Consumer Class Action

Turning Tide on the Whole Nation as a Viable Class?

** Is the All State Nationwide Class Back for False Advertising Plaintiffs?**                                                                                                                                                                                                                                     

Abstract map of the United States of America covered by a social network composed of blue people symbols connected together at various sizes and depths on a white background with pixelated borders. Futuristic north american computer and social network background.

Class defense counsel, faced with a false advertising law suit seeking to certify a class of consumers across multiple states, often rely on Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) as impenetrable authority for the proposition that material differences between various state consumer protection laws preclude one single court from certifying a nationwide consumer class.  Mazza was a defining “stay in your lane” case for consumer class actions – but are chinks in the armor showing?

In Mazza, defendant Honda on appeal from the lower court, which certified a class of Acura RL buyers who complained of a faulty collision-mitigation braking system, successfully argued at the Ninth Circuit that several material differences between California consumer-protection laws and those of other jurisdictions at issue precluded certification of a nationwide class.  666 F.3d at 591.  Some states, for example, require plaintiffs to demonstrate scienter and/or reliance, while others do not.  Id. Similarly, some state’s consumer laws have no private right of action.  Id.  And significant differences exist in the remedies available to plaintiffs under the various state laws.  Id.  Because prevailing choice-of-law analysis required that home-state law should govern each class member’s claim, the court vacated the class-certification order.  Id.

Many trial courts – not just those in the Ninth Circuit – have followed the Mazza court’s reasoning and denied nationwide class certification where material differences in state laws were identified – even at the pleading stage. Gianino v. Alacer Corp., 846 F. Supp. 2d 1096 (C.D. Cal. 2012); Frezza v. Google Inc., 2013 WL 1736788 (N.D. Cal. Apr. 22, 2013) (precluding North Carolina plaintiffs from asserting claims under California law, given that the transaction at issue took place in North Carolina); Ralston v. Mortgage Investors Group, Inc., 2012 WL 1094633 (N.D. Cal. Mar. 30, 2012) (out of state adjustable-rate mortgage holders could not rely on California UCL); Maniscalo v. Brother International (USA) Corp., 709 F.3d 202 (3d Cir. 2013) (New Jersey law does not apply to South Carolina consumers); Garland v. Servicelink L.P., No. GLR–13–1472, 2013 WL 5428716 (D. Md. 2013) (Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) does not apply to Maryland residents);  In re Celexa & Lexapro Mktg. & Sales Practices Litig., 291 F.R.D. 13 (D. Mass. 2013) (nationwide class of prescription anti-depressant drugs buyers could not be certified); Harris v. CVS Pharm., Inc., CV 13–02329 AB (AGRx), 2015 WL 4694047, at *4–5 (C.D. Cal. Aug. 6, 2015) (California plaintiff who purchased products in California lacked standing to bring a claim under a Rhode Island statute); Davison v. Kia Motors Am., Inc., No. SACV 15-00239-CJC, 2015 WL 3970502, at *2 (C.D. Cal. June 29, 2015) (denying nationwide certification on behalf of Kia Optima owners whose vehicle had allegedly defective electronic door locks).

But more recently, judges are taking a second look at Mazza.  Judge Gillan in the Northern District of California recently stated that reading a “bright line rule” into Mazza “significantly overreads” the case.  Valencia v. Volkswagen Grp. of Am. Inc., No. 15-CV-00887-HSG, 2015 WL 4760707, at *1 (N.D. Cal. Aug. 11, 2015).  Rather, he stated, Mazza’s application should be limited to its choice-of-law analysis and its determination that California law should not be applied to non-California residents, rather than a wholesale edict that nationwide classes are, as a matter of law, un-certifiable.  Id. citing Forcellati v. Hyland’s Inc., 876 F.Supp.2d 1155, 1159 (C.D.Cal.2012).  And rather than the choice of law analysis being performed at the pleading stage on a motion to dismiss, Judge Gillan held that this factual inquiry is more appropriately addressed at the class certification stage.  Id. citing In re Clorox Consumer Litigation, 894 F.Supp.2d 1224, 1237 (N.D.Cal.2012) (“Since the parties have yet to develop a factual record, it is unclear whether applying different state consumer protection statutes could have a material impact on the viability of Plaintiffs’ claims”).

