Goldman Sachs Ruling Can't Save Cosmetics Class Action

Goldman Sachs Ruling Can't Save Cosmetics Class Action Photo: Catalin Plesa/iStockphoto.com.

What do mortgage-backed securities have to do with antiwrinkle creams? Not a whole lot, a federal appeals court told a group of disappointed class action lawyers on Thursday.

In a 10-page decision, the U.S. Court of Appeals for the Second Circuit refused to apply plaintiffs-friendly precedent from a securities case against Goldman Sachs & Co. to a consumer class action against Estée Lauder Companies Inc. and its Clinique Laboratories unit. The panel instead affirmed a judge’s decision to toss the case, which accused the cosmetics companies of making impossible “de-aging” claims while hawking seven of Clinique’s Repairwear products.

Scott & Scott and Carella, Byrne, Cecchi, Olstein, Brody & Agnello brought the case in December 2012, asserting breach of warranty, unjust enrichment and state consumer fraud claims on behalf of three named plaintiffs and a proposed nationwide class. Defense lawyers at Skadden, Arps, Slate, Meagher & Flom moved to dismiss the case six months later, arguing, among other things, that the plaintiffs lacked standing because they purchased only three of the seven products listed in the amended complaint. U.S. District Judge Alfred Covello in New Haven, Conn., granted the motion in November 2013 and dismissed the case with prejudice.

On appeal, the plaintiffs looked to an unlikely source for help on the standing issue. They cited the Second Circuit’s own September 2012 decision in NECA-IBEW Health & Welfare Fund v. Goldman Sachs, which allowed mortgage-backed securities investors to press class claims related to certificates they never purchased. The investors had standing, the Goldman panel ruled, as long as the offerings in question were backed by home loans from the same set of originators as the certificates in which they’d actually invested.

That ruling, which the U.S. Supreme Court declined to reconsider last year, has been a great boon for mortgage-backed securities plaintiffs seeking to preserve and maximize their claims. The lawyers suing Estée Lauder hoped to use the Goldman decision to the same effect in their own case, arguing that it gave their clients standing to assert class claims for individual cosmetic products they didn’t purchase.

The Second Circuit bluntly disagreed Thursday. Unlike the securities offerings at issue in the Goldman case, the panel found, the consumer plaintiffs couldn’t point to a “common set of concerns” for each of the Clinique products at issue.

“Here, by contrast, each of the seven different products have different ingredients, and Clinique made different advertising claims for each product,” the panel wrote. “Entirely unique evidence will, therefore, be required to prove that the 35-some advertising statements for each of the seven different Repairwear products are false and misleading.”

The panel included Circuit Judge Barrington Parker, who authored the NECA-IBEW v. Goldman decision. In addition to rejecting the consumers’ standing arguments, the appeals court agreed with Judge Covello that the plaintiffs hadn’t backed their claims with sufficient details.

Erin Green Comite of Scott & Scott argued for the plaintiffs at the Second Circuit opposite Skadden’s Kenneth Plevan. Comite wasn’t immediately available to comment. Plevan said through a Skadden spokesperson that the defendants are pleased with the ruling.

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