Jacobs et al v. L'Oreal U.S.A., Inc. et al
Filing
244
OPINION AND ORDER: For the foregoing reasons, L'Oreal's motions to decertify the New York class is granted only to the extent of precluding the New York class from proceeding on a theory that the product packaging deceptively suggested that it was safer than other hair relaxers. The motion to decertify is otherwise denied in its entirety. L'Oreal's motion to exclude the testimony of Colin Weir is also denied, but the parties must submit, by November 9, 2018, a proposed schedule for the additional discovery relating thereto. The Clerk of the Court is directed to close entry number 228 on the docket of this case. (Signed by Judge Jed S. Rakoff on 10/29/2018) (jwh) Modified on 11/1/2018 (jwh).
USDC SDi'iY
DOCUMENT
ELECT&ONlCALLY FILED
DOC #: __---j"--+--1+.w......
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
DATF FTI t:D: ,-
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I
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I
In re: AMLA LITIGATION
:
I
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OPINION AND ORDER
L--------------------------~
JED S. RAKOFF, U.S.D.J.
This litigation concerns the sale by defendants L'Oreal
USA,
Inc. and its subsidiary Soft Sheen-Carson LLC
(collectively, "L'Oreal") of the "Amla Legend Rejuvenating
Ritual Relaxer"
(the "product"), a kit used to straighten curly
hair. Plaintiffs, charging that the product was unreasonably
dangerous and that its advertising was deceptive, brought
individual claims and also sought certification of a nationwide
class and several subclasses asserting claims under the laws of
various states. This Court originally certified a Florida class
and a New York class to pursue claims of unjust enrichment, as
well as declaratory and injunctive relief. The New York class
was further certified to pursue claims under New York's General
Business Law
§
349. In ruling on the motions for summary
judgment, however, the Court decertified all class claims except
the New York class claim under NYGBL
§
349.
L'Oreal now moves to decertify the one remaining class.
Following the parties' written briefing, the Court heard oral
argument on October 17, 2018. For the reasons stated herein, the
motion to decertify is partly granted, but only to the extent of
1
precluding the class from proceeding on the theory that the
product's packaging deceptively suggested it was safer than
other hair relaxers. The motion is otherwise denied.
Full familiarity with the history of this case is here
assumed. The factual allegations relevant to the present motion
are as follows:
The product is a kit consisting of five components:
scalp protector;
(2) a relaxer cream;
(3) a shampoo;
(1) a
(4) a
conditioner; and (5) an oil moisturizer. As a general matter,
relaxer creams make hair straighter by using an alkaline agent
to break the disulfide bonds in the hair's keratin proteins.
This process can cause hair to fall out and can also irritate or
burn the scalp. The purpose of a scalp protector is to prevent
or minimize such injuries by keeping the relaxer from touching
the user's scalp.
This Court previously found that a genuine dispute exists
as to whether the product's advertised scalp protector actually
protects scalps. Order dated July 31, 2018
("S.J. Order"), at
16, ECF No. 223. The Court further found that a reasonable jury
could conclude that the inclusion of the scalp protector in the
product increased its price and therefore caused purchasers to
pay a price premium. S.J. Order 24. Taken together, a reasonable
jury could conclude that L'Oreal promised purchasers a
functioning scalp protector; that purchasers paid more as a
2
result; that the scalp protector did not,
in fact,
function; and
that the purchasers therefore overpaid for the product.
This Court additionally found that a genuine dispute exists
as to whether the packaging misleadingly implied that the
product was safer than other relaxer creams. S.J. Order 22. The
product is advertised as "no-lye," which is literally true - the
active ingredient in the product is lithium hydroxide, not lye
(i.e. sodium hydroxide). S.J. Order 18-19. However, surveys
conducted by both L'Oreal and by the plaintiffs' expert J.
Michael Dennis suggest that many consumers understand "no-lye"
hair relaxers to be gentler and safer than relaxers that contain
lye. S.J. Order 19-21. Because "the evidence strongly suggests
that the product is not safer" than other relaxers, there exists
a genuine dispute as to whether these collective representations
deceptively implied that it was safer. S.J. Order 18. Whether,
however, this provides a basis for an additional class claim is
more problematic.
A class action may be maintained only if the class and
class representatives satisfy the requirements of numerosity,
commonality, typicality, and adequacy. F.R.C.P. 23(a)
Additionally, class membership must be in some sense
ascertainable.
In re Petrobas Sec. Litig., 862 F.3d 250, 257
(2d
Cir. 2017). Further, a class action seeking money damages, as
the class here does,
is permissible only if common questions of
3
law or fact predominate over individual issues and the class
action is superior to other methods for adjudicating the
controversy. F.R.C.P. 23(b) (3); Wal-Mart Stores,
564 U.S. 338, 362-63
Inc. v. Dukes,
(2011). Members of a 23 (b) (3) class must be
given "the best notice that is practicable under the
circumstances, including individual notice to all members who
can be identified through reasonable effort." F.R.C.P.
2 3 ( c) ( 2) (B) . The notice must include information about the
nature of the action, the definition of the class, the claims at
issue, that a class member may be excluded upon request, and
that a class judgment will be binding upon class members.
F.R.C.P. 23(c) (2) (B). It is the obligation of the Court to
ensure continued compliance with Rule 23's requirements. See
Amara v. CIGNA Corp., 775 F.3d 510, 520 (2d Cir. 2014); F.R.C.P.
23 (c) (1) (C). The burden remains on the plaintiffs to prove, by a
preponderance of the evidence, that these requirements remain
satisfied. Mazzei v. Money Store, 829 F.3d 260, 270 (2d Cir.
