[00:00:00] Speaker 04:
Good morning, please be seated.

[00:00:02] Speaker 04:
Welcome to Denver in July.

[00:00:05] Speaker 04:
Glad we finally got this case on a docket that worked for everybody, and it's a good week to be in Denver.

[00:00:14] Speaker 04:
Looks like a lot of interest out there in the gallery, so welcome to the court if you haven't been here before.

[00:00:21] Speaker 04:
So we just have one case this morning, obviously, and I think

[00:00:26] Speaker 04:
You've been told that we're looking at 20 minutes 20 minutes and then five rebuttal five rebuttal and since this is the only case we have some flexibility today and You know kind of use that time as you see fit So if we're ready to go let's get started the case is 23 dashed 2180 done versus Santa Fe natural tobacco company and Mr.. Westler your first up

[00:00:56] Speaker 01:
Thank you, Your Honor.

[00:00:56] Speaker 01:
May it please the court, Matthew Wessler, for the plaintiff's appellants.

[00:01:01] Speaker 01:
For decades, as public awareness about the deadly effects of cigarettes spread, cigarette sales in the US have waned with one exception, Natural American Spirit.

[00:01:10] Speaker 01:
Unlike other conventional brands, the owners of Natural American Spirit recognized that consumers were desperate for less dangerous cigarette, and so deceptively reassured them that American Spirit cigarettes were less harmful by labeling every pack as, quote, natural,

[00:01:25] Speaker 01:
end quote, 100% additive free.

[00:01:28] Speaker 01:
It worked according to the overwhelming common evidence produced in this case, including public health experts, scientific evidence, FDA studies, and even the defendant's own internal records.

[00:01:40] Speaker 01:
This uniform marketing campaign enabled the defendants to charge consumers a premium price for every pack.

[00:01:47] Speaker 01:
To this day, natural American spirits remain one of the only growing brands of cigarettes in a sea of decline.

[00:01:54] Speaker 01:
In its class certification decision below, the district court recognized that the lawsuit here, which seeks to hold the defendants accountable for their deceptive labeling and overcharge to consumers, was tailor-made for proceeding as a class because it involved a large group of people who had been harmed in the same way, by the same conduct, but involved relatively small dollar individual claims.

[00:02:19] Speaker 01:
And it also understood that the key element for both theories of liability in this case is primarily governed by the same objective reasonable consumer standard.

[00:02:30] Speaker 01:
For the first theory, what's known as this court referenced it as the menthol theory, the court therefore correctly held that predominance was satisfied because the crucial common question whether an objectively reasonable consumer would be deceived

[00:02:45] Speaker 01:
by the misleading statements that the tobacco in natural American-spirited cigarettes was additive-free, was capable of being answered with common proof.

[00:02:54] Speaker 01:
As the court explained, public health experts, scientific studies, and other evidence, including consumer surveys and the defendant's own records, overwhelmingly demonstrated that consumers interpret descriptors like natural and additive-free to mean that these cigarettes

[00:03:12] Speaker 01:
are less harmful than other brands and do not contain any additives.

[00:03:16] Speaker 02:
How did the court satisfy the common proof test for menthol when you still have the standing issues and who can bring the suit in the first place, which the appellee says is one of the huge problems about lack of common proof for tobacco.

[00:03:36] Speaker 02:
But it seems the two claims are similarly situated in terms of the

[00:03:41] Speaker 02:
the standing plaintiffs.

[00:03:44] Speaker 01:
So there's no doubt that the name plaintiffs have standing here.

[00:03:48] Speaker 01:
I think if I'm understanding your question correctly, it's this concept of ascertainability.

[00:03:53] Speaker 01:
Is there a threshold requirement before you reach?

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For the class action.

[00:03:58] Speaker 02:
Yeah, before you reach.

[00:03:59] Speaker 02:
The issue before us is whether the class actions should be certified or not, whether that was an error.

[00:04:05] Speaker 01:
Well, I think the district court issued a split decision, certified one theory, refused to certify the other theory.

[00:04:13] Speaker 02:
Right, where one should be and one should not.

[00:04:15] Speaker 01:
Yeah.

[00:04:15] Speaker 01:
Yeah.

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And so on this question of this threshold ascertainability requirement, the defendants rely for that theory on a line of cases that has really only developed in the Third Circuit.

[00:04:28] Speaker 01:
In those cases, a case called Carrera was the first Third Circuit decision to adopt this threshold

[00:04:34] Speaker 01:
ascertainability requirement.

[00:04:35] Speaker 01:
The court there said, yes, as a prerequisite to certifying a class before you reach the factors of Rule 23A or before you reach the factors of Rule 23B, there is this implicit threshold requirement that you be able to demonstrate not injury

[00:04:56] Speaker 01:
respectfully, Your Honor.

[00:04:57] Speaker 01:
It isn't an Article III injury question.

[00:04:59] Speaker 01:
It's a question about whether you can identify who is in the class.

[00:05:03] Speaker 02:
Right, right.

[00:05:04] Speaker 02:
The question is who purchased these cigarettes and how can you prove that?

[00:05:08] Speaker 02:
Right.

[00:05:09] Speaker 02:
And so if that is a fundamental problem for one of the claims, it would seem it would be

[00:05:16] Speaker 02:
a problem for another claim.

[00:05:17] Speaker 02:
So how did the district court get around that?

[00:05:20] Speaker 01:
Well, the district court refused to think about that question the way the Third Circuit has.

[00:05:27] Speaker 01:
It did not conclude that this ascertainability question operates as a threshold requirement.

[00:05:34] Speaker 00:
But in any event, it said it didn't doom certification.

[00:05:37] Speaker 00:
I'm sorry, Judge Ross.

[00:05:37] Speaker 00:
In any event, it said it didn't doom certification, right?

[00:05:40] Speaker 01:
It didn't doom certification.

[00:05:41] Speaker 00:
So how should we be thinking about this, especially if that's reviewed for abuse of discretion, right?

[00:05:45] Speaker 01:
Yeah, so this court obviously has never weighed in on this question.

[00:05:49] Speaker 01:
There are about five or six circuits that have.

[00:05:52] Speaker 01:
One, the third circuit has said it exists as this threshold implicit requirement in Rule 23.

[00:05:57] Speaker 01:
Most of the other circuits, the ninth circuit, the 11th circuit, the seventh circuit, have all looked at this question and have said this isn't a question about how to identify class members as a matter of objective criteria.

[00:06:11] Speaker 01:
That is an easy threshold requirement to meet

[00:06:14] Speaker 01:
Does the class definition tell you who's in the class?

[00:06:17] Speaker 01:
Here, under that understanding of, I guess, ascertainability, I don't think there's any question that the definition tells you who's in the class.

[00:06:25] Speaker 01:
It's everyone who purchased the cigarettes.

[00:06:28] Speaker 01:
What those circuits have said is this class member identification question, who is in the class, is best located in Rule 23B's superiority or manageability analysis or inquiry.

[00:06:42] Speaker 01:
It asks a question about

[00:06:43] Speaker 01:
comparatively whether a class action is the best or most superior way to pursue the litigation as opposed to other forms of litigation like individual claims.

[00:06:54] Speaker 04:
Is proof of purchase an element of each class member's claim?

[00:07:00] Speaker 01:
It's certainly true that if in an individual case, someone would have to come forward and show that they purchased the product.

[00:07:08] Speaker 01:
And here, all of the named plaintiffs who brought this case to begin

[00:07:13] Speaker 01:
have satisfied that requirement.

[00:07:15] Speaker 01:
There's no dispute that they've all purchased the product.

[00:07:18] Speaker 04:
I don't think that... But every class member is going to have to prove that he or she purchased an American Spirit cigarette, right?

[00:07:26] Speaker 01:
Yes.

[00:07:26] Speaker 01:
Definitely true at the back end, but I think what... What do you mean at the back end?

[00:07:32] Speaker 01:
If this case ends in a position where there is a liability finding against the defendants and aggregate damages award,

[00:07:40] Speaker 01:
At that point then anybody who purchased the class will be anybody who purchased the product and individuals who are seeking to recover out of that damages award will have to show in some way that they purchased the product.

[00:07:56] Speaker 04:
And won't Santa Fe have the right to challenge each and every

[00:08:01] Speaker 04:
purported class member?

[00:08:03] Speaker 01:
Well, I actually don't think that's right in a case like this one, and I want to try to... Why not?

[00:08:08] Speaker 04:
Yeah, I want to try to draw a distinction.

[00:08:09] Speaker 04:
And let me just broaden my question a little.

[00:08:13] Speaker 04:
You know, if the benefits of a class action are to avoid, you know, many trials for thousands if not millions of class members, and we're going to have many trials at the back end,

[00:08:30] Speaker 04:
then I'm wondering why many trials at the front end are eliminated here.

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And that goes to the predominance and superiority, frankly.

[00:08:43] Speaker 04:
But anyway, tell me why in the back end.

[00:08:47] Speaker 04:
I don't have to worry about some of the challenging individual claimants.

[00:08:52] Speaker 01:
Yeah.

[00:08:53] Speaker 01:
So let me answer the back end, and then if I can, move to the question about where to locate this inquiry.

[00:08:57] Speaker 01:
So on the back end, I think this court has already

[00:08:59] Speaker 01:
held that a defendant does not have a right to challenge individual claimants' efforts to recover out of a common fund in a very specific kind of case, in this kind of case.

[00:09:13] Speaker 01:
That's the Inri Urethane decision that this court issued a few years ago.

[00:09:17] Speaker 01:
In that case, the defendants made the exact same argument that they're making here.

[00:09:20] Speaker 01:
We have a Seventh Amendment right, a due process right, to challenge every claimant

[00:09:25] Speaker 01:
who comes forward and files a claim form or an affidavit or anything like that.

[00:09:29] Speaker 01:
But in a case where there is a fixed liability, you know with certainty that the defendants have a fixed amount of liability for the alleged harm and where that liability doesn't change one way or the other based on who comes forward to file a claim.

[00:09:48] Speaker 04:
It does change because a lot of consumers are going to have different reactions to the

[00:09:52] Speaker 04:
the mislabeling under, I think under your price premium theory.

[00:09:59] Speaker 01:
Well no, I disagree with that.

