Lambert v. Nutraceutical Corp. - Ninth Circuit

Headline: The Ninth Circuit Court held that Fed. R. Civ. Pro. 23(f) is procedural in nature and subject to equitable considerations. Failure to enter a petition for permission to appeal within the fourteen-day time bar is not always fatal.

Areas of Law: Civil Procedure

Issues Presented: Whether the fourteen-day time limit, provided in Federal Rule of Civil Procedure 23(f), may be tolled and if so under what circumstances.

Brief Summary: Plaintiff brought a consumer class action against defendant. Plaintiff alleged that defendant’s product made egregious false representations causing injury. The district court granted defendant’s motion to decertify the class. Plaintiff filed a petition for permission to appeal the district court’s order three months after the order to decertify had been granted. Rule 23(f) provides that a petition for permission to appeal an order granting or decertifying a class must be filed within fourteen days of said order. Despite the express language in Rule 23(f), the court held that a strict application of Rule 23(f) is not in the best interest of fairness and equity. The time bar set in Rule 23(f) is a procedural in nature and thus may be subject equitable exceptions, like tolling, under certain circumstances. Petitioner’s petition was granted and the district court’s order to decertify the class was reversed.

Significance: Rule 23(f) is not jurisdictional in nature but procedural and subject to equitable exceptions under certain circumstances.

Extended Summary: Plaintiff, Troy Lambert, brought a consumer class action against defendant, Nutraceutical Corporation, for violations of California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and Consumer Legal Remedies Act (“CLR”).

Nutraceutical manufactured and marketed “Cobra Sexual Energy,” an alleged aphrodisiac supplement not approved by the Food and Drug Administration (“FDA”). Despite “Cobra Sexual Energy’s” lack of FDA approval, defendant claimed its product contained performance-enhancing herbs that would provide users with “animal magnetism” and “potency wood.” Based on these assertions plaintiff purchased the product, Had Lambert known the product lacked FDA approval, plaintiff contends he would not have purchased the product.

The District Court granted the class certification because Lambert’s full refund damages model provided a reasonable theory that monetary relief could be ascertained on a class wide bases. Once discovery concluded, defendant moved to decertify the class. The district court granted Nutraceutical’s motion to decertify. The district court explained that although Lambert’s full refund damages model was consistent with the theories of liability alleged, his failure to provide “the key evidence necessary to apply his class wide model for damages,” was fatal.

Ten days after the order decertifying the class, Lambert informed the district court of his intention to file a motion for reconsideration. The district court instructed Lambert to file the motion within ten days. Lambert did as instructed and moved for reconsideration ten days later. Lambert’s motion for reconsideration was rejected. Not to be denied, Lambert then filed a Rule 23(f) petition for permission to appeal to the appellate court fourteen days after his motion for reconsideration was denied. Plaintiff’s motion was conditionally granted. The appellate court instructed the parties to not only address the substantive issues in their briefs but to also address the timeliness of plaintiff’s petition.

Rule 23(f) requires that a petition for permission to appeal an order granting or denying class-certification be filed within fourteen days after the order is entered. However, the rule is silent as to the effect a motion for reconsideration has on the fourteen-day deadline. Lambert’s petition for permission to appeal was filed approximately three months after the order for decertification was granted. In order to determine whether Rule 23(f) bars Lambert’s petition, the panel first had to determine whether Rule 23(f) was jurisdictional. The panel held that it was not jurisdictional and that equitable remedies may be considered.

In reaching its decision the panel referenced similar holdings reached by the US Supreme Court in Eberhart v. United States, 546 U.S. 12 (2205) and Boweles v. Russel, 551 U.S. 205 (2007). In Eberhart, the Supreme Court held that a deadline in the Federal Rules of Criminal Procedure was procedural in nature, as opposed to jurisdictional, because the rule did not affect the scope of the tribunal’s authority to hear a case. 546 U.S. at 12. In Bowles, the court held that deadlines in statutes are jurisdictional. 551 U.S. at 207. In applying Bowels and Eberhart the court held that Rule 23(f) is not jurisdictional because it is procedural in nature, does not regulate or remove the court’s authority to hear a case, and is not part of a statute.

After determining that Rule 23(f) is not jurisdictional that panel had to decide what if any equitable considerations could be applied and whether plaintiff was entitled to any. The panel held that the doctrine of tolling can be applied to the fourteen-day deadline. Citing again to case law, the panel agreed with the Third District’s reasoning: “at the bottom, the purpose of equitable tolling is to soften the harsh impact of technical rules which might otherwise prevent a good faith litigant from having his or her day in court.” Rudin v. Myles, 781 1043, 1055 (9th Cir. 2015).

Although Lambert filed his petition for appeal was three months after the  order to decertify the class was initially granted, the panel determined that equitable considerations should be applied to Lambert’s case. The panel found no evidence of bad faith. Furthermore, there was justifiable reliance on the district court’s instructions (ten days after the order for decertification was granted petitioner was told that he had ten more days to file his motion).

The panel outlined factors it considers when determining whether a litigant should be granted and equitable exception. Some of the factors listed were: (1) whether the litigant pursued his rights diligently; (2) whether external circumstances affected the litigant’s ability to comply with the fourteen-day deadline; and (3) other legal actions taken by litigant. Here, Lambert conveyed his intention to file a motion for reconsideration to the district court, complied with the imposed deadline set by the court, and thereafter was diligent in submitting his petitioning to the appellate court.

Finally, the panel addressed the arguments against allowing tolling and other equitable considerations. The panel found arguments regarding judicial efficiency, the uncertainty tolling creates in class action litigation, and the proposed narrow reading of the Rule 23(f) by defendant as unpersuasive or incorrect.

Having answered the timeliness issue of Lambert’s request, the panel next addressed whether the district court abused its discretion in decertifying the class on the basis of Lambert’s inability to prove restitution damages through the proposed full refund model. The panel held that district did abuse its discretion, relying again on case precedent: “damage calculations alone cannot defeat certification.” Yokoyama v Midland Nat’l Life Ins. Co,  594 F.3d 1087, 1094 (9th Cir. 2010).

 

To read the full opinion, please visit: http://cdn.ca9.uscourts.gov/datastore/opinions/2017/09/15/15-56423.pdf

 

Panel: Richard A. Paez, Marsha S. Berzon, and Morgan Christen, Circuit Judges

 

Argument Date: March 9, 2017

 

Date of Issued Opinion: September 15, 2017

 

Docket Number: D.C. No. 2:13-cv-05942-AB-E

 

Decided: Reversed and remanded for further proceedings. The court found that plaintiff’s petition for class certification, pursuant to Fed. R. Civ. P. 23(f), was timely made.

 

Case Alert Author: Luis F. Bustamante

 

Counsel

Gregory Weston (argued) and David Elliott, The Weston Firm, San Diego, California; Ronald A. Marron, The Law Offices of Ronald A. Marron APLC, San Diego, California; for Plaintiff-Appellant.

 

Steven N. Feldman (argued) and John C. Hueston, Hueston Hennigan LLP, Los Angeles, California; Jon F. Monroy, Monroy Averbuck & Gysler, West Lake Village, California; for Defendant-Appellee.

Author of Opinion: Richard A. Paez

 

Circuit: Ninth

 

Case Alert Supervisor: Professor Glenn Koppel

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