2016) .
As noted, this Court previously found that the only
surviving class claim is a claim by a New York class for
vio~ations
of New York General Business Law
§
349. That section
prohibits "[d]eceptive acts or practices in the conduct of any
business, trade or commerce or in the furnishing of any service
in [New York]." NYGBL
§
349(a).
In addition to enforcement
4
actions brought by the Attorney General, the statute authorizes
private actions by "any person who has been injured by reason of
any violation of this section" to recover "actual damages or
fifty dollars, whichever is greater." NYGBL § 349(h).
An action under
§
349 has three elements: "first, that the
challenged act or practice was consumer-oriented; second, that
it was misleading in a material way; and third, that the
plaintiff suffered injury as a result of the deceptive act."
Stutman v. Chemical Bank, 731 N.E.2d 608, 611
(N.Y. 2000). The
test for deceptiveness is objective, asking whether the
representations or omissions were "likely to mislead a
reasonable consumer acting reasonably under the
cir~umstances."
Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank,
N.A.,
647 N.E.2d 741, 745 (N. Y. 1995). Importantly, "reliance is
not an element of a section 349 claim." Stutman, 731 N.E.2d at
612.
In its current
motio~,
L'Oreal raises no fewer than 19
challenges to continued certification of the New York class.
Most of these challenges were unsuccessfully raised in L'Oreal's
previous motions, but the Court, in an excess of caution, has
reviewed them anew.
First, L'Oreal argues that there is no proof that the scalp
protector is universally defective, pointing out that this Court
observed in its summary judgment ruling that the plaintiffs'
expert, Patrick Obukowho, "cannot reliably testify that the
scalp protector in every kit is ineffective" because his
experiment bearing on that issue relied on the scalp protector
from just one kit. Def. Mem. Supp. Mot. Decertify ("Decert.
Mot.")
2, ECF No. 229. But, as this Court went on to say,
"[b]oth the relaxer and the scalp protector appear to be mass
produced, so one would expect any individual box to be the same
as the others. L'Oreal, of course,
is free to argue to the Jury,
including through presentation of its own experiments or other
evidence, that this outcome is not .
. representative." S.J.
Order 15. Plaintiffs are not obligated to produce evidence that
each and every box of a mass-produced product has identical
chemical properties. The mere possibility of a variance between
mass-produced products presents a question for the jury; it does
not mandate decertification.
Second, L'Oreal complains that the plaintiffs have not
identif 1ed the specific chemical deficiency in the scalp
protector that causes it to fail.
Decert. Mot. 2. L'Oreal does
not endeavor to explain why this should matter.
If the scalp
protector fails to keep the relaxer cream from reaching the
scalp, thus exposing users to irritation and burns, the chemical
basis for that failure is irrelevant.
Third, L'Oreal argues that the plaintiffs' evidence "shows
that the [scalp protector's] chemistry inherently operates
6
differently among users." Decert. Mot.
3. The evidence shows no
such thing. Obukowho opined that the degree of risk to users
from the relaxer cream might vary as a result of differences in
sweat, salt content, and so on. See Obukowho Dep., Lewis Deel.
Exh. 2, at 159:3-160:7, ECF No. 156-2. He never suggested such
differences might affect how well the scalp protector prevents
the relaxer cream from penetrating to the skin.
If L'Oreal means
to argue that there is no classwide proof that the relaxer cream
is dangerous - and therefore no proof that allowing it to touch
the skin matters - L'Oreal is mistaken. While this Court
previously concluded that there was insufficient proof that the
relaxer cream in the product is more dangerous than other
relaxer creams, there is no dispute that "all hair relaxers can
cause hair breakage and scalp burning." S.J. Order 4, 12. That
is ample basis for a jury to conclude ttat a working scalp
protector is important and that the allegedly defective scalp
protector here imposed a price premium on consumers.
Fourth, L'Oreal argues that the low rate of consumer
complaints about the scalp protector "forecloses classwide proof
of a uniform [scalp protector] defect." Decert. Mot. 3. The
Court was not convinced by this argument in L'Oreal's motion for
summary Judgment, see S.J. Order 15-16, and it is not convinced
now. Because the product instructions caution
~sers
not to let
the relaxer cream touch the scalp, it is plausible that many
7
users would not be injured even if the scalp protector failed to
work,
resulting in a low incidence of complaints. L'Oreal
protests that the plaintiffs have claimed that the scalp
protector defect results in virtually universal injuries, but
the phenomenon of litigants exaggerating the likelihood of
injury is hardly uncommon. Decertification is not mandated every
time a party's proof fails to entirely live up to their puffery
in legal memoranda.
Fifth,
L'Oreal argues that since, according to the
plaintiffs' evidence, the relaxer cream becomes more
crystallized, and therefore more dangerous,
as a function of
shelf life, the propensity to injure of any given batch is an
individual question. Decert. Mot. 5-6. But as the Court has
already observed,
it is uncontested that any relaxer cream can
cause scalp burning. Even if plaintiffs are correct that the
relaxer cream becomes more dangerous as it crystallizes, a
reasonable JUry could conclude that the totally non-crystallized
product was still capable of causing injury and therefore still
required a scalp protector. L'Oreal's own survey,
in which 85.4%
of respondents indicated that a scalp protector should always be
used before applying a no-lye relaxer,
S.J. Order 24-25
~
102, ECF No.
supports this conclusion.
(citing Lewis Deel. Exh.
10 ["Hibbard Rep."]
