[00:00:02] Speaker 04:
May it please the court, James Spyer for Defendant and Appellant Epoch Everlasting Play, LLC.

[00:00:09] Speaker 04:
Your Honor, as this case concerns, a line of toys known as calico critters.

[00:00:15] Speaker 04:
Let me just say I'd like to reserve four minutes for rebuttal.

[00:00:19] Speaker 04:
Calico critters are animal figures that are flocked and are sold with small accessories.

[00:00:26] Speaker 04:
The warning on each Calico Critters box states, warning, choking hazard, small parts not for children under three years.

[00:00:36] Speaker 04:
The plaintiff contends that Calico Critters violates the CPSC small parts rule and are accordingly banned hazardous substances that are illegal to sell because they pose a choking danger to children under three.

[00:00:53] Speaker 04:
on defendant's motion to dismiss, the district court agreed with that and held that calico critters are, in fact, banned hazardous substances because they contain small parts.

[00:01:05] Speaker 04:
Our argument on appeal does not challenge that ruling.

[00:01:09] Speaker 04:
But it is important to note that the CPSC, which is responsible for drafting that rule and enforcing that rule and has been for decades,

[00:01:21] Speaker 04:
has known about calico critters for decades and has expressly allowed them to be sold.

[00:01:28] Speaker 04:
It's also important to note that calico critters are legal to buy and to possess.

[00:01:34] Speaker 04:
Now, the plaintiff bought calico critters for her granddaughter, who was four years old at the time of purchase.

[00:01:43] Speaker 04:
The plaintiff considers calico critters, in her own words, a, quote, great toy.

[00:01:50] Speaker 04:
Her granddaughter played with those Calico Critters regularly for years.

[00:01:55] Speaker 04:
So there is no dispute in this case that the plaintiff bought a great product that was legal to buy, performed exactly as expected, caused no harm to the plaintiff or her granddaughter, is not considered dangerous for kids over three, and gave her granddaughter years of pleasure.

[00:02:18] Speaker 04:
Nevertheless, the plaintiff claims that she is entitled to, along with an entire class, the maximum amount of restitution available under the UCL, a full refund of the purchase price.

[00:02:34] Speaker 04:
And she also seeks a class-wide injunction banning the sale of Calico critters with small parts, despite the fact that she has never stated that she intends to buy the product again.

[00:02:48] Speaker 04:
District court sir.

[00:02:49] Speaker 01:
I mean I'm trying to make sense of that testimony comes from her deposition And she qualifies it by saying no.

[00:02:56] Speaker 01:
I don't want to buy not at this time She doesn't categorically say no correct.

[00:03:01] Speaker 01:
What do I do with that?

[00:03:04] Speaker 04:
I think as a matter of logic, saying I have no desire to buy a product at this time does not allow you to infer anything about a future intent.

[00:03:15] Speaker 04:
It just simply, I don't have any intent to buy it at this time.

[00:03:20] Speaker 04:
As to future times, I may not have even thought about it.

[00:03:24] Speaker 04:
I may want to buy the product again.

[00:03:25] Speaker 04:
I may not want to buy the product again.

[00:03:28] Speaker 04:
It's pure speculation at this point to say that from saying I have no intent to buy the product at this time means that you can infer an intent to buy a product at a later time.

[00:03:41] Speaker 04:
And it's important to understand that allegations of possible future injury are not sufficient under the law

[00:03:50] Speaker 04:
And the plaintiff has cited no case that finds standing in this context where there is not an affirmative statement of an intention to buy the product.

[00:04:03] Speaker 04:
Also to your point, Judge Forrest, the Supreme Court in the Lujan case held that, quote unquote, some day intentions without any description of concrete plans

[00:04:16] Speaker 04:
or indeed any specification of when that someday will be are not sufficient to establish standing for injunctive relief.

[00:04:24] Speaker 04:
And here, there is no record of even a someday intention, much less concrete plans as required in the Lujan case.

[00:04:34] Speaker 04:
So the district court certified the class, found that the plan is full refund method was a valid methodology for calculating class wide damages.

[00:04:44] Speaker 04:
and found that plaintiff had standing to seek injunctive relief and was accordingly an adequate class representative.

[00:04:53] Speaker 01:
So I want to ask a remedy question.

[00:04:56] Speaker 01:
If we agreed that there was no standing for the injunctive relief, that doesn't resolve the damages claim.

[00:05:05] Speaker 01:
What do we do in turn?

[00:05:05] Speaker 01:
This is up on, this started in state court, right?

[00:05:09] Speaker 04:
Yes.

[00:05:10] Speaker 01:
So if we don't have, if she doesn't have standing for the injunctive relief claim, that means we don't have jurisdiction over it.

[00:05:16] Speaker 01:
What do we do with it?

[00:05:18] Speaker 04:
Well, if she lacks standing for injunctive relief, it is not disputed in this case that she is an inadequate class representative for any purpose.

