Environmental, social, and corporate governance (ESG) initiatives have become increasingly important in today’s business setting.  Increased awareness and heightened scrutiny of ESG-related issues, combined with third-party litigation funding, has led to a surge in ESG-related litigation and enforcement actions as consumers, regulators, and investors seek to hold companies accountable for claims about their environmental and social impact.  

This post explores the emerging trends shaping the landscape of ESG litigation, which are increasingly centralized in courts in the District of Columbia.  Such claims are often brought by nonprofit organizations seeking to take advantage of local consumer protection laws which they claim allow them standing to sue.

Continue Reading A Closer Look: Developing Trends in ESG Litigation

In a short, unanimous opinion on April 12, 2024, the Supreme Court shut the door on “pure omission” claims under Rule 10b–5 and made clear that the Rule is limited to claims based on false or misleading statements.

The case, Macquarie Infrastructure Corp. v. Moab Partners, L.P., concerns alleged omissions in Defendant Macquarie’s SEC filings related to its subsidiary’s operation of bulk liquid storage terminals.  In 2016, the United Nations’ International Maritime Organization issued a regulation limiting this subsidiary’s ability to store high-sulfur fuel oil, its single largest product. Though the regulation was set to take effect in 2020, Macquarie did not discuss the regulation in its public filings.

Continue Reading Supreme Court rejects pure omission claims under SEC Rule 10b–5

The Northern District of Illinois recently denied certification to several proposed classes of purchasers of a seizure drug called Acthar in City of Rockford v. Mallinckrodt ARD, Inc., No. 3:17-cv-50107, 2024 WL 1363544 (Mar. 29, 2024).  Class plaintiffs had alleged that defendant Express Scripts, a drug distributor, conspired with Mallinckrodt, a drug manufacturer, to raise the price of Acthar through an exclusive distribution arrangement.  In denying certification to the damages classes, the court determined that plaintiffs had not met Rule 23(b)(3)’s predominance standard because they lacked a reliable economic model showing that damages were “capable of measurement on a classwide basis,” as required by Comcast Corp. v. Behrend, 569 U.S. 27, 34 (2013).

Continue Reading Court Denies Class Certification in Antitrust Case Based on Expert’s Reliance on Unsupported Assumptions in Damages Model

Another federal district court has dismissed a putative class action complaint asserting that an online retailer’s chat feature violated the users’ privacy under the California Invasion of Privacy Act (“CIPA”), Cal. Penal Code §§ 630 et seq.  See Garcia v. Build.com, Inc., Case No. 22-cv-1985-DMS-KSC (S.D. Cal. Mar. 29, 2024), ECF 37. 

Continue Reading Federal Court Dismisses Class Action Asserting California Wiretapping Claim Based on Website Chat Feature

Defendants in privacy class action lawsuits increasingly face assertions by plaintiffs and putative class members that they should be awarded statutory penalties that vastly exceed any purported actual damages. A recent decision under the False Claims Act reinforces the constitutional limitations plaintiffs may face in pursuing these outsized awards.

The United States District Court for the District of Minnesota recently reduced a monetary award under the False Claims Act (31 U.S.C. §§ 3729-3733) on the basis that it violated the Excessive Fines Clause of the Constitution, cutting the award by more than half from approximately $487,000,000 to $217,000,000. See United States ex rel. Fesenmaier v. Cameron-Ehlen Grp., Inc., No. 13-CV-3003 (WMW/DTS), 2024 WL 489708.

The court recognized that civil penalties violate the Excessive Fines Clause if they are grossly disproportional to the gravity of the offense. To assess disproportionality, the court applied Eighth Circuit precedent specifying several factors to be considered, including “the reprehensibility of a defendant’s conduct, the relationship between the penalty and the harm to the victim, the sanctions in other cases for comparable misconduct, legislative intent, and the defendant’s ability to pay.” The court also recognized the Supreme Court’s directive that “the ratio of punitive damages to compensatory damages may provide a guidepost to district courts in conducting this inquiry.”

