Law

            Can a plaintiff sue in federal court for consumer fraud when he never purchased and never used the product?  This is not a trick question, and the obvious answer is also the correct answer.  No, he can’t.  But the point raises interesting strategic issues that we will get to in a minute.  The case du jour is Dapeer v. Neugrogena Corp., No. 14-22113-Civ, 2015 U.S. Dist. LEXIS 37644 (S.D. Fla. Mar. 25, 2015), where the plaintiff filed a class action alleging that the labeling for more than 20 different types of sunblock made deceptive sun protection claims.  Id. at **2-3.  Mind you, the plaintiff did not allege sunburn, or any other adverse effect of the allegedly underpowered and purportedly not-so-water-resistant lotions and sprays.  His claims were of the economic type, as class actions these days tend to be, alleging that he would not have purchased the products had he known that the products did not actually block the sun or resist water as well as the labels claimed.  Id. at *3.

            The problem for the plaintiff was that he had purchased only two of the products, leading the court to conclude that he lacked Article III standing to represent classes asserting claims over the products he never bought.  Apparently, there are district courts that would have allowed this plaintiff to do what he wanted to do, i.e., represent class members on claims involving over 20 products [see id. at *9 n.3], although we cannot see how that can possibly be.  The rule in the Eleventh Circuit seems rock solid:  “[A]t least one named plaintiff must establish Article III standing for each class subclaim.  In other words, Article III standing of a named plaintiff must be established on a claim-by-claim basis within the Eleventh Circuit, and deferring the standing determination to the class certification stage will yield no different result.”  Id. at *9 (citations omitted). 

            So to have standing in a claim alleging deceptive sales, the plaintiff must have bought the product, and the district court therefore dismissed the claims related to products the plaintiff did not purchase or use.  Id. at *9 (“Here, Plaintiff lacks Article III standing to bring claims on behalf of the . . . products he did not purchase because he cannot conceivably allege any injuries from the products that he never purchased or used.”).  The class action still went forward, but with claims over two products instead of more than 20. 

            This result is, again, pretty straightforward.  So why then is this case interesting?  Well, when it comes to asserting the lack of Article III standing in a class action, a defendant should be careful what it wishes for.  We’ve warned about the strategic risk of asserting lack of constitutional (Article III) standing in Class Action Fairness Act (“CAFA”) cases before, here and here.  Cases in federal court, including cases filed or removed under CAFA, are predicated on the federal court having the constitutional power to adjudicate them, and if there is no constitutionally cognizable harm (which usually means that no “case or controversy” and thus no standing), then successfully staying in federal court is highly doubtful.

            The result we fear is that the case will end up in state court, something the defense usually tries to avoid.  We came across this conundrum most recently in defending against a medical monitoring class action involving an implanted medical device.  The plaintiff filed the case in state court, and because personal injury class actions have gone the way of the dodo, the plaintiffs affirmatively alleged that they had experienced no present injury and were seeking only future monitoring for themselves and everyone else treated with similar devices.  So what to do?  If we removed the case under CAFA, what were the odds of sticking in federal court, where Article III standing is a constitutional prerequisite?  The risk is that removing a case under CAFA and then moving to dismiss for lack of Article III standing could become a self-defeating proposition, with the CAFA removal and the lack of standing essentially canceling each other out.  The standing argument may have effectively invalidated the CAFA removal, resulting in the remand of a live class action back to the state court from which it was removed.  The result is litigation in state court—which is where the case started to begin with. 

            The plaintiff in Dapeer filed his case directly in federal court—i.e., the sunblock defendant did not remove the case under CAFA—but the defendant faced a strategic pivot similar to ours.  It had a meritorious challenge to standing in connection with more than 90 percent of the plaintiff’s claims, so they fired that cannon and won.  Or did they?  Like we warned in our prior posts, a dismissal for lack of subject matter jurisdiction under Article III is without prejudice.  The claims therefore do not go away, but rather live to fight another day.  Sure, the defendant in Dapeer now has a pared-down class action in federal court, but because a dismissal for lack of standing is without prejudice, the other claims could wind up in state court, where standing requirements are often relaxed and where defendants typically prefer not to be.  On the other hand, the defendant could have left standing unchallenged and instead fought over the scope of the class when opposing class certification in the preferred forum—federal court. 

            There is no clear answer, but defendants should be mindful of this risk when challenging Article III standing.  Unless counsel is very sure that the state in question has identical standing/case-or-controversy requirements as the federal courts, asserting lack of constitutional standing as grounds for dismissal can be counterproductive.  Maybe the state in question has the same cognizable injury requirements as the federal system.  Maybe there are other rock solid defenses.  In many cases, defendants would be better served raising those issues instead of constitutional standing, because winning on those other defenses could get you what standing cannot—a dismissal with prejudice, which is a far preferable result.

            Here, the defendant may have been influenced by the apparent weakness of the plaintiff’s claims, which was not lost on the district court.  In permitting the pared-down claims to go forward, the district court cautioned as follows:  “Before moving on to consider [the defendant’s] other arguments however, I would like to note that my decision to allow Plaintiff to move forward with his high SPF claims is more a reflection of the standard required when considering a Rule 12(b)(6) motion to dismiss than of my confidence in the underlying merit of Plaintiff’s claims.  . . .  There remain a great number of questions regarding the viability of Plaintiff’s claims and the relief he seeks that will not be as easily overlooked as this case proceeds.”  Id. at **15-16.  It could be that an early assault was the way to go, and maybe this tenuous class action will collapse under its own, now-reduced weight.  If it is as weak as the district court made it out to be, we hope it does. 

            Whatever happens, the plaintiff got burned by asserting economic claims over products he never bought, touched, tasted, or smelled.  That is the correct result, but defendants should bear in mind that Article III standing can sometimes deflect the heat in directions they might not like.