Proposed Bill Would Implement Daubert Standard in Missouri

As we discussed back in 2013, the United States Supreme Court’s decision in Comcast left no doubt that any damages model offered up by the proponent of class certification must “be consistent with its liability case.”   This ruling put some teeth into the damages element in the class certification context, and strongly implied that the requirements of Daubert or Frye apply at the class certification stage.  This month, the Third Circuit joined the Seventh, Eighth, and Ninth Circuits have all agreed that the Daubert admissibility standard must be taken into account when assessing admissibility of expert testimony at the class certification stage.

Now, of course, this is only useful if one’s jurisdiction actually sets some parameters on the admissibility of expert testimony.  Missouri courts, however, follow Mo. Rev. Stat. 490.065, which is somewhat general in its standards, and does not follow either Daubert or Frye in civil matters, relying instead on the discretion of the court once the basic foundational standards of the statute have been satisfied.  See e.g., State v. Robertson, 328 S.W.2d 745, 752, n.2 (W.D. 2010).

House Bill 697, however, looks to augment Section 490.065 by explicitly applying the Daubert admissibility standards to civil actions (excepting juvenile and family law actions). Should this measure be passed, it would go a long way toward setting some concrete standards for the admissibility of expert testimony.  Combined with Comcast, this measure could prove a useful tool in excluding the type of junk science and ipse dixit damages models used in the past to justify the certification of expansive classes. (Full Disclosure, our colleague Kevin Corlew, who represents the 14th District, is the sponsor of this bill).

    It’s Congress’s Prerogative: Citizenship of LLCs Under CAFA

    Everybody’s talkin’ all this stuff about LLCs. Well, not exactly, but the Tenth Circuit is talking about LLC citizenship. Joining the chorus of every other circuit court to consider the issue, the Tenth Circuit recently held that citizenship of an unincorporated association (e.g., an LLC) for removal-diversity purposes is to be determined by reference to the citizenship of each of its members. See Siloam Springs Hotel, L.L.C. v. Century Sur. Co., No. 14-6119, 2015 WL 1430335 (10th Cir. Mar. 31, 2015).

    Were this a class action, the result would be different. For purposes of CAFA, said the Court in footnote 1, an LLC’s citizenship for removal-diversity purposes is determined in the same manner as a corporation—by its state of organization and principal place of business. Why the different result under CAFA? As the Tenth Circuit put it: Not my prerogative. The prerogative to expand the established citizenship rule for corporations to other entities is legislative. Congress exercised its prerogative by including § 1332(d)(10) in CAFA.

    So for all those LLC members finding themselves involved in a class action and asking, Why don’t they just let me live? Keep § 1332(d)(10) in mind when preparing the notice of removal. Live wherever you want, LLC members! Your citizenship won’t count when applying CAFA’s minimal-diversity requirement. And for the counsel preparing that removal notice, no need to worry about tracking down the details of each LLC member. Under CAFA, you don’t need to prepare a lengthy affidavit outlining the citizenship of each member of an LLC.

    As for LLCs involved in individual cases, well, they’ll have to wait for a “New Edition” of the removal statute to change the citizenship rules.

      Going Meta: A Class of Class Action Lawyers in the GMO Rice MDL

      In a very meta turn, Riceland Foods, Inc. found itself on the receiving end of a class action composed of class action firms and plaintiffs from the GMO Rice MDL overseen by Judge Catherine D. Perry of the USDC of the Eastern District of Missouri.  Riceland had been a co-defendant along with defendant Bayer in that litigation and had then cross-claimed Bayer and settled for $ 92 million.  Following the District Court’s orders awarding common benefit expenses and fees, three law firms that had incurred legal fees and expenses while performing class benefit work sought to certify a class representing not only other law firms but also clients who had paid for common benefit services and expenses.  The proposed class brought claims of unjust enrichment and quantum meruit against Riceland on the basis that Riceland had benefitted from the putative class’s common benefit work in obtaining a judgment against Bayer, and sought ten per-cent of Riceland’s gross recovery against Bayer.

      The District Court certified a 23(b) class in a March 19 Memorandum and Order.  Before delving into the 23(b) requirements, the District Court performed a limited choice of law analysis to determine which state’s laws would govern the unjust enrichment and quantum meruit claims of the multi-state putative class.  Using Missouri’s “Significant Relationship Test,” the District Court found that Missouri had the most significant relationship to the unjust enrichment claim and the quantum meruit claim, primarily because the claims arose from an MDL venued in Missouri.  Other important contacts, such as where a benefit was conferred or received, or the location of the parties, were dismissed out of hand as either of “little significance” or “too taxing” to determine individually.  This begs the question of why such contacts would be disregarded rather than considered as creating individualized choice of law issues potentially compromising the superiority or manageability of a (b)(3) class, as well as the wisdom of basing choice of law considerations of happenstance as variable as the predilection of the JPML.

