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Kurtz v. Kimberly-Clark Corp.

United States District Court, E.D. New York

March 27, 2017

D. JOSEPH KURTZ, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
KIMBERLY-CLARK CORPORATION & COSTCO WHOLESALE CORPORATION, Defendants. ANTHONY BELFIORE, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
THE PROCTER & GAMBLE COMPANY, Defendant. DESMOND R. ARMSTRONG, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
COSTCO WHOLESALE CORPORATION & NICE-PAK PRODUCTS, INC., Defendants. GLADYS HONIGMAN, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
KIMBERLY-CLARK CORPORATION, Defendant. STEVEN and ELLEN PALMER, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
v.
CVS HEALTH & NICE-PAK PRODUCTS, INC., Defendants. EUGENE and VICTORIA RICHARD, Individually and on Behalf of All Others Similarly Situated, Plaintiff,
v.
WAL-MART STORES, INC. & ROCKLINE INDUSTRIES, Defendants.

          Anthony Belfiore: Lester L. Levy Michele Fried Raphael Roy Herrera Sean Michael Zaroogian Matthew Insley-Pruitt Robert Scott Plosky Wolf Popper LLP.

          D. Joseph Kurtz: Samuel H. Rudman Mark S. Reich Robbins Geller Rudman & Dowd LLP Mark J. Dearman Stuart A. Davidson Robbins Geller Rudman & Dowd LLP.

          Desmond R. Armstrong: Mark S. Reich Robbins Geller Rudman & Dowd, LLP.

          Gladys Honigman: Mark S. Reich Robbins Geller Rudman & Dowd, LLP.

          Steven and Ellen Palmer: Samuel H. Rudman Mark S. Reich Robbins Geller Rudman & Dowd LLP.

          The Procter and Gamble Company: Emily Henn Covington & Burling LLP Claire Catalano Dean Covington & Burling LLP Cortlin Lannin Sonya Winner Covington & Burling LLP.

          Kimberly-Clark Corporation: Eamon Paul Joyce Sidley Austin LLP Daniel A. Spira Kara L. McCall Sidley Austin LLP.

          Costco Wholesale Corporation: James M. Bergin Adam James Hunt Kayvan Betteridge Sadeghi Morrison & Foerster Eamon Paul Joyce Sidley Austin LLP.

          Nice-Pak Products, Inc.: James M. Bergin Morrison & Foerster.

          CVS Pharmacy, Inc.:James M. Bergin Morrison & Foerster.

          MEMORANDUM & ORDER CERTIFYING CLASS ACTIONS

          Jack B. Weinstein, Senior United States District Judge.

         Table of Contents

         I. Introduction ........................................................................................................................... 3

         A. General Theory .................................................................................................................. 4

         B. Original Cases .................................................................................................................... 6

         II. Procedural Background ...................................................................................................... 12

         A. Overview of Cases ............................................................................................................ 12

         B. Motion to Dismiss for Lack of Standing Denied in Belfiore Action ............................ 14

         C. Motions for Class Certification in the Belfiore and Kurtz Actions .............................. 15

         D. Preliminary Rulings on Class Certification in Belfiore Action .................................... 16

         1. Injunctive Class ............................................................................................................ 18

         2. Damages Class .............................................................................................................. 19

         E. Stay and FTC Referral .................................................................................................... 24

         F. Motion to Reconsider Denied in Belfiore Action ........................................................... 25

         G. Final FTC Consent Order with Nice-Pak ...................................................................... 26

         H. Motion to Lift Stay Denied in Kurtz Action ................................................................... 27

         I. Continued Urging of Settlement Discussions ................................................................ 28

         J. Aggregate Agency Adjudication ..................................................................................... 29

         K. Conclusion of FTC Investigation of Kimberly-Clark ................................................... 29

         L. Belfiore Update Letter and Request for Conference .................................................... 30

         M. Request for Briefing on Lifting of Stay ......................................................................... 32

         N. Continued Encouragement to Aggregate and Settle .................................................... 32

         O. Instant Motion Practice ................................................................................................... 33

         III. Deciding Class Certification Prior to Deciding Summary Judgment ......................... 34

         IV. Facts .................................................................................................................................. 36

         A. Plaintiff Belfiore ............................................................................................................... 36

         B. Plaintiff Kurtz .................................................................................................................. 37

         C. Procter & Gamble's Charmin Freshmates .................................................................... 39

         D. Kimberly-Clark's Flushable Wipes ................................................................................ 42

         E. Costco's Kirkland Signature Moist Flushable Wipes .................................................. 48

         V. Definitions of “Flushability” ............................................................................................... 55

         A. According to the FTC ...................................................................................................... 55

         B. According to the Plaintiffs ............................................................................................... 55

         C. According to Plaintiffs' Experts ..................................................................................... 56

         D. According to Plaintiffs' Counsel ..................................................................................... 57

         E. According to Defendants' Experts ................................................................................. 57

         F. According to Defendants' Counsel ................................................................................. 58

         G. According to Defendants' Labeling Practices ............................................................... 60

         H. According to Dictionaries ................................................................................................ 61

         I. Lack of Consumer Surveys ............................................................................................. 61

         VI. Expert Reports ................................................................................................................. 62

         A. Plaintiffs' Expert: Colin B. Weir .................................................................................... 62

         B. Procter & Gamble's Expert: Carol A. Scott, Ph.D. . ..................................................... 64

         C. Costco's Expert: Denise N. Martin, Ph.D. . .................................................................... 65

         D. Kimberly-Clark's Expert: Keith R. Ugone, Ph.D. . ....................................................... 66

         VII. New York Law .................................................................................................................. 66

         A. New York General Business Law §§ 349 and 350 ......................................................... 67

         B. Common Law Claims ...................................................................................................... 69

         1. Negligent Misrepresentation ....................................................................................... 69

         2. Breach of Express Warranty ....................................................................................... 70

         3. Unjust Enrichment ....................................................................................................... 70

         VIII. Class Certification in Kurtz and Belfiore ....................................................................... 70

         A. Rule 23(a)(1): Numerosity ............................................................................................... 74

         B. Rule 23(a)(2): Commonality ............................................................................................ 76

         C. Rule 23(a)(3): Typicality .................................................................................................. 82

         1. Typicality in Belfiore .................................................................................................... 84

         2. Typicality in Kurtz ........................................................................................................ 85

         D. Rule 23(a)(4): Adequacy of Representation .................................................................. 89

         1. Adequacy in Belfiore .................................................................................................... 90

         2. Adequacy in Kurtz ........................................................................................................ 91

         E. Implied Requirement of Ascertainability ...................................................................... 94

         F. Rule 23(b) Factors ............................................................................................................ 98

         1. Rule 23(b)(2) Injunctive Relief .................................................................................... 98

         2. Rule 23(b)(3) Damages ............................................................................................... 114

         IX. Appointment of Class Counsel ...................................................................................... 129

         X. Conclusion .......................................................................................................................... 129

         I. Introduction

         In a number of class actions, consumers sue vendors and manufacturers of “flushable toilet wipes.” Purchasers contend that the products are not flushable-they clog household plumbing.

