April 30, 2012 Articles

Mazza's Impact on False-Advertising Class Actions

The case will likely make it more difficult to certify consumer class actions for false advertising under California law, unless they involve a huge marketing campaign.

By Kelsey M. Larson and Carlos M. Lazatin

Today’s consumer products advertising appears saturated with claims of health and fitness benefits—from vitamins that “support prostate health” (Johns v. Bayer Healthcare, LLC, No. 09-CV-1935-AJB, 2012 U.S. Dist. LEXIS 13410, at *3 (S.D. Cal. Feb. 3, 2012)) and shoes designed to tone hamstrings, calves, and butts more than regular sneakers (Altieri v. Reebok Int’l, Ltd., Amended Class-Action Complaint, No. 4:10-CV-11977-FDS (D. Mass) at ¶ 22) to supplements that enhance a person’s immune system (Gianino v. Alacer Corp., No. SACV-09-01247-CJC, 2012 U.S. Dist. LEXIS 32261, at *2 (C.D. Cal. Feb. 27, 2012)) or provide “great digestion through science” (Rikos v. The Procter & Gamble Co., No. 1:11-CV-226, 2012 U.S. Dist. LEXIS 25104, at *2 (S.D. Ohio Feb. 28, 2012)). The companies that manufacture, market, and sell these products and tout these benefits often find themselves named as defendants in class-action lawsuits that challenge the accuracy of these health-benefit claims. Traditionally, California has been a favorite jurisdiction for the class-action plaintiff’s bar to file such false-advertising lawsuits, with its perceived plaintiff-friendly consumer-protection laws. However, plaintiffs may want to think twice before deciding to file a false-advertising class action in federal court in California in light of the Ninth Circuit’s recent decision in Mazza v. American Honda Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012).

Mazza represents a significant, watershed decision in the Ninth Circuit’s jurisprudence on false-advertising class actions. The court’s 2–1 majority opinion, authored by Judge Ronald M. Gould, vacated a district court’s order that had certified a nationwide class of consumers suing Honda for false advertising under California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq.; False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 et seq.; and Consumers Legal Remedies Act (CLRA), Cal. Civ. Code § 1750 et seq. Mazza, 666 F.3d at 587. Although the appeal was argued on June 9, 2010, the Ninth Circuit stayed its decision pending the U.S. Supreme Court’s ruling in Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541 (2011). (The decision was issued on January 12, 2012. The Mazza plaintiffs filed a petition for panel or en banc rehearing in the Ninth Circuit on February 2, 2012. The petition was denied on March 16, 2012.)

Mazza concerns Honda’s alleged failure to disclose serious and material limitations of its Collision Mitigation Braking System (CMBS), an optional feature offered on certain of its Acura models. 666 F.3d at 585–86. In 2006, Honda ran television commercials and magazine advertisements featuring the CMBS, which the company marketed as a defense against rear-end collisions. However, in 2007 and 2008—a period equivalent to two thirds of the three-year class period—Honda’s CMBS advertising campaign was more limited, with the CMBS promoted in some product brochures, a single print ad in a consumer magazine, video kiosks at Acura dealerships, and a website designed for Acura owners. Id. at 586–87.

The Ninth Circuit reversed the district court’s certification order on two key grounds. First, applying California’s “governmental interest” choice-of-law test, the Ninth Circuit concluded that each class member’s claim should be governed by the consumer-protection laws of that member’s home state—thus precluding a finding that common issues of law predominate in a nationwide class under Rule 23(b)(3). Id. at 594. Notably, the Ninth Circuit’s application of California’s choice-of-law test focused on the “place of the wrong” to determine the jurisdiction with the predominant interest in applying its law. The court concluded that, in a false-advertising action, the state in which the misrepresentations were communicated to and relied on by class members is the “place of the wrong.” Id. at 593–94.

Second, the Ninth Circuit held that common issues of fact would not predominate under Rule 23(b)(3) even for a California-only class, because such a class of consumers would include members who were never exposed to, and therefore could not have relied on, the alleged misrepresentations, given the limited scope and varied nature of Honda’s advertising. Id. at 596.

Mazza will likely make it more difficult to certify consumer class actions for alleged false advertising under California law—including those involving health-benefit claims—in the absence of a massive, relatively monolithic advertising and marketing campaign. District court decisions issued in the wake of Mazza suggest that obtaining certification of such consumer class actions has in fact become more challenging.

Choice-of-Law in False-Advertising Cases
Many false-advertising claims involving consumer products are filed as nationwide class actions—that is, the plaintiffs’ class definition includes all purchasers of the product in the United States during a given time period. A central question in these cases is whether the law of one state may be applied to the purported nationwide class and, if not, whether the need to apply the laws of multiple jurisdictions will preclude a finding of predominance of legal issues under Rule 23(b)(3). As explained in Mazza, this determination turns on the application of California’s three-party governmental interest choice-of-law test. Under this test, a court must follow three steps:

First, the court must determine whether the “relevant law of each of the potentially affected jurisdictions with regard to the particular issue in question is the same or different.”

Second, if there is a difference, the court must determine whether a “true conflict” exists by examining each jurisdiction’s interest in the application of its own law.

Third, if there is a “true conflict,” the court must compare the interest of each jurisdiction in the application of its own law “to determine which state’s interest would be more impaired” if its law were not applied.

Kearney v. Salomon Smith Barney, Inc., 39 Cal. 4th 95, 107–08 (2006); McCann v. Foster Wheeler, LLC, 38 Cal. 4th 68, 87–88 (2010).

Applying this test in Mazza, the Ninth Circuit first determined that there were material differences between California’s consumer-protection statutes and those of other jurisdictions, particularly on the elements of reliance and scienter. This conclusion is consistent with federal decisions across the country that have found states’ consumer-protection laws to be materially different from one another. The Ninth Circuit next concluded that “each state has a strong interest in applying its own consumer protection laws” to the sales transaction. Based on the California Supreme Court’s recent choice-of-law decision in McCann v. Foster Wheeler, LLC, 48 Cal. 4th 68 (2010), the Ninth Circuit reasoned that each state has an interest in setting the appropriate level of consumer protection for its residents and liability for companies that sell goods and services in the state.

In the final step of the analysis—determining which state’s interest would be more impaired if its law were not to apply—the Ninth Circuit focused on federalism and the notion that each state should be left to decide how best to “calibrate liability to foster commerce.” Id. at 593. The court analyzed key California precedents on choice-of-law—including McCann, 48 Cal. 4th at 94 n.12, Zinn v. Ex-Cell-O Corp., 148 Cal. App. 2d 56, 80 n.6 (Ct. App. 1957), and Hernandez v. Burger, 102 Cal. App. 3d 795, 802 (Ct. App. 1980)—to hold that the place of the wrong has the predominant interest in having its law applied. In cases involving alleged misrepresentations, Mazza concluded, the place of the wrong is the state where the last event necessary to make the party liable occurred. Thus, in false-advertising cases, the state that has the ultimate interest in having its law applied is the state where the advertisements were “communicat[ed]” to and “reli[ed] thereon” by each putative class member. Because the laws of each class member’s home jurisdiction would therefore apply to that class member’s claim, variations in state law precluded certification of a nationwide class. Id. at 596.

Mazza’s conclusion that the law of the state where the transaction occurred governs each class member’s claim ought to similarly preclude certification of other false advertising class actions brought under California’s UCL and CLRA. Indeed, Mazza appears to be the Ninth Circuit’s first decision squarely to examine the propriety of certifying a nationwide class asserting claims under California’s consumer protection statutes. In reversing the district court’s decision to grant class certification, Mazza also represents a clear departure from a line of district-court cases in which nationwide classes had been certified under the UCL and CLRA.

In the three short months since the Ninth Circuit handed down its ruling in Mazza, the decision has already had a tangible impact on putative nationwide class actions brought under California’s UCL, CLRA, and for breach of express warranty. In Rikos v. The Procter & Gamble Co., the defendants brought a motion to strike the class allegations relating to an over-the-counter digestive-care product called Align that was claimed to help support and build a healthy digestive system, restore natural digestive balance, and protect against upset stomach. No. 1:11-CV-2226, 2012 U.S. Dist. LEXIS 25104, at *2 (S.D. Ohio Feb. 28, 2012). Relying on Mazza, the district court granted the defendants’ motion to strike the nationwide class allegations because “the states where Align was purchased have the predominate interest in the application of their laws to transactions between their citizens and Procter & Gamble.” In another recent class action for alleged violations of the UCL and CLRA involving representations that the dietary supplement “Emergen-C” provides benefits to the user’s immune system, the district court, again relying on Mazza, denied certification of a nationwide class under the UCL and CLRA. Gianino v. Alacer Corp., No. SACV-09-01247-CJC, 2012 U.S. Dist. LEXIS 32261, at *15–16 (C.D. Cal. Feb. 27, 2012).

At least one district court, however, recently found that Mazza does not necessarily foreclose certification of any nationwide class brought under California’s UCL or CLRA. In Bruno v. Eckhart Corp, et al., No. SACV-11-0173-DOC, 2012 U.S. Dist. LEXIS 30873 (C.D. Cal. March 6, 2012), the plaintiff brought a class action alleging violations of the UCL, FAL, CLRA, and breach of express warranty based on alleged misrepresentations that the defendants’ CoQ10 enzyme liquid product had six times better absorption and effectiveness than the equivalent enzyme in competing brands. Defendants filed a motion to decertify the certified nationwide class based on Mazza. In refusing to decertify the class, the district court held that California’s choice-of-law test must be applied in light of the particular legal issue in question and that other states’ consumer-protection laws do not materially differ from the UCL and CLRA as a matter of law on all issues in every case. The court also found that the defendants had failed to analyze California and other states’ laws as they applied to the particular issues in that case. Nevertheless, the Bruno decision appears to be exceptional, as it is clear that the ability of plaintiffs to obtain certification of a nationwide class under California’s consumer-protection laws has become increasingly difficult in the wake of the Mazza decision.

Issue of Class-Wide Exposure to Alleged Misrepresentations
In consumer class actions involving health-benefit claims, one of the most significant, recurring issues in class certification is whether proof of class members’ exposure to and reliance on the allegedly misleading statements is subject to class-wide proof. After holding that a nation-wide class could not be certified in Mazza for lack of predominance of common issues of law, the Ninth Circuit in Mazza held that, even if the class were limited to California consumers, “common issues of fact would not predominate in the class as currently defined because it almost certainly includes members who were never exposed to, and therefore could not have relied on, Honda’s allegedly misleading advertising material.” The court of appeals reached this conclusion after examining Honda’s very limited advertising of the challenged braking system in product brochures and television commercials. The court contrasted this discrete, narrow advertising effort with the far-reaching, “decades-long” tobacco advertising campaign in In re Tobacco II Cases, 46 Cal. 4th 298 (Cal. 2009), “where there was little doubt that almost every class member had been exposed to defendants’ misleading statements.”