      The District Court also concluded that common questions of law and fact predominated over individual ones, and rejected Riceland’s assertion that each plaintiff must first identify each attorney that created each piece of work product utilized by Riceland in its cross-claim against Bayer and then identify which particular class member paid for each piece of work in order to determine at whose expense Riceland was unjustly enriched or which party conferred a benefit on Riceland.  The District Court specifically distinguished the facts of this case from prior cases denying the certification of such claims on the basis that because the putative class members undertook to “pool their resources” in the MDL as part of a “collective effort,” they need not show which client or counsel paid for specific items, only that the class jointly incurred expenses to provide a benefit on Riceland.  This is an interesting distinction, and it will be instructive to see if the members of the class agree that they all jointly agreed to pool their efforts regardless of which client or counsel undertook those efforts when it comes time to divide the common benefit pie amongst them.

      Hopefully the parties can agree on how to allocate any common benefit fees and expenses from this class action so that we won’t need a class action to recover fees and expenses from a class action to recover fees and expenses from an MDL.

        Missouri Court of Appeals Prohibits Fact-Finding, Reverses Denial of Certification in Asbestos Medical-Monitoring Suit

        In a decision emphasizing the continuing viability of medical-monitoring class actions, the Missouri Court of Appeals clarified plaintiffs’ burden of proof at the class-certification stage by holding that the trial court may not consider expert testimony or other evidence that contradicts the plaintiffs’ theory of the case.

        In Elsea v. U.S. Engineering Company, No. 77687 (Mo. App. W.D. Mar. 17, 2015), the plaintiffs sought certification under Mo. Rule 52.08(b)(3) (the state-law counterpart to Rule 23(b)(3)) of a class of individuals who had spent two consecutive weeks or eighty hours in the Jackson County Courthouse after the defendants had performed a retrofit of the building.  According to the plaintiffs’ allegations and experts, asbestos dust was blown and tracked through the courthouse during the retrofit, putting putative class members at a significantly increased risk for latent disease.  The plaintiffs sought recovery of compensatory damages for the expense of necessary prospective medical monitoring.

        Following a four-day evidentiary hearing, the trial court denied the plaintiffs’ motion for class certification due to a number of individualized issues relating to exposure, causation, and the medical necessity of a monitoring regime for each class member.  After accepting interlocutory review, the Court of Appeals reversed.  Significantly, the court held that the trial court undertook improper findings of fact and that it should have accepted the allegations and evidence presented by the plaintiffs as true, citing its previous holdings in Hope v. Nissan N. Am., Inc., 353 S.W.3d 68 (Mo. App. W.D. 2011) and Hale v. Wal-Mart Stores, Inc., 231 S.W.3d 215 (Mo. App. W.D. 2007).  The court then went on to emphasize that “the common and predominant fact of exposure” warranted certification and that “individual factors are not relevant in a medical monitoring claim.”  It further rejected the defendants’ arguments regarding the threshold level of exposure that would trigger the need for medical monitoring, reiterating that the plaintiffs’ allegations must be taken as true at the class-certification stage and any factual issue should have been reserved for the jury at the class trial.

        In contrast to Elsea, the United States Supreme Court’s recent decisions in Wal-Mart Stores, Inc. v. Dukes and Comcast v. Behrend underscores putative class plaintiffs’ evidentiary burden under Rule 23 and the unavoidable overlap between merits and class issues during certification; the Elsea opinion also creates an uneasy tension with the court’s previous statements that “federal interpretations of Rule 23 are relevant in interpreting Rule 52.08.” Craft v. Philip Morris Cos., 190 S.W.3d 368, 376 (Mo. App. 2005).  To the extent the Missouri Supreme Court seeks to bring Rule 52.08 more in line with the federal standard, we may well hear from it soon.

          Law360’s 6 Recent Class Certification Rulings You Need to Know

          Although this blog is focused on highlighting recent orders and opinions from courts within the 8th and 10th Circuit, there are countless others from courts around the country that will inevitably impact and influence class action jurisprudence.  Law360 published the “6 Recent Class Cert. Rulings Every Litigator Needs To Know,” a nice compilation of recent rulings that may affect your practice (of course, none were from the 8th and 10th Circuit – otherwise you would have already heard about it here!).