Last week, the court in Kaatz v Hyland’s Inc., No. 7:16-cv-00237-VB, (S.D.N.Y July 6, 2016) (Dkt. No. 29) similarly found it premature to deal with concerns about standing to represent consumers in all 50 states at the pleading stage. Judge Briccetti stated he was part of a “growing consensus” of federal district judges who believe standing issues that go to putative class members’ commonality and typicality are better addressed at the class certification stage, rather than on a motion to dismiss.  Dkt. No. 29 at 7 – 8, citing In re DDAVP Indirect Purchaser Antitrust Litig., 903 F. Supp. 2d 198, 214 (S.D.N.Y. 2012).  The Kaatz case, itself, dealt with two New York residents who claimed they were misled by the marketing and labeling for Hyland’s homeopathic baby products such as Baby Teething Gel and Baby Nighttime Tiny Cold Syrup.  The allegations followed the familiar trope of “natural” claims being misleading, as the product/s allegedly contained synthetic ingredients such as sodium benzoate and potassium sorbate, which are used as food preservatives.  They accused Hyland of violating all 50 states’ consumer protection laws and sought to certify a nationwide class.  Plaintiffs argued that even though they were all New York residents, the questions of common issues and manageability of the proposed nationwide class were better left for the class certification stage.  Judge Briccetti agreed, holding that Hyland’s arguments were “premature” at the motion to dismiss stage – finding that “class certification is logically antecedent to standing when, as here, class certification is the source of the potential standing problems.”  Id.

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Long Term Effects of Tobacco II

** A Return to the Limits of In Re Tobacco II?  Courts Find That Not Every Advertisement is Part of a “Long-Term Campaign” **                                                                                                                                                                                              

London, England - May 20, 2016: Packets of Various Old Cigarette Boxes from the 1970's

We normally don’t blog about unpublished decisions because . . . lack of precedential value and all that . . . .  and that may turn out to be the case with the recent California Court of Appeal’s opinion in Santamarina v. Sears Roebuck & Co., B246705, 2016 WL 1714226, at *1 (Cal. Ct. App. Apr. 26, 2016) and the Ninth Circuit’s memorandum decision in Haskins v. Symantec Corp., No. 14-16141 (9th Cir. June 20, 2016).  But these decisions are simply too good for us to pass up the opportunity to post about them  – particularly for those who represent clients being sued under California’s CLRA or UCL based on foggy claims of consumer fraud.  Invariably, a defendant bringing a Rule 9(b) motion to dismiss or opposing class certification based on the putative class representative’s inability to identify the false advertisements she relied on will be met with the plaintiff’s invocation of the “long-term advertising campaign” language in In re Tobacco II Cases (Tobacco II), 46 Cal. 4th 298 (2009) – the salve that heals all reliance deficiencies.

Of course, Tobacco II dealt with a class representatives’ allegations of “a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.”  46 Cal. 4th at 306 (emphasis added.)  Which is no exaggeration, Joe Camel was R.J. Reynolds’ pitchman for a decade — although it seemed much longer — and the Marlboro Man rode shotgun for Philip Morris for almost half a century.  Based on that allegation, the California Supreme Court held, “[W]here . . . a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.”  Id. at 328.  Despite the limited nature of this ruling, plaintiffs who have no idea what advertisements they may have seen frequently claim that the defendant engaged in a “long-term [false] advertising campaign.” Id.

Courts have shown varying degrees of willingness to go along with this class representative claim, particularly at the pleading and class certification stages.  Those that do, often quote this language from Tobacco II:  “The substantive right extended to the public by the UCL is the right to protection from fraud, deceit and unlawful conduct, and the focus of the statute is on the defendant’s conduct.” 46 Cal 4th at 324.  Courts accepting the “long-term advertising campaign” excuse for the plaintiff’s inability to identify the advertisements he relied on tend to read Tobacco II as a judicial declaration that the UCL and CLRA are primarily punish-the-defendant statutes and only secondarily consumer protection laws.

But in Santamarina – a case involving “Made in the USA” advertising by Sears for its Craftsman® tools – the California Court of Appeal scaled back the expansive readings of Tobacco II by other California courts.  In Santamarina, the putative class representatives were able to identify the specific advertising and labeling on which they relied so standing was not at issue as it was in Tobacco II.  In addition, falsity and materiality were not in dispute given California law on “Made in the USA” claims.  Moreover, discovery in the case apparently showed that Sears understood that “Made in the USA” was a valuable sales claim and internal marketing studies demonstrated that a significant percentage of consumers believed Craftsman® tools were made in the United States.

