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Inferior Solutions Mean Inadequate Plaintiffs – In re Aqua Dots

Posted in Certification

I don’t often rush to post news of a new opinion, but when I open my inbox to find multiple emails telling me something new and big has happened, that’s a different story. And yesterday, I had a number of people telling me about a new opinion out of the Seventh Circuit: In re Aqua Dots Products Liability Litigation.

Russell Jackson wrote about this case last year, when the district court issued its opinion. The case concerned a child’s toy called Aqua Dots, which was basically colored beads that, when you added water, would fuse together into whatever design you had arranged. The problem was, Aqua Dots looked a lot like candy. So much so that some kids swallowed them, and were put into brief comas. As soon as Aqua Dots found out, they recalled the product. But, sure as Thanksgiving is followed by Christmas shopping, the recall was followed by a class action.

The District Court had a hard time understanding how a class action would be superior to the recall, so it declined to certify the proposed class on superiority grounds. The plaintiffs appealed. The Seventh Circuit affirmed the result in an opinion by Judge Easterbrook. As he put it:

It is hard to quarrel with the district court’s objective. The lower the transactions costs of dealing with a defective product, the better. The transactions costs of a class action include not only lawyers’ fees but also giving notice under Rule 23(c)(2)(B). Notice may well cost more, per kit, than the kits’ retail price—and could be ineffectual at any price, since most purchases were anonymous. The court can’t send each buyer a letter. Notice would be by publication, yet the recall was widely publicized. Why bear these costs a second time? The Consumer Products Safety Commission has not expressed dissatisfaction with the recall campaign or its results, and the record does not contain any evidence of injury to children after the recall was announced. Spin Master believes that most of the 400,000 kits not returned in the recall were used before the recall began and that few, if any, defective kits remain in consumers’ hands. Consumers whose children used their kits are not members of the proposed class, so a public notice of a class action could be expensive yet pointless.

(Emphasis added.) Despite Judge Easterbrook’s initial sympathy, he took issue with the fact that the trial court had departed from the text of Rule 23. (While the judge had held that the class action was not superior, he had not identified what kind of adjudication it would be superior to. Judge Easterbrook held that the voluntary recall of Aqua Dots was a resolution, but not an adjudication.) And, as Judge Easterbrook pointed out, the Supreme Court has made it clear that the text of Rule 23 controls over any individual policy preferences:

A district court is no more entitled to depart from Rule 23 than it would be to depart from one of the Supreme Court’s decisions after deeming the Court’s doctrine counterproductive. Rule 23 establishes a national policy for the Judicial Branch; individual district judges are not free to prefer their own policies. The Court made this point twice in its most recent Term. See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011); Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179 (2011).

(Emphasis added.)  Here’s where the opinion gets really interesting. Because while Judge Easterbrook held that the trial court could not depart from the text of Rule 23, he found another textual source for the court’s holding.

Instead of departing from the text of Rule 23(b)(3), the district court should have relied on the text of Rule 23(a)(4), which says that a court may certify a class action only if “the representative parties will fairly and adequately protect the interests of the class.” Plaintiffs want relief that duplicates a remedy that most buyers already have received, and that remains available to all members of the putative class. A representative who proposes that high transaction costs (notice and attorneys’ fees) be incurred at the class members’ expense to obtain a refund that already is on offer is not adequately protecting the class members’ interests.

(Emphases added.)  In other words, when a plaintiff files a class action that basically duplicates a voluntary action that the defendant has already taken, she may not have come up with an inferior method, but she is an inadequate representative of the class, in part because she appears to be prizing her attorneys’ best interests over those of the class.

I’d usually close up by asking how a defendant can use an opinion like this, but in this case I don’t think I really need to add anything.

(Hat tip to Ted Frank and David Appelbaum.)