[Drug and Device Law] New Jersey Federal Baked Goods Fraud Class Actions Are Toast
Almost on this date in 1901 (tomorrow actually), Teddy Roosevelt for the first time uttered in public the immortal phrase, "Speak softly and carry a big stick". It is hard to find people who do not admire that statement. It is harder to find people who actually practice it. These days we are accustomed to wimpy parents and blowhard politicians who talk tough but do nothing. As a result, you get teenagers gobbling up the cheese-of-the-month delivery and Russia gobbling up Crimea. We also encounter some soft-hearted and -headed judges who speak loudly and wield no stick – at least when it comes to clamping down on bogus lawsuits. Corporate defendants hauled/haled/but-definitely-not-hailed into court are held to ludicrously high standards, while plaintiffs dwell in a world of do-overs and feckless flexibility.
A couple of weeks ago we discussed CD Cal Judge Wilson, who is as demanding as he is smart. One could say (and we have said) the same about Judges Posner, Boggs, Kozinski, and Rakoff. One could also say that about D NJ Judge Irenas who sits in the Camden federal courthouse, which we can see out our window if we crane our heads just so. If you read the Robing Room evaluations of Judge Irenas (which you must necessarily take with a grain of salt, since they are peppered with the comments of sore losers) a picture emerges of intelligence and rigor.
We can be an oath-helper on that fact. After our first year of law school, we summered at McCarter & English in Newark, NJ. Irenas was a partner there, and was universally acknowledged to be the smartest lawyer in the building. In our second or third week as a summer associate, we received an assignment from Irenas. The other summer associates cackled with glee. That is because in addition to having a reputation for being smart, Irenas had a reputation for not suffering fools gladly. And all of the summer associates were fools. An Irenas assignment was an opportunity, but a frightening one.
We can be an oath-helper on that fact. After our first year of law school, we summered at McCarter & English in Newark, NJ. Irenas was a partner there, and was universally acknowledged to be the smartest lawyer in the building. In our second or third week as a summer associate, we received an assignment from Irenas. The other summer associates cackled with glee. That is because in addition to having a reputation for being smart, Irenas had a reputation for not suffering fools gladly. And all of the summer associates were fools. An Irenas assignment was an opportunity, but a frightening one.
The assignment involved the inevitable research memo. After we turned it in to him and were grilled to a nice medium-well, we got on a conference call. At one point, the party on the phone voiced some trepidation and reservations, whereupon Irenas thundered a withering critique of said reservations. Loud dysphemisms filled the air. He must have seen us shaking with terror, because he smiled and gestured to show us that his finger, which was resting on the microphone (back then speakerphones were separate from the actual telephone, and were connected by a wire) was also pushing down on something we did not know existed - a mute button. He then released the button and rendered a much more temperate, but still piercing, dissection of the reservations. What he said was about a hundred times more insightful and felicitously expressed than our pathetic research memo. Lesson learned.
Our encounter with Irenas was all too brief that long-ago summer. In the decades since we have never encountered a smarter lawyer. Eventually, he became a judge, and his reputation for intelligence followed him to the federal courthouse. Of course, there are plenty of smart judges out there. But not all are willing to apply that intelligence to winnow away weak litigation. A delicious example of a brilliant judge taking a close look at a case and dismissing it for not passing muster is Mladenov v. Wegman's Food Markets, Inc., 2015 U.S. Dist. LEXIS 112740 (D.N.J. August 26, 2015).
Mladenov was actually three cases – three purported diversity class actions in which the plaintiffs alleged that three different grocery stores misrepresented bread and bakery products as being baked fresh in the store, when they were actually frozen, processed, or baked in another location, supposedly in violation of New Jersey consumer fraud statutes as well as express warranties. The class was defined as all individuals and entities within New Jersey who purchased bread and/or bakery products advertised and sold as “made in house” and/or “freshly baked” and /or "freshly boiled” and/or “fresh” in those three grocery stores located in New Jersey on or after December 14, 2008.
Judge Irenas tested the ingredients of the lawsuits layer by layer. The court initially asked the parties to address whether the classes would be ascertainable. The proposed classes consisted of consumers who purchased individual allegedly-misrepresented products and the proposed method of identifying class members would rely on retail records. The class definitions also required that the purchased products were specifically advertised at the time as based in store or baked fresh. But here is a big problem: the retail records, such as receipts, would not reflect such information. Moreover, the plaintiffs did not dispute that cash purchasers of the bread and bakery products who did not use loyalty cards could not be identified in any reliable way. So much for ascertainability. The court also decided that certification under Fed. R. Civ. P. 23(b)2) – which applies to actions for injunctive or declaratory relief – was unavailable here because even though such claims were included in the prayer for relief, it was obvious that the lawsuits were primarily for money damages.
Getting beyond the class certification issue, the court went on to dismiss the substantive claims because the plaintiffs failed to plead unlawful conduct, ascertainable loss, or a causal relationship between the alleged unlawful conduct and loss. The plaintiffs alleged that the defendants displayed in-store signs such as “STORE BAKED ROLLS.” But the complaints did not allege that the plaintiffs actually saw such signs, in which store that occurred, or when the plaintiffs saw it. As the court observed, the defendants’ stores contain numerous bread and bakery products and the signs advertising such products change often. It was simply not the case that all relevant items were stamped “freshly baked.”
Further, nowhere in their complaints or anywhere else did the plaintiffs allege facts supporting an out-of-pocket loss, i.e., that the products they purchased were worthless. Wherever the bread was baked, it was presumably edible. The plaintiffs claimed to be particularly health conscious consumers, but they did not allege that the relevant products were somehow less nutritious due to their not being made from scratch in the store. As the court saw it, the real allegation underlying the case was that the plaintiffs paid an unnecessary premium for what they believed to be store-made bread. That would be a benefit-of-the-bargain theory of ascertainable loss. But the plaintiffs “gave no basis for valuing the products they received as opposed to the products they were promised.” Rather, the plaintiffs alleged only that they purchased various bread and bakery products at premium prices over the years and would not have done so “in absence of Defendant’s misleading advertisement.” Easy to say. The problem with this theory ties in with the class action ascertainability issue: the plaintiffs did not specify any instance in which they even saw the defendant’s advertisements, either in the stores or on websites. The plaintiffs also failed to allege which food products they purchased as a result of viewing the advertisements. Thus, the court could not, without more, “infer from Plaintiffs’ pleadings a link between an affirmative misrepresentation and an ascertainable loss.”
The court slices open the plaintiffs’ allegations and finds more puff than filling. We then get to watch each legal theory fall, one by one. Thus, the court tartly dispenses with the misrepresentation claims because the “conclusory allegations regarding numerous potential purchases of various products over a substantial period of time with the mere specter of supposedly misleading advertisements generally existing in Defendants’ stores and websites will not suffice under Rule 9(b)’s heightened pleading standard.”
The court slices open the plaintiffs’ allegations and finds more puff than filling. We then get to watch each legal theory fall, one by one. Thus, the court tartly dispenses with the misrepresentation claims because the “conclusory allegations regarding numerous potential purchases of various products over a substantial period of time with the mere specter of supposedly misleading advertisements generally existing in Defendants’ stores and websites will not suffice under Rule 9(b)’s heightened pleading standard.”
The warranty claims disintegrated into mere crumbs. An express warranty claim “requires a plaintiff to allege that she brought a product based on a particular promise regarding that product, which ultimately proved false.” But, again, the plaintiffs cannot successfully plead such a claim without identifying in the complaints any specific sign or advertisement they saw and the products they purchased as a result. Again, the plaintiffs simply did not satisfy the recipe.
The claims for injunctive and declaratory relief also found their way to the waste bin. There was no plausible claim of threat of immediate harm. How could there be? After all, the plaintiffs disclaimed any intention to continue to purchase the defendants’ bread and bakery products. Instead, the plaintiffs argued that they were entitled to injunctive relief based on the threat of future harm to other consumers. How thoughtful. How inadequate. At this stage, when no class has been or ever will be certified, the court considered “Plaintiffs’ claims as they apply to Plaintiffs alone, not the putative class.”
We will end with the icing on the cake, the aspect of the case that is most relevant to drug and device law. The plaintiffs’ claims under the New Jersey consumer protection statute appeared to rely on regulations (specifically, 21 C.F.R. § 101.95) under the Food Drug and Cosmetic Act. But it is “well settled … that the FDCA creates no private right of action.” The plaintiffs in this bakery fraud case could not use the New Jersey statute “to bootstrap a FDCA claim they could not otherwise bring.” That is a tasty result. (We cannot resist wondering why California courts resist this sort of logic and rigor, and why they are willing to entertain so much silly food litigation premised on nothing more than a hunger for attorney fees.)
Mladenov may not be a drug or device case, but what it says about no FDCA private right of action, or class ascertainability, or connecting specific representations to injury, are all pertinent to our field. Plus there’s this: all lawyers should know that one cannot walk into Judge Irenas's courtroom with legal arguments that are half-baked.
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Posted By Steve McConnell to Drug and Device Law at 9/01/2015 10:38:00 AM --
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