Archive for April 3rd, 2008

The United States Court of Appeals for the Second Circuit issued a major consumer fraud class certification decision today in McLaughlin v. Philip Morris USA, Inc. et al., No. 06-4666-cv (April 3, 2008).  The case involved RICO and other consumer fraud claims arising out of alleged misrepresentations by tobacco companies about the relative healthiness of light cigarettes.  The court decertified a class that had been certified by the district court despite the plaintiffs’ allegations of uniform misrepresentations, holding that “proof of misrepresentation — even widespread and uniform misrepresentation — only satisfies half of the equation; the other half, reliance on the misrepresentation, cannot be the subject of general proof.”

The court went on to reject various theories of liability offered by the plaintiffs in an effort to avoid problems of individualized reliance and causation, including theories involving alleged impact on market prices, similar to the  “fraud on the market” and “price inflation” theories that have been raised with varying success in other recent consumer class actions (see https://classactionblawg.com/2008/03/28/price-inflation-and-fraud-on-the-market-theories-in-consumer-class-actions/).  In rejecting these theories, the court found allegations that the alleged misrepresentations caused changes in market prices to be too attenuated and speculative.

The court also held that individual  issues predominated with respect to the defendants’ statute of limitations defense, since the issue of when each member of the class became aware of the alleged fraud is necessarily an individualized inquiry.

A full copy of the opinion is available at the New York Times website: http://graphics8.nytimes.com/packages/pdf/business/tobacco/tobacco.040408.pdf

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