Recent years have seen an uptick in lawsuits attacking food and beverage labeling practices, such as use of “all natural” or whether to include genetically-modified-organism (GMO) information on labels. However, class certification has experienced mixed results. It comes as no surprise that class status will be denied where class representatives and putative class members did not save proof of purchase (i.e., receipts) and are otherwise unable to establish that they purchased the product allegedly at issue. Nonetheless, creative plaintiffs’ counsel continue to develop novel moves hoping to “save” their cases in the consumer-litigation context. A full discussion of class certification, preemption, primary jurisdiction, and Food and Drug Administration regulatory scheme would be too lengthy. We hope, however, to convey a sense of what lies ahead regarding class certification and ways courts and the legislature may approach claims involving food and beverage labeling.
August 20, 2014 Articles
Sense Ahead: What Is In Store for Food/Beverage Labeling Claims?
By Vivian Quinn and Tracey Ehlers
Plaintiffs May Try to Avoid Dismissal by Severing Claims
Defendants have repeatedly argued that unrelated products and claims should not be tried together in the context of food-labeling class actions. In Trazo v. Nestle USA, Inc., 2013 U.S. Dist. LEXIS 171211(N.D. Cal. Dec. 4, 2013), the District Court for the Northern District of California ruled that the case could be severed into seven separate cases to avoid dismissal on commonality grounds.
The plaintiffs initially asserted six misbranding theories with regard to seven products. When faced with the court’s order striking their class allegations, however, the plaintiffs sought leave to sever the case into independent actions corresponding to the claims and products at issue. In ruling in favor of severance, the court agreed with the plaintiffs that different transactions and occurrences are at issue with respect to each group of plaintiffs and corresponding products; reasoned that “each misbranding theory requires a different analysis to determine if the statements were false or misleading depending on product packaging, product type and nature of the claims asserted”; agreed with the plaintiffs that severance will help to “streamline discovery and case management”; found little potential for prejudice against Nestle; and agreed with the plaintiffs that the “majority of the evidentiary proof required to sustain claims for each product will likewise be unique.”
This is a development to watch not only in the district courts in California but also in other courts around the country where consumer-labeling class actions have been filed.
Ability to “Ascertain” Class Membership Remains Critical
Another area that provides fodder for discussion involves a named plaintiff attempting to bring an action on behalf of class members regarding unrelated products or unsubstantiated purchase of products. The Third Circuit in Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013),answered the question of what will and what will not suffice to establish “ascertainability” in a class action targeting a product’s labeling. If class members are not ascertainable from a defendant’s records, there must be “a reliable, administratively feasible alternative,” and the court cautioned “against approving a method that would amount to no more than ascertaining by potential class members’ say so.” Id. at 305 (citing Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 594 (3d Cir. 2012) (“If class members are impossible to identify without extensive and individualized fact-finding or ‘mini-trials,’ then a class action is inappropriate.”)). In vacating the trial court’s class-certification order, Carrera explained that a plaintiff “must show by a preponderance of the evidence that the class is ‘currently and readily ascertainable’ based on objective criteria, and the trial court must undertake a rigorous analysis of the evidence to determine if the standard is met.” Carrera,727 F.3d at 306 (citations omitted). The Third Circuit found that the plaintiffs put forth no objective criteria and the trial court’s analysis was lacking to such an extent that the order certifying the class was an abuse of discretion.
Carrera had to do with consumers who were targeting the advertising for Bayer’s One-A-Day WeightSmart diet supplement. The ascertainability question was “whether each class member purchased WeightSmart in Florida.” Applying the above standard, the Third Circuit held that the trial court abused its discretion in accepting the plaintiffs’ proposals for determining class membership—namely, retailer records of online sales and/or loyalty/rewards-card sales or affidavits of putative class members. There was “no evidence that a single purchaser of WeightSmart could be identified using records of customer membership cards or records of online sales” and “no evidence that retailers even have records for the relevant period.” Carrera, 727 F.3d at 309. It was also an abuse of discretion to allow the plaintiffs to proceed on unverifiable affidavits of class members. This would improperly deny Bayer the opportunity to challenge class membership. “This is especially true where the named plaintiff’s deposition testimony suggested that individuals will have difficulty recalling their purchases of WeightSmart.”
