Why Potential Whistleblowers Should Speak with A Lawyer Right Away

Big companies bury themselves with accountants and lawyers to defend and justify their conduct, so if you’re in the midst of a fraudulent scheme, you need to speak with a whistleblower lawyer as soon as possible to understand your rights and make sure you don’t become the scapegoat for the conduct.

Whistleblowers are protected through various programs and statutes, but only if they are navigated properly. There’s an SEC Whistleblower Program to report when companies who are subject to SEC regulations are corrupt and with an SEC whistleblower lawyer you can potentially remain anonymous from start to finish.  Similarly, with commodities, the CFTC whistleblower program which had a record year with hundreds of millions of dollars of recoveries has mechanisms to protect the whistleblower.  There’s also the IRS whistleblower program which requires a very detailed and specific case designed to catch tax cheats who did over $2 million of fraud, but generally much more.  Also, many states have their own respective whistleblower programs with states like the California Whistleblower Laws and Illinois Whistleblower Laws allowing one to bring a case when private insurance companies are defrauded and New York Whistleblower Laws having teeth to combat tax cheats.

However, by far the most expansive use of whistleblower protections and recoveries comes from the False Claims Act (FCA), which has had billions upon billions of recoveries year after year.  People who speak with False Claims Act attorneys must have cases in which the government is defrauded. Generally, the most abuse is found with Medicare Fraud and Medicaid Fraud and it can be elegant with structuring where certain locations of facilities are and whether they’re on campus or off campus, timing of submissions of claims or altering locations of claims to ensure larger recoveries, upcoding in many different ways such as the billing a higher code for more Medicare reimbursement and false diagnosis.  In some egregious cases, not only do health care providers bill for services not rendered, but even worse they bill for services rendered but not needed!  Imagine being subjected to an unnecessary surgery just so the doctor can receive a bonus or make a yacht payment.  Also popular are illegal kickbacks in which the medical provider pays for Medicare or Medicaid patients and Stark Act issues where the medical provider restricts the patient’s choices and compels them to go to a pharmacist or facility such as physical therapy where the provider has an undisclosed interest.

Whistleblowers should do the right thing and candidly discuss with their whistleblower lawyer the facts of their case to see what type of rights you have.  The longer you silently sit by while you witness the Medicare Fraud or Medicaid Fraud, the more compromised you are.  Don’t fall for calling their whistleblower hotline which is oftentimes a hotline that will lead to the whistleblower’s firing.  Once you become aware of the fraud or once you’ve decided you want to do something about it you should speak with a professional who focuses their practice on whistleblower rights.   In the medical field, you wouldn’t expect to show up to work without any training and know how to perform surgery, similarly the right whistleblower law firm will have the right tools and advise to counsel you about how to perform the qui tam operation to allow the greatest chance of success.

With success there is also a tremendous possible upside. With billions recovered last year alone, whistleblower awards could amount to up to 30% of the recovery, which means last year courageous individuals received hundreds of millions of dollars for doing the right thing.

If you know of Medicare Fraud, Medicaid Fraud or many other types of fraud,  the company already has a head start on covering it up, you need to speak with a whistleblower lawyer like former FBI Special Agent Jason T. Brown of Brown, LLC, who can educate you about your rights and help navigate the best path to success.

Making Millions in Malaysia, Must the Money be Metered?

Goldman Sachs was a leading wealth investor in Malaysia until just a few years ago before migrating out of the country, evidently with a lot of money, if you believe Malaysia. Investigations by the new finance minister of Malaysia now suggests that Goldman Sachs might have been involved in illicit activities while it was raking in money during its presence in the country, and the government is now demanding that Goldman Sachs pay up for the “scheme” that they were seemingly implementing.  With the globalization of financial whistleblower cases, issues that have a United States nexus may be able to be litigated either under an SEC Whistleblower framework, Customs fraud or sometimes under the False Claims Act (FCA) itself as classical qui tam lawsuits.

Malaysian Government Demands Reimbursement from Goldman Sachs

Earlier this year, Lim Guan Eng, the new finance minister of Malaysia, announced that the local government is now seeking reimbursement from Goldman Sachs after they were found to have possibly been conducting an illicit scheme within the country.

Recently, a governmental scandal has unfolded within the Malaysian region, after billions of dollars disappeared with no apparent evidence where the funds went. No, this wasn’t a cryptocurrency pump and dump scheme, it was believed by Malaysia to be tied in with Goldman Sachs.  The scandal caused the Malaysian government to suffer a significant loss and become larger in debt, which had a significantly adverse effect on the country’s local economy.

After researching the loss, the new finance minister of Malaysia, Lim Guan Eng, mentioned that they have been investigating the activities of financial powerhouse Goldman Sachs, who was a leading investor in the area. The investigation found evidence that the company might have been implementing illicit actions during their time in Malaysia, and some of these actions could potentially be linked to the current debt that the country finds themselves in. Several connections between the actions of Goldman Sachs and the recent scandal in the country has also been noted, according to Lim Guan Eng.   Allegations however, are merely allegations, and the more definitive allegations of what the conduct was have yet to emerge.

While no definite statements have been published yet, the government is seeking reimbursement from Goldman Sachs in order to recover from the economic damage sthat they had suffered through the actions that they believe were caused by Goldman Sachs.

Several parties have already been interviewed in order to gain more insight into the matter, but parties have thus far denied their knowledge of any illicit activities. The bank that was used by Goldman Sachs made several millions of dollars from the transactions performed by the company, but also advised several media publications that they had no knowledge of any particular illicit activity by the client.

Conclusion

Goldman Sachs made millions, if not billions, of dollars in Malaysia, and recent investigations have led to allegations against Goldman Sachs in which Malaysia is demanding compensation. Is this another example of corporate corruption or perhaps government mismanagement or both?  It’s too early to tell.  Perhaps this is an example of violations of the FCPA Foreign Corrupt Practice Act that could dovetail into an SEC whistleblower complaint or perhaps it’s something else.  Individuals with information about the events are encouraged to call a whistleblower law firm to share their information to see if it’s actionable.

Muscle Milk = Missing Milk & Muscle?

Muscle Milk is a well known product that came into prominence in the last decade touting its benefits, its taste and at times its leanness.  A nationwide class action lawsuit was certified in California alleging that Muscle Milk:

  1. The Muscle Milk Labeling and its various benefits cannot be independently verified.
  2. Representations regarding the extent of the content of the amino acid L-Glutamine may be exaggerations.
  3. Calling the product lean is an unfair or false comparator because it is not leaner compared to comparable products.

In the past Cytosport, the maker of Muscle Milk settled a class action for allegations regarding the fat content of its product for $5 million dollars.  Cytosport is now owned by Hormel Foods and is the defendant in the Muscle Milk litigation.

As a whistleblower law firm, we are always interested to hearing from those individuals that may have insider information regarding the labeling of this product.

Further, if you have consumed muscle milk in New Jersey, New York or anywhere else, we’re interested in hearing from you and whether you think you’ve been defrauded or received the benefit of the product.

The Court recently certified a class action based on the allegations.  Please note that certification of a class is not a finding of liability or guilt against the company, it just means from a legal technical perspective the moving papers satisfied the procedural requirements in Federal Rule of Civil Procedure 23.

If you have information regarding Muscle Milk or have used Muscle Milk please call our whistleblower lawyers or class action lawyers at (877) 561-0000.

Here is a copy of the Court’s opinion certifying the Muscle Milk Class Action:

CLASS ACTION

ORDER (1) GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION; AND (2) GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO EXCLUDE EXPERT TESTIMONY

  1. JAMES LORENZDistrict Judge.

Pending before the Court is Plaintiffs’ motion for class action certification. Defendant filed an opposition, and Plaintiffs replied. As part of opposition to Plaintiffs’ motion, Defendant filed a motion to exclude the testimony of Plaintiffs’ expert Elizabeth Howlett, Ph.D. Plaintiffs opposed the motion and Defendant replied.1 This matter is submitted on the briefs pursuant to Civil Local Rule 7.1.d.1. For the reasons which follow, Plaintiffs’ motion for class certification is granted in part. Defendant’s motion to exclude Dr. Howlett’s testimony is granted in part for purposes of class certification only.

  1. BACKGROUND

Plaintiffs are consumers who purchased Defendant’s protein shake and/or protein powder products. They allege that (1) the Nutrition Facts panel and packaging of some of Defendant’s ready-to-drink protein shake products overstated the amount of protein content; (2) the Ingredients section on the labels of their Muscle Milk protein powder products included amino acid L-glutamine, L-glutamine was also listed as an ingredient of the “Precision Protein Blend” elsewhere on the labels, and an L-glutamine molecule was shown on a chart of the amino acid profile for some of the products, implying that L-glutamine was included in its unbonded form, when none was included; and (3) prominently displaying on its Muscle Milk protein powder packaging that the product was “lean” or contained a special blend of “Lean Lipids,” when the products contained oils and were no leaner than other protein powders on the market which were not marketed as “lean.”

Plaintiffs contend that Defendant’s product labeling is false and misleading in violation of California, Florida and Michigan state consumer protection laws. After Defendant’s summary judgment motion was granted in part, the following claims remain: violation of California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq. (“FAL”); violation of California Consumer Legal Remedies Act, Cal. Civ. Code §§ 1750 (“CLRA”); violation of California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq. (“UCL”); violation of Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201 et seq. (“FDUTPA”); violation of Michigan Consumer Protection Act, Mich. Comp. Laws § 445.903(1)(c) (“MCPA”); and breach of express warranty under California Uniform Commercial Code — Sales, Cal. Com. Code § 2313. Plaintiffs seek, among other remedies, injunctive relief and restitution.

Plaintiffs move for class action certification under Federal Rule of Civil Procedure 23(b)(3). They seek to certify two nationwide classes, one for the purchasers of Defendant’s liquid shakes, and the other for protein powder purchasers defined as follows:

All persons in the United States who, within four (4) years of the filing of this Complaint, purchased Defendant’s Cytosport Whey Isolate Protein Drink; Monster Milk: Protein Power Shake; Genuine Muscle Milk: Protein Nutrition Shake; and Muscle Milk Pro Series 40: Mega Protein Shake. All persons in the United States who, within four (4) years of the filing of this Complaint, purchased Defendant’s Muscle Milk: Lean Muscle Protein Powder; Muscle Milk Light: Lean Muscle Protein Powder; Muscle Milk Naturals: Nature’s Ultimate Lean Muscle Protein; Muscle Milk Gainer; and High Protein Gainer Powder Drink Mix; Muscle Milk Pro Series 50: Lean Muscle Mega Protein Powder (14 oz. to 10 lbs. products); and the [sic] size Monster Milk: Lean Muscle Protein Supplement (2.06 and 4.13 lbs. products).

(Doc. no. 157 (notice of mot.) at 2.)2 Plaintiffs request that the nationwide classes be certified for UCL and FAL violations. (Id.)

Plaintiffs also move for certification of subclasses for California, Florida and Michigan residents under each state’s consumer protection statutes, as well as the Magnuson-Moss Warranty Act, 15 U.S.C. §§2301 et seq. (“MMWA”). (Doc. no. 157 at 2-4.) Like the nationwide classes, there are two subclasses for each state, one for the liquid shake purchasers and the other for protein powder purchasers. The respective lists of relevant products are the same as for the nationwide classes. (See id. at 3-4.)

  1. DISCUSSION

“The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (internal quotation marks and citation omitted). A party seeking class certification must be prepared to prove that it meets the requirements of Federal Rule of Civil Procedure 23(a) and the requirements of at least one of the categories under Rule 23(b). Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013).

The district court must conduct a rigorous analysis to determine whether these prerequisites of Rule 23 have been met. Gen. Tel. Co. v. Falcon, 457 U.S. 147, 161 (1982). The moving party “must . . . satisfy through evidentiary proof” Rule 23 requirements. Comcast, 569 U.S. at 33. Accordingly, “the class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action,” Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 (1978) (internal quotation marks and citation omitted), and it “may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,” Falcon, 457 U.S. at 160, which may “entail some overlap with the merits of the plaintiff’s underlying claim,” Dukes, 564 U.S. at 351. If a court is not fully satisfied that the requirements of Rules 23(a) and (b) are met, certification should be denied. Id. at 161. However, “Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage. Merits questions may be considered to the extent—but only to the extent— that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” Amgen Inc. v. Conn. Ret. Plans and Trust Funds, 568 U.S. 455, 466 (2013).

  1. Rule 23(a) Requirements

“Rule 23(a) ensures that the named plaintiff is an appropriate representative of the class whose claims he or she wishes to litigate. The Rule’s four requirements — numerosity, commonality, typicality, and adequate representation — effectively limit the class claims to those fairly encompassed by the named plaintiff’s claims.” Dukes, 564 U.S. at 349 (internal quotation marks and citations omitted). “A party seeking class certification must affirmatively demonstrate his compliance with the Rule — that is, she or he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Id. at 350 (emphasis in original).

  1. Numerosity

Rule 23(a)(1) requires the class to be “so numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1); Staton v. Boeing Co., 327 F.3d 938, 953 (9th Cir. 2003). The plaintiff need not state the exact number of potential class members; nor is a specific minimum number required. Arnold v. United Artists Theatre Circuit, Inc., 158 F.R.D. 439, 448 (N.D. Cal. 1994). Rather, whether joinder is impracticable depends on the facts and circumstances of each case. ld. Plaintiff has shown that several million of Defendant’s products were sold in California alone during the relevant time. Defendant does not dispute that this is sufficient to meet the numerosity requirement, and the Court finds that this requirement is met.

Defendant claims, however, that the putative class members are not “ascertainable.” It makes four arguments. First, Defendant argues that Plaintiffs’ proposed “class definitions embrace many consumers who do not have valid claims” in that some putative members have no standing because they suffered no injury, and would therefore have to be individually screened out of the class. (Doc. no. 170-1 (opp’n) at 56.) To the extent the argument is directed at the class definition, it was rejected in Briseno v. ConAgra Foods, Inc., 844 F.3d 1121 (9th Cir. 2017). At class certification stage, it is sufficient that the class be defined by an objective criterion, i.e., whether the class members purchased the relevant products. See id. at 1124 (affirming decision to the same effect). This is met here, because Plaintiffs list the relevant products in the definition of each proposed class.

To the extent the argument is directed to standing specifically, it is also rejected. “In a class action, standing is satisfied if at least one named plaintiff meets the requirements.” Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007). Defendant attacked each class representative’s standing in its summary judgment motion. The Court concluded that all class representatives had standing at least as to some of their claims. (Doc. no. 209 (order) at 4-8.)

To the extent Defendant suggests that the class definition is overbroad because it may potentially contain some members who were not injured, the issue is better addressed in terms of the predominance requirement under Rule 23(b)(3). Briseno, 844 F.3d at 1125 n.4 (citing Torres v. Mercer Canyon, Inc., 835 F.3d 1125, 1136-39 (9th Cir. 2016)). Moreover, as a practical matter, overinclusiveness in class actions involving low-cost consumer goods presents a low risk of fraudulent or mistaken claims, “perhaps to the point of being negligible” because they generate “consistently low participation rates,” which makes it “very unlikely that non-deserving claimants would diminish the recovery of participating, bona fide class members.” Id. at 1130 (internal quotation marks, citation and footnote omitted).