156-10). And while L'Oreal speculates that the
scalp protector might perform adequately against non8
crystallized relaxer cream, that is pure conjecture without any
even arguable basis in the evidence. L'Oreal is free to make
this argument to the jury;
Sixth,
it does not warrant decertification.
L'Oreal points to supposedly "[m]aterial variations"
in the product's packaging because only two of the three
versions of the product state that the scalp protector "Protects
Scalp & Skin." Decert. Mot.
6. But L'Oreal does not explain any
meaningful distinction between a package which advertises that
it contains a "scalp protector" and another package which
advertises that it protects scalps, and the Court can discern
none.
1
It is also not material that the cartons of two of the
three product variants include the phrase "Fast relaxing
processing time" and recommend a processing time of 15 rather
than 20 minutes.
Decert. Mot.
7.
Plaintiffs' evidence tends to
show that the relaxer cream penetrated the scalp protector
within a few minutes, and while that evidence may be challenged,
there is no evidence in the record suggesting that the scalp
protector would work adequately for 15 minutes but not for 20
minutes. The jury's finding as to the scalp protector's
: At oral argument, L'Oreal claimed that some online retailers do not
display the rear of the carton, where the scalp protector is
mentioned, and argued that online purchasers therefore could not be
exposed to the allegedly deceptive claim. Tr. Oct. 17, 2018, at 34:2235:3. The Court is not convinced. L'Oreal did not specify which online
retailers this applies to, nor point to any evidence in the record of
those retailers' online displays.
9
effectiveness will therefore be uniform for all class members,
whichever version of the product they purchased.
Seventh, L'Oreal notes that the instructions included with
the product varied between different versions of the product.
But any arguments predicated on differences between the
instructions, which were inside the box, are
irrelevan~;
class
members were injured (if at all) by the payment of a price
premium, which was complete before they ever opened the package
and read the instructions.
Eighth, L'Oreal points out that one of the carton
variations does not contain the phrase ''Ref ills to reveal
visibly fuller,
that,
silkier hair." Decert. Mot. 7. The Court agrees
insofar as this phrase is not common to all versions of
the product, plaintiffs should not rely upon it to prove class
liability. But given the abundance of other challenged
statements that arguably conveyed the allegedly misleading
message that the product was safer than other relaxers, this
minor discrepancy does not mandate decertification.
Ninth, L'Oreal points out that some cartons were labeled
"for all hair types" and others for "medium to coarse hair."
Decert. Mot. 7. This minor variation is not material. If the
jury finds that the balance of the representations falsely
implied that the product was safer than other hair relaxers,
10
then the product was deceptive whether it was advertised to all
consumers or only to a subset.
Tenth, L'Oreal argues that customers who knew the risks of
the product could not have been reasonably deceived by the
deceptive packaging regarding the scalp protector. Decert. Mot.
11. This is a factual assertion, but L'Oreal offers no evidence
to support it. Moreover, while it is certainly possible that
many buyers understood hair relaxers to carry certain risks,
it
seems unlikely that any significant number of buyers understood
L'Oreal's scalp protector to be ineffective at protecting the
scalp, as alleged here.
It seems even less likely that those
buyers would pay a price premium just to obtain a scalp
protector they knew to be dysfunctional. In any event, where
"materiality is judged according to an objective standard," it
is "a question common to all members of the class." Amgen Inc.
v. Connecticut Retirement Plans and Trust Fun?s, 568 U.S. 455,
459 (2013).
Eleventh, L'Oreal argues that the record lacks proof that
individual plaintiffs saw the labeling that advertised the scalp
protector. Decert. Mot.
13 n.9. But when, as here, the
challenged statements are on the packaging of the product
itself, such individualized proof is unnecessary. This is not a
case where a class seeks to challenge the content of a separate
advertisement, to which any individual buyer may or may not have
11
been exposed. Cf. Goldemberg v.
Companies,
Inc.,
8 F. Supp.
Johnson & Johnson Consumer
3d 467,
480
(S.D.N.Y.
2014).
It is
reasonable to assume that any buyer of the product saw the
product's packaging.
If the law required individualized proof
that every class member saw the challenged statements, no matter
how obvious and prominent a part of the packaging, consumer
class actions would be impossible to maintain.
Twelfth, L'Oreal argues that the plaintiffs have not shown
that New York law applies to every class member,
since the class
includes anyone who bought the product in New York and is not
limited to New York residents.
Decert. Mot.
9-10. The Court is
satisfied that New York courts would apply a New York consumer
protection law to a transaction that occurred in New York.
2
For
tort claims, New York applies the law of the jurisdiction with
the greatest interest in the litigation. Schultz v. Boy Scouts
of America,
Inc.,
480 N.E.2d 679,
684
(N.Y.
1985). For laws that
regulate conduct, "the law of the jurisdiction where the tort
occurred will generally apply because that jurisdiction has the
greatest interest in regulating behavior within its borders."
Cooney v. Osgood Machinery,
Inc.,
612 N.E.2d 277, 280
(N.Y.
1993) .
Because this case arises under diversity jur1sd1ction, this Court
applies New York conflict-of-law rules. Klaxon Co. v. Stentor Elec.
Mfg. Co., 313 U.S. 487, 496 (1941).
2
12
Here, a prohibition on deceptive advertising is conductregulating. New York, as the site of the tort for all class
members,
is therefore the appropriate source of law. The New
York Court of Appeals has held that
§
349 applies to
"transactions that take place in New York State" and "does not
turn on the residency of the parties." Goshen v. Mutual Life
Ins. Co. of New York, 774 N.E.2d 1190, 1196
(N.Y.
