Certiorari granted by United States Supreme Court in Wal-Mart v. Dukes

On December 6, 2010, the United States Supreme Court granted certiorari in what will eventually be known as Wal-Mart v. Dukes.  The Supreme Court limited review to two issues, Question I from the Petition, and a second issue included by the Court.  The Court said:

The petition for a writ of certiorari is granted limited to Question I presented by the petition. In addition to Question I, the parties are directed to brief and argue the following question: "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

Question I from the Petition is as follows:

Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)—which by its terms is limited to injunctive or corresponding declaratory relief—and, if so, under what circumstances.

Petition, at i.  The Court declined to hear Question II, which asked, "Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23."

This decision could run the gamut from a highly fact-specific outcome, to a treatise on discrimination class actions, to a wholesale commentary on the Rule 23(a) requisites.  Considering the scope of issues covered in the Dukes v. Wal-Mart en banc decision, it's very difficult to handicap this race.

Gutierrez v. Wells Fargo Bank Findings of Fact and Conclusions of Law now available

The Findings of Fact and Conclusions of Law After Bench Trial by United Stated District Court Judge William Alsup (Northern District of California) in Gutierrez v. Wells Fargo & Co. is now available for review - all 90 pages of it.

You can view the embedded opinion in the acrobat.com flash viewer below:

If the viewer isn't working for you (say, if you are viewing this on an iPad or iPhone), you can download the opinion here.

Wells Fargo ordered to repay an estimated $203 million in overdraft fees to customers

United Stated District Court Judge William Alsup (Northern District of California) issued a number of Orders, including injunctive relief and an order requiring refunds in the estimated amount of $203 million, after finding defendant Wells Fargo guilty of "gouging and profiteering" when it reordered bank charges from highest to lowest so as to maximize the number of overdrafts that could occur in an account.  Gutierrez v. Wells Fargo & Co.  See this previous post for more on the case.

Wells Fargo's attempt to decertify a consumer class action bounces

You can't blame them for trying.  Unless you are a judge.  Then you can.  In Gutierrez v. Wells Fargo & Co., 2010 WL 1233810 (N.D. Cal. Mar. 26, 2010, Judge William Alsup was not impressed with defendant's attempt to decertify a consumer class action involving over 1 million class members.  First, some background is in order.

Plaintiffs alleged that defendants Wells Fargo & Company and Wells Fargo Bank, N.A. improperly assessed overdraft charges on their customers' debit card transactions.  Two separate practices were allegedly employed by defendants: (1) the publication, in the “online banking” section of the Wells Fargo Bank website, of inaccurate available-balance information to their customers, and (2) the re-sequencing of debit card transactions from highest to lowest value-rather than in the order in which purchases were completed-prior to being posted against a customer's account. Plaintiffs alleged that the false balance information was employed to increase the likelihood that customers would incur overdraft charges, while the resequencing was employed to maximize the number of overdraft charges defendants could assess against their customers. Defendants denied these allegations. A few months into the dispute, defendant Wells Fargo & Company was voluntarily dismissed from the action, leaving only Wells Fargo Bank.  Both practices were used to certify classes, but the court later decertified claims resting upon the inaccuare balance theory.

Wells Fargo Bank then moved for summary judgment or decertificaiton of the re-sequencing class.  The court denied the request for decertification:

Counsel have been reminded on various occasions that the presence of individualized issues is not fatal to class actions brought under Rule 23 ( see, e.g., Dkt. No. 245 at 9). Rather, the rule tolerates some individualized issues, so long as “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” FRCP 23(b)(3). Rule 23 also requires a court to be ever cognizant of whether the class action device “is superior to other available methods for the fair and efficient adjudication of the controversy.”