         From the beginning of this litigation it was clear that some form of consolidation of consumer complaint (as well as those of municipalities, if possible) was desirable. See Letter to Judges Phyllis Hamilton, Donald C. Nugent, and Leonard D. Wexler, 14-CV-1142, Sept. 11, 2014, ECF No. 39; Letter to Judge Robert L. Hinkle, 14-CV-1142, Feb. 18, 2015, ECF No. 77. Thus far, a constellation of class actions has appeared: suits by consumers' lawyers have proliferated; dug in defenses by producers and sellers have slowed disposition; and failure by the courts and an administrative agency to apply mass tort solutions have left an unresolved, fractured litigation.

         In the most recent round of briefing, the parties have directed attention to what they consider the most critical point in the litigation: the motions for class certification made in cases brought by New York purchasers D. Joseph Kurtz (14-CV-1142) and Anthony Belfiore (14-CV-4090). In the present memorandum and order, the court grants, in part, the motions for class certification in these two cases. The other actions have been stayed, transferred or dismissed, and in Kurtz, slimmed down to include only New York purchasers and law. See Palmer v. CVS-Health & Nice-Pak Prod, Inc., 2017 WL 656767 (E.D.N.Y. Feb. 17, 2017) (transferring action to the District of Maryland); Armstrong v. Costco Wholesale Corp. & Nice-Pak Prod., Inc., 2017 WL 656768 (E.D.N.Y. Feb. 17, 2017) (transferring action to the District of Oregon); Kurtz v. Kimberly-Clark Corp., 2017 WL 751231 (E.D.N.Y. Feb. 27, 2017) (severing and transferring New Jersey-based claims, denying certification of a nationwide class, and staying Honigman & Kurtz v. Kimberly-Clark, 15-CV-2910); Richard & Richard v. Wal-Mart Stores, Inc. & Rockline Indus., Order Dismissing Case with Prejudice, 15-CV-4579, Jan. 19, 2017, ECF No. 95 (dismissing New Hampshire case with prejudice on consent). Kurtz and Belfiore are now New York consumer class actions.

         A. General Theory

         Six separate but related consumer class actions were before the court. They were brought by consumers who purchased moist toilet wipes sold by retailer defendants, produced by manufacturer defendants, and marked “flushable.” Alleged in all the cases are defects in labeling. Consumers seek money damages and injunctive relief against manufacturers and retailers of these moist wipes, which are labeled and advertised as “flushable” but alleged not to be “flushable.” See Kurtz v. Kimberly-Clark Corp., Costco Wholesale Corp., No. 14-CV-1142 (“Kurtz action”) (relying on New Jersey and New York law); Armstrong & Kurtz v. Costco Wholesale Corp. & Nice-Pak Prods., Inc., 15-CV-2909 (“Armstrong action”) (relying on Oregon law); Palmer & Palmer v. CVS Health & Nice-Pak Prods., Inc., 15-CV-2928 (“Palmer action”) (relying on Maryland law); Honigman v. Kimberly-Clark, 15-CV-2910 (“Honigman action”) (relying on New York law); Belfiore v. Procter & Gamble Co., 14-CV-4090 (“Belfiore action”) (relying on New York law); Richard & Richard v. Wal-Mart Stores, Inc. & Rockline Industries, 15-CV-4579 (“Richard action”) (relying on New Hampshire law).

         In dealing with the kind of multiple-plaintiff versus multiple-defendant national consumer problems presented in the instant federal litigation, there are a number of ways to proceed. The goal is to achieve a single decision by a single court or administrative agency-preferably through a global settlement-that fairly decides all pending disputes, forestalls future similar disputes, and protects both consumers and suppliers. The American civil adjudicative system provides a number of flexible tools to achieve such a resolution. The memorandum issued by the court on November 18, 2016 explains these tools in detail. See Kurtz v. Kimberly-Clark Corp., 2016 WL 6820405 (E.D.N.Y. Nov. 18, 2016). The parties, contrary to the court's urging, have chosen to proceed independently and to litigate a dispute which could have been readily settled to the benefit of all parties and the public by relatively minor changes in labeling.

         This court was faced with six individual class actions, while keeping its eye on related cases in other venues. See, e.g., City of Perry, Iowa v. Procter & Gamble Co., 188 F.Supp.3d 276 (S.D.N.Y. 2016) (a municipal waste disposal case); Meta v. Target Corp., 2016 WL 5076089 (N.D. Ohio Sept. 20, 2016) (consumer case); Belfiore v. Procter & Gamble Co., 311 F.R.D. 29, 43-45 (E.D.N.Y. 2015), reconsideration denied, 140 F.Supp.3d 241 (E.D.N.Y. 2015) (listing pending “flushable” wipes litigations brought by consumers and municipalities in other jurisdictions); Scheduling Order, 14-CV-4090, Oct. 13, 2016, ECF No. 209 at 3 (requiring the parties to “notify the court of any similar cases they are aware of involving flushable wipes' efficacy and dangers pending in any court or administrative agency, whether consumer or municipality oriented, in the United States or abroad”).

         Individual class case adjudication state by state is not satisfactory. Nevertheless, the plaintiffs have chosen this route-unchallenged by defendants-and the court is compelled to follow the parties' choice. It is certifying New York class actions in Kurtz and Belfiore and has transferred, stayed, or dismissed the other actions.