2002).
L'Oreal claims the class also includes people who, while
outside New York, purchased the product online from a New Yorkbased online retailer, or had the product delivered to a
location in New York.
Decert. Mot.
10. The Court disagrees. The
certified class was limited to persons "who bought one or more
of the products in New York." Order on Class Certification 37,
ECF No.
138. The phrase "in New York" modifies the phrase "who
bought," meaning that the person who bought the product was in
New York at the time of the purchase. The class therefore does
not include people who bought the product from outside of New
York, even if the seller was located in New York or the buyer
had the product shipped to New York post-purchase.
3
3 In Goshen, the New York Court of Appeals interpreted § 349 not to
apply to out-of-state transactions. 774 N.E.2d at 1196. The Second
Circuit has implemented that rule through a "transaction-based" test,
wherein the location of the consumer is not dispositive. Cruz v.
FXDirectDealer, LLC, 720 F.3d 115, 122 (2d Cir. 2013). Arguably, an
onl1ne transaction with a New York business occurs in New York, thus
implicating the GBL. See, e.g., id. at 123-24 (holding that
transactions involving out-of-state plaintiffs "clearly" "occurred in
New York" where customer communications and payment had to be sent to
13
Thirteenth,
in what is really its only genuinely new
argument, L'Oreal argues that the class representation is not
adequate because the named plaintiffs disclaimed class members'
damages exceeding $50 in favor of classwide statutory damages.
Decert. Mot. 19. L'Oreal argues that class members will be
precluded from pursuing individual actions under New York's
"transactional" rules of res judicata. Decert. Mot. 19 n.12.
It may be true that,
following a Judgment in this case, New
York law would preclude class members from recovering in
connection with the purchases at issue. See Josey v. Goord, 880
N.E.2d 18, 20
(N.Y. 2007)
("[O]nce a claim is brought to a final
conclusion, all other claims arising out of the same transaction
or series of transactions are barred, even if based upon
different theories or if seeking a different remedy.")
(quoting
O'Brien v. Syracuse, 429 N.E.2d 1158, 1159 [1981]); Small v.
Lorillard Tobacco Co., Inc., 252 A.D.2d 1, 11 (1st Dep't 1998),
aff'd 720 N.E.2d 892
(N.Y. 1999)
(applying this principle to
putative class action); see also Taylor v. Sturgell, 553 U.S.
defendant's New York office); Ward v. TheLadders.com, Inc., 3 F. Supp.
3d 151, 168 (S.D.N.Y. 2014) (holding that plaintiffs had sufficiently
pleaded § 349 claim where defendant "operated a website and maintained
its bank account in New York," because communications and transactions
"occurred on or through the website itself, which is equivalent to
communicating or transacting directly with a New York address").
However, in light of the Court's determination that the definition of
the class excludes purchases by customers located outside of New York,
the Court need not decide whether § 349 claims would otherwise lie for
such customers.
14
880, 891 n.4
(2008)
(holding that federal courts sitting in
diversity apply the preclusion rules of the state in which the
court sits). And if class representatives gave up potentially
lucrative individual damages claims of absent class members in
order to make the class action more feasible,
that might present
a conflict. Here, however, the Court is satisfied that class
representation is adequate.
To begin with, L'Oreal's asserted conflict appears more
hypothetical than real. L'Oreal relies heavily on the
plaintiffs' own language, which claimed that every user of the
product suffered injuries amounting to thousands of dollars. But
hyperbole is not uncommon in litigation, and the mere fact that
the plaintiffs likely exaggerated the ubiquity of user injury
does not compel this Court to adopt those claims as true.
If
absent members of the New York class really did have viable and
lucrative personal injury claims, they likely would have filed
these claims by now. L'Oreal points to lawsuits in Louisiana,
Maryland, and Alabama, see Decert. Mot. 19; Tr. Oct. 17, 2018 at
21:12-14, but has not identified any suit by an absent member of
the New York class.
The Court's confidence that there are few,
if any,
outstanding claims is bolstered by the fact that no class member
has opted out. L'Oreal treats this fact as damaging to
plaintiffs, apparently seeking to imply that the notice was
15
inadequate because class members did not receive personal
notice. Decert. Mot. 20. However,
in previously opposing the
notice plan, L'Oreal argued that the number of purchasers in New
York was likely low and that the plan was overbroad - in other
words,
that the notice would reach too many people, rather than
too few.
Def. Mem. Opp. Mot. Distrib. Class Notice 1--2, ECF No.
149. 4 This Court nonetheless approved the notice plan, which
included individual notice to class members known to the parties
and notice by print and onl1ne publication. Order dated Jan. 5,
2018, at 3-6, ECF No.
153. In particular,
responding to
L'Oreal's overbreadth argument, this Court noted that it was
preferable to "err on the side of comporting with due process
and providing broad notice rather than unnecessarily increasing
the risk of absent plaintiffs being bound by judgment in class
actions about which they did not know." Id. at 4.
Admittedly, the efforts of class counsel to locate
individual class members have been less than sterling. At oral
argument, L'Oreal represented that, at the time of class
certification, plaintiffs had seven outstanding subpoenas to
retailers seeking information about individual purchasers. Tr.
Oct. 17, 2018 at 24:20-22. After certification was granted,
4
While notice must be provided to individuals "who can be identified
through reasonable effort," F.R.C.P. 23(c) (2) (B), L'Oreal took the
position that there was "no feasible or possible way to identify"
individual class members here. Def. Mero. Opp. Mot. Distrib. Class
Notice 4.