[00:05:28] Speaker 04:
Okay?

[00:05:29] Speaker 01:
Wait a minute.

[00:05:29] Speaker 01:
For any purpose?

[00:05:30] Speaker 01:
You mean for all claims?

[00:05:32] Speaker 04:
For any, she cannot represent a damages only class.

[00:05:36] Speaker 01:
Why?

[00:05:36] Speaker 04:
If she lacks standing for injunctive relief.

[00:05:39] Speaker 04:
That's because

[00:05:40] Speaker 04:
her inability to seek injunctive relief means that the only way class members could obtain injunctive relief is by filing a separate action.

[00:05:53] Speaker 01:
My recollection from the complaint is that we have a damages only class, so couldn't this case proceed as a damages only class action?

[00:06:02] Speaker 04:
What the judge did was certify a class under 23B3

[00:06:08] Speaker 02:
With the plaintiff claiming the right to seek both injunctive relief and Damages right, but we can send it back for the district court to determine what's left after that Well what our position is if we decide that she has no standing for the injunctive relief claim Can we send it back for the district court to then determine whether?

[00:06:30] Speaker 02:
there can be certification for damages only class and

[00:06:33] Speaker 04:
If she, Your Honor, I think the question is clearly before this court right now.

[00:06:39] Speaker 04:
She does not dispute that if she lacks standing for injunctive relief, she cannot be an adequate class representative for any purpose.

[00:06:46] Speaker 01:
Where in the record is she making that concession?

[00:06:48] Speaker 04:
Well, because we said it in our opening brief, she did not dispute it in her answering brief.

[00:06:57] Speaker 04:
It's an undisputed proposition that we put out in our opening brief.

[00:07:00] Speaker 02:
But I'd like... Right.

[00:07:01] Speaker 02:
Well, it's the procedural posture, right, because she's now seeking injunctive and restitution.

[00:07:07] Speaker 02:
And if one leg of that stool is knocked off, whether there's anything left, I think that's usually the district court's determination.

[00:07:16] Speaker 02:
I mean, you may be right that what they might want is a certification for a class that has both injunctive and damages.

[00:07:24] Speaker 02:
But I don't know that that's a fork on conclusion, but let's see what

[00:07:27] Speaker 04:
I think it is a foregone conclusion.

[00:07:31] Speaker 04:
I think they want both injunctive relief and damages,

[00:07:35] Speaker 02:
As a matter of law... At this stage, given the procedural posture that we are at this stage, you're right about that.

[00:07:41] Speaker 04:
Yes.

[00:07:42] Speaker 04:
As a matter of law, if she lacks standing for injunctive relief, she cannot be a class representative for a damages only class because that would amount to claim splitting and would jeopardize the claims of class members seeking injunctive relief.

[00:08:00] Speaker 01:
Is that a rule 23 problem?

[00:08:02] Speaker 01:
I don't think that's a sort of typical

[00:08:05] Speaker 01:
court procedure problem.

[00:08:07] Speaker 04:
It's a race judicata problem, Your Honor, okay?

[00:08:13] Speaker 04:
So the only way that class members can seek injunctive relief, if she lacks standing for injunctive relief, is to file a... What if the district court chooses to permit amendment of the complaint?

[00:08:27] Speaker 02:
There's all kinds of procedural vehicles to narrow the lawsuit, and so I think normally we let the district court figure that out.

[00:08:36] Speaker 04:
Your honor, then I would move on to the point that no full refund is available in this case.

[00:08:43] Speaker 04:
And I'm happy to do that now or happy to talk more about injunctive relief standing.

[00:08:48] Speaker 02:
All right.

[00:08:48] Speaker 02:
Why don't you spend the few minutes, I know you wanted to save time as well, talking about why a full restitution model is not appropriate.

[00:08:56] Speaker 02:
So my question for you is that if a product is, let's say,

[00:09:02] Speaker 02:
illegal to be sold.

[00:09:03] Speaker 02:
In that instance, we would then have a full restitution model, right?

[00:09:10] Speaker 04:
No, Your Honor.

[00:09:12] Speaker 04:
Why not?

[00:09:14] Speaker 04:
Because the basic fundamental rule of restitution under the UCL is that you cannot obtain a full refund where the plaintiff has benefited from the product.

[00:09:27] Speaker 04:
And in this case, it is undisputed

[00:09:30] Speaker 04:
that the plaintiff has benefited from the product.

[00:09:33] Speaker 04:
The fact that this product is, according to the district court, illegal to sell does not alter that analysis because the rules of restitution do not change depending on what the underlying conduct is.

[00:09:49] Speaker 04:
The rules of restitution are very clear.

[00:09:51] Speaker 04:
If you receive a benefit from a product, you're not entitled to a full refund.

[00:09:57] Speaker 02:
Right, I think the question is whether that illegality renders the product valueless.

[00:10:03] Speaker 04:
And what I would say to that, Your Honor, is clearly illegal products have value.

[00:10:11] Speaker 04:
A product has value if an individual is willing to pay for that product.

[00:10:17] Speaker 04:
Cocaine has value to some people.

[00:10:19] Speaker 04:
Prostitution has value to some people.

[00:10:23] Speaker 04:
A ruling that illegal products

[00:10:26] Speaker 04:
just have no value as a matter of law would simply ignore the undisputed fact here.

[00:10:32] Speaker 03:
So economically, you're obviously right.

[00:10:33] Speaker 03:
I guess the question is, what does the case law say as far as, because it would have to be sort of this legal fiction that illegal products don't have value.

[00:10:41] Speaker 03:
And I think that, so what is, why is that not supported?

[00:10:45] Speaker 03:
The idea that just as a matter of law, we're going to declare them have no value, even though they obviously do economically.

[00:10:51] Speaker 04:
Because, I think the law is clear and the Supreme Court has said it on several occasions, that courts cannot make assumptions like that when they are clearly at odds with the facts.

[00:11:02] Speaker 03:
And in this case, they are clearly at odds.

[00:11:03] Speaker 03:
What's your best case for the idea that something that's illegal still has value for purposes of restitution?

[00:11:12] Speaker 04:
We cited two cases, Your Honor.

[00:11:13] Speaker 04:
We cited the Shahinian case involving illegal medical gowns.

[00:11:20] Speaker 04:
where the court said that, yes, the claim is that these medical gowns are illegal, but the plaintiff has not made any showing that these gowns are valueless to them.

[00:11:31] Speaker 04:
So therefore, you are not entitled to a full refund.

[00:11:35] Speaker 04:
And we cited the Ang versus Bimbo case, which says the same thing in the context of products, of food products that are illegal to sell.

[00:11:46] Speaker 04:
Now, it's also,

[00:11:50] Speaker 04:
a concern that the plaintiff says that allowing a full refund here would somehow legitimize wrongful conduct, okay?

[00:11:59] Speaker 03:
So they need a full refund because otherwise seems to me that damage is only classed as very tough because the amount of value somebody's getting is going to vary from plaintiff's opinion.

[00:12:10] Speaker 03:
So that's the big driver of the desire to have a full refund here?

[00:12:14] Speaker 04:
Your Honor, they actually in their class certification papers put forth two alternative methods.

[00:12:19] Speaker 04:
a full refund method and something less than a full refund method.

[00:12:23] Speaker 04:
So they understand that they actually sought themselves.

[00:12:27] Speaker 03:
How could you have a not full refund class where, even for damages, where common issues are predominant?

[00:12:34] Speaker 03:
Because, you know, somebody buys these things, figures out that they're, whoa, these things don't seem safe, and then throws them in the closet, and then this grandma lets her kids play with these things a ton.

[00:12:47] Speaker 03:
So, like, that seemed to vary from person to person.

[00:12:50] Speaker 04:
Your Honor, I'm not necessarily disagreeing with you.

[00:12:54] Speaker 04:
All I'm saying is that at this point, we're not faced with that issue.

[00:12:57] Speaker 04:
So I cannot, I'm not going to offer an opinion on that issue.

[00:13:01] Speaker 02:
But... Well, she did say that the purpose, the very purpose that she purchased for was for her granddaughter to play with.

[00:13:06] Speaker 02:
And had she known that the product was dangerous, she wouldn't have done it.

[00:13:13] Speaker 02:
She wouldn't have bought it at all.

[00:13:14] Speaker 04:
That's right.

[00:13:15] Speaker 04:
But Your Honor,

[00:13:16] Speaker 04:
Simply saying, well, had I known of the wrongful conduct, I wouldn't have bought the product.

[00:13:22] Speaker 04:
All that does is entitle you to standing to sue under the UCL.

[00:13:26] Speaker 04:
That does not entitle you to any specific amount of restitution.

[00:13:30] Speaker 04:
And that's a principle that's very clearly laid out in a number of California Supreme Court cases.

[00:13:36] Speaker 04:
So simply saying, well, I wouldn't have bought the product, therefore I'm entitled to a full refund.

[00:13:41] Speaker 04:
That's not the way that restitution under the UCL works.

[00:13:45] Speaker 04:
And it's important, Your Honor, in this world where someone is suggesting just making an assumption that illegal products are valueless.

[00:13:57] Speaker 04:
First of all, it's contrary to the facts.

[00:13:59] Speaker 04:
Courts are not supposed to be making assumptions that are contrary to the facts.

[00:14:03] Speaker 04:
And just to be clear, all we're talking about here is whether plaintiff is entitled to a full refund, okay?

[00:14:11] Speaker 04:
In determining what is an appropriate amount of restitution,

[00:14:15] Speaker 04:
The focus is on the plaintiff and on what is needed to make the plaintiff whole.

[00:14:23] Speaker 04:
Courts cannot decrease or increase the amount of restitution depending on their view of the egregiousness of the defendant's conduct or the type of conduct involved.

