Class Action Litigation Newsletter | 4th Quarter 2023

• Published date: 24 February 2024
• Subject Matter: Consumer Protection, Litigation, Mediation & Arbitration, Consumer Law, Arbitration & Dispute Resolution, Class Actions, Trials & Appeals & Compensation
• Law Firm: Greenberg Traurig, LLP
• Author: Greenberg Traurig, LLP

This GT Newsletter summarizes recent class-action decisions from across the United States.

Highlights from this issue include:

• Second Circuit reverses denial of motion to compel arbitration based on uncluttered user interface providing "reasonably conspicuous notice."
• Second Circuit decertifies long-running securities fraud class action finding link between corrective disclosures and the alleged misrepresentations insufficient.
• Third Circuit finds plaintiff has standing to pursue FDCPA claim but remands for determination whether individualized inquiry needed to ascertain if individual class members had standing predominates over common issues.
• Fifth Circuit vacates class certification in breach of contract case because plaintiffs failed to show class-wide injury.
• Sixth Circuit vacates order certifying issue-classes in design defect case for deficient analysis of Rule 23's commonality requirement.
• Seventh Circuit remands insurance policyholder class action to state court based on CAFA's internal-affairs and home-state exceptions.
• Eleventh Circuit holds that 2018 Amendment to Fed. R. Civ. P 23(e)(2) does not displace Bennett factor analysis to determine whether a proposed settlement is "fair, reasonable and adequate."
• Eleventh Circuit (en banc) rules that receipt of an unwanted text message causes a concrete injury and can establish standing for a class representative bringing TCPA claim.
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First Circuit

DiCroce v. McNeil Nutritionals LLC, 82 F.4th 35 (1st Cir. 2023)

Consumer's state-law claims based on federal labeling law dismissed as preempted by Food, Drug, and Cosmetic Act.

Plaintiff Kristin DiCroce appealed from the district court's dismissal of her complaint for allegedly misleading labeling and marketing of Lactaid supplements. The district court held that DiCroce's false advertising and deceptive trade practices claims both failed because "no reasonable consumer could find Lactaid's product labels deceptive, nor has DiCroce identified a misrepresentation of fact." The First Circuit did not address the claims substantively and instead affirmed the dismissal on grounds that the state law claims were preempted by federal law.

Specifically, DiCroce's legal action hinged on her assumption that Lactaid's labels violated the federal Food, Drug, and Cosmetic Act (FDCA) labeling requirements and therefore were misleading to consumers. However, only the Food and Drug Administration (FDA) may enforce the FDCA; there is no private right of action. The FDCA preempts any state-law claim that exists "solely by virtue" of an FDCA infraction. Unless a plaintiff pleads that conduct (1) violates FDCA labeling requirements and (2) would also violate chapter 93A even if the FDCA did not exist, the claim is preempted. DiCroce did not contend that Lactaid did not perform as promised, nor did she provide any basis, independent of federal labeling laws, from which the court could conclude that a consumer would be misled by Lactaid's label. In fact, DiCroce's complaint acknowledged that Lactaid's disclaimer statements were "literally true," arguing only that the labels are nevertheless misleading because they violate the FDCA. The First Circuit concluded that when Congress enacted the FDCA, it tasked the FDA, not private citizens, with addressing such alleged violations.

Alves v. Goodyear Tire & Rubber Company, No. 22-11820, 2023 WL 4706585 (D. Mass. July 24, 2023)

Operation of an interactive website is not sufficient to demonstrate defendant availed itself of minimum contacts necessary to warrant personal jurisdiction.

Plaintiff brought a putative class action against Goodyear Tire & Rubber Company alleging the company's use of Session Replay Code technology on its website violated Massachusetts privacy laws. Goodyear moved to dismiss for lack of personal jurisdiction in Massachusetts. Plaintiff argued the court had personal jurisdiction over Goodyear because through Goodyear's website the injury occurred in and was felt in Massachusetts. Specifically, plaintiff alleged defendant knew that its practices would directly result in collection of information from Massachusetts citizens while those citizens browsed www.goodyear.com. Nevertheless, plaintiff claimed, defendant chose to avail itself of the business opportunities of marketing and selling its goods and services in Massachusetts and collecting real-time data from website visit sessions Massachusetts citizens initiated while in Massachusetts. The court found Goodyear's intentional activities, including the operation of www.goodyear.com, the licensing and procurement of Session Replay Code technology, and the gathering and use of user data, undisputedly all took place outside Massachusetts. Indeed, the only intentional contact between Goodyear and Massachusetts that is relevant to the claims at issue was the accessibility of www.goodyear.com in Massachusetts.