16
however, plaintiffs did not follow up on those subpoenas, take
depositions, or retrieve documents. Tr. Oct. 17, 2018 at 24:1722. When asked about this at oral argument, plaintiffs' counsel
explained that her experience in past, unrelated litigation was
that retailers either did not have accurate contact information
for customers or did not retain records going back far enough.
Tr. Oct. 17, 2018 at 25:12-17. That is a woefully deficient
explanation. Having propounded the subpoenas,
it would have cost
class counsel very little to at least follow through with them.
Also troubling to the Court is the fact that, as recently
as August 23, 2018, the notice website had not been updated
since February 8. Tr. Oct. 17, 2018 at 24:23-25. It still told
visitors that the trial in this case had taken place
o~
April
30, 2018. Tr. Oct. 17, 2018 at 25:1-2. At oral argument,
plaintiffs' counsel was unable to offer any explanation for this
"oversight." Tr. Oct. 17, 2018 at 28:7-12.
Despite these failings, however, the Court remains
satisfied that the notice in this case was adequate. Although
the website should have been updated, the outdated trial
schedule it gave was still later than the final opt-out date,
which was April 2, 2018. Thus, any visitor to the site after
April 30 would have missed the opt-out deadline in any event,
and any harm caused by the failure to update the trial schedule
was therefore minimal.
17
Moreover, although the Court is mystified that plaintiffs
abandoned their efforts to obtain more information about
individual class members, the notice plan approved by this Court
did not require plaintiffs to seek out such information.
It only
required individual notice to be provided to class members whose
information was already in L'Oreal's or class counsel's
possession. Order dated Jan.
5, 2018, at 3. According to a
declaration filed by a representative of Epiq, the notice
administrator, notice was sent by mail to 18 members of the New
York class, as well as to 140 email addresses. Azari Deel.
~~
7,
9, ECF No. 241. Notice was also published in Rochester, Buffalo,
Syracuse, Albany, and New York City newspapers, and online via
Facebook and the Google and Yahoo ad networks. Azari Deel.
~~
10-15. The case website registered 26,801 unique visitors.
Azari Deel.
~
18.
Given the foregoing,
the Court remains satisfied that
notice to class members was sufficient. If L'Oreal means to
relitigate the sufficiency of the notice plan now,
it is
woefully untimely. The Court approved the plan in January and
the opt-out deadline was in April. The case is prepared to go to
trial. Decertification is not mandated by the bare possibility
that a few class members might not have seen the notice and
might have individual claims that they wish to bring but have
not yet filed.
18
Fourteenth, L'Oreal raises concerns over whether there is
adequate proof that class members were injured. To begin with,
L'Oreal claims that each class plaintiff admitted that "physical
injuries form the injury-in-fact that confers Article III
standing for class members' statutory consumer protection
claims." Decert. Mot. 8. But it bases this suggestion on the
responses of plaintiffs' counsel to certain requests for
admission.
In actuality, plaintiffs' counsel did not concede
that physical injury was what gave class members standing; they
simply denied a request for admission that asserted that
physical injury did not form the basis for standing. See Lewis
Deel. Exhs. 2-4,
~
20. And while a party's admission is
"conclusively established," F.R.C.P.
36(b), that is not to say
that a party's denial conclusively establishes the opposite of
what is denied. See Hicks v. Mercedes-Benz U.S.
Intern.,
Inc.,
877 F. Supp. 2d 1161, 1170 (N.D. Ala. 2012)
("A denial simply
shows that the issue has not been conceded;
it does not possess
the heft of an affidavit, stipulation,
deposition testimony,
status of an
interrogatory answer, or
let alone the 'conclusively established'
admission.").~
When the Court raised this point at oral argument, L'Oreal responded
that Rule 36 requires denials to be specific. Tr. Oct. 17, 2018 at
24:1-4. But that does not give denials independently binding effect.
Rather, if a party feels that a denial is insufficient, it may move to
determine the sufficiency of the answer, at which point the court may
0
order that the matter is admitted. F.R.C.P. 36(a) (6). L'Oreal never
19
In any event, this Court has already concluded that there
is sufficient evidence of injury to every class member: "If
there is a price premium, then every purchaser of the kit paid
more than they otherwise would have, so every purchaser was
injured." S.J. Order 26. That satisfies Article III's injury-infact requirement.
Fifteenth, L'Oreal contends that there is no classwide
proof that the alleged defect manifested. Decert. Mot. 8-9. The
cases cited by L'Oreal almost all involve claims based on a risk
of injury from a product. See, e.g., Rivera v. Wyeth-Ayerst
Laboratories, 283 F.3d 315, 319 (5th Cir. 2002)
(product
liability claim based on allegedly defective product not
cognizable where class plaintiffs conceded product was not
defective as to them); Braun v. Abbott Laboratories, 895 F.
Supp. 530, 563
(E.D.N.Y. 1995)
(injuries resulting from exposure
to diethylstilbestrol in utero cognizable only once injuries
manifested). Of course the mere possibility that a product is
defective will not support a cause of action. See In re
Bridgestone/Firestone,
Inc., 288 F.3d 1012, 1017
(7th Cir. 2002)
(plaintiffs not entitled to recovery on theory that latent
defect made every unit less valuable). That is the purpose of
requiring the defect to "manifest." But, as this Court has
asked this Court to rule on the sufficiency of plaintiffs' answers,
and so their denials are not binding.
20
already explained, plaintiffs do not here allege a latent
defect;
rather,
"[t]hey allege that the scalp protector does not
protect scalps. That defect,
if it exists, was manifest from the
moment of purchase." S.J. Order 33.