          In addition to the cases highlighted in the Law360 article, Andrew Trask of Class Action Countermeasures also published “The Ten Most Significant Class Action Cases of 2014,” a nice summation of impactful cases from the last year.

            One Man’s Trash . . . Whitton v. Defenbaugh, et al.

            In an interesting opinion, United States District Judge Carlos Murguia disposed of Defendant Defenbaugh Disposal, Inc.’s Motion for Reconsideration which questioned compatibility of the District Court’s order certifying a class of consumers charged an “environmental/fuel charge” and an “administrative fee,” and a concurrent order denying summary judgment against the sole putative class representative based on the voluntary payment doctrine.  Defenbaugh naturally questioned, among other less ripe issues, how the District Court could junk their summary judgment motion against Whitton as being too “heavily fact-dependent” to adjudicate at the summary judgment stage while concurrently certifying a class action.  In his order denying reconsideration, Judge Murguia defended his orders as compatible because the summary judgment issue was decided only with respect to the putative class representative, Mr. Whitton, “meaning that only Mr. Whitton’s actions or knowledge were relevant to defendants’ motion for summary judgment,” while “predominance is analyzed in terms of all proposed plaintiffs – not just named-plaintiff Whitton.”

            This is certainly true, but the logic smells fishy.  The very definition of a class action, as a representative action, means that the actual claims of the absent class members will not be before the court, and that their claims must necessarily be adjudicated only through the prism of the named class representative.  If the only class representative proffered is subject to uniquely problematic fact-laden defenses that don’t really apply to the rest of the class so as to create a predominance issue, is that class representative truly typical or even adequate?  And how can predominance be assumed when the claims of the one proposed class representative raise such fact-dependent individualized defenses?  In the end, the differing standards for granting summary judgment and certifying a class don’t appear to explain how the claims of a proposed class representative can be sufficiently individually fact-specific so as to preclude summary judgment on a dispositive defense, yet allow resolution of the class claims through the trial of that one peculiar individual’s claim.  And if the District Court’s analysis is accurate – that only the class representative but not the absent class members may be subject to this individualized defense – is it fair to allow the claims of the absent class members to get trashed because the class representative is such a peculiarly vulnerable standard-bearer?

              “There Are 5,000 Stories to Tell”: Western District of Missouri Rejects Bid to Certify Power-and-Light Discrimination Class

              Emphasizing the individualized nature of each putative class member’s experience, Judge Ortrie Smith denied the plaintiffs’ motion for class certification in Combs v. The Cordish Companies et al., No. 14-0227, 2015 WL 438154 (W.D. Mo. Feb. 3, 2015).

              Alleging that the defendants unlawfully limited their access to Kansas City’s popular Power and Light District, the plaintiffs brought suit under 42 U.S.C. § 1981 and sought to certify a class comprised of all persons of African-American descent who were “excluded, ejected, harassed, or suffered other discriminatory treatment” at the hands of the defendants. In denying class certification, Judge Smith homed in on the need for detailed and individual factual inquiries. In particular, he focused on the fact that putative class members would have to prove more than that the defendants intended to discriminate against them – they would also have to demonstrate that they were in fact victims of discrimination. This, according to Judge Smith, “requires an individualized examination of the circumstances surrounding each and every ejection” and defeats a finding of predominance.

              For example, each of the estimated 5,000 putative class members may have to testify about their particular harassment, wrote Judge Smith. And even if each person were to testify for only an hour, this would require 625 trial days – a figure that would likely be far greater, given that the defendants would be entitled to present their own witnesses as well. “It will literally take years to resolve these individualized issues, which means the common issues do not predominate over the individual issues.”

              Although cognizant that the community as a whole may have been harmed by the defendants’ conduct, Judge Smith noted that such an observation does not mean that class certification is permitted under Rule 23: “There are 5,000 stories to tell, not one – and therein lies the difference between a permissible class action and what Plaintiffs propose.”

                Close Enough For Remand: Hood v. Gilster-Mary Lee Corp., 2015 WL 328499 (W.D. Mo., Jan 26, 2015)

                How does one prove the citizenship of members of the putative class for purposes of applying CAFA’s jurisdictional exceptions?  For instance, the Local Controversy Exception under 28 U.S.C. Section 1332(d)(4) requires the federal district court to decline to exercise CAFA jurisdiction if (among other requirements) two-thirds of the putative class members are citizens of the state in which the action was originally filed.  But since absent class members are typically absent, how do you know?

                This issue popped up before Judge Harpool when the defendant which operated a microwave popcorn packaging plant in Jasper Missouri used CAFA to remove yet another diacetyl class.  While it is well-settled that the party seeking remand must prove the application of one of CAFA’s exceptions, this is easier said than done.

                Rather than apply strict proof, the district court elected to rely on “common sense” and “logic.”  Although only 41% of the class actually confirmed Missouri citizenship, the district court found more than a kernel of truth in caselaw creating a rebuttable presumption that the state of residency is also the state of citizenship for absent class members.  And although the putative class stretched back to workers from 2008 forward, plaintiffs had it in the bag once they produced “representative data” indicating that the vast majority of putative class members had last-known addresses in Missouri.  Because actual proof of citizenship would be “impossible,” the district court settled for representative data.

                In deciding to remand the case, the district court specifically rejected cases from other jurisdictions declining to base citizenship analysis on last known address data, and distinguished this type of industrial exposure case from other cases, such as cell phone cases, where mailing addresses and phone numbers may not be representative of citizenship.  Between this and the Cape Cod Potato Chip decision, it’s been a starchy salty week for the Western District.



                  Down With the Chips When the Chips Are Down: Kelly v. Cape Cod Potato Chip Company, Inc.

                  In a recent decision from the United States District Court for the Western District of Missouri, Judge Whipple demonstrated that he is indeed “down with the chips” when it’s crunch time by granting Defendants’ 12(b)(1) and 12(b)(6) motion to dismiss the putative class claims asserted under the MMPA against Cape Code Potato Chip Company, Inc. and Snyder’s-Lance, Inc.    In her complaint, the class representative alleged that the sale of these tasty snacks violated the MMPA because they were falsely labeled as “all natural” and containing “no preservatives.”  As you may recall, a valid MMPA claim requires the plaintiff to allege: 1) the purchase of merchandise from the defendant; 2) for personal, family, or household purposes; and 3) ascertainable loss of money or property; 4) as a result of a practice proscribed by section 407.025.1 of the MMPA.

                  After sinking his teeth into Defendants’ motion, Judge Whipple may have Ruffled a few feathers when he agreed that the Plaintiff had failed to allege any unlawful marketing practice as defined by the MMPA, which includes “any deception, fraud, false pretenses, false promise, misrepresentation, unfair practice or the concealment, suppression or omission of any material fact.”  First, Judge Whipple found that Plaintiff had failed to provide any plausible or applicable definition of the term “natural,”  and therefore failed to allege that the use of that term in the packaging and marketing of the offending chips was deceptive or misleading under the MMPA.  In doing so, Judge Whipple had to grapple with an issue other courts have had to address – the lack of standardized definitions and standards for marketing terms such as these.  Judge Whipple rejected any application of the Merriam-Webster definition of natural (defined as “existing or produced in nature”) as clearly inapplicable, as potato chips do not occur in nature, which is indeed a pity.  He then noted that the FDA has (quite unhelpfully in the author’s view) thus far declined to adopt any formal definition of the term “natural.”   Finally, Judge Whipple rejected the application of other possible benchmarks from the USDA or FDA as inapplicable to food destined for human consumption such as potato chips.  Absent a standard by which the term “natural” could be adjudged either true or false, Judge Whipple naturally found Plaintiff failed to plead any unfair trade practice by the use of that claim.  In addition, the Court found that the full disclosure of the ingredients on the federal-complaint label as a matter of law defeated any claim that consumers had been deceived as to the ingredients contained in the package.

                  For the second course, Judge Whipple concluded that the Plaintiff also lacked Article III standing to assert claims for injunctive relief and claims based on the purchase of varieties of chips she had never purchased.  Because Plaintiff had alleged in the class complaint that she would never have purchased these chips had she known the “true nature” of these chips as an “unnatural” and “inferior” product, the Court necessarily found that she was unlikely to purchase them again.  Because few people like purchasing inferior and unnatural products, Judge Whipple found no likelihood of future injury, and therefore no standing to pursue injunctive relief requiring Cape Cod Chips to cease deceptively selling its chips and to truthfully represent them to her.  And while Plaintiff argued that as a putative class representative she had standing to assert the claims of unnamed class members who had purchased the twelve varieties of ships she had not purchased, Judge Whipple didn’t bite.  Because the class representative must have personally standing to bring the class claims, he concluded that she could not maintain an action on behalf of other class members for the purchase of flavors of chips she didn’t purchase.