The legal claims of the “re-sequencing” class target the alleged overcharging of overdraft fees for over a million different Wells Fargo customers (Dkt. No. 285, Exh. A at 37-38). All members of the “re-sequencing” class were charged overdraft fees due to defendant's accused high-to-low posting of transactions. The fees themselves, however, were only around $34 each. Given this backdrop, it cannot be disputed that a denial of class-certification would close the door of justice to a staggering amount of claimants. The deterrent value of class litigation and the desirability of providing recourse for the injured consumer who would otherwise be financially incapable of bringing suit clearly render the class action a viable and important mechanism in challenging an alleged fraud on the public. This is especially important here, where the allegedly unlawful practice disproportionately gouges those who maintain, due to choice or (more likely) financial hardship, a shallow amount of funds in their checking accounts.

On the other hand, this order must give full consideration to whether plaintiffs' revised damages study is sufficient to establish class-wide proof of actual injury and/or damages for each absent class member. Otherwise, Rule 23 would be used to truncate the required substantive elements of proof by each claimant in violation of the Rules Enabling Act, 28 U.S.C.2071-77. Having considered the various limitations inherent in Wells Fargo's transaction data (discussed in detail by this order), and the fact that proving actual injury if suits were brought individually would still require the same types of assumptions made by Olsen in his report, this order finds that plaintiffs have presented sufficient class-wide proof of actual injury to survive defendant's motion for decertification. Given this showing, there is no question that common questions predominate in this action. As such, defendant's motion for class decertification is Denied.

Slip op., at 13 -14.  It is interesting that the weaknesses in defendant's transaction data was used by the court to nullify challenges to the methodology used by plaintiffs' expert to assess damages for the class.  The court found that the same flaws in data would impact an individual's attempt to prove damages.  The opinion contains a detailed discussion, with an example, of the allged practices and the damage extrapolation methodology used by plaintiffs' expert.

More on the Vioxx decision

In December, I promised more detailed comments about In re Vioxx Class Cases (December 15, 2009), decided by the Second Appellate District, Division Three.  As promised, I provide more pithy commentary (or blather, as you see fit to classify it).  The Court's discussion began with a reminder that is worth repeating.  The standard of review on a appeal challenging a trial court's decision to grant or deny certification is reviewed for an abuse of discretion, absent certain specific errors:

“ ‘Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification. . . . "[I]n the absence of other error, a trial court ruling supprted by substantial evidence generally will not be disturbed “unless (1) improper criteria were used [citation]; or (2) erroneous legal assumptions were made [citation].” ’ ”

Slip op., at 14, citing Tobacco II.  Next, the Court stated the requisites for class certification.  The discussion was the usual stuff, but for one statement regarding predominance of common issues of law or fact:  "To determine whether the questions of fact and law at issue in the litigation are common or individual, it is necessary to consider the individual causes of action pleaded, and the issues raised thereby."  Slip op., at 15.  It is difficult to find any guidance about how to assess predominance.  Here, the Court indicates that the analysis proceeds on a cause-of-action by cause-of-action basis.

Turning to the various casues of action, the Court first addressed the claim arising under the CLRA.  The Court followed decisions that permit an inference of reliance when a misrepresentation is material:

The language of the CLRA allows recovery when a consumer “suffers damage as a result of” the unlawful practice. This provision “requires that plaintiffs in a CLRA action show not only that a defendant’s conduct was deceptive but that the deception caused them harm.” (Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1292.) Causation, on a class-wide basis, may be established by materiality. If the trial court finds that material misrepresentations have been made to the entire class, an inference of reliance arises as to the class. (Id. at p. 1292.) This is so because a representation is considered material if it induced the consumer to alter his position to his detriment. (Caro v. Proctor & Gamble Co., supra, 18 Cal.App.4th at p. 668.) That the defendant can establish a lack of causation as to a handful of class members does not necessarily render the issue of causation an individual, rather than a common, one. “ ‘[P]laintiffs [may] satisfy their burden of showing causation as to each by showing materiality as to all.’ ” (Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1292.) In contrast, however, if the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action. (Caro v. Proctor & Gamble Co., supra, 18 Cal.App.4th at p. 668.)

Slip op., at 16.