         B. Original Cases

         Consumers in all six cases claimed they paid a premium for what are known as “flushable wipes”-moist towelettes intended for use in place of, or in addition to, toilet paper-that are not flushable and clog household toilet facilities. While in some cases consumers seek damages for impairment by clogging of household human waste systems (leading into municipal sewers or private cesspools), the central injury claimed is payment of an unjustified premium for a product that was misrepresented as “flushable.” See, e.g., Belfiore 311 F.R.D. at 64 (“The injury is the payment of an inflated price, not the clog. What happened after [the individual plaintiff's] purchase, as a result of his sewage disposal system or the condition of his pipes, is irrelevant to the class's premium price theory.”). Damages for impairment of cesspools or household sewage systems or municipal systems by clogging or otherwise is not covered by the class certifications since they are either not before the court or are too variable and individual to be covered in a class action.

         These are putative class actions by consumers and householders only. It might have been contended that consumers have standing not only to pursue their own claims, but also to advance municipal claims as taxpayers because clogging at sewage plants ultimately puts in danger the system to which their household disposal systems are connected. Arguably, this would provide householders with an interest in the whole municipal operating system for disposing of toilet waste. But such municipal-based claims have not been advanced by plaintiffs. The instant consumer cases are distinguished from cases claiming clogging of municipal sewage systems and their machinery. See e.g., City of Perry, 188 F.Supp.3d.

         The “flushable” industry has sales in the billion dollar range. It includes many manufacturers and retailers, different designs, and a variety of brands. It depends on convincing consumers that they will get the added comfort from “moist” wipes without fear that, because the fabric is stronger and less likely than toilet paper to break up quickly when flushed, the toilet will clog.

         Factual and scientific hearings were conducted jointly by the court and magistrate judge to help determine how these cases should be administered. Extensive scientific testimony and demonstrations were introduced, showing advantages of the products and potential difficulties and concerns relied upon by the plaintiffs; enough evidence was produced to warrant consideration of certification issues. See, e.g., Science Day Part I Hr'g Tr., 14-CV-1142, 14-CV-4090, June 19, 2015 (“Science Day I”); Science Day Part II Hr'g Tr., 14-CV-1142, 14-CV-4090, July 21, 2015 (“Science Day II”).

         In October 2015, the court stayed all related flushable actions pending in the Eastern District of New York. The issue of an appropriate definition of “flushable” wipes and related matters were respectfully referred to the Federal Trade Commission (“FTC”). See Belfiore, 311 F.R.D. at 39, 73-80; see also Order Staying Cases, 14-CV-1142, Oct. 13, 2015, ECF No. 183.

         At that time, the Commission was considering claims against defendants in this court. The FTC had a filed complaint against Nice-Pak Products, Inc. (“Nice-Pak”). Nice-Pak is the manufacturer of the “flushable” wipes sold by retailers Costco Wholesale Corporation (“Costco”) and CVS Health (“CVS”). The Commission was separately conducting individual investigations into the “flushable” products of Kimberly-Clark Corporation (“Kimberly-Clark”) and Procter & Gamble Company (“Procter & Gamble”).

         After the stays were interposed in the instant court proceedings, the FTC entered into a final consent order with Nice-Pak. See Nice-Pak Final Consent Order, 14-CV-1142, Nov. 10, 2015, ECF No. 207-1 (“Nice-Pak Final Consent Order”). In addition to binding Nice-Pak, the final consent order reaches the retailers that market and sell Nice-Pak's “flushable” wipes, including Costco and CVS. See Kurtz v. Kimberly-Clark Corp., 2015 WL 8481833, at *2 (E.D.N.Y. Dec. 10, 2015).

         The Nice-Pak final consent order includes the following flexible and somewhat amorphous definition of “flushability:”

[D]isperses in a sufficiently short amount of time after flushing to avoid clogging, or other operational problems in, household and municipal sewage lines, septic systems, and other standard wastewater equipment[.]

See Nice-Pak Final Consent Order at 3. This definition is bland, written in generalities with no precision as to time of breakdown of the wipes once they are flushed or the extent of their break down into discrete pieces or shreddings. But the FTC order does present a reasonable attempt to devise a national standard protective of consumers, manufacturers and retailers.

         In June 2016, while the cases were stayed and referred to the FTC, the Administrative Conference of the United States adopted a non-binding recommendation recognizing the value of “aggregation techniques to resolve similar claims in adjudications.” See Aggregation of Similar Claims in Agency Adjudication, 81 Fed. Reg. 40259 (June 21, 2016); see also Michael Sant'Ambrogio & Adam Zimmerman, Inside the Agency Class Action (June 15, 2016) (analyzing the use of aggregate procedures in administrative agencies as well as the challenges and benefits of aggregate agency adjudication); Michael Sant'Ambrogio & Adam Zimmerman, Administrative Conference of the United States, Aggregate Agency Adjudication (June 9, 2016), available at https://www.acus.gov/report/aggregate-agency-adjudication-final-report.

         This court then indicated that the instant cases might be “particularly appropriate for aggregate agency resolution;” it encouraged the parties “to explore the opportunity for aggregate adjudication of their claims before the FTC pursuant to the new federal recommendation by the Administrative Conference of the United States.” Kurtz v. Kimberly-Clark Corp., 315 F.R.D. 157, 159 (E.D.N.Y. 2016).

         The Commission seems unlikely to take action in response to this court's referral. In a letter responding to an inquiry by one of the plaintiffs in the instant cases, the agency indicated its intent to address “flushability”-related claims only on a case-by-case basis. It specified that: (1) it cannot engage in “aggregate adjudication” of claims, due to its administrative design; (2) it does not intend to prescribe trade regulation rules in relation to issues raised by this court's referral; and (3) the parties and the court can look to the Nice-Pak final consent order for guidance on the Commission's views regarding representations of “flushability.” See FTC Letter dated July 27, 2016, 14-CV-4090, Aug. 3, 2016, ECF No. 184-2 (“July 27, 2016 FTC Letter”) for the full FTC response.

