UCL

Alert: Ninth Circuit Opens A Door For All Natural Class Claims

October 13, 2016All Natural Litigation, Certification, False Advertising, FDA, Food, Individualized Damages, Injunctive ReliefAll Natural, California, certification, commonality, FDA, Ninth Circuit, Reasonable Consumer, UCL

** Appeal Court Panel Holds That Genuine Dispute Remained As To Whether All Natural Claims Would Survive Reasonable Consumer Test **

By: Brent E. Johnson hires-2 Judge Lucy H. Koh gave all natural class defendants cause for celebration back in 2014 when she closed the door on a putative class representative’s claim that Dole’s fruit juices and fruit cups were wrongfully labelled as “All Natural.” Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 6901867 (N.D. Cal. Dec. 8, 2014). Last week, however, the Ninth Circuit re-opened that door slightly – at least enough for the plaintiffs’ bar to try to squeeze their feet in.

Mr. Brazil alleged in his 2012 Complaint that Dole’s fruit cups and fruit juices were falsely labelled as “All Natural” because they contained citric acid (i.e. vitamin C) and ascorbic acid (used to prevent discoloring). Dole successfully argued on summary judgment that Plaintiff had failed to show that a significant portion of the consuming public or of targeted consumers, acting reasonably under the circumstances, would be misled by its labeling. Id. at *4, citing Lavie v. Procter & Gamble Co., 105 Cal.App. 4th 496, 507 (2003). Plaintiff’s own opinion about the added Vitamin C and absorbic acid was not enough. Id. Neither was his rationale that a reasonable consumer could be misled by virtue of a label that violated FDA guidance on the topic (the FDA is not a reasonable consumer and vice versa, Judge Koh reasoned). Further, in a prior ruling, Judge Koh decertified Plaintiff’s main damages class because Plaintiff’s damages model (or lack thereof) failed the threshold test of Comcast Corp. v. Behrend, 569 U.S. ___ (2013), i.e., that damages could be adequately calculated with proof common to the class. Brazil appealed both the summary judgment and decertification decisions.

The Ninth Circuit affirmed in part and reversed in part. Brazil v. Dole Packaged Foods, LLC, No. 14-17480, 2016 WL 5539863, at *1 (9th Cir. Sept. 30, 2016).

The good news is that the Ninth Circuit agreed with Judge Koh’s decertification of the damages class – and by so doing signaling that the Circuit will continue adhering to the Comcast principle that Plaintiffs have the burden of demonstrating a viable class-wide basis of calculating damages. It held that the lower court correctly limited damages to the difference between the prices customers paid and the value of the fruit they bought—in other words, the “price premium.” 2016 WL 5539863, at *2 – 3, citing In re Vioxx Class Cases, 103 Cal. Rptr. 3d 83, 96 (Cal. Ct. App. 2009). The Ninth Circuit reiterated that under the price premium theory, a plaintiff cannot be awarded a full refund unless the product she purchased was worthless – which in this case – the fruit was not. Id. citing In re Tobacco Cases II, 192 Cal. Rptr. 3d 881, 895 (Cal. Ct. App. 2015). Because Mr. Brazil did not (and presumably could not) explain how this premium could be calculated across a common class, the motion to decertify was rightly decided. Id. at *3.

The bad news is that the Appeals Court rejected the lower court’s reasoning that bare allegations of an individual’s claims of deception were insufficient to show the reasonable consumer would be equally deceived. Troublingly, the court used the FDA’s informal policy statement (see Janney v. Mills, 944 F. Supp. 2d 806, 812 (N.D. Cal. 2013) (citing 58 Fed. Reg. 2302–01)) on the issue as determinative of the reasonable consumer standard. As one commentator has noted, this converts informal guidance into binding authority.

With the damages class gone, the Ninth Circuit remanded the case for a determination of Plaintiff’s injunctive relief class. That may be a pyrrhic victory in the end. As we have blogged in the past, a plaintiff who is aware of the supposed deception is not in a position, as Pete Townshend penned, to be fooled again.

