Previously, the courts of appeals lacked jurisdiction to review class certification rulings until the conclusion of a case, and immediate review of such rulings was available only in extraordinary cases.  E.g., In re Master Key Antitrust Litigation, 528 F.2d 5, 10 (2d Cir. 1975) (interlocutory review of class certification orders available only in “exceptional circumstances,” requiring 3 factors to be satisfied:  (1) class action designation was “fundamental to the further conduct of the case,” (2) review of order was “separable from the merits” of the action, and (3) “the order was likely to cause irreparable harm to a defendant in terms of time and money spent in defending a huge class action”) (internal quotation marks omitted).

In the decade since its adoption, Rule 23(f) became a vehicle for defendants to often obtain review of class certification rulings, notwithstanding the purportedly high standard for the grant of immediate review.  E.g., Vallario v. Vandehey, 554 F.3d 1259, 1263 (10th Cir. 2009) (interlocutory review under Rule 23(f) appropriate (1) in “death knell” situations (i.e., where “a questionable class certification order is likely to force either a plaintiff or a defendant to resolve the case based on considerations independent of the merits”); (2) where there is “an interest in facilitating the development of the law”; and (3) where district court’s decision is “manifestly erroneous”).  In those instances where a circuit court granted a plaintiff’s petition for review of a class certification denial, it was almost invariably to affirm the denial.

Well, along now comes the Eleventh Circuit in Williams v. Mohawk Industries, Inc., 568 F.3d 1350 (11th Cir. 2009), in a May 28th opinion that reversed – that’s right, reversed – a denial of class certification.

In Mohawk Industries, the plaintiffs, current and former employees of the defendant, the second largest carpet manufacturer in the U.S., filed a proposed class action suit under both the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) and Georgia’s state RICO (“Little RICO”) statute, alleging that Mohawk conspired with various temporary employment agencies to knowingly hire illegal aliens so as to lower its labor costs, thereby driving down the plaintiffs’ wages.  Mohawk moved to dismiss the plaintiffs’ complaint for failure to state a claim, which the district court denied as to the RICO claims but granted its motion as to certain of Plaintiffs’ common law unjust enrichment claims.  On appeal, the Eleventh Circuit agreed that the district court had properly sustained the federal and state RICO claims but held that it should have dismissed all of the unjust enrichment claims.  Williams v. Mohawk Industries, Inc., 411 F.3d 1252 (11th Cir. 2005).

On remand, the plaintiffs moved for class certification.   In an unpublished decision, the district court denied their motion.  The plaintiffs then sought review of that denial by Rule 23(f) petition and, on May 28th, the Eleventh Circuit issued a published opinion holding that the district court had abused its discretion in refusing to certify the class.

The Eleventh Circuit took the district court to task for conducting an improper class certification analysis.  It noted that the plaintiffs had presented “two overarching questions” common to all members of the class:  (1) whether Mohawk conducted or participated in the conduct of an enterprise’s affairs under the federal RICO statute; and (2) whether Mohawk engaged in a pattern of racketeering activity or a conspiracy to violate the Georgia RICO statute.  The court of appeals also noted that the district court had wrongly likened the case to a Title VII discrimination suit, noting that, in contrast, RICO claims “are often susceptible to common proof.”   In this respect, the Eleventh Circuit held that the district court had wrongly relied on  decentralized decision-making at Mohawk about hiring and wages to conclude that the plaintiffs’ claims aren’t amenable to common proof, noting that the plaintiffs’ claims aren’t dependent on “proof of individual acts of disparate treatment as often is the case under Title VII.”

Based on its conclusion that common questions predominate in the plaintiffs’ suit, the Eleventh Circuit rejected the district court’s finding that a class action trial would not be manageable (and hence class action treatment not a superior means of adjudicating the case – the so-called “superiority” factor that must be considered for classes being certified under Rule 23(b)(3)), noting that “the factor of manageability is ordinarily satisfied so long as common issues predominate over individual issues.”

