San Francisco lawyers rescued Wal-Mart and a group of pet food manufacturers on Monday from a class action that could have led to millions of dollars in damages.
A federal judge in Nevada granted a motion by the defense to pre-emptively deny certification to a class of plaintiffs that would have spanned eight states (pdf), including California.
Squire, Sanders & Dempsey of counsel Evan Nadel, who with partner Mark Goodman represented Wal-Mart, said a pre-emptive motion is "particularly potent," because it can eliminate exposure early on.
"My first impression was I really thought that was a huge stretch for them to get class treatment of a fraud claim," said Nadel.
Typically, plaintiffs try to certify a class only after getting a chance to discover more facts about a case. But courts allow defendants to deny certification early on if the law simply wouldn't support it.
Margaret Picus, a Nevada woman, filed a class action in state court against Wal-Mart and a group of food manufacturers in April 2007, alleging that they illegally labeled their pet food "Made inUSA," though some ingredients were imported from China.
The previous month, the Food and Drug Administration had announced that certain pet food ingredients imported from China were sickening and killing cats and dogs.
The defense removed Picus' class action to federal court, where she narrowed her claim to a violation of the Nevada Deceptive Trade Practices Act and similar laws in seven other states.
On Monday, U.S. District Judge Philip Pro of Nevada denied Picus class certification in Picus v. Wal-Mart Stores, 07-00682, ruling that subjective, individual issues made a class action the wrong way to handle the case.
Specifically, Pro wrote in his decision, the law requires the plaintiffs to prove that each person who bought the tainted pet food did so because it was labeled "Made in USA."
Picus' attorney, Norman Blumenthal, said Tuesday that Pro was acting as a "soldier for corporate America" and that his ruling makes it "open season on consumers."
"We think the court is insensitive to the history of the law and the need for consumer protection," said Blumenthal, of La Jolla, Calif.'s Blumenthal, Nordrehaug & Bhowmik. He said he is considering his options for appeal.
He said Pro had gone against California law by requiring that each potential class member show they relied on the "Made in USA" labeling to buy the product. "The issue is whether or not consumers as a group are likely to be deceived," Blumenthal said.
Pro's ruling discussed a California federal case that addressed the reliance issue, but drew a distinction between the yogurt purchases there and the pet food purchases.
When it comes to California's Consumers Legal Remedies Act, the local statute mirroring the Nevada law, the issue of reliance is an open question, said Scott Pearson, a Los Angeles-based partner at Stroock & Stroock & Lavan who specializes in complex commercial litigation.
Pearson, who represents defendants in such cases, said most of the decisions on the issue have so far come from federal district courts or California appellate courts.
"I think that that's something that is going to be the subject of a lot of litigation over the next couple of years," he said.