         The FTC has now closed its investigation of Kimberly-Clark without defining “flushability” in that case. See FTC Closing Letter, 14-CV-1142, June 30, 2016, ECF No. 228-1. Apparently, the only remaining ongoing relevant investigation is the FTC's inquiry into Procter & Gamble's “flushability” claims. See Procter & Gamble Letter, 14-CV-4090, Aug. 4, 2016, ECF No. 185; Feb. 3, 2017 Hr'g Tr. at 14:3-4 (“[The FTC] remains engaged in an ongoing inquiry into P&G, Procter & Gamble's Freshmates.”).

         Given the number of cases challenging manufacturers' and retailers' representations of “flushability” that are currently pending before this court and other courts across the country, resolution of the instant consumer actions through a coordinated national federal administrative agency approach would have been desirable. See, e.g., Belfiore, 311 F.R.D. at 79 (noting the “substantial danger of inconsistent rulings among various courts and the FTC” and stating that “[w]hether wipes should be labeled ‘flushable' is a national issue that requires a single national resolution.”).

         As indicated in the court's October 2015 memorandum and order in the Belfiore action, the FTC appeared to be particularly well-suited to lead such an effort. See id. at 76-80. It is an agency “specifically tasked with addressing deceptive labeling.” Id. at 78. It was already considering the “flushability”-related claims of several manufacturers and retailers of allegedly “flushable, ” moist wipes. Development of a uniform definition of “flushability” through consolidated agency action-rather than through individual consumer class suits-could have led to regulation of the market and national advertising issues as a whole, avoiding inconsistent judgments and protecting consumers, producers and retailers nationwide:

Certification of a damages or an injunctive class might thwart the development of an integrated and transparent national market. With multiple cases before this court and others across the nation (each at a different phase and featuring different substantive state laws), the FTC's engagement in an ongoing inquiry of defendant, and the agency's pending agreement with another manufacturer, there is a substantial risk of inconsistent judgments regarding the meaning of “flushable.” A robust management of the “flushable” problem by the FTC, rather than by courts, could avoid unnecessary inconsistencies and controversies, helping manufacturers, retail vendors and consumers alike.

Id. at 39 (emphasis in original).

         In the absence of action by the FTC, uniform resolution of “flushability” claims could have been achieved through a class-wide settlement, with industry-wide regulation through standards set by the relevant industry association, through multidistrict litigation, or by legislative action at the municipal, state, or federal level. See Kurtz, 2016 WL 6820405. These mechanisms have not been invoked by the parties, although an association of the producers of flushable wipes has been considering the problem, and relevant legislation has been proposed in New York State. See Belfiore, 311 F.R.D. at 47, 50. In the absence of an administrative, legislative, industry-wide or settlement approach, the court is compelled to address these consumers' claims on a state-by-state basis.

         This memorandum and order serves, in part, as a synopsis of the measures already taken in the six class actions pending before this court. It sets out a roadmap for the next steps to be addressed in each individual case that is still pending. All prior orders and memoranda are deemed included in this memorandum as follows: Belfiore v. Procter & Gamble Co., 94 F.Supp.3d 440 (E.D.N.Y. 2015) (denying defendant's motion to dismiss); Belfiore v. Procter & Gamble Co., 311 F.R.D. 29 (E.D.N.Y. 2015) (outlining preliminary rulings on class certification, staying case and referring matters to the FTC); Belfiore v. Procter & Gamble Co., 140 F.Supp.3d 241 (E.D.N.Y. 2015) (denying plaintiff's motion for reconsideration); Kurtz v. Kimberly-Clark Corp., 2015 WL 8481833 (E.D.N.Y. Dec. 10, 2015) (denying motion to lift the stay); Kurtz v. Kimberly-Clark Corp., 315 F.R.D. 157 (E.D.N.Y. 2016) (encouraging the parties to explore aggregate agency adjudication of their claims with the FTC); Order, 14-CV-1142, Oct. 13, 2016, ECF No. 252 (recommending that the parties seek centralization of cases pending all over the nation in one court, through multidistrict litigation or the appointment by the court of a special master or masters to assist in settlement); Kurtz v. Kimberly-Clark Corp., 2016 WL 6820405 (E.D.N.Y. Nov. 18, 2016) (describing methods of consolidation and resolution); Order Dismissing Case with Prejudice, 15-CV-4579, Jan. 20, 2017, ECF No. 95 (dismissing the Richard action with prejudice); Palmer v. CVS-Health & Nice-Pak Prod, Inc., 2017 WL 656767 (E.D.N.Y. Feb. 17, 2017) (transferring the Palmer action to the District of Maryland); Armstrong v. Costco Wholesale Corp. & Nice-Pak Prod., Inc., 2017 WL 656768 (E.D.N.Y. Feb. 17, 2017) (transferring the Armstrong action to the District of Oregon); Kurtz v. Kimberly-Clark Corp., 2017 WL 751231 (E.D.N.Y. Feb. 27, 2017) (severing and transferring New Jersey-based claims, denying certification of a nationwide class of consumers and staying the Honigman action).

         As noted above and below, the motions for a New York State class certification are granted, in part, in Kurtz and Belfiore. See infra Part VIII.

         II. Procedural Background

         A. Overview of Cases

         The nature and status of the six putative class actions originally pending before this court are set out below:

1. Kurtz v. Kimberly-Clark Corp. & Costco Wholesale Corp., No. 14-CV-1142 (E.D.N.Y. filed Feb. 21, 2014): This is a putative class action. Plaintiff has filed a motion to certify classes of consumers who purchased flushable wipes sold by defendant Costco-known as “Kirkland Signature Moist Flushable Wipes, ” and manufactured by Nice-Pak-and flushable wipes manufactured by defendant Kimberly-Clark. Alleged are violations of section 56:8-1 of the New Jersey Consumer Fraud Act, sections 349 and 350 of the New York General Business Law, and the common law. Injunctive and monetary relief are sought. This action remains open; the New Jersey aspects have been severed and ordered transferred to the District of New Jersey. See Kurtz v. Kimberly-Clark Corp., 2017 WL 751231 (E.D.N.Y. Feb. 27, 2017).
2. Belfiore v. Procter & Gamble Co., No. 14-CV-4090 (E.D.N.Y. filed July 1, 2014): This is a putative class action filed by a consumer who purchased “flushable” wipes manufactured by defendant Procter & Gamble. Claimed are violations of section 349 of the New York General Business Law. Plaintiff seeks monetary damages and injunctive relief. This action remains open.
3. Armstrong v. Costco Wholesale Corp. & Nice-Pak Products, Inc., No. 15-CV-2909 (E.D.N.Y. filed May 19, 2015): This is a putative class action filed by a consumer who purchased “flushable” wipes sold by defendant Costco and manufactured by defendant Nice-Pak. Alleged are violations of Oregon's Unlawful Trade Practices Act and its common law. Both injunctive and monetary relief are sought. Defendants have answered the complaint. No motion for class certification has been made. This case was transferred to the District of Oregon. See Armstrong v. Costco Wholesale Corp. & Nice-Pak Prod., Inc., 2017 WL 656768 (E.D.N.Y. Feb. 17, 2017).
4. Honigman v. Kimberly-Clark Corp., No. 15-CV-2910 (E.D.N.Y. filed May 19, 2015; complaint filed May 20, 2015): This is a putative class action brought by a consumer who purchased “flushable” wipes manufactured by defendant Kimberly-Clark. Alleged are violations of sections 349 and 350 of the New York General Business Law and the common law. Both injunctive and monetary relief are sought. Defendant has answered the complaint. No motion for class certification has been made. No discovery has taken place. The case is stayed. Certification decisions in Kurtz and Belfiore will control the ultimate disposition of this case. See Kurtz v. Kimberly-Clark Corp., 2017 WL 751231 (E.D.N.Y. Feb. 27, 2017).
5. Palmer & Palmer v. CVS Health & Nice-Pak Products, Inc., No. 15-CV-2928 (E.D.N.Y. filed May 20, 2015): This is a putative class action brought by consumers who purchased “flushable” wipes sold by defendant CVS and manufactured by defendant Nice-Pak. An amended complaint was filed on July 9, 2015. Alleged are violations of the Maryland Consumer Protection Act, section 13-301, and the common law. Both injunctive and monetary relief are sought. Defendants have answered the amended complaint. No class certification motion has been made. This case was transferred to the District of Maryland. See Palmer v. CVS-Health & Nice-Pak Prod, Inc., 2017 WL 656767 (E.D.N.Y. Feb. 17, 2017).
6. Richard & Richard v. Wal-Mart Stores, Inc. & Rockline Indus., No. 15-CV-4579 (E.D.N.Y. filed Aug. 5, 2015): This was a putative class action brought by consumers who purchased “flushable” wipes manufactured by defendant Rockline Industries (“Rockline”) and sold by defendant Wal-Mart Stores, Inc. (“Wal-Mart”). Alleged were violations of New Hampshire Regulation of Business Practices for Consumer Protection, section 358-A:2, and the common law. Both injunctive and monetary relief were sought. Upon suggestion by the court that it would transfer the case, the parties dismissed the case with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(a)(ii). Order, 15-CV-4579, Jan. 19, 2017, ECF No. 95.

See generally Belfiore, 311 F.R.D. at 42-43.

         B. Motion to Dismiss for Lack of Standing Denied in Belfiore Action

         Defendant in the Belfiore action moved, pursuant to Federal Rule of Civil Procedure 12(b)(1), to dismiss the claim for injunctive relief for lack of standing; moved to dismiss under Rule 12(b)(6) for failure to state a claim; and moved to strike plaintiff's class action-related allegations under Rule 12(f). Belfiore, 94 F.Supp.3d at 443-44.

         Because plaintiff was unlikely to ever purchase the product again, defendant argued he could not show that the requested injunctive relief would “redress a real and immediate threat of future injury to him.” Id. at 444 (quotation marks and citation omitted).

         Defendant's motion was denied. Plaintiff was found to have standing to pursue injunctive relief even though he was unlikely to re-purchase the product because he was trying to protect other consumers:

To hold otherwise would denigrate the New York consumer protection statute, designed as a major support of consumers who claim to have been cheated. The only way a consumer could enjoin deceptive conduct would be if he were made aware of the situation by suffering injury. But once the consumer learned of the deception, he would voluntarily abstain from buying and therefore could no longer seek an injunction.
An injunction in connection with a class action is designed to afford protection of future consumers from the same fraud. It does this by permitting the plaintiff to sue on their behalf.

Id. at 445 (emphasis added). It was determined that plaintiff had standing and defendant's motion to strike the class allegations was denied. Id. at 445-47.

         C. Motions for Class Certification in the Belfiore and Kurtz Actions

         Prior to the October stay and FTC referral, plaintiff in the Belfiore case moved to certify a class action, pursuant to subsections (b)(2) and (b)(3) of Federal Rule of Civil Procedure 23. He defined the proposed class as: “all persons and entities who purchased Charmin Freshmates in the State of New York between May 23, 2011 and May 23, 2014[.]” Belfiore, 311 F.R.D. at 51. In February 2015, defendant Procter & Gamble sought denial of Belfiore's class certification motion. See Mot. to Deny Class Cert., 14-CV-4090, Feb. 27, 2015, ECF No. 59. In August 2015, the court heard oral argument on Belfiore's motion for class certification. Minute Entry, 14-CV-4090, Aug. 12, 2015, ECF No. 126. By a recent letter to the court, Belfiore defined the proposed class as: “All persons and entities who purchased Charmin Freshmates in the State of New York between May 23, 2011 and the present.” Letter, 14-CV-4090, Feb. 6, 2017, ECF No. 242.

         Plaintiff in the Kurtz action moved for class certification pursuant to Federal Rule of Civil Procedure 23 subsections (b)(2) and (b)(3) in February 2015. See Kurtz Mem. in Supp. of Class Cert., 14-CV-1142, Feb. 27, 2015, ECF No. 81 at 1. He sought certification of classes of national, New York, and New Jersey purchasers of Kimberly-Clark and Costco products. Id. at 3. Kimberly-Clark and Costco opposed. See Kimberly-Clark Mot. to Deny Class Cert., 14-CV-1142, Feb. 27, 2015, ECF No. 82; Costco Mot. to Deny Class Cert., 14-CV-1142, Feb. 27, 2015, ECF No. 87. The court heard oral argument on plaintiff's motion for class certification in October 2015. See Kurtz Class Cert. Oral Arg. Hr'g Tr., 14-CV-1142, Nov. 10, 2015, ECF No. 204. By a recent letter to the court, Kurtz clarified that he is now seeking to certify three classes: (1) “All persons and entities who purchased Kimberly-Clark Flushable Products in the State of New York between February 21, 2008 and the present.”; (2) “All persons and entities who purchased Kirkland Signature Flushable Wipes in the State of New York between July 1, 2011 and the present.”; and (3) “All persons and entities who purchased Kimberly-Clark Flushable Products from February 21, 2008 and the present or Kirkland Signature Flushable Wipes from July 1, 2011 to the present.” Letter, 14-CV-1142, Feb. 6, 2017, ECF No. 282. The third class would be national in scope.