[00:10:00] Speaker 01:
Under the price premium theory it doesn't matter at all what in any individual consumer may have thought or understood about the label.

[00:10:09] Speaker 01:
Why not?

[00:10:10] Speaker 04:
If you didn't think natural additive free meant

[00:10:16] Speaker 04:
safer and healthier than he wasn't deceived.

[00:10:19] Speaker 01:
The price premium theory doesn't turn on individual consumer preferences.

[00:10:24] Speaker 01:
It turns on the amount that the defendants were able to extract based on the allegedly unlawful statement.

[00:10:31] Speaker 00:
And it's an objective standard, right?

[00:10:32] Speaker 01:
And that is an objective inquiry.

[00:10:35] Speaker 01:
So the way it works is that in all of these states, there is an objective reasonable consumer standard.

[00:10:41] Speaker 01:
It does not turn on what any individual consumer may have thought about the statement.

[00:10:46] Speaker 04:
The only thing that... Yeah, but there is a subclass of consumers that that theory doesn't capture.

[00:10:55] Speaker 04:
Well, I'm sorry.

[00:10:57] Speaker 04:
Well, there's the menthol theory... Under your price premium theory.

[00:11:01] Speaker 04:
you're assuming all consumers are similarly situated, which would be an objective standard, but your theory of liability is that not all consumers were deceived because some of them were not.

[00:11:13] Speaker 01:
I think this is a really important point, so I just want to be clear about this.

[00:11:17] Speaker 01:
The theory of liability

[00:11:19] Speaker 01:
doesn't turn on whether any individual consumer was deceived or not.

[00:11:23] Speaker 01:
The only thing it turns on is whether, under the objective consumer reasonable standard, the statement itself was deceptive.

[00:11:30] Speaker 01:
And that question is not proven.

[00:11:33] Speaker 01:
The plaintiffs have not.

[00:11:35] Speaker 02:
That is the violation, the liability question.

[00:11:39] Speaker 02:
But I'm not sure that that's the damages question.

[00:11:42] Speaker 02:
OK, so I'm liable.

[00:11:44] Speaker 02:
What do I have to pay?

[00:11:45] Speaker 02:
What do you have to pay?

[00:11:49] Speaker 02:
seems to me, I'm having trouble seeing how you're unhooking that from proof about what individuals overpaid because they were confused.

[00:12:00] Speaker 02:
Now, I'm not sure that's a relative determination because that problem's going to exist whether it's done by class action or by a million individual suits.

[00:12:10] Speaker 02:
So it neither shows nor harms superiority.

[00:12:14] Speaker 02:
But I just don't see how

[00:12:17] Speaker 02:
It doesn't figure into how much has to be paid into damages by natural tobacco if they're found liable.

[00:12:26] Speaker 01:
Yes, so let me try to answer that.

[00:12:28] Speaker 01:
Before I do, I just want to say I think there are two cases that... And you do need to come back to my back end.

[00:12:34] Speaker 01:
I will try to come back to your back end.

[00:12:37] Speaker 01:
You go with that first.

[00:12:38] Speaker 04:
No, no, no.

[00:12:39] Speaker 04:
Go with Judge Ebel and then come back to me.

[00:12:41] Speaker 01:
Okay.

[00:12:41] Speaker 01:
I listened to him first and then you, so I'll go to you first.

[00:12:44] Speaker 01:
There are two cases that I think are really key on this question, Judge Ebel.

[00:12:49] Speaker 01:
The first is from the 11th Circuit.

[00:12:50] Speaker 01:
This is what?

[00:12:51] Speaker 01:
The first is from the 11th Circuit.

[00:12:54] Speaker 01:
It's called Carullo.

[00:12:55] Speaker 01:
Spell the first word.

[00:12:56] Speaker 01:
C-A-R-R-I-U-O-L-O, I believe.

[00:13:01] Speaker 01:
Okay?

[00:13:02] Speaker 01:
Now, the 11th Circuit looked, it's almost an identical kind of case.

[00:13:06] Speaker 01:
It was a case about, it's a car case, so it's not, you know, cigarettes.

[00:13:10] Speaker 01:
But the question there was, did GM put a misleading or deceptive five-star safety rating on its cars?

[00:13:17] Speaker 01:
Okay?

[00:13:18] Speaker 01:
This is under Florida Consumer Protection Law, the same statute that we have here.

[00:13:23] Speaker 01:
And what the 11th Circuit said is the analysis for liability is objective and causation and damages.

[00:13:31] Speaker 01:
It's all an objective inquiry.

[00:13:33] Speaker 01:
And the way that you measure damages is you ask how much could GM have charged more for

[00:13:40] Speaker 01:
the statement that the car had a five-star safety rating compared with the car without that statement.

[00:13:50] Speaker 01:
And I think that's exactly the way to think about this question here.

[00:13:54] Speaker 01:
A price premium theory for damages comes up with a single

[00:13:58] Speaker 01:
measure of damages.

[00:14:00] Speaker 01:
How much were the defendants able to charge more per PAC based on the unlawful statement?

[00:14:05] Speaker 00:
That's it.

[00:14:06] Speaker 00:
Can I ask you just a clarifying question about that?

[00:14:08] Speaker 00:
So should we be thinking about the difference between the fact of damage or the fact of harm and the calculation of damage in how you're describing the thinking about that case?

[00:14:21] Speaker 01:
Well, I mean, I think the fact of damage is

[00:14:25] Speaker 01:
distinct from the calculation of harm.

[00:14:27] Speaker 01:
Right.

[00:14:27] Speaker 01:
What we have to show here, we're not, we're just at the Rule 23 stage.

[00:14:31] Speaker 01:
Can the damages be proven on a class-wide basis?

[00:14:34] Speaker 00:
And when you're saying damages, you mean can the harm be proven?

[00:14:36] Speaker 00:
Yes.

[00:14:37] Speaker 00:
With common proof.

[00:14:38] Speaker 00:
Correct.

[00:14:38] Speaker 00:
And that's different from calculating the damages later.

[00:14:40] Speaker 00:
Correct.

[00:14:40] Speaker 01:
There has been no actual calculation.

[00:14:42] Speaker 01:
We just have to be, again, at the, for predominance, and I'm going to try to get back Judge Tikovitch to your question.

[00:14:48] Speaker 02:
For pretty much sit down to two things you got to get back to him, but you can have a second.

[00:14:53] Speaker 01:
I did I'm sorry Thank you for reminding me.

[00:14:55] Speaker 01:
So yeah, I'll give you the site excited in the breeze The Ninth Circuit has a decision a recent decision called Lytle L Y T L E Okay, that is it is also on almost all fours with what's going on here in terms of?

[00:15:09] Speaker 01:
the way that these cases, the way damages are proven in these cases.

[00:15:14] Speaker 02:
We'll figure that out by reading those cases.

[00:15:15] Speaker 01:
Okay, proceed down the queue.

[00:15:17] Speaker 01:
Okay, Judge Rossman, I forgot your question.

[00:15:22] Speaker 00:
That's fair, that's fair.

[00:15:23] Speaker 00:
I'm sorry.

[00:15:25] Speaker 00:
My question is really in terms of thinking about the elements of your claim and how we're to, well, just think about if there's a Comcast problem, right, with the damage and mob.

[00:15:34] Speaker 01:
Yeah, all we have to prove

[00:15:36] Speaker 01:
all, at this stage, we're not, there isn't, we have to not even prove, that was the wrong use of the word.

[00:15:41] Speaker 01:
We are at the Rule 23 stage.

[00:15:42] Speaker 01:
Show, all we have to show is that, is that the majority of the elements in this case are capable of common proof.

[00:15:50] Speaker 01:
That's it.

[00:15:51] Speaker 01:
We have, I think, done that.

[00:15:52] Speaker 01:
The district court found that that was true for the question of whether the statements are deceptive or false, okay?

[00:15:58] Speaker 01:
That is true for the question of causation.

[00:16:01] Speaker 01:
The district court has a whole, you know, multiple pages.

[00:16:05] Speaker 01:
This is, you know, the fourth appendix volume, 18 to 30, where the court lays out the relevant evidence, common class-wide evidence that can support causation.

[00:16:17] Speaker 01:
statements throughout that section where the court is identifying how these statements drove the sale and the price premium that the defendants were able to charge.

[00:16:27] Speaker 01:
That leaves damages.

[00:16:29] Speaker 01:
What the district court said about damages on the mental side of things is there is no Comcast problem because the model that the plaintiff's expert has proposed to use here can calculate the isolated amount of damages for each unlawful statement.

[00:16:46] Speaker 01:
and the expert can come up with a specific number associated with the amount that the defendants were able to charge as a premium for putting that statement on the box.

[00:16:59] Speaker 01:
It's one number, it's one amount, and it applies across the board to everybody who purchased the pack.

[00:17:03] Speaker 00:
Why wouldn't the overstatement of damages under your expert's model result in individualized inquiries?

[00:17:09] Speaker 01:
There isn't an overstatement of damages.

[00:17:12] Speaker 00:
Well, let's assume that the district court's understanding that you needed to account for multiple definitions or interpretations of the misleading terms would propel that.

[00:17:21] Speaker 01:
I think that is an incorrect understanding of what this expert was proposed to do.

[00:17:27] Speaker 01:
I think this is, to me, a very key point, and I would encourage everybody to go look at the experts

[00:17:33] Speaker 01:
expert report.

[00:17:35] Speaker 01:
Dr. Dubay, he is the leading expert in this way of calculating damages.

[00:17:40] Speaker 01:
It's at the second appendix volume, pages 195.

[00:17:42] Speaker 00:
But you don't disagree with the district court's conclusion that he did not disaggregate the different definitions or potential interpretations, I guess.

[00:17:50] Speaker 01:
Yes, but his position, the way that this analysis works is you do not disaggregate.

[00:17:57] Speaker 01:
It doesn't matter what any particular plaintiff may have understood about

[00:18:02] Speaker 02:
These labels and here's why his analysis you were giving you're impressed with giving us the citation We're in the second.

[00:18:09] Speaker 01:
Yeah one at second volume 195 to 197.

[00:18:11] Speaker 01:
All right now proceed His analysis takes as a given it starts by assuming that a jury has already Determined that the statement is unlawful.

[00:18:23] Speaker 01:
Okay, once you once you reach that point that

[00:18:26] Speaker 01:
then under all of these state consumer protection statutes, you have to remove the statement.

[00:18:31] Speaker 01:
It cannot be included on the PAC.

[00:18:33] Speaker 01:
And so what he says is, at that point, what I will do is I will calculate a value assigned to that particular statement that the defendants were able to charge everybody.

[00:18:44] Speaker 01:
It's uniform across the board and it doesn't matter what anybody

[00:18:48] Speaker 01:
The 11th Circuit in Karula makes this point really clearly.

[00:18:51] Speaker 01:
It doesn't matter what anybody might have thought about that statement.

[00:18:54] Speaker 01:
They paid more because it was on the box, and it was on the box unlawfully.

[00:18:58] Speaker 01:
What do we do about the disclaimer?

[00:19:00] Speaker 01:
Yep.

[00:19:02] Speaker 01:
And I do want to get back to your question.

[00:19:04] Speaker 01:
You're not going to sit down and put an answer mark.

[00:19:05] Speaker 01:
So I just want to flag that it's still out there.

[00:19:08] Speaker 01:
So the disclaimer.

[00:19:09] Speaker 01:
The district court, I think it's a little hard to figure out in this fact

[00:19:17] Speaker 01:
Findings of fact section in the district court's opinion exactly what's going on with the disclaimer.

[00:19:22] Speaker 01:
You can look, and this is at pages basically 20 through 31.

[00:19:29] Speaker 01:
of the fourth volume of the appendix, or it's actually 18, where the district court is kind of walking through the significance of the disclaimer.

[00:19:37] Speaker 01:
And there are a series of fact findings the district court includes that make clear that there's record evidence demonstrating that the disclaimer is ineffective, that it does not work to alter consumer understandings of these terms.

[00:19:55] Speaker 01:
Sorry?

[00:19:55] Speaker 02:
For any consumer.

[00:19:56] Speaker 01:
For any consumer.

[00:19:57] Speaker 01:
It's class-wide common evidence.

[00:19:59] Speaker 01:
This is, as an example, paragraph 144 of the district court's fact findings, page 31 of the fourth volume of the appendix.

[00:20:08] Speaker 01:
It says, disclaimers about cigarette safety do not offset misperceptions of cigarette harms.

[00:20:15] Speaker 01:
On paragraph 88,

[00:20:17] Speaker 01:
It quotes an FDA study published in 2015 that looks at this specific disclaimer, and it says the FDA concluded that the disclaimer, and I'm just going to quote it here, did not convey any modified risk to consumers.

[00:20:36] Speaker 01:
It didn't cure the perception of how either less harmful these cigarettes were or anything else.

[00:20:45] Speaker 04:
What about the class of

[00:20:47] Speaker 04:
of purchasers that, and this really is a causation question, but that read the disclaimer and understood it to mean what it said it mean.

[00:20:59] Speaker 04:
And then just to segue to my back end question, couldn't Santa Fe at the back end challenge whether these purchasers

[00:21:09] Speaker 04:
actually bought cigarettes and they ask, did you see the disclaimer?

[00:21:13] Speaker 04:
Yes.

[00:21:14] Speaker 04:
Did you think the cigarettes were safe?

[00:21:16] Speaker 04:
No.

[00:21:16] Speaker 04:
You think they're healthy?

[00:21:17] Speaker 04:
No.

[00:21:18] Speaker 04:
Right.

[00:21:18] Speaker 04:
Can't they do that on the back ends?

[00:21:20] Speaker 01:
So I think it's irrelevant, and here's why it's irrelevant.

[00:21:24] Speaker 01:
The plaintiff's theory of, and I'm in my red, so.

[00:21:27] Speaker 04:
They can or can't.

[00:21:28] Speaker 04:
Can they cross-examine a class member claimant

[00:21:33] Speaker 04:
on the back end of those types of questions.

[00:21:35] Speaker 01:
No, no, and I'm in my red, so if you don't... No, I'll give you your bottle.

[00:21:38] Speaker 01:
Okay.

[00:21:39] Speaker 01:
So the plaintiff's theory in this case assumes that to prove liability, assumes that everybody read the disclaimer.

[00:21:48] Speaker 01:
So the reason I said it's irrelevant on the back end

[00:21:51] Speaker 04:
Okay, is the plaintiff's theory... And it assumes that everybody would be misled.

[00:21:55] Speaker 01:
What the plaintiffs have to prove isn't anything about any individual reliance.

[00:22:03] Speaker 01:
Did you read it?

[00:22:04] Speaker 01:
What did you think?

[00:22:05] Speaker 01:
That's not the theory.

[00:22:06] Speaker 01:
The theory here is we can prove under the objective reasonable consumer standard that exists in all of these states that even if everybody read the disclaimer along with everything else on the pack,

[00:22:18] Speaker 01:
that an objective consumer would have been misled.

[00:22:21] Speaker 01:
Now, they may lose, okay, the plaintiffs may lose on that question.

[00:22:26] Speaker 01:
OK.

[00:22:26] Speaker 00:
So should the district court have assumed, based on your pleadings, that the disclaimer at this stage was ineffective?

[00:22:32] Speaker 01:
I'm sorry, Judge Austin.

[00:22:33] Speaker 00:
Should the district court have assumed the disclaimer was ineffective?

[00:22:36] Speaker 01:
No.

[00:22:36] Speaker 01:
What the district court should have done is it should have not resolved the merits question about the effect of the disclaimer.

[00:22:43] Speaker 01:
It should have said, proof of the significance or effect of the disclaimer is a merits question, but it can be resolved class-wide, and if the

[00:22:54] Speaker 01:
defendants are successful in convincing a fact finder that the disclaimer cures whatever potential deception exists for the other statements, then that will be a fatal similarity for the class.

[00:23:08] Speaker 01:
Everybody in the class will lose if that's correct, because the inquiry is objective.

[00:23:12] Speaker 01:
So there will be one answer for everybody across the board.

[00:23:16] Speaker 01:
And what the district court instead did

[00:23:19] Speaker 01:
is it said, well, I think the disclaimer is curative or effective.

[00:23:23] Speaker 01:
And so I'm resolving that question at the Rule 23 stage.

[00:23:26] Speaker 01:
But that is not.

[00:23:29] Speaker 01:
You know, this court, every court has uniformly recognized that that kind of merits inquiry isn't appropriate at the Rule 23 stage.

[00:23:36] Speaker 04:
Doesn't Wal-Mart Duke say you can't peek at the merits as kind of a holistic Rule 23 inquiry?

[00:23:42] Speaker 01:
Yes, and this court has said the same thing.

[00:23:45] Speaker 01:
Most courts recognize that you can take a peek at the merits, but this isn't a peek.

[00:23:49] Speaker 01:
What would have been a peek here is if you had an unambiguous disclaimer

[00:23:56] Speaker 01:
without any contrary evidence in the record demonstrating anything about its effectiveness.

[00:24:03] Speaker 01:
If you had a record like that, the district court might be in a position to say, I think there's no doubt that this thing does what I'm being told it does.

[00:24:13] Speaker 01:
But there is paragraph after paragraph after paragraph in the record where the district court is identifying common class-wide evidence that disclaimers

[00:24:24] Speaker 01:
as a general matter and this specific disclaimer are ineffective.

[00:24:28] Speaker 01:
And so when you're faced with that situation, two competing views, we're not saying we're right about this, but we're saying we will rely on number one, the fact that everybody read the disclaimer, and number two, the record evidence we have in the record that the district court recognized exists, that the disclaimer is ineffective, and we think we can convince a jury across the board for everybody that under an objective consumer standard, the disclaimer didn't

[00:24:54] Speaker 01:
change the deceptive nature of these statements?

[00:24:57] Speaker 04:
You're a little bit over, but I did have one clarifying question on the menthol theory.

[00:25:02] Speaker 04:
And maybe this is a fact question.

[00:25:09] Speaker 04:
So the menthol packaging says it's additive-free, but menthol is an additive.

[00:25:17] Speaker 04:
And is your theory that there was menthol added to the tobacco

[00:25:24] Speaker 04:
for the flavoring or that there was a, and I thought it was a menthol filter and the smoke would come through the filter.

[00:25:32] Speaker 04:
That would be the flavoring.

[00:25:34] Speaker 01:
It migrates though.

[00:25:38] Speaker 01:
it migrates into the tobacco and then everyone gets it.

[00:25:41] Speaker 04:
From the filter, some of the chemicals go into the tobacco.

[00:25:44] Speaker 04:
And that's the additive?

[00:25:46] Speaker 01:
Yeah.

[00:25:47] Speaker 01:
And this question, again, we are not at like a liability merit stage of this case.

[00:25:53] Speaker 01:
So the defendants may be able to convince a fact finder that the statement is literally true.

[00:26:00] Speaker 01:
Like that is

[00:26:01] Speaker 01:
like perfectly acceptable possible outcome of the way that this would play out.

[00:26:05] Speaker 01:
But again, because we're operating under this kind of objective standard for liability, causation, and damages, we are not in a position where there's anything individualized about that question or anything else.

[00:26:20] Speaker 04:
Right, but I just want to say the problem is that something in the filter migrates into the tobacco part of the product.

[00:26:27] Speaker 01:
I realize, Judge Sinkovich, I never got to your

[00:26:30] Speaker 01:
your question about the back end challenge of affidavits.

[00:26:34] Speaker 01:
I can do that now, or I can wait until I come back.

[00:26:37] Speaker 01:
All right.

[00:26:38] Speaker 01:
Well, let's hear from Sanfe.

[00:26:39] Speaker 04:
Thank you.

[00:26:39] Speaker 04:
You'll get your five minutes on rebuttal.

[00:26:50] Speaker 03:
Good morning, Your Honors, and may it please the Court

[00:26:53] Speaker 03:
A plaintiff has no cause of action or Article 3 standing unless he actually purchased natural American spirit cigarettes.

[00:27:10] Speaker 03:
But in this case, there's no way to determine that while protecting the defendant's rights unless you put every plaintiff on the stand subject to cross-examination, which would take years.

[00:27:20] Speaker 03:
That alone destroys Rule 23B3 predominance for both the safer cigarettes and the menthol classes.

[00:27:26] Speaker 02:
So you're saying that predominance includes an evaluation of whether there are differences among potential claimants?

[00:27:36] Speaker 03:
Yes, Your Honor, and particularly if the only way they can satisfy the most fundamental element of their claim, that they actually purchase the product, is by putting each plaintiff on the stand.

[00:27:48] Speaker 02:
would exist whether you're dealing with a class action or thousands of individual suits?

[00:27:53] Speaker 03:
I think that's largely my point.

[00:27:55] Speaker 02:
It kind of becomes a neutral in a way.

[00:27:57] Speaker 02:
Excuse me?

[00:27:58] Speaker 02:
It applies regardless of the mechanism used for the lawsuit.

[00:28:02] Speaker 03:
I think that's true, but when it comes to class actions, the first question that you have to ask is are individual issues going to predominate over the common ones.

[00:28:11] Speaker 03:
Remember, a class action

[00:28:13] Speaker 03:
is just a mechanism for aggregating individual claims, but it doesn't change anybody's rights for better or for worse.

[00:28:20] Speaker 03:
I think it's pretty undisputed that an individual plaintiff lawsuit, the plaintiff would have to establish at the outset that she actually purchased the product before a court could then proceed to adjudicate the merits of the claim or award and damages.

[00:28:32] Speaker 02:
And if this were proceeded as a class action, they'd still have to prove it when they become a claimant.

[00:28:36] Speaker 02:
I mean, when they file their claim, we've declared a class action.

[00:28:40] Speaker 02:
We've reached a decision on the merits of liability.

[00:28:43] Speaker 02:
Now you want to make a claim, you have to prove you purchased it.

[00:28:47] Speaker 02:
They're not going to be deprived of any rights.

[00:28:49] Speaker 03:
Well, so a couple of responses to that, Your Honor, because I think they actually will.

[00:28:54] Speaker 03:
First of all, I'll accept for the sake of argument that all of this can happen at the back end when everybody comes forward and tries to make their claim for damages.

[00:29:04] Speaker 03:
So at the back end, we have to have a million mini trials to determine whether they purchase the patent.

[00:29:09] Speaker 02:
If you don't have a class, you're going to have to have a million mini trials also.

[00:29:12] Speaker 03:
Well, Your Honor, no.

[00:29:13] Speaker 03:
Then we'll have a bunch of individual lawsuits, and we'll see who comes forward and actually files the individual lawsuit.

[00:29:19] Speaker 03:
The problem with the class action, it allows them to bring them all together and largely use it to coerce a settlement.

[00:29:24] Speaker 03:
And that's a lot of their analysis.

[00:29:27] Speaker 02:
attribute of a class action, isn't that the death nail for small value consumer claimants, that there is essentially no effective solution if you say that negates class action options?

[00:29:42] Speaker 03:
No, Your Honor, and I have a few responses to that very important question.

[00:29:46] Speaker 03:
The first is just to take it head on.

[00:29:48] Speaker 03:
No, there are plenty of small dollar class actions that will still survive because in many cases it's pretty easy to establish who actually purchased the product.

[00:29:56] Speaker 03:
Take your quintessential securities class action.

[00:29:59] Speaker 03:
Public records show who purchased the product even if it's a penny stock or a Consumer Protection Act case against a bank.

[00:30:05] Speaker 03:
or an online retailer, where bank records or retailer records are going to show who purchased it.

[00:30:11] Speaker 03:
The Supreme Court's decision in TransUnion is actually another good example of that.

[00:30:15] Speaker 03:
There, there were a group of plaintiffs who claimed that their credit reports were unlawfully disseminated to third parties.

[00:30:22] Speaker 03:
TransUnion's records showed whose records were disseminated to third parties.

[00:30:26] Speaker 03:
But I take your point.

[00:30:27] Speaker 02:
There are going to be... But for product liability cases, then, let me be more specific.

[00:30:31] Speaker 02:
You would pretty much negate any collective

[00:30:36] Speaker 02:
actions on product liability?

[00:30:38] Speaker 03:
You wouldn't negate it, but you would limit it.

[00:30:40] Speaker 03:
There are, and their amicus actually point to a lot of examples of where in the products liability context, there are records that the defendant keeps as to who purchased the product.

[00:30:49] Speaker 03:
Think of when you purchase a consumer item where you have a warranty.

[00:30:53] Speaker 03:
The warranty provides a record

[00:30:55] Speaker 03:
of your purchase.

[00:30:56] Speaker 03:
But there are going to be a lot of cases that get knocked out.

[00:30:58] Speaker 03:
That reflects the fact that 23B3 was always meant to be an adventure from the beginning.

[00:31:05] Speaker 03:
The Supreme Court has made that very clear.

[00:31:07] Speaker 03:
And one of the principal guardrails on that adventure is the predominance inquiry.

[00:31:12] Speaker 03:
It doesn't mean, though, that defendants go unpunished.

[00:31:15] Speaker 03:
Federal and state governments are charged with enforcing these consumer protection laws.

[00:31:20] Speaker 03:
One of the problems with an overly assertive interpretation of 23B3 is it undermines that law enforcement discretion by deputizing plaintiff's attorneys as private attorneys generally.

[00:31:30] Speaker 00:
What do you mean by overly assertive?

[00:31:33] Speaker 03:
Well, Your Honor, I could use this case as a perfect example because I think it's a perfect illustration of it.

[00:31:37] Speaker 03:
The Federal Trade Commission and 30 state attorneys general actually sued us raising the very same claims that my friends are raising here.

[00:31:46] Speaker 03:
And we resolve that litigation by agreeing to disclaimers.

[00:31:50] Speaker 03:
The reason we're here today is because my friends don't like the disclaimers that 38 attorneys general and the FTC agreed to.

[00:31:58] Speaker 00:
I'm sorry.

[00:31:58] Speaker 00:
You were talking about an overly assertive interpretation of the rule, not a description of the nature of the litigation here.

[00:32:04] Speaker 00:
That's what I'm asking you about.

[00:32:05] Speaker 03:
You know, there I'll actually go to the three sets of circuits that have addressed what I'm calling the predominance inquiry.

[00:32:12] Speaker 03:
to illustrate what I think is an overly assertive interpretation of Rule 23B3.

[00:32:17] Speaker 03:
If you look at the third circuit, the first circuit, and the fourth circuit on the one hand, and the second and the sixth circuits on the other, what all five of those courts say is that if you cannot determine whether or not somebody even purchased the

[00:32:35] Speaker 03:
without putting everybody on the stand, that is either necessarily going to defeat or significantly undermine the ability to show predominance.

[00:32:45] Speaker 00:
Situate that within the specific text of the rule.

[00:32:48] Speaker 00:
How would we interpret what you're saying?

[00:32:50] Speaker 00:
within the text of the rule.

[00:32:52] Speaker 00:
We're under 23B3D, right?

[00:32:55] Speaker 00:
Is that right?

[00:32:57] Speaker 00:
23B3D, the likely difficulties in managing a class action.

[00:33:01] Speaker 00:
That's one of four factors that the district court, within its discretion, weighs and balances to determine whether the predominance inquiry is met.

[00:33:11] Speaker 00:
Is that right?

[00:33:12] Speaker 03:
Well, you're right that we're under rule 23B3.

[00:33:17] Speaker 03:
I start just by looking at the predominance inquiry.

[00:33:19] Speaker 03:
which says in the very first sentence, you have to find that questions that are common to the class predominate over individualized questions.

[00:33:26] Speaker 03:
And if you literally do have to go through every plaintiff to decide whether they purchase the product, to determine whether they have a cause of action or Article III standing, that is necessarily going to defeat predominance.

[00:33:38] Speaker 00:
Now my friends say... Well, I'm sorry, your point is though, I think, if I understand you correctly, you need to then keep reading, right?

[00:33:45] Speaker 00:
If the matters pertinent to these findings include

[00:33:48] Speaker 00:
The matters pertinent to these findings of predominance and commonality superiority include, and there's four of them.

[00:33:54] Speaker 00:
So your position is that one can defeat, right?

[00:33:59] Speaker 00:
That under 23B3D, the district court could have concluded.

[00:34:02] Speaker 03:
I think I have two responses to that, Your Honor.

[00:34:05] Speaker 03:
The first is it doesn't have to fit into A, B, C, or D. The predominance inquiry asks if there are any questions of law or fact that are individualized and predominate over any

[00:34:18] Speaker 03:
common questions.

[00:34:20] Speaker 03:
So those are just illustrations.

[00:34:22] Speaker 03:
But secondly, my friend wants to put manageability, the fourth prong, under superiority.

[00:34:27] Speaker 03:
And that's the error that the seventh and the ninth and the 11th circuits made as well.

[00:34:32] Speaker 03:
If you actually read the text of the rule,

[00:34:34] Speaker 03:
It starts out by talking about predominance and superiority.

[00:34:37] Speaker 03:
Then it says, the matters pertinent to these findings include, and it lists four factors, the fourth one of which is manageability.

[00:34:45] Speaker 03:
So even if you thought this was just a manageability issue, the plain text of the rule makes clear that that's relevant to the predominance inquiry as well.

[00:34:54] Speaker 03:
And here it's quite clear that the only way you can show that a plaintiff actually has standing to proceed and a cause of action is by asking,

[00:35:03] Speaker 03:
have they actually purchased the product?

[00:35:07] Speaker 02:
Give us a few sentence definition of the word predominance.

[00:35:12] Speaker 02:
Predominance means what?

[00:35:15] Speaker 03:
Predominance means as a practical matter when you litigate the case, are you going to be entwined in individualized issues over common questions?

[00:35:25] Speaker 03:
I don't dispute that.

[00:35:27] Speaker 03:
Over.

[00:35:27] Speaker 03:
That is, are you going to be more than half concerned with the individual?

[00:35:32] Speaker 03:
I think it's a practical inquiry, Your Honor.

[00:35:34] Speaker 03:
And I think practically you have to ask yourself, how is this case going to be tried?

[00:35:39] Speaker 03:
And I think one component of it is, are we going to be spending all of our time on individualized questions or common questions?

[00:35:45] Speaker 03:
All of your time, or at least most of our time.

[00:35:48] Speaker 02:
So are you again coming back to kind of a predominance question of more than any other factor, or is it

[00:35:58] Speaker 02:
more than all of the individual factors, because there's always going to be individual factors on damages cases.

[00:36:04] Speaker 00:
For sure.

[00:36:05] Speaker 02:
And there hopefully will always be common questions, or you wouldn't even think about a class action.

[00:36:10] Speaker 02:
So you got both, always.

[00:36:14] Speaker 02:
And most of the predominant cases I've focused on don't seem to worry a lot about the standing issue.

[00:36:21] Speaker 02:
Is it because it's non-merit based?

[00:36:24] Speaker 02:
But it's always there, and it's a big elephant in the room.

[00:36:30] Speaker 03:
So I think it's both the standing issue and the merits issue, because you don't have a cause of action at all if you didn't buy the product.

[00:36:37] Speaker 03:
Even if you think that we totally lied about our products and charged a huge price premium, if you didn't buy the product, we didn't cause your injury.

[00:36:44] Speaker 03:
So it's still part of the analysis.

[00:36:48] Speaker 03:
But I do think it goes within the predominance prong.

[00:36:51] Speaker 03:
And remember, this is an abuse of- Does the importance of the issue

[00:36:54] Speaker 02:
Calculate into what is predominant.

[00:36:57] Speaker 03:
I think it does I think it's the importance of the issue how much time you spend Litigating it it is trusted to the district court's discretion and that's an important point I want all of those things all of those things and one of the important points I want to make is if you actually look at judge Browning's opinion

[00:37:12] Speaker 03:
He agreed with us in saying that he thought that the right answer actually was that this inability to determine who could buy the product should defeat class certification for both of the classes.

[00:37:25] Speaker 03:
Where he made his errors, he then went on to say, but I actually think that the 10th circuit is going to align itself with the seventh and the ninth on the one hand versus the first, third, fourth, second, and sixth circuits on the other hand.

[00:37:39] Speaker 03:
So if left to his discretion and under the right understanding of the rule, he indicated he would have exercised his discretion in our favor, but he mispredicted what you would do.

[00:37:51] Speaker 03:
I would urge you to take a close look at the Second Circuit's decision in the Petrobras case, because I think it is a very good analysis of the predominance question.

[00:38:00] Speaker 03:
I'm going to be very candid.

[00:38:01] Speaker 03:
At the beginning, what the Second Circuit did is it said it didn't agree with the Third Circuit's approach, where it put it all under the notion of ascertainability.

[00:38:09] Speaker 03:
But what it went on to say is that you really get to the same place under the predominance inquiry, because if, in fact, we do have to look at every individual plaintiff to decide whether or not they bought the product, that is going to be an overwhelming question when you're talking about a class action that has thousands, tens of thousands, and maybe

[00:38:29] Speaker 03:
millions of members.

[00:38:31] Speaker 03:
And that's basically our argument, that whether you look at it using the ascertainability language that the Third Circuit uses, or the predominance language that the Second Circuit uses, it gets you to the same place.

[00:38:44] Speaker 03:
I think the Supreme Court's decisions in Halliburton 2 and Amgen, excuse me, are really quite on point here.

[00:38:52] Speaker 03:
Now those were securities fraud class actions.

[00:38:54] Speaker 03:
And what the Court said was that generally in a securities fraud class action,

[00:38:59] Speaker 03:
The fraud on the market rule is what allows you to certify a class.

[00:39:02] Speaker 03:
But there are times when the fraud on the market rule fails.

[00:39:05] Speaker 03:
And the court made crystal clear that if the fraud on the market rule were to fail in a way that required individualized reliance determinations, that would necessarily defeat class certification.

[00:39:17] Speaker 03:
If I could quote the key language from the opinion, this is Halliburton 2.

[00:39:22] Speaker 03:
And without the presumption of reliance, a Rule 10B-5 suit cannot proceed as a class action.

[00:39:28] Speaker 03:
Each plaintiff would have to prove reliance individually, so common issues would not predominate over individual ones.

[00:39:35] Speaker 03:
Well, this is that in spades, because the most fundamental question, whether they even purchased the product, is going to require you to put every one of these potentially millions of plaintiffs on the stand.

[00:39:48] Speaker 03:
no matter how important you think other issues are, I cannot see how they could predominate over a process that is going to take years, if not decades.

[00:39:57] Speaker 00:
You cannot see, but what is our standard of review on the question that the district court actually, the finding or conclusion the district court actually reached, which was that it was not going to doom certification here?

[00:40:07] Speaker 03:
Sure, and it's the abuse of discretion standard, but with two caveats.

[00:40:11] Speaker 03:
One, if you make a legal error, that's an abuse of discretion.

[00:40:14] Speaker 03:
And two, the district court said, actually in his opinion, that if it were left up to him, he would have ruled in our favor.

[00:40:21] Speaker 00:
What is the legal error?

[00:40:23] Speaker 03:
The legal error was that he thought that what the Seventh Circuit and the Ninth Circuit said was correct, which is that these individualized questions into whether or not you purchased the product can never, standing alone,

[00:40:35] Speaker 03:
defeat class certification.

[00:40:37] Speaker 03:
That's contrary to what the first, second, third, fourth, and sixth circuits have said, Your Honor.

[00:40:43] Speaker 03:
What those courts have said, some have said it isn't necessarily defeat certification.

[00:40:48] Speaker 03:
Others have said it at least can defeat certification.

[00:40:51] Speaker 03:
He thought it could never defeat certification.

[00:40:53] Speaker 03:
And if you look at the Seventh and Ninth Circuit decisions that go the other way, it's important to note that they do not even address the predominance question.

[00:41:02] Speaker 03:
They assume that this is solely an issue that goes to superiority.

[00:41:06] Speaker 03:
and manageability, but they don't address predominance.

[00:41:09] Speaker 03:
We've actually looked at some of the briefs.

[00:41:10] Speaker 03:
We don't think that the predominance issue was even presented to them.

[00:41:14] Speaker 03:
But when courts like the second and the sixth have got it squarely, they said, oh, this really is a predominance inquiry.

[00:41:20] Speaker 03:
And if you look at the analysis that the Third Circuit is doing, although it calls it ascertainability, what it is really doing is a predominance inquiry because it's asking.

[00:41:29] Speaker 03:
Can I determine this fundamental element?

[00:41:32] Speaker 03:
Did they buy the product in an administratively feasible way, or do I have to have many trials on every single plaintiff to figure it out?

[00:41:40] Speaker 03:
And if the latter, class certification fails because they use the term ascertainability, whereas the second and the sixth circuits get to the same place using the same predominance.

[00:41:50] Speaker 04:
Is ascertainability the same as administrative ability?

[00:41:54] Speaker 04:
administrative difficulties?

[00:41:55] Speaker 03:
Your Honor, I actually think it's just another way for that court to do the predominance analysis.

[00:42:01] Speaker 03:
Administrative feasibility asks, does the defendant have records?

[00:42:06] Speaker 03:
Can we just have an expert look at the records and figure out who purchased the product or not?

[00:42:11] Speaker 03:
In a case like this, it's clear that there are no records that answer that.

[00:42:15] Speaker 03:
And instead, the only way to answer that question is by putting everybody on the stand.

[00:42:19] Speaker 00:
How should we be thinking about or should we be thinking about the nature of the industry in determining how challenging the asset trainability inquiry is here?

[00:42:28] Speaker 00:
There's no records of the purchases.

[00:42:31] Speaker 00:
You mentioned TransUnion as an example of where there were records.

[00:42:35] Speaker 00:
How should the absence of that, given the nature of the industry and the consumer product at issue, factor into our ascertainability analysis?

[00:42:44] Speaker 03:
Well, Your Honor, respectfully, I don't think that the nature of the industry should factor into it at all.

[00:42:49] Speaker 03:
What you should be asking is, you know, is the plain language of the rule satisfied?

[00:42:54] Speaker 00:
Well, the nature of the industry in terms of how we're supposed to think about whether there are records or not.

[00:43:01] Speaker 03:
I'm not sure I'm following your question.

[00:43:03] Speaker 03:
There are no records.

[00:43:04] Speaker 03:
Nobody nobody disputes that there are no records The reason there are no records is because this is a relatively small dollar item But the Supreme Court has made clear that a defendant Absolutely has the right to insist on any defenses in a class action that it could have raised in an individualized case that's exactly what the Supreme Court said at the liability stage and

[00:43:27] Speaker 02:
There isn't a case law that says they can assert those rights at the certification stage.

[00:43:32] Speaker 02:
My biggest concern in this case is, are we taking liability issues that are going to have to be dealt with at trial and when claimants are made?

[00:43:41] Speaker 02:
And are we moving all of that stuff into the certification stage, which is meant to be a bit of a more abbreviated process?

[00:43:50] Speaker 02:
That's my concern.

[00:43:51] Speaker 03:
Yeah.

[00:43:51] Speaker 03:
I guess I have two responses, Your Honor.

[00:43:53] Speaker 03:
One, I don't think we're doing that.

[00:43:55] Speaker 03:
But two, I don't think that it would matter.

[00:43:57] Speaker 03:
And I would like to start with the Supreme Court's recent decision in the Walmart case, which I think is quite clear in stating that it does matter at the class certification stage.

[00:44:06] Speaker 03:
It's not kicking the can down the road.

[00:44:08] Speaker 03:
What the Court specifically said was that because the Rules Enabling Act forbids interpreting Rule 23 to abridge and large or modify any substantive right, a class cannot be certified on the premise that Walmart will not be entitled to litigate

[00:44:23] Speaker 03:
its statutory defenses to individual claims.

[00:44:27] Speaker 03:
And what Walmart and cases like Shady Grove and the Sprint Against APCC case make clear is that all a class action device is a tool, an innovative and adventuresome tool

[00:44:40] Speaker 03:
to aggregate individual claims, but it doesn't change any defendant's rights or remove any defense that the defendant would otherwise have simply because you put all the cases together in a class.

[00:44:52] Speaker 03:
Couldn't you hold all those rights to be asserted at the claimant stage, at the administrative stage?

[00:45:01] Speaker 03:
No, Your Honor, and that's the second point that I wanted to make in response to your question.

[00:45:05] Speaker 03:
First, think about it as an individual case.

[00:45:08] Speaker 03:
If I came in as an individual plaintiff and I wanted to sue Santa Fe because they tricked me into buying their products and I paid a price premium, the first thing I would have to do is establish that I actually bought the product.

[00:45:20] Speaker 03:
If I didn't, I would be tossed out for lack of Article 3 standing and on a 12b6 motion to dismiss because I haven't stated a claim if I haven't purchased the product at all.

[00:45:30] Speaker 03:
What Walmart makes crystal clear is that they don't get to short-circuit that process by suing in a class.

[00:45:38] Speaker 03:
Rather, cases like Steel Company make clear that Article III standing issues have to be determined before the court proceeds to adjudicate the merits of the claim so it can't be kicked to the end.

[00:45:49] Speaker 02:
Well, the ultimate right isn't going to be short-circuited, because before you may get a claim recovered,

[00:45:56] Speaker 02:
that will have to be decided.

[00:46:00] Speaker 02:
But you're saying it's got to be decided at the certification stage, partly because there's some kind of a right not to have the expense of litigation, I think.

[00:46:13] Speaker 03:
That's not the basis.

[00:46:15] Speaker 03:
My argument is what you're saying, but that's not the basis of my argument.

[00:46:18] Speaker 03:
When a court certifies a class, what the court is saying is that every member of that class is now a plaintiff before me.

[00:46:24] Speaker 03:
Once it certifies a class and proceeds to rule on the merits, it's now saying every member of that class has succeeded on the merits of their individual claim.

[00:46:34] Speaker 03:
Steel Company tells us that you cannot make that second step unless you've got Article III standing over all of the individual claimants in the first place.

[00:46:43] Speaker 03:
That's why you need to be able to determine

[00:46:46] Speaker 03:
on a class-wide basis whether or not there's Article III standing.

[00:46:50] Speaker 03:
Now this is a little bit different than what was going on in the LabCorp case, which I know you all are familiar with.

[00:46:55] Speaker 03:
LabCorp involved two different issues.

[00:46:57] Speaker 03:
One is

[00:46:58] Speaker 03:
The main issue was, has the class been defined in a way such that everybody has Article III standing?

[00:47:03] Speaker 03:
We're not challenging that.

[00:47:05] Speaker 03:
They're defining the class as everybody who purchased the product.

[00:47:09] Speaker 03:
So by definition, everyone includes Article III standing.

[00:47:12] Speaker 03:
We're going to the second step and asking, OK, well, how are you going to prove that?

[00:47:16] Speaker 03:
And if the only way you can prove that in a realistic way

[00:47:20] Speaker 03:
is by putting everybody on the stand subject to cross-examination.

[00:47:23] Speaker 00:
Why is that the only way?

[00:47:24] Speaker 03:
That's directly relevant to predominance.

[00:47:26] Speaker 00:
Why is that the only way?

[00:47:27] Speaker 00:
I mean, what about affidavits?

[00:47:29] Speaker 00:
The premise of your argument assumes there's only one path.

[00:47:33] Speaker 00:
Why is that correct?

[00:47:34] Speaker 03:
Sure.

[00:47:35] Speaker 03:
I would point you directly to Judge Kayada's first circuit decision in the N. Re.

[00:47:40] Speaker 03:
Asacol case.

[00:47:41] Speaker 03:
because he takes this on directly.

[00:47:43] Speaker 03:
What he makes clear is that in Ray Asacol, A-S-A-C-O-L.

[00:47:52] Speaker 03:
If the affidavits are uncontested, then yes, that works.

[00:47:56] Speaker 03:
But we have a right to contest the affidavits, particularly when you're talking about sales that occurred 10 years ago.

[00:48:03] Speaker 03:
Again, that goes back to Walmart, where they say that you cannot short circuit our defenses just because it's a class action.

[00:48:09] Speaker 03:
And we certainly will contest any affidavit when these are 10-year-old purchases, sometimes 20-year-old purchases, and there are no records of it.

[00:48:18] Speaker 03:
We have a right to insist that they meet their burden of proof.

[00:48:21] Speaker 03:
We don't have to just take their say-so.

[00:48:23] Speaker 03:
Judge Kayada takes that on directly in the in-ray asset call case and says affidavits don't work if the defendant is contesting the affidavits.

[00:48:33] Speaker 03:
That's what we have here, and that's why it requires all of these controls.

[00:48:39] Speaker 04:
We'll see if they have the right at that claims situation.

[00:48:48] Speaker 04:
If it gets to that, would you be able to challenge each claimant's understanding of the packaging, or is it simply

[00:48:59] Speaker 04:
binary did you buy the cigarette or not?

[00:49:02] Speaker 03:
100 percent.

[00:49:04] Speaker 03:
My view is we would have a right to challenge everything.

[00:49:07] Speaker 03:
So we could challenge whether or not they purchased the product.

[00:49:11] Speaker 03:
We could challenge whether or not they purchased the product before or after they saw the disclaimer.

[00:49:15] Speaker 03:
In our view, if they saw the disclaimer,

[00:49:16] Speaker 03:
then they weren't deceived at all.

[00:49:19] Speaker 03:
We could say that only, even if you didn't see the disclaimer before you purchased your first pack, you saw it after you purchased your second pack because it's on the package, all of those issues would be wide open.

[00:49:30] Speaker 04:
Why doesn't the reasonable consumer expectation

[00:49:33] Speaker 04:
to us take care of that problem.

[00:49:35] Speaker 03:
For a couple of reasons, Your Honor.

[00:49:37] Speaker 03:
First, you have to ask what would a reasonable consumer have thought based on what they looked at.

[00:49:44] Speaker 03:
What Judge Browning said in this case is that you essentially have two different groups of consumers.

[00:49:51] Speaker 03:
One group of consumer just saw additive free, the descriptor on the pack.

[00:49:55] Speaker 03:
Another group of consumers just saw maybe additive free alongside of disclaimer.

[00:50:01] Speaker 03:
So they saw two different sets of representations.

[00:50:04] Speaker 03:
So you've got two different liability questions.

[00:50:06] Speaker 03:
It's as if they were buying two different products.

[00:50:09] Speaker 03:
And you've got to figure out whether you fall into bucket one or bucket two.

[00:50:13] Speaker 03:
And that, in and of itself, is an individualized determination that you're going to have to reach.

[00:50:19] Speaker 03:
Now, my friend was saying that, in their view, that disclaimers fail across the board.

[00:50:23] Speaker 03:
It's fine.

[00:50:23] Speaker 03:
I get that that's their argument.

[00:50:25] Speaker 03:
Our argument is the opposite, and I think it's more than a reasonable one.

[00:50:29] Speaker 03:
If the jury were to accept our position, it is going to have to figure out whether you fall in bucket one or bucket two.

[00:50:36] Speaker 03:
That's the second reason why Judge Browning found that the safer cigarettes class should not be certified.

[00:50:43] Speaker 00:
Why aren't the two buckets themselves the result of a legal error on the district court's part in implementing the reasonable objective standard?

[00:50:55] Speaker 03:
Because, Your Honor, I think that within each bucket, you do the reasonable objective standard.

[00:51:00] Speaker 03:
So you ask, if you have a group of people that only saw the descriptor, would a reasonable person have been deceived just by the descriptor?

[00:51:07] Speaker 03:
If you have another group of people that saw the disclaimer, you ask, and I think my friends agree with this, would a reasonable person have been deceived by the disclaimer?

[00:51:17] Speaker 03:
Their position is a reasonable person would have been deceived by the disclaimer,

[00:51:21] Speaker 03:
Our view is the opposite.

[00:51:23] Speaker 03:
If we prevail before the jury, and Judge Browning was clear that this was ultimately a jury question, if we prevail before the jury, you've got to figure out whether you're in bucket one or bucket two because you saw two different sets of representations.

[00:51:36] Speaker 03:
So that was the second error with respect to the safer cigarettes class.

[00:51:40] Speaker 03:
I know my time is out.

[00:51:41] Speaker 03:
I wanted to touch on the Comcast error.

[00:51:43] Speaker 03:
Just quickly, because you'll get five minutes.

[00:51:45] Speaker 03:
And I think the Comcast error is particularly significant

[00:51:48] Speaker 03:
Judge Browning got it right on safer cigarettes, wrong on menthol.

[00:51:52] Speaker 03:
I'd like to just take a minute on the menthol theory.

[00:51:55] Speaker 03:
On the menthol theory, their theory, as my friend explained to you, is that the menthol migrated from the filter into the tobacco.

[00:52:05] Speaker 03:
So when a purchaser of menthol cigarettes, somebody who by definition wanted menthol flavor, purchased the cigarettes, they were tricked into not understanding that the menthol started in the filter

[00:52:17] Speaker 03:
and migrated into the tobacco.

[00:52:20] Speaker 03:
So the Comcast question is, how much more did they pay because they did not understand that the menthol in their menthol cigarettes started out in the filter and migrated into the tobacco?

[00:52:32] Speaker 03:
The answer to that question is almost certainly zero, which is why their expert doesn't even attempt to answer that question.

[00:52:39] Speaker 03:
And that's the Comcast error.

[00:52:41] Speaker 03:
Your damages model has to be tied to your theory of liability.

[00:52:46] Speaker 03:
If it's not, it's as if you have no damages model at all, and damages become yet another individualized question.

[00:52:53] Speaker 03:
Judge Browning understood that properly for safer cigarettes, but respectfully, we think he erred when it came to the menthol cigarettes.

[00:53:00] Speaker 04:
Thank you.

[00:53:03] Speaker 04:
Amy, why don't you give Mr. Wessler, we'll do a seven and seven rebuttal just because we've asked a lot of questions.

[00:53:10] Speaker 04:
You don't have to use it all if you don't want.

[00:53:22] Speaker 01:
Thank you, Your Honor.

[00:53:23] Speaker 01:
I guess I'm Matthew Wesser again for the plaintiff's appellants.

[00:53:29] Speaker 01:
I think I want to pick up on the back end set of questions, if that's OK, and then we can move to the front end.

[00:53:35] Speaker 01:
But Judge Ebel, I think you are exactly right.

[00:53:38] Speaker 01:
What the defendants are asking this court to adopt is a categorical rule that in any small dollar consumer or antitrust case in which a consumer would go into a store and purchase a product,

[00:53:51] Speaker 01:
those cases are incapable of being certified under Rule 23.

[00:53:55] Speaker 01:
That is the upshot of their rule that they are asking this court to adopt.

[00:53:59] Speaker 01:
They have several different reasons why they think that's right.

[00:54:02] Speaker 01:
But the end outcome here isn't that there is some kind of balancing that should take place.

[00:54:07] Speaker 01:
They think that as a categorical matter, in any case where there aren't records of purchases or some other uniform documentary way of demonstrating as an objective matter who purchased the product, you can't certify the class.

[00:54:22] Speaker 01:
That is exactly the opposite of the reason why Rule 23 exists.

[00:54:27] Speaker 01:
When it was first adopted, the whole point, this is in the committee notes to the rule, it was designed to allow small dollar claims to be banded together to be pursued on behalf of all of the claims.

[00:54:41] Speaker 01:
So if you actually endorse the rule that the defendants are asking you to endorse, it will do the exact opposite of what Rule 23 is designed to do.

[00:54:52] Speaker 01:
There is a question here about these back end, you know, who is in the class?

[00:54:57] Speaker 01:
Okay, how do we identify who's in the class?

[00:54:59] Speaker 04:
And will it come?

[00:55:00] Speaker 04:
You know, Walmart does say, you know, what it says about proving the elements of a claim and defendants still get those rights.

[00:55:08] Speaker 01:
Absolutely.

[00:55:09] Speaker 04:
How does that tie in?

[00:55:10] Speaker 04:
Absolutely.

[00:55:11] Speaker 04:
That's true for a small dollar.

[00:55:12] Speaker 01:
Absolutely.

[00:55:13] Speaker 01:
This gets to your, I think this gets us back finally to your question about do defendants have a Seventh Amendment due process right?

[00:55:20] Speaker 01:
to challenge everybody's affidavit.

[00:55:22] Speaker 01:
And I can't do any better.

[00:55:24] Speaker 01:
I'll just tell you the pin site for the decision of this court in in-ray urethane.

[00:55:28] Speaker 01:
There is a whole section from that decision.

[00:55:30] Speaker 01:
It's labeled Seventh Amendment.

[00:55:32] Speaker 01:
It looks at this exact question.

[00:55:35] Speaker 01:
Does a defendant have a seventh?

[00:55:37] Speaker 02:
In which case are you talking about?

[00:55:38] Speaker 01:
In-ray urethane antitrust litigation.

[00:55:41] Speaker 01:
The pin site is 768, F3rd at 1269.

[00:55:45] Speaker 01:
It's this whole section where this court looks precisely

[00:55:50] Speaker 01:
at the rights, the due process or Seventh Amendment rights that a defendant has on the back end in a class action.

[00:55:57] Speaker 01:
And what it says, and I'm just going to quote the language.

[00:56:00] Speaker 01:
Well, it's a little tricky to quote, but the defendants make this Seventh Amendment argument.

[00:56:04] Speaker 01:
They say, we have a right to challenge all of this stuff on the back end.

[00:56:09] Speaker 01:
And what this court said was, we reject this argument because Dow, who is the defendant in that case,

[00:56:15] Speaker 01:
has no interest in the method of distributing the aggregate damages award among the class members.

[00:56:22] Speaker 01:
What's really key here is that when we're talking about a case like what was going on in the Urethane decision or what we're talking about here is a case in which the total aggregate amount of damages is fixed.

[00:56:37] Speaker 01:
There is no uncertainty about how much the defendant will owe if there is a liability finding

[00:56:46] Speaker 01:
And a jury believes the plaintiff's damages expert.

[00:56:49] Speaker 02:
The key is the damages you're measuring are the unjust enrichment of the defendant rather than accumulation of injuries by a bunch of claimants.

[00:57:02] Speaker 02:
So I hadn't appreciated until just this moment how important it was that you brought this case in part as an unjust enrichment case.

[00:57:11] Speaker 01:
How much did the defendant extract

[00:57:15] Speaker 01:
from the consumers based on its unlawful labels.

[00:57:19] Speaker 01:
And that is a fixed number per pack.

[00:57:22] Speaker 01:
It's a specific number.

[00:57:24] Speaker 01:
It does not fluctuate depending on which statement a jury finds unlawful.

[00:57:28] Speaker 01:
And it doesn't fluctuate at all in the aggregate, because we know, the defendants know down to the pack how many packs they sold.

[00:57:37] Speaker 01:
And so you heard my friend on the other side say, go look at the First Circuit's decision in Inre, Assacole.

[00:57:43] Speaker 01:
That's the Judge Callada decision.

[00:57:45] Speaker 01:
I absolutely would encourage you to go look at that case, because what is going on there is very different from what we have here.

[00:57:53] Speaker 01:
In that case, which was a question about

[00:57:57] Speaker 01:
the unlawful delay of the entry of a generic drug into the market.

[00:58:04] Speaker 01:
You had a completely uncertain amount of damages.

[00:58:07] Speaker 01:
You didn't know how many people would have bought the generic drug had it been on the market for longer.

[00:58:13] Speaker 01:
And so in that setting, where you don't have fixed aggregate liability, there are potential problems about evaluating who might have purchased the product when

[00:58:23] Speaker 01:
Were they brand loyalists?

[00:58:24] Speaker 01:
Would they have purchased the brand name instead of the G?

[00:58:27] Speaker 01:
You didn't know.

[00:58:27] Speaker 01:
But the First Circuit has another case that looks at this issue in a different context.

[00:58:32] Speaker 01:
It's called in rain nexium, 777 F3rd at 20.

[00:58:37] Speaker 01:
And what it says there is affidavits are a perfectly acceptable method for demonstrating who is entitled to recover out of a common fund, especially in a case where the aggregate liability is fixed.

[00:58:51] Speaker 01:
The Seventh Circuit,

[00:58:52] Speaker 01:
In Mullins, a case we've cited, both sides have cited Mullins.

[00:58:55] Speaker 01:
It's one of the cases that rejects this ascertainability requirement that the defendants are asking you to adopt.

[00:59:02] Speaker 04:
In those cases, the defendant can still challenge the affidavit on whatever grounds it thinks it has.

[00:59:09] Speaker 01:
To answer that question, I'll just... All the affidavit is is a statement that I bought the package.

[00:59:15] Speaker 04:
It says, I bought the product.

[00:59:17] Speaker 01:
But what the Seventh Circuit said is where... This is at page 670 of the decision.

[00:59:22] Speaker 01:
where the total amount of damages can be determined in the aggregate, where you know ex ante before we get there, how much exactly will the defendant owe?

[00:59:32] Speaker 01:
Down to the penny, where we know that, this is what the Seventh Circuit said, the identity of particular class members does not implicate the defendant's due process interest at all.

[00:59:43] Speaker 01:
Because a defendant, once liability has been set,

[00:59:46] Speaker 01:
And once the damages amount is fixed, it does not have any interest in which of the claimants are coming forward to recover out of the common fund.

[00:59:54] Speaker 01:
So it said the addition or subtraction of individual members affects neither the defendant's liability nor the total amount of damages it owes to the class.

[01:00:03] Speaker 01:
I think this is really key.

[01:00:05] Speaker 01:
That is the world we are in.

[01:00:07] Speaker 01:
in this case.

[01:00:08] Speaker 01:
Now, even if we were to just take a step back and say maybe there would be some individual issues related to damages,

[01:00:16] Speaker 01:
This court and other circuits uniformly have said that that issue is not capable of defeating class certification.

[01:00:25] Speaker 01:
And this kind of question, this back end, what will happen if we have this right?

[01:00:28] Speaker 01:
I mean, this is the dog that never barks.

[01:00:30] Speaker 01:
There is not a single case, a single case that the defendants have identified to you, I'm not aware of any, where this issue has actually occurred in the real world.

[01:00:41] Speaker 01:
It is one of these speculative, hypothetical arguments

[01:00:44] Speaker 01:
that gets made all the time, but when it actually comes down to it and you are sitting at the end of this case, which we're now 10 years into it, you know, however many years where you're sitting potentially on a jury finding of liability and a measure of damages, that's it.

[01:01:02] Speaker 01:
The defendant does not care because their liability is fixed.

[01:01:06] Speaker 02:
Yeah, go ahead and wrap up.

[01:01:07] Speaker 02:
Can I ask just one question that has nothing to do with

[01:01:11] Speaker 02:
I'm just curious about it.

[01:01:14] Speaker 02:
What happens to the excess money in the class if you pay it calculated on the total overpayment, overcharges, and not nearly as many claimants

[01:01:23] Speaker 02:
file a claim.

[01:01:25] Speaker 02:
What happens to that extra money?

[01:01:26] Speaker 01:
Well, there are mechanisms in place to do additional notice efforts to try to get more people.

[01:01:34] Speaker 04:
The judge's favorite charity.

[01:01:37] Speaker 01:
There are Cypre doctrines that have been used by courts to send that money to the next best option, basically, which is its own thing.

[01:01:47] Speaker 01:
But district courts have developed strategies for figuring out what to do in those situations.

[01:01:56] Speaker 02:
This is destined to have a lot of unclaimed money in it, I think.

[01:02:01] Speaker 02:
And I'm just curious.

[01:02:01] Speaker 01:
Yeah.

[01:02:02] Speaker 01:
I mean, I don't know what would happen in a case like this.

[01:02:05] Speaker 01:
I'm an appellate lawyer, so I don't know exactly how this plays out on the ground.

[01:02:12] Speaker 01:
You know, the total amount of liability in this case is absolutely fixed down to the penny, and that's why this idea that what the defendant really needs to do is challenge these class members is both untrue, I think, as a controlling question, the Discord has already decided to in-regure thing, and also just as a practical matter, never occurs.

[01:02:32] Speaker 01:
There isn't a single case where this has actually happened.

[01:02:35] Speaker 01:
If I could just make one last point, which goes back to the merits, because Judge Timkovich, I have heard you

[01:02:42] Speaker 01:
asked several times, well, why doesn't the sort of subjective preferences of these individual consumers matter?

[01:02:50] Speaker 01:
And the best I can do is to, again, tell you that every circuit that has looked at that question in the context of state consumer protection claims like this one that involve fraudulent or deceptive labeling and in which the damages, that the theory of liability is that

[01:03:08] Speaker 01:
that deceptive claim is unlawful and it allowed the defendant to charge more for the product than they otherwise would have, has said explicitly this is that as an example, but it's not the only one.