[00:14:37] Speaker 04:
What the California Court of Appeal has said in the in-rate tobacco two cases is that UCL restitution may not be based solely on deterrence, no matter how egregious the defendant's conduct.

[00:14:51] Speaker 04:
And there's no punitive damages allowed in the UCL.

[00:14:54] Speaker 04:
So simply making a decision, we're going to deem this product valueless as a matter of law.

[00:15:01] Speaker 04:
even though the plaintiff received a benefit from it, and even though this would entitle them to a full refund, would just ignore settled rules of restitution under the UCL.

[00:15:11] Speaker 02:
Thank you, counsel.

[00:15:12] Speaker 02:
You're actually a little bit over time, and I know you wanted to save some time, so I'll put two minutes back on the clock for your vote.

[00:15:17] Speaker 04:
Thank you very much, your honor.

[00:15:28] Speaker 00:
Good morning, Your Honors.

[00:15:29] Speaker 01:
Good morning.

[00:15:30] Speaker 00:
Philip Kovnat on behalf of Ms.

[00:15:31] Speaker 00:
Jackson-Jones and the certified class of California purchasers of the Calico Critters Toys.

[00:15:37] Speaker 00:
I would like to begin with this issue of Article 3 standing.

[00:15:40] Speaker 00:
I think Judge Forrest and Judge Wynne are absolutely correct that there is no question here she has standing to seek restitution on behalf of the class and is therefore an adequate class representative under Rule 23A4.

[00:15:52] Speaker 00:
Judge Wright could easily, whatever this court decides with regard to the injunctive relief and the Article 3 standing,

[00:15:59] Speaker 00:
the class can still be certified for restitution only.

[00:16:03] Speaker 02:
Now that's- You'd have to, we'd have to send it back for a do-over.

[00:16:08] Speaker 02:
And I don't know, depending on the stage of how far along you are, you might have to start all over again.

[00:16:15] Speaker 00:
I disagree, Your Honor.

[00:16:16] Speaker 00:
I mean, the district court certified a class of California purchasers.

[00:16:19] Speaker 00:
The district court said for all relief sought in the complaint.

[00:16:23] Speaker 02:
The order- Maybe I didn't say it well.

[00:16:27] Speaker 02:
the current certification wouldn't stand, right?

[00:16:31] Speaker 00:
I disagree, Your Honor, respectfully, because the class is certified and the class is defined as the California purchasers from January 30th, 2019 until the present.

[00:16:41] Speaker 00:
The remedy that's available to that class is not part of that class definition.

[00:16:46] Speaker 01:
I mean, if this court decides... You have to have standing for every type of relief that you're seeking.

[00:16:51] Speaker 01:
So if you don't have standing for a particular type of relief, that relief can't stay in the case.

[00:16:56] Speaker 00:
But plaintiffs at any time could just abandon their request for injunctive relief.

[00:17:00] Speaker 01:
That's what I want to drill down to.

[00:17:00] Speaker 01:
Do you think that because this case came up on removal from state court, what happens with, again, if we conclude that there is no standing for the injunctive relief claim, or just injunctive relief, does that go back down to state court?

[00:17:16] Speaker 01:
Does that get dismissed?

[00:17:17] Speaker 01:
Can you split these claims based on remedy?

[00:17:20] Speaker 01:
What happens?

[00:17:21] Speaker 00:
I think if this court holds them as Jackson Jones does not have standing for injunctive relief, then send it back to the district court and the parties can file papers in the district court to seek certification for restitution only.

[00:17:33] Speaker 00:
I mean, I don't think there's any need to send it to state court.

[00:17:36] Speaker 00:
It would just get removed back.

[00:17:39] Speaker 00:
to federal court, so that would just be a waste of judicial resources.

[00:17:42] Speaker 00:
And it's not claim splitting.

[00:17:44] Speaker 00:
It's just dropping one of the forms of relief.

[00:17:46] Speaker 01:
So that's what I'm getting at.

[00:17:47] Speaker 01:
So your clients or your position would be that you would just make a choice in the district court to abandon the injunctive relief aspect of your claim so that you can proceed in federal court on the damages part.

[00:17:59] Speaker 00:
Correct.

[00:18:00] Speaker 00:
But I think that would be an unfortunate result, because as the deaths of multiple children and severe injuries to other children demonstrate, the injunctive relief is a critical aspect of this case.

[00:18:10] Speaker 01:
Well, that may be true.

[00:18:11] Speaker 01:
And so if that is so critical, your clients also have the choice, again, if we conclude that there's no standing federal court for that type of relief, to just go back to state court and then get all the relief that you can under the California statute.

[00:18:24] Speaker 00:
But the defendant would just remove it back to federal court under Rule 23F.

[00:18:29] Speaker 00:
I'm sorry, under the CAFA class action fairness act.

[00:18:34] Speaker 00:
So we would just end up back in federal court anyway.