Turning Tide on the Whole Nation as a Viable Class?

July 11, 2016Certification, Consumer Class Action, False Advertisingcertification, CLRA, Consumer Class Action, false advertising, UCL

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

By: Brent E. Johnson

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.

Long Term Effects of Tobacco II

June 27, 2016Certification, Consumer Class Action, False Advertisingascertainability, California, certification, CLRA, Consumer Class Action, false advertising, Ninth Circuit, UCL

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

By: Brent E. Johnson

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.

The Injunction Conundrum

January 10, 2016Article III Standing, Consumer Class Action, False AdvertisingArticle III standing, class certification, false advertising, Injunction, Rule 23, UCL

** Courts Are Inconsistently Grappling With the Question of Whether a Plaintiff Has Standing for an Injunction Prohibiting Misleading Behavior if They are Aware of the Behavior ** . . .

By: Brent E. Johnson

An interesting catch-22 exists with respect to injunctive relief in purported consumer class actions in federal court. If a plaintiff discovers misleading conduct (for example a mislabeled product), her basis for an injunction would be – relief from the company misleading her again! But if the plaintiff is aware of the false advertising, is it plausible that she would be misled in future? To quote the old chestnut – “fool me once, shame on you – fool me twice, shame on me.” By affirmatively pleading the elements of the misleading conduct, doesn’t a plaintiff inherently disqualify herself from the standing required to seek an injunction in federal court? This is the argument that won the day in the recent Yakult case in the Central District of California. Plaintiff in that case, Nicolas Torrent, sued on the allegation that Yakult’s probiotic beverages that claim to have beneficial cultures which “balance [the] digestive system” are misleading because (according to Plaintiff) there is no credible scientific evidence that the probiotics do what Yakult says they do. Torrent v Yakult U.S.A. Inc., No 8:15-cv-00124-CJC-JCG (C.D. Cal Jan. 27, 2015) (“By definition, healthy people already have a stable digestive health balance of trillions of intestinal bacteria. Yakult, contrary to what defendant advertises, cannot make a healthy person more healthy in terms of digestive health or otherwise.”) Plaintiff claimed that Yakult violated California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200 et seq.) and that he was entitled to restitution and injunctive relief. Id. at ECF No. 32, Second Amended Compl. ¶¶ 14 – 16. Curiously, though, by the time of the motion for class certification, Plaintiff dropped his demand for restitution or money damages and only asserted a claim for injunctive relief. Id. at ECF No. 41, Pl.’s Mot. for Class Cert. ¶ 4. With only the injunction at issue, the lawsuit became a test case of sorts. In answering the question, the district court was clear that plaintiff did not have standing as there was “[in]sufficient likelihood that [he] will be wronged in a similar way.” Id. at ECF No. 52, Order (January 5, 2016) citing Los Angeles v. Lyons, 461 U.S. 95, 111 (1983); O’Shea v. Littleton, 414 U.S. 488, 495-96 (1974) (“Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief … if unaccompanied by any continuing, present adverse effects.”) The court noted the split within the Central District of California on the standing issue (see In re ConAgra, 302 F.R.D. 537, 573 – 76 (C.D. Cal. Aug. 1, 2014) (collecting cases)) and acknowledged the counter-argument that to deny injunctive relief would upset the enforcement of the UCL – but ultimately decided that it was not the courts’ place to carve out Article III standing exceptions for consumers. Order at 6 – 8. On that basis, Rule 23 class certification was denied. Highlighting the split on this standing issue, a district court in Illinois just a few days later held the opposite. Leiner v. Johnson & Johnson Consumer Co., Inc., No. 15-c-5876, (N.D. Ill. Jan. 12, 2016). In this case. plaintiff claimed that Johnson & Johnson violated the Illinois Consumer Fraud and Deceptive Business Practices Act by labeling and advertising two “Baby Bedtime Bath products” as “clinically proven” to help babies sleep better – when it allegedly knew the products hadn’t been clinically proven to have that effect. Plaintiff sought to represent a class of Illinois purchasers. The Illinois court aligned itself with courts that have held that consumers don’t forfeit standing by knowing the basis of their claims observing that, without an exception, consumers could never avail themselves of injunctive relief.