One can’t get overly enthusiastic and interpret Mohawk Industries as heralding the leveling of the Rule 23(f) playing field overnight.  Among other things, one has to keep in mind that federal courts have generally been giving a relatively favorable reception to motions to certify classes in so-called Civil RICO “wage depression” suits filed by American workers being cheated by greedy employers who’ve knowingly violated the immigration laws by hiring illegal aliens, see Brewer v. Salyer, No. CV F 06-1324-AWI-DLB, 2009 WL 1396148 (E.D. Cal. May 18, 2009) (certifying class of seasonal hourly wage earners suing food processor); Marin v. Evans, No. CV-06-3090-RHW, 2008 WL 2937424 (E.D. Wash. July 23, 2008) (certifying class of legally-authorized employees of Washington State fruit farming company), than to certain other kinds of cases.

Still, the Eleventh Circuit’s decision in Mohawk Industries, and some other circuit court reversals of class certification denials – the Ninth Circuit’s reversal last summer of a denial in an employment discrimination case alleging pay disparity, Parra v. Bashas’, Inc., 536 F.3d 975 (9th Cir. 2008), and the Third Circuit’s reversal of the denial in Hagan v. Rogers, No. 07-1412, 2009 WL 1708084 (3d Cir. June 19, 2009), a civil rights action filed by state prisoners, which was issued a month after Mohawk Industries – seem to be tentative signs of a fairer shake for class action plaintiffs from the appellate courts.

In recent years, while many favorable outcomes had been reported in personal injury cases stemming from smoking-related ailments, e.g., Boeken v. Philip Morris Inc.,  127 Cal. App. 4th 1640, 26 Cal. Rptr. 3d 638 (2d Dist. 2005) (award of $5.5 million compensatory damages and $50 million punitive damages to smoker who developed lung cancer that metastasized to his brain), consumer fraud claims against “Big Tobacco” had experienced rough sledding in both the federal and state courts.  By “consumer fraud,” we can broadly categorize those claims that don’t entail personal injuries for smoking-related ailments.

In particular, a number of courts had reversed class certification orders in consumer fraud cases brought against cigarette makers, holding that the individualized nature of claims (whether under state consumer fraud law or under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”)) and the need to apply the law of class members’ respective states to their claims rather than a single state’s law to all of the members of a proposed multistate class, made the claims unsuitable for class action treatment.  Other courts had held that claims relating to the marketing of cigarettes were preempted by the Federal Cigarette Labeling and Advertising Act (“Cigarette Labeling Act”).  Some notable adverse rulings included Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996); Barnes v. American Tobacco Co., 161 F.3d 127 (3d Cir. 1998); McLaughlin v. American Tobacco, 522 F.3d 215 (2d Cir. 2008); and In re Tobacco Cases II, 20 Cal. Rptr. 3d 693 (Cal. Ct. App. 4th Dist 2004).

Recently, however, a spate of major rulings from both federal and state courts, including the U.S. Supreme Court, suggest that a shift in momentum in favor of plaintiffs in consumer fraud litigation against cigarette makers is underway.

First, last December, in Altria Group, Inc. v. Good, 129 S. Ct. 538 (2008), the Supreme Court rejected cigarette manufacturers’ arguments that the Cigarette Labeling Act preempted a state law consumer fraud claim (in that case, under the Maine Unfair Trade Practices Act) relating to the deceptive marketing of “light” cigarettes.  The Court distinguished traditional state claims concerning fraudulent marketing (specifically, that the descriptor “light” deceives buyers of light cigarettes by fraudulently advertising the “light” cigarettes as delivering less tar and nicotine than regular brands) from the failure-to-warn-based common law claims that the Court had held in Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992), to be preempted.  The Court concluded that a consumer fraud claim based on the fraudulent promotion of “light” cigarettes wasn’t a “warning neutralization” claim that imposes a duty to provide specific warnings about the product and usurps federal regulation of cigarette warning labels.  Were it so, it would run afoul of Section 5(b) of the Cigarette Labeling Act, which provides that “[n]o requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this chapter.”   15 U.S.C. § 1334(b).  Rather, the Court held that such a claim is simply grounded in the state law “duty not to make fraudulent statements.”