Applying this test, the district court concluded, “[w]hile no single factor was determinative,” the disproportionate size of the punitive damages warranted a reduction in the monetary award. The court also noted, inter alia, that the current punitive damages award exceeded what would be appropriate under analogous criminal statutes, and that there was no allegation of physical harm. The court also observed that the statutory penalties, which amounted to over $352,000,000, were tied to the number of false claims submitted—a number driven in part by billing practices and not actual harm.   

While United States ex rel. Fesenmaier demonstrates that damages ratios remain a critical aspect of an Excessive Fines analysis, it also shows that certain statutorily mandated civil penalties may be unconstitutional if their application inflates the penalty amount in a way that departs drastically from actual damages.

A federal judge in the Southern District of California recently granted Hwareh.com’s motion to dismiss a proposed class action claiming that third-party source code on its website unlawfully routed information about consumer information to that third party.  See Zarif v. Hwareh.com, Inc., No. 3:23-cv-00565-BAS-DEB (S.D. Cal.).  The court found that the plaintiff—whose claims included asserted violations of the Federal Wiretap Act, 18 U.S.C. § 2510 et seq., and the California Invasion of Privacy Act, Cal. Pen. Code § 631—failed to establish that the court had personal jurisdiction over Hwareh.com, an online pharmacy.  Hwareh.com is incorporated in Delaware and maintains its principal place of business in Missouri, but the plaintiff alleged that its website was available in California and that it maintained a non-resident pharmacy license in the state.  The court’s decision is the latest in a series of decisions clarifying personal jurisdiction in the context of privacy claims.

Continue Reading Federal Court Dismisses Wiretapping Claims Against Pharmacy for Lack of Personal Jurisdiction

In Elegant Massage, LLC v. State Farm Mutual Automobile Insurance Co., 95 F.4th 181 (4th Cir. 2024), the Fourth Circuit took the unusual step of exercising interlocutory appellate jurisdiction over an order denying a motion to dismiss.  Having granted a petition for interlocutory review under Federal Rule of Civil Procedure 23(f) of a class certification order, the court concluded that its review of the class order required it also to review the district court’s earlier denial of the defendant’s motion to dismiss. 

Continue Reading In Rare Move, Fourth Circuit Exercises Pendent Jurisdiction Over Non-Final Order

A court in the Southern District of New York recently denied plaintiffs’ motion for class certification on adequacy grounds in a suit challenging the labeling of “Maximum Strength” Robitussin cough syrup.  See Woodhams v. GlaxoSmithKline Consumer Healthcare Holdings (US) LLC (S.D.N.Y. Mar. 21, 2024).

Continue Reading SDNY Court Denies Class Certification in Suit Challenging Robitussin “Max Strength” Labels

Numerous student athletes have filed putative class actions against the NCAA and its member institutions for injuries resulting from concussions sustained while playing college sports, some of which have been consolidated into an MDL.  The MDL court recently denied certification of several Rule 23(c)(4) issues classes based on the plaintiffs’ earlier waiver of the ability to seek certification of a 23(c)(4) class.  See In re NCAA Student-Athlete Concussion Injury Litigation—Single Sport/Single School (Football), 2024 WL 1242987 (N.D. Ill. March 22, 2024).

Continue Reading Illinois Federal Court Denies Certification of Student-Athlete Issues Classes on Waiver Grounds

This blog has covered recent decisions from the Eleventh Circuit that have taken a hard look at class action settlements.  For example, we previously discussed the Eleventh Circuit’s per se prohibition on the inclusion of incentive awards for class action representatives in class action settlements.  See Johnson v. NPAS Sols., LLC, 975 F.3d 1244 (11th Cir. 2020) (vacating settlement in part because it included incentive awards).  Just recently, the Eleventh Circuit vacated the approval of another class action settlement because it “included relief that [the district court] had no jurisdiction to award.”  Smith v. Miorelli, 93 F.4th 1206, 1209 (11th Cir. 2024).

Continue Reading Eleventh Circuit Vacates Settlement Approval Because Plaintiffs Lacked Standing to Seek Injunctive Relief