696 A.2d 793 | N.J. Super. Ct. App. Div. | 1997
This is a ease involving a consumer fraud lawsuit against Johnson & Johnson-Merck Consumer Pharmaceuticals (hereinafter “J & J”) for its allegedly false advertising of a product it manufactures and markets called Pepcid AC (hereinafter “Pepcid”). The Plaintiffs seek through the instant motion to represent a nationwide class of persons who between June 12, 1995, and October 20, 1995, purchased Pepcid and suffered ascertainable losses, including at the minimum purchasing Pepcid when they would not otherwise have done so or at prices they would not otherwise have paid.
Pepcid is a relatively new non-prescription product which is designed to prevent heartburn and acid indigestion. Between June 12, 1995, and October 20, 1995, J & J ran a nationwide
(1) 8 out of 10 doctors and pharmacists chose Pepcid AC acid controller over Tagamet HB;
(2) Pepcid controls acid for 9 hours — all day or all night; and,
(3) Only Pepcid AC has proven that it can prevent heartburn and indigestion.
J & J blanketed the marketplace with air and print media containing a wide variety of claims promoting Pepcid, most of which have never been challenged. Two of the three claims that plaintiffs now challenge (see above) were enjoined in a lawsuit with SmithKline Beecham in October and December of 1995.
After consideration of the briefs submitted and the argument of counsel, I conclude that class certification should be denied, as individual questions of law and fact predominate over those common to the proposed class. While recognizing the strong preference of the New Jersey courts in favor of granting class certification, this case is distinguishable from the situation envisioned by our courts as appropriate for class action disposition.
As a general matter, New Jersey courts, as well as federal courts construing the federal class action rule after which our rule is modeled, have consistently held that the rule must be
The requirements for class action suits are governed by Rule 4:32. The requirement to qualify for class certification consists of a two-step process. The prerequisites that first must be satisfied under R. 4:32-1(a) are: (1) numerosity; (2) questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of those of the proposed class; and (4) the representatives will fairly and adequately protect the interests of the class. Second, if these four elements are met, then under subsection (b) of the rule one of three alternatives for the maintainability of the class action must be satisfied. The plaintiffs in this case seek to certify their proposed class under R. 4:32-1(b)(3) which requires both the predominance of common questions of law or fact over questions affecting only the individual members, and the superiority of a class action over other available methods of adjudication. The factors pertinent to a (b)(3) finding include the interests of the class members in individually controlling the prosecution or defense of separate actions, the extent and nature of any litigation concerning the controversy already commenced by or against members of the class, and the difficulties likely to be encountered in the management of a class action. R. 4:32-1(b)(3).
Plaintiffs assert that they have satisfied all of the prerequisites for class certification set forth in R. 4:32-1(a), and I agree. First, the R. 4:32-1(a)(1) requirement of numerosity of proposed plaintiffs is met here. See, e.g., Delgozzo, 266 N.J.Super. at 184,
Next, the R. 4:32-1(a)(2) requirement of commonality of questions of law or fact is also met here. To meet this requirement under subsection (a), the class as a whole must raise at least one common question of law or fact. Phillip Steven Fuoco, Robert F. Williams, Class Actions in New Jersey State Courts, 24 Rutgers L.J. 737, 752 (1993). In this instance the entire class alleges a eommon theory of liability under claims of misrepresentation of advertising by J & J leading to their injuries. Common facts are present as the complaint refers to the same two advertisements, thus corollary questions of fact with respect to the advertisements also exist.
The R. 4:32-1(a)(3) requirement of typicality of claims of the plaintiffs and the rest of the proposed class overlaps with the test for R. 4:32-1(a)(4), adequacy of representation. See In re Cadillac, supra, 93 N.J. at 425, 461 A.2d 736. A plaintiff’s claim is typical of the claims of the class if it arises from the same event or course of conduct which has given rise to the claims of the other class members. Id. Here the plaintiffs’ claims arise from the same nationwide advertising practices of J & J in connection with the sale and marketing of the same product; thus, plaintiffs have satisfied the. typicality requirement of the rule.
The last requirement of R. 4:32-1(a) that the plaintiffs fairly and adequately represent the interests of the class is presumed in New Jersey courts, and the burden is on the opposing party to demonstrate that the proposed representation will be inadequate. Delgozzo, supra, 266 N.J.Super. at 188, 628 A.2d 1080. Elements of this requirement include the interests of the named representatives being co-extensive with the interests of the other members of the class and assurance that the representatives
While the threshold requirements of R. 4:32-1(a) have been satisfied, the inquiry does not end there. Plaintiffs must also satisfy R. 4:32-1(b), third subsection, requiring that common questions of law and fact predominate and that a class action is the superior method for adjudication of these claims. This is clearly the more difficult question, and it is also where plaintiffs, in my opinion, fail in their attempt to be certified as a class.