In May, the California Supreme Court issued a long-awaited decision in In re Tobacco Cases II, 46 Cal. 4th 298, 207 P. 3d 20 (2009), in which it had been called upon to interpret an amendment to that state’s Unfair Competition Law (“UCL”) effected by Proposition 64, passed in 2004. As amended, the statute now imposes a standing requirement, requiring that a plaintiff be a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.”

The plaintiffs in Tobacco II Cases alleged that the tobacco industry defendants violated the UCL “by conducting a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.”  The trial court had certified a class of California resident cigarette smokers, but subsequently decertified the class based on Proposition 64 amendment of the UCL,

In a landmark ruling, however, the California Supreme Court held that in a proposed consumer fraud class action under the UCL, only the named plaintiff must prove actual reliance on the defendant’s alleged fraud.   Absent class members do not have to have actually relied on the alleged fraud.   Moreover, in cases involving false advertising – such as the tobacco litigation, which heavily centers on the defendants’ fraudulent marketing – in order to establish actual reliance, the plaintiff doesn’t have to prove that the false advertisement was the sole reason why he made the purchase at issue.  And in cases involving pervasive advertising over a long period of time – such as the decades-long cigarette advertising – the plaintiff doesn’t even have to point to a specific advertisement that he relied upon.  The California Supreme Court accordingly reversed the trial court’s class decertification order.

Also in May of this year, the U.S. Court of Appeals for the District of Columbia Circuit, in a 92-page per curiam opinion in United States v. Philip Morris USA, Inc., 566 F.3d 1099 (D.C. Cir. 2009), affirmed the material respects of the decision rendered by U.S. District Judge Gladys Kessler after a nine-month bench trial, in a Civil RICO action brought by the Government against cigarette manufacturers and their trade organizations.  That decision found liable the defendants liable for a decades-long conspiracy to deceive the public about the health effects of cigarette smoking by fraudulently denying that smoking causes cancer and emphysema, that secondhand smoke causes lung cancer and endangers children’s respiratory and auditory systems, that nicotine is an addictive drug and Defendants manipulated it to sustain addiction, that light and low tar cigarettes are not less harmful than full flavor cigarettes, and that Defendants intentionally marketed cigarettes to youth.

The D.C. Circuit – which had previously reversed Judge Kessler’s ruling that the Government was entitled to pursue a $280 billion disgorgement claim against the defendants, United States v. Philip Morris USA, Inc., 396 F.3d 1190 (D.C. Cir. 2005), holding that disgorgement is not an available remedy under the Civil RICO statute – held that there was substantial evidence to support Judge Kessler’s finding that defendants had engaged in predicate acts of mail and wire fraud, and rejected the defendants’ arguments that they had lacked specific intent to commit fraud, that their statements had not been material, that at least a portion of their statements had been protected by the First Amendment, and challenges to specific findings of fraud (such as to the marketing of “light” cigarettes,” the addictiveness of cigarettes, and the health effects of secondhand smoke), as well as numerous other arguments, such as whether certain elements of a RICO claim had been established, including the existence of an “enterprise” within the meaning of the RICO statute.

In addition, the D.C. Circuit sustained the district court’s finding that there was a reasonable likelihood that defendants would commit future RICO violations, thereby warranting injunctive relief.  The court rejected such arguments as defendants’ assertion that their current business practices and the 1998 Master Settlement Agreement that they had entered into with the Attorneys General of 46 states made future violations unlikely.

Finally, the court affirmed certain aspects of the program of corrective statement dissemination that Judge Kessler ordered as injunctive relief – such as the use of package “onserts” – while directing the district court to revisit certain another component of that remedy (the use of point-of-sale displays) because of that remedy’s impact on the rights of third-party retailers.

That these three decisions dealt blows to cigarette makers on an array of issues cigarettes – federal preemption, amenability of claims to class certification, and Civil RICO liability and scope of relief – and with those issues having broad implications for future litigation pertaining to their fraudulent advertising and promotion of  suggests that we’re seeing a turning point, one that may also portend a retreat from the hostility that courts had been showing in recent years to proposed class action cases involving other types of consumer fraud and Civil RICO claims.