The district court reasoned that the proper question was not where plaintiff experienced a particular injury or effect but whether the defendant's intentional conduct connected it to the forum. The court held that the facts alleged in the complaint did not establish a sufficiently strong relationship between Goodyear's intentional activities in Massachusetts and the dispute to warrant exercise of personal jurisdiction. The operation of an interactive website did not show that the defendant formed a contact with Massachusetts. The court concluded that without defendant creating a sufficient connection with the forum state itself, personal jurisdiction was not proper.

John Doe v. Atrius Health, Inc., C.A. No. 22-12196, 2023 WL 6961905 (D. Mass. Oct. 20, 2023)

Private entity that voluntarily participates in federal incentive programs for financial gain does not fall within ambit of federal-officer removal statute.

Plaintiff filed a putative class action against non-governmental health care provider Atrius Health alleging systematic violation of patients' state-law privacy rights. The complaint alleged that Atrius Health's websites used a visitor tracking tool, allowing that information to be processed and shared with third-party advertisers. Atrius Health removed the action to federal court under 28 U.S.C. ' 1442(a)(1), the federal-officer removal statute. Plaintiffs moved to remand, contending that federal subject-matter jurisdiction was lacking because defendant failed to meet the requirements of ' 1442(a)(1).

The removing party "bears the burden under ' 1442(a)(1) to establish: (1) that it was acting under a federal officer's authority; (2) that the charged conduct was carried out for or relating to the asserted official authority; and (3) that it will assert a colorable federal defense to the suit." Atrius contended its alleged use of the computer code was to comply with regulations that assist the government with enhancing patient engagement and supporting the creation of infrastructure to promote adoption of nationwide interoperable health-information technology. The court found that argument insufficient to support federal-officer removal, because a private firm's compliance (or noncompliance) with federal laws, rules, and regulations does not by itself fall within the scope of the statutory phrase "acting under" a federal official.

Second Circuit

Edmundson v. Klarna, Inc., 85 F.4th 695 (2d Cir. 2023)

Second Circuit reverses denial of motion to compel arbitration where uncluttered user interface, spatially coupled with the mechanism and language for manifesting assent, provides reasonably conspicuous notice of arbitration terms.

Defendant Klarna, Inc. provides a "buy now, pay later" service that allows shoppers to buy a product and pay for it over time without incurring interest or fees. Shortly after plaintiff used Klarna to pay for online purchases, Klarna automatically deducted partial payments from plaintiff's checking account. Because plaintiff's account lacked sufficient funds, plaintiff incurred overdraft fees that were assessed by the third-party financial institution associated with her bank account (not Klarna). Plaintiff brought a putative class action alleging that Klarna misrepresents and conceals the risk of bank overdraft fees, asserting claims for common law fraud and violation of the Connecticut Unfair Trade Practices Act. The district court denied Klarna's motion to compel arbitration, but the Second Circuit reversed and remanded with instructions to grant Klarna's motion.

In discussing the formation of a web-based contract'and whether a "reasonably prudent" user will be on inquiry notice of arbitration terms if they are presented in a "clear and conspicuous way"'the Second Circuit reiterated its prior statements in Meyer v. Uber Techs, Inc., 868 F.3d 66 (2d Cir. 2017) about how a "reasonably prudent" internet or smartphone user is "not a complete stranger to computers or smartphones, having some familiarity with how to navigate to a website or download an app," and knows what a hyperlink looks like and that it links "to another webpage where additional information will be found." The Second Circuit also reiterated the importance of a company's interface presentation, noting that "when terms are linked on an 'uncluttered' interface and temporally and 'spatially coupled with the mechanism for manifesting assent,'" and no scrolling is required, that is sufficient to qualify as reasonably conspicuous notice as a matter of law. The Second Circuit also reiterated that an explicit reference to the words "I agree" is not necessary for a user to manifest assent, and that various other factors are to be considered, including whether the interface clearly warned the user that taking a specific action would constitute assent (e.g., creating an account and agreeing to be bound to the linked terms) and the timing and location of being presented with the terms.

The Second Circuit concluded that Klarna provided "reasonably conspicuous notice" of its arbitration terms and that plaintiff manifested assent...