Safe Harbor From Murky Waters in the Supply Chain

December 22, 2015Safe Harbor Defense, Transparency in SupplyCalifornia, CLRA, FAL, Supreme Court, Transparency in Supply Chains Act, UCL

seafood

**Nestle Defends Class Action in the Central District of California with Successful Motion to Dismiss and Sets Valuable Precedent With California Transparency in Supply Chains Act Safe Harbor Defense** . . .

By: Brent E. Johnson

The California Transparency in Supply Chains Act of 2010, requires retailers doing business in California to make specific disclosures on its website about efforts it makes to “eradicate slavery and human trafficking from its direct supply chain.” (Cal. Civ. Code § 1714.43). In our prior post on this topic we noted the Transparency Act applies to large retailers (those with $100 million in worldwide sales). Id. And that the Transparency Act’s focus is on information – the retailer must disclose what efforts it takes to: verify the risks of human trafficking and slavery in its supply chain; audit its suppliers; certify its suppliers’ compliance with laws regarding slavery and human trafficking; maintain internal policies and procedures on the subject; and train its management on these policies and procedures. Id. Important to note, the Act does not require that a retailer actually do any of these things – the mandate is to inform the public what efforts are made. The point of the Transparency Act is consumer empowerment – to give consumers who are concerned about the topic a point of reference – and ultimately give the market the ability to reward or punish retailers who are (or are not) doing enough. Nestle USA was one of the first companies to be tested by the Plaintiffs’ bar on whether the Transparency Act created more than an obligation to inform the public about its efforts to eradicate the problem – and whether there is an implied legal obligation to inform the public about the actual occurrences or risk in its supply chain of human slavery or trafficking. See Barber v. Nestle USA, Inc., No. SACV1501364CJCAGRX, (C.D. Cal.). The case involved Nestle USA’s branded pet food which sources seafood from Thai fisheries. The court took judicial notice that it has been reported widely the Thai fishing industry is notorious for having widespread forced and other inhumane labor practices. Plaintiffs alleged that they would not have purchased Nestle USA’s products if they knew of that connection and therefore that the defendant had violated California’s CLRA (Cal. Civ. Code § 1750 et seq.); FAL (Cal. Bus. & Prof. Code § 17500 et seq.; and UCL (Cal. Bus. & Prof. Code § 17200 et seq.). However, Nestle USA cited to its compliance with the Transparency Act – to the fact that it had informed the public of its efforts – and therefore that it was squarely within a consumer law “safe harbor.” A “safe harbor” is the concept articulated by the California Supreme Court that a defendant cannot be liable under the UCL for unlawful conduct if it is doing something that “the Legislature has permitted . . . or considered a situation and concluded no action should lie.” Cel-Tech Comms., Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 182 (Cal. 1999.). The doctrine has been applied widely to California consumer laws. Alvarez v. Chevron Corp., 656 F.3d 925, 933–34 (9th Cir. 2011) (applying the safe harbor doctrine to CLRA claims); Pom Wonderful LLC v. Coca Cola Co., No. CV 08-06237 SJO(FMOx), 2013 WL 543361, at *5 (C.D. Cal. Apr. 16, 2013) (applying the safe harbor doctrine to FAL claims). Nestle USA argued that Plaintiffs could not make an end run around the legislature by making it liable for disclosures that were fully compliant with the Transparency Act. The district court agreed holding that Plaintiff may not “simply impose their own notions of the day as to what is fair or unfair” – that the “California Legislature considered the situation of regulating disclosure by companies with possible forced labor in their supply lines and determined that only the limited disclosure mandated by § 1714.43 is required.” Barber v. Nestle USA, Inc., No. SACV1501364CJCAGRX, 2015 WL 9309553, at *4 (C.D. Cal. Dec. 9, 2015). Accordingly, it granted Nestle USA’s motion to dismiss. Id.

