Bahamas Surgery Center, LLC v. Kimberly-Clark Corporation et al.

Filing 529

FINDINGS OF FACT AND CONCLUSIONS OF LAW by Judge Dolly M. Gee. In light of the foregoing, the Court finds in favor of Plaintiff and against Defendants on Plaintiffs UCL claim. Nevertheless, because Plaintiff fails to meet the standard for equitable relief, the Court DENIES Plaintiffs request for restitution and injunctive relief. The Court will enter Judgment accordingly. (See document for details.) (kti)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 14 15 16 17 ) BAHAMAS SURGERY CENTER, LLC, ) Case No.: CV 14-8390-DMG (PLAx) ) Plaintiff, ) ) FINDINGS OF FACT AND v. ) CONCLUSIONS OF LAW ) KIMBERLY-CLARK CORPORATION, ) ) et. al., ) ) Defendants. ) ) ) 18 19 The legal claims in this case came before a jury during a nine-day trial that began 20 on March 28, 2017 and concluded on April 7, 2017. The jury returned a verdict in favor 21 of Plaintiff Bahamas Surgery Center, LLC and against Defendants Kimberly-Clark 22 Corporation and Halyard Health, Inc. based on the claim of concealment. The jury 23 awarded Plaintiff and the class $3,889,327 in compensatory damages, prejudgment 24 interest, and $350 million in punitive damages against Kimberly-Clark. The jury also 25 awarded Plaintiff and the class $261,445 in compensatory damages, prejudgment interest, 26 and $100 million in punitive damages against Halyard Health. See Doc. ## 501, 503 27 (verdict forms). 28 -1- 1 In addition to this legal claim, Bahamas brought an equitable claim against 2 Defendants under California’s Unfair Competition Law (“UCL”). As to this remaining 3 equitable claim, the Court makes the following findings of fact and conclusions of law 4 pursuant to Rule 52 of the Federal Rules of Civil Procedure. I. 5 FINDINGS OF FACT1 6 7 This is a class action consisting of the following class members: All entities and 8 natural persons in California who purchased MICROCOOL* Breathable High 9 Performance Surgical Gowns (“MicroCool Gowns”) as end-purchasers from February 12, 10 2012 and January 11, 2015. See Class Cert. Order at 34 [Doc. # 270]; Amended Final 11 Pretrial Conference Order at 2 [Doc. # 450]. This excludes (a) governmental entities; (b) 12 any person or entity in which any judge, justice, or judicial officer presiding over this 13 matter and members of their immediate families and judicial staff, have any controlling 14 interest; and (c) any partner or employee of Class Counsel. Class Cert. Order at 34 n.15. 15 Bahamas bases its equitable class claim under the UCL on the same underlying 16 facts as the concealment claim that it presented to the jury, i.e., that Defendants concealed 17 material information from Plaintiff and the class relating to a defect in the MicroCool 18 Gowns and that, as a result, Plaintiff and the class overpaid for the gowns. Given that the 19 verdict forms did not require the jury to make any express findings as to why it found for 20 Bahamas on the sole legal claim, the Court looks to the jury instructions and the jury’s 21 verdict to discern the jury’s implicit determinations. 22 23 The Court instructed the jury that for Bahamas to prevail on the concealment claim, it must prove the following: 24 25 26 27 28 1 To the extent any of the Court’s findings of fact may be considered conclusions of law or vice versa, they are so deemed. -2- 1 2 3 4 5 6 7 8 9 10 11 12 13 1. That Defendants disclosed some facts to Plaintiff but intentionally failed to disclose other facts, making the disclosure deceptive; or That Defendants intentionally failed to disclose certain facts that were known only to them and Defendants knew that Plaintiff did not know or could not have reasonably discovered those facts; or That Defendants actively concealed important facts from Plaintiff or prevented Plaintiff from discovering those facts; 2. That Plaintiff did not know of the concealed facts; 3. That Defendants intended to deceive Plaintiff by concealing the facts; 4. That the concealed or non-disclosed facts were material; 5. That Plaintiff was harmed; and 6. That Defendants’ concealment was a substantial factor in causing Plaintiff’s harm. Jury Instructions No. 26. [Doc. # 493.] 14 Having found for Plaintiff, the jury must have implicitly found that Bahamas 15 proved by a preponderance of the evidence that Defendants intentionally failed to 16 disclose material facts to Bahamas and/or actively concealed material facts from 17 Bahamas relating to the MicroCool Gowns of which Bahamas was unaware, and which 18 led Bahamas to suffer harm. 19 The Court adopts, as it must, the jury’s implicit factual determinations as embodied 20 in its verdict, including its conclusion that Bahamas satisfied its burden at trial by proving 21 by a preponderance of the evidence that Defendants intentionally concealed material 22 information about the MicroCool Gowns from Bahamas and the class. 23 Given the sheer size of the jury’s verdict and the evidence presented at trial, one of 24 the implicit findings of the jury also includes, at the very least, a determination that 25 Defendants concealed information regarding a defect in the MicroCool Gown, and that 26 the defect was material to whether the MicroCool Gown deserved the AAMI Level 4 27 rating which Defendants used to market the gown. The specific defect on which the 28 evidence focused at trial was the vulnerability of the MicroCool Gowns’ sleeve seams to -3- 1 tearing and/or permitting access to fluids. See, e.g., Keith Edgett Testimony at 17 (“I 2 would see the complaints [relating to the MicroCool Gowns] . . . in lists that would be 3 circulated specific to strike-through or gross failure, meaning liquid penetration. I recall 4 seeing complaints of sleeves falling off the gowns.”) [Doc. # 506, Ex. A]. 5 The jury obviously credited Bahamas’ percipient witnesses and expert witnesses 6 over Defendants’ expert witnesses. See, e.g., id. at 8, 30 (“There was general awareness 7 that the [MicroCool Gown] product[] w[as] not compliant, and there was a general 8 concern with respect to what risks that presented to healthcare workers, patients, and the 9 community. . . . Yet that was not communicated to the customer base.”); Bernard Vezeau 10 Testimony at 8 (“[T]here was no priority to fix [the MicroCool Gowns’ compliance 11 issues] whatsoever, because making improvements to the [MicroCool Gown] product 12 was in direct conflict with improving the margins on the product. . . . And the clear 13 direction from Kimberly-Clark headquarters out of Dallas was we needed to make the 14 business more profitable.”) [Doc. # 506, Ex. B]; Joanne Bauer Testimony at 10 15 (testifying she does not dispute making statement that she was “sick and tired of the 16 noncompliance problems” that had plagued various products for close to a decade) [Doc. 17 # 506, Ex. D]; see also, e.g., Rolando Ferrera Testimony, 3/31/17 Transcript at 77 18 (discussing sleeve seam manufacturing problems with MicroCool Gown production at 19 Honduras plant and that Defendants had to have known about strikethrough and 20 channeling issues). 21 Additionally, the evidence presented at trial demonstrated that Bahamas and class 22 members incurred economic damages as a result of Defendants’ concealment and were 23 entitled to a partial refund of the amounts they overpaid to Defendants, as calculated by 24 Bahamas’ damages expert, Michael Williams. 25 In light of the evidence presented by the parties at trial and the jury’s implicit 26 findings, the Court finds that Bahamas proved by a preponderance of the evidence that 27 Defendants’ failure to disclose material information to, or active concealment of such 28 information from, Bahamas relating to the MicroCool Gown’s defective sleeve seam and -4- 1 non-compliance with the AAMI Level 4 standard (under either the 2003 or 2012 2 iterations of the standard) constitutes a fraudulent business practice that is likely to 3 deceive the reasonable consumer. 