If a “common nucleus of operative facts” exists and the plaintiffs seek to redress a common legal grievance, then predominance of common law or facts may be found. In re Cadillac, supra, 93 N.J. at 430-31, 461 A.2d 736. While individual issues of causation, reliance and damages do not preclude class certification, Strawn v. Canuso, 140 N.J. 43, 67, 657 A.2d 420 (1995), common questions of law or fact must outweigh individual questions in order to satisfy the predominance requirement. See Saldana, supra, 252 N.J.Super. at 196-99, 599 A.2d 582.
In order to ascertain whether or not common questions predominate, we must analyze the legal issues and the proofs needed to sustain them. The following issues of law or fact are common to the case:
In the instant matter plaintiffs have set forth counts in their complaint alleging fraud, negligent misrepresentation and violations of the New Jersey Consumer Fraud Act and those of all other states. In order to establish a case for common law legal fraud, a plaintiff must prove material representation of a presently existing or past fact; knowledge or belief by the defendant of its falsity; an intention that the other person rely on it, reasonable reliance thereon by the other person and resulting damages. The Jewish Center of Sussex Cty. v. Whale, 86 N.J. 619, 624-25, 432 A.2d 521 (1981); Van Dam Egg Co. v. Allendale Farms, Inc., 199 N.J.Super. 452, 456-57, 489 A.2d 1209 (App.Div.1985).
To establish their claim sounding in negligent misrepresentation, plaintiffs must prove that an incorrect statement was negligently made and justifiably relied upon to recover damages for economic loss or injury sustained as a consequence of that reliance. H. Rosenblum, Inc. v. Adler, 93 N.J. 324, 334, 461 A.2d 138 (1983).
The New Jersey Consumer Fraud Act provides that
“(t)he act, use or employment by any person of unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby is declared to be an unlawful practice____”
[N.J.S.A. 56:8-2]
Affirmative acts prohibited by the Consumer Fraud Act, including conduct such as alleged in our situation, require no showing of intent. Cox v. Sears Roebuck & Co., 138 N.J. 2, 647 A.2d 454 (1994). A private plaintiff, however, must not only show a violation of the Act, but must also demonstrate that he or she “suffered an ascertainable loss ... as a result of the unlawful
A brief sampling of the deposition testimony of the representative class members who instituted this lawsuit illuminates the enormous difficulties that will be encountered in attempting to establish the elements of reliance, ascertainable loss or injury for plaintiffs’ claims. For example, plaintiff Loretta Lento testified at her deposition on July 29,1996 that she purchased Pepcid in June of 1995 because she saw “the” advertisement on television. When questioned as to which television advertisement she saw, she couldn’t remember. In fact, she stated, “I don’t remember that, if I saw a lot of commercials, but I saw that it was advertised on TV and also some of my friends told me that they took it.” Also, when questioned as to the content of these advertisements she couldn’t remember what was depicted in the advertisements, nor could she remember when she saw the Pepcid advertisements or whether she saw one commercial or several different commercials. When questioned as to the newspaper advertisements, Ms. Lento stated that she remembered seeing a newspaper advertisement once, but that she couldn’t remember what it said. She stated, “I just saw Pepcid Acid, that is it, I don’t know. I don’t remember. I didn’t read it. I just quickly noticed it being advertised.”
Plaintiff Stephen Feinberg paints no clearer a picture of his recollection of the advertisements for Pepcid. He stated at his deposition on August 1, 1996, “I don’t remember [the advertisements] word for word but what impressed me was that they convinced me that if I applied it twenty minutes before I ate that I could avoid heartburn. This is what interested me. But I know one of the ads, I don’t know which one now say so many doctors
Plaintiff Bernard Gross
Therefore while common issues certainly exist in the instant matter in that the dispute is premised upon the false and misleading nature of publicly disseminated advertisements of Pepcid by J & J, the question of whether each consumer purchased Pepcid AC in reliance on those three particular advertisements during a massive media “blitz” would necessarily be highly individualized and complex. As only persons who saw the challenged advertisements, relied on the challenged advertisements in purchasing Pepcid, and would not have purchased the Pepcid but for the challenged advertisements should be included in the class, individual questions predominate over questions in common.
However, courts in other jurisdictions have dealt directly with the fact situation of class certification in false advertising cases. In Strain v. Nutri/System, Inc., plaintiffs alleged that defendant misrepresented the results of its weight loss program in nationwide television, radio and newspaper advertisements. 1990 WL 209325, *6 (E.D.Pa. Dec.12, 1990). The court stated:
“In the instant ease, the proposed class consists of all individuals who joined Nutri/System. Implied in that class definition is the conclusory assumption, that everyone who joined did so in reliance on the advertising____ (S)atisfaction of the reliance issue, requires each class member to narrate a story which includes individualized proof of which advertisements he saw and whether they indeed enrolled in reliance of those advertisements. There are no shortcuts. The proposed class may include individuals who joined Nutri/System’s upon the recommendation of a friend or for some other personal reasons. Lacking in this case is a single set of operative facts that can be applied on a class wide basis — Because the incidents did not occur in a single place, at the same time, or under identical conditions individualized issues of causation arise. In the instant matter, the determination of liability of the defendant requires individualized proof pertinent to each advertisement, interview and subsequent sign-up.” Id. at *6.
The court found the fact that an individual signed up for the Nutri/System Program not to be evidence that she was induced to do so by the allegedly fraudulent misrepresentation. Id. at *7. The court ultimately held that individualized questions of reliance would predominate over common issues at trial and that a class action is not superior to other methods for the fair and efficient adjudication of the controversy. Id. at *8.
Plaintiffs in the Rosenstein case asserted that because of Mazola’s supposed serum cholesterol lowering capability, CPC marketed Mazóla at higher prices than other cooking oils and margarine. The marketing scheme enticed plaintiffs and other consumers to purchase Mazóla in lieu of other similar products, and thus pay more than they normally would have for other cooking oils and margarine. Id.
The court found that the requirements of F.R.C.P. 23(b)(3)
The plaintiffs’ state law claims of fraud and negligent misrepresentation in the Mazola case were predicated on allegations of false and misleading advertising. Id. at *6. The Mazola court stated that in an action for fraud, an essential element of the claim is the plaintiff acting in reliance on the defendant’s misrepresentations. The court further stated that individual questions of reliance predominate over common questions, thus “the fraud cause of action is generally not appropriate for resolution in a plaintiff-class action.” Id. (citing Strain, 1990 WL 209325 at *9).
In my opinion the situation in the present case is different than those in the cited New Jersey cases. New Jersey has never certified a class action in a mass media false advertising case. Here we are faced with a proposed class of consumers who allegedly were induced to purchase a certain product based on allegedly deceptive advertising practices. Under New Jersey law, fraud depends upon proof of a central element: reliance on the allegedly false statements. Negligent misrepresentation requires proof of proximate cause, and under the Consumer Fraud Act, it must be established that the false statements are linked to some “ascertainable loss” on the part of the consumer. This makes the situation before the court much more similar to the facts in Strain and the Mazola case. Fraud cases are markedly different from products liability cases in that a key focus of the proofs is on the reliance element of the claim, rather than the self evident link between defect and damage. In order for plaintiffs to prove that each individual member of the class relied on those particular advertisements, every single member of the class would have to answer individualized questions as to whether each member of the
Aside from the individual issues predominating over common ones in such a scenario, there is also the problem that, given such highly individualized inquiries, the superiority of class certification to other forms of adjudication, the last requirement for class certification, severely lessens. A determination of whether a class action is “superior” to other forms of adjudication turns on its fairness to all parties and the effect of class certification on efficient judicial management. In re Cadillac, 93 N.J. at 436, 461 A.2d 736.
Plaintiffs argue that the addressing of individual reliance issues could be done at a later phase of the litigation without causing undue case management problems. They draw our attention to cases such as In re Kirschner Medical Corp. Sec. Litig., 139 F.R.D. 74, 83 (D.Md.1991) and In re ORFA Sec. Litig., 654 F.Supp. 1449, 1462 (D.N.J.1987) as examples of this practice. However, the analogy to such cases fails, as these matters involve securities fraud, where there is a specific exception to the requirement that reliance must be proved. The court in the Mazda case specifically found the various devices of presuming reliance to be limited to the securities law context, where courts can assume a nearly perfect market of information, but that such presumptions cannot be made with respect to the consumer market. Rosenstein, 1991 WL 1783, *4. Therefore, we are back to the problem of proving each person’s reliance on the advertisements on an individual basis, with each person having to narrate his or her personal story.
While in this case the individual claims amount to such nominal sums of money that it would appear to be unreasonable for individual class members to bring suit, that is not to say that the
Based on the foregoing reasons, plaintiffs motion for class certification is denied.
The campaign has continued unabated thereafter but only with the representations that the New York District Court found to be proper. See, infra, text page 340, 696 A.2d at 795, footnote 2.
See SmithKline Beecham Consumer Healthcare, L.P. v. Johnson & JohnsonUerck Consumer Pharmaceuticals Co., Inc., 906 F.Supp. 178 (S.D.N.Y.1995). In August of 1995, SmithKline sued J & J in the Southern District of New York for making false and misleading statements in violation of the Lanham Act. The Honorable Harold Baer, Jr. preliminarily enjoined J & J from making these statements in its advertisements.
Neither this nor the list of individual issues are intended to control in any later proceedings that may arise in the case.
Despite the similarity of name Mr. Gross is not related to any member of the law firm representing plaintiffs.
The federal rule equivalent of New Jersey R. 4:32-1 (b)(3).