This dismissal sets an important precedent for the defense bar: Costco has been sued in the Northern District of California under similar circumstances with respect to its sale of seafood sourced from Thailand. Sud. v. Costco Wholesale Corp., No. 3:15-cv-03783 (N.D. Cal). Costco’s Motion to Dismiss is currently pending. Chocolate manufacturers have faced similar lawsuits with respect to slave and child labor in the cocoa supply chain: Mars has been sued in the Central District of California (Wirth v. Mars, Inc., No. 8:15-cv-1470 (C.D. Cal September 10, 2015) and in the Northern District (Hodson v. Mars, Inc., No. 4:15-cv-04450-DMR (N.D. Cal. September 28, 2015). Hershey’s has also been sued in the Northern District of California (Dana v. The Hershey Company, No. 3:15-cv-04453 (N.D. Cal. September 28, 2015). Mars’ Motion to Dismiss has been filed in its cases and a decision is currently pending.

Phantom Discounts Hurting Retailers

October 15, 2015Consumer Class Action, Phantom DiscountsCalifornia, FAL, standing, UCL

**Momentum Building Against Retailers and Department Stores Sued by Purported Class Representatives Alleging that Advertised “Sales Price” Marketing and Labels are Misleading Consumers** . . .

By: Brent E. Johnson

On October 9, 2015 Nordstom failed in its attempt to have the district court in its California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200 et seq.) and Fair Advertising Laws (FAL) (Cal. Bus. & Prof. Code § 17500 et seq) purported class action case dismiss under Rule 12. Branca v. Nordstrom, Inc., S.D. Cal., No. 3:14-cv-02062, Order, ECF No. 30, October 9, 2015. Plaintiff bought his case alleging that the companies outlet Nordstrom Rack stores used tags with two prices on it: a “Compare At” price and below that the “Actual Price” – the latter a steep discount on the former. Plaintiff alleges he believed the Compare At price was the price for the item at Nordstrom’s mainline stores, or at least the prevailing market price in department stores. Accordingly, when he found out that his purchased items were never sold at mainline stores – he alleges that his perceived “discount” was illusory and that he was misled. Judge Michael M. Anello of the U.S. District Court for the Southern District of California disagreed with Nordstrom’s motion to dismiss, holding that Plaintiff’s theory of being misled was robust enough to pass the reasonable consumer test at the crux of California consumer law. Equally problematic for Nordstrom, Judge Anello ruled that Plaintiff could represent a class of consumers wider that those who could identify with respect to the exact item he purchased. The district court here considered cases such as Anderson v. Jamba Juice Co., 888 F. Supp. 2d 1000 (N.D. Cal. 2012) and Astiana v. Dreyer’s Grand Ice Cream, Inc., Nos. C-11-2910 EMC, C-28 11-3164 EMC, 2012 WL 2990766 (N.D. Cal. July 20, 2012) – where courts found that Plaintiffs had standing with respect to items not identical – but substantially similar to the product to which Plaintiff purchased (i.e. a different flavor in the same range) – as analogous and persuasive. Here the court found that the “Compare At” labels were identically used across the store, even though the products which they might have been affixed to differed. This has the potential to create a class of consumers who purchased hundreds, if not thousands of items, not just the limited class of people who purchased the exact sweatshirt and cargo shorts that Plaintiff Branca in this case alleged that he bought.

