Case Notes

After granting review, the United States Supreme Court also affirmed. The Court first rejected the defendant's argument that “representative evidence” could never be used to treat all class members uniformly, and thereby certify a class under Rule 23(b)(3) on the ground that common questions in the action predominated over individual ones, where the facts as to individual class members ' here, their time spent donning and offing ' actually differed. “Whether a representative sample may be used to establish classwide liability will depend on the purpose for which the sample is being introduced and on the underlying cause of action,” stated the Court. Here, the record showed the experiences of class members were similar enough that “the experiences of a subset ' can be probative as to the experiences of all.” For that reason, the expert's study could have been used in any individual employee's suit to prove his entitlement to overtime, and therefore was properly used here.

The Court further emphasized that the representative evidence was only necessary “to fill an evidentiary gap created by the employer's failure to keep adequate records,” so the FLSA's remedial nature militated in favor of allowing plaintiffs to use the evidence rather than leaving them uncompensated for want of more precise proof.

The Court also noted that its conclusion was not in conflict with Wal-Mart v. Dukes, 564 U.S. 338 (2011), where the Court had rejected the suggestion that employment discrimination plaintiffs could certify a class and conduct a “Trial By Formula” using representative evidence. Unlike the present case, the experiences of the Dukes class members were so dissimilar that evidence of allegedly discriminatory actions as to a sample set would have had no probative value as to the experiences of the remaining class members, and thus no class member could have relied on such representative evidence in an individual action. Under those circumstances, permitting use of the evidence “would have violated the Rules Enabling Act by giving plaintiffs and defendants different rights in a class proceeding than they could have asserted in an individual action.” In this case, however, the representative evidence was not an impermissible means of “absolving the employees from proving individual injury,” but rather “a permissible means of making that very showing.”

Last, the Court rejected the defendant's contention that the class award was improper because there was no way to ensure that uninjured class members would not recover. The defendant argued that the jury's award of $2.9 million when the plaintiff's expert had estimated $6.7 million in class-wide damages meant the jury had rejected parts of the expert's methodology, making it impossible to know which employees were in fact entitled to overtime consistent with the jury's conclusions. The Court explicitly acknowledged the importance of the question whether uninjured class members may recover damages, but concluded that because the trial court had not yet ordered disbursement of the award or specified how it would be disbursed, the question was not yet presented. The Court also suggested that there might be ways the district court and parties could work backward from the amount of the award to determine which class members were actually entitled to recover.

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Citizenship of REIT for Diversity Jurisdiction Determined by Citizenships of All Shareholders and Trustees

In Americold Realty Trust v. Conagra Foods, Inc., 2016 U.S. LEXIS 1652 (S. Ct. 2016), a group of corporations sued a real estate investment trust (REIT) in Kansas state court alleging breach of contract for failing to compensate the group after its food perished in a fire at defendant's warehouse. Defendant removed the case to the United States District Court for the District of Kansas, asserting jurisdiction based on diversity of citizenship between plaintiffs and the defendant. The plaintiffs did not challenge jurisdiction, the court accepted it, and ultimately granted judgment for the defendant.

On the plaintiffs' appeal, the United States Court of Appeals for the Tenth Circuit requested supplemental briefing on whether diversity jurisdiction actually existed. The court then concluded that the citizenship of a “non-incorporated artificial entity” such as a REIT is determined by the citizenship of all of its “members,” which here included, at a minimum, all shareholders. Because the record did not identify the shareholders' citizenships, however, defendant had failed to demonstrate that those citizenships differed from those of the corporate plaintiffs and hence the district court had no jurisdiction. The United States Supreme Court granted certiorari to resolve confusion among the federal circuits as to how to determine the citizenship of unincorporated entities.

The Court began by reviewing its earlier jurisprudence on diversity jurisdiction, emphasizing its “oft-repeated rule” that the diversity of a unincorporated entity depends on the citizenship of its members, but acknowledged it had never defined that term.