4 II. 5 CONCLUSIONS OF LAW 6 A. Unfair Competition Law 7 The UCL prohibits “unfair competition,” which is defined as any “unlawful, unfair 8 or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. A business 9 practice under the UCL is “fraudulent” if “members of the public are likely to be 10 deceived.” Comm. on Children’s Television v. Gen. Foods Corp., 35 Cal. 3d 197, 211 11 (1983). In particular, to establish a UCL violation based on concealment and/or non- 12 13 disclosure of material facts, a plaintiff must generally prove the following: (1) 14 Defendants engaged in “unfair competition” by engaging in a “fraudulent business act or 15 practice”; (2) plaintiff “has suffered injury in fact and has lost money or property as a 16 result of the unfair competition,” Cal. Bus. & Prof. Code § 17204; (3) the information 17 Defendants concealed or failed to disclose was material, see, e.g., In re Tobacco II Cases, 18 46 Cal. 4th 298, 326-27 (2009); and (4) Defendants had a duty to disclose the material 19 information omitted, see, e.g., Falk v. GMC, 496 F. Supp. 2d 1088, 1098 (N.D. Cal. 20 2007) (“If [Defendant] had this duty [to disclose], yet failed to follow through with it, 21 members of the public would very likely be deceived.”). The Court did not include 22 actual reliance as an element of the claim, because “[a]ctual reliance is presumed (or at 23 least inferred) when the omission is material.” Ehrlich v. BMW of N. Am., LLC, 801 F. 24 Supp. 2d 908, 919 (C.D. Cal. 2010) (citing Tobacco II, 46 Cal. 4th at 327). 25 B. Jury’s Implicit Determinations 26 “[W]here legal claims tried by the jury and equitable claims tried by the court are 27 ‘based on the same set of facts, the Seventh Amendment requires the trial judge to follow 28 the jury’s implicit or explicit factual determinations.’” Sanders v. City of Newport, 657 -5- 1 F.3d 772, 783 (9th Cir. 2011), quoting Miller v. Fairchild Indus., Inc., 885 F.2d 498, 507 2 (9th Cir. 1989) (“the district court in deciding the [equitable] claim will be bound by all 3 factual determinations made by the jury in deciding the [legal] claims”); Los Angeles 4 Police Protective League v. Gates, 995 F.2d 1469, 1473 (9th Cir. 1993) (reversing district 5 court’s denial of equitable relief because it “engag[ed] in factfinding contrary to the 6 implicit findings of the jury verdict”). 7 Because the verdict form does not contain express factual findings, the Court must 8 look to the jury instructions to determine whether findings can be inferred from the jury’s 9 verdict. Los Angeles Police Protective League, 995 F.2d at 1473. 10 Since Bahamas’ UCL claim is based on the same underlying facts as the legal 11 claim decided by the jury, it follows from the jury’s implicit determinations on the legal 12 claim that Bahamas satisfied its burden of establishing by a preponderance of the 13 evidence that Defendants engaged in a fraudulent business practice (i.e., concealment of 14 material information pertaining to the MicroCool Gown) likely to deceive the public and 15 reasonable consumers. See, e.g., Tu Thien The, Inc. v. Tu Thien Telecom, Inc., No. CV 16 11-09899-MWF (JEMx), 2014 U.S. Dist. LEXIS 111200, at *4 (C.D. Cal. Aug. 11, 17 2014) (adopting jury’s findings in ruling on equitable claims because they are based on 18 the same underlying facts as the legal claims). Accordingly, Bahamas prevails on its UCL claim.2 19 20 C. Appropriate Equitable Relief 21 22 23 24 25 26 27 28 2 The Court rejects Defendants’ argument that Bahamas lacks standing to bring its UCL claims against Halyard on behalf of the class. See Def. Resp. at 4 n.1 [Doc. # 521.] As the Court stated on the record, the juridical link doctrine permits Bahamas to pursue claims against Halyard. See 4/6/17 Transcript; see also La Mar v. H & B Novelty & Loan Co., 