When is the Proper Time To Challenge Standing in Class Actions? New Jersey Says To Wait Until Class Certification.

by BakerHostetler

On Monday, a New Jersey federal judge denied a motion to dismiss for lack of standing in a deceptive marketing class action in which the named plaintiffs had not purchased a number of the named products. This decision effectively held that, in a class action, the appropriate time to analyze standing is at the class certification stage, not at the Rule 12 stage. In In re L’Oreal Wrinkle Cream Marketing and Sales Practices Litigation, Civ. No. 2:12 – 03571 (WJM), 2013 WL 6450701 (D.N.J. Dec. 9, 2013), plaintiffs alleged that L’Oreal used false, misleading, and deceptive marketing for a number of products in its anti-wrinkle cream line. The popular cosmetic company contested the plaintiffs’ standing because they did not actually purchase every product named in the suit.

Plaintiffs alleged that the company’s marketing campaign for 30 anti-wrinkle creams falsely insinuated that the products were the result of rigorous scientific research and testing. However, the named plaintiffs had only purchased 16 of the 30 creams. L’Oreal moved to dismiss the claims relating to the 14 unpurchased products, theorizing that plaintiffs lacked standing to sue over products they did not purchase.

The court declined to follow a line of cases that preclude standing where the named plaintiffs did not purchase the products. Instead, it acknowledged that the issue of standing can be delayed if the plaintiffs meet a three-part test. The court explained that, in cases where (1) the basis for each claim is the same with respect to the purchased and not purchased products, (2) the products are closely related, and (3) the defendants are the same, the court should put off its standing evaluation until class certification. The court found that plaintiffs met the three elements since the advertising campaign for each product repeated the same allegedly false and deceptive claims, the basis for plaintiffs’ claims were the same for all of the products, and all the products were closely related because they were in the same product lines. The court denied L’Oreal’s motion to dismiss and deferred the standing issue until the class certification stage.

This case highlights the strategic challenges in deciding when to challenge standing of the named class representative. Generally speaking, there are three options: (1) seek dismissal of the named plaintiff’s individual claims pre-certification; (2) seek to deny certification on adequacy and typicality of the named class representative based on standing grounds; or (3) seek dismissal of the class claims based on standing after certification. In deciding which option to pursue, the following checklist should be helpful:

v  What is the law in the jurisdiction and the preferences of the judge? Not only will this answer determine when standing challenges should be made, this answer will also inform any removal or venue choices to make.

v  How easily can plaintiffs’ counsel find more class reps that do have standing? If counsel has the resources and reputation to find more class representatives, efforts to dismiss the current plaintiff may end up to be a waste of defense time and money.

v  What is the strength of the other arguments against class certification? If standing and variances in the purchases of different products is your best class certification defense, then raising standing in opposition to class certification may make sense. But if there are several defenses to class certification, it may be best to seek dismissal on these standing grounds early. Even if you are unsuccessful, there may be value in beginning to educate the judge early about just how unsuitable the case is for class treatment.

v  Is there an opportunity to get a second bite at the apple? Depending upon the case, jurisdiction, and judge, there may be strategic reasons to try the standing arguments out in an early motion to dismiss, and then take what is learned from that order and re-package arguments for class certification.

v  What is the settlement potential of the case? If early settlement is being considered, then perhaps there is a strategic reason to get an early motion to dismiss filed so that the potential for an early win can be considered in any settlement negotiations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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