Here, Maryland law ' under which defendant was organized ' provided that a REIT is managed for the benefit and profit of its shareholders, who also hold ownership and voting interests in the entity. Accordingly, such shareholders are equivalent to the shareholders of a joint-stock company or partners in a limited partnership, both of which the Court had previously held to be members of their respective entities for the purposes of determining diversity.

The Court rejected the defendant's reliance on a prior case in which the Court had held that where a trustee brings a suit in his own name on behalf of a trust, the relevant citizenship is that of the trustee as an individual. The Court noted that while “traditional trusts” were not distinct legal entities that could sue or be sued in their own names, some states had created legal entities such as the REIT, which, while nominally “trusts,” did have the capacity to sue or be sued. Accordingly, the citizenship of such non-traditional trusts was determined by the citizenship of its members ' here, the REIT's shareholders ' as well as its trustees. The Court also rejected an amicus' argument that the citizenship of an unincorporated entity should be based on where it was established or had its principal place of business, as the diversity jurisdiction statute provides with respect to corporations. The Court, however, saw “no reason to tear [] down” the “doctrinal wall” between incorporated and unincorporated entities by adopting this rule, noting that Congress could amend the diversity statute if it desired this result.

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Failure-to-Warn Claims Were Preempted

In In re Zofran (Ondansetron) Products Liability Litigation, 2016 U.S. Dist. LEXIS 7638 (D. Mass. Jan. 22, 2016), plaintiffs brought numerous suits around the country against the manufacturer of an anti-nausea drug, alleging that it caused birth defects when used by pregnant women. The plaintiffs claimed that the defendant failed to adequately warn about the drug's risks, and failed to comply with United States Food and Drug Administration (FDA) regulations by marketing the drug for off-label uses or withholding relevant safety information from the FDA.

The Judicial Panel on Multidistrict Litigation created a multidistrict litigation (MDL) and transferred 208 cases to the United States District Court for the District of Massachusetts for pre-trial management. Before the start of discovery, the defendant moved to dismiss all suits, arguing that they were preempted by the Food Drug and Cosmetic Act (FDCA) because the FDA, which must approve all prescription drug warnings, had previously rejected a citizen's petition requesting that the drug be reclassified to a higher pregnancy risk category and hence accompanied by stronger warnings about use during pregnancy.

The court noted that it was hesitant to decide the issue as presented because the preemption standard was whether there was “clear evidence” the FDA would have rejected the warning plaintiffs argued should have given, an issue on which the plaintiffs had not yet had the opportunity to gather any facts. The court also suggested, without deciding, that the FDA might treat a request for a labeling change by a citizen's petition differently than an identical request by a manufacturer, so that the rejection of a citizen's petition might not be dispositive. Further, given the case's infancy, the court was not clear as to how the warning(s) for which the various plaintiffs advocated compared with those sought by the rejected citizen's petition. Accordingly, the court held that the defendant's failure-to-warn preemption argument was “premature at best,” and rejected it without prejudice to renewal at a later date.

The defendant also argued that the plaintiffs' claims based on allegedly unlawful off-label marketing and concealment of safety information from the FDA were preempted by the FDCA because the claims conflicted with the FDA's exclusive authority to police fraud under that act. Under prior case law, a state law claim is not preempted for that reason if the claim: 1) merely incorporates, but does not rely solely upon, the FDCA violation; and 2) is founded on conduct that would otherwise give rise to liability under state law. Because there were over 200 different cases, however, the court was unwilling to undertake the necessary analysis, “especially where the parties have devoted a total of only three pages of briefing to the issue.” While many claims might ultimately fail on these grounds, in order to address preemption, the court would need to go through each claim in each case, identify the applicable state law and then assess whether the particular claim was preempted under the governing standard. Accordingly, the court also rejected this preemption argument without prejudice to its later renewal. ' David R. Geiger and Catherine C. Deneke, Foley Hoag LLP