         D. Preliminary Rulings on Class Certification in Belfiore Action

         Class certification motions remained pending until now.

         Both damages and injunctive relief are sought by plaintiffs. Plaintiff Belfiore claims statutory damages of fifty dollars per purchase based on a premium price theory. Id.; see N.Y. Gen. Bus. Law § 349(h) (permitting recovery of “actual damages or fifty dollars, whichever is greater”). He seeks to enjoin defendant Procter & Gamble from labeling its wipes product as “flushable” and “safe for sewer and septic systems.” Belfiore, 311 F.R.D. at 51 (citation omitted).

         In its memorandum and order staying the case and referring issues to the FTC, this court made preliminary rulings on Belfiore's motion for class certification. See Belfiore, 311 F.R.D. at 59-73. These findings remain in force. It was concluded that the Federal Rule of Civil Procedure 23(a) factors were satisfied:

The numerosity requirement is satisfied. See id. at 61 (“Here, numerosity is obvious. The number of individual purchases of Freshmates in New York is over a million.”) (citations omitted).
The commonality requirement is satisfied. The common injury was identified as “the price premium on every product sold.” Id. at 63. Defendant's argument that the injury depended on the individual purchaser's expectations or experience after purchase was rejected: “Liability . . . does not depend on whether class members relied upon the representation when they purchased Freshmates, nor does it depend on whether the product met their personal, subjective expectations. Rather, the ‘injury is the [excessive] purchase price.' . . . The purpose of New York General Business Law § 349, is to ‘punish companies that sell products using advertising that misleads the reasonable consumer.'” Id. at 62 (citations omitted). This position is strengthened by the New York Court of Appeals opinion in Borden v. 400 E. 55th St. Assoc., L.P., et al., providing an expansive and flexible definition of a New York State class action. See 24 N.Y.3d 382, 394-95 (2014); Thomas A. Dickerson & Leonard B. Austin, New York State Class Actions in 2016, N.Y. Law Journal, Sept. 28, 2016 available at http://www.newyorklawjournal.com/id=1202768776871/New-York-State-Class-Actions-in-2016?slreturn=20160917145328.
The typicality requirement is satisfied. The central issue in the case is the alleged payment by consumers of a price premium for a product that misrepresented itself as flushable. “The injury is the payment of an inflated price, not the clog.” Belfiore, 311 F.R.D. at 64. Individual plumbing damages are not relevant to the price premium theory and are not subsumed in the class action. Id. (“What happened after [plaintiff's] purchase, as a result of his sewage disposal system or the condition of his pipes, is irrelevant to the class's premium price theory.”).
The adequacy of representation requirement is satisfied. See id. at 64-65. Counsel for plaintiff have handled the case with great skill and full attention.
The implied requirement of ascertainability is satisfied. The proposed class comprising “all persons or entities who purchased [defendant's ‘flushable' product] Freshmates in New York State between May 23, 2011 and May 23, 2014” sufficiently “identifies a particular group of individuals [who were] harmed in a particular way (defrauded by labels and marketing materials [leading to higher prices]) during a specific period in particular areas. Only one product is at issue, and it was labeled in a uniform manner.” Id. at 66 (quotation marks and citations omitted). The fact that plaintiff did not retain receipts of purchase is not a bar to certification. Id. at 66-67. The purchases and their price can be proven by other means.

         1. Injunctive Class

         This court rejected defendant Procter & Gamble's position that plaintiff Belfiore did not have Article III standing to pursue injunctive relief for a product he will not re-purchase. Id. at 67; Belfiore, 94 F.Supp.3d at 444-45; supra Part II.B. If defendant's theory were to be accepted, it would effectively bar injunctive classes in consumer deception cases, since purchasers who become aware of a harm and stop buying the offensive product would not be able to seek relief for the class. That result is undesirable as a matter of public and federal policy and practice:

To hold otherwise would denigrate the New York consumer protection statute, designed as a major support of consumers who claim to have been cheated. The only way a consumer could enjoin deceptive conduct would be if he were made aware of the situation by suffering injury. But once the consumer learned of the deception, he would voluntarily abstain from buying and therefore could no longer seek an injunction.
An injunction in connection with a class action is designed to afford protection of future consumers from the same fraud. It does this by permitting the plaintiff to sue on their behalf.
Given plaintiff's dissatisfaction with Freshmates, it is unlikely he will re-purchase the product again. No information to the contrary has been provided. Based on the law as interpreted, he has standing.

Belfiore, 94 F.Supp.3d at 445.

         The court noted that it would likely certify an injunctive class under Federal Rule of Civil Procedure 23(b)(2):

Here, certification of an injunctive class is appropriate. Rule 23(b)(2)'s rigorous requirements are satisfied. First, an injunction prohibiting defendant from labeling Freshmates “flushable” and “safe for sewer and septic systems” would provide a single solution, applicable to each class member. Second, the proposed class is cohesive . . . . Third, certification of an injunctive class is necessary because an injunction, unlike monetary damages, will protect the rights of all consumers.

Belfiore, 311 F.R.D. at 68.

         Defendants now argue that certification of an injunctive class is not available because of the recent decision of the Court of Appeals for the Second Circuit in Nicosia v. Amazon, Inc., 834 F.3d 220 (2d Cir. 2016). See infra Part VIII.F.1.c.1. In Nicosia, the offending product had been completely taken off the market. See Nicosia, 834 F.3d at 239. Because defendant continues to sell a version of the “flushable” wipes almost identical in construction and effect to the ones purchased by plaintiff, injunctive relief is appropriate. See infra Part VIII.F.1.c.1

         2. Damages Class

         In its October 2015 memorandum and order, this court preliminarily determined that the predominance requirement to certify a damages class was satisfied. See Belfiore, 311 F.R.D. at 68-71. It noted that hedonic regression-the premium damages model set forth by plaintiff's expert-could be used to determine whether the class paid a premium for the product because it was marketed as “flushable.” Id. at 70. Once the injury is established-i.e., the payment of a price premium for allegedly mislabeled “flushable” wipes-statutory damages can be calculated on a class-wide basis pursuant to section 349(h) of the New York General Business Law. See id.

         The instant case is not barred by Zyprexa UFCW Local 1776 v. Eli Lilly & Co., 620 F.3d 121, 133 (2d Cir. 2010):

There, the Second Circuit Court of Appeals held that certification of a putative class based on an “excess price theory” constituted an “abuse of discretion” because the damages model was “not susceptible to generalized proof with respect to either but-for or proximate causation.” But Zyprexa is distinguishable on two grounds. First, in that case the issue was whether plaintiffs demonstrated reliance, an element not required under New York General Business Law § 349. Second, in Zyprexa (as distinct from the instant case) the persons who purportedly relied on the misrepresentations were distinct from those who were allegedly harmed.

Belfiore, 311 F.R.D. at 70-71 (citations omitted) (emphasis in original).

         Zyprexa remains inapplicable. In that case, involving medically prescribed drugs, the Court of Appeals for the Second Circuit's opinion was premised, at least in part, on the fact that purchase depended on a doctor's decision and prescription, in which price was a nominal or no factor. Zyprexa, 620 F.3d at 126. In the instant cases the consumer makes the decision herself at the cash register based, at least in large part, on labeling and price.

         The court indicated that it would likely deny certification of a damages class under Federal Rule of Civil Procedure 23(b)(3) because the superiority requirement was not satisfied. Belfiore, 311 F.R.D. at 73. It explained that the FTC was in a better position to protect consumers in New York and nationally given its authority to investigate deceptive practices and the fact that it was already considering “flushable” claims by defendant Procter & Gamble and other manufacturers:

In the instant case, a class action seeking statutory damages is not a superior method of adjudication. The FTC is better suited to protect consumers nationally as well as those in New York. Not only does the FTC's mandate encompass investigating deceptive practices in the labeling of consumer goods, the agency is already considering “flushable” claims made by this defendant, and those of at least one other manufacturer. In the interest of uniform protection of consumers, the FTC should address the instant case and related cases, lest inconsistent judgments and labeling abound. This risk is serious, as noted by the number of cases that have already reached varying dispositions. Consumers as well as vendors require a uniform definition of “flushable, ” and the FTC is best suited to announce it.

Id. (citations omitted) (emphasis in original).

         The court also opined that an award of statutory damages could be excessive and in violation of New York State policy as embodied in section 901(b) of the New York Civil Practice Law and Rules (“CPLR”). See id. Section 349 of the New York Business Law, pursuant to which plaintiff is suing, permits an action to recover statutory damages. Specifically, the provision allows a plaintiff to initiate “an action . . . to enjoin such unlawful act or practice, an action to recover his actual damages or fifty dollars, whichever is greater, or both such actions.” N.Y. Gen. Bus. Law § 349(h) (emphasis added). Section 901(b) of the New York CPLR prohibits the maintenance of New York State class actions seeking to recover “a penalty, or minimum measure of recovery created or imposed by statute, ” unless that statute explicitly authorizes recovery through a class action. CPLR § 901(b).

         Federal Rule of Civil Procedure 23, which sets forth the requirements for maintaining a class action in federal court, contains no such restriction. See Fed. R. Civ. P. 23. In Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010), the Supreme Court of the United States considered the interaction between Federal Rule of Civil Procedure 23 and New York CPLR section 901(b). A majority of the Court concluded that section 901(b) and Rule 23 do conflict, and that Rule 23 represents a lawful exercise of Congress's procedural rulemaking power. Shady Grove, 559 U.S. at 399-401; see also Belfiore, 311 F.R.D. at 56-59; H. Korn, A. Miller, et al., N.Y. Civ. Prac. ¶ 901.29 (David L. Ferstendig ed., 2016) (addressing the Supreme Court's rejection of recognition of section 901(b) under Federal Rule of Civil Procedure 23).

         The dissenting opinion in Shady Grove was the right one according to academics in New York. See, e.g., H. Korn, A. Miller, et al., N.Y. Civ. Prac. ¶ 901.22 (first ed., 1995) (“Subdivision (b) of CPLR 901 expressly prohibits the maintenance of a class action to recover a penalty or minimum measure of recovery unless the statute creating or imposing such a remedy specifically authorizes recovery of the statutory remedy in a class action. The prohibition, which has no federal counterpart and does not stem from a recommendation of the Judicial Conference, would presumably protect businesses against catastrophic judgments considering that many of the statutes authorizing class actions to recover a penalty or minimum recovery also limit the total liability of the defendant. . . . Statutory damages constitute a ‘penalty of minimum measure of recovery' so as to bar a class action in the absence of specific authorization.”); H. Korn, A. Miller, et al., N.Y. Civ. Prac. ¶ 901.29 (David L. Ferstendig ed., 2016) (stating that, prior to the Supreme Court's decision in Shady Grove, “[p]erhaps on the basis of comity and to discourage forum shopping, the federal courts have routinely denied class certification and referred to CPLR § 901(b)”); In re Zyprexa Prod. Liab. Litig., 671 F.Supp.2d 397, 463-64 (E.D.N.Y. 2009) (“If allowed to proceed in their entirety, the State's claims could result in serious harm or bankruptcy for this defendant and the pharmaceutical industry generally. For the legal system to be used for this slash-and-burn-style of litigation would arguably constitute an abuse of the legal process. Constitutional, statutory, and common law rights of those injured to seek relief from the courts must be recognized. But courts cannot be used as an engine of an industry's unnecessary destruction.”) (citation omitted).

