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Tuesday, August 9, 2011

Back Doctors Ltd. v. Metropolitan Prop. & Cas. Ins. Co.: Seventh Circuit Reverses Remand Under The CAFA Where Punitive Damages Not Disclaimed

A chiropractic clinic filed a putative statewide class action in state court which included a claim under the Illinois Consumer Fraud Act. While the plaintiff did not seek punitive damages, the plaintiff never disclaimed them, and never filed a binding stipulation or affidavit to that effect. It was undisputed potential actual damages exceeded $2.9 million. Defendant removed on the basis that even a 1:1 ratio of punitive damages meant the jurisdictional stakes exceeded the $5 million threshold under the Class Action Fairness Act.

The trial court remanded, finding it was not reasonably probable for the plaintiff to recover above $5 million. The Seventh Circuit accepted the defendant's petition for leave to appeal and reversed. The Seventh Circuit reasoned as follows:

(1) the reasonable probability language has been abandoned; the proper standard for the amount in controversy is that "unless recovery of an amount exceeding the jurisdictional minimum is legally impossible, the case belongs in federal court"

(2) there is no presumption against federal jurisdiction or removal, and the CAFA must be implemented according to its terms, not to disfavor removal of large-stakes class actions

(3) a plaintiff's post-removal statement in a case alleging fraud that it does not "now" want punitive damages is insufficient to make such damages legally impossible where the plaintiff neither disclaimed punitive damages in the complaint nor filed a binding affidavit or stipulation doing so

(4) it is questionable whether a named plaintiff, which has a fiduciary responsiblity to class members, can "throw away" punitive damages even if the plaintiff is willing to disclaim them to remain in state court

637 F.3d 827 (7th Cir. 2011)

(Please note that Westlaw mistakenly lists Lisa M. Lilly as representing both the defendant and plaintiff - Lisa M. Lilly, along with SNR Dentron US LLP and Hepler Broom, represented the defendant)

Monday, December 28, 2009

De Bouse v. Bayer AG: Proximate Cause under the Illinois Consumer Fraud Act

On December 17, 2009, the Illinois Supreme Court issued its opinion in De Bouse v. Bayer AG, No. 107528 (Ill. Dec. 17, 2009). The Court answered three certified questions. The first question was whether a plaintiff can maintain an action under the Illinois Consumer Fraud Act when the plaintiff did not receive, directly or indirectly, advertising or communications from the defendant. The Court answered no to this question. The second question was whether by offering a prescription drug on the market, a manufacturer is making a representation that the drug is reasonably safe. The Court answered that it was not. Third, the Court considered whether a consumer can maintain a cause of action under the ICFA based on indirect deception, i.e., deception of someone other than the plaintiff. The Court answered yes, but found that on the facts of the case, the plaintiff failed to state such a claim.

The plaintiff in De Bouse brought a putative class action suit against a pharmaceutical company. Plaintiff alleged Bayer violated the ICFA by fraudulently misrepresenting and suppressing material facts about the dangers of the drug Baycol. The plaintiff stated Bayer sold the drug representing it was reasonably safe; Bayer knowingly concealed information about the risks associated with taking the drug so that consumers would buy it; and that the plaintiff was indeed deceived when she purchased Baycol, a drug she would never have bought had she known of the risks. The Plaintiff also alleged that by concealing these risks, Bayer was able to charge prices beyond the fair market value of the drug.

But the plaintiff admitted she had no knowledge of Baycol before her physician prescribed it, and she did not research the drug or review any medical references. Based on these facts, Bayer moved for summary judgment, arguing the plaintiff could not have been actually deceived or suffered damages because she had not seen, read or heard anything about the effects of the drug.

The trial court denied the motion but certified questions under Supreme Court Rule 308. On appeal, the Fifth District found that a consumer could maintain an ICFA action based on indirect deception and concealment of safety risks. De Bouse v. Bayer AG, 373 Ill. App. 3d 774, 869 N.E.2d 365 (5th Dist. 2007). The Illinois Supreme Court, however, directed the Fifth District to vacate its judgment and reconsider in light of the recently decided case Barbara’s Sales v. Intel Corp., 227 Ill.2d 45, 879 N.E.2d 910 (2007). De Bouse v. Bayer AG, 226 Ill. 2d 613, 880 N.E.2d 181 (2008).

In Barbara’s Sales, the plaintiff alleged Intel represented that its new computer chip was the best on the market. Further, the plaintiff stated that the product’s name included the number four, seeming to represent that it was better and faster than chip number three. The Supreme Court determined this was mere “puffery” and so plaintiff had no actionable claim under the ICFA. Regarding the need to show actual deception, the Court noted that, in a class action, “plaintiffs must prove that each and every consumer who seeks redress actually saw and was deceived by the statements in question.”