The Court then discussed claims arising under the UCL. The authority cited by the Court was described in a manner that was fairly favorable to consumers.  For example, the Court said, "Consumer class actions under the UCL serve an important role in the enforcement of consumers’ rights."  And, as to remedies, the Court observed, "The UCL balances relaxed liability standards with limits on liability."  Slip op., at 18.  The fraudulent prong of the UCL received a similarly broad construction through the authority noted by the Court:

In order to obtain a remedy for deceptive advertising, a UCL plaintiff need only establish that members of the public were likely to be deceived by the advertising.  (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267; Massachusetts Mutual Life Ins. Co. v. Superior Court, supra, 97 Cal.App.4th at p. 1290.) The question has arisen as to which members of the public need be likely to be deceived. The law focusses on a reasonable consumer who is a member of the target population. (Lavie v. Proctor & Gamble Co. (2003) 105 Cal.App.4th 496, 508.) “Where the advertising or practice is targeted to a particular group or type of consumers, either more sophisticated or less sophisticated than the ordinary consumer, the question whether it is misleading to the public will be viewed from the vantage point of members of the targeted group, not others to whom it is not primarily directed.”

Slip op., at 18.  The Court then discussed the countours of the restitution remedy under the UCL.  Here, Tobacco was cited, but the Court's summary of the extent of restitution foreshadowed the Court's determination that a means for proving a restitutionary value were lacking:

As to restitution, the UCL provides that “[t]he court may make such orders or judgments . . . as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.”15 (Bus. & Prof. Code, § 17203.) This language, providing restitution of funds which “may have been acquired,” has been interpreted to allow recovery without proof that the funds were lost as a result of actual reliance on defendant’s deceptive conduct. (Tobacco II, supra, 46 Cal.4th at p. 320; Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 450-451; Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1144.) While the “may have been acquired” language of Business and Professions Code section 17203 is so broad as to allow restitution without individual proof of injury, it is not so broad as to allow recovery without any evidentiary support. (Colgan v. Leatherman Tool Group, Inc. (2006) 135 Cal.App.4th 663, 697.) The difference between what the plaintiff paid and the value of what the plaintiff received is a proper measure of restitution. (Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 174.) In order to recover under this measure, there must be evidence of the actual value of what the plaintiff received. When the plaintiff seeks to value the product received by means of the market price of another, comparable product, that measure cannot be awarded without evidence that the proposed comparator is actually a product of comparable value to what was received. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 675.)

Slip op., at 19.

Having discussed what must be established for CLRA and UCL claims, the Court then analyzed predominance as to each cause of action.  For the CLRA, the Court agreed that reliance/materiality issues could not be resolved on a classwide basis:

The trial court found that the decision to prescribe Vioxx is an individual decision made by a physician in reliance on many different factors, which vary from patient to patient. The trial court quoted from Dr. Silver’s declaration, indicating eight individual factors which a physician must assess in determining whether and what to prescribe for pain.

Slip op., at 22.  In reality, this decision is an example of why tort-type issues frequently undermine attempts to certify classes.  The Court noted some of the complicated reliance variables:

On appeal, plaintiffs draw this court’s attention to Merck’s alleged common campaign of hiding the cardiovascular risks of Vioxx, arguing that such common misrepresentations support a common inference of reliance. Plaintiffs suggest that Merck hid “an increased risk of death,” associated with Vioxx, and argue, “there can be nothing more material than an increased risk of death.” Plaintiffs’ argument is a vast oversimplification of the matter, and one which overlooks all of the evidence to the contrary on which the trial court relied.