Second, Defendant contends that “Plaintiffs’ class definitions are unworkable because the members cannot be reliably identified,” as “[m]ost customers do not remember the specific types of products they bought or when they purchased them.” (Doc. no. 170-1 at 57.) Defendant concedes that this argument was rejected in Briseno (id. at 58 n.51), which held that Rule 23 does not require the class representative to prove an “administratively feasible” way to identify each putative class member. 844 F.3d at 1128-29. “[N]either Rule 23 nor the Due Process Clause requires actual notice to each individual class member,” but allow for “notice by publication . . ., or even at an appropriate physical location,” id. at 1128-29, to the members who cannot “be identified through reasonable effort,” Fed. R. Civ. Proc. 23(c)(2)(B) (emphasis added).

Third, Defendant maintains that the class settlement in Delacruz v. CytoSport, U.S. Distr. Ct. N.D. Cal. case no. 11cv3532, “released any claims based on the protein present in Muscle Milk shakes sold between July 18, 2007 and December 31, 2012.” (Doc. no. 170-1 at 57.) The settlement agreement and the order granting final approval of settlement each include a broad release clause, which apparently intended to preclude claims such as the claims asserted in this action. (See Delacruz, doc. no. 67-1 (first am. settlement agreement) at 6-7 & 16-17; doc. no. 91 (order) at 13-15.) However, a class action settlement’s “bare assertion that a party will not be liable for a broad swath of potential claims does not necessarily make it so.” Hesse v. Spring Corp., 598 F.3d 581, 590 (9th Cir. 2010).

A settlement agreement may preclude a party from bringing a related claim in the future even though the claim was not presented and might not have been presentable in the class action, but only where the released claim is based on the identical factual predicate as that underlying the claims in the settled class action.

Id. (internal quotation marks and citations omitted). The claims asserted in this action are not based on the “identical factual predicate” as Delacruz. Delacruz was not directed at any representations made with respect to Defendant’s protein powders, and to the extent it was directed at the liquid shakes, it did not attack representations regarding the quantity of protein. (See Delacruz, doc. no. 185-14 (second am. compl.); doc. no. 67-1 at 2, 11-12; doc. no. 91 at 4, 7-8.) Accordingly, Delacruz does not limit the scope of the class proposed in this action.

Fourth, Defendant argues that the label for Monster Milk: Lean Muscle Protein Supplement, a protein powder, was changed during the proposed class period to exclude the reference to “Lean Lipids.” Defendant argues that individuals who purchased this product after the label change “cannot be included in any class.” (Doc. no. 170-1 at 57.) Although Defendant is correct that the reference to “Lean Lipids” was removed, other allegedly misleading references to “lean” remained. (Doc. no. 157-22 (Kashima Decl. App’x A); cf id. at 2-15 (referencing “Lean Lipids”) & id. at 16-17 (no longer referencing “Lean Lipids,” but including the claims “new leaner formula,” “lean protein,” and “lean muscle protein supplement”).) Accordingly, the removal of “Lean Lipids” from some of the labels has no effect on class certification in this action.

  1. Commonality Under Rule 23(a) and Predominance Under Rule 23(b)(3)

The second element of Rule 23(a) requires the existence of “questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). To meet this requirement, the putative class members’ claims must depend on a common contention, which must be of such nature that it is capable of class-wide resolution. Decision on the contention must resolve an issue that is central to the validity of each one of the claims in one stroke. [¶] What matters to class certification is not the raising of common questions . . . but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.

Dukes, 564 U.S. at 350 (internal quotation marks and citation omitted).

Similarly, the predominance inquiry under Rule 23(b)(3) “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” Amchem Prods, Inc. v. Windsor, 521 U.S. 591, 623 (1997). Unlike Rule 23(a)(2), which is met when there is “even a single common question,” Dukes, 564 U.S. at 359 (quotation marks and brackets omitted), Rule 23(b)(3) requires that “common questions predominate over any questions affecting only individual class members.” Amgen, 568 U.S. at 469 (internal quotation marks and citation omitted, emphasis in original).

Because “Rule 23(a)(2)’s `commonality’ requirement is subsumed under, or superseded by, the more stringent Rule 23(b)(3) requirement that questions common to the class `predominate over’ other questions[,]” Amchem, 521 U.S. at 609, see also id. at 623, the Court considers these requirements — commonality and predominance — together. The predominance inquiry begins “with the elements of the underlying cause of action.” Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011).

Defendant argues that certification should be denied because the alleged claims are “idiosyncratic individual claims.” (Doc. no. 170-1 at 37.) With respect to the protein powder products, “no one cared about” the L-glutamine and “lean” representations, and each consumer purchased the products for his or her own individual reasons. (Id.) With respect to the protein shake products, according to Defendant, Plaintiffs cannot prove a “common shortfall” for the protein content statement, because any such shortfall differs among the various protein shake formulations. For all products Defendant attacks Plaintiffs’ proposed method of calculating damages on a class-wide basis. (Id. at 50.) Finally, Defendant argues that a nationwide class cannot be certified because of individual choice of law questions. (Id. at 35-37.) These arguments are addressed below.

  1. Warranty Claims

Plaintiff seeks certification of the MMWA claim for the California, Florida and Michigan subclasses. (Doc. no. 157 at 2-3.) This claim was dismissed in the order granting in part Defendant’s summary judgment motion. (Doc. no. 209 at 10-12.) Accordingly, the request to certify the MMWA claim is denied as moot.

Plaintiffs’ intent with respect to the state law claims for breach of express warranty is unclear. In the notice of motion, Plaintiffs state that if their MMWA claim is not certified, they seek to certify the state law warranty claims. (Doc. no. 157 at 3 n.2.) However, Plaintiffs do not brief certification of these state law claims, although they refer to them in two footnotes. (Doc. no. 157-1 at 32-33 n. 14 & 15.) They also state that they “only move for certification of their MMWA claims at this time.” (Id. at 34 n.16.) Their intent regarding certification of the state law breach of express warranty claims is therefore unclear.

To the extent Plaintiffs may have intended to certify these claims, the issue is moot as to the Florida and Michigan claims, which were dismissed at summary judgment. (See doc. no. 209 at 8-10.) As to the California claim, Plaintiffs do not meet their burden.

Defendant argues that Plaintiffs cannot meet the predominance requirement because breach of express warranty requires individual proof of reliance and causation. On summary judgment, the Court determined that California law does not require proof of reliance. (Doc. no. 209 at 10 (citing Jud. Council of Cal. Civ. Jury Instr. (“CACI”) no. 1230 cmt (2017) (quoting Hauter v. Zogarts, 14 Cal.3d 104, 115 (1975)); Cal. Comm. Code § 2313(1) & Cal. Code Cmt. 2).) However, it requires proof of causation. CACI no. 1230 ¶6 (“That the failure of the [product] to be as represented was a substantial factor in causing [plainitff]’s harm.”). Plaintiffs do not address causation for this cause of action. (Seedocs. no. 157-1, 185.) Accordingly, to the extent Plaintiffs request that the California subclass include a claim for breach of express warranty, their motion is denied for failure to properly support it.

  1. California Consumer Protection Claims
  2. Elements

Plaintiffs allege false or misleading statements on Defendant’s product labels in violation of the UCL,3 FAL4 and CLRA, Cal. Civ. Code § 1770(a)(5).5

The standard for determining whether a defendant misrepresented the characteristics, uses or benefits of goods and services under Civil Code section 1770, subdivision (a)(5) is the same as that for determining whether there was false advertising under the UCL and false advertising law.

Chapman v. Skype, Inc., 220 Cal.App.4th 217, 230 (2013); see also Williams v. Gerber Prods Co., 553 F.3d 934, 938 (9th Cir. 2008) (am. Dec. 22, 2008). In this regard, “it is necessary only to show that members of the public are likely to be deceived.” Tobacco II Cases, 46 Cal.4th 298, 312 (2009) (internal quotation marks, brackets, ellipsis and citation omitted). The “focus is on the defendant’s conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.” Id. at 312; see also id. at 324. Accordingly, no individualized proof is required to show deceptiveness.

In class actions alleging UCL and FAL violations, once a class representative establishes statutory standing,6 injunctive relief and restitution are “available without individualized proof of deception, reliance and injury.” Tobacco II Cases, 46 Cal.4th at 319-20.

The CLRA claim requires the additional “showing of actual injury as to each class member.” Steroid Hormone Prod. Cases, 181 Cal.App.4th 145, 155 (2010); see also id. at 156 (discussing Cal. Civ. Code § 1780(a) (“Any consumer who suffers any damage as a result of the use . . . of a . . . practice declared to be unlawful by Section 1770 may bring an action. . . .”)). However, injury, as well as reliance and causation, can be proved “by showing that the alleged misleading statement was material, even if [Defendant] might be able to show that some class members would have bought the products even if they had known [the representation was false].” Steroid Prod. Cases, 181 Cal. App. 4th at 156-57. “Materiality of the alleged misrepresentation generally is judged by a `reasonable man’ standard. In other words, a misrepresentation is deemed material if a reasonable man would attach importance to its existence in determining his choice of action in the transaction in question. . . .” Id. at 157 (internal quotation marks, brackets and citation omitted).

  1. Class Member Reliance and Causation — L-glutamine and “Lean” Statements on Protein Powder Labels;Daubert Motion

Defendant argues certification should be denied because Plaintiffs presented no proof that the L-glutamine and “lean” statements were deceptive. (Doc. no. 170-1 at 42, 45.) As discussed above, for all three California consumer protection claims, the issue is decided on a class-wide basis, regardless of each individual consumer’s understanding. See Tobacco II Cases, 46 Cal.4th at 312 (“it is necessary only to show that members of the public are likely to be deceived”); see also Chapman, 220 Cal. App. 4th at 230 (same standard applies to UCL, FAL and CLRA claims); Williams, 553 F.3d at 938 (same). Moreover, it is not necessary to prove actual falsity, it is sufficient to prove that the representation, “although true, is either actually misleading or . . . has a capacity, likelihood or tendency to deceive or confuse the public.” Chapman, 220 Cal. App. 4th at 226 (internal quotation marks and citations omitted); see also Tobacco II Cases, 46 Cal.4th at 312. Whether Plaintiffs are successful in proving deceptiveness or not, the outcome of this issue affects the claims on a class-wide basis. The merits of this issue therefore do not preclude class certification. Accordingly, it is neither necessary nor appropriate for the Court to decide it at this stage. See Amgen, 568 U.S at 466.

Defendant next maintains that individual “proof of causation and thereby reliance” is required. (Doc. no. 170-1 at 39.) The argument is based on the premise that to avoid individual proof of causation, Plaintiffs must show that the “lean” and L-glutamine representations were material to the class members. This is not required for the UCL and FAL claims, but is required for the CLRA claim. See Steroid Prod. Cases, 181 Cal. App. 4th at 156-57.

In support of their contention that the L-glutamine and “lean” representations are material, Plaintiffs primarily rely on their marketing expert Elizabeth Howlett, Ph.D. (Doc. no. 157-8 (“Howlett Report”) at 8.) Defendant moves to exclude Dr. Howlett’s opinions as inadmissible under Rule 702 of the Federal Rules of Evidence. (Doc. no. 170-1 at 59.) For the reasons stated below, Defendant’s Daubertmotion is granted in part.

The party offering evidence bears the burden of showing that the evidence is admissible. See Bourjaily v. United States, 483 U.S. 171, 175-76 (1987). Accordingly, Plaintiffs bear the burden of showing that Dr. Howlett’s materiality opinions are admissible. To be admissible, among other things, expert opinion must be based on sufficient facts or data. Fed. R. Evid. 702(b).

Dr. Howlett based her opinion on two factors — role of L-glutamine in muscle recovery and immune system function, and Defendant’s own marketing research. (Howlett Report at 8; see Videotaped Deposition of Dr. Elizabeth Howlett (“Howlett Depo.”) at 30-35; see also id.at 21.)7 Dr. Howlett did not cite any references for her opinions regarding the function of L-glutamine in the body, but relied on “common knowledge.” (Howlett Depo. at 31-34; see also Howlett Report at 8.) However, she admitted that the effect of L-glutamine on the body was “out of [her] area of expertise.” (Howlett Depo. at 37.) She also admitted that Defendant’s marketing research materials referenced in her report were not referencing L-glutamine, but were more generally addressing protein content. (Id. at 32-35.)

Plaintiffs point to Dr. Howlett’s deposition testimony that the primary source of the information she reviewed for her report was Defendant’s own marketing research. (Doc. no. 185 at 26 (citing Howlett Depo. at 21).) The problem with this argument is that Dr. Howlett’s report cites to only a few pages out of those documents (Howlett Report at 8), which do not address L-glutamine. (Howlett Depo. at 32-35). Based on the foregoing, Dr. Howlett’s opinion that L-glutamine representations were material to the consumers is unsupported by sufficient facts or data. Defendant’s motion to exclude this opinion is granted for purposes of the pending motion for class certification.

In addition to moving to exclude Dr. Howlett’s opinions, Defendant offered the opinion of its marketing expert Ravi Dhar to argue that the L-glutamine representations were not material. (Doc. no. 170-1 at 43 (citing doc. no. 170-7 (“Dhar Report”).) Dr. Dhar opined, based on a consumer survey he conducted, that “the overwhelming majority of the respondents do not even mention L-glutamine as a reason for buying the products.” (Dhar Report at 10; see also id. at 10-13.)

Plaintiffs do not address Dr. Dhar’s opinion. Instead, they offer evidence of their own independently of Dr. Howlett’s opinion. They rely on, among other things, the deposition testimony of Adam Schrententhaler, Defendant’s Director of Product Development (Transcript of the Testimony of Adam Schrententhaler (“Schrententhaler Depo.”)),8 and Defendant’s own marketing research (doc. no. 170-38 through 40 (Kashima Decl. Exs. M-O)). (See doc. no. 185 at 19-20, 37.)

Adam Schrententhaler and his team formulated all Defendant’s products, “created all the label content, [and] produced claim substantiation.” (Schrententhaler Depo. at 13.) He testified it was Defendant’s understanding that L-glutamine played a role for athletes in muscle maintenance or building. (Id. at 124.) Defendant’s marketing research shows that muscle maintenance and building were important to consumers who purchased protein supplements. (See, e.g., Ex. N at 034911; Ex. O at 034303.)9 L-glutamine content was specified, and its function for athletes was highlighted, on some of Defendant’s protein powder labels. (Kashima Decl. Ex. K at 29-36 (“5g L-glutamine to enhance muscle tissue recovery/repair”).) This evidence tends to show, independent of Dr. Howlett’s opinions, that L-glutamine representations were material.

Plaintiffs contend that their evidence is sufficient to prevail on the predominance issue with respect to the L-glutamine representations. (Doc. no. 185 at 20.) They argue that materiality is a merits issue that should not be decided at the class certification stage. (Id. at 18.) According to Plaintiffs, the relevant inquiry is whether materiality can be proven on a class-wide basis and not whether the alleged misrepresentations were in fact material. (Id. at 20.) Citing Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1026 (9th Cir. 2008), Plaintiffs allow that “to the extent [they] must show some prima facie showing of materiality at class certification, `[s]urveys and expert testimony regarding consumer assumptions and expectations may be offered but are not required; anecdotal evidence may suffice.'” (Doc. no. 185 at 19 (emphasis in original) (quoting Clemens, 534 F.3d at 1026).)

Clemens did not address class certification. It held that to prevail on the issue of materiality at summary judgment, evidence of consumer assumptions and expectations may be sufficient to raise a genuine issue of fact. 534 F.3d at 1026.10 Unlike summary judgment, prevailing on a motion for class certification requires the court to resolve any factual disputes necessary to determine whether class certification requirements are met. Ellis v. Costco Wholesale Corp., 657 F.3d 970, 983 (9th Cir. 2011). In Ellis, the district court decision was vacated because the court did not resolve the factual dispute, presented through conflicting expert opinions, whether there was a nationwide common pattern and practice of alleged employment discrimination that could affect the class as a whole. This was required before the court could decide whether there was commonality of issues of fact or law for purposes of class certification. Id. at 98-84. Ellis expressly rejected the reasoning, relied upon by Plaintiffs here, that because both sides presented admissible evidence, a finding of commonality was appropriate. Id. at 984.

