Casket Buyers Can Seek Fees, Costs from Non-Settling Defendants in Antitrust Suit

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Eleven consumers can proceed with an antitrust action against the largest U.S.casket manufacturer, Batesville Casket Company, and funeral home chain Service Corporation International, but they can not represent a class of casket purchasers, the U.S. Court of Appeals in New Orleans has ruled.
The consumers who had purchased Batesville caskets alleged that the casket maker and the nation’s largest funeral home chains conspired to prevent independent casket discounters from selling Batesville caskets directly to consumers at discounted prices.

Dismissal of the consumers’ claims seeking attorney fees and costs for lack of subject matter jurisdiction was reversed; however, the appellate court affirmed the lower court’s dismissal of claims for injunctive relief and denial of class certification.

The complaining consumers who had settled with one of the original defendants—funeral home chain Stewart Enterprises, Inc.—for an amount greater than the maximum amount of compensatory damages being sought still had standing to seek costs and reasonable attorney fees from the remaining defendants, the appellate court held. The consumers were not seeking compensatory damages beyond those agreed to in the settlement and did not recover the attorney fees and costs available to them under Sec. 4 of the Clayton Act. The Clayton Act provides a successful plaintiff a mandatory award of costs and attorney fees.

The plaintiffs had a right to sue for the statutorily mandated costs and reasonable attorney fees even if the settlement with one defendant meant that no additional compensatory damages actually would be recovered. Actual recovery of compensatory damages was not required. A ruling to the contrary would discourage plaintiffs from making early settlements with some but not all defendants because a settlement could later
operate to preclude full recovery of fees and costs pursuant to the Clayton Act, according to the court.

The consumers lacked standing to seek injunctive relief, the court also ruled. Any harm would have been reparable by a monetary award, and the chance of one of the consumers purchasing another one of the defending manufacturer’s caskets or his or her family purchasing one of the caskets upon the consumer’s death did not create a real or immediate potential future injury. The fact that death is inevitable is not sufficient to establish a real and immediate threat of future harm.

The court also concluded that the Funeral Consumers Alliance, Inc.—a nonprofit consumer rights organization that claims 400,000 individuals as members—lacked Article III standing to pursue injunctive relief. The organization did not allege that there was a real and immediate threat that any of its members would purchase an allegedly overpriced Batesville casket from one of the funeral homes that was alleged to be part of the conspiracy.

Class Certification

The district court did not err by denying certification of a nationwide class of consumers, according to the appellate court. The plaintiffs failed to meet Federal Rule of Civil Procedure 23(b)(3) predominance and superiority requirements. Rule 23(b)(3) requires a party seeking class certification to demonstrate both (1) that questions common to the class members predominate over questions affecting only individual members, and (2) that class resolution is superior to alternative methods for adjudication of the controversy.

The lower court was acting within its discretion when it adopted a magistrate judge’s recommendation, concluding that individualized issues affecting each of the roughly one million purported class members nationwide would predominate over common ones, given the lack of a national market or a nationwide conspiracy. The appellate court rejected the consumers’ argument that the district court “ignored” the evidence of national market and nationwide conspiracy presented by their expert.

Partial Dissent

A dissenting opinion agreed with the denial of class certification and dismissal of injunctive relief claims; however, it contended that subject matter jurisdiction was lacking over the consumers’ claims for costs and attorney fees. The case was moot because the consumers no longer had a “personal stake in the outcome.” The dissenting judge would not have allowed the consumers’ attorneys to seek “a trial merely for their own self-interested ‘byproducts’ of litigation.”

The September 13, 2012, decision in Funeral Consumers Alliance, Inc. v. Service Corporation International will appear at 2012-2 Trade Cases ¶ 78,048.

Vehicle Retailer Held Liable Under Consumer Fraud Act for False Internet Ad

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

An out-of-state consumer was entitled to damages in a New Jersey Consumer Fraud Act (CFA) claim against an in-state seller of used vehicles that advertised over the Internet, according to the New Jersey Supreme Court. A lower court’s judgment and award of more than $25,000 in damages—plus attorneys’ fees and costs—was reinstated.

The consumer, living in Missouri, placed a bid for a used vehicle in an online auction run by the retailer, which was doing business in New Jersey. The online advertisement for the vehicle stated that the frame and convertible top were in good condition. The retailer spoke with the consumer on the telephone and stated that the car was in good enough condition to drive from New Jersey to Missouri.

After the consumer won the auction, the retailer informed the consumer that the car was probably not safe enough to drive across the country. The automatic headlights and windshield wipers did not work and the car lacked a spare tire. Nevertheless, the consumer paid for the car and had the retailer ship it to Missouri.

Once it arrived, the consumer had it inspected by a repair shop, which found that the frame was nearly rusted in half—thereby disqualifying it from registration in Missouri—and the top was in poor condition. The consumer filed a CFA claim in New Jersey against the retailer for losses sustained as a result of the allegedly false advertising.

"Dealer"

At trial, the retailer asserted that he did not misrepresent the condition of the car and that, in any event, he was not a “dealer” subject to the reach of the CFA. The trial court found that, contrary to the advertisement, the car did not have a solid frame, the engine did not “run strong,” the headlights and windshield wipers did not function, the car had been owned by more than one person, and the radio was not original equipment.

It further found that the retailer qualified as a “dealer” under the CFA and that the retailer had violated the CFA by clear and convincing evidence. The trial court awarded $25,953 in trebled damages, $29,950 in attorneys’ fees, and $6,544 in costs.

The state appellate court dismissed the CFA claim on the ground that the trial court should have entered judgment for the retailer at the close of the consumer’s case instead of deferring consideration and hearing the retailer’s evidence. It did, however, award the compensatory damages of $8,651 under a common law fraud claim.

"Textbook" Claim

On review, the New Jersey Supreme Court found that the seller pled and proved a “textbook” CFA claim. The CFA prohibits any person from committing any unconscionable commercial practice, deception, fraud, or misrepresentation of a material fact in connection with the sale or advertisement of any merchandise.

The definition of “person” was “sufficiently expansive to ensnare [the retailer].” He could not claim that he was exempt from coverage as a member of a regulated industry or learned profession.

An assertion that the retailer was not a “dealer” subject to the CFA was unavailing. It was “simply irrelevant” whether the retailer qualified as a “dealer” within the state lemon law, which expressly stated that it did not limit rights or remedies under any other law. Accordingly, the Supreme Court reinstated the trial court judgment in all respects.

The April 8 decision is Real v. Radir Wheels, Inc., CCH State Unfair Trade Practices ¶31,802.