Sixteenth,
L'Oreal argues that there cannot be classwide
proof of injury because
worked and (2)
(1)
some scalp protectors might have
some scalp protectors might have failed as the
result of individual misuse,
rather than defect.
Decert. Mot.
12-13. This is essentially a recapitulation of L'Oreal's earlier
argument that there is no proof that the scalp protector failed
universally. The Court's answer is the same: L'Oreal may argue
to the jury that any defects were exceptional, or that failure
was the result of misuse, and it will be the plaintiffs' burden
to prove otherwise. This factual dispute does not mandate
decertification.6
Seventeenth,
L'Oreal repeaLs its argument that Small v.
Lorillard Tobacco Co.,
720 N.E.2d 892
6
(N.Y.
1999),
imposes a
L'Oreal claims that it would be unfair to preclude them from
inquiring into absent class members' misuse of the product. Decert.
Mot. 13. But such evidence would be relevant only if the plaintiffs
planned to prove the product's defect by anecdotal proof of in]uries
sustained by absent class members. Rather, the plaintiffs' case will
likely be built on a combination of expert testimony and anecdotal
proof from named plaintiffs. As to the latter, L'Oreal will be given
every opportunity to convince the jury that their injuries were the
result of misuse rather than defect. And insofar as plaintiffs ask the
jury to extrapolate from the named plaintiffs' individual injuries to
find classw1de defect, L'Oreal can ask the Jury to extrapolate from
the named plaintiffs' misuse. L'Oreal does not explain why it requires
further "individualized" defenses against non-individualized proof.
21
physical injury requirement for claims under NYGBL § 349. This
Court has rejected this precise argument twice before, and
L'Oreal makes no effort to engage with the substance of those
rulings. See S.J. Order 32-33; Order on Class Certification 30.
The Court will explain once more.
In Small, the New York Court
of Appeals held that the mere fact of deception in the course of
buying a product does not constitute injury. 720 N.E.2d at 898.
Crucially, however,
the plaintiffs in that case did not "allege
that the cost of cigarettes was affected by the alleged
misrepresentation," and the Court of Appeals explicitly did not
foreclose the possibility that "a plaintiff might have a claim
for the higher price the consumer paid for the product as a
result of the misrepresentation." Id. at 898 & n.5. That is
precisely the claim here: that plaintiffs paid more than they
should have because of deceptive marketing. Thus, contrary to
L'Oreal, there is no improper conflation of deception and
injury. "The deception is the false and misleading label, and
the injury is the purchase price." Ebin v. Kangadis Food Inc.,
No.
13-cv-2311, 2013 WL 6504547, at *5
(S.D.N.Y.
Dec. 11, 2013)
(Rakoff, J.); see also Irvine v. Kate Spade and Company, No.
cv-7300, 2017 WL 4326538, at *5
16-
(S.D.N.Y. Sep. 28, 2017)
(holding that plaintiffs' allegation that goods they purchased
were worth less than the prices paid was a "classic" example of
price premium injury).
22
L'Oreal relies on Izquierdo v. Mondelez Internat'l,
No. 16-cv-4697, 2016 WL 6459832
Inc.,
(S.D.N.Y. Oct. 26, 2016). In
Izquierdo, the court held that the plaintiffs had failed to
allege injury from the defendant's practice of allegedly
packaging movie theatre candy in a way that made the boxes
appear to contain more candy than they actually did. Id. at *7.
In other words, the Izquierdo court concluded that a consumer
who expected to receive more candy than the box actually
contained was not thereby injured. Id. But Izquierdo is
distinguishable, because the plaintiffs in that case did not
"allege[] that they paid a higher price for the Candy than they
otherwise would have, absent deceptive acts." Id. Here,
plaintiffs do claim to have paid a higher price. Nothing in
Izquierdo suggests that the provision of a lesser quantity of
goods than advertised cannot serve as evidence of a price
premium.
7
7
To the extent that Izquierdo stands for the proposition that
consumers are not injured when they receive fewer goods than
advertised, this Court respectfully disagrees. See Daniel v. Mondelez
Internat'l, Inc., 287 F. Supp. 3d 177, 197 (E.D.N.Y. 2018) (holding
that "less product than promised constitutes an inJury"). The Second
Circuit has held that a pla1nt1ff is inJured, within the meaning of
NYGBL § 349, when the plaintiff "purchased a product and did not
receive the full value of her purchase." Orlander v. Staples, Inc.,
802 F.3d 289, 302 (2d Cir. 2015). In doing so, the Second Circuit
approvingly cited a New York trial court decision holding that a
plaintiff had adequately pleaded a § 349 violation by alleging that
defendants sold propane in what appeared to be 20-pound tanks, but
actually contained only 15 pounds of propane. Id. (citing Lazaroff v.
Paraco Gas Corp., 967 N.S.Y.2d 867, 2011 WL 9962089, at *1, *5 [Sup.
Ct. Kings Cty. Feb. 25, 2011]). But, in any event, plaintiffs here do
not claim injury simply because the product they purchased was less
23
Eighteenth, L'Oreal argues that plaintiffs have failed to
produce a reliable methodology to measure classwide damages
because the only evidence of the total number of New York
purchases is Colin Weir's untimely expert declaration. Decert.
Mot. 17. The Court notes that the damages methodology proposed
by plaintiffs - multiplying the number of New York purchases of
the product by $50 - is quite reliable, since NYGBL
§
349
provides for statutory damages. That is sufficient to
"establish[] that damages are capable of measurement on a
classwide basis." Comcast Corp. v. Behrend, 569 U.S. 27, 35
(2013)
(emphasis added).