This marks another notch in the belt of Plaintiffs’ lawyers against major department stores. In a similar case, JCPenny were sued in relation to its use of “Discounted Price” and “Sales Rack” pricing – and the retailer lost on its motion for summary judgment. Spann v. J.C. Penney Corp., No. SA CV 12-0215 FMO, 2015 WL 1526559, at *2 (C.D. Cal. Mar. 23, 2015). It subsequently also lost on it opposition to class certification. Spann v. J.C. Penney Corp., 307 F.R.D. 508 (C.D. Cal. 2015). In Gattinella v. Michael Kors, No. 14-cv-5731, 2014 WL 7722027 (S.D.N.Y.), a similar “outlet” discount case was litigated and ultimately settled for $4,900,000. See 32 NY. J.V.R.A. 6:8. Similar cases are pending against TJ Maxx (Chester v. The TJZ Companies., 5:15-cv-01437-DDP-DTB (C.D. Cal.)) Kohl’s (Chowning v Kohl’s Department Stores, Inc., 3:15-cv-01624-JAH-WVG (S.D. Cal.)).

Google Reversed on Rule 23

September 23, 2015Individualized Damages, Rule 23California, FAL, Ninth Circuit, Predominance, Rule 23, UCL

**Ninth Circuit Chips Away at Individualized Damage Preclusion under Rule 23 Predominance – reversing Google’s District Court Win on Certification ** . . .

By: Brent E. Johnson

The Ninth Circuit has held in Pulaski & Middleman, LLC v. Google, Inc., No. 12-16752, 2015 WL 5515617 (9th Cir. Sept. 21, 2015) that under California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200 et seq.) and Fair Advertising Laws (FAL) (Cal. Bus. & Prof. Code § 17500 et seq there is no need for a court to make individual determinations regarding entitlement to restitution. In this case, Google was sued in the Northern District of California in relation to its ubiquitous AdWords advertising. Plaintiff alleged that it was unfair and misleading for Google to charge AdWords users for ads that were served up on error pages and parked domains (i.e. on pages with no real content). The district court denied certification holding that it could not simply assume that every AdWords member who had ads placed on error or parked pages derived no economic benefit from the ads. Rather, an individualized analysis was required that precluded class treatment. The Ninth Circuit panel disagreed. It held that under California’s UCL and FAL, the test is whether members of the public were “likely to be deceived” – thus an individualized inquiry is not required to achieve certification. In other words, the Ninth Circuit parsed between an entitlement to restitution (a common question) and what the restitution actually is (an individual question) and held that only the former was required at the certification stage. As such, the circuit panel held it was legal error for the district court to focus on individualized restitution. The court held that its ruling in Yokoyama v. Midland Nat. Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010) that damage calculations alone cannot defeat certification governed. The Ninth Circuit’s laser focus on “liability” and its warning to district courts not to conflate restitution calculations with liability inquiries (which can be traced back to the California Supreme Court In re Tobacco II Cases, 46 Cal.4th 298 (2009)) sets a difficult course for UCL and FAL defendants to navigate.

Craft, Draft or Daft?

September 1, 2015Alcohol Labeling, Consumer Class ActionCLRA, craft beer, FAL, puffery, UCL

**Plaintiffs’ Lawyers Failing to Get Traction in Craft Beer and Spirit False Advertising Claims That “Handmade” or “Craft” is a Misleading Term in the Context of Alcohol Labels ** . . .

By: Brent E. Johnson

Plaintiff lawyers have recently set their site on beer and spirits manufacturers claiming that terms used in advertising such as “handcrafted”, “handmade” or the imprimatur of “craft beer” are being used misleadingly by mass producers. Several defendants have been successful to date in having the cases dismissed on the pleadings. In Nowrouzi v. Maker’s Mark Distillery, Inc., No. 14CV2885 JAH NHS, 2015 WL 4523551, at *1 (S.D. Cal. July 27, 2015), plaintiffs allege that they purchased Maker’s Mark Bourbon because its label contained the statement that it was “handmade,” which allegedly led plaintiffs to believe the spirit “was of superior quality” than other bourbon (thus justifying spending more for defendant’s product than other bourbons). Unsurprisingly, Maker’s Mark bourbon is made with machines. In a similar action (bought by the same Plaintiff firm) In Welk v. Beam Suntory Imp. Co., No. 15CV328-LAB JMA, 2015 WL 5022527, at *1 (S.D. Cal. Aug. 21, 2015). plaintiffs allege they were misled by the word “handcrