D R U G A N D M E D I C A L D E V I C Efraud act claim cannot be proven on anaggregate basis.Where reliance isuncontested, courtsare reluctant to allowaggregate treatment ofa claim since individualissues will predominate.44 n <strong>For</strong> <strong>The</strong> <strong>Defense</strong> n <strong>October</strong> <strong>2010</strong>Elements of a StatutoryConsumer Fraud Act ClaimOften modeled on the Federal Trade CommissionAct, the Uniform Consumer SalesPractices Act, the Unfair Trade Practicesand Consumer Protection Act, or the UniformDeceptive Trade Practices Act, moststates have a consumer fraud act that definesunlawful conduct in greater or lesserdetail, describes the available remedies, anddelineates who may seek them. See Comment:<strong>The</strong> Tennessee Consumer ProtectionAct: An Overview, 58 Tenn. L. Rev. 455,456–457 (Spring 1991); William A. Lovett,State Deceptive Trade Practice Legislation,46 Tul. L. Rev. 724, 730 (Apr. 1972). Becauseof these common characteristics, thelanguage used in a given state’s consumerfraud act is generally similar to that usedin other states. Many of these statutes providesome sort of private remedy enforceableby private litigants. <strong>For</strong> example, theRhode Island consumer fraud act provides:Any person who purchases or leasesgoods or services primarily for personal,family, or household purposes andthereby suffers any ascertainable loss ofmoney or property, real or personal, asa result of the use or employment by anotherperson of a method, act, or practicedeclared unlawful by [the CFA] maybring an action under Rules of Civil Procedurein the superior court of the countyin which the seller or lessor resides, isfound, has his or her principal place ofbusiness, or is doing business, or in thesuperior court of the county as is otherwiseprovided by law, to recover actualdamages or two hundred dollars ($ 200),whichever is greater.R.I. Gen. Laws §6-13.1-5.2.Other states have similar provisions authorizingprivate consumer fraud act claimswhen the protected person has suffered an“ascertainable loss” “as a result of ” the defendant’suse or employment of an unlawfulpractice, and permitting varying degrees oflegal and equitable relief. See, e.g., AlaskaStat. §45.50.531; Ark. Code Ann. §4-88-113; Conn. Gen. Stat. §42-110g; IdahoCode §48-608; 815 Ill. Comp. Stat. Ann.505/10a; Ky. Rev. Stat. §367.220; La. Rev.Stat. 51:1409; Miss. Code Ann. §75-24-15;Mo. Rev. Stat. §407.025; N.J. Stat. §56:8-19; Or. Rev. Stat. §646.638; 73 Pa. Stat.§201-9.2; S.C. Code Ann. §39-5-140; Tenn.Code Ann. §47-18-109; W. Va. Code §46A-6-106; cf., Minn. Stat. §325D.15 (any persondamaged “by reason of a violation” maysue for actual damages).A plain reading of this type of consumerfraud act suggests that an individual plaintiff’sloss must come about “as a result of”the defendant’s unlawful practice. In otherwords, a plaintiff must prove a causal nexusbetween the loss and the offending conduct.This usually means that a plaintiffmust prove that the plaintiff relied on theallegedly deceptive conduct. Where reliefis sought on behalf of a class or some othergroup of consumers, the causation requirementshould extend to each individualmember of the group, which extends tothe reliance element. Plaintiffs in aggregateconsumer fraud act claims often attempt toeliminate the reliance requirement fromthe causation analysis by essentially ignoringthe “as a result of” language found inmost statutes. Some courts have agreedthat proof of direct reliance is not alwaysrequired. But most courts that have consideredthe question have held that a relianceinquiry informs the causation analysis. Ina case brought by an individual plaintiff,the jury could determine whether to credithis or her testimony that the defendant’sconduct caused an “ascertainable loss.” Ina class action or other aggregate litigation,the ability to prove that unnamed classmembers suffered an ascertainable loss“as a result of” of the defendant’s conductin violation of a consumer fraud act implicatesthe rules for class certification.Reliance and Causation in Classand Other Aggregate Litigation<strong>The</strong> consumer fraud acts of most states donot specify whether aggregate treatment ofclaims is permissible. Some states—Mississippi,Louisiana, South Carolina, and Tennessee,for example—explicitly precludeclass or other representative actions forconsumer fraud act claims. Even then, theSupreme Court’s recent decision in ShadyGrove Orthopedic Associates, P.A. v. AllstateInsurance Company, 559 U.S. , 130S. Ct. 1431, 176 L. Ed. 2d 311 (<strong>2010</strong>), suggeststhat a class action which otherwisemeets the applicable requirements of Fed.R. Civ. P. 23 may proceed in federal courtnotwithstanding a state law bar on classtreatment of the statutory claim at issue.In Shady Grove, a divided court upheld aplaintiff’s attempt to pursue a class actionin federal court even though the state lawwhich formed the substantive basis for itsclaim specifically precluded classwide relief.Under Shady Grove, plaintiffs in states withsimilar laws may not be able to pursue classwiderelief in state court, but the decisionmay allow them to seek class treatment infederal court in some circumstances. Thiswill obviously impact the decision whetherto remove such cases, especially where reliefis sought on behalf of putative class membersfrom more than one state.In states permitting class treatment,the question becomes whether plaintiffscan meet the requirements of the applicableclass action rules. In federal court or instates with civil procedure rules modeledon Fed. R. Civ. P. 23, a plaintiff must showthat all four requirements of Fed. R. Civ. P.23(a) are met and that the case falls withinone of the categories described in Fed.R. Civ. P. 23(b). See Alba Conte and HerbertNewberg, Newberg on Class Actions(4th ed.) §3:1 at 210 (2002). Although thedetails of these are beyond the scope ofthis article, Fed. R. Civ. P. 23(a) has fourrequirements: numerosity; commonality,typicality, and adequacy of representation.Assuming these can be met, litigants inconsumer fraud act actions often attemptto shoehorn their claims into the categoriesencompassed by Fed. R. Civ. P. 23(b)(2)(the party opposing the class has acted ongrounds generally applicable to the group)or Fed. R. Civ. P. 23(b)(3) (common questionsof law or fact predominate over indi-
vidual issues and the class action device issuperior to other methods available to adjudicatethe controversy). Both have similarrequirements to ensure the class actiondevice is appropriate for the circumstancesof a given case.<strong>The</strong> “predominance” and “superiority”requirements of Fed. R. Civ. P. 23(b)(3)attempt to ensure that the class device is notmisused. Courts have recognized that thepresence of individual issues of causationor reliance destroys predominance underFed. R. Civ. P. 23(b)(3). See, e.g., Basic Inc.v. Levinson, 485 U.S. 224, 242 (1988) (“individualissues [would overwhelm] commonones” in case where “proof of individualizedreliance from each member of [a] proposedplaintiff class” is required); Johnstonv. HBO Film Mgmt., Inc., 265 F.3d 178, 194(3d Cir. 2001) (where “plaintiffs were notentitled to a presumption of reliance,” districtcourt “did not abuse its discretion inconcluding the plaintiffs failed to establishthe predominance requirement of Rule23(b)”); Broussard v. Meineke Disc. MufflerShops, Inc., 155 F.3d 331, 342 (4th Cir. 1998)(“because reliance ‘must be applied withfactual precision,’ plaintiffs’ fraud and negligentmisrepresentation claims do not providea ‘suitable basis for class-wide relief”)(quoting Jensen v. SIPCO, Inc., 38 F.3d 945,953 (8th Cir. 1994)). Thus, where reliance isuncontested, courts are reluctant to allowaggregate treatment of a claim since individualissues will predominate.Plaintiffs seeking classwide damages forconsumer fraud act violations sometimestry to invoke Fed. R. Civ. P. 23(b)(2) whenseeking certification. Federal Rule 23(b)(2)was intended to apply primarily to equitableclaims and any monetary relief awardedwas to be incidental to the equitable, injunctiverelief sought by plaintiffs. Zinser v.Accufix Research Inst., Inc., 253 F.3d 1180,1195 (9th Cir. 2001). Thus, courts have heldthat “class certification under Rule 23(b)(2) is proper only when the primary reliefsought is declaratory or injunctive.” In reSt. Jude Med., Inc., 425 F.3d 1116, 1121 (8thCir. 2005). In fact, the United States SupremeCourt has previously held there is“at least a substantial possibility” that actionsseeking monetary damages are onlycertifiable under Fed. R. Civ. P. 23(b)(3),which provides class members with noticeand the right to opt-out. See Ticor Title Ins.Co. v. Brown, 511 U.S. 117, 121 (1994) (emphasisadded). Even assuming a case mightqualify for treatment under Fed. R. Civ. P.23(b)(2), courts have noted that because thatrule does not require notice or the right toSINCE 1980, the economistsand analysts at the Center for<strong>For</strong>ensic Economic Studieshave worked closely with plaintiff anddefense attorneys from both small andlarge firms and a wide variety ofbusinesses and government agencies.We assist with discovery, uncover keydata, critique opposing claims andproduce clear, credible reports andtestimony. Attorneys and their clientshave relied on our expertise inthousands of cases in jurisdictionsacross the country.Our areas of concentration includePersonal Injury / Wrongful Death;Commercial Loss / BusinessInterruption; Damages in EmploymentLitigation; Statistical Analysis of Liabilityin Employment Claims; and BusinessValuation.opt-out, the proposed class must exhibit“cohesiveness” as a condition precedent tocertification. See Newberg §4:11 at 61 (“Rule23(b)(2) includes an implicit ‘cohesiveness’requirement, which precludes certificationEconomic Damages AnalysisLitigation consulting in injury, commercial and employment mattersContact us to discuss how we can helpyou prepare and present yourdamages case.Some senior staff membersPia Di Girolamo, PhDBernard Lentz,PhDT H E C E N T E R F O RFORENSIC ECONOMIC STUDIESThirty years of service: 1980 - <strong>2010</strong>1608 WALNUT STREET, PHILADELPHIA, PENNSYLVANIA 19103WWW.CFES.COM 800.966.6099 CFES@CFES.COMChad L. StallerMBA, JD, MACJames Markham,PhD, JD, CPCU<strong>For</strong> <strong>The</strong> <strong>Defense</strong> n <strong>October</strong> <strong>2010</strong> n 45