However, L'Oreal is correct that Weir's declaration is the
only record evidence of total retail purchases in New York.
8
If
the declaration should have been stricken as untimely, then
plaintiffs have not come forward with evidence sufficient to
carry their burden of showing classwide damages.
9
valuable than expected, but because they allegedly paid a higher price
than they would have absent the deception.
8
Helpfully, the plaintiffs agree with L'Oreal that Weir's declaration
is an expert report and do not dispute that it is the only evidence in
the record of total retail sales. See Mem. Opp. Mot. Exclude 2, ECF
No.
187.
9
Although L'Oreal moved to exclude Weir's report in its summary
briefing, the Court denied that motion (and other Daubert
motions) as moot because its resolution was not material to the
Court's rulings on summary Judgment.
judgmen~
24
Fede r al Ru l e o f Ci vi l
Procedure 2 6 ( a ) ( 2 ) ( B ) re qu i res the
timely disclosure of any expert reports. Here, the deadline for
plaintiffs to file their expert reports was October 6, 2017, but
Weir's report was not disclosed, nor was he even identified as a
witness, until plaintiffs submitted their papers in opposition
to L'Oreal's motion for summary judgment on March 6, 2018. When
a party fails to disclose a witness, the witness may not be used
"unless the failure was substantially justified or harmless."
F.R.C.P. 37(c).
In deciding whether to exclude belatedly
disclosed evidence, the court must weigh four factors:
party's explanation for failure to timely disclose;
the
(2) the
importance of the testimony of the precluded witness;
prejudice suffered by the opposing party; and (4)
(1)
(3) the
the
possibility of a continuance. Patterson v. Balsamico, 440 F.3d
104, 117
(2d Cir. 2006).
As to the first factor,
the explanation for the untimely
disclosure, plaintiffs report that they were told by defense
counsel that L'Oreal receives third-party retail sales data, see
Rivas Deel. Exh. 2
~
2("Rutherford Deel."), ECF No. 188-2, and
that defense counsel orally promised to produce such data during
discovery but failed to do so, see Pl. Mem. Opp. Decert. 17.
Plaintiffs claim to have realized it was necessary to introduce
retail sales data only after the December 20, 2017 deposition of
Angela Rutherford, L'Oreal's F.R.C.P. 30(b) (6) witness, at which
25
point it was clear that L'Oreal would not be producing evidence
of retail sales. However, even assuming arguendo that defense
counsel did in fact represent to plaintiffs that sales data
would be forthcoming,
there is still no excuse for plaintiffs'
failure to seek this Court's assistance to obtain such data in a
timely fashion,
or to update their disclosures pursuant to
F.R.C.P. 26(e).
As to the second factor, however, Weir's report and
testimony is crucially important. Without it, there would be no
evidence of record supporting classwide damages and the class
action might have to be discontinued. Complete exclusion would
therefore be a harsh penalty.
As to the third factor,
the Court finds that L'Oreal has
suffered minimal, if any, prejudice from the delay. L'Oreal's
main claim to prejudice is that it needs to depose Weir and to
hire a rebuttal expert to prepare a report. Plaintiffs represent
(and L'Oreal does not contest) that the IRI sales data upon
which Weir's report was based was disclosed in July 2017. Pl.
Mot. Opp. Decert. 17. Although Weir's identity and report were
not disclosed until March of 2018, the instant motion was filed
in late August. Because of scheduling conflicts, trial will not
begin until 2019. By the time of trial, there will have been
more than enough time for L'Oreal to depose Weir and hire a
rebuttal expert. That should dissipate whatever prejudice
26
initially attached to the belated disclosure. And as for the
fourth factor,
the rescheduling of the trial means that a
continuance has, in effect, already been granted.
In short, while the Court is not fully satisfied by
plaintiffs' counsel's explanation for the delay,
the Court
concludes that the belated disclosure of Weir's report was
harmless and that exclusion would be inappropriate. Therefore,
Weir will be permitted to testify as an expert at trial, and the
plaintiffs will have admissible evidence to support their
damages model. L'Oreal will be permitted to depose Weir and to
retain a rebuttal expert if it so chooses.
If L'Oreal does hire
a rebuttal expert, plaintiffs will have a chance to depose that
expert after the filing of the expert's report. Accordingly, the
parties shall submit to the Court, by no later than November 9,
2018, a proposed schedule for all this additional discovery.
Nineteenth, L'Oreal argues that the plaintiffs have failed
to calculate the product's market price but for the alleged
deception and therefore cannot prove that every class member
paid a price premium. Decert. Mot. 13-15. The argument goes as
follows: The record shows that the product was sold by various
vendors for various prices.
10
Plaintiffs have not adduced any
:o Specifically, two named plaintiffs attested to the prices they paid
for the product. Turnipseed Dep. 138:21-139:2, ECF No. 125-5 ($5.50,
including a coupon for $1.50); Jacobs Dep. 65:11-13, ECF No. 125-3
(eight dollars and change). Additionally, in August of 2017, counsel
for L'Oreal ordered three units of the product from three different
27
expert opinion as to the "fair" market price for the product
absent the alleged misrepresentations. Therefore, some class
members may have paid less than the fair price, and thus did not
pay a price premium as a result of the alleged deception.
