Class Action Quarterly Update - Summer 2016

Class Action Defense Alert | October.06.2016

Overall Trends

The summer of 2016 saw continued trends in class action filings. Telephone Consumer Protection Act (TCPA) cases continued to be rampant, with multiple cases being filed daily on a national scale. Most were generally directed to unsolicited business faxes and text messages. With respect to faxes, there have been a substantial number of filings with medical offices and centers as the representative plaintiffs. Given the medical community’s continuing reliance on fax machines, this is not surprising. Debt collection companies appear to be increasingly targeted by class action TCPA lawsuits as well for unsolicited phone calls and voicemails.

“All Natural” class actions continued as well but, in California at least, there may be a decline of such cases in coming months (see below). Similarly, evaporated cane juice lawsuits appear to be on the decline. Cases based on the New Jersey Truth-in-Consumer Contract law continue to flourish, as they have over the last year (see below). Outlet store cases (i.e. cases against retailers who have outlet stores which sell lesser quality products or products at no discount) continued to appear at the beginning of the summer, but have since tapered off. There was a rash of data breach class action filings against Yahoo! Inc. at the end of September following the highly publicized mass data breach. Finally, a small handful of cases concerning inflated drug prices have begun to pop up, likely in response to increased publicity surrounding high prices for necessary drugs like EpiPen.

New Jersey Truth-in-Consumer Contract, Warranty and Notice Act Cases Continue to Be Filed

From May 1 to September 30, 2016, there have been 17 class action suits filed under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 (with a total 54 filed over the past year). The TCCWNA prohibits sellers from “offer[ing] to any consumer or prospective consumer or enter[ing] into any written consumer contract or giv[ing] or display[ing] any written consumer warranty, notice or sign” that “violates any clearly established legal right of a consumer.” Functionally this translates to liability where any representation purports to limit a seller’s liability, waive potential fees, shift costs, or require a consumer to submit to arbitration. TCCWNA violations entitle plaintiffs to statutory and actual damages, injunctive relief, and attorney’s fees.

The TCCWNA has been broadly construed not only in terms of its subject matter, but also with respect to possible plaintiffs and possible defendants. While the TCCWNA is generally applied to traditional consumer contracts, it has also been applied to terms and conditions on gift certificates and even representations made on restaurant menus. Defendant entities, while statutorily defined as “sellers,” have been more generally construed as any entity involved in the production of a consumer good, or are part of the chain of distribution, advertising, or sale of the consumer good. Thus, practically any entity that obtains some benefit from the transaction may be viewed as a “seller” under the TCCWNA.

The volume of recent cases appears to be largely a function of a high volume of internet activity and the availability of website analytics, making it easy to establish numerosity for class certification. However, a recent unpublished New Jersey appellate decision has somewhat limited plaintiffs to those who have actually purchased something from the seller (or otherwise shown the existence of a consumer contract). See Smerling v. Harrah's Entm't, Inc., No. A-4937-13T3, 2016 N.J. Super. Unpub. LEXIS 2062 (Super. Ct. App. Div. Sep. 9, 2016). Still, given the broadly interpreted scope of the TCCWNA, entities should review all terms and conditions displayed to possible consumers at any point in the chain of distribution, paying particular heed to any provisions that could be viewed as limiting an entity’s liability, waiving fees or shifting costs, or requiring consumers to submit to arbitration.

“All Natural” Potentially to Decline as Target for Class Action Plaintiff Firms

In the coming months it would not be surprising to see a decrease in “All Natural” lawsuits in California. On September 30, 2016, in Brazil v. Dole, No. 14-17480 (9th Cir. Sept. 30, 2016), the Ninth Circuit upheld an order decertifying a class of purchasers who bought certain Dole products advertised as “All Natural” which actually contained citric acid and ascorbic acid. The three-judge panel found that the Plaintiff had failed to show how it could prove on a class-wide basis what the damages were – i.e., what the premium that purchasers paid for “All Natural” products was. This could bode well for food manufacturers faced with similar lawsuits. However, there is always the possibility that this reasoning might not be applicable in all cases, and it is conceivable that a court could potentially be convinced such damages might be proved through the use of experts in marketing, advertising, consumer surveys, and/or some other field.

Also of note in Brazil v. Dole, the appellate court reversed the order granting summary judgment for the Defendant. The court found that, contrary to the findings of the district court, whether “All Natural Fruit” is misleading to a reasonable consumer is a question of fact. The trial court had found that because “All Natural” was applied directly to “Fruit,” it therefore did not apply to the product in its entirety.