ADDDITIONAL CASES Anthony Belfiore, individually and on behalf of all others similarly situated, Plaintiff v. The Procter & Gamble Company, Defendant; 14-CV-4090 MEMORANDUM & ORDER ON REMAND I. Introduction Widely scattered about the country, individual consumers and other actors, including municipalities, have sued the retailers and manufacturers of “flushable” toilet wipes — moist towelettes intended for use in place of, or in addition to, toilet paper. They allege that the toilet wipes are not flushable as advertised. In the present litigation, plaintiffs are consumers. Plaintiff Kurtz and Plaintiff Belfiore (collectively, “Plaintiffs”) brought suit against Kimberly-Clark Corporation (“Kimberly-Clark”), Costco Wholesale Corporation (“Costco”), and The Procter & Gamble Company (“Procter & Gamble,” and collectively with Kimberly-Clark and Costco, “Defendants”) in 2014, alleging a host of causes of action. In December 2017, this court certified injunctive relief and damages classes of New York consumers who alleged a violation of New York State consumer law. Defendants appealed. After briefing and oral argument, the Court of Appeals for the Second Circuit remanded a critical damages issue to this court: In particular, we note our specific concern with the Plaintiffs’ proof that they can establish the injury and causation elements of their claims at trial with common evidence…. On remand, the district court should offer the parties the opportunity to submit additional evidence and should then assess whether the Plaintiffs have ‘affirmatively demonstrated [their] compliance’ with Rule 23(b)(3)’s predominance requirement…. After further review of the record, the district court should choose whether to decertify the damages classes or maintain the current certification orders. Kurtz v. Costco Wholesale Corp., 768 F. App’x 39, 41 (2d Cir. 2019) (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011) (alteration in original)). This court, having held substantial post-mandate evidentiary hearings with extensive evidence and briefs, concludes that its current certification orders are appropriate. Plaintiffs prepared and provided to this court expert reports opining that there is a marketwide price premium for wipes labeled as flushable. Their expert developed and performed hedonic regression analyses to arrive at this conclusion. Each of Defendants’ experts has advanced a litany of alleged problems with Plaintiffs’ expert’s regression theory and his actual computation, including his attempts to meet Defendants’ experts’ criticisms. The post-mandate evidentiary hearing was conducted over four days, during which four experts testified. Plaintiffs’ expert was credible and demonstrated his methodology to be reliable. Defendants’ experts’ criticisms were unpersuasive as to the issue before the court — whether Plaintiffs can demonstrate causation and injury by common evidence. Following post-hearing briefing and oral argument, the parties’ motions to exclude opponents’ experts are rejected under the Federal Rules of Evidence. As to the class certification issue, Plaintiffs have met their burden and demonstrated that the injury and causation elements of their claims can be proven with common evidence. Individual issues are not a basis for denying certification. Common issues predominate. This court renews its prior certification of the classes under Federal Rule of Civil Procedure 23(b)(3) for the reasons set out below. II. Background A. Plaintiffs and Their Claims The facts underlying these litigations are discussed at length in the court’s decision certifying the classes. See Kurtz v. Kimberly-Clark Corp., 321 F.R.D. 482, 508-20 (E.D.N.Y. 2017). In sum, Plaintiffs Belfiore and Kurtz allege that they purchased flushable toilet wipes manufactured or sold by Defendants that are not flushable even though they are advertised and labeled as having the characteristic of flushability. Id. at 493. Plaintiff Belfiore purchased Charmin Freshmates, manufactured by Defendant Procter & Gamble. Id. at 508. Plaintiff Kurtz purchased Defendant Kimberly-Clark’s Cottonelle wipes and Defendant Costco’s Kirkland flushable wipes. Id. Plaintiffs claim that they paid more than they should have for the wipes because they were advertised as being flushable and are not. Id. at 493. At this juncture of the litigation, at issue are claims brought under New York’s consumer protection statutes, General Business Law Sections 349 and 350. Id. at 525-26. New York General Business Law Section 349 prohibits deceptive acts in the conduct of any business, trade, or commerce. N.Y. Gen. Bus. Law §349(a). New York General Business Law Section 350 prohibits false advertising in the conduct of any business, trade, or commerce. Id. §350. For their claims to succeed, Plaintiffs must prove that each defendant has engaged in consumer-oriented conduct that is materially misleading and that they suffered an injury as a result. Koch v. Acker, Merrall & Condit Co., 967 N.E.2d 675, 675 (N.Y. 2012); City of New York v. Smokes- Spirits.Com, Inc., 911 N.E.2d 834, 838 (N.Y. 2009); see