Carrera contains an important discussion regarding the due-process rights of defendants in class actions. The court explained that a “defendant in a class action has a due process right to raise individual challenges and defenses to claims, and a class action cannot be certified in a way that eviscerates this right or masks individual issues.” The court stressed that a “defendant has a similar, if not the same, due process right to challenge the proof used to demonstrate class membership as it does to challenge the elements of a plaintiff’s claim” and that “[a]scertainability provides due process by requiring that a defendant be able to test the reliability of the evidence submitted to prove class membership.” Id.; see also Donaca v. Dish Network, LLC, 2014 WL 623396, at *5–6 (D. Colo. Feb. 18, 2014) (relying on Carrera in holding that class of persons who received robocalls was not ascertainable); Karhu v. Vital Pharms., Inc., 2014 WL 815253, at *3 (S.D. Fla. Mar. 3, 2014)(citing Carrera and denying motion for class certification on ascertainability grounds where plaintiff did not suggest any practical means of verifying class membership; the court would not allow absent class members to identify themselves through the submission of affidavits, holding that “accepting affidavits . . . of purchases without verification would deprive [defendant] of its due process rights to challenge the claims of each putative class member”).
A recent food-labeling case also found Carrera to be persuasive authority. See Sethavanish v. ZonePerfect Nutrition Co., 2014 WL 580696, at *4–5 (N.D. Cal. Feb. 13, 2014) (purported nationwide class of purchasers of ZonePerfect nutrition bars labeled “all natural”). Finding the reasoning of Carrera persuasive, the court denied the plaintiff’s motion for class certification because the plaintiff had not presented any reasonable method for ascertaining the class—the plaintiff had not identified any method of identifying class members or of ruling out fraudulent claims. “Even though there is no requirement that a named plaintiff identify all class members at the time of certification, that does not mean that a named plaintiff need not present some method of identifying absent class members to prevail on a motion for class certification.”
Although the following courts denied class certification on ascertainability grounds, they did not rely on Carrera:
- Astiana v. Ben & Jerry’s Homemade, Inc., 2014 WL 60097, at *3 (N.D. Cal. Jan. 7, 2014) (class certification of “all natural” label claims on ice-cream products containing alkalized cocoa rejected because only a fraction of the ice cream contained the ingredient and plaintiffs could not identify those who purchased ice cream with the ingredient; ascertainability was also implicated because plaintiffs could not separate class members who purchased the product with a different label or different ingredients; further, the court agreed with defendant’s argument that plaintiffs were required to introduce evidence that customers paid a premium for “all natural” ice cream and that a class should not be certified because plaintiff could not prove that consumers paid more for ice cream with this label on a nationwide basis).
- McManus v. Sturm Foods, Inc., 292 F.R.D. 606, 610 (S.D. Ill. 2013) (in addition to ruling against plaintiff on Rule 23’s commonality requirement, the court denied class certification on ascertainability grounds because plaintiffs could not separate class members who purchased the product with a different label or different ingredients).
Federal district courts in California have, however, declined to extend Carrera, stating “[i]n this Circuit, it is enough that the class definition describes a set of common characteristics sufficient to allow a prospective plaintiff to identify himself or herself as having a right to recover based on the description.” Brazil v. Dole Packaged Foods, LLC, 2014 WL 2466559, at *6 (N.D. Cal. May 30, 2014) (citing McCrary v. The Elations Co., LLC, 2014 WL 1779243, at *8 (C.D. Cal. Jan. 13, 2014)). In Brazil, the district court disagreed that ascertainability was lacking because Dole’s labels did not identify the method that was used to create ascorbic acid or citric acid. Rather, Dole admitted that all of its customers received ascorbic acid and citric acid in its products that were made in a similar way. This was sufficient to defeat the defendant’s ascertainability argument. Brazil, 2014 WL 2466559, at *5. A petition for leave to appeal has been filed.
Named Plaintiffs Must Have Incentives Aligning with Those of Absent Class Members
Emphasizing that different products have different functions and different consumers, courts have held that claims by a named class representative who purchased a product that differs from the product(s) purchased by absent class members will fail to satisfy the typicality requirement of Rule 23(a)(3). See, e.g., Gonzalez v. Procter & Gamble Co., 247 F.R.D. 616, 621–22 (S.D. Cal. 2007) (named plaintiff did not satisfy Rule 23(a)(3) typicality requirement where product purchased was not one of the 28 products subject to allegedly false hair-strengthening claims); Lewis Tree Serv., Inc. v. Lucent Techs. Inc., 211 F.R.D. 228, 234 (S.D.N.Y. 2002) (named plaintiff, who purchased only 2 of the more than 60 products at issue, did not satisfy Rule 23(a)(3) typicality requirement).