Building on California decisional law following the passage of Proposition 64, for example, Cohen v. DIRECTV, Inc.,178 Cal. App. 4th 966, 980 (Ct. App. 2009), and Pfizer Inc. v. Superior Court, 182 Cal. App. 4th 622, 632 (Ct. App. 2010), the Ninth Circuit found that differences in consumers’ exposure to the alleged misrepresentations to be significant. Cohen involved allegations that a satellite television provider, DirecTV, had disseminated misrepresentations to induce consumers to purchase more expensive high-definition services. In affirming the trial court’s order denying the plaintiff’s motion for class certification for claims under the UCL and CLRA, the California Court of Appeal in Cohen found that common issues of fact did not predominate because the class included subscribers who never saw any of the advertisements before purchasing the high definition services, subscribers who only saw advertisements without the allegedly misleading statements, and subscribers who purchased the high-definition services for reasons other than the allegedly deceptive advertising, including word of mouth or seeing the high-definition service in a store or at someone’s house. These differences in consumers’ exposure to the alleged misrepresentations were significant because, as the court observed, the UCL does not “authorize an award . . . on behalf of a consumer who was never exposed in any way to an allegedly wrongful business practice.”

The California Court of Appeal reached a similar conclusion in Pfizer, a putative class action brought under the UCL over the alleged misrepresentation that Listerine mouthwash was “as effective as floss.” The court of appeal found that certification of a class of Listerine purchasers was inappropriate because the facts demonstrated that many, if not most, class members were never exposed to the “as effective as floss” statements. In fact, the statement was printed only on some versions of the Listerine bottles, not all of the bottles shipped during the class period displayed the statement, and Pfizer aired just four commercials with the statements, none of which ran continuously during the class period. In vacating the trial court’s certification order, the court of appeal reiterated that “one who was not exposed to the alleged misrepresentations and therefore could not possibly have lost money or property as a result of the unfair competition is not entitled to restitution” under California’s UCL.

The Ninth Circuit’s clear adoption of the Cohen and Pfizer line of authorities in Mazza offers defendants in false-advertising cases a strong basis to oppose class certification in cases in which advertising varied over time, by media, and by geographic location. Under the Ninth Circuit’s reasoning in Mazza, in the absence of a large-scale advertising campaign that is likely to have exposed all class members to the same misrepresentations, differences in consumers’ exposure to the alleged misstatements can and should preclude certification of a consumer class under the California’s UCL and CLRA. This conclusion has particular significance for claims over the advertising of health and fitness benefits because the advertising at issue in these cases will often be more analogous to that in Mazza, Cohen, and Pfizer than that in Tobacco II. For example, a manufacturer may make a health-benefit claim that appeared only on the product’s website; class members who never viewed the website and, therefore, were never exposed to the statement could not form part of any class. Likewise, consumers who never viewed the statement prior to purchasing the product should similarly be excluded. In short, Mazza confirms that differences in class members’ exposure to the alleged misrepresentations may be determinative of the class-certification inquiry, even in the wake of the Tobacco II decision.

Of course, Mazza does not necessarily spell the end of certification of consumer false-advertising claims, including those involving the promotion of certain health benefits. Class-action plaintiffs will undoubtedly try to distinguish Mazza and argue that the advertising at issue is more similar to the saturation campaign in Tobacco II. Plaintiffs successfully made this argument in a recent case involving the statement on the packaging of Men’s One A Day Vitamins that the vitamin would “support prostate health.” Johns v. Bayer Healthcare, LLC, No. 09-CV-1935-AJB, 2012 U.S. Dist. LEXIS 13410, at *3 (S.D. Cal. Feb. 3, 2012). In certifying a class of Men’s One A Day purchasers, the district court distinguished Mazza on the grounds that, unlike in that case, in Johns, “everyone who purchased the Men’s Vitamins would have been exposed to the prostate claim that appeared on every package from 2002 to 2009.” Johns therefore raises the possibility that, even following Mazza, statements that appear consistently on product packaging over an extended period of time may still support class certification.

Mazza represents the Ninth Circuit’s most significant pronouncement to date on the certification of consumer class actions brought pursuant to California’s unfair-competition and false-advertising laws. The ruling should provide much-needed guidance to courts addressing the critical issue of class certification in such cases.

Keywords: litigation, class actions, unfair competition, false advertising, class certification, California

Kelsey M. Larson and Carlos M. Lazatin – April 30, 2012

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