also In re Scotts EZ Seed Litig., 304 F.R.D. 397, 409 (S.D.N.Y. 2015). Conduct is materially misleading if it makes representations or omissions that are “likely to mislead a reasonable consumer acting reasonably under the circumstances.” Gaidon v. Guardian Life Ins. Co. of Am., 725 N.E.2d 598, 604 (N.Y. 1999) (internal quotation marks and citations omitted); see also Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009). Suit was also brought under New York State common law. These claims are irrelevant for purposes of class certification. B. March 2017 Class Certification Decision and Subsequent Appeal Following extensive briefing and multiple hearings, in 2017, this court certified three classes under Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3): 1. “All persons and entities who purchased Charmin Freshmates in the State of New York between May 23, 2011 and March 1, 2017.” Kurtz, 321 F.R.D. at 554-55. 2. “All persons and entities who purchased Kimberly-Clark Flushable Products in the State of New York between February 21, 2008 and March 1, 2017.” Id. at 555. “Kimberly-Clark Flushable Wipes” are flushable, moist wipe products sold under the Cottonelle, Scott, Huggies, PullUps, U by Kotex, and Poise brands. Id. at 527. 3. “All persons and entities who purchased Kirkland Signature Flushable Wipes in the State of New York between July 1, 2011 and March 1, 2017.” Id. at 555. This court concluded that the requirements of Rules 23(b)(2) and 23(b)(3) were met. Id. at 527-54. The decision was made, in part, in reliance on Plaintiffs’ expert Colin B. Weir’s reports explaining his price premium damages model, which relied on a hedonic regression analysis. Id. at 550 (“The defendants challenge Mr. Weir’s premium damages model as insufficient to establish classwide injury or causation…. The model is sufficient for certification.” (internal citations omitted)). An interlocutory appeal was filed. Defendants argued, among other matters, that Plaintiffs had not met their burden of showing that common issues will predominate because they had not demonstrated that they can establish injury and causation by common proof. Kurtz, 768 F. App’x at 40. In particular, Defendants contended that Plaintiffs’ allegation that Weir could prove causation and injury using a hedonic regression analysis — common evidence — was not sufficient proof of compliance with Rule 23(b)(3)’s predominance requirement that questions of law or fact common to class members predominate over any questions affecting only individual class members. Id. Concluding that the record at that time did not allow the Court of Appeals to determine whether Defendants’ predominance argument had merit, the case was remanded to the district court to “offer the parties the opportunity to submit additional evidence and…then assess whether Plaintiffs have ‘affirmatively demonstrated [their] compliance’ with Rule 23(b)(3)’s predominance requirement.” Id. at 41 (quoting Wal-Mart, 564 U.S. at 350 (alteration in original)). C. Remand to District Court; Subsequent Proceedings; Experts Upon remand, this court scheduled an evidentiary hearing. See Order, 14-cv-1142, ECF No. 311. The hearing was adjourned to allow the parties time to conduct discovery and obtain expert analyses. See Order, 14-cv-1142, ECF No. 325. Discovery on the issues was allowed. See Scheduling Order, 14-cv-1142 (July 8, 2019). Plaintiffs submitted to the court three expert reports from Weir, one for each defendant. See Suppl. Decl. Kimberly-Clark Colin B. Weir, 14-cv-1142, ECF No. 377 (“Weir Suppl. Decl. Kimberly-Clark”) (filed under seal as Suppl. Decl. Kimberly-Clark Colin B. Weir, 14-cv-1142, ECF No. 337); Suppl. Decl. Costco Colin B. Weir, 14-cv-1142, ECF No. 378 (“Weir Suppl. Decl. Costco”) (filed under seal as Suppl. Decl. Costco Colin B. Weir, 14-cv-1142, ECF No. 339-1); Suppl. Decl. Procter & Gamble Colin B. Weir, 14-cv-4090, ECF No. 329 (“Weir Suppl. Decl. Procter & Gamble”) (filed under seal as Suppl. Decl. Procter & Gamble Colin B. Weir, 14-cv-4090, ECF No. 295-1). Defendants submitted rebuttal reports. Suppl. Rebuttal Decl. Keith R. Ugone, Ph.D., 14-cv-1142, ECF No. 376 (“Kimberly-Clark Ugone Suppl. Decl.”) (filed under seal as Suppl. Rebuttal Decl. Keith R. Ugone, Ph.D., 14-cv-1142, ECF No. 344); Suppl. Expert Report Denise Martin, Ph.D., 14-cv-1142, ECF No. 380 (“Costco Martin Suppl. Decl.”) (filed under seal as Suppl. Expert Report Denise Martin, Ph.D., 14-cv-1142, ECF No. 342-1); Expert Report Carol A. Scott, Ph.D., No. 14-cv-4090, ECF No. 328 (“Procter & Gamble Scott Suppl. Decl.”) (filed under seal as Expert Report Carol A. Scott, Ph.D., No. 14-cv-4090, ECF No. 301); Errata to Expert Report Carol A. Scott, Ph.D., dated July 26, 2019, ECF No. 300-1. A full evidentiary hearing was conducted beginning on August 6, 2019. See Evid. Hr’g Tr. Each expert testified, as did a fact witness for Defendant Kimberly-Clark, Ken Champa. Champa is senior brand manager for Kimberly-Clark’s Cottonelle brand; he testified about Kimberly-Clark third party data usage, pricing of Kimberly-Clark flushable wipes products, competition for those products, consumer purchase motivations, and product and packaging changes. See id. 238:16-330:20. The experts’ reports and their testimony is described below. 1. Colin B. Weir Weir is Vice President at Economics and Technology, Inc. (“ETI”), “a research and consulting firm specializing in economics, statistics, regulation and public policy.” Weir Suppl. Decl. Kimberly-Clark 1; Weir Suppl. Decl. Costco 1; Weir Suppl. Decl. Procter & Gamble 1. He holds an M.B.A., with honors, from the High Technology Program at Northeastern University and a B.A. cum laude in business economics from The College of Wooster. Id. Prior to joining ETI, he worked at Stop and Shop Supermarkets for seven years, as head of a cash department, grocery/receiving clerk, and price-file maintenance head. Id. Since joining ETI, he has consulted on a number of consumer and wholesale products matters. Id. Weir has provided expert testimony before federal and state courts, the Federal Communications Commission, and state regulatory commissions. Id. During the pre-remand class certification proceedings, Weir submitted expert reports proposing three damages models: (1) full compensatory damages, (2) statutory price premium damages, and (3) statutory damages. Kurtz, 321 F.R.D. at 523. In those reports, Weir “propose[d] using hedonic regression analysis, a tool that purports to measure the value of various product attributes in order to demonstrate the existence of, and to isolate the amount of, a price premium attributable to [D]efendants’ use of ‘flushable’ in merchandising.” Id. At that time, Weir proposed relying on evidence from Defendants, industry resources, and independent market research data; he provided a preliminary list of product attributes on which he would rely to run his analysis. Id. Weir carried out his proposed hedonic regression analysis after remand. As detailed in his reports and during the evidentiary hearing, this entailed several steps. First, Weir collected two types of data: sales data and product attribute data. Sales data was gathered from several sources. Weir obtained from IRI weekly sales of flushable wipes, other wipes, and toilet tissue from February 2010 through May 2019 in New York State. Weir Suppl. Decl. Kimberly-Clark 46; Weir Suppl. Decl. Costco 47; Weir Suppl. Decl. Procter & Gamble 44. IRI is a market research company that collects sales data from retailers and makes that data available to companies and market researchers. See Evid. Hr’g Tr. 15:13-21; see also About Us, IRI, https://www.iriworldwide.com/en-US/Company/About-Us (last visited Oct. 24, 2019) (“IRI integrates the world’s largest set of otherwise disconnected purchase, media, social, causal and loyalty data to help [consumer packaged goods], retail, over-the-counter health care and media companies grow their businesses.”). Another company, Nielsen, operates in the market research business and competes with IRI. See Evid. Hr’g Tr. 17:17-25. Third party market research of this kind is generally relied on by Defendants. Id. 16:10-23; Weir Suppl. Decl. Kimberly-Clark 47; Weir Suppl. Decl. Costco 48; Weir Suppl. Decl. Procter & Gamble 45. In Weir’s extensive experience “major businesses in the United States either use Nielsen or IRI data on a routine basis.” Evid. Hr’g Tr. 18:1-12. Weir obtained data from IRI for nationwide products after conducting product research, including a review of top selling brands of wipes and of product labels with label claims useful for a comparison. Id. 31:4-32:17, 33:18-34:12. He chose the same products as he did for the hedonic regression analysis he had performed in a flushable wipes consumer action brought against Defendant Procter & Gamble in the United States District Court for the Northern District of California, Pettit v. Procter & Gamble Company, No. 15-cv-2150, since the products used in that analysis were sold nationwide. Evid. Hr’g Tr. 31:4-32:17. He received statistical results that satisfied him as an expert that the data was appropriate for use in New York. Id. Weir noted that his statistical analysis does not require the inclusion of data for every product to arrive at “a statistically reliable result[.]” Id. 20:16-21. Most IRI sales data is at the level of actual, individual transactions obtained from retailers, while about 15 percent of the sales is estimated by IRI. Id. 18:13-25. The identity of private label products is generally masked. Id. 19:1-15. Weir properly confirmed the accuracy of the IRI data prior to using it: Q What did you do to confirm that the IRI data was accurate? A I looked at a number of indicia of the IRI data including its use by companies generally and defendants in this case. I looked at information provided by IRI to understand their data collection methods. There are other data sources, I think this is now going back five years so I apologize that my memory may not be perfect, but there were other sources of data against which I was able to compare the IRI data to determine that they were in agreement across multiple sources. Q So what sources of data did you compare [with] the IRI data you used? A There were, and I haven’t looked at them recently, but there were other sales data that were provided to me back in 2015 against which I was able to compare the then current IRI data. Id. 147:25-148:15. Also obtained by Weir was sales data from online retailers Amazon.com and Drugstore.com and internal transaction-level data and coupon discount data from Defendant Costco. Weir Suppl. Decl. Kimberly-Clark 48; Weir Suppl. Decl. Costco
