May 24, 2022

Volume XII, Number 144

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May 23, 2022

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Litigation Minute: What to Do When Your Company Is Threatened with a Consumer Class Action

WHAT YOU NEED TO KNOW IN A MINUTE OR LESS

You are in-house counsel for a consumer-facing company, and you have just been handed a letter from a plaintiff’s firm you’ve never heard of, threatening to file a class action over labeling, advertising, a company policy, or an alleged defect in your consumer product. What do you do?

Know you are potentially at risk

Any consumer-facing company is a potential target for a consumer class action, this includes manufacturers, suppliers, and potentially others within the chain of distribution. In recent years, consumer class actions have run the gamut from claims alleging false advertising and labeling of consumer products, illegal recording of telephone calls by customer service personnel, violation of the Telephone Consumer Protection Act, data and biometric privacy breaches, and violations of a myriad of specific consumer protection statutes enacted throughout the country. There is also an increasing trend of seeking class certification in traditionally one-off tort cases, particularly those involving personal care products, home improvement products, and even kitchenware.

Examine the demand letter for clues to scale of risk

The initial letter will hold many clues regarding the potential risk. For example, the name on the letterhead can signal whether there is a credible threat from a firm that not only settles, but tries cases, or whether you are dealing with lawyers who will fold under pressure, rather than pursue a case, if the merits of the claim are questionable. There may also be indications that suggest whether the threat is an attempt to quickly settle the consumer’s claim on an individual basis, or whether it is a prelude to an expensive attempt to certify a traditional class. The level of detail contained in the letter may reveal this as an opportunity to resolve a potential problem at a minor cost; an opportunity to turn what could be a minor problem into a major and expensive one; or an unavoidable litigation slog that just has to be dealt with. The threat may be a one-off or part of a nationwide trend of similar claims brought against similar industries. Minimal detail may reveal an undeveloped factual or expert record and may be an opening for a quick and cheap resolution. However, significant detail such as identification of other similar claims, reference to scientific data, or quantifying the number of individuals potentially affected by the alleged wrong may signal the claim is part of a nationwide trend. This may mean there is an easy solution to be found by conforming to the advertising and labeling changes made by similarly situated entities, or pointing to existing policy changes that have satisfied other plaintiffs’ counsel; or it may signal you are about to be dragged into an expensive and protracted process.

Prepare for the growing trend of class action claims

As the prevalence of threatened consumer class action claims continues to grow, virtually all consumer-facing companies will at some point receive a demand letter. Fortunately, the consumer class actions bar is a relatively small one where the players interact with each other repeatedly over time. This helps ensure a predictable pattern of litigation and often a roadmap for early and efficient resolution.

Copyright 2022 K & L GatesNational Law Review, Volume XI, Number 197
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About this Author

Matthew G. Ball Attorney Litigation Business KL Gates San Francisco
Partner

Matt Ball is a litigation partner and business trial lawyer in K&L Gates’ San Francisco office. He focuses on class action defense and strategic commercial litigation for consumer-focused industries, such as homebuilders, consumer financial services, as well as makers of food, dietary supplements, and homeopathic remedies, among other consumer products. He also represents employers in wage and hour class actions, and plaintiffs and defendants in complex commercial and intellectual property litigation.

At times “strategic litigation” means...

415-249-1014
Michele C. Barnes Attorney Litigation Business KL Gates San Francisco
Partner

Michele Barnes is a seasoned trial attorney who is a member of the firm's complex commercial litigation and disputes practice group.  In addition to trying cases throughout California and the Western United States, Michele has argued before the Ninth Circuit Court of Appeals and the California Court of Appeals.

Michele represents manufacturers and suppliers of industrial and commercial products in a variety of business and product liability disputes, and counsels companies on risk management best practices.

415-249-1011
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