Materiality of the alleged misrepresentations is central to finding commonality and predominance, and therefore to class certification of the CLRA claim. If the alleged misrepresentations are material, individualized proof of reliance and causation is not required, and can be presumed on a class-wide basis. Steroid Prod. Cases, 181 Cal. App. 4th at 156-57. If they are not material, the claim does not necessarily fail, but individual proof of reliance and causation will be required for each would-be class member, thus precluding class certification.

Both parties presented admissible evidence tending to show that the L-glutamine representations were or were not material. Ellis requires the Court to resolve the factual dispute. Plaintiffs bear the burden to show that all requirements for class certification are met. This includes a showing of materiality. See Comcast, 569 U.S. at 33.

Plaintiffs do not address Dr. Dhar’s opinion, but merely dismiss it as “some conflicting evidence” and argue that “Defendant’s self-serving, post-dispute expert reports do not foreclose certification of the proposed Class.” (Doc. no. 185 at 20.) Given admissible evidence on both sides of the materiality issue, which appears to be evenly balanced, Plaintiffs’ arguments are insufficient to carry their burden of showing that the L-glutamine representations were material.

The parties also dispute whether Defendant’s “lean” representations on the protein powder labels were material. Plaintiffs rely on Dr. Howlett’s opinion that “fat level of Lean Muscle Milk Products is material.” (Howlett Report at 8; see also Howlett Depo. at 37, 42-43.) In this regard, Dr. Howlett’s opinion was focused on the “Lean Lipids” representation on the product labels. (Howlett Depo. at 42-43, 79.) She based her materiality opinion on Defendant’s marketing research which stated that weight loss management was important to consumers. (Howlett Report at 8 (citing Ex. O at 34303); Howlett Depo. at 38, 42-43.)

Defendant criticizes this basis because the document considered by Dr. Howlett does not reference “Lean Lipids” and addresses a whole category of protein products on the market, not only Muscle Milk products. (Doc. no. 170-1 at 46.) This argument is rejected. Defendant’s research concluded that weight loss management was important to consumers. (See, e.g., Ex. O at 34303.) It is therefore not a stretch to opine that consumers find fat content representations material. It is undisputed that “Lean Lipids” refers to the fat in Defendant’s product. Defendant’s motion to exclude Dr. Howlett’s materiality opinion regarding “Lean Lipids” representation is denied.

In addition to attacking the admissibility of Dr. Howlett’s opinion, Defendant relies on Dr. Dhar’s report. (Doc. no. 170-1 at 46.) Based on a consumer survey, Dr. Dhar opined that the “lean” statements on the labels did not have an impact on the purchase decision. (Dhar Report at 15-17.)

In response, in addition to Dr. Howlett’s report, Plaintiffs point to Defendant’s marketing research showing that a significant portions of consumers purchase protein powder for weight loss and weight management. (See, e.g., Ex. M. at 34847-48; Ex. N. at 34911.) They do not address Dr. Dhar’s report, however, other than to dismiss it in a summary fashion outlined in the context of L-glutamine representations above. As noted, where both sides have come forward with admissible evidence of materiality, which appears to be evenly balanced, this is insufficient for Plaintiffs to meet their burden of showing, for purposes of class certification, that the “lean” representations were material.

For the foregoing reasons, Defendant’s motion to exclude Dr. Howlett’s opinion is granted insofar as she opined that the L-glutamine representations were material. This opinion is excluded for purposes of the pending class certification motion only. Defendant’s Daubertmotion is denied in all other respects. Plaintiffs failed to meet their burden, with respect to the CLRA claim only, that the L-glutamine and “lean” representations were material, and that causation can be proved on a class-wide basis. This precludes certification of the CLRA claim to the extent it is based on L-glutamine and “lean” statements on protein powder labels.

iii. Class Member Injury — Protein Content Statements on Protein Shake Labels

With respect to the protein shakes, Defendant argues that Plaintiffs cannot meet the predominance requirement because they “failed to offer any common evidence of injury,” and because the parties would have to test each batch and bottle of the many formulations of protein shakes. (Doc. no. 170-1 at 49.) Individual proof of injury is not required for the class members to prevail on the UCL and FAL claims; however, it is required for the CLRA claim. Steroid Prod. Cases, 181 Cal. App. 4th at 155.

Defendant also argues that Plaintiffs used invalid methodology to test the protein content of the shakes. (Doc. no. 170-1 at 48-49.) Alternatively, it argues that protein content was not uniformly overstated, because in some instances it was accurately stated and in others it was actually greater than stated. (Id. at 49.) These arguments go to the issue whether Plaintiffs can prove deceptiveness of the protein content statement. As previously discussed, regardless of Plaintiffs’ success or failure on this issue, the result applies to the class as a whole.11 See Tobacco II Cases, 46 Cal.4th at 312 (“members of the public are likely to be deceived”); see also Chapman, 220 Cal. App. 4th at 226 (not necessary to prove actual falsity). As the issue does not preclude class certification, it need not, and should not, be decided at this stage. See Amgen, 568 U.S at 466.

Defendant next contends that the claim should not be certified because Defendant offered many varieties of the protein shakes during the class period, and each variety had its own stated protein content and alleged shortfall. (Doc. no. 170-1 at 47-49.) Defendant maintains that this shows there is no “common shortfall” for all protein shake varieties. (Id. at 48.) Accepting at face value the contention that the discrepancy varies among the various shake formulations, and considering that the standard is whether “members of the public are likely to be deceived,” Tobacco II Cases, 46 Cal.4th at 312, it is not fatal to class certification if the shortfall is not the same for each variety.

Although different products may have to be tested for protein content, Defendant’s argument that each batch and bottle of each variety of the shake will have to be tested to determine whether the class members were injured (doc. no. 170-1 at 49) is rejected. The parties stipulated for purposes of class certification that the amount of protein did not vary materially between different batches of the same product during the class period. (Doc. no. 104 at 1.) Further, Elizabeth Kimball, Defendant’s nutritional scientist and compliance manager (Deposition of Elizabeth Willard Kimball, Ph.D. (“Kimball Depo.”) at 45-46),12 admitted that there were no variations with respect to the base product formula between various flavors of the same product. (See Kimball Depo. at 45-46, 48-52.)

As Defendant itself suggests, a proper sampling method is sufficient to determine whether the actual protein content varies from the statements on the labels. (See doc. no. 170-1 at 49 n.38.) There is no dispute whether the alleged shortfall can be proved or disproved by sampling, but only as to the validity of the chosen sampling method. Methodology is relevant to the sufficiency, and potentially admissibility, of the evidence to prove deceptiveness, and need not be resolved for purposes of class certification. Defendant’s argument that certification should be denied because Plaintiffs would have to make an individualized showing of protein content is rejected.

  1. Calculation of Damages

Defendant next contends that class certification should be denied based on Comcast v. Behrend, 569 U.S. 27 (2013), which held that “the plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability.” Leyva v. Medline Indus. Inc., 716 F.3d 510, 514 (9th Cir. 2013)(citing Comcast, 569 U.S. at 37-38). In Comcast the plaintiffs advanced four theories of antitrust liability, only one of which was approved for class treatment. Comcast, 569 U.S. at 35. The plaintiffs’ proposed damage calculation would include damages caused by all four theories of liability combined. Id. at 36. The holding of Comcast is based on the “unremarkable premise” that if the plaintiffs prevailed, they would be entitled only to damages resulting from one theory of liability. Id. at 35. The Court concluded,

It follows that a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible to measurement across the entire class for purposes of Rule 23(b)(3).

Id.

Plaintiffs seek restitution. (Doc. no. 157-1 at 28.) “The difference between what the plaintiff paid and the value of what the plaintiff received is a proper measure of restitution.” In re Vioxx Class Cases, 180 Cal.App.4th 116, 131 (2009). Plaintiffs propose two alternative models of calculating damages stemming specifically from Defendant’s protein, L-glutamine and “lean” representations. To the extent these models attribute damages to each alleged misrepresentation separately, they comply with Comcast.

Defendant also argues that class certification should be denied because neither of the proposed damages models has been performed. Defendant cites no binding authority holding that class certification should be denied unless the experts have already calculated damages,13 especially when, as here, the parties bifurcated class certification and merits discovery. (Doc. no. 170-4 (Kaplan Decl. Ex. H (Joint Rule 26(f) Report and Discovery Plan)) at 78.) Plaintiffs filed expert declarations explaining their proposed models.

Plaintiffs propose conjoint analysis to calculate class-wide damages attributable to protein content statements on the protein shake labels, and L-glutamine and “lean” statements on the protein powder labels.14 Conjoint analysis is a quantitative consumer preference analysis used to measure the relative value of various product attributes. (Doc. no. 157-8 (“Howlett Report”) at 9.) It has been used in marketing research since the 1970s. (Id. at 10.) Dr. Howlett opined that it is possible “to use the conjoint analysis to quantify the Price Premium associated with the allegedly false `Protein, L-Glutamine, and Lean Claims’ on a class-wide basis.” (Id. at 6.)

Dr. Howlett proposes to use the choice-based variant of the conjoint analysis. (Id. at 11.) In a choice-based conjoint analysis, the study respondents are presented with a product that has multiple options for each studied attribute, such as a specific number of car color options and whether the car has a sunroof. (Id. at 9.) The choices presented to the respondents have all combinations of the studied attributes. By analyzing the respondents’ choices, it is possible to quantify the relative impact of each attribute on product preference, i.e.,the value of each attribute. (Id.) With statistical analysis, it is possible to derive the distribution of preferences across all respondents. (Id.at 11.) If one of the studied attributes is price or premium over average market price, the analysis can determine the dollar value of each attribute or the percentage of the average market price associated with each attribute. (Id. at 9, 12.)

For the pending case, Dr. Howlett proposes to use a national online survey directed to a sample of consumers who purchased one or more of relevant protein shake or powder products. (Id. at 12.) Defendant’s shake products are to be used to study the importance of the protein amount, and the protein powder products to study L-glutamine and “lean” representations. (Id. at 13.) The study would ensure that the product attributes of the highest importance to the sampled consumers are included. (Id.) The responses will be statistically analyzed to determine the value of each of the three attributes, for example an additional gram of protein, presence or absence of L-glutamine and presence or absence of “Lean Lipids” statements. (Id. at 14-15.) The value of each additional increment of protein or presence of L-glutamine or “Lean Lipids” will be separately multiplied by total product purchases to arrive at class-wide damages. (Id. at 16.)

Defendant criticizes Dr. Howlett’s proposed study by arguing that she “assumes the ultimate conclusion that consumers cared about and paid a price premium for the L-glutamine or Lean Lipids statements,” because she intends to include them in the conjoint analysis. (Doc. no. 170-1 at 55.) These attributes must be included, because they are the attributes studied by her analysis. Dr. Howlett testified that if consumers are indifferent to these attributes, the result of the analysis would show it. (See Howlett Depo. at 51-53.) Defendant’s argument omits the pertinent part of Dr. Howlett’s testimony. (See doc. no. 170-1 at 55 (citing Howlett Depo. at 51:24-52:14).)

Defendant further contends Dr. Howlett “does not know if she could obtain pricing data she needs.” (Doc. no. 170-1 at 56.) Defendant misconstrues Dr. Howlett’s deposition testimony about pricing data. (See doc. no. 170-1 at 56 (citing Harris Depo. at 57-58).) She testified she would use data from market research firms such as Information Resources, Inc. and Nielsen, which “almost certainly” is available. (Howlett Depo. at 57-58.) Nowhere in the cited deposition testimony did Dr. Howlett indicate she could not obtain the pricing data. Furthermore, Defendants produced their sales data for each product relevant to this action by state and date. (Doc. no. 157-1 at 41 n.25.)

Finally, Defendant argues that Dr. Howlett’s analysis does not meet the Comcast requirement that damages be tied only to the liability theory at issue for class treatment. Plaintiffs’ L-glutamine claim is based on the contention that the protein powder products did not contain any appreciable amount of unbonded L-glutamine, as opposed to bonded L-glutamine. Defendant contends Dr. Howlett does not explain how she will determine the value of the unbonded, as opposed to bonded, L-glutamine. (Doc. no. 170-1 at 55.) Plaintiffs’ do not address this argument. (See doc. no. 185 at 26, 29-31.) Because damages must be based on the specific theory of liability, certification is denied as to the consumer protection claims based on L-glutamine statements.

As an alternative method of calculating damages attributable to protein content statements on protein shake products, Plaintiffs propose hedonic regression analysis to be conducted by Jeffrey E. Harris, M.D., Ph.D. (See doc. no. 157-7 (“Harris Report”) at 6.) Because Dr. Howlett’s proposed conjoint analysis of the same statements is sufficient to meet Plaintiffs’ burden to show that damages can be calculated on a class-wide basis, the Court need not address Defendant’s criticisms of the alternative method.

For the foregoing reasons, Plaintiffs met the commonality and predominance requirements for (1) the UCL, FAL and CLRA claims to the extent they are based on statements of protein content on protein shake labels; and (2) UCL and FAL claims to the extent they are based on “lean” statements on protein powder labels.

  1. Florida Consumer Protection Claims

Plaintiffs allege that the false or misleading statements on Defendant’s product labels also violated the FDUTPA, Fla. Stat. §§ 501.201 et seq. To prevail on this claim, a plaintiff must show that that “the alleged practice was likely to deceive a consumer acting reasonably in the same circumstances.” Fla. Offc. of Atty Gen. v. Commerce Comm. Leasing, LLC, 946 So.2d 1253, 1258 (Fla. D. Ct. App. 2007) (internal quotation marks and citation omitted.) The plaintiff “need not show actual reliance on the representation or omission at issue.” Id.(citation omitted). Defendant does not disagree. (See doc. no. 170-1 at 24.) This standard is the same as for the UCL and FAL claims. The measure of damages under the FDUTPA is the difference in the market value of the product as sold and the product as promised. Ft. Lauderdale Lincoln Mercury, Inc. v. Corgnati, 715 So.2d 311, 313-14 (Fla. D. Ct. App. 1998). It is the same measure as restitution under the UCL and FAL. Accordingly, for the reasons stated in the context of California consumer protection claims, Plaintiffs meet the commonality and predominance requirements for a FDUTPA violation based on the protein content statements on protein shakes and “lean” statements on protein powders.

  1. Michigan Consumer Protection Claims

Plaintiffs allege that Defendant also violated the MCPA, Mich. Comp. Laws § 445.903(1)(c). The statute prohibits “[u]nfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce” defined in pertinent part as “representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have.” Id. This provision is identical to the CLRA, Cal. Civ. Code § 1770(a)(5). As with California consumer protection claims,

members of a class proceeding under the [MCPA] need not individually prove reliance on the alleged misrepresentations. It is sufficient if the class can establish that a reasonable person would have relied on the representations.

Dix v. Am. Bankers Life Assur. Co., 415 N.W.2d 206, 209 (Mich. Supr. Ct. 1987) (footnote omitted). Plaintiffs concede that the analysis under the MCPA should be the same as under the CLRA. (Doc. no. 157-1 at 31 n.12.) The measure of damages under the MCPA is the same as restitution under California consumer protection statutes — difference in value between the product as promised and product as sold. See Mayhall v. A.H. Pond Co., Inc., 341 N.W.2d 268, 271-72 (Mich. Ct. App. 1983). Accordingly, for the reasons stated in the context of California consumer protection claims, Plaintiffs meet the commonality and predominance requirements for a Michigan subclass asserting an MCPA violation based on the protein content statements on protein shakes.

  1. Nationwide Class for FAL and UCL Violations

Finally, Plaintiffs seek certification of a nationwide class for the FAL and UCL claims. Defendant argues that a nationwide class cannot be certified because California law does not apply to out-of-state putative class members, and that each class member’s own state law should apply, thus precluding a finding that common issues predominate for a nationwide class.

California state law applies to the conflict-of-law issue presented by Plaintiffs’ motion to certify a nationwide class. See Mazza v. Am. Honda Motor Co., 666 F.3d 581, 589 (9th Cir. 2012).

California law[, rather than the law of a foreign state,] may be used on a classwide basis so long as its application is not [unconstitutionally] arbitrary or unfair with respect to nonresident class members, and so long as the interests of other states are not found to outweigh California’s interest in having its law applied.

Wash. Mut. Bank v. Super. Ct., 24 Cal.4th 906, 921 (2001) (citations omitted).

“Under California’s choice of law rules, the class action proponent bears the initial burden to show that California has `significant contact or significant aggregation of contacts’ to the claims of each class member.” Mazza, 666 F.3d at 589 (quoting Wash. Mut. Bank, 24 Cal.4th at 921). “Such a showing is necessary to ensure that application of California law is constitutional.” Id. at 589-90 (citing Allstate Ins. Co. v. Hague, 449 U.S. 302, 310-11 (1981)).

It is undisputed that Defendant is incorporated and headquartered in California, its principal place of business is in California, the final decisions regarding representations made on product labels were made in California, and many of the products were produced in California. (Cf. doc. no. 157-1 (mot.) at 41-42 (citing Kashima Decl. Ex. A (excerpts from depo. of Adam Schrententhaler)) with doc. no. 170-1 (opp’n) at 35-37.) This constitutes sufficient contacts between the claims of out-of-state putative class members and the state of California to meet the constitutional requirement. See, e.g., Mazza, 666 F.3d at 590 (corporate headquarters, advertising agency and large part of the putative class in California).

When the class action proponent makes a showing of the requisite contacts, [g]enerally speaking[,] the forum will apply its own rule of decision unless a party litigant timely invokes the law of a foreign state. In such event that party must demonstrate that the latter rule of decision will further the interest of the foreign state and therefore that it is an appropriate one for the forum to apply to the case before it.

Wash. Mut. Bank, 24 Cal.4th at 919 (internal quotation marks, brackets and citations omitted). Defendant contends that the UCL and FAL should not apply to the out-of-state class members, and that their respective state laws should apply instead. (See doc. no. 170-1 at 35-37.) Defendant bears the burden to show that the “governmental interest approach,” i.e., the choice-of-law analysis under California law, favors foreign law. See Mazza, 666 F.3d at 590 (“burden shifts to the other side to demonstrate that foreign law, rather than California law, should apply to class claims”) (internal quotation marks and citation omitted).

Under the first step of the governmental interest approach, the foreign law proponent must identify the applicable rule of law in each potentially concerned state and must show it materially differs from the law of California. The fact that two or more states are involved does not in itself indicate there is a conflict of laws problem.

Wash. Mut. Bank, 24 Cal.4th at 919-20. Defendant filed a chart titled “Material Differences in State Consumer Protection and Deceptive Trade Practices.” (Doc. no. 170-6 (Decl. of Matthew Kaplan Ex. T).)15 It contends that some, but not all, states require reliance or causation, some require intent to induce reliance, some have a shorter or longer statute of limitations than California, and some states do not authorize class actions under consumer protection laws. (Id. at 2.) Plaintiffs counter that there is no material difference, because the UCL and FAL are “additive rather than exclusive” to the consumer protection laws of other states. (Doc. no. 157-1 at 43-44; doc. no. 185 at 35.) Plaintiffs cite no binding authority for this proposition. The California appellate cases they cite do not conclude there are no material differences. See Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 242 (2001) (“California consumer protection laws are among the strongest in the country.”); Clothesrigger, Inc. v. GTE Corp., 191 Cal.App.3d 605, 616 (1987) (“California’s more favorable laws may properly apply to benefit nonresident plaintiffs when their home states have no identifiable interest in denying such persons full recovery.”). Wershba approved a class-wide settlement of a California unfair business practice claim across a nationwide class because, notwithstanding the differences in the consumer protection laws of various states, “this is not necessarily fatal to a finding that there is a predominance of common issues among a nationwide class.” 91 Cal. App. 4th at 244. Clothesrigger held that the trial court did not make the findings required by the governmental interest analysis and remanded for findings. 191 Cal. App. 3d at 613-16, 619-20. The differences among state consumer protection laws, for example, in the requirement of defendant’s intent or knowledge, or a statute of limitations that is shorter than California’s, are material. See Mazza, 666 F.3d at 590-91; see also McCann v. Foster Wheeler LLC, 48 Cal.4th 68, 88-90 (2010) (statute of repose under foreign law would bar the action).

If there is a material difference, the foreign law proponent must next establish the foreign “jurisdiction’s interest in the application of its own law under the circumstances of the particular case” to show that “a true conflict exists.” Mazza, 666 F.3d at 590 (quoting McCann, 48 Cal.4th at 90) (emphasis added). Defendant does not analyze the state interests under the circumstances of this particular case, but points to the findings made in Mazza. (Doc. no. 170-1 at 36.) Mazza observed that in the false advertising context, “[e]very state has an interest in having its law applied to its resident claimants,” 666 F.3d at 591-92 (internal quotation marks, brackets and citation omitted); “each state has an interest in setting the appropriate level of liability for companies conducting business within its territory,” id. (citing McCann, 48 Cal.4th at 91); and “[e]ach state has an interest in balancing the range of products and prices offered to consumers with the legal protections afforded them,” id. Mazza concluded that it was error to “discount[] or not recogniz[e] each state’s valid interest in shielding out-of-state businesses from what the state may consider to be excessive litigation.” Id. These interests are valid for any state. Based on the foregoing, in a case where a plaintiff seeks to apply California consumer protection law to a California corporation on behalf of foreign citizens who purchased defendant’s products outside California, a true conflict arises where California law affords either greater or lesser consumer protection because other states may choose to offer lesser consumer protection and a more business-friendly climate than California, while others may offer more consumer protection and a less business-friendly environment.

Third, if the court finds that there is a true conflict, it carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the application of its own law to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state, and then ultimately applies the law of the state whose interest would be more impaired if its law were not applied.

Mazza, 666 F.3d at 590 (quoting McCann, 48 Cal.4th at 82 (citations and quotation marks omitted)). In making this analysis,

the court does not weigh the conflicting governmental interests in the sense of determining which conflicting law manifested the `better’ or the `worthier’ social policy on the specific issue. An attempted balancing of conflicting state policies in that sense is difficult to justify in the context of a federal system in which, within constitutional limits, states are empowered to mold their policies as they wish. Instead, the process can accurately be described as a problem of allocating domains of law-making power in multi-state contexts—by determining the appropriate limitations on the reach of state policies—as distinguished from evaluating the wisdom of those policies. Emphasis is placed on the appropriate scope of conflicting state policies rather than on the `quality’ of those policies.

McCann, 48 Cal.4th at 97 (internal quotation marks, brackets, ellipses and citation omitted); see also Mazza, 666 F.3d at 593.

Defendant does not offer an analysis of its own, but relies entirely on the holding in Mazza: “because the interests of those other states in applying their own laws to their own consumers is stronger than California’s `attenuated’ interest, the Ninth Circuit held that `each class member’s consumer protection claim should be governed by the consumer protection laws of the jurisdiction where the transaction took place.'” (Doc. no. 170-1 at 36 (quoting Mazza, 666 F.3d at 594).)

California legislature expressed a strong interest in regulating false advertising which emanates from California into other states. It is unlawful under the UCL and FAL to make or disseminate a false or misleading statement “or cause [it] to be made or disseminated before the public in this state, or to make or disseminate [it] or cause [it] to be made or disseminated from this state before the public in any state.” Cal. Bus. & Prof. Code §§ 17500, 17200 (incorporates § 17500 by reference). Under the facts of the pending case, applying these provisions to out-of-state sales is consistent with the principle that “a jurisdiction ordinarily has the predominant interest in regulating conduct that occurs within its borders. . . .” McCann, 48 Cal.4th at 97-98 (internal quotation marks and citations omitted).

Based on this principle, McCann and Mazza found foreign law applicable to their facts. In Mazza, the defendant, American Honda Motor Company, was headquartered in California and its advertising agency, which produced the allegedly misleading materials, was located in California. However, the advertising campaign, as it pertained to the relevant representations, was “very limited,” and it was “likely that many class members were never exposed to the allegedly misleading advertisements.” Mazza, 666 F.3d at 595. In Mazza, whether a purchaser was exposed to the allegedly misleading statement depended in large part on whether the ultimate seller chose to present it, for example, when the representations were made in product brochures, Acura Style magazine, video or other presentations, which were available only at dealerships. Id. at 586-87 (through “small scale marketing efforts,” dealers were “encouraged” to show promotional materials at dealership kiosks). Accordingly, “the communication of the advertisements to the claimants and their reliance thereon in purchasing vehicles—took place in the various foreign states, not in California.” Id. at 594. In this regard, the Court concluded,

We recognize that California has an interest in regulating those who do business within its state boundaries, . . ., but we disagree with the dissent that applying California law to the claims of foreign residents concerning acts that took place in other states where cars were purchased or leased is necessary to achieve that interest in this case.

Id. (emphasis added).

Mazza relies in large part on McCann, 48 Cal.4th 68 (2010), because the choice of law issue is governed by California law. Mazza, 666 F.3d at 589. McCann decided that foreign law applied because the incident occurred in Oklahoma when the plaintiff was an Oklahoma resident and the defendant was conducting business in Oklahoma. 48 Cal.4th at 98. The fact that the defendant was a New York company was not persuasive, because Oklahoma had an interest in promoting business, whether by domestic or foreign companies. Id. at 97. The fact that the plaintiff later moved to California for unrelated reasons was happenstance that should not determine the choice of law. Id. The Court recognized that the outcome could be different, if the defendant’s conduct occurred in California:

California’s interest in applying its laws providing a remedy to, or facilitating recovery by, a potential plaintiff in a case in which the defendant’s allegedly tortious conduct occurred in another state is less than its interest when the defendant’s conduct occurred in California.

Id. at 99.

In the pending case, the alleged misconduct occurred entirely in California. (See Schrententhaler Depo. at 60-61).) All allegedly false representations were made on Defendant’s product labels, and all products were sold with labels. All final decisions regarding the labels were made and approvals were given in California, where Defendant is incorporated and maintains its principal place of business. Defendant distributed its products nationwide.

The fact that some products were purchased in one state rather than another should be immaterial to the choice of law under the facts of the present case, because the alleged misconduct occurred entirely in California. Defendant points to no state with a greater interest in enforcing its laws under the facts of this case. Applying the UCL and FAL nationwide does not impede other states in applying their policies, whether through consumer-friendly or business-friendly legislation, to the conduct that occurs within their borders. In light of the foregoing, Defendant has provided no grounds to conclude that any other state’s interest, including any state’s “interest in promoting business,” Mazza, 666 F.3d at 593, would be more impaired than California’s, if California law did not apply.

Defendant’s argument that the questions of law presented by each state’s own consumer protection laws defeat a showing of commonality and predominance is rejected. For the reasons stated above, and in the context of California consumer protection claims, Plaintiffs meet the commonality and predominance requirements for the UCL and FAL claims on a nationwide basis to the extent they are based on statements of protein content on protein shake labels and “lean” statements on protein powder labels.

  1. Typicality

The typicality requirement of Rule 23(a)(3) focuses on the relationship of facts and issues between the class and its representatives.

[T]he commonality and typicality requirements of Rule 23(a) tend to merge. Both serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff’s claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.

Dukes, 564 U.S. at 249 n.5 (internal quotation marks and citation omitted). “[R]epresentative claims are `typical’ if they are reasonably co-extensive with those of absent class members; they need not be substantially identical.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998).

The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.

Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010) (internal quotation marks and citations omitted).

Defendant does not dispute that Plaintiffs’ claims are typical of the class members’ claims. Plaintiffs and putative class members were injured by the same conduct — Defendant’s allegedly misleading statements on product labels. The relevant conduct is not unique to named Plaintiffs. The legal theories Plaintiffs seek to assert on behalf of the class apply equally to Plaintiffs and the class members. Plaintiffs therefore meet the typicality requirement.

  1. Adequacy

Rule 23(a)(4) requires a showing that “the representative parties will fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). This requirement is grounded in constitutional due process concerns: “absent class members must be afforded adequate representation before entry of judgment which binds them.” Hanlon, 150 F.3d at 1020. In reviewing this issue, courts must resolve two questions: “(1) do the named plaintiffs and their counsel have any conflicts of interest with other class members, and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class?” Id. In other words, the named plaintiffs and their counsel must have sufficient “zeal and competence” to protect the interests of the rest of the class. Fendler v. Westgate-California Corp., 527 F.2d 1168, 1170 (9th Cir. 1975).

Defendant does not dispute that the adequacy requirement is met. No conflict of interest is apparent from the record between Plaintiffs and their counsel on one hand and the putative class on the other.

With respect to Plaintiffs, the issue is whether they “maintain a sufficient interest in, and nexus with, the class so as to ensure vigorous representation.” In re Online DVD Rental Antitrust Litig., 779 F.3d 934, 943 (9th Cir. 2015) (internal quotation marks, brackets and citation omitted). Based on Plaintiffs’ declarations, they have suffered the same injury as they allege on behalf of the class, understand their duties if appointed class representatives, and are willing to undertake them, including vigilantly prosecuting the case on behalf of the class. To date, Plaintiffs have been actively involved in the prosecution of this action, including providing information to class counsel, participating in written discovery and giving deposition testimony. They intend to continue to actively prosecute the case on behalf of the class. (Doc. no. 157-2 (“Roman Decl.”); 157-3 (“Clay Decl.”); 157-4 (“Reichert Decl.”); 157-5 (“Ehrlichman Decl.”).) Although Plaintiff Christopher Roman has criminal history, Defendant does not contend he cannot adequately represent the class. Roman’s history does not include crimes which would adversely reflect on his credibility. (See Deposition of Christopher Roman (“Roman Depo.”) at 12-18.)16Plaintiffs therefore meet Rule 23(a)(4) adequacy requirements.

Based on the counsels’ declarations, California attorneys Jeffrey R. Krinsk and Trenton Kashima, as well as Michigan attorneys Nick Suciu III, Jason J. Thompson, and Amy L. Marino meet Rule 23(a)(4) adequacy requirements and Rule 23(g) requirements for appointment of class counsel. (Doc. no. 157-9 (“Suciu Decl.”), 157-10 (“Thompson Decl.”), 157-11 (“Krinsk Decl.”), 157-11 (Ex. A to Krinsk Decl.), 157-13 (“Marino Decl.”) at 2).

  1. Rule 23(b)(3) Requirements

Certification under Rule 23(b)(3) is proper when “the questions of law or fact common to class members predominate over any questions affecting only individual members, and . . . a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. Proc. 23(b)(3).

As discussed above, this action meets the predominance requirement. The superiority requirement includes consideration of:

(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and(D) the likely difficulties in managing a class action.

Fed. R. Civ. Proc. 23(b)(3). This inquiry “requires the court to determine whether maintenance of this litigation as a class action is efficient and whether it is fair,” such that the proposed class is superior to other methods for adjudicating the controversy. Wolin, 617 F.3d at 1175-76.

Defendant argues class action is not superior because individual issues predominate and there are material differences among state consumer protection laws. (Doc. no. 170-1 at 58-59.) Defendant also contends that “Plaintiffs have not offered any means [to] exclude uninjured class members.” (Id. at 58 (citing Chow v. Neutrogena Corp., 2013 WL 5629777 *2 (C.D. Cal. Jan. 22, 2013).) The latter argument is based on the contention that each class member may not have been exposed to the allegedly misleading advertisements, and therefore would not suffer the same injury. See Chow, 2013 WL 5629777 *1-2. All of Defendant’s arguments were rejected in the context of analyzing the predominance requirement.

This is a consumer class action involving low-priced consumer goods and a large number of potential class members. Prosecution of the alleged claims requires discovery, including product testing, and expert analysis, including consumer surveys. It would therefore most likely not be feasible for class members to individually prosecute the consumer protection claims asserted herein. See Briseno, 844 F.3d at 1129. The class members’ interest in individually controlling the prosecution of individual actions is small. According to Plaintiffs, no other similar cases are pending. (Doc. no. 157-1 at 41.)

This action bears a substantial connection to California, as Defendant is located in California (Schrententhaler Depo. at 61), two of the named Plaintiffs, as well as numerous other consumers, purchased Defendant’s products during the class period in California (see Clay Decl. at 2; Roman Decl. at 2). The record does not reflect any reason not to concentrate the litigation of the claims in this District. Finally, it does not appear that this action will be more difficult to manage than other class actions.

For the foregoing reasons, the Court finds that all requirements for class action certification under Rule 23(b)(3) are met with respect to (1) the nationwide classes as to the UCL and FAL claims to the extent they are based on statements of protein content on protein shake labels and “lean” statements on protein powder labels; (2) the California subclasses as to the UCL, FAL and CLRA claims to the extent they are based on statements of protein content on protein shake labels; and UCL and FAL claims to the extent they are based on “lean” statements on protein powder labels; (3) the Florida subclasses as to the FDUTPA violation based on the protein content statements on protein shakes and “lean” statements on protein powders; and (4) the Michigan subclass as to the MCPA violation based on the protein content statements on protein shakes.

III. CONCLUSION

  1. Plaintiffs’ motion for class certification is granted in part and denied in part. The following classes are certified:

(a) A nationwide class comprising of all persons in the United States who, within four (4) years of the filing of this action, purchased Defendant’s Cytosport Whey Isolate Protein Drink; Monster Milk: Protein Power Shake; Genuine Muscle Milk: Protein Nutrition Shake; and Muscle Milk Pro Series 40: Mega Protein Shake. The class is certified for purposes of prosecuting violations of the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., and California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq., to the extent the claims are based on the protein content statements on product labels.

(b) A nationwide class comprising of all persons in the United States who, within four (4) years of the filing of this action, purchased Defendant’s Muscle Milk: Lean Muscle Protein Powder; Muscle Milk Light: Lean Muscle Protein Powder; Muscle Milk Naturals: Nature’s Ultimate Lean Muscle Protein; Muscle Milk Gainer; High Protein Gainer Powder Drink Mix; Muscle Milk Pro Series 50: Lean Muscle Mega Protein Powder (14 oz. to 10 lbs. products); and Monster Milk: Lean Muscle Protein Supplement (2.06 and 4.13 lbs. products). The class is certified for purposes of prosecuting violations of the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., and California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq., to the extent the claims are based on the “lean” statements on product labels.

(c) All persons residing in California who, within four (4) years of the filing of this action, purchased Defendant’s Cytosport Whey Isolate Protein Drink; Monster Milk: Protein Power Shake; Genuine Muscle Milk: Protein Nutrition Shake; and Muscle Milk Pro Series 40: Mega Protein Shake. The class is certified for purposes of prosecuting violations of the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq., and California Consumer Legal Remedies Act, Cal. Civ. Code § 1770(a)(5), to the extent the claims are based on the protein content statements on product labels.

(d) All persons residing in California who, within four (4) years of the filing of this action, purchased Defendant’s Muscle Milk: Lean Muscle Protein Powder; Muscle Milk Light: Lean Muscle Protein Powder; Muscle Milk Naturals: Nature’s Ultimate Lean Muscle Protein; Muscle Milk Gainer; High Protein Gainer Powder Drink Mix; Muscle Milk Pro Series 50: Lean Muscle Mega Protein Powder (14 oz. to 10 lbs. products); and Monster Milk: Lean Muscle Protein Supplement (2.06 and 4.13 lbs. products). The class is certified for purposes of prosecuting violations of the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq., and California False Advertising Law, Cal. Bus. & Prof. Code §§ 17500 et seq., to the extent the claims are based on the “lean” statements on product labels.

(e) All persons residing in Florida who, within four (4) years of the filing of this action, purchased Defendant’s Cytosport Whey Isolate Protein Drink; Monster Milk: Protein Power Shake; Genuine Muscle Milk: Protein Nutrition Shake; and Muscle Milk Pro Series 40: Mega Protein Shake. The class is certified for purposes of prosecuting violations of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201 et seq., to the extent the claim is based on the protein content statements on product labels.

(f) All persons residing in Florida who, within four (4) years of the filing of this action, purchased Defendant’s Muscle Milk: Lean Muscle Protein Powder; Muscle Milk Light: Lean Muscle Protein Powder; Muscle Milk Naturals: Nature’s Ultimate Lean Muscle Protein; Muscle Milk Gainer; High Protein Gainer Powder Drink Mix; Muscle Milk Pro Series 50: Lean Muscle Mega Protein Powder (14 oz. to 10 lbs. products); Monster Milk: and Lean Muscle Protein Supplement (2.06 and 4.13 lbs. products). The class is certified for purposes of prosecuting violations of the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201 et seq., to the extent the claim is based on “lean” statements on product labels.

(g) All persons residing in Michigan who, within six (6) years of the filing of this action, purchased Defendant’s Cytosport Whey Isolate Protein Drink; Monster Milk: Protein Power Shake; Genuine Muscle Milk: Protein Nutrition Shake; and Muscle Milk Pro Series 40: Mega Protein Shake. The class is certified for purposes of prosecuting violations of the Michigan Consumer Protection Act, Mich. Comp. Laws § 445.903(1)(c), to the extent the claim is based on protein content statements on product labels.

  1. Excluded from the above classes are: (a) Defendant and any entity in which Defendant has or had a controlling interest; (b) the officers and directors of Defendant at all relevant times, the members of Defendant’s officers’ and directors’ immediate families and their legal representatives, heirs, successors, or assigns; (c) any judge to whom this action is assigned, any members of such judges’ staffs, and any members of such judges’ immediate families; and (4) all persons or entities that purchased the relevant products for purposes of resale.
  2. Plaintiffs Chayla Clay, Chris Roman, Erica Ehrlichman, and Logan Reichert are appointed as class representatives for the nationwide classes. In addition, Plaintiffs Chayla Clay and Chris Roman are appointed as class representatives for the California classes, Plaintiff Logan Reichert is appointed as class representative for the Florida classes, and Plaintiff Erica Ehrlichman is appointed as class representative for the Michigan class.
  3. Attorneys Jeffrey R. Krinsk, Trenton Kashima, Nick Suciu III, Jason J. Thompson, and Amy L. Marino are appointed as class counsel under Rule 23(g).
  4. No later than September 14, 2018, the parties shall jointly propose a class notice in compliance with Federal Rule of Civil Procedure 23(c)(2)(B).
  5. Defendant’s Daubertmotion is granted with respect to the opinion of Elizabeth Howlett, Ph.D. that the statements on protein powder labels regarding L-glutamine were material. The opinion is excluded for purposes of this Order only. Defendant’s motion is denied in all other respects.

IT IS SO ORDERED.

FootNotes

  1. Not counting exhibits which were filed non-electronically and several motions to file documents under seal, the parties filed in excess of 4,000 pages of briefing and exhibits.
  2. With the exception of deposition transcripts, all page references in citations to docketed documents are to the page numbers assigned by the ECF system.
  3. The UCL provides in pertinent part:unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.

Cal. Bus. & Prof. Code § 17200.

  1. The FAL provides in pertinent part:It is unlawful . . . to make or disseminate . . . in any . . . advertising . . . or in any other manner or means whatever . . . any statement, concerning . . . personal property . . ., which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading. . . .

Cal. Bus. & Prof. Code § 17500.

  1. The pertinent CLRA provision reads,The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful: . . .(5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that he or she does not have.

Cal. Civ. Code § 1770(a)(5).

  1. Defendant’s contention on summary judgment that Plaintiffs could not establish statutory standing because they did not rely on Defendant’s representations was granted in part and denied in part. (Doc. no. 209 at 5-8.) Nevertheless, there remains a named Plaintiff with statutory standing for each consumer protection claim as to each allegedly misleading statement. (Id.)
  2. Excerpts from the Howlett Depo. were filed as doc. no. 170-4 (Kaplan Decl. Ex. F) and doc. no. 185-7 (Marino Decl. Ex. E). Throughout this Order, page references to deposition testimony are to the page numbers in the transcript.
  3. Excerpts from the Schrententhaler Depo. were filed as doc. no. 157-26 and 157-32 (Kashima Decl. Exs. A & G).
  4. Page references are to the page numbers assigned by the parties in discovery.
  5. The plaintiff’s showing in Clemensdid not suffice, however, and summary judgment was granted for the defendant. Id.
  6. Defendant acknowledges this is a merits issue. (Doc. no. 170-1 at 49 (“Plaintiffs’ claims fail on the merits.”).)
  7. Excerpts from the Kimball Depo. were filed as doc. no. 157-33 (Kashima Decl. Ex. H.)
  8. This issue was not an impediment to class certification in In re Conagra Foods,which considered at length proposed expert opinions regarding class-wide proof of damages. 90 F.Supp.3d 945, 1025-32. 945 (C.D. Cal. 2015); aff’d Briseno v. ConAgra Foods, Inc.,844 F.3d 1121(9th Cir. 2017).
  9. Although class certification was denied for the CLRA claim based on the L-glutamine and “lean” statements, damages analysis is relevant to the UCL and FAL claims based on the same statements.
  10. Defendant’s brief devotes only one sentence to this issue (doc. no. 170-1 at 36) and the entirety of the discussion is presented in a 58-page single spaced chart in 8-point print. (Doc. no. 170-6 (Decl. of Matthew Kaplan Ex. T).) This is a brazen run around the page limits, which were already extended by parties’ request. (Seedoc. no. 154 (Order Regarding Briefing Plaintiffs’ Motion for Class Certification and Defendant’s Summary Judgment and DaubertMotions).) Failure to comply with orders of the Court is grounds for sanctions. Civ. Loc. Rule 83.1.

16. Excerpts from the Roman Depo. were filed as doc. no. 170-6 at 189-221, and doc. no. 185-8.

New York Catches Tax Cheats under its Tax Fraud Whistleblower Provisions

Whistleblower laws have wide range of powers and affects, but one of the most potent is New York’s Qui Tam provisions which enable an insider to turn in tax cheats and receive a whistleblower award.

Many Qui tam lawsuits are filed under the False Claims Act provide a way for the government to retrieve funds that they have been cheated of. These cases are usually filed by employees who work at a company that is conducting healthcare fraud, like Medicare Fraud or Medicaid Fraud. When the employee notices such activity, they can get in touch with a whistleblower lawyer to file an official report and initiate a secretive lawsuit against the employer. Different types of qui tam cases can be filed, and recent developments in New York are setting an example of how tax-related whistleblower lawsuits can be beneficial for the state government and to the whistleblower.  There are also IRS Whistleblower actions, but those cases must be incredibly detailed and show over $2 million in fraud (underpayments or no payments) and generally significantly higher amounts.

Tax Fraud Whistleblower Cases In New York

New York State is one of the few states in the country that provides appropriate laws that ensure citizens in the state can file for a qui tam case if they know of tax fraud. When such a case is filed with a tax fraud attorney, state authorities are notified of the case and given the opportunity to intervene before the case becomes public.

The False Claims Act laws in New York State was modified in 2010 to allow the citizens to come forward with information that suggests different types of tax-related fraudulent activities are being conducted at their employer. Additionally, the law also ensures that the individual who blows the whistle is appropriately awarded for the fact that they filed the qui tam lawsuit. The reward provided to the whistleblower is granted only after the state has recovered the lost funds from the accused party. Rewards provided to the whistleblower for tax fraud qui tam generally range from 15% to 30% of the amount that the state recovers.

Since the initiation of these laws in the New York State, the government has already been able to retrieve over $56 million in lost funds thanks to whistleblowers speaking up about fraudulent activity that is conducted oftentimes by their employers.     Some common schemes employers use to cheat on taxes is paying workers off the books, falsely designating workers as independent contractors instead of employees and outright not reporting income.

The state is setting an example for other states, as very few states currently have such laws implemented. Others states in the country are advised to consider looking at how New York has already benefited and in turn recouping money from tax cheats helps everyone with their taxes.

Conclusion

When tax fraud is detected, it is important to report the New York Tax Fraud the relevant authorities in the right manner utilizing a tax whistleblower lawyer. Citizens of the New York State are able to file qui tam cases under the False Claims Act, which then allows the whistleblower who filed the case to receive a reward if the case turns out to be successful. Contacting an experienced whistleblower attorney can ensure you have the foundation for at a case that may succeed, such as speaking with former FBI Special Agent and whistleblower lawyer Jason T. Brown of Brown, LLC.

$260+ Million Settlement False Claims Act (FCA) False Billing Whistleblower Case

Health Management Associates plead guilty to false billing as well as other violations of the False Claims Act as a result of a whistleblower action that was commenced looking into its billing practices. The hospital chain that has facilities throughout the United States was pressuring physicians into admitting patients to their hospitals, even when outpatient services would have been adequate to provide treatment to the patient. Physicians were incentivized for complying with the requests made by the management staff at HMA. After a full investigation, which started in 2013, the hospital chain agreed to pay a settlement fee of more than $260 million.

Whistleblower Case Against Health Management Associates

On the 25th of September 2018, the U.S. Department of Justice issued a press release stating that Health Management Associates was found guilty and agreed to pay a settlement fee that reached over $260 million in total.

The settlement was agreed by the major hospital chain after a whistleblower case was filed against them by two former employees. The whistleblower case accused HMA of defrauding the government by false billing. False billing allegations are core to actions under the False Claims Act and inherently involve allegations of Medicare Fraud and/or Medicaid Fraud.

The investigation found that the company had enforced rules that awarded physicians for admitting patients who came to the emergency room when an outpatient treatment would have been sufficient. Physicians did explain that they were forced into these actions by the management of HMA. This type of practice is comparable to upcoding, since billing for the in patient treatment generated significantly greater amounts of revenue for the hospitals and a burden to the taxpayers.

According to whistleblower attorney Jason T. Brown, “This is an excellent qui tam settlement as a case this extensive its challenging to show the individualized course of treatment did not warrant hospitalization especially when Doctors should err on the side of caution when patient health is at issue.  However, when a medical institution makes it a pattern and practice to admit patients upon self-reporting of issues that ostensibly don’t require hospitalization it does a disservice to everyone including the patient and the taxpayer who foots the bill for Medicare Fraud.  Great work by the government, the law firms involved, and to the courage of the whistleblowers who blew the whistle on this unlawful practice.”

Not only will the two employees who came forward be showered with praise for doing the right thing, but under the settlement mechanism of the False Claims Act, they will receive a whistleblower award of approximately $27 million dollars, no small sum for doing the right thing.  While the FCA calls for awards up to 30% of the sums recovered, it is based on the sums recovered based on the information provided by the whistleblower, also known as the relator, so it’s critical to articulate the case in a prompt and correct manner.

In addition to admitting patients to the hospital when admission was not necessary in terms of their medical condition, the investigation also discovered that the chain of hospitals overbilled government health care agencies for services that were provided to the patients during their admission.

Governmental health care agencies affected included Medicare and Medicaid, both of which are federally funded.

Conclusion

This is only one example of the many cases related to fraud in the healthcare industry, brought forward by whistleblowers. Employees who blow the whistle and report such fraud play an important part in reducing health care fraud and damage done to the United States governmental health plans, including Medicaid and Medicare. If you have noticed such misconduct in the workplace, it is important to contact an experienced whistleblower attorney, such as former FBI Special Agent Jason T. Brown at Brown, LLC, who can investigate your case and determine if it is worth filing. You may be eligible for a reward of up to 30% the amount claimed in a settlement, should your case be successful.

DEA Investigates Tennessee County for High Number of Opioid Prescriptions

Consistent with the current’s administration directive to try to file more opioid whistleblower lawsuits under the False Claims Act (FCA) and other statutes, the Drug Enforcement Administration (DEA) announced that they had initiated an official investigation into a high rate of prescription opioids being ordered by pharmacies in a certain Tennessee County. According to data collected by the DEA, painkiller prescriptions in the county reached a level that would provide every person in the county, including children, a total of 270 tablets during the year 2017. That may be a heckuva party for some, but one needs to see the wake of broken lives in the hangover.

Tennessee County Under Investigation

Clay County, forming part of the Tennessee County, is a very small area with only one single city, known as Celina. The county has a population of only 7,800 citizens. Celina is home to only four pharmacies in total, as well as a couple of churches, a few diners, and a number of antique shops. Everything in this rustic town echoes shadows of the past where it really is located in walking distance.

What triggered an investigation by the Drug Enforcement Administration is the fact that 1.5 million painkillers were purchased in 2017 by the four pharmacies that are found in Celina. According to the DEA investigators, this is an alarmingly high number of prescription painkillers purchased by the four pharmacies, especially considering the fact that the population of the city is so low. After some calculation, they found that the 1.5 million prescription pills would equal 270 pills for every single person who is part of the city – including the youth and children.

Anderson Hometown Pharmacy was investigated on the 27th of August. The other pharmacies that are part of the city are also being investigated at the moment, as well as the doctors in town that are prescribing these drugs to patients.

The owner of the pharmacy explained to federal agents who led the investigation that the aging population and workforce of the town was what led to the increased need for pain medication. This, however, still doesn’t explain why 1.5 million prescription-level painkillers were bought in just one year.

Further investigations are still ongoing to help federal agents find more information in regards to the case and to help them point down parties that might be involved in possibly illicit activities.

Conclusion

The investigation that is currently in an ongoing in Tennessee County will continue until the DEA can make a more definite determination on why prescriptions have reached such a high level. Employees at doctors and pharmacies may come forward in the meantime and blow the whistle, which would allow the DEA to obtain data on why prescription numbers are so high. If you find yourself in a situation where a doctor, specialist, or a pharmacy you are employed at conducts itself  in an unlawful manner, you should get in touch with  whistleblower lawyer such as Jason T. Brown at Brown, LLC, who is a Former FBI Special Agent and whose qui tam law firm is experienced in dealing with whistleblower cases.

$102 Million in Whistleblower Awards Rewarded to Pharmaceutical Whistleblowers

Pfizer, a giant global pharmaceutical company that produces some of the world’s most commonly used drugs, agreed to a settlement amount of $2.3 billion and pled guilty after in a whistleblower case that lasted for six years. After the settlement from Pfizer was finalized, $102 million in whistleblower awards were paid out to the whistleblowers who initiated the case and brought forward the evidence that advanced the case against Pfizer.

Pfizer’s $2.3 Billion Settlement

The majority of whistleblower cases reported under the False Claims Act (FCA) occur within the healthcare industry. Each year hundreds of millions of dollars and sometimes billions, are often recovered by the government after a successful qui tam case. In the history of these cases, the Qui Tam lawsuit filed against Pfizer marked the largest whistleblower settlement to date.

In 2003 six employees at Pfizer, came forward with evidence that suggested the pharmaceutical company was conducting fraud.  It was alleged that the company created an internal culture that suggested the organization’s purpose is to drive sales above all and the promotion of the drugs had to be done in manners that were not necessarily approved by the FDA, otherwise he would not be considered a “team player.”

They were advised to promote a pain medication known as Bextra for purposes other than what it was approved for, which is known as off-label promotion.  Off-label promotion may come in different ways where pharmaceutical sales representatives tell the medical facilities they are distributing the drugs to that the product has many more benefits than listed and tells them to prescribe it to their patients for things that were not approved by the FDA. After refusing to comply with the requests from Pfizer, the lead whistleblower was dismissed from his position and fired from the company.

Strong corroborated evidence of the off-label promotion was provided against Pfizer, which led to a full investigation by the government into the matters reported in the whistleblower lawsuit. The investigation lasted for more than five years. Ultimately, In 2009 Pfizer pled guilty due to the evidence brought forward against the company, as well as findings from an investigation initiated by the government and the lawyer who led to the case.

The company agreed to pay a settlement fee of $2.3 billion for the damages and for fines that were issued to them. The government awarded $102 million of the settlement paid by Pfizer to the individuals who initiated the whistleblower case.

The lead whistleblower obtained over $50 million of the reward for commencing the case.

Conclusion

After bringing forward evidence of fraudulent activities by Pfizer that stemmed from off-label promotion of its drugs, the whistleblowers were able to commence a lawsuit under the False Claims Act and hold it accountable for promoting products for things that were not approved by the FDA.  Pfizer’s record $2.3 billion settlement should put other pharmaceutical companies on notice that the government will not allow them to try to promote products in a way that has not been cleared by the FDA for the safety of the people.  If you’re asking yourself, “How do I report Medicare Fraud,” People who have information regarding off-label promotion or other inside information regarding the government being defrauded should speak with a pharmaceutical whistleblower lawyer like former FBI Special Agent Jason T. Brown of Brown, LLC to receive a free consultation regarding their rights.

What to Do When You’re in an Accident with a Truck

If you were unfortunately in an accident with a Truck, you need to speak with a truck accident lawyer that is experienced and is results oriented, like former FBI Special Agent Jason T. Brown, of Brown, LLC, Jersey City, NJ (but handling cases all over the country such as York, PA, Rochester, NY, Chicago, IL).  First of all, it’s important to take care of you first!  One of the questions truck accident defense lawyers like to ask is, “Who did you call first – your lawyer or your doctor?”  If you’re badly injured from a truck accident, of course, you need to seek medical treatment first, but they key is not to wait.  Don’t delay.  Delay favors the Truck Carrier.

From the moment of collision, the truck companies have insurance people and defense attorneys working on the case to try to insulate themselves from liability and to minimize the payout to the trucking accident victim, if anything at all.  They will try to reach out to you and lock you into your version of what occurred, even while you’re still in the hospital or on medicine that makes you loopy.  You have to avoid making statements before retaining counsel.  Even the most innocuous thing can hurt you.  For example, one of the most common questions a sly insurance investigator may ask you just a couple days after the truck accident, is something along the lines, “Hi – I’m John Smith with ABC Trucker’s Insurance, I just have a few questions, so we can find out what sort of compensation if any we’re going to offer you.  Before we begin, how are you doing today?”  As soon as you answer politely, “I’m doing great, how about you,” they will memorialize that the injured person indicated they were doing great only two days after the accident and use it against you.

Truck Accidents are serious business and the trucking insurance company has learned to spend big bucks up front to try derail your case before it begins which can save them the hundreds of thousands or millions you might be entitled to if you retained a truck accident injury lawyer shortly after the accident occurs.  Why are they such big cases?  First, the injuries are much more severe.  Truck accidents easily cause death, broken bones, concussions, and other life-altering injuries.  Also, under most state laws, the legislatures have recognized the potential for a truck injury to create major injuries, so they make the trucking company hold larger insurance policies than just a normal vehicle.

Ride-share accidents are on the rise, since the ride-share services promote individuals to carry passengers in a commercial setting, even though they may be brand new without being trained in ride-along fashion or familiar with the roads they are driving on. Since ride-shares like Uber Accidents and Lyft Accidents are commercial in nature when the are carrying a passenger, even though the smaller vehicles may not cause the extent of injury that a trucking injury would, they carry commercial policies and its best to retain ride-share counsel to deal with those entities as well.

Once you’ve retained your truck accident lawyer, he or she will guide you regarding the next steps, but acting quickly is the key.  You want to identify the police who took the report and obtain a copy (which counsel can do for you), find out if any tickets were issued, potentially photograph the scene of the accident to see if there are any factors that led to the accident, and put the truck on notice of the pending claim and to preserve all relevant evidence.  There’s many factors that need to converge to make your case a success, that is why if you were unfortunately in an accident with a truck or a ride-share, you should speak with Brown, LLC, Jersey City, NJ to know your rights and receive a free consultation.

How Long Does It Take to Resolve A Whistleblower Case?

In the last decade the amount of whistleblower awards have hit the billion dollar mark.  Sadly, that means there’s been billions and billions of fraud and funds that require recapturing.  One of the most common questions whistleblowers ask is how long does it take to resolve a qui tam lawsuit.  Like a fine wine good things take time, and a successful qui tam lawsuit depends on many, many factors, including the selection of the right whistleblower lawyer, candor with your qui tam counsel and filing the case properly under seal.  Even with all that, there are many more suits that lose than win and you should expect it to take a long, long time for the most part, with an occasional quick victory.

The Process of a Qui Tam Lawsuit

To understand how long a Qui Tam lawsuit really takes, it is important to consider the many processes involved in these specialized cases. There are various types of whistleblower statutes, the most prolific is the False Claims Act (FCA), the CFTC Whistleblower statute, the SEC Whistleblower statute and various other state False Claims Act and whistleblower statutes such as the Illinois False Claims Act, the California False Claims Act, and the New York Tax Whistleblower laws.  Each statute you must navigate differently, and all of them take time.

For statutes like the Federal and most state False Claims Acts you must file the matter with a whistleblower law firm and cannot file it pro se (without an attorney). The case starts with the whistleblower speaking with an attorney who focuses on qui tam matters.  Most whistleblower lawyers will offer a free, confidential consultation regarding the matter and will only receive payment if they win the case.  It is important when you call a whistleblower hotline or speak with the right qui tam counsel you candidly discuss the case, the proofs and your likelihood of success. Nothing is ever guaranteed.

If the case has potential, then the whistleblower attorney drafts the complaint based on the evidence to file the case. The qui tam lawsuit is then filed secretly under seal along with a Disclosure Statement, with all the relevant information and proofs.

At this time, the lawyer and the whistleblower needs to wait for the government to consider the case and do some investigation on their side. The government needs to decide whether or not they wish to intervene in the case which can take considerable time.  Generally, the case stays under seal for at least a year, but it can be many, many years until the government makes up its mind whether to take the case, which is known as a whistleblower intervention, or to decline the case allowing the case to be unsealed

Many times when the government conducts a thorough investigation and corroborates the allegations of the complaint, it often resolves the matter contemporaneously with its unsealing.  However if it is not resolved upon unsealing, the case turns into a normal piece of litigation with the Court setting the litigation schedule and depending on the jurisdiction the case can take another couple years until the trial.  Most cases resolve before trial, but some will have to be tried, and also there is an appeal process.

Conclusion

A whistleblower case can take a significant period of time since there are many procedures and steps that need to be taken in order for the case to be filed, investigated, litigated and completed. In some cases, the process can take several years before any true progress is made. On the short side, some cases can take a year to eighteen months, with most cases averaging 3-5 years and some could be a decade long battle. The length of time the case remains under seal can be used to your advantage as well which is why its important to speak with a seasoned whistleblower lawyer like former FBI Special Agent Jason T. Brown, from Brown, LLC and his qui tam team to determine If you have a whistleblower case worth filing.

How Much Is a Whistleblower Awarded for a Successful Case?

Filing a whistleblower case is courageous but risky.  Even though there are various statutes that prohibit retaliation against whistleblowers, once a case is commenced a whistleblower may feel like everyone is out to get them or that people are following them or their phones are tapped, or a variety of other symptoms that although they are unfounded are common beliefs from people going through the process.  Most of the concerns are unfounded since the initial qui tam lawsuit is filed under seal, which means the company committing the Medicare Fraud, Medicaid Fraud, or SEC violation is not even aware initially there is a charge against them.  That coupled with the fact the whistleblower lawsuit may take years sometimes takes the wind out of the potential relator’s sails, but with the right whistleblower law firm to address your concerns the process becomes more palatable.

Although justice should be a prime motivating factor in commencing a qui tam lawsuit, there is also a possible economic reward for the right information.  The whistleblower award is provided if the case turns out to be successful and the government is able to retrieve funds that were lost due to the fraudulent activity. This raises common questions whistleblowers ask:

How much can I win as a whistleblower?

What is the average whistleblower settlement?

Rewards for Whistleblower Cases

In recent years billions of dollars have been recaptured and sent back to the government for violations of the False Claims Act (FCA), the most commonly used whistleblower statute that fights fraud against the government.

The reward provided to a whistleblower varies from case to case and statute to statute. For cases that address Medicare Fraud and Medicaid Fraud, or Defense Contractor Fraud, if the case is successful a whistleblower can receive between 15% and 30% of the amount that is recovered during the case under the False Claims act and potentially more under different State False Claims Act statutes like the Illinois False Claims Act

If the government intervenes in a case under the FCA the relator (whistleblowers) percentage is generally 15-25%.  If the government declines intervention then it go as high as 30%?   So it’s better if the government doesn’t intervene in the case, right?  Well, as a rule that is wrong, since the average whistleblower settlement for a case intervened by the government is roughly $12.5 million dollars, and without government intervention it’s a couple million.  So although a whistleblower may stand to gain more percentagewise without the government’s intervention, it’s a smaller piece of the pie.  The numbers may be a little deceptive because some of the bigger settlements can be in the hundreds of millions of dollars and those are generally with government intervention, so they can skew the bell curve for awards.

Under various statutes like the New York False Claims Act, Illinois False Claims Act, the California False Claims Act there are other mechanisms in which you can also recover for violations against the state or private insurance.  Some actions may include tax fraud, which there is also an IRS Whistleblower provision, which in order to trigger Federally you would need a stellar case with crystal clear information spoon-fed to the government, but the New York Tax Fraud provisions can be advanced much easier with our without the government.  The IRS requires the IRS.  Also, popular in recent years are the use of the SEC whistleblower statutes and the CFTC whistleblower statutes where whistleblower awards can go up to 30%.

Conclusion

Whistleblower cases are challenging, but there is a certain satisfaction that can come from doing what’s right and if successful the whistleblower award can be as high as in the tens of millions of dollars if not more.  Many factors go into whether the whistleblower case is worth bringing, and what percentage of the award is given so it’s important to speak with an experience whistleblower lawyer who fights for and protects whistleblowers like Jason T. Brown (Former FBI Special Agent), of Brown, LLC who can educate you about your rights and the pros and cons of commencing a whistleblower lawsuit.