[00:18:36] Speaker 01:
I mean, there's a whole bunch of case law about whether you can split claims when a federal court only has jurisdiction over some and not others.

[00:18:42] Speaker 01:
And yes, that's a fight you'd have to have.

[00:18:44] Speaker 01:
But I think it's a choice you could make if the injunctive relief is really that important.

[00:18:49] Speaker 00:
I agree, Your Honor, and I mean, I think it will obviously depend what this panel decides with respect to that.

[00:18:54] Speaker 00:
I would like to make the argument, though, that Ms.

[00:18:56] Speaker 00:
Jackson-Jones has standing for injunctive relief.

[00:18:59] Speaker 00:
If we look at her testimony,

[00:19:02] Speaker 00:
I mean, the defendants focus very narrowly on this one portion of her deposition where she says, in response to a question from counsel, I take it you have no desire to purchase these toys.

[00:19:14] Speaker 00:
And she said, not at this time.

[00:19:16] Speaker 00:
And Judge Forrest pointed that out.

[00:19:19] Speaker 00:
If you look at the broader context of her testimony,

[00:19:22] Speaker 00:
She said she loved the toys.

[00:19:23] Speaker 00:
She's obsessed with the toys.

[00:19:24] Speaker 00:
Her granddaughter continues to ask for the toys, including as Christmas gifts.

[00:19:28] Speaker 00:
She said she wanted to collect a whole little bunny world for her granddaughter.

[00:19:33] Speaker 00:
The defendant's advertising... I agree with you.

[00:19:35] Speaker 01:
The problem with it, as I've searched all through the deposition transcript, is there's nothing... She doesn't go the next step of saying, now that I realize there's a problem, I still am interested in this.

[00:19:47] Speaker 00:
future.

[00:19:49] Speaker 01:
She never says that.

[00:19:50] Speaker 00:
But the question is whether the district court drew a reasonable inference from the record.

[00:19:53] Speaker 00:
That's an abuse of discretion.

[00:19:55] Speaker 00:
For this court to overturn the district court's factual findings, they have to be illogical.

[00:19:59] Speaker 01:
You know the legal standards, so why didn't plaintiff's counsel just have her do another declaration and make this abundantly clear if that was true?

[00:20:05] Speaker 00:
Because this court has chastised parties for manufacturing testimony simply to get standing.

[00:20:10] Speaker 00:
Ms.

[00:20:10] Speaker 00:
Jackson-Jones was honest in her deposition.

[00:20:13] Speaker 00:
She said she loves the toys, she's obsessed with the toys, her grandchildren want the toys, but she has safety concerns about them.

[00:20:19] Speaker 01:
And if she had known, I mean if she knew... I don't understand how submitting an additional declaration to clarify the point, if it was true that she really does want to buy these in the future, I don't know how that would be manufacturing evidence.

[00:20:30] Speaker 00:
Sure, your honor, and I recognize that point.

[00:20:32] Speaker 00:
I mean, I'm just saying that she was honest.

[00:20:35] Speaker 00:
The district court.

[00:20:37] Speaker 02:
I don't think that's really the issue.

[00:20:39] Speaker 02:
The issue really is right now, given the way that the record stands, you're asking us to draw an inference.

[00:20:48] Speaker 02:
And so then the question becomes whether that's too speculative, depriving her of adequate standing.

[00:20:55] Speaker 02:
to represent the class for injunctive relief.

[00:20:59] Speaker 02:
She could have said, I love the toy, and if given the opportunity, I would definitely buy it again.

[00:21:04] Speaker 02:
That's what the record shows.

[00:21:06] Speaker 02:
And Davidson, we found that there was standing there.

[00:21:09] Speaker 02:
So it's not that she would be dishonest.

[00:21:11] Speaker 02:
It's just that you did not close that loop.

[00:21:14] Speaker 02:
And so the record is weakened because of that.

[00:21:17] Speaker 00:
I recognize that your honor and I'm not asking this court to draw an inference.

[00:21:19] Speaker 00:
I'm asking this court to see if the district courts inference was illogical implausible or without support in the record, which is a highly deferential standard of review.

[00:21:28] Speaker 00:
Judge Wright is a very experienced district judge.

[00:21:31] Speaker 00:
He sees class certification motions frequently.

[00:21:34] Speaker 00:
He certified this class.

[00:21:36] Speaker 00:
He didn't spell out in detail all the facts in the record that support the finding of standing for injunctive relief.

[00:21:41] Speaker 00:
Right.

[00:21:41] Speaker 02:
I mean, you said he made a factual finding, but I can't tell whether he thought through this issue and reached the question of, I don't think it's too speculative, because here's the inference that I'm drawing, and here's where the record supports that.

[00:21:53] Speaker 02:
He didn't do that.

[00:21:54] Speaker 00:
I recognize that, your honor, and to be fair to Judge Wright, there were a lot of issues in the class certification paper.

[00:22:00] Speaker 00:
Standing was one narrow issue.