Despite the above, the Court of Appeal concluded that plaintiffs could not establish commonality or that the proposed class was ascertainable.  Notably, the plaintiffs defined the class as “All persons who purchased, in the State of California from January 6, 2001 through the present, any Craftsman branded tool or product where any unit or part thereof was entirely or substantially made, manufactured, or produced outside of the United States.”  The Court of Appeal agreed with the superior court that this definition doomed the proposed class under commonality and ascertainability requirements because the proposed class included consumers who never saw any Craftsman® “Made in the USA” advertising or labeling.  The Court of Appeal responded to plaintiffs’ incantation of Tobacco II by holding, “Given that the time period at issue was several years, and only some Sears advertising and marketing could potentially be found to be false or misleading, substantial evidence supported the trial court’s finding that the advertising at issue here is not equivalent to the decades-long campaign in Tobacco II.”  Particularly important are these words:  “In contrast to the evidence here, Tobacco II ‘involved identical misrepresentations and/or nondisclosures by the defendants made to the entire class.’” Santamarina, 2016 WL 1714226, at *10 (citing  Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 849.

For being designated as an unpublished opinion, the California Court of Appeal’s decision in Santamarina is unusually expansive in its analysis – covering 34 pages.  In contrast, Haskins v. Symantec is the soul of wit.  In a mere two paragraphs, the Ninth Circuit upheld the district court’s dismissal of a putative class action complaint alleging that Symantec failed to warn consumers that hackers had compromised the 2006 version of its ubiquitous Norton antivirus software.  The plaintiff claimed, among other things, that she relied on Symantec’s advertising that its software was secure (when it allegedly wasn’t) in buying it – without identifying the specific advertising.  The Ninth Circuit affirmed the district court’s dismissal under Rule 9(b) “[b]ecause Haskins’s complaint did not allege that she read and relied on a specific misrepresentation by Symantec.”  In response to the plaintiff’s predictable invocation of Tobacco II, the Ninth Circuit found that the plaintiff “failed to establish that the Tobacco II standard is applicable to her pleadings because the misrepresentations at issue here were not part of an extensive and long-term advertising campaign like the decades-long campaign engaging in saturation advertising targeting adolescents in Tobacco II.”

Two cases do not a trend make — especially when California law is involved.  But it is encouraging to see courts – even in unpublished decisions – return Tobacco II to its stated limits rather than assuming that any and every advertisement is part of a long-term campaign.

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Is the Primary Jurisdiction Doctrine Alive Again for “Natural” Defendants?

 ** Ninth Circuit Stays Natural Case In “Food Court” **
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The doctrine of primary jurisdiction is a prudential means to stay or dismiss a party’s claims if the claims are better adjudicated or answered by an administrative agency – it “is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.” Ellis v. Tribune Television Co., 443 F.3d 71, 81 (2d Cir.2006). It is properly applied “whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.” Id. When applicable, “a court defers to the agency for advisory findings and either stays the pending action or dismisses it without prejudice” Johnson v. Nyack Hosp., 86 F.3d 8, 11 (2d Cir.1996).

Courts must make a case-by-case determination when considering primary jurisdiction.   In doing so, they generally focus on: (1) whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency’s particular field of expertise; (2) whether the question at issue is particularly within the agency’s discretion; (3) whether there exists a substantial danger of inconsistent rulings; and (4) whether a prior application to the agency has been made. Nat’l Commc’ns Ass’n v. AT & T, 46 F.3d 220, 222 (2d Cir.1995).

There was a time when “primary jurisdiction” was in vogue for “all natural” defendants because of the perception that the FDA was the proper administrative body to answer the question of what sort of ingredients and products qualify as “natural.”  The leading case was Astiana v. Hain Celestial Grp., Inc., 905 F. Supp. 2d 1013 (N.D. Cal. 2012). This case involved Hain Celestial’s cosmetics products with labels including “All Natural,” “Pure Natural,” or “Pure, Natural & Organic.” In this case, the putative nationwide class representatives alleged that they had been duped into purchasing Hain’s cosmetics that allegedly contained synthetic and artificial ingredients such as benzyl alcohol.  As is typical in such cases, the plaintiffs sought damages and injunctive relief under a variety of theories including statutory violations under the California’s Consumer Legal Remedies Act. The district court dismissed the case, applying primary jurisdiction, holding that “[in] the absence of any FDA rules or regulations (or even informal policy statements) regarding the use of the word “natural” on cosmetics labels, the court declines to make any independent determination of whether defendants’ use of “natural” was false or misleading. Doing so would “risk undercutting the FDA’s expert judgments and authority.” Other district courts invoked the agency’s primary jurisdiction to wait and see if the FDA intended to offer  regulations regarding the use of the term “natural” (in particular in GMO food cases). In re Gen. Mills, Inc. Kix Cereal Litig., No. CIV–A–12–249 KM, 2013 WL 5943972 (D.N.J. Nov. 1, 2013), Barnes v. Campbell Soup Co., No. C12–05185 JSW, 2013 WL 5530017 (N.D.Cal. July 25, 2013) (GMO food case), Cox v. Gruma Corp., No. 12–CV–6502 YGR, 2013 WL 3828800 (N.D.Cal. July 11, 2013) (GMO case).

Undeterred by the district court’s dismissal, the Plaintiffs in Astiana went on a two pronged attack. They went directly to the FDA seeking guidance on the definition of “natural.”  The FDA responded by letter stating – “cosmetic public health and safety matters are currently fully occupying the resources that FDA has available for proceedings on cosmetics matters” and “proceedings to define ‘natural’ do not fit within [the agency’s] current health and safety priorities.” Plaintiffs also appealed to the Ninth Circuit.  Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 759 (9th Cir. 2015). The Ninth Circuit held that — while the district’s court primary jurisdiction doctrine decision was not wrong — it should have stayed the matter awaiting an FDA response. Upon remand, the district court revisited the primary jurisdiction argument and, recognizing that the recent FDA letter demonstrated that the FDA has no interest in the subject matter and, therefore,  referral to the FDA would be futile, the court denied defendant’s motion to stay on primary jurisdiction grounds. Astiana v. Hain Celestial Grp., Inc., No. 4:11-cv-06342-PJH (N.D. Cal. October 9, 2015) (Dkt. No. 114).

Courts in other jurisdictions have followed this same rejection of the primary jurisdiction doctrine argument made by cosmetic company defendants in “natural” cases. Goldemberg v. Johnson & Johnson Consumer Companies, Inc., 8 F. Supp. 3d 467, 476 (S.D.N.Y. 2014) (“the FDA has not begun to promulgate a rule concerning the term natural in cosmetics . . [i]nstead, it recently declined to make such a determination . . . [t]hus, as the agency is not simultaneously contemplating the same issue . . . this factor weighs against applying the primary jurisdiction doctrine”); Paulino v. Conopco, Inc., No. 14-CV-5145 JG RML, 2015 WL 4895234, at *1 (E.D.N.Y. Aug. 17, 2015); Langan v. Johnson & Johnson Consumer Companies, Inc., 95 F. Supp. 3d 284, 290 (D. Conn. 2015); Fagan v. Neutrogena Corp., No. 5:13-CV-01316-SVW-OP, 2014 WL 92255, at *1 (C.D. Cal. Jan. 8, 2014) (“Plaintiffs’ claims are not barred by the doctrine of primary jurisdiction . . . [as the] FDA has affirmed that proceedings to define the term natural in the context of cosmetics do not fit within its current health and safety priorities.”); see also Reid v. GMC Skin Care USA Inc., No. 815CV277BKSCFH, 2016 WL 403497, at *1 (N.D.N.Y. Jan. 15, 2016) (rejecting primary jurisdiction in case alleging that face cream with “DNA repair effect” statements was misleading); Randolph v. J.M. Smucker Co., No. 13-80581-CIV, 2014 WL 1018007, at *6 (S.D. Fla. Mar. 14, 2014).

At the same time that the primary jurisdiction doctrine was being buried with respect to “natural” claims, it remained viable in various food cases, particularly those presenting discrete technical questions, i.e. Backus v. Gen. Mills, Inc., 122 F. Supp. 3d 909, 933 (N.D. Cal. 2015) (primary jurisdiction invoked on question of the amount of trans fat in baked goods that is safe); Saubers v. Kashi Co., 39 F. Supp. 3d 1108 (S.D. Cal. 2014) (primary jurisdiction invoked with respect to “evaporated cane juice” labels) (collecting cases). The basis for primary jurisdiction in particular in the ECJ cases is that that FDA has indicated that it WILL issue regulatory guidance on evaporated cane juice – but not until the end of 2016. See also Draft Guidance for Industry on Ingredients Declared as Evaporated Cane Juice; Reopening of Comment Period; Request for Comments, Data, and Information, 79 Fed.Reg. 12,507 (Mar. 5, 2014).  Most evaporated cane juice cases are currently stayed (or dismissed) see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016) (extending ECJ stay for an additional 180 days, until August 2016) (Laporte, J.); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016) (Orrick, J.) (extending ECJ stay and continuing case management conference until July 2016). A few judges have lifted the ECJ stay (impatient at the FDA’s movement) but they appear to be out-liers. See Figy v. Lifeway Foods, Inc., No. 3:13-cv-4828-TEH (N.D. Cal. Jan. 4, 2016), Dkt. No. 57; Swearingen v. Pacific Foods of Oregon, Inc., No. 13-cv-04157 (N.D. Cal. Jan. 5, 2015), Dkt. No. 61.

But we digress.  Back to “natural” and a significant development.  In November 2015, the FDA issued a request for comments regarding the use of the term “natural” in connection with food product labeling. See Use of the Term “Natural” in the Labeling of Human Food Products; Request for Information and Comments, 80 Fed. Reg. 69,905 (Nov. 12, 2015)See our previous blog post.  While noteworthy in and of itself, the FDA’s requests for comments also raised the secondary issue of whether the FDA’s new-found interest in potentially defining “natural” with respect to foods  triggers the primary jurisdiction doctrine?   Last week, the Ninth Circuit answered – Yes. In Kane v. Chobani, LLC, No. 14-15670, 2016 WL 1161782, at *1 (9th Cir. Mar. 24, 2016), the circuit court dealt with an appeal from the Northern District of California where buyers of Chobani fruit flavored Greek yogurt filed suit against  the company alleging that its labels and advertising violated California law because the “all natural” yogurt included fruit juice and turmeric.  Before the district court, the plaintiffs had a difficult time articulating why it was plausible to allege that fruit juice and turmeric are unnatural vacillating between the argument that it is unnatural to use these ingredients to color yogurt and the argument that the fruit juices at issue were so heavily processed that they are no longer natural.  Ultimately the district court found that the case warranted dismissal on Rule 9(b) and 12(b)(6) grounds. Kane v. Chobani, LLC, 973 F. Supp. 2d 1120, 1138 (N.D. Cal. 2014).  Plaintiffs appealed on the basis that under primary jurisdiction their case should have been stayed – not dismissed. And the Ninth Circuit agreed,  vacating the dismissal and remanding to the district court under a stay pending resolution of the FDA’s “natural” proceedings. So a win for the plaintiffs in Chobani – but one that defendants will take careful note of – in the Ninth Circuit and beyond.

 

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A Poker Lesson From The Pom Wonderful v. Coca-Cola Co. Cases

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** Coca Cola Prevails in false Advertising Case Bought By Pom Wonderful – Trying to Protect its Pomegranate Juice Market – While at the Same Time Settling Class Actions **                                                                                                                                                                                                                                                            

Pom Wonderful lost its 7 1/2 year battle against Coca-Cola this week after a nine person jury in California found that Coke was not misleading consumers with its Minute Maid division’s “Pomegranate Blueberry Flavored Blend of 5 Juices” which contained only a half-percent of pomegranate and blueberry juice.  Pom Wonderful LLC v. The Coco-Cola Co., No. cv-08-06239-SJO (MJWX) (C.D. Cal. March 21, 2016) (Dkt. 732). Pom had argued that the product’s labeling, which included pictures of all five fruits with the pomegranate dominating (although the apple was pretty darn big too) and the fact that “Flavored Blend of 5 Juices” was in smaller print below “Pomegranate Blueberry” was intended to “hoodwink” consumers into believe that pomegranate and blueberry juices were significant components of the product.  In addition, Pom pointed to the color of Minute Maid’s juice in its clear plastic bottles, which resembled pomegranate juice (i.e., red).  Pom’s attorneys told the jury that Coke leached off of the hard work and money that Pom had invested in growing the pomegranate juice market by creating a cheap juice that Pom’s customers would be tricked into buying due to the cost differential and the belief that they were getting the healthy benefits of pomegranate juice.  Pom sought $77.6 million in lost profits.

Coke’s principal defense was simple — it’s label was accurate and complied with FDA guidelines.  However, it is worth noting that Coke recently settled – subject to preliminary and final court approval — a putative consumer class action, Niloofar Saeidian v. The Coca Cola Company, Case No. 09-cv-06309, which was filed in the Central District of California approximately one year after Pom filed its lawsuit and which made the same deceptive labeling allegations on behalf of a nation-wide class of consumers who purchased the juice.  Interestingly, both the Pom and Saeidian cases are before Judge S. James Otero.  The proposed class action settlement provides for full refunds to class members with proof of purchase (uncapped) and up to two vouchers for replacement products in Coke’s Minute Maid, Simply, Smartwater, Vitaminwater, Vitaminwater Zero, and Honest Tea brands (capped at 200,000 on a “first come, first served” basis).  Coke also agreed to pay the administrative costs of the settlement (est. $400,000), attorney fees and costs not to exceed $700,000, a $5,000 incentive payment to Mr. Saeidian, and to donate $300,000 in product to Feeding America.  Finally, during the pendency of the class action (and the Pom case for that matter), Coke discontinued Minute Maid’s Enhanced Pomegranate Blueberry Flavored Blend of 5 Juices and represented in the settlement that it has no plans to reintroduce it.  Niloofar Saeidian v. The Coca Cola Company, No. 09-cv-06309, (C.D. Cal. Feb. 26, 2016) (Dkt. 192).

Does Coke regret settling the class action lawsuit less than a month before its triumph in Pom?  The difference between the results highlights the stark differences between consumer class actions and Lanham Act false advertising cases.  The latter, especially those not involving negative advertising – are notoriously hard on plaintiffs.  First, surveys show that juries say they read labels – word for word – (see Persuasion Strategies National Jury Survey, 2015).  It thus an uphill battle to convince them they have been misled by a label.  Second, if a company dishes it out, it will almost surely have to take it (nobody’s ads are perfect after-all). In Pom, Pom Wonderful’s claim of misleading labeling was met by Coke asserting “unclean hands” — pointing the jury to an 2012 administrative law judge’s decision in a case brought by the FTC against Pom that Pom made unsubstantiated claims that its juice treated, prevented or reduced the risk of heart disease, prostate cancer, and erectile dysfunction (upheld by POM Wonderful, LLC v. F.T.C., 777 F.3d 478 (D.C. Cir. 2015)).  This is likely a second critical underestimate of jurors’ typical behavior that worked against Pom. Most jurors react predictably to a party’s perceived hypocrisy. Third, most advertisements aren’t blatantly (legal term: “ literally”)  false so the question of whether an ad or label is materially deceptive comes into play.  Experts are hired to present bone dry surveys of consumer behavior, markets and perceptions of the offending ad that are subject to methodology challenges and sometimes clash with jurors’ own perceptions:  “Why do we need an expert? Everybody knows what that means?”  These experts’ opinions even conflict with the company’s own beliefs from time to time.  Indeed, Coke’s counsel’s closing argument mocked Pom’s assertion that Minute Maid’s juice stole customers from Pom by quoting from some early “creative briefs” prepared by Pom’s marketing department that Pom’s target audience for certain ads was “health-conscious hypochondriacs,” juxtaposing that audience with Minute Maid’s target market — regular old families.  And fourth, even if a corporate plaintiff successfully navigates these tough proof issues, it is left with the daunting task of proving that it suffered actual injury from its competitor’s ad and the amount of that injury in dollars – no easy task in multi-competitor markets that suffer the slings and arrows of shifting consumer tastes, new market entrants, the next “new thing,” and the fluctuation of the economy as a whole.  Frequently, defense counsel in Lanham Act cases are willing to just poke holes in plaintiffs’ experts’ damage analyses through cross-examination and possibly their own experts’ critiques without proffering alternative damage calculations on the theory that offering alternative numbers is a tacit admission of liability and creates a floor.  Coke eschewed this approach and called an expert who testified that, even accepting some of Pom’s forensic accountant’s premises, Pom’s damages would only be between $886,000 and $9.8 million – not $77.6 million (see also this post on the strategy for damages anchors).  In the end, that tactical decision didn’t matter.  In less than a day of deliberations, the jury determined that Coke’s blended juice did not mislead consumers about the amount of pomegranate juice in the bottle.  Pom Wonderful LLC v. The Coco-Cola Co., No. cv-08-06239-SJO (MJWX) (C.D. Cal. March 21, 2016) (Dkt. 732).