In Wiener v. Dannon Co., 255 F.R.D. 658 (C.D. Cal. 2009), the named plaintiff purchased Dannon’s Activia product but had never purchased the other two products allegedly at issue: Activia Light and DanActive. Activia and DanActive contained different probiotics. Dannon argued that the plaintiff’s claims were not “typical” of the DanActive consumers because the products were advertised separately and involved different health benefits that were supported by different studies. The plaintiff argued that “typicality” was satisfied, because her legal theories were identical to those advanced on behalf of all potential class members, and Dannon’s advertising was identical for both products. Rejecting the plaintiff’s argument, the court stressed that it must “ensure that the named plaintiffs have incentives that align with those of absent class members so as to assure that the absentees’ interests will be fairly represented” and that the absentees’ claims will be adequately pursued. Because the plaintiff had only purchased Activia and had never purchased DanActive, the claims of the unnamed plaintiffs who purchased DanActive were not “fairly encompassed by plaintiff’s claims,” and the court refused to certify the class.
Similarly, in Major v. Ocean Spray Cranberries, Inc., 2013 WL 2558125 (N.D. Cal. June 10, 2013), the plaintiff failed to meet the typicality requirement of Rule 23 where the plaintiff attempted to include entire product lines based on the purchase of only a few Ocean Spray products, and the plaintiff “failed to link any of those products to any alleged misbranding issue.” The plaintiff purchased a sparkling pomegranate blueberry drink and alleged misrepresentations based on language on the label making specific claims about blueberries. The plaintiff sought to certify a class, however, that included products with labels making no claim about blueberries. The court explained that “[t]he evidence needed to prove plaintiff’s claim that the Diet Sparkling Pomegranate Blueberry drink contained false or misleading labeling is not probative of the claims of unnamed class members who purchased products within the ‘Sparkling’ line that did not contain blueberries.” The court concluded that “the typicality requirement [was] not met” because “plaintiff’s proposed classes are so broad and indefinite that they encompass products that she herself did not purchase [and] had nothing to do with.” Id.; but see Brazil, 2014 WL 2466559, at *9 (typicality met even where named plaintiff did not purchase every identified product because all products included in the proposed class definition, including the product plaintiff purchased, had “all natural fruit” label statements and contained ascorbic acid and citric acid).
Why Classes Seeking Monetary Damages Face Dismissal
As commentators are examining the “popularity” of the Northern District of California for food-law class actions, what is truly interesting is the manner in which a federal district court in the Second Circuit in Ackerman v. Coca-Cola Co., 2013 WL 7044866 (E.D.N.Y. July 18, 2013), has disposed of a proposed class seeking economic damages, even when it involves underlying California law. In Ackerman, part of the federal multidistrict litigation In re: Glaceau Vitaminwater Marketing and Sales Practice Litigation (No. II) (M.D.L. No. 2215), the plaintiffs sought injunctive relief and monetary damages for the defendants’ alleged deceptive labeling and marketing of “Vitaminwater.” The plaintiffs commenced a class action identifying two putative classes: (1) New York residents who purchased the product from January 20, 2003, to present, and (2) California residents who purchased the product from January 15, 2005, to present. The plaintiffs claimed that the labeling depicts the beverage as an alternative to water and soft drinks and includes language that it will “assist consumers in maintaining healthy dietary practices”; also, the drink touts “specific purported health benefits . . . rather than just another sugary soft drink.” Ackerman, 2013 WL 7044866, at *1.
The plaintiffs were hoping that the state law underlying the claims (New York and California) would offer them an opportunity to maintain actions under New York General Business Law section 349 (deceptive business practices), General Business Law section 350 (false advertising), and deceit/misrepresentation and unjust enrichment under New York common law as well as under several California statutes (California Unfair Competition Law, California False Advertising Law, and California Consumers Legal Remedies Act) and California common-law deceit/misrepresentation.
In its report and recommendation, the magistrate judge recommended that although the plaintiffs met Rule 23(a)’s requirements of numerosity, commonality, typicality, and adequacy of representation (for certification of classes seeking both injunctive and monetary relief), the plaintiffs did not satisfy the predominance and superiority prongs of Rule 23(b)(3) with regard to the monetary-damages claim.
Common questions did not predominate with regard to monetary damages sought by the class. New York plaintiffs’ false-advertising claim under General Business Law section 350 required a showing of individual reliance, whereas some of the other claims involved a “reasonable consumer” standard for reliance. Also, loss causation must be addressed on an individual basis, including proof that each class member paid a premium for Vitaminwater over another beverage. Despite the argument by the plaintiffs that California courts are more inclined to find predominance in cases brought under California consumer-protection laws than are courts in New York for cases brought under General Business Law sections 349 and 350, the magistrate urged that the predominance prong failed for the California plaintiffs’ claims as well. The court in Ackerman is bound by Second Circuit rulings, not Ninth Circuit rulings. And the Second Circuit has held (in the “light” cigarette cases) that “because the acceptable measure of injury-out-of-pocket damages would require individualized proof, class-wide issues [could not] be said to predominate.” McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 228 (2d Cir. 2008); but see Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975) (the amount of damages is invariably an individual question and does not defeat class action treatment); Yohoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1094 (9th Cir. 2010) (“In this circuit . . . damage calculations alone cannot defeat class certification.”).