When reconsidering De Bouse, the Fifth District determined that Barbara’s Sales did not change its previous ruling. De Bouse v. Bayer AG, 385 Ill. App. 3d 812, 896 N.E.2d 882 (5th Dist. 2008). The appellate court distinguished the two cases in that, while Barbara’s Sales concerned affirmative representations and immaterial “puffing,” Bayer allegedly suppressed negative safety facts that identified serious injuries associated with the drug. The court found that because a consumer is entitled to make informed choices, a cause of action exists under the ICFA based on a claim of indirect deception.

In the Illinois Supreme Court opinion in De Bouse, however, the Court relies on Barbara’s Sales, as well as numerous other ICFA decisions, stating: “The basic principle in each of the foregoing cases is that to maintain an action under the Act, the plaintiff must actually be deceived by a statement or omission that is made by the defendant. If a consumer has neither seen nor heard any such statement, then she cannot have relied on the statement and, consequently, cannot prove proximate cause.” While the Court found that a plaintiff could state a claim under the ICFA based on indirect deception, the Court ruled that the plaintiff failed to do so. This was so because the plaintiff alleged the general deception of “consumers, the medical community, the health care insurance industry, and the public,” but failed to allege that any specific doctor or other third party with a demonstrated connection to plaintiff was deceived. For this reason, the Court vacated the order denying Bayer’s motion for summary judgment.

Because the Court held summary judgment should have been granted for Bayer, the Court did not need to address whether Bayer’s appeal of the order granting class certification was timely, which was an issue raised below. The Court stated, however, that class certification is not proper when the named plaintiff has no cause of action and so cannot adequately represent the class. Because De Bouse no longer had a cause of action, the Court also vacated the order certifying the class.

The decision has wider implications for class actions under the ICFA. The Court reaffirmed its finding in Oliveira v. Amoco Oil Co., 201 Ill. 2d 134, 776 N.E.2d 151 (2002), which it had also cited in Barbara’s Sales, that “plaintiffs in a class action must prove that ‘each and every consumer who seeks redress actually saw and was deceived by the statements in question.’” Regarding the class issues in Barbara’s Sales, the Court stated: “Because the plaintiffs could not demonstrate that they were, as a class, deceived by such statements, the class certification was reversed.” Moreover, the Court’s findings that De Bouse must prove she was actually deceived to prove proximate cause under the ICFA, and that she failed to do so based on the individual facts of her claim, suggest that in many actions each consumer in a class will similarly need to prove proximate cause on the facts of his or her claim. Defendants opposing class certification likely will argue that deciding whether each class member has proved proximate cause will require, under De Bouse, individualized determinations that will predominate.

Wednesday, August 13, 2008

Mulligan v. QVC: Summary Judgment on Illinois Consumer Fraud Act Claim

In May, 2008, the First District of the Illinois Appellate Court decided Mulligan v. QVC, Inc., a case where the trial court denied class certification and granted summary judgment to the defendant on an Illinois Consumer Fraud Act claim. 2008 WL 1990450 (1st Dist. May 7, 2008). The plaintiff alleged QVC violated the ICFA by deceptively advertising suggested retail values that were too high. According to the plaintiff, these suggested retail values made it seem like shoppers were getting a better deal than they actually obtained by buying items from QVC.

But the plaintiff admitted that the suggested retail values seemed high to her when she saw the ads, that she continued purchasing QVC items even after filing the lawsuit, and that the suggested retail values were only one factor in her decision to purchase. Applying Barbara's Sales v. Intel, 227 Ill. 2d 45, 879 N.E.2d 910 (2007), the First District found the plaintiff failed to show she was actually deceived. (Under Intel and previous case law, to prove proximate cause in an ICFA case based on alleged deception, a plaintiff must show he or she was actually deceived.)

The Illinois appellate court also found the plaintiff sustained no actual damages. The court reasoned that because expert testimony showed the prices the plaintiff actually paid to QVC were still lower than the prices she would have paid in the market generally, she was not injured or damaged. In other words, she may not have gotten as good as a bargain as she'd hoped, but it didn't damage her financially because she still paid less by buying from QVC than she would have paid elsewhere.

Based on these findings, the appellate court affirmed summary judgment for the defendant, and affirmed the denial of class certification because the named plaintiff's claim failed.

While the appellate court did not further address class issues, this case can support a defendant's argument that both the actual deception/proximate cause and actual damages elements of an ICFA claim are individualized issues that a court will need to decide separately for each class member, precluding a finding that common issues predominate. Plaintiffs, on the other hand, can argue that Mulligan, Intel, and the previous seminal case Avery v. State Farm never addressed whether actual deception or actual damages can be determined on a class basis, so it is unknown how the Illinois Supreme Court woud rule on the question.