[00:22:02] Speaker 00:
He did not go, you know, chapter and verse through all details in the record, but he did say that he credited Miss Jackson Jones's testimony that her granddaughter continued to ask for more toys.

[00:22:12] Speaker 00:
And he credited her testimony that her granddaughter loved the toys and he drew the inference that she would be interested if she could tell when she goes into a store whether they are banned hazardous substances or not.

[00:22:24] Speaker 00:
And that's why it fits within the Davidson framework because as Mr. Spier

[00:22:29] Speaker 00:
acknowledged all of these toys have a label that say choking hazard or three plus some of them are actually banned hazardous substances some are not Jackson Jones still shops at Walmart she still shops on Amazon these are places where these toys are sold she's interested in the toys I mean the fact that in her deposition in response to a leading question from opposing counsel she said not at this time does not vitiate all I mean

[00:22:55] Speaker 03:
The problem is you're saying she's interested in these toys but we can't take your, you know, we have to take her word now.

[00:23:00] Speaker 03:
I want to make sure for a run out of time on the damages issue.

[00:23:03] Speaker 03:
I'm really struggling with this idea that the restitution model, full restitution makes sense here because these, you know, kids played with this, the very name plaintiff or grandkids played with these toys a ton.

[00:23:18] Speaker 03:
It doesn't appear like any of them got injured by the toys.

[00:23:22] Speaker 03:
It's just like it seems like if smoking cigarettes and you get terminal cancer and, you know, I'm sure everybody gets terminal cancer probably is like, you know, I wish I hadn't done that, you know, and they but if smoking cigarettes can have value which makes sense that there was some value associated with those even though they can give you terminal cancer, then how can these having these kids have played with these toys

[00:23:48] Speaker 03:
have no value at all.

[00:23:50] Speaker 03:
Economically, that can't be right.

[00:23:53] Speaker 03:
So it'd have to be some sort of like legal fiction that's imposed that once something has a defect, it has no value.

[00:24:01] Speaker 03:
But that doesn't make any sense to me either because, I mean, the type of things that have no value are things like a drug that's sold or a supplement that's sold that's supposed to do something.

[00:24:09] Speaker 03:
It just doesn't do it.

[00:24:10] Speaker 03:
So the reason people are buying it

[00:24:12] Speaker 03:
is to do this thing and it just does not do that.

[00:24:15] Speaker 03:
We just know it doesn't do it.

[00:24:17] Speaker 03:
But if instead like it does that thing but it has, it hurts you to a certain number of people, right?

[00:24:23] Speaker 03:
Like it actually does, it causes you to lose weight but a certain number of people get sick from it or something, then it would have value to a bunch of people because they lost weight.

[00:24:31] Speaker 03:
And that seems that these toys fall in that category.

[00:24:34] Speaker 03:
Kids play with them, they love them.

[00:24:36] Speaker 00:
Right, your honor.

[00:24:37] Speaker 00:
I think the key thing here is that under California law, under the steroid hormone products cases, something that is illegal to sell is, by definition, valueless or worthless, regardless of what the recipient of the product does.

[00:24:51] Speaker 00:
And the best example of that, it's interesting you mentioned cigarettes, is this in Ray Jewell case from the Northern District of California.

[00:24:57] Speaker 00:
where it's a long opinion, but in one portion of it, the question was as to this youth class of purchasers who purchased e-cigarettes, and it was illegal to sell the e-cigarettes to those youth purchasers.

[00:25:08] Speaker 03:
And that's binding on us, and that's binding on, I mean, I guess it's a matter of life, but that's a state rule, you're saying, that says even though it's not true economically, your damages would be

[00:25:20] Speaker 03:
We're going to say they're zero.

[00:25:22] Speaker 03:
Is that binding on us in figuring out what somebody's damages would be?

[00:25:28] Speaker 03:
Because it's not their actual real measure of damages.

[00:25:30] Speaker 03:
It's kind of a false measure.

[00:25:31] Speaker 03:
It's a penalty, basically, that would be being imposed on people.

[00:25:34] Speaker 00:
I mean, it's not a penalty, it's restitution, but under the Erie Doctrine, this court has to apply state law.

[00:25:38] Speaker 03:
But it's not actually restitution.

[00:25:42] Speaker 03:
If I told you something that said it would make you a million dollars, and it turned out that thing was illegal, and it only made you $900,000, the restitution would be $100,000, right?

[00:25:56] Speaker 03:
When we could call it, we could say, no, as a matter of law, you have to give them back a million dollars, but let's not pretend that's restitution.

[00:26:03] Speaker 03:
What I'm wondering is, can we just ignore the reality of what it is and say, well, California says that that's the measure?

[00:26:12] Speaker 00:
Yeah, I mean, in the in-rate jewel case, there was no argument that the vaping products didn't work as expected.

[00:26:17] Speaker 00:
I'm sure the youth class derived benefit or pleasure from those e-cigarettes, but the court said they are inherently unlawful and therefore have no value.