                  This brief but salty order has some real nutritional value.  First, it tells us that absent an applicable definition of the standard or term claimed to have been falsely represented, it’s hard to show it was misrepresented as an unfair practice under the MMPA.  Second, full disclosure of the ingredients on the label crunches any potential claims based on consumers misunderstanding the ingredients.  Finally, there’s no Article III standing in consumer classes for products the class representative didn’t purchase, and no standing to enjoin the future sale of a product which you have pleaded you wouldn’t buy again anyway.   We’ll keep an eye on this case in the event Plaintiff a-peels.



                    Eighth Circuit rips district court for failing to rigorously analyze class requirements

                    On January 13, 2014, the Eighth Circuit overturned, on interlocutory appeal pursuant to Fed. R. Civ. P. 23(f), a district court’s order certifying four classes of Nebraska consumers, who alleged that Credit Management Services Inc. (“CMS”) and its in-house counsel violated the Fair Debt Collection Practices Act. This is notable not only for the fact that the Eighth Circuit granted review. Writing for the panel, Judge Loken revoked the district court’s certification order, finding that the district court abused its discretion in certifying the class without conducing a “rigorous analysis . . . of what the parties move prove” and that Rule 23 requires.

                    The plaintiffs alleged that CMS and four in-house lawyers violated the FDCPA, by sending standard-form collection complaints and discovery requests. Plaintiffs alleged that the standard-form pleadings violated various provisions of the FDCPA, making them unfair or deceptive or practices that also violate Nebraska consumer protection laws.

                    The court started its analysis by noting that a preliminary inquiry at the class certification stage may require the district court to resolve factual disputes, even when the disputes overlap with the merits of the case.  Thus, class certification was only appropriate here if the standard-form complaints and discovery requests that CMS sent to putative class members were violative of the FDCPA and Nebraska consumer protection laws “on their face,” as the plaintiffs had alleged.  The district court erred, the court said, when it concluded that the predominant common question was whether the defendants sent each putative class member a standard-form complaint and discovery request, which violated the FDCPA and Nebraska law.  Rather, the court failed to conduct a “rigorous analysis” of what the plaintiffs must prove in order to prevail on their facial invalidity theories, the panel said. “Our task, then, is to fill this void which requires separate analyses of the legal theories attacking the standard form complaints and discovery requests.”

                    The court noted that it had recently “surveyed the complex question of FDCPA liability for litigation activities in a non-class action” and found that a debt collector’s fact allegations in state court are not false and misleading, in violation of the FDCPA, simply because the claims were not adequately supported in the collection action.  Instead, this analysis depends on a number of particularized factors.  In the class certification context, however, “these complexities—ignored by the plaintiffs and not addressed by the district court—are highly relevant to a rigorous analysis of the well-traveled Rule 23 inquiries into commonality, typicality, adequate representation of the class, predominance, and superiority.”

                    The court went on to explain that two scenarios were possible. First, if plaintiffs’ theory of liability proved wrong under the FDCPA and Nebraska law, then plaintiffs would lose on the theory attacking the standard-form complaints, and prompt resolution on summary judgment motions would have obviated the need for class certification.  Second, if plaintiff’s theory of state law was correct, many individualized issues would be required in order to solve class members’ claims.  As a result, the court held, the “records pertaining to every state court collection suit must be reviewed. . . .”

                    Finally, the panel ruled that the district court erred in ruling that plaintiffs’ separate claims against the in-house lawyers did not affect class certification.  The court noted that (1) only one in-house lawyer singed the standard-form pleadings, and that (2) these “debt-ridden young lawyers” have little net worth.  The court indicated that the class members may have had a stronger claim against the individual attorney who actually singed the pleadings in that consumer’s collection lawsuit.  “Thus, by alleging that impecunious individual defendants are jointly and severally liable to all members of the largest possible classes, plaintiffs created an issue of class action superiority that cannot be ignored at the class certification stage.”

                    Some helpful takeaways for federal court practitioners: At the class certification stage, raising only a few “common questions” is not enough to certify a class, particularly when the answers to those common questions do not generate common answers capable of resolving the litigation.   In addition, where individual issues appear, it may be necessary for the court to resolve factual disputes at or before the class certification stage, even though they overlap the merits of the case.  As was shown in the Powers decision, often times those individualized inquires make class certification untenable.