffs alleged that Honda’s “advertisements
misrepresented the characteristics of the CMBS and omitted material
information on its limitations” in violation of the UCL, FAL and CLRA.
• Applying California’s three‐step choice-of-law analysis, the Ninth Circuit found
that a nationwide class could not be certified.
• The court also held that even a California class could not be certified because
Honda’s advertising campaign was not extensive enough to presume reliance
by the class as a whole.
o Distinguishing In re Tobacco II Cases, 46 Cal. 4th 298 (2009), in which the California
Supreme Court found that plaintiffs were not required to demonstrate reliance for individual
class members where there was a long-term, “massive” advertising campaign, the Ninth
Circuit held that individual class members' reliance could not be presumed where “it is likely
that many class members were never exposed to the allegedly misleading advertisements.”
Limiting Nationwide Class Actions on
Choice-of-Law and Reliance Grounds
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Applying a Heightened Ascertainability Standard at the Class Certification Stage
The Second, Third, Fourth, and Eleventh Circuits apply a
“heightened” ascertainability standard requiring that:
• The class is “defined with reference to objective criteria,” and
• There is a “reliable and administratively feasible mechanism for determining
whether putative class members fall within the class definition.”
The First Circuit has adopted a hybrid approach.
Other circuits have either adopted a less rigorous standard at the
certification stage, requiring only an objectively defined class, or
have expressly declined to adopt any ascertainability standard.
E.g., Briseno v. ConAgra Foods, Inc., 2017 WL 24618 (9th Cir. Jan. 3, 2017)
o Plaintiffs brought false advertising class action against ConAgra alleging “100% natural” label
on vegetable oil was misleading because the product was made from GMO ingredients.
o The Ninth Circuit affirmed the district court's class certification decision, but expressly stated
that the Ninth Circuit has not adopted an ascertainability requirement.
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Dismissing False Advertising Claims
Under the “Reasonable Consumer” Standard
Ebner v. Fresh, Inc., No. 13-cv-56644 (9th Cir. Mar. 17, 2016)
• The Ninth Circuit affirmed dismissal of “slack fill” false advertising class action, holding
that a reasonable consumer would not be misled by lip balm packaging that allows only
75 percent of the product to advance up the tube.
Galanis v. Starbucks Corp., No. 16-4705 (N.D. Ill. Oct. 14, 2016)
• The Northern District of Illinois dismissed a putative false advertising class action alleging
that Starbucks misrepresents the amount of liquid in its iced drinks because they also
contain ice. The court held that a reasonable consumer who purchases an iced drink
expects ice to be included.
Popejoy v. Sharp Electronics Corp., No. 14-6426 (D.N.J. June 9, 2016)
• The District of New Jersey dismissed with prejudice a putative nationwide class action
alleging that Sharp misled consumers by advertising LCD TVs as LED TVs. The court
held that a reasonable consumer would not be deceived by Sharp’s marketing because
the product packaging stated that the TV was both an LCD TV and an LED TV.
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Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013)• The Supreme Court held that the plaintiffs’ proposed damages model fell “far short of establishing that
damages are capable of measurement on a class-wide basis.”
• The Court reasoned that “a model purporting to serve as evidence of damages in [a] class action
must measure only those damages attributable to that theory. If the model does not even attempt to
do that, it cannot possibly establish that damages are susceptible of measurement across the entire
class for purposes of Rule 23(b)(3).”
But see Pulaski & Middleman v. Google, Inc., No. 12-16752 (9th Cir. 2015) The Ninth Circuit reversed an order denying class certification of UCL and FAL claims, holding that
“differences in damage calculations do not defeat class certification,” even after Comcast.
Brazil v. Dole, No. 5:12-cv-01831 (9th Cir. 2016)• The Ninth Circuit affirmed the district court’s order decertifying the 23(b)(3) damages class “[b]ecause
Brazil did not explain how this premium could be calculated with proof common to the class.”
But see Briseno v. ConAgra Foods, Inc., 2017 WL 24618 (9th Cir. Jan. 3, 2017)• Plaintiffs’ damages model combined a regression analysis with a study that purported to isolate the
price premium attributable to the alleged misrepresentations.
• The Ninth Circuit held that requiring a methodology for class-wide damages was not the same as
imposing an ascertainability requirement, and held that individual damages issues did not preclude
certification.
Denying Class CertificationBased on Plaintiffs’ Damages Model
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Work with outside counsel to review advertising claims
Use language that would make sense to a reasonable
consumer
Consider including a mandatory arbitration provision with a
class action waiver in all consumer contracts
Catch the problem early – pay attention to consumer
complaints and correspondence
Consider implementing a voluntary refund program or
other administrative remedies
Best Practices
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Presented by Hyongsoon Kim
Akin Gump Strauss Hauer & Feld
Recent Trends in Statutory Class Actions
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Statutory Damages Class Actions on the Rise
Fair Credit
Reporting
Act (FCRA)
50%increase from
2014 to 2015
Video Privacy
Protection Act (VPPA)
Fair Debt
Collection
Practices
Act (FDCPA)
50%increase in
past four years
Telephone
Consumer
Protection
Act (TCPA)
Tripledincrease from
2012 to 2015
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Minimum Statutory Damages
Plus actual damages(if any), fees, costs,
and possible punitive damages
FCRA$100 to $1,000 per violation
VPPAAt least $2,500 per
violation
TCPA $500 per violation
Plus actual damages (if any),
Fees, costs, and possible punitive damages
FDCPAUp to $1,000 per person
Plus treble damages (3x) for a “willful
or knowing” violation
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Approximately 2,270 complaints filed under these common
statutes in 2015 and 2016 were reviewed:
These statutes relate to the treatment and protection of
consumer’s personal information, including credit and debt
information, and information related to video and other forms
of communication.