[00:26:26] Speaker 00:
I think the best case on this is an 11th Circuit decision.

[00:26:29] Speaker 00:
It's called Debernardus versus IQ formulations.

[00:26:32] Speaker 00:
It was cited in our amicus or in the amicus brief at page 11.

[00:26:36] Speaker 00:
And there the court, it was conducting a standing analysis, but it was about a supplement that was illegal to sell, not illegal to buy.

[00:26:45] Speaker 00:
And the court said that it accepted the principle that when a federal agency has borrowed- What supplement was that?

[00:26:53] Speaker 00:
I actually don't know.

[00:26:55] Speaker 00:
The case is Devin Artis versus IQ formulations.

[00:26:57] Speaker 00:
It's a very long time.

[00:27:00] Speaker 03:
A lot of supplements don't serve their purpose at all.

[00:27:03] Speaker 03:
Like, you know, like there's no test.

[00:27:04] Speaker 03:
And that one I would say, you know, people are buying it to get huge and be a bodybuilder and it just doesn't serve that at all.

[00:27:10] Speaker 03:
And it doesn't, and it's just not like you're getting some use out of it.

[00:27:13] Speaker 03:
But that's different than where you're like selling an energy drink that also is supposed to turn you into Superman.

[00:27:19] Speaker 03:
And you don't know like half the people who are buying it

[00:27:22] Speaker 03:
just because they like the taste of the energy drink and they want something to drink.

[00:27:24] Speaker 03:
So they're getting some benefit.

[00:27:25] Speaker 03:
You see what I'm saying?

[00:27:26] Speaker 03:
Like, I'm not sure.

[00:27:27] Speaker 00:
But this is a bright line.

[00:27:27] Speaker 00:
It's not about whether the product performs as expected.

[00:27:30] Speaker 00:
It's a bright line rule that if a federal authority like the CPSC or in that case, the FDA has barred the sale of a product, then it is inherently valueless, regardless of what supposed benefits it may confer.

[00:27:44] Speaker 03:
And that is a... And we can just take that legal proclamation, even though it doesn't fit with reality, and say that

[00:27:52] Speaker 03:
That is how we will measure damage, because it seems damages are supposed to reflect what you actually, how you're actually injured.

[00:27:59] Speaker 00:
I agree, but the California, there is a body of California law on this.

[00:28:04] Speaker 00:
It's not very well developed, but it is developed in the common law, in the Deborah and Artis case, they set a line in Florida cases.

[00:28:11] Speaker 00:
So there is this history in the common law that if a product has been banned by some

[00:28:16] Speaker 00:
It's legally, legally, legally, legally, legally valueless.

[00:28:20] Speaker 00:
Exactly.

[00:28:21] Speaker 00:
I couldn't have said it better myself.

[00:28:22] Speaker 00:
Yeah.

[00:28:22] Speaker 03:
So then what that does is not really actually your damages.

[00:28:24] Speaker 03:
It's a penalty of sorts.

[00:28:25] Speaker 03:
Like it's basically saying if you sell a product that we will penalize you.

[00:28:29] Speaker 03:
And I'm just trying to think of maybe that maybe that's allowed, but I don't have to think about it.

[00:28:34] Speaker 00:
Yeah, I disagree.

[00:28:35] Speaker 00:
It's a penalty.

[00:28:36] Speaker 00:
I mean, the California Supreme Court has defined restitution as putting the consumer back in the place you would have been prior to the unlawful activity.

[00:28:44] Speaker 00:
This is an automatic, it's virtually.

[00:28:47] Speaker 03:
Right, so and Mike, going back to my example, you made $900,000, I now have to give you a million dollars, you have $1.9 million, you spent a million dollars, you have $900,000 more.

[00:28:57] Speaker 03:
And so that is not putting you back in a position, that is giving you, that is hitting me with a $900,000 penalty.

[00:29:03] Speaker 00:
I mean, I think that to do otherwise would vindicate something that has been deemed unlawful that is a concept.

[00:29:10] Speaker 00:
I mean, it appears in the collateral source rule or there's various legal principles where, you know, a defendant might have to pay more than the plaintiff actually suffered, but that is because

[00:29:21] Speaker 00:
to the extent there's a windfall, and I disagree with the defendant's use of the term windfall here, but to the extent there's a windfall, that should go to the person whose rights were violated versus the unlawful actor.

[00:29:34] Speaker 03:
We do that, but it's a penalty.

[00:29:35] Speaker 03:
It's just not damages.

[00:29:37] Speaker 00:
Sure.

[00:29:37] Speaker 00:
Regardless of the characterization, I think restitution does

[00:29:43] Speaker 00:
A full refund is sort of the classic example of restitution.

[00:29:47] Speaker 02:
In this case, it does make her whole.

[00:29:50] Speaker 02:
But the problem, though, is that there's evidence that the granddaughter did enjoy and used it and played with it.

