A few months ago, we wrote about the Second Circuit’s oral argument in the “flushable” hygienic wipes consumer class action cases. And now, the septic saga continues.
The Second Circuit’s Summary Order
By way of background, in March 2017, Judge Weinstein of the Eastern District of New York certified three consumer class actions for purposes of both damages and injunctive relief. Two classes were certified in a suit filed by Joseph Kurtz, and another class was certified in a case initiated by Anthony Belfiore. See Kurtz v. Kimberly-Clark Corp., 14-cv-01142; Belfiore v. Procter & Gamble Co., 14-cv-04090.
In these cases, the consumer plaintiffs alleged that the defendants had misled them by marketing so-called “flushable toilet wipes” that were not, in fact, flushable at all. On the contrary, the plaintiffs alleged, the wipes “clog household plumbing” when flushed. Kurtz v. Kimberly-Clark Corp., 321 F.R.D. 482, 492 (E.D.N.Y. 2017). Plaintiffs contended that they, and all absent class members, had paid a “price premium” for “flushable” wipes, only to be denied the benefit of their bargain. To determine the value of this price premium, Plaintiffs’ damages expert utilized hedonic regression analysis—“a tool that purports to measure the value of various product attributes in order to demonstrate the existence of, and to isolate the amount of, a price premium attributable to defendant’s use of ‘flushable’ in merchandising.” Id. at 523-24. As we’ve noted in prior coverage, the validity of this analysis is hotly contested, and many judges have declined to credit it.
In the wipes case, however, the district court accepted the plaintiffs’ price premium analysis, and concluded that the predominance standard of Rule 23(b)(3) was satisfied. The court, however, appeared to recognize that this was not a foregone conclusion, and it “recommended” interlocutory review by the Second Circuit.[1]
Ask and you shall receive. The Second Circuit granted the Defendants’ petition for interlocutory review, heard oral argument—and sent the case back to the district court. In its brief summary order, the panel found the factual record insufficient to rule on plaintiffs’ certification motion, and remanded for supplementation of the factual record, enabling the court to “make appropriate findings on the predominance issue.” Kurtz v. Costco Wholesale Corp., 768 F. App’x 39, 40-41 (2d Cir. 2019).
Back in the Eastern District of New York
Upon remand, after a supplemental discovery period, the district court held a four-day evidentiary hearing on class certification. Ultimately, the district court’s views remained unchanged. The court held that “its [prior] certification orders were appropriate” and that “Plaintiffs has met their burden and produced common proof of causation and injury.” Kurtz v. Kimberly-Clark Corp., No. 14-CV-1142, 2019 U.S. Dist. LEXIS 185334, at *3, 41 (E.D.N.Y. Oct. 25, 2019) (“Flushable Remand”).
The Court largely credited the expert analysis set out by Plaintiffs’ expert, Colin B. Weir. Following a recitation of Weir’s use of hedonic regression analysis, Judge Weinstein determined that Plaintiffs introduced evidence “supporting the contention that there is a marketwide price premium attributable to the flushable label on toilet wipes, and that every New York consumer paid a percentage amount more for flushable toilet wipes as a result of this characterization.” Flushable Remand at *36-37. Weir thus claimed that, absent the “flushable” designation, each and every purchaser of wipes would have paid less by the same margin. Once again, the court credited this rather remarkable conclusion, and deemed it sufficient to satisfy the predominance requirement.
Defendants offered powerful countervailing evidence that many consumers did not pay the ‘premium’ Weir asserted—such as those who purchased the wipes on deep discount, and those who were indifferent to the “flushable” designation and purchased the wipes for other reasons. Those consumers, Defendants pointed out, got the full benefit of their bargain and suffered no injury. But the district court rejected these arguments in summary fashion, and suggested that even those consumers were injured by the “marketwide price premium” Plaintiffs posited. Flushable Remand at *39. That Plaintiffs had not come forward with data, for example, as to how many purchasers of flushable wipes actually try to “flush them” did not weigh against a finding of predominance, in the Court’s assessment.[2]
The Future of Flushable Wipes Litigation
The battle over “flushability,” and the alleged “price premium” associated with that feature, is not over yet. The Second Circuit’s summary order on the district court’s first class certification decision authorized either party to take an interlocutory appeal of the second one as well. Defendants have already availed themselves of this opportunity, so the Second Circuit will weigh in on “hedonic regression” soon enough. Stay tuned!
[1] As set out in our earlier post, the Court also found that the named plaintiffs had standing to seek injunctive relief on behalf of a class of consumers, even though they themselves were “unlikely to re-purchase the product” again in the future. Id. at 497.
[2] On remand, the Court also rejected motions to exclude the testimony of both Weir and Dr. Keith R. Ugone, Defendant Kimberly-Clark’s rebuttal expert. Id. at *29-35.