Common Privacy Statutes
FDCPA
TCPA
FCRA
VPPA
ECPA
FACTA
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Three states (California, New York and New Jersey) account for over 50 percent of cases
California accounts for over 23 percent of cases
Followed by New York, which accounts for over 17 percent of cases
New Jersey and Illinois account for 23 percent of cases
California, 23.20%
Florida, 7.11%
Illinois, 9.08%
New Jersey, 14.12%
New York, 17.74%
Pennsylvania, 3.32%
Wisconsin, 8.58%
Other, 16.84%
Favored Courts – By District Court (2015-2016)
FACTA, FDCPA, FCRA, ECPA, TCPA and VPPA:
*as of September 23, 2016
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Outdated/Antiquated Laws
Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227
Passed in 1991
What violates: automated phone calls, text messages and faxes without consent
Damages: plaintiffs’ actual losses OR $500 statutory damages per violation, whichever is greater; treble damages available for “willful” violations
Expansive interpretation of “autodialer”
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Plaintiffs’ Expansive Arguments
Video Privacy Protection Act (VPPA), 18 U.S.C. § 2710
Passed in 1988
What violates: knowing disclosure by “video tape service providers” of “personally identifiable information.”
Damages: $2,500 liquidated damages
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Expanding the definition of:
• VTSP
• Personally Identifiable Information (“PII”)
• Consumer
Establishing bases for more intangible harms
Extending the pool of liability to recipients of data, not just
those who disclose data
Sample Case Law:• In re Nickelodeon Consumer Privacy Litig., 827 F.3d 262 (3d. Cir. June 27, 2016):
Static digital identifiers such as IP addresses (did not identify a specific person)
• Yershov v. Gannett Satellite Info. Network, Inc., 820 F.3d 482 (1st Cir. Apr. 29, 2016):
GPS coordinates were PII; “PII is not limited to information that explicity names a
person”
Plaintiffs’ Expansive Arguments
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Potential for large damages awards in class action context
• TCPA: purpose was to enable plaintiffs
to file without lawyer in small claims court
In re Capital One Tel. Consumer Prot. Act Litig.,
80 F. Supp. 3d 781 (N.D. Ill. 2015)
• Settlement of $75 million approved by court
• Class of 17 million members
• Attorneys’ fees of $15 million
Why Statutory Claims Are Attractive to Plaintiffs: Damages
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Easier for plaintiffs to prove how much harm
was suffered by putative class members
Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013):
damages methodology must be tied to theory of liability
• Can require expert testimony
• Can lead to denial of class certification
Why Statutory Claims Are Attractive to Plaintiffs: Class Certification
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Aranda v. Caribbean Cruise Line, No. 12-cv-4069 (N.D. Ill. Aug. 23, 2016)
• Violations of TCPA
• Alleged injury = common to class
• Statutory damages = common issues predominate
• Fewer individualized issues
• Certified class
Ramirex v. Trans Union, LLC, No. 12-cv-00632 (N.D. Cal. June 22, 2016)
• Similar holdings under FCRA
• Actual injury = common issues predominate
Why Statutory Claims Are Attractive to Plaintiffs: Class Certification
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Spokeo, Inc. v. Robins, 136 S. Ct. ___ (2016)
• False information about age, job status, and employment
• Violation of FCRA
• 9th Circuit: injury sufficient for standing
• Supreme Court (6-2): harm must be “concrete” and “particularized”
o “Concrete” injury = “de facto” (must actually exist)
o Congress may elevate concrete, de facto injuries
o Violation of procedural statutory right may be sufficient
• Remanded to 9th Circuit
Spokeo and Article III Standing
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Romero v. Dept. Stores Nat’l Bank, No. 15-cv-193 (S.D. Cal. Aug. 5, 2016)
o One unanswered telephone call is not sufficient injury to confer standing.
Ung v. Universal Acceptance Corp., No. 15-cv-127 (D. Minn. Aug. 3, 2016)
o The fact that the call happened is injury sufficiently concrete to confer standing.
Gubala v. Time Warner Cable, Inc., No. 16-2613 (7th Cir. 2017)
o Class action regarding Time Warner’s alleged storage of former customers’
information. The district court granted Time Warner’s motion to dismiss, finding
that the suit claimed no concrete injury. Plaintiffs appealed to the Seventh Circuit.
o The Seventh Circuit heard oral arguments on January 4, 2017.
o Judges Richard Posner and Frank Easterbrook were very critical of plaintiffs’
claims. Judge Posner stated “There’s no harm. Nobody cares.”
What Is Clear After Spokeo?
Courts are grappling with how to interpret Spokeo.
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Concluding Thoughts
Statutory damages class actions are on the rise
They can expose companies to massive potential liability
and can be expensive to defend
Develop and implement best practices to ensure your
compliance department is familiar with the technical
requirements of these statutes
Partner with counsel — both in-house and outside
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Panelists
Neal Marder
Partner
Akin Gump – Los Angeles
T+1 310.728.3740
Hyongsoon Kim
Senior Counsel
Akin Gump – Irvine
T+1 949.885.4218
Rachael Jeck
Co-General Counsel
VCA Inc.
T+1 310.571.6577
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