Common Types of Frauds in The Healthcare Industry Reported by Whistleblowers

Every year the American taxpayer is cheated out of billions of dollars as a result of fraud, such as systemic Medicare Fraud and Medicaid Fraud. The fraudulent activity occurs in all industries as people wrongfully think the government isn’t watching.  There are all sorts of mechanisms to ensure that companies and people don’t cheat the government and various whistleblower laws to award people with targeted information to come forward with their whistleblower case.

Take a recent case against Spa Castle Inc, for example, a company who committed tax fraud and  settled for $2.5 million under the New York Tax Whistleblower Laws which allow private citizens to commence whistleblower actions to hold tax cheats accountable.  The tax whistleblower in this case received a $575,000 New York Tax Whistleblower Award for reporting on how the massage parlors failed to report income, thereby failed to pay taxes, thereby cheating the taxpayer out of money.  The IRS has a whistleblower program as well, where if the insider has very specific information regarding over $2 million dollars of tax fraud they may act, but it must be very detailed insider information.

However, the most common industry where fraud against the government occurs is in the healthcare industry – with fraud such as hospitals and medical facilities submitting false claims such as providing unnecessary treatments, upcoding, using unlicensed individuals, engaging in kickbacks schemes and a host of other violations meant to cheat Medicare of Medicaid or private insurance out of money.

Types of Healthcare Fraud

There are different types of fraudulent activities that occur within the healthcare industry. Some cost the government more than the others. Understanding the types of healthcare fraud and how to recognize such fraud is important for whistleblowers. The ability of a whistleblower and the government to bring a claim are governed by the False Claims Act (FCA).

False Billing

False billing or billing for services not rendered is a relatively common type of fraud that occurs in the healthcare industry. This involves a physician or treatment facility, including care centers and hospitals, submitting claims to Medicare or another federally funded policy for services that were not provided to a patient. In some cases, the fraud would go as far as to forge a signature in order to make such false claims or doctor a chart to justify the bill.

Providing Unnecessary Treatments and Services

Many doctors and health care facilities have been found guilty of providing treatments that are unnecessary, with the sole purpose of committing Medicare Fraud and Medicaid Fraud and billing their insurance policy for the services rendered.  Medical necessity cases can be difficult to prove if reasonable minds disagree regarding the extent or course of the treatment.  One such example is the case against a doctor for falsely diagnosing patients with skin cancer in order to initiate unnecessary treatments on the patients when insured through Medicaid or Medicare.  There are many examples where the medical provider reflexively bills everyone for treatments that walk through the door, whether they need it or not.  For example, the Doctor may ask do you ever have a headache and when almost anyone answers yes, they might feel your temples and bill for a detailed cranial test or reflexology.

Double Billing

Double billing refers to scenarios where a medical provider bills a patient’s healthcare policy for two visits when the patient only had one appointment with the doctor. The doctor would often use a duplicate of the original claim for the “real” appointment and change a few details, such as the date, and then submit the same claim again.

Service or Item Upcoding

Services rendered by healthcare providers have specific codes assigned to them. Some codes yield higher payouts for the provider from a federally funded policy. The same goes for the prescription of medical devices. Some healthcare providers would submit a higher code to a patient’s healthcare provider than the code of the item or service provided to the patient with the sole purpose of additional profits.

Conclusion

The government relies on whistleblowers to come forward with concrete information to hold accountable many of these tax cheats, Medicare frauds and other cheating of the government and insurance.  Most False Claims Act whistleblower cases are filed against hospitals, care centers, physicians, or other parties in the healthcare industry. Double billing and claiming for unprovided services are common types of fraud committed by them. Whistleblowers play an important role in uncovering such fraudulent activities and helping the government retrieve ill-gotten funds. In turn, whistleblowers may be entitled to a whistleblower award for their information. Under the False Claims Act, the whistleblower must use a whistleblower law firm.  If you believe you have information regarding Medicare Fraud, Medicaid Fraud or many other types of fraud against the government you should consult with a whistleblower law firm like Brown, LLC led by former FBI Special Agent Jason T. Brown to go over your rights and determine how to make your case.

References

https://ag.ny.gov/press-release/ag-underwood-and-acting-tax-commissioner-manion-announce-criminal-conviction-and-false

Collective and Class Action Lawsuit Filed against Moe’s Southwest Grill Franchise for Alleged Unpaid Overtime and Unlawful Tip Retention under the Federal and New Jersey Wage and Hour Laws

On September 13, 2018, the lead Plaintiff Marco Gonzalez filed a collective and class action complaint in the United States District Court for the District of New Jersey, alleging that Defendants Fast Casual Partners, LLC and its owner Lee DiPrizito, who operate a number of franchised stores of Moe’s Southwest Grill restaurant in the States of New Jersey and New York, violated the federal Fair Labor Standards Act (“FLSA”) and the New Jersey Wage and Hour Laws and Regulations (“NJWHLR”), by failing to compensate its hourly-paid restaurant workers proper overtime wages and by unlawfully keeping tips.

The complaint alleges that to the extent Defendants paid the restaurant workers for hours in excess of forty (40) in a workweek, Defendants paid them straight time for overtime, that is, such payments were made at their regular hourly rates, rather than time and one-half (1.5) of their regular rates of pay as required by the FLSA and NJWHLR.  The complaint also alleges that Defendants unlawfully kept the credit card tips and catering tips without distributing them to the restaurant workers.

The complaint seeks to represent the following putative FLSA collective members with respect to the federal claims:

All hourly-paid restaurant workers employed by Defendants at any time from three (3) years prior to the filing of this Complaint through the date of judgment.

The complaint also seeks to represent the following putative Rule 23 class members with respect to the New Jersey claims:

All hourly-paid restaurant workers employed by Defendants in the State of New Jersey at any time from two (2) years prior to the filing of this Complaint through the date of judgment

Mr. Gonzalez brings this collective and class action on behalf of himself and all other similarly situated hourly-paid restaurant workers to recover unpaid overtime wages, unlawfully kept tips, liquidated damages, pre- and post- judgment interest, and reasonable attorneys’ fees and costs.

The case is Gonzalez v. Fast Causal Partners, LLC d/b/a Moe’s Southwest Grill, et al., Case No.: 2:18-cv-13840-SRC-CLW.

The plaintiff is represented by Brown, LLC (formerly the JTB Law Group).

If you have any questions or information to provide about the above article, you may contact the following attorneys:

Nicholas Conlon; nicholasconlon@jtblawgroup.com; (877) 561-0000
Ching-Yuan (“Tony”) Teng; tonyteng@jtblawgroup.com; (877) 561-0000

South Carolina Judge Enters Judgment for $114M in Favor of Whistleblowers

The United States government suffers an astronomical loss in the billions each year due to fraud in the healthcare industry. Doctors, laboratories, and many healthcare facilities commit fraud in many different ways. When misconduct occurs in these facilities and the patient is insured through a governmental program, such as Medicare or Medicaid, then it means money is being stolen from the U.S. government.

Early in 2018, a judge in South Carolina entered a judgment  that totaled $114 after three whistleblower cases were investigated. A number of health care facilities and doctors were linked to the case, all of whom were held responsible for the fraud they had committed. The evidence in regards to the fraudulent activity was brought forward by employees of these facilities.

Whistleblower Cases Against Health Care Facilities In South Carolina

After three whistleblower cases were filed this year, a South Carolina judge entered a judgment against them for $114M, payable by the healthcare institutes that were involved in the Qui Tam cases. This judgment was made after a jury at Charleston, SC, found the defendants in the case guilty for defrauding Medicare, a health care program that is funded by the government.

Three Qui Tam cases were filed, and the litigation of the three cases was conducted together. Only one of the whistleblowers involved in these cases testified in the courtroom.  Evidence was made available that proved these companies were paying certain physicians to order blood tests from the laboratories that were completely unnecessary. These drug tests yielded large fees, which were claimed from the federally funded insurance program of the patient. The physicians who participated in the fraud were instructed only to seek out patients who were insured by Medicaid or a similar healthcare agency.

In many cases, some expensive blood tests were ordered for cardiovascular diseases that the patient did not have. The doctor was, in turn, paid a $20 fee for ordering these tests. The pay to play or kickback scenario sometimes triggers violations of the Anti-Kickback statutes or if there is self-dealing the Stark Act.

The investigation found that Health Diagnostic Laboratory had submitted a total of 35,074 claims to government health care programs. Another 3,813 claims linked to these frauds were submitted by Singulex, a blood laboratory based in California.

Conclusion

Whistleblowers play an important role in the recovery of money lost by the government due to fraud in the healthcare industry. The case against Quest Lab, Singulex, and the Health Diagnostic Laboratory allowed the government of the United States to recover $114M in losses caused by fraudulent activities from these institutes. While no specific data was released regarding the awards issued to the whistleblowers, the reward amount was likely between $17.1M and $34.2M, divided between the employees who brought up the Qui Tam lawsuits. If you know of any healthcare fraud, Medicare Fraud, Medicaid Fraud or anyone else defrauding the government you should speak with a whistleblower law firm like Brown, LLC who offers free consultations and can advice you on your rights.

How Do Whistleblower Cases Combat Fraudulent Activity in the Health Care Industry?

Thousands of health care facilities have had to pay an aggregate of billions of dollars in penalties for committing fraud against the government and the taxpayer in the form of Medicare Fraud and Medicaid Fraud.  When employees of a facility committing fraud detect the misconduct, they can come forward with accusations and file a whistleblower case, also known as a Qui Tam action.

For some actions, like CFTC whistleblower actions, SEC whistleblower actions, and IRS whistleblower actions, the identity of the individual can remain confidential throughout the entirety of the process.  For the most common case filed, under the False Claims Act (FCA), while the identity of the whistleblower is initially sealed from the defendant, it is revealed when the case becomes unsealed after the government has had time to investigate the matter.  Many employees fear the potential consequences of their actions, but certain and aggressive laws have been implemented to ensure these employees are not only rewarded but also thoroughly protected against retaliation.

How Whistleblower Cases Work

Understanding how Qui Tam lawsuits work is an important factor for employees who witness fraudulent activity in their workplace. When an employee in the healthcare industry finds that their employers is conducting fraud – such as when false claims are made to the patients’ health care policies, then the employee may come forward with evidence in order to file a case against their employer.  This fraud may happen in many ways such as overbilling, upcoding, billing for services not rendered, and a variety of other health frauds that are often creative ways to overbill Medicare and Medicaid.

The False Claims Act specifies that any citizen is able to sue a business or a person who conducts fraud that leads to a loss of governmental funds. If you suspect or know of a fraud, you should consult with a Qui Tam attorney to learn about your rights and the pros and cons of proceeding with a whistleblower lawsuit.

The only parties who will be notified of the lawsuit during the early stages of the case are the government. The case is kept secret from the party that is being accused. The government can then decide if they would like to intervene in the case. If the government decides not to intervene, the whistleblower can still continue with the case with the whistleblower attorney they have retained to represent them.  Under the False Claims Act, you must have an attorney to file the case with you; you can not file the case without one.

The government after reviewing the complaint will conduct what is known as a relator interview, that is it will sit down and interview the individual complaining of the fraud.  From that interview it will determine whether there are any leads that should be followed, the course of the qui tam investigation and whether to intervene or not.  At some point the Defendant will be made aware of the investigation, and the whistleblower will be given a head’s up before that occurs.

If the case is settled, or if there is a judgment obtained, and the government has recovered the funds they have lost due to the fraudulent activity, a reward between 15% and 30% the settlement amount is provided to the whistleblower.

Conclusion

Even though many individuals observe misconduct in the workplace, often resulting in fraud, employees are often not sure what to do about it or how exactly whistleblower cases work. Fortunately, with appropriate guidance, the whistleblower can put together a solid case and even be rewarded in the process. Choosing the right lawyer becomes an essential factor here, so it is important to consult with a firm like Brown, LLC who has successfully handled whistleblower cases in the past, and can educate you about your rights.

CareCore National LLC Pays $54M Settlement In Qui Tam Case

An investigation that started in February 2013 resulted in the settlement of a Qui Tam case against CareCore National LLC. A licensed nurse who was employed at CareCore National LLC came forward with evidence of the unlawful practice that was being conducted. After two law firms represented the nurse, a False Claims Act (FCA) lawsuit was filed under seal with the federal court in Southern District of New York. The settlement called for CareCore to pay $54 million. Since the case was filed using the provisions in the FCA, the whistleblower award of roughly 20% or $10 million dollars will be given to the woman who had the courage to bring this matter to the government’s attention through her whistleblower lawyer.

The Qui Tam Case Against CareCore National LLC

On the 21st February 2013, a whistleblower case was filed secretly, under seal, against the health care agency CareCore National LLC. A licensed nurse, known as the relator in the case, brought evidence of misconduct in her workplace to two whistleblower law firm who focus on prosecuting these violations.

CareCore National LLC is a company based in Bluffton, South Carolina. They have several branches throughout the United States. The company provides an authorization service for doctors and other facilities who need to verify whether specific types of tests need to be conducted on patients, ultimately promoting their services as a cost-saving way to ensure only the necessary tests are performed on a doctor’s patients.

When any information is missing from a submitted file or when the authorization request submitted to the company does not comply with the set criteria, then nurses are instructed to submit them back to the doctor who originally submitted the request. The doctor would then be requested to review the request and provide the data that is missing from the authorization request.

According to the nurse who brought the whistleblower case forward, however, the company instructed nurses to instead rubber stamp all authorization requests as “Process As Directed.” This means the request is not submitted back to the doctor for review, but rather passed on and the tests are authorized, even when they are not truly necessary. In turn, this led to thousands of patients undergoing diagnostic tests like MRIs, even when not necessary to assist in their diagnosis. Claims were made from federally funded insurance providers. Ironically, the process was nicknamed P.A.D. and jokingly referred to as Padding the bill, which is not joke to taxpayers who every year have to foot the bill for billions of dollars in Medicare and Medicaid Fraud.

Conclusion

Thousands of whistleblower cases against healthcare organizations are filed each year with whistleblowers exposing corruption in such areas as Medicare and Medicaid Fraud.   The False Claims Act provides a way for the government to be repaid for fraudulent misconduct that causes them a loss. These cases play a vital role in preventing further fraud and bringing existing fraudulent activity against federally funded health insurance plans to the attention of the right lawyers who focus on whistleblower cases. If you’re wondering “How do I blow the whistle?” or “Do I have a whistleblower case?” you should speak with a whistleblower law firm like Brown, LLC who can provide a free confidential consultation.

What is a CFTC Whistleblower?

The CFTC Whistleblower program is an acronym for the Commodity Futures Trading Commission Whistleblower program.  The program is designed to provide whistleblower awards for the insiders or those with detailed information regarding violations of the Commodity Exchange Act.  The information must lead to the CFTC bringing a successful enforcement action.  As with other whistleblower programs, the CFTC has an anti-retaliation provision that prohibits taking action against someone who commences a CFTC action.  It is strongly recommended that someone considering commencing any qui tam lawsuit retain whistleblower counsel, particularly a CFTC whistleblower lawyer (like Brown, LLC – formerly JTB Law Group, LLC) to assist with navigation through the whistleblower process.

CFTC Covered Actions

A term of art in the CFTC whistleblower program is “Notices of Covered Actions.” A Notice of Covered Action refers to when the CFTC is successful with a settlement or judgment in excess of 1 million dollars in economic sanctions against a defendant.  One must vigilantly check the Notices, since if you submit a TCR, which is the form to file a CFTC whistleblower complaint, then you have 90 days from the Notice to apply for the award.