[01:03:22] Speaker 01:
This is the 11th Circuit case, 823, F3rd at 985.

[01:03:27] Speaker 01:
This is exactly the argument the defendant is making here.

[01:03:32] Speaker 01:
And the court said the mental state of each class member is irrelevant.

[01:03:36] Speaker 01:
That's the actual language that the 11th Circuit used.

[01:03:40] Speaker 01:
And then the defendant is incorrect to suggest in these cases that the plaintiffs must prove

[01:03:46] Speaker 01:
that every class member saw the label and was subjectively deceived by it.

[01:03:51] Speaker 04:
And you're saying that was Judge Browning's principal error in the safer cigarette?

[01:03:56] Speaker 01:
I think Judge Browning's principal error was that he resolved a merits question about the significance of the disclaimer.

[01:04:03] Speaker 01:
That question, the significance of the disclaimer,

[01:04:07] Speaker 01:
rises or falls one way or the other across the class, and it should have been something that was left for the merits.

[01:04:14] Speaker 01:
What he should have done was recognize that the question of what impact does the disclaimer have on the objective reasonable consumer standard is a question that will either be answered by the jury in favor of the plaintiffs or in favor of the defendants, but either way will apply

[01:04:37] Speaker 01:
Cross the board on liability to the whole class.

[01:04:39] Speaker 01:
Thank you.

[01:04:48] Speaker 03:
Thank you, Your Honors.

[01:04:48] Speaker 03:
This is 100% not a case where damages are fixed.

[01:04:54] Speaker 03:
What my friend is talking about is your quintessential common fund case.

[01:04:58] Speaker 03:
Let me give you a couple of examples of common fund cases.

[01:05:01] Speaker 03:
You got 50 employees that are saying they are collectively entitled to a $50 million pension fund.

[01:05:07] Speaker 03:
The employer has no right to those $50 million.

[01:05:10] Speaker 03:
The employees collectively have a right.

[01:05:12] Speaker 03:
The employer doesn't care how it's divided up.

[01:05:14] Speaker 03:
He's out $50 million no matter what.

[01:05:16] Speaker 03:
If you go back in time, you'll look at cases brought by shipping crews, claiming that the crew of a ship was collectively entitled to 5% of the bounty of the ship.

[01:05:26] Speaker 03:
Doesn't matter how many crew members are ultimately entitled, they collectively get 5%.

[01:05:31] Speaker 03:
That's exactly what in re-urethane was.

[01:05:35] Speaker 03:
A common, fun case.

[01:05:36] Speaker 03:
My friend quoted from the decision, but he left out the key sentence that was the last sentence in the paragraph that he read.

[01:05:42] Speaker 03:
And this is that sentence.

[01:05:44] Speaker 03:
And Dao cannot complain about the uncertainties inherent

[01:05:48] Speaker 03:
in an aggregate damages award because Dow never requested individualized findings on damages.

[01:05:55] Speaker 03:
Dow agreed in that case to treat it as a common fund case.

[01:06:00] Speaker 03:
In a typical class action, total damages are simply the sum of the damages that flow from each valid claim.

[01:06:09] Speaker 03:
Now my friend relies very heavily on the Seventh Circuit's decision

[01:06:13] Speaker 03:
in the Mullins case.

[01:06:14] Speaker 03:
Now I think Mullins got a lot of things wrong, but the one thing that Mullins got right was this very issue.

[01:06:21] Speaker 03:
Mullins describes the different types of class actions and then he gets to this type of class action and here's what the Seventh Circuit said in Mullins.

[01:06:30] Speaker 03:
The total damages cannot be determined in the aggregate

[01:06:33] Speaker 03:
but there is a common method of determining individual damages.

[01:06:37] Speaker 03:
Most consumer fraud class actions fit this model.

[01:06:40] Speaker 03:
In this situation, the Seventh Circuit explained, the defendant's due process interest is implicated because the calculation of each member's damages affects the total amount of damages it owes to the class.

[01:06:54] Speaker 03:
So 100%, this is not a common fund case.

[01:06:58] Speaker 03:
Instead, total damages equal the sum of each valid claim and the amount of damages you award to each valid claim.

[01:07:06] Speaker 02:
Is unjust enrichment a common fund?

[01:07:11] Speaker 02:
Because that claims that they were enriched improperly.

[01:07:17] Speaker 02:
And that doesn't look to who the actual injuries were.

[01:07:21] Speaker 02:
So why isn't that a common fundamental?

[01:07:23] Speaker 03:
Because, Your Honor, even in unjust enrichment claims, they're bringing a claim on behalf of themselves, and they've got to establish their own damage.

[01:07:30] Speaker 03:
I think a lot of this goes back to the sort of fundamental point that a class action is simply an aggregation of individual claims.

[01:07:40] Speaker 03:
In an individual claim, even an individual unjust enrichment claim,

[01:07:44] Speaker 03:
An individual plaintiff would have to come forward, would first have to show that I bought the product.

[01:07:50] Speaker 03:
If they didn't buy the product, they're out on their ear.

[01:07:52] Speaker 03:
They can't bring an unjust from Richmond claim or anything else.

[01:07:55] Speaker 03:
If they brought the product, then you would proceed to adjudicate the merits of the claim and you ask, would a reasonable consumer in their position, depending on what they saw, disclaimer versus descriptor, would they have been deceived?

[01:08:07] Speaker 03:
If so, what was the injury?

[01:08:10] Speaker 03:
But you still have to jump through all of those hoops.

[01:08:12] Speaker 03:
And if those initial hoops require individualized determinations,

[01:08:17] Speaker 03:
then you never get to the damages issue because damages go to standing and to whether or not you have a viable cause of action at all.

[01:08:26] Speaker 03:
And Walmart tells us you don't get to short circuit our individualized defenses that challenge whether they have Article III standing and whether they have a cause of action.

[01:08:35] Speaker 03:
simply because they're joining part of a class.

[01:08:39] Speaker 03:
Now, Judge Browning actually agreed with us on this, and he certainly agreed that it was relevant to the predominance inquiry, what he concluded that it wasn't relevant all by itself.

[01:08:50] Speaker 03:
That's what explains the split decision between Safer Cigarettes and Menthol, the Menthol classes on Safer Cigarettes.

[01:08:57] Speaker 03:
He said, yes, this individualized question is a problem.

[01:09:00] Speaker 03:
But problem, if that's all there was, I wouldn't certify the class.

[01:09:04] Speaker 03:
But for Safer Cigarettes, I've got the co-purchase problem, whether they saw the disclaimer problem.

[01:09:11] Speaker 03:
And the Comcast damages issue, when I put all three of those together, that's enough to deny class certification.

[01:09:17] Speaker 03:
When he turned to the menthol classes, he said that all I have is whether or not they purchased the product, although that is an individualized question that is relevant to predominance.

[01:09:27] Speaker 03:
And Judge Browning said, if left to my own druthers, I would probably deny certification for that reason alone.

[01:09:34] Speaker 03:
He predicted that you would align yourselves with the Seventh and the Ninth Circuits and say that that can never alone defeat class certification.

[01:09:41] Speaker 03:
That's the error he made on the menthol side.

[01:09:45] Speaker 00:
So to agree with you on that, we would have to construe that as a legal error and review it either as part of the abuse of discretion standard or whatever, but we have to understand it as not just a purely discretionary weighing determination.

[01:09:58] Speaker 03:
Yeah, I think you can understand it in a couple of different ways.

[01:10:00] Speaker 03:
One is that it's a legal error.

[01:10:02] Speaker 03:
And two, you have Judge Browning on the record saying, this is how I would have exercised my discretion on my own, but I felt constrained by a misprediction, we hope, a misprediction in how this court would establish the legal rule.

[01:10:16] Speaker 00:
I appreciate that that's perhaps a fair description of his ruling.

[01:10:20] Speaker 00:
What I'm trying to understand is if we are to construe this as a legal error, however packaged, under whatever standard of review, what is it that compels this as a legal error?

[01:10:30] Speaker 00:
There was a disagreement, you say, within the circuits.

[01:10:33] Speaker 00:
What is it under the rule that suggests that he erred?

[01:10:36] Speaker 03:
Oh, sure.

[01:10:36] Speaker 03:
Sure.

[01:10:37] Speaker 03:
Because if you just start out with the rule, the predominance inquiry says, do any common questions outweigh any individualized questions or vice versa?

[01:10:48] Speaker 03:
Any.

[01:10:49] Speaker 03:
And so to adopt a rule, as the Seventh and the Ninth Circuits have, that says that individualized questions about who purchased the product can never

[01:10:59] Speaker 03:
defeat predominance as a matter of law, and that's the rule in the Seventh and the Ninth Circuits, as my friend described, that is a legal error.

[01:11:07] Speaker 00:
And you understand Judge Browning to have thought he was operating under incorrect understanding of the law?

[01:11:13] Speaker 03:
Yes, Judge Browning was quite clear.

[01:11:15] Speaker 03:
He said, if it were just up to me, I would probably go along with the way that the Third Circuit has analyzed this issue.

[01:11:22] Speaker 03:
But he predicted that you would go along with the seventh and the ninth circuits.

[01:11:26] Speaker 03:
I would add into the third circuit, the second and the sixth circuits, I think those two courts' decisions are particularly good on explaining why this really is a predominance problem, and at the very least can alone defeat predominance.

[01:11:40] Speaker 03:
So one way to resolve this case is to say, look, Judge Browning got it right on the safer cigarettes class.

[01:11:46] Speaker 03:
There were a bunch of things going on.

[01:11:48] Speaker 03:
in the exercise of his discretion, he got it right.

[01:11:51] Speaker 03:
When it comes to the menthol class, he did misunderstand how we would apply the legal rule.

[01:11:56] Speaker 03:
We don't agree with the Seventh and the Ninth Circuits.

[01:11:59] Speaker 03:
We think that the Second and the Sixth Circuits got it right, so we should send it back to him to exercise his discretion in light of what the rule, what we think the correct rule is.

[01:12:11] Speaker 04:
Thank you, counsel.

[01:12:12] Speaker 04:
We appreciate the arguments this morning.

[01:12:13] Speaker 04:
In traveling to Denver, your excuse and the case will be submitted.

[01:12:17] Speaker 04:
Thank you, Your Honor.