         The New York Court of Appeals has emphasized the desirability of a flexible interpretation of section 901(b) to permit effective use of a class action in protecting large numbers of people. See Borden, 24 N.Y.3d at 394-95; see also H. Korn, A. Miller, et al., N.Y. Civ. Prac. ¶ 901.28 (David L. Ferstendig ed., 2016) (stating that in class actions alleging violations of section 349 of the New York General Business law, section 901 will not restrict recovery “if [statutory] damages are waived and class members are informed and given the right to opt-out of the proposed class action”).

         Shady Grove was analyzed in Belfiore. It was concluded that the effect of section 901(b) on a proposed federal class action should be considered when deciding on certification, and the case would tend to weigh against use of Rule 23:

There is some justification for the prediction that Freshmates purchasers may be entitled to $95.5 million in “statutory damages.” While Shady Grove does not prohibit federal class actions seeking fixed statutory damages, such an award, in this case, is inconsistent with . . . New York's substantive policy animating § 901(b). An award of this projected magnitude would run counter to the policy of Congress in implementing the Class Action Fairness Act: to discourage excessively harsh results eclipsing plaintiff's actual damages.

Belfiore, 311 F.R.D. at 73.

         On further reflection, any weight given to the paragraph above would flout the Supreme Court's Shady Grove decision, and that case is not relied upon in the instant cases as a basis for denying certification. While disagreeing with the Supreme Court majority opinion, the district court is bound by it. A certified damages class under Rule 23 is not controlled by section 901(b)- statutory damages under section 349(h) are available on a class basis in federal court, even though they would be barred by section 901(b) if the same action were to proceed in state court-an undesirable situation in view of Erie principles. See id. at 59.

         E. Stay and FTC Referral

         In October 2015, this court stayed all six pending cases pursuant to the primary jurisdiction doctrine and referred the controversy to the FTC. It ruled:

The case is stayed, pursuant to the primary jurisdiction doctrine, pending the conclusion of the FTC's inquiry and any subsequent action by the agency. The stay may be lifted by the court to avoid unnecessary delays or for other reasons.

Id. at 78; see also Order Staying Cases, 14-CV-1142, Oct. 13, 2015, ECF No. 183 (“The issue of an appropriate definition of ‘flushable' and related issues are respectfully referred to the Federal Trade Commission. The stays may be lifted by the court to avoid unnecessary delays or for any other reason.”).

         The court explained that the FTC was suited to protect all consumers in the nation. That agency was already considering several “flushable” claims, including those made by defendants in actions pending before this court. It was desirable to allow the FTC to address the instant cases and develop a uniform national definition of “flushability”-in order to avoid inconsistent judgments and better protect consumers nationwide. See Belfiore, 311 F.R.D. at 73.

         Noted was that “[d]etermining whether the term ‘flushable' is deceptive to a reasonable consumer is directly within the agency's discretion.” Id. at 78. Given the fact that the FTC was already investigating the “flushability” claims of several defendants, and that a number of cases had been brought by consumers and municipalities against manufacturers of purportedly “flushable” wipes, the court indicated that “[t]here may be substantial danger of inconsistent rulings among various courts and the FTC.” Id. at 79. Action by the Commission would save resources and assist in reaching “a single national resolution” of “a national issue.” Id.

         F. Motion to Reconsider Denied in Belfiore Action

         Plaintiff in the Belfiore action moved to reconsider the October 5, 2015 memorandum and order, including the court's decision to stay the case and refer matters to the FTC. See Belfiore Mem. in Supp. of Recons., 14-CV-4090, Oct. 16, 2015, ECF No. 157. He pointed to the “flushable” definition included in the then draft consent order between the FTC and Nice-Pak, arguing that it was sufficient to “guide courts and legislative bodies to a ‘single national resolution.'” Id. at 2; see also Belfiore, 140 F.Supp.3d at 245.

         Plaintiff's motion for reconsideration was denied. The court again determined that referral to the FTC was appropriate; the agency should be given the opportunity to develop a uniform definition of “flushable” in order to reduce the risk of inconsistent directions to the industry:

Referral to the FTC in the present case is appropriate. The FTC is specifically granted broad power to regulate advertising and should be afforded the opportunity to determine a uniform definition of “flushable” applicable on a national, and perhaps international, basis. As noted in the October 5 memorandum and order, allowing the FTC to develop a common definition of “flushable” reduces the substantial risk of inconsistent judgments and facilitates the prospect of an injunctive class settlement, aiding manufacturers, retailers, and the public.

Belfiore, 140 F.Supp.3d at 245-46 (citations omitted).

         The court reiterated its preliminary view on the question of class certification, stating that if it were to certify a damages class, it would be bound by Shady Grove to allow plaintiff's exorbitant New York statutory damages of fifty dollars a purchase:

The court reaffirms as presently appropriate what it had declared in the October 5 memorandum and order and at the October 21 hearing on plaintiff's motion for reconsideration: If the court were to grant money damages class certification now, it would be bound by Shady Grove to allow plaintiff's statutory damages claim. New York General Business Law § 349(h) allows injured consumers to bring an action to recover either actual damages or fifty dollars per purchase, whichever is greater. The actual damages at issue in the present case (the price premium of the difference between wipes labeled “flushable” compared to other moist wipes not so labeled) are likely to be quite small compared to the fifty dollars per purchase statutory damages provided by § 349(h). If a damages class certification under Shady Grove were granted now, the class representative would have to seek the higher statutory amount, given his fiduciary obligation to attempt to obtain the best deal possible for class members. The court reserves the right to modify or reject this position when the stay is lifted.
In its memorandum and order the court noted that its present view on a damages class was based “primarily on the ground that certification would violate important New York State policy, ” because of Shady Grove. But, the court considered other factors relevant to an analysis under Rule 23(b)(3) of the Federal Rules of Civil Procedure. They include the difficulty in determining actual damages, the availability of non-judicial alternatives such as refund programs, and the superiority of FTC administrative remedies in this case.

Id. at 246-47 (emphasis in original) (citations omitted).

         G. Final FTC Consent Order with Nice-Pak

         On October 30, 2015, the FTC finalized its consent order with Nice-Pak. See Nice-Pak Final Consent Order at 6. Nice-Pak was ordered to “not make any representation, in any manner, expressly or by implication . . . unless the representation is non-misleading” that its wipes product:

A. is safe for sewer systems;
B. is safe for septic ...

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