First, evidence indicated that Vioxx did not present “an increased risk of death” compared to traditional NSAIDs for all patients. Traditional NSAIDs killed 16,500 people per year due to gastrointestinal bleeds. For patients with stomach ulcers or other gastrointestinal risk factors, traditional NSAIDs presented a higher risk of death than the risk of cardiovascular death posed by Vioxx. Second, evidence indicated that the cardiovascular risks of Vioxx were not material for all patients. Some patients would still take Vioxx today if it were on the market; some physicians would still prescribe it regardless of risks. Indeed, it cannot be disputed that other drugs pose similar, or even greater, risks of death than Vioxx, but are still in use – because, for some patients, the benefits outweigh the risks. Third, Merck introduced substantial evidence that all physicians are different and obtain their information about prescriptions from myriad sources. For those physicians with a distrust of statements made by the pharmaceutical industry, Merck’s statements could not have been material. For those patients whose TPPs required pre-approval of Vioxx (or would only pay for Vioxx under certain circumstances), the TPP’s decision likely would override any patient or physician reliance on Merck’s statements. Fourth, physicians consider many patient-specific factors in determining which drug to prescribe, including the patient’s history and drug allergies, the condition being treated, and the potential for adverse reactions with the patient’s other medications – in addition to the risks and benefits associated with the drug. When all of these patient-specific factors are a part of the prescribing decision, the materiality of any statements made by Merck to any particular prescribing decision cannot be presumed. All of this evidence supports the trial court’s conclusion that whether Merck’s misrepresentations were material, and therefore induced reliance, is a matter on which individual issues prevailed over common issues, justifying denial of class certification with respect to the CLRA claim.

Slip op., at 23-24.

Similar problems with the UCL were then discussed by the Court:

[T]he court specifically found that class damages are not subject to common proof. The court concluded that the monetary value plaintiffs wish to assign to their claim – the difference in price between Vioxx and a generic, non-specific NSAID, implicates a patient-specific inquiry and therefore fails the community of interest test. In short, the trial court rejected the entire premise of plaintiffs’ class action. While the trial court allowed the possibility that plaintiffs could recover for having been exposed to misrepresentations, the trial court concluded that the theory that the entire class was harmed because Vioxx was no more effective, and less safe, than naproxen implicated individual issues of proof.

On appeal, plaintiffs mount a two-pronged challenge to the trial court’s conclusions. First, they argue that they offered sufficient factual evidence that naproxen is a valid comparator to Vioxx. Specifically, they rely on the declaration of their medical expert to the effect that, based on the VIGOR study, Vioxx was, overall, no more effective, and less safe, than generic naproxen. The trial court did not err in rejecting naproxen as a valid class-wide comparator. Defendants introduced substantial evidence that, after Vioxx was withdrawn from the market, most Vioxx patients switched to another COX-2 inhibitor, not a generic NSAID such as naproxen. As this evidence indicates that Vioxx was worth more than naproxen to a majority of class members, it is more than sufficient to support the trial court’s conclusion that naproxen is not a valid comparator on a class-wide basis.

Plaintiffs’ second argument is that the validity of naproxen as a comparator goes to the merits of the action, and should not be addressed on a motion for class certification. Plaintiffs argue that since the UCL and FAL allow an award of restitution without individualized proof of deception, reliance and injury, the trial court should not have been considering the validity of naproxen as a comparator. We do not disagree that a trial court has discretion to order restitution even in the absence of individualized proof of injury. (Fletcher v. Security Pacific National Bank, supra, 23 Cal.3d at p. 452.) However, in order to obtain class wide restitution under the UCL, plaintiffs need establish not only a misrepresentation that was likely to deceive (Corbett v. Superior Court, supra, 101 Cal.App.4th 649, 670) but the existence of a “measurable amount” of restitution, supported by the evidence. (Colgan v. Leatherman Tool Group, Inc., supra, 135 Cal.App.4th at p. 698.) The failure of naproxen as a viable class-wide comparator thus defeats the claim for class-wide restitution.

Slip op., 26-27.  With accepted reasons for denying certification as to each cause of action, the trial court was affirmed.  I skipped one other basis for the Court's decision that a denial of certification was appropriate.  The Court found that a typicality problem was created by the interaction with third-party payors.  Some TPPs would only pay for Vioxx when other NSAIDs did not work for the patient.  Some co-pay situations with flat rate copays rendered the economic comparison argument moot.  Generally, the Court noted that the defined class was overbroad, creating a number of problems for itself that could not be reconciled.  See, Slip op, at 20-22.  Here is yet another example why tort-type issues routinely sink class actions.