The plaintiffs also failed to satisfy the “superiority” prong of Rule 23(b)(3), i.e., they did not establish that a monetary damages class was superior to other methods for adjudicating their claims. The magistrate observed that “manageability is ‘critical to the Rule 23(b)(3) analysis’” and that plaintiffs failed to sustain their burden of establishing the manageability of the proposed classes. Ackerman, 2013 WL 7044866, at *21. The plaintiffs failed to present a class-wide damages model that could be used based on common proof and a reliable method of distributing damages to putative class members, or to estimate the cost of notice and claims administration. The plaintiffs did not challenge this part of the magistrate’s report and recommendation. See No. 09-cv-395 Docket No. 144.
The magistrate did, however, recommend that an injunctive-relief class be certified, urging that “defendants clearly ‘acted . . . on grounds generally applicable to the class,’ and injunctive relief constitutes a significant aspect of the relief sought.” “If, as plaintiffs allege, the name ‘Vitaminwater’ is misleading to a reasonable consumer, then equitable relief in the form of an injunction would be an appropriate remedy.” Ackerman, 2013 WL 7044866, at *17.
The defendants immediately filed an objection to the report and recommendation, arguing that certification of an injunctive-relief class would be improper (and unnecessary). Citing Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011),the defendants argued that a Rule 23(b)(2) class may not be certified where, as here, the plaintiffs also requested non-incidental monetary relief. See No. 09-cv-395 Docket No. 142. The plaintiffs responded with their own take on the issues presented. See Docket No. 144 (Sept. 6, 2013) (arguing that monetary claims do not preclude class certification under Rule 23(b)(2)).
As we await the federal district court’s adoption or rejection of the magistrate’s recommendation(s), rest assured that certification of class actions involving economic damages is something that will continue to be litigated and may result in review by the United States Supreme Court.
For instance, in Lanovaz v. Twinings North America, Inc., 2014 WL 1652338 (N.D. Cal. Apr. 24, 2014), alleging that the defendant made false representations with respect to its tea products (that they are a “Natural Source of Antioxidants”), the court granted in part and denied in part the plaintiff’s motion for class certification. The court ruled that ascertainability had been established, despite the lack of records or receipts to identify purchasers, because the class definition was specific enough to allow the plaintiff to identify herself as having a right to recover. The court further held that the commonality and typicality requirements were satisfied because each product in the proposed class definition contained the same “natural source of antioxidants” labeling. The court rejected the defendant’s argument that the materiality of the allegedly misleading statement had to be determined on an individualized basis, finding that the plaintiff need only establish that the reasonable consumer would attach importance to the phrase, which could be determined on a class-wide basis.
Although the court certified an injunctive-relief class under Rule 23(b), it denied certification of the monetary-damages class, finding that the plaintiff had not presented a sufficient damages model and rejecting the “full refund” model as inappropriate in the restitution context. In doing so, the court held that the plaintiff’s expert had not provided a sufficient measure of damages under a “price premium” model because he had no way of linking a difference in price to the antioxidant label. Id. at *4–7; see also Caldera v. J.M. Smucker Co., 2014 WL 1477400, at *3 (C.D. Cal. Apr. 15, 2014) (denying plaintiff’s motion to certify a monetary-relief class where plaintiff failed to offer any evidence or expert testimony that damages could be calculated based on the difference between the market price and true value of the products—various Crisco and Uncrustables sandwiches products; holding that without such evidence, plaintiff failed to satisfy her burden of proving that damages could be proven on a class-wide basis).
Conclusion
Our “crystal ball” projection in January anticipated a momentum shift in favor of the defense of labeling claims. This notion has been somewhat tempered, however, by plaintiffs’ “pivot and turn” as the year unfolds. As courts continue to limit the viability of class actions generally, plaintiffs have doubled down on attempts to avoid dismissal. We anticipate that courts will continue to dismiss putative class actions targeting the food and other industries where consumers do not typically retain receipts and may have no other objective method to establish that they purchased the product at issue. And the certification of class actions involving economic damages is something that will continue to be litigated and may result in review by the U.S. Supreme Court. Intrigue with food and beverage labeling and class-action litigation will continue across the land.
While these developments provide an interesting backdrop for legal analysts, there can be no underestimating the time and expense required for companies that are facing the onslaught of litigation over product labels. This will continue to affect marketing and sales in the industry for some time to come.
Keywords: litigation, mass torts, consumer class actions, Carrera, class certification
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