A few months ago, I wrote a short blog post to discuss my disagreement with a Northern District of Illinois decision that denied class certification in a case involving the sale of defective toy beads to children. When ingested, these toy bead “aqua dots” metabolize into gamma-hydroxybutyrate, or GHB, the “date rape” drug. The district court held that the company’s recall was superior to a class action as a method of “adjudication” under Rule 23(b)(3).
In August, the Seventh Circuit Court of Appeals affirmed that district court decision, though on different grounds.[1] In an opinion by Judge Easterbrook, the Court rejected the district court’s expansive holding that “adjudication” under Rule 23 could encompass product recalls, but it endorsed the district court’s rationale.[2] The Court held that class certification was properly denied under Rule 23(a)(4)’s “adequacy” prong, reasoning that the representative parties (and their counsel) were not “fairly and adequately protect[ing] the interest of the class” because Plaintiffs were essentially asking for relief that had already been offered (refunds) through a procedure with higher transaction costs (litigation).[3] The Court brushed away the counterargument that litigation provided for additional punitive damages by noting that punitive damages were state law issues and such complex case management considerations weighed even further against class certification.[4] The Court noted that, “The Consumer Products Safety Commission has not expressed dissatisfaction with the recall campaign or its results, and the record does not contain any evidence of injury to children after the recall was announced.”[5]
Last Thursday, the Consumer Products Safety Commission “expressed dissatisfaction” with Aqua Dots by slapping a $1.3 million dollar fine on Spin Master, the Aqua Dots importer. The fine is the third largest toy-related penalty ever issued by the Commission.[6] The Commission alleged that Spin Master knowingly imported and sold a banned hazardous substance, and knowingly failed to report the defect.[7]
It is fortunate in this case that the public agency was able and willing to enforce its civil penalty authority to provide a deterrent effect for future offenders; it is unfortunate that the judiciary denied private plaintiffs the procedural process that they deserved. At the very least, I would hope that the Consumer Products Safety Commission action helps refute the notion that the Plaintiffs in Aqua Dots were not trying to “fairly and adequately protect the interest of the class.”
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