Commodity Exchange Act

The Commodity Exchange Act (CEA) is what regulates the trading of commodity futures.  You can read the full act here at 7 USC 1 – 27f.  Basically, there are many different ways in which futures can be the subject of a whistleblower action.  Insider Trading, pumping and dumping, blasting the news groups to manipulate the market, putting the interest of the company before the client to name a few.  Inherently, the nature of futures trading sounds sophisticated, and some of its designs are traps to separate the unwary from their money.  Further, in a complex system oftentimes individuals and companies find ways to corrupt if for their own economic benefit which is what the CFTC Whistleblower program seeks to remedy.

CFTC Whistleblower vs. SEC Whistleblower

An SEC whistleblower is someone who provides information regarding a publicly traded company where generally the company is violating various SEC provisions.  The CFTC whistleblower program is limited to commodities and futures trading.

CFTC Final Orders and Award Determinations

It is important to review the CFTC Final Orders and Awards page to try and ascertain whether information you provided has been acted upon.  On August 2nd, 2018, The Commodity Futures Trading Commission (CFTC) announced record breaking whistleblower awards totaling $45 million dollars. The CFTC pointed out the increased amounts reflect the “growing success of the CFTC’s Whistleblower Program, in particular the increasing volume and complexity of incoming whistleblower submission.”  Attached is a sample highly redacted order which you can view some whistleblowers received significant whistleblower awards and some had their requests denied.

CFTC Whistleblower Law Firm

Whistleblower Law is highly complex and always evolving.  There’s very stringent ways to file a whistleblower lawsuit and if you run afoul your case may automatically lose based on procedural technicalities.  If you have information regarding commodities or futures frauds, you should speak with a CFTC lawyer right away.  The lawyers at Brown, LLC protect CFTC whistleblowers and offer free confidential consultations and can speak with you after hours or during the weekend when its most convenient for you, but even if you don’t speak with our whistleblower law firm, you should consult with a whistleblower lawyer as soon as possible to protect your rights and to assist you in filing your CFTC claim.

New York’s False Claims Act – Alive & Well!

New York is one of the few states that has a very robust False Claims Act (FCA) that enables the state to go after tax cheats to a greater extent. On August 30th, 2018 the Appellate Court in New York allowed a case to proceed alleging a massive tax fraud that was initially dismissed at the trial level. An anonymous whistleblower filed a case against Moody’s alleging tax fraud. The allegations are highly technical in one sense, “Plaintiff relator asserts claims on behalf of the State and City against Moody’s under section 189(g) of the State Finance Law (the False Claims Act [NYFCA]), alleging that Moody’s “knew that MAC . . . did not qualify for the protections of the laws governing captive insurance companies,” yet submitted “materially false and fraudulent” tax returns treating MAC as a legitimate captive.” In another sense the allegations boil down to what they generally do, that the company cheated on its taxes, thereby cheating the taxpayer. The case against Moody’s is still in the allegation phase and although the Court is allowing the case to proceed indicating it has been pled with sufficient specificity it has made no decision regarding the underlying merits.

A relator is someone who brings an action on behalf of the government through a qui tam action, otherwise known as a whistleblower action. There are many different types of whistleblower claims New Yorkers or those who have information regarding New York violators of the law can bring. They include:

• Medicaid Fraud
• Tax Fraud
• Off the Books Employees (Tax Fraud)
• Revenue Concealment (Tax Fraud)
• Use of Dummy Companies (Tax Fraud)
• Defrauding the State Government
• Bid Rigging
• Kickbacks

Also, many cheats also involve defrauding the federal government which would implicate the Federal False Claims Act (FCA) as well for things like:

o Medicaid Fraud
o Defense Contractor Fraud
o IRS Fraud
o SEC Whistleblower Fraud
o CFTC Whistleblower Fraud

The whistleblower statutes are dense and complex and require navigating them the right way. In contrast to other areas of law, if you don’t file something properly under seal to commence your whistleblower lawsuit you may forfeit your right to an award.

Therefor, it is critical to consult with a New York Whistleblower lawyer to educated yourself about your rights and protect you if you decide to proceed. Some statutes, like the SEC Whistleblower provisions may enable you to proceed anonymously from start to finish with the use of an SEC whistleblower or CFTC whistleblower lawyer. Others, like the False Claims Act require the use of a qui tam law firm in order to receive a qui tam award. If you believe you a New York Whistleblower claim, you should speak with a whistleblower lawyer who has a track record of success to guide you through the process. Each day of delay compounds the risk that you are not the first to file which can deprive you of an award or that even worse if you knew about the fraud and failed to blow the whistle, you may be looked as a target in the investigation if someone beats you to the punch. Consider having a free confidential consultation with a New York whistleblower law firm before someone else who knows about the fraud does.

The Best Advice for Whistleblowers

As a whistleblower lawyer who handles cases all over the country from Jersey City to San Francisco, I have the greatest amount of respect for people who have the courage to come forth and put it all on the line to blow the whistle on things they know are wrong and need to be righted. The companies who engage in these frauds are the villains, and the whistleblowers deserve to be knighted.

Each year I compile a list of lessons learned and try to impart the wisdom of our whistleblower law firm onto those that are thinking of blowing the whistle, but don’t know what do. Here is my 2018 list of advice for whistleblowers.

Patience is a Virtue

Good things happen to people who know how to wait, but not to those who wait too late. There’s many different ways to blow the whistle, whether it’s through the False Claims Act (FCA) which addresses defrauding the government via companies committing Medicare Fraud, Medicaid Fraud and Defense Contractor Fraud, SEC Whistleblowers who disclose when the financial companies don’t have the best interest of the clients in mind including inside trading, pump and dumps, cryptocurrency and ICO fraud, CFTC whistleblowers who blow the whistle on the commodities frauds, and IRS whistleblowers who have substantial information regarding tax cheats. Due to the first filed rule, you need to make sure that you promptly file your case if its actionable, but don’t expect things to happen overnight. Sure, some of False Claims Act lawsuits take a year, but generally it’s a long process with extended periods of quiet time and once the FCA complaint is filed its out of your hands for a bit while the government decides what it’s going to do. Make sure you’re working with a False Claims Act law firm that you feel you have a connection with and that is affirmatively going to update you about your case and that you can reach out to on a regular basis even when nothing is going on to speak about your whistleblower case and answer all your questions – even if it’s again and again! A good qui tam lawyer will have gone through the qui tam process many of times, and this is probably your only time. It shouldn’t ever be a bother for them to comfort you in your time of need and curiosity. Some cases can take five or six years to play out and some longer. Remember to enjoy the road, because it’s a long one; don’t just think about the destination.

Think about your Parachute

The whistleblower statutes contemplate cases coming from those on the inside, in a superior position to provide information of wrongdoings, corporate fraud, and outright cheats. A good insider is generally an employee or close to those that will be held accountable when the case is ultimately disclosed. Even though almost every whistleblower statute imaginable has a provision that prohibits whistleblower retaliation, it will happen. The timing may be out of your control about when your identity is disclosed or when the company will conduct an internal hunt for who it thinks could be cooperating, but you have a running start since you’re the one commencing the action. Start to think about what your options are if you have to leave the company. Work on your resume. Look for other opportunities. Also, consider depending on how radical the fraud is do you really want to continue working at the company. We all need to make a living, but if you feel you’re compromising your soul, you need to search whether it’s worth it. Some egregious frauds we’ve encountered are Medicare Frauds where the doctors perform unnecessary surgery just so they can bill for it, Defense Contractor Fraud, where the company takes a shortcut and puts our soldiers at risk, and things like churning and bilking people’s accounts in the SEC context, where the company is hiding fees, taking fees, or doing other things to exploit people’s investments and retirements. You should think about your exit strategy early and generally when you’re still employed it’s an easier time to find new work. Further, it will be easier to find new work before the extent of the fraud of the company becomes public or else when you’re interviewing the taint of the dirty company may make it harder to find a new job.

Find a Whistleblower Law Firm You Feel Comfortable Working With

While the qui tam lawyers at our firm are personable, hardworking and have a track record of success, the chemistry needs to be right between our firm and the whistleblower we’ll be working with for us to consider representation. We’ve turned down cases that are actionable False Claims Act cases because we didn’t think there would be good chemistry and you should be discerning as well. Questions you should consider are will you have access to the qui tam lawyers handling your case, the head of the firm, and can the whistleblower lawyers contact you after hours or on the weekends when it may be easier for you to speak.

There is a proverb in the legal realm that a person who represents his or her own self in court has a fool for a client. There’s quite a bit of information and misinformation online regarding qui tam lawsuits. One thing is for certain; as of this writing in order to file a False Claims Act lawsuit, you must use a lawyer. That is, you cannot bring the action yourself pro-se without an attorney. You shouldn’t do it anyway, as even an attempt to file a whistleblower action the wrong way could result in you losing your case right from the start.

I hope these points added some guidance to you if you’re thinking about filing a whistleblower lawsuit. Even if our dedicated team of whistleblower lawyers is not the right fit for you in the long-term, we’d love to speak with you about your potential case in the short-term and go over in depth whether we help you with your matter or at least steer you in the right direction. We protect whistleblowers coast to coast, so whether you’re in Jersey City or San Diego, Houston, or Tampa or anywhere in between, feel free to call our whistleblower lawyers at (877) 561-0000, for a free whistleblower consultation and no matter what, we’ll wish you the best of luck with your qui tam case.

Trump Administration Impact of Whistleblower/Qui Tam Cases

One thing everyone should be able to agree on is that taxpayer fraud hurts us all.  Its hard to find someone who likes paying taxes and part of the reason they’re so high is because of all the waste, fraud and abuse in government.  People are wonderful.  They do things to help each other even when they don’t have to.  The flip side of the coin, is that people are sometimes disinterested or don’t want to involve themselves in a situation and become a whistleblower.  The qui tam process is a complicated one and without the right whistleblower lawyer it can become a maze that you might never escape.  The other coin itself is the fraud.

In recent years, billions upon billions of dollars have been recovered using a statute know as the False Claims Act (FCA) in which individuals who have the courage to come forward and file a complaint can receive a whistleblower award up to 25% of the recovery.  When you do the math that means hundreds of millions of dollars have gone to whistleblowers in recent years.

This blog is meant to be apolitical and not meant to stimulate a discussion regarding personal opinions about the new administration.  It is however, a discussion of the trends affecting qui tam and whistleblower laws over the last few years.

Although not directly related to this administration, but emerging roughly at the same time, a landmark case was decided called Escobar dealing with the issue of materiality in FCA complaints. The concept of materiality is whether the complained about violation really hurts the taxpayer or is just a very technical one.  One example is in the defense contract context.  The contract with the federal government may call for all sorts of requirements before billing the government for work rendered, including pre-approval from a certain officer.  Let’s say tens of millions of dollars of work were done and paid, but that officer never approved the work.  Even though technically, this could be considered a false claim, the Courts and the government will look to see whether the government would have approved the work anyway.  If the answer is yes, then the violation would not be considered material and you will in all likelihood lose your case under Escobar. 

The new administration has been taking a different posture with cases it declines.  Understanding whistleblower litigation, a case must be filed under seal and the government first decides whether it wants to intervene or not.  In the distant past non-intervention was close to death to a case. Then there was a wave of cases that succeeded without the government’s assistance.  Now, the United States Attorney’s Office has sometimes been taking the position that if there is not an intervention, they may insist or move for a dismissal.  My opinion may depart slightly from the other whistleblower lawyers who think this is a bad thing.  I think if the government weighs in early and says it does not view the violation as material it’s a good thing.  Why go through years of a case if the arbiter for the taxpayers, the government, says it wasn’t harmed can there be a harm?  I won’t take a 100% definitive position on that, because I can envision a massive fraud where a bureaucrat makes the wrong call about the harm, and that’s why there’s the chance to tee up issues like this to the Court.

Another area where the new administration is impacting whistleblower laws is by ending the practice of issuing guidance for regulations.  The guidance was sometimes used as support and less frequently as a basis to commence False Claims Acts.

The final areas to keep an eye on in the relator share or the whistleblower award amount.  In a successful qui tam case the whistleblower is graded in many different areas to determine what percentage of what recovered monies they are entitled to.  Anecdotally, it appears they are trying to knock down the percentage to the whistleblower.  While this may bring more short term gain to the government, it is myopic since it may discourage other whistleblowers from coming forward.

Keep in perspective – many whistleblowers are extremely courageous individuals who do the right thing and run the risk of being fired from their job, being harassed, and suffering other backlash.  Some of what they blow the whistle on is the most distasteful of frauds in the Medicare Fraud and Medicaid Fraud arena.  Medicare Fraud Whistleblowers sometimes blow the whistle on unnecessary services that are so extreme, that doctors are willing to perform unnecessary surgery just to line their own pockets.  That’s horrific and needs to be prioritized and eradicated.

It’s only year 2 into this new administration as of this writing, so we’ll keep an eye on these emerging trends in whistleblower laws.  Remember, if you need a whistleblower lawyer, the qui tam lawyers at Brown, LLC will offer you a free consultation and are only paid if they win your case.

Dynamex is Dynamite

An explosive legal opinion was issued by the California Supreme Court in April of this year, as they weighed in on a landmark land mined issue that is sure to impact and proliferate more California Wage & Hour Lawsuits.  A question that has always plagued companies is what constitutes an employer/employee relationship versus an employer/independent contractor relationship.  The California Supreme Court answered a few questions that people ponder such as:

“Am I an independent contractor or an employee?”

“In California how can I tell if I’m an employee or an independent contractor?”

“Am I entitled to overtime in California?”

The California Independent Contractor vs. Employee test is called the ABC Test, although some would argue there is nothing ABC about it.

The first and most important facet of the way the California Supreme Court addressed the issue is to view it from the prism that by default workers are employees, not independent contractors, and the employer has the burden to show otherwise.  In furtherance of illustrating that a worker is indeed an independent contractor and not an employee, the employer must establish all three prongs of the ABCs:

(A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(B) The worker performs work that is outside the usual course of the hiring entity’s business; and

(C) The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

Another fascinating aspect of the ruling is its retroactivity, meaning the Court’s ruling is applicable to past situations, not just issues moving forward.

This case has massive implications to various different industries from exotic dancers to construction workers, from mechanics to temp workers.  Almost anyone can be viewed as an employee versus an independent contractor under the California standard and may be owed significant amounts of overtime and damages.

In recent years, class actions have been stymied by the use of arbitration clauses.  However, California also has a law called the Private Attorney General Act, also known as PAGA, which essentially deputizes the individual to bring an action through the government, and since the government can not be hamstrung by arbitration, then the case can proceed in court.

Forward thinking individuals may also anticipate a wave of Tax Qui Tam actions, also known as IRS whistleblower actions, as for larger companies that avoided paying millions in taxes there may be tax consequences.  This is a complicated issue as there may also be back taxes owed by the employee who was formerly considered an independent contractor.  Also, one should not forget if they are in the health care or defense contractor industry, the False Claims Act (FCA) and California False Claims Act may kick in if there is other ways in which the company is defrauding the government.

Dynamex has tilted the playing field to allow workers to receive rights and protections as workers, not just being able to summarily cast them out when someone is inconvenient to the company without consequences.  In order to see how Dynamex affects you or to learn more about your California overtime rights, whether you’re an independent contractor or an employee, call our wage and hour lawyers at (877) 561-0000. For wage and hour lawsuits and consultations, there is no money up front, the conversation is confidential, and the firm is only paid if we win your case.