For the most part, the Court is not persuaded. A price
premium exists when the price of a product is artificially
raised by deceptive or fraudulent claims. In some cases,
ascertaining whether such a premium exists will require detailed
expert analysis into the factors that influence pricing,
including a comparison of the prices charged for similar
products and isolation of confounding variables. That is
especially so when the impact of the allegedly deceptive
labeling on price is unclear or speculative - as with many of
the cases cited by L'Oreal. See, e.g., Weiner v. Snapple
Beverage Corp., No. 07-cv-8742, 2010 WL 3119452, at *6 (S.D.N.Y.
Aug. 5, 2010)
(holding that plaintiffs failed to show impact of
"All Natural" juice label on price); Ault v. J.M. Smucker Co.,
310 F.R.D. 59, 67-68
(S.D.N.Y. 2015)
(similar, for "All Natural"
vendors for pre-tax prices of $13.14, $8.87, and $11.99. Doherty Deel.
~ 3(a)-(c), ECF No. 119. Finally, plaintiffs' expert Colin Weir
reports that the product was sold for between $7.38 and $10.34 in New
York, with a median price of $9.79. Rivas Deel. Exh. 36 ("Weir Deel.")
~ 8, ECF No. 180-15. The Court notes that Jacobs purchased the product
in Kentucky, not New York, see Jacobs Dep. 70:17-18, and that attorney
Doherty did not specify the locations of the vendors from whom she
purchased the product. L'Oreal is therefore incorrect when it asserts
that "it is undisputed that . . . the actual prices class members paid
. . . varied by more than 100%." Decert. Mot. 15 (emphasis added).
28
cooking oil); Ackerman v. Coca-Cola Co., No. 09-cv-395, 2013 WL
7044866, at *20 n.30
(E.D.N.Y. July 18, 2013)
(similar,
for
"vitaminwater"); see also Oscar v. BMW of North America, LLC,
09-cv-11, 2012 WL 2359964, at *4
(S.D.N.Y. June 19, 2012)
(holding that plaintiffs failed to show that car manufacturer's
failure to disclose tire shortcomings affected price, where
vehicle in question had many features that might be attractive
to purchasers).
But this is not such a case. The product is a five-step
process for relaxing hair with five corresponding components:
scalp protector,
moisturizer.
relaxer cream, shampoo, conditioner, and
If plaintiffs' allegations are to be believed, one
of the components - the scalp protector - simply did not
function. Nor was this an incidental or unimportant part of the
kit. Indeed, as noted, a survey conducted by L'Oreal's own
expert, Dr. Hibbard,
found that users of relaxer cream
overwhelmingly believe that a scalp protector should be applied
before using the cream. Hibbard Rep.
~
102(iii). In other words,
the inclusion of a functioning scalp protector had value to
consumers. A reasonable jury could conclude, based on this
evidence, that this value was reflected in the ultimate purchase
price. See
Orl_~nder,
802 F.3d at 302
(holding that a price
premium exists where "on account of a materially misleading
practice,
[the plaintiff] purchased a product and did not
29
receive the full value of her purchase"). The fact that
consumers paid varying pr:ces for the product does not alter
this analysis, as a jury could reasonably conclude that no
matter what the consumer paid, the price would have been lower
still but for the deceptive packaging.
NYGBL
§
Importantly, because
349 permits statutory damages, it does not matter how
much the alleged misrepresentations increased the purchase
price, so long as the price paid was higher than it otherwise
would have been.
L'Oreal protests that an expert calculation of the but-for
market price is essential in all class actions under NYGBL
§
349. The Court disagrees. Such a calculation might be
necessary where the impact of the challenged representations on
/
the ultimate price is speculative or unclear. Here, however, the
loss of value resulting from a non-functional component is
straightforward. Suppose a consumer bought a box purporting to
contain five widgets, only to discover that just four widgets
were inside. Surely a lay jury is competent, without expert
assistance, to conclude that the consumer has been bilked. Or,
alternatively, suppose that the product at issue in this case
was advertised just the same, but the box contained only the
relaxer cream - no shampoo, no conditioner, no scalp protector,
and no moisturizer, nothing. Would it really be necessary to
adduce expert evidence as to the hypothetical price of such a
30
product before a Jury could find in favor of the plaintiffs? The
Court thinks not. The case presented here, according to the
plaintiffs' theory,
is analogous. Of course, it remains the
plaintiffs' burden to prove injury, and L'Oreal may argue to the
Jury that purchasers of the product paid a fair price for what
they received.
The Court reaches a different result, however, as to
plaintiffs' alternative theory for liability,
~'
that the
product's packaging as a "no-lye" relaxer, along with various
other claims, misleadingly communicated that it was safer than
other relaxers. The value of this assertion is not readily
quantifiable,
in contrast to the absence of a core component of
the kit. Plaintiffs have offered no methodology for teasing out
the impact on price of these allegedly deceptive claims.
Accordingly, the New York class remains certified to pursue
claims under NYGBL
§
349 on the theory thdt the product
deceptively indicated that it included a scalp protector, when
in fact the scalp protector did not function or was unreasonably
dangerous. The class may not proceed on the theory that the
product's packaging deceptively communicated that it was safer
than other relaxers.
For the foregoing reasons, L'Oreal's motions to decertify
the New York class is granted only to the extent of precluding
the New York class from proceeding on a theory that the product
31
packaging deceptively suggested that it was safer than other
hair relaxers. The motion to decertify is otherwise denied in
its entirety. L'Oreal's motion to exclude the testimony of Colin
Weir is also denied, but the parties must submit, by November 9,
2018, a proposed schedule for the additional discovery relating
thereto. The Clerk of the Court is directed to close entry
number 228 on the docket of this case.
SO ORDERED.
Dated:
New York, NY
October
~4, 2018
32
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