489 F.2d 461, 465–66 (9th Cir. 1973) (juridical link doctrine may apply doctrine may apply (1) where the named plaintiff’s harms “are the result of a conspiracy or concerted schemes between the defendants,” or (2) where it would be “expeditious” to combine the defendants into one action because they are “juridically related.”). As the Court pointed out in its April 6, 2017 oral ruling on the issue of standing, Halyard Health spun off from Kimberly-Clark on October 31, 2014 and assumed all liabilities in connection with the MicroCool Gowns through Defendants’ Distribution Agreement. See Amended Final Pretrial Conference Order at 2–3 (admitted facts) [Doc. ## 450, 477-1]. -6- 1 Bahamas seeks restitution in the same amount as the compensatory damages 2 awarded by the jury. The Court denies Bahamas’ request, because the jury’s 3 compensatory damages award is an adequate remedy at law. See, e.g., Greene v. Bowen, 4 639 F. Supp. 554, 563 (E.D. Cal. 1986) (“[A]s a general matter . . . a person suffering 5 monetary injury has an adequate remedy at law and accordingly equitable relief should be 6 denied.”). 7 In addition to restitution, Bahamas seeks injunctive relief in the form of a notice 8 from each Defendant’s Chief Executive Officer (“CEO”) concerning the trial’s outcome. 9 A plaintiff seeking a permanent injunction must demonstrate: 10 11 12 13 14 (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006). 15 16 Here, Bahamas contends that monetary damages do not adequately notify class 17 members regarding the material information that Defendants concealed. Assuming that is 18 true, Bahamas has not satisfied its burden to show that class members will likely suffer 19 irreparable harm in the absence of a letter from Defendants’ CEOs concerning the 20 outcome of the trial. 21 Gowns sold during the class period may still be sitting on shelves waiting to be used by 22 class members. Trial Ex. 203; Declaration of Michael Avenatti (“Avenatti Decl.”) ¶ 4, 23 Ex. 3 (evidence that MicroCool Gowns have a shelf life of five years). Nonetheless, 24 because there was no evidence that anyone had suffered physical harm while wearing a 25 MicroCool Gown as a result of a strikethrough or a torn sleeve, the Court cannot presume 26 without competent evidence that class members likely will suffer such harm due to future 27 MicroCool Gown use. Furthermore, there is nothing to prevent Class Counsel from 28 notifying class members of the outcome of the trial in any manner he chooses. It is reasonable to infer that some of the millions of MicroCool -7- 1 Finally, Plaintiff requests that Defendants be enjoined from issuing statements 2 seeking to “contradict, undercut, or otherwise minimize the findings of the Court or the 3 injunctive relief awarded.” See Pl. Post-Trial Brief at 22. Such relief is not necessary to 4 address Plaintiff’s and the class members’ harm, which is economic in nature. The Court 5 therefore rejects Plaintiff’s request. 6 In short, while Bahamas satisfies the elements for a UCL claim based on 7 fraudulent concealment, because it has not shown that it lacks an adequate remedy at law 8 that addresses the harm it suffered, its request for restitution and injunctive relief is 9 DENIED.3 10 III. 11 CONCLUSION 12 In light of the foregoing, the Court finds in favor of Plaintiff and against 13 Defendants on Plaintiff’s UCL claim. Nevertheless, because Plaintiff fails to meet the 14 standard for equitable relief, the Court DENIES Plaintiff’s request for restitution and 15 injunctive relief. 16 The Court will enter Judgment accordingly. 17 18 DATED: May 15, 2017 19 20 DOLLY M. GEE UNITED STATES DISTRICT JUDGE 21 22 23 24 25 26 27 28 3 In light of the Court’s ruling, it need not address Defendants’ arguments that the primary jurisdiction and abstention doctrines bar Bahamas from receiving any relief under the UCL. -8-

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