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Lead Toys Class Action Defense Cases–In re Mattel: California Federal Court Denies Motion To Dismiss Class Action Complaint Holding Class Action Allegations Were Adequate Save For Federal CPSA Claim

Defense Motion to Dismiss Class Action Claim under Federal Consumer Protection Safety Act (CPSA) Granted but Remaining Claims in Class Action Adequately Pleaded and Survived Motion to Dismiss California Federal Court Holds

Plaintiffs filed a class action against numerous defendants, manufacturers and retailers of children’s toys, alleging they “sold certain toys that were defective and unsafe, and made actionable representations about the quality of the products.” In re Mattel, Inc., Toy Lead Paint Products Liab. Litig., 588 F.Supp.2d 1111, 1114 (C.D. Cal. 2008). Specifically, the class action focused on three types of toys: “toys that were produced with allegedly unsafe levels of lead paint, toys that included small, swallowable magnets that allegedly pose a hazard to children, and a specific toy blood pressure cuff that allegedly contains high levels of lead, but is not specifically alleged to contain lead paint.” Id. The class action advanced numerous claims for relief, including violations of the federal Consumer Protection Safety Act (CPSA), and of California’s Consumers Legal Remedies Act (CLRA), unfair competition law (UCL), and Song-Beverly Consumer Warranty Act (CWA). Id. The class action defendants included Mattel and Fisher-Price (the “Manufacturer Defendants”), id. n.2, and Target, Toys “R” Us, Wal-Mart, KB Toys and Kmart (the “Retailer Defendants”), id. n.3. The Consumer Product Safety Commission ordered a recall of the lead paint toys and magnet toys, and the Manufacturer Defendants provided replacement toys to consumers. Id. Wal-Mart moved to dismiss the class action claims against it, and the remaining defendants filed a separate motion to dismiss the class action as to them. Id. The district court granted the motion in part, and denied the motion in part.

Defense attorneys first argued that the “a voluntary product replacement pursuant to a 16 C.F.R. § 1115.20 corrective action plan preempts state law remedies seeking reimbursement for an allegedly hazardous product.” In re Mattel, at 1115. The district court disagreed. The federal court explained that CPSC regulations permit a company to “submit a voluntary ‘corrective action plan’ to correct an alleged violation of the consumer product safety laws.” Id. (citing 16 C.F.R. § 1115.20(a)). However, the same regulations “explicitly state that actions taken in a voluntary corrective action plan have ‘no legally binding effect,’ and that the CPSC ‘reserves the right to seek broader corrective action.’” Id. (quoting 16 C.F.R. § 1115.20(a)). If preemption applied, as defendants argued, then a manufacturer could essentially “choose their own remedy to a CPSA violation with no guarantee for input from harmed parties…and little incentive on the part of the CPSC to ensure that the proposed remedy was completely adequate.” Id. (citation omitted). The district court therefore rejected the preemption argument, id., at 1116.

The district court further found that the class action adequately alleged injury, and permitted the class action claim that sought recovery for future medical monitoring. See In re Mattel, at 1116-17. The court explained at page 1117, “The main point of the medical monitoring claim is that no one knows whether the children in question actually ingested the lead – that is what the monitoring is for. Plaintiffs were injured through (potential) exposure to lead that required them to seek out the medical monitoring. Defendants’ argument might be more persuasive in the context of adult exposure, but in the context of children who cannot reasonably be expected to state reliably whether they ingested the lead paint, there is no obvious way to know whether the exposure was actual or only ‘potential’ without at least the initial testing that Plaintiffs seek.” The federal court further found that the class action “properly allege[d] damages for the purchase price of the toys that allegedly were defective and not fit for their represented use,” referring to this claim as a “straightforward” request to “get their money back.” Id., at 1117. In this regard, the court concluded that the voluntary product replacement “does not change the fact that a plaintiff has been injured” and does not, standing alone, defeat plaintiff’s standing claim. Id. The federal court agreed with defendants, however, that the magnet and cuff plaintiffs failed to properly plead a violation of the CPSA. That statute requires a “violation of a consumer product safety rule” or of some “other rule or order issued by the Commission,” id. (quoting 15 U.S.C. § 2072(a)); the class action complaint does not allege any such violation, id., at 1117-18.

Turning to defendants’ claim that the class action’s claims “sound in fraud” and therefore had to be pleaded with particularity,” the district court disagreed. In re Mattel, at 1118. In the court’s view, the class action “neither specifically alleges fraud nor alleges facts that necessarily constitute fraud.” Id. Rather, the class action complaint “merely allege that the representations were likely to deceive and that Plaintiffs were damaged by the deception,” id. The court further found that the class action’s negligence claim against the Retailer Defendants survived the motion to dismiss. While defendants argued that they had no duty to inspect the toys for latent defects, the federal court held that the Retailer Defendants had “a duty to inspect a product if it knows or has reason to know that the product might be dangerous,” and according to the class action, defendants “knew or had reason to know that the toys that are the basis of this suit were defective by virtue of several recalls of toys from China made with lead paint…, reports from the CPSC about harm from small magnets, and a 2006 recall of Mattel magnet toys under similar circumstances,” id. While plaintiffs may not be able to prove the allegations in the class action, the allegations were adequate to satisfy the “rather minimal pleading standard” required of plaintiffs. Id., at 1118-19.

The Manufacturer Defendants, Mattel and Fisher-Price, moved to dismiss the UCL and CLRA claims against them because plaintiffs are not California residents. Under California law, “state statutory remedies may be invoked by out-of-state parties when they are harmed by wrongful conduct occurring in California.” In re Mattel, at 1119 (citation omitted). The class action challenged several statements “that are reasonably likely to have come from or been approved by Mattel corporate headquarters in California,” and while the tie between Fisher-Price and California is “weaker,” the class action “does allege that ‘many of [Fisher-Price’s] executives, including its Vice President of Consumer Products, are located in California.’” Id. And finally, the court rejected defendants’ challenge to the CLRA claim, concluding that plaintiffs gave adequate notice to pursue the CLRA claim. Id., at 1119-20. Accordingly, save for the federal CPSA claim, the district court denied the motion to dismiss the class action, id., at 1120.

NOTE: Wal-Mart asked the district court to abstain from ruling on the class action’s UCL claim for injunctive relief “in light of a currently pending action by the California Attorney General for similar relief.” In re Mattel, at 1120. The court concluded that this case did not present an “exceptional circumstance” warranting such relief, as the two lawsuits “are not substantially similar.” Id.

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