One can assume that Pom went into this Lanham Act lawsuit against Coke with eyes wide open.  Clearly Pom is sincere in its view that its hard work and research funding created the explosive growth in consumer demand for pomegranate juice and its market should not be hijacked by impostors.  Pom had previously been to trial against Ocean Spray and Welch’s making similar Lanham Act claims to the ones asserted against Coke.  In the Ocean Spray case, a two-week trial in the Central District of California at the end of 2011 resulted in a jury verdict that Ocean Spray did not deceptively advertise its “100% Juice Cranberry and Pomegranate” juice after two hours of deliberation.   Pom Wonderful LLC v. Ocean’s Spray Inc., No. 2:09-cv-00565-DDP-R2 (C.D. Cal. Dec. 2, 2011) (Dkt. 552). The Welch’s case proved a pyrrhic victory for Pom – the Central District of California jury found in 2010 that Welch’s labeling of its juice as “100% Juice White Grape Pomegranate” was literally true but nevertheless deceptive yet concluded that Pom was unable to prove any injury.  Interestingly, Welch’s – like Coke – settled two consolidated consumer class action lawsuits making the same claims as Pom five months after its victory over Pom. Pom Wonderful LLC v. Welch Foods Inc., No. 2:09-cv-00567-AHM-AGR (C.D. Cal. Sept. 13, 2010) (Dkt. 374).

In the end, the problem with Pom’s Lanham Act lawsuits – like many such cases – may be the plaintiff.  Jurors are asked to find that the defendant deceived consumers, but then give the money to a competitor – not a particularly satisfying result.  This is obviously not a problem in consumer class actions.  In a Lanham Act case, if the advertising is negative and directly pointed at the competitor or if the advertisement is particularly naughty – for example, Blue Buffalo’s trumpeting that its premium priced dog food contained no byproducts when the company knew that it did (lesson: don’t mess with man’s best friend) – a jury will likely find liability and damages.  But in the more common “literally true but deceptive” case, Lanham claims are a hard sell.  In the triad of Pom cases, the only one in which actual consumers testified as to deception was Welch’s, which might have had something to do with the jury’s finding of deception.                                                                                                                                                                                                             

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Shocked, shocked to find that [Yogurt] is going on in here!

** Purported Class Representative Loses Second Bite at Yoghurt Certification After Court Accuses Him of “Manufacturing” Standing **                                                                                                                                                                                                                                                                                                                                                                    

“I Will Never Buy It Again” . . . “Just Kidding.”  We’ve posted about a recent trend in consumer class action litigation: denying standing for injunctive relief to putative class representatives who claim false advertising due to the fact that these would-be class representatives are now unlikely to be misled in a similar way in the future. In Torrent v. Yakult USA, Plaintiff Nicolas Torrent claimed he bought Yakult’s probiotic yogurt drink due to beneficial digestion claims – which he claims was misleading.  Torrent confirmed his utter disdain for Yakult’s yogurt in interrogatory responses: as a result, on January 7, 2016, the District Court for the Central District of California denied class certification, in part, due to Torrent’s lack of standing for injunctive relief.  Torrent v Yakult U.S.A. Inc., No 8:15-cv-00124-CJC-JCG (C.D. Cal Jan. 27, 2015) (Dkt 52).  “Because Torrent has not even alleged that he intends to buy Yakult in the future, let alone submitted evidence to that effect, the Court concludes that he lacks Article III standing to pursue injunctive relief here.” Id. Ten days later, Torrent bought a couple of bottles of Yakult  and shortly thereafter filed a renewed motion for class certification.  Id. at Dkt. 53.  If brevity is the soul of wit, the motion is Louis C.K.  “Plaintiff intends to purchase Yakult in California in the future.”  The Court was having none of it, observing that Torrent either knew he intended to buy Yakult when he filed his initial motion for certification (but told the court the contrary) or his subsequent purchase of the yogurt and declaration he intended to buy even more (never mind the allegedly false advertising) “appears to be an effort to manufacture standing in direct response to this Court’s prior ruling.”  Id. (March 7, 2015) (Dkt. 65).  Torrent’s claims for injunctive relief – based on his “manufactured” evidence – akin to Captain Renault in Casablanca claiming to be “shocked, shocked to find that gambling is going on in here!” (while the croupier hands him a pile of money] – fell on deaf ears.

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