49, 51; Weir Suppl. Decl. Procter & Gamble 46. Weir explained in his reports that he obtained Nielsen market research data from Kimberly-Clark and Procter & Gamble; this material was not challenged at the hearing. Kimberly-Clark Weir Suppl. Decl. 49; Weir Suppl. Decl. Procter & Gamble 47. The second type of data Weir obtained was product attribute data — information about what characteristics products claim, e.g., flushability and number of sheets per package. Weir obtained and reviewed product labels in gathering this data. Evid. Hr’g Tr. 15:22-16:4. He did not obtain all historic label data, because, in his experience as an expert, that is not necessary when the attribute of interest is constant; he determined the flushable label is constant here. Id. 28:2-23, 38:5-12. He also obtained product attribute data from IRI. Id. 15:22-16:4. Second, Weir prepared the data for use in a hedonic regression analysis. For Defendants Kimberly-Clark and Procter & Gamble, he used information from IRI for the necessary sales data. Id. 22:7-15. Although other data was available and it is “technically possible that it could be incorporated into the analysis,” he claimed, the litigation schedule did not afford him the time to include the additional data. Id. 22:13-15. For Defendant Costco, Weir used IRI and Costco sales data. Weir Suppl. Decl. Costco 57. These decisions by him had the effect of excluding all private label products for Defendants Kimberly-Clark and Procter & Gamble and private label products other than Costco’s for Defendant Costco. Weir testified that this does not affect the robustness of the methodology, “[b]oth because of [his] past experience showing that inclusion of such products does not have a material result when they are included, but also because if you look at peer-reviewed literature you will see many people studying products but that don’t include private label brands.” Evid. Hr’g Tr. 762:1-6. For each defendant, Weir integrated the sales data with product attribute information. Weir Suppl. Decl. Kimberly-Clark 55; Weir Suppl. Decl. Costco 57; Weir Suppl. Decl. Procter & Gamble 53. He identified “top-selling products representing a majority of the sales identified by IRI,” obtained labels for those products, and generated a spreadsheet of manufacturer claims on the product labels and other product claimed attributes. Id. Weir had engaged in essentially the same analysis in Pettit v. Procter & Gamble Company. Id. He utilized in the instant litigation the data set of product attributes he prepared in that Northern District of California case. Id. For Defendant Costco, product label and attribute information from products sold at Costco were added to this data set. Weir Suppl. Decl. Costco 57. He identified the following product attributes as variables to be used in the hedonic regression analysis: (1) “flushable” claims, (2) brand, (3) number of sheets, (4) number of packs, (5) wipe area, (6) package type, (7) baby & toddler/adult, (8) travel pack, (9) alcohol free, (10) hypoallergenic, (11) aloe & vitamin E, (12) fragrance/scent, (13) natural claims, and (14) sensitive/gentle claims. Weir Suppl. Decl. Kimberly-Clark 56; Weir Suppl. Decl. Costco 58; Weir Suppl. Decl. Procter & Gamble 54. For Defendant Costco, whether the products were sold at Costco was also a variable. Weir Suppl. Decl. Costco 58. Weir explained in his reports and during the evidentiary hearing the variables and how he decided upon them: I had gone through a process of examining the underlying sales data, understanding which products were large sellers in the marketplace, reviewing the labels, reviewing the deposition testimony of corporate executives that work with these products to get an understanding of the likely product attributes for inclusion in the model and then running a number of regressions to test the specification of the model to find the specification that, in tandem with economic theory, the facts of the case and the statistics…for evaluating regression, appeared to produce a reliable result. Evid. Hr’g Tr. 23:21-24:6. He explained that he took adequate steps to ensure he had all appropriate variables: …[T]hat’s done through a combination of analysis of the facts at hand, looking at the nature of the products, looking at the statistics of the regression. There’s no rule that says these are the attributes that you need to look at. It’s basically something where you need to apply some amount of judgment based on the facts and circumstances of your research objective and the nature of what it is that you’re studying. Id. 25:19-26:1; see also Weir Suppl. Decl. Kimberly-Clark