[00:29:57] Speaker 02:
So I think that's what they're relying on is that there's some value because you did use it and you played with it.

[00:30:03] Speaker 02:
There's there.

[00:30:04] Speaker 02:
Remind me or.

[00:30:06] Speaker 02:
I want to make sure that I understand the record.

[00:30:08] Speaker 02:
When she saw her daughter putting the toy in her mouth, she put the toy away and didn't play with it after that.

[00:30:15] Speaker 00:
That's correct.

[00:30:16] Speaker 00:
But I would add, she did buy another Calico Critter toy under the mistaken understanding that it was not a banned hazardous substance, which goes to this informational injury where she goes into these stores, she can't tell the difference.

[00:30:29] Speaker 00:
So she did purchase another one.

[00:30:31] Speaker 00:
But yes, you're correct.

[00:30:32] Speaker 00:
When she saw her granddaughter putting the toy in her ear and her mouth, she hid them away and then gave them away, which also shows that at that point, at least, they were valueless to her.

[00:30:43] Speaker 00:
And I see my red light is on.

[00:30:45] Speaker 02:
All right.

[00:30:45] Speaker 02:
Let me see if my colleagues have any additional questions.

[00:30:48] Speaker 02:
Thank you.

[00:30:49] Speaker 00:
Thank you, Your Honors.

[00:30:55] Speaker 04:
Thank you, Your Honors.

[00:30:56] Speaker 04:
I'll be brief.

[00:31:00] Speaker 04:
Judge Van Dyke, your response to my colleague's question on his point that all this does is make my client whole.

[00:31:10] Speaker 03:
It doesn't do that, but his other response is that as a legal matter, that's just what the rule is.

[00:31:14] Speaker 03:
So is he right about that?

[00:31:16] Speaker 03:
As a legal matter, if it's illegal, it's valueless.

[00:31:20] Speaker 03:
However Judge Wynn said it, she said it really well.

[00:31:24] Speaker 02:
Legally valueless.

[00:31:26] Speaker 04:
There are two cases that they cite for that proposition.

[00:31:30] Speaker 04:
One is a California Court of Appeal case called Inray Steroid Hormone.

[00:31:34] Speaker 04:
That case does not involve any issue of restitution or entitlement to a full refund.

[00:31:41] Speaker 04:
It's just nowhere mentioned in the case.

[00:31:44] Speaker 04:
So that case is out.

[00:31:45] Speaker 04:
Okay, what about the other case?

[00:31:47] Speaker 04:
The other case is a district court case called Inray Jewel.

[00:31:51] Speaker 04:
which is a federal district court.

[00:31:53] Speaker 04:
That's a federal district court case.

[00:31:54] Speaker 04:
It's a non-binding district court decision.

[00:31:57] Speaker 04:
And the key distinction in Juul, which was about vaping products illegally sold to minors, was that in Juul, there was no finding.

[00:32:07] Speaker 04:
There was no evidence, nothing discussed in the opinion that any plaintiff... Well, I mean, you have me at federal district court.

[00:32:14] Speaker 03:
They just, I mean, they do crazy stuff all the time.

[00:32:16] Speaker 03:
So, like, this is not binding.

[00:32:18] Speaker 03:
It doesn't tell us what California law is.

[00:32:20] Speaker 04:
It does not tell you what California law is.

[00:32:22] Speaker 04:
And what Juul did was base its ruling on a case called Ortega.

[00:32:27] Speaker 04:
And in Ortega...

[00:32:29] Speaker 04:
the court held that a full refund was appropriate because the product was not only illegal.

[00:32:34] Speaker 03:
So I'll look at it, but I don't want to take any more time.

[00:32:37] Speaker 03:
But it's not binding on us, so it's only if it's correct.

[00:32:42] Speaker 02:
Could be persuasive.

[00:32:44] Speaker 03:
Could be persuasive.

[00:32:45] Speaker 04:
I do not agree.

[00:32:47] Speaker 04:
But just one point on the injunctive relief and lack of standing for it, the second reason

[00:32:54] Speaker 04:
injunctive relief is not available to the plaintiff here is because the plaintiff has made it abundantly clear through her own admissions that, quote, she does not intend to purchase calico critters while they are still hazardous substances and, quote, is unwilling to buy illegal choking hazards.

[00:33:16] Speaker 04:
She's just talked herself right out of any ability to obtain injunctive relief.

[00:33:21] Speaker 04:
Because if she is not going to buy an illegal product, there is no possible threat of injury.

[00:33:28] Speaker 04:
Because what she's saying is, I'm not going to buy an illegal product.

[00:33:31] Speaker 04:
And that was her claimed injury.

[00:33:34] Speaker 02:
All right.

[00:33:34] Speaker 02:
Thank you very much, counsel.

[00:33:35] Speaker 02:
We appreciate your arguments.

[00:33:37] Speaker 02:
From both sides, the matter is submitted.