Yamada v. Nobel Biocare Holding AG

• Decision Date: 20 April 2016
• Docket Number: No. 14-55263,14-55263
• Citation: 825 F.3d 536
• Parties: Jason M. Yamada, D.D.S., on behalf of himself and others similarly situated, Plaintiff–Appellee, v. Nobel Biocare Holding AG; Nobel Biocare AB; Nobel Biocare USA, LLC, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

825 F.3d 536

Jason M. Yamada, D.D.S., on behalf of himself and others similarly situated, Plaintiff–Appellee

v.Nobel Biocare Holding AG; Nobel Biocare AB; Nobel Biocare USA, LLC, Defendants–Appellants.

No. 14-55263

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 12, 2016—Pasadena, California

Filed April 20, 2016

Amended June 9, 2016

Eric Y. Kizirian (argued) and Michael K. Grimaldi, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, California; Jeffry A. Miller, Lewis Brisbois Bisgaard & Smith LLP, San Diego, California, for Defendants–Appellants.

Myron Moskovitz (argued), Piedmont, California; William M. Audet, and Jonas P. Mann, Audet & Partners, LLP, San Francisco, California, for Plaintiff–Appellee.

Before: Marsha S. Berzon and John B. Owens, Circuit Judges, and Algenon L. Marbley,^** District Judge.

ORDER

The opinion filed on April 20, 2016 and appearing at 2016 WL 1579705 is hereby amended. The amended opinion will be filed concurrently with this order.

The opinion is amended as follows:

On page 13, line 6 has been added. The sentence now reads: < Accordingly, we have previously held that an opposing party normally has a right to see the timesheets on which a district court relied in issuing a fee award.>

On page 15, line 5 has been added. The sentence now reads counsel have access to the timesheets relied on to support the fee order.>

On page 15, footnote 7 has been added. Footnote 7 reads <This case is different from United States v. Eyraud, in which we held that the district court's denial of a defendant's request for access to the original billing invoices used for restitution purposes to determine compensable attorneys' fees did not violate her right to Due Process. 809 F.3d 462, 471 (9th Cir.2015). Eyraud “had access to the [victim's] law firm's declaration describing the work it performed relating to Eyraud's fraud and the invoice summaries listing the amount of time that work took.” Id. It was only to verify that those disclosed “documents accurately reflected the pertinent information contained in the privileged billing records,” the court examined the original in camera. Id. The court then confirmed that the summaries relating to work and time spent that had been extracted from the privileged material were accurate, i.e., “simply corroborative of what counsel already had seen.” Id. With the accurate summaries in hand, we held that Eyraud was “able to challenge the legal basis for the court's order.” Id. Thus, she had been “afforded adequate notice [of the facts] and a meaningful opportunity to be heard.” Id. By contrast, here the court made an independent determination of appropriate fees, but it did not reveal the actual basis of its ruling or provide Nobel with access to the information used to reach that ruling. Thus, unlike Eyraud, Nobel was denied a meaningful opportunity to review and to litigate the merits of the award.>

The parties may not file petitions for rehearing or rehearing en banc in response to the amended opinion. The mandate shall issue forthwith.

OPINION

MARBLEY, District Judge:

Defendants–Appellants Nobel Biocare Holding AG, Nobel Biocare AB, and Nobel Biocare USA, LLC (collectively, “Nobel”) appeal the district court's order awarding class counsel more than $2.3 million in attorneys' fees. Defendants appeal on four bases. First, they contend that the district court violated their due process rights by basing its fee order on an ex parte, in camera review of timesheets that they could not review or challenge. Second, they argue that the district court did not adequately discount the lodestar. Third, they assert that the district court's cross-check of the lodestar was flawed. Finally, they submit that the district court erred in awarding a multiplier based solely on the contingent risk factor of the litigation. Plaintiffs argue that Defendants have waived the first argument by failing to raise the issue timely or adequately.

We find that Defendants have not waived their due process argument, and we vacate the district court's fee order and remand with instructions.

BACKGROUND

Named Plaintiff Dr. Jason Yamada, DDS is a Torrance, California-based dentist specializing in tooth implants. Dr. Yamada attended a promotional symposium in 2004 hosted by Nobel featuring their NobelDirect dental implants. Following the symposium, Dr. Yamada implanted dozens of NobelDirect implants into his patients but noticed that the implants failed at a rate he deemed unusually high. Just over a year after the implant's launch, two Swedish professors at the University of Gothenburg warned that the implants were causing bone loss, and they urged Nobel to withdraw the implants from the market. In response to those allegations, Nobel contacted the Swedish Medical Products Agency (“SMPA”), a government agency akin to the United States Food and Drug Administration, to investigate. In February of 2008, the SMPA formally closed its investigation with no adverse findings as to the implants' safety or efficacy. Nevertheless, at least a dozen of Dr. Yamada's patients' NobelDirect implants failed, which necessitated explant surgery—that is, removal of the implants—oral reconstruction, implant replacement, and continued monitoring. Dr. Yamada performed those necessary reparative surgeries at his own expense.

On June 30, 2010, Dr. Yamada filed a class action complaint against Nobel alleging a defect in the NobelDirect implant. The complaint alleged causes of action for declaratory relief, implied indemnity, breach of express and implied warranty, and a violation of California Unfair Competition Law (“UCL”), California Business and Professions Code §§ 17200, et seq .

On November 5, 2010, Nobel filed a motion to dismiss Dr. Yamada's first amended complaint. On January 20, 2011, the district court (the Honorable Jacqueline Nguyen) denied the motion as to all but the implied indemnity claim, which it dismissed with prejudice. That same day, the district court ordered Dr. Yamada to file his motion for class certification by February 28, 2011. Meanwhile, the parties filed their preliminary report under Rule 26(f) of the Federal Rules of Civil Procedure. The report was filed prior to discovery, and it noted that Defendants had sole possession of the vast majority of key documents in the litigation. Plaintiffs sought compensatory damages (both past and projected loss), restitution, and declaratory relief to protect the class, essentially a form of indemnity. Projected classwide damages were estimated at $450 million and were calculated as follows: $8 million for the price of the 20,000¹ failed implants, representing an estimated 20% failure rate out of 100,000 total implants at $400 per implant; $70–100 million for the surgical replacement of the 20,000 implants at $3,500 per procedure; $60 million to repair or restore teeth adjacent to the implant; and $325 million for monitoring and medical costs.

On August 12, 2011, the district court certified a nationwide class and appointed Dr. Yamada class representative. On May 11, 2012, the case was reassigned to the Honorable Michael Fitzgerald. On June 11, 2012, Nobel moved both for summary judgment as to all outstanding claims and for reconsideration of class certification or, alternatively, decertification of the class, arguing that two recently decided cases materially changed the applicable law. The district court denied Nobel's motion for summary judgment but ordered supplemental briefing on the motion for reconsideration, finding well taken Defendants' argument that Mazza v. American Honda Motor Co. , 666 F.3d 581 (9th Cir.2012), and American Honda Motor Co. v. Superior Court , 199 Cal.App.4th 1367, 132 Cal.Rptr.3d 91 (2011), represented material changes of law under Civil Local Rule 7-18.² Mazza held that “California law may only be used on a classwide basis if ‘the interests of other states are not found to outweigh California's interest in having its law applied.’ ” 666 F.3d at 590 (quoting Wash. Mut. Bank v. Super. Ct. , 24 Cal.4th 906, 921, 103 Cal.Rptr.2d 320, 15 P.3d 1071 (2001) ). In making that determination, Mazza requires courts to conduct “a three-step governmental interest test.”³ Id. The district court conducted the test and ultimately denied Defendants' motion for reconsideration under Mazza due to, among other reasons, “the overwhelming connections between California and [Defendants'] conduct relevant to [the] case.”

The material change under American Honda concerned causation. In American Honda, the California Court of Appeal stated that for a California breach of warranty claim to proceed, the movant for class certification must provide “substantial evidence of a defect that is substantially certain to result in malfunction during the useful life of the product.” 199 Cal.App.4th at 1375, 132 Cal.Rptr.3d 91. To do that, the movant must demonstrate through expert testimony that “there was an inherent defect and that it caused the product to malfunction or that it was substantially certain the product would malfunction as a result of the defect.” Id. at 1377, 132 Cal.Rptr.3d 91. The district court found that the record demonstrated hundreds of potential causes for implant failures, and that the cause of any particular failure was uncertain. Accordingly, the district court granted in part Defendants' motion and decertified the class as to the claims for declaratory relief, breach of express warranty, and breach of implied warranty. The court left standing the claims for unfair and fraudulent business practices under California's UCL.

The parties settled the remaining claims. On May 21, 2013, the district court issued an order granting preliminary approval of the settlement. The settlement agreement provided compensation for class members as follows: all implantees whose NobelDirect implants failed before the effective date of the settlement agreement and who had not yet received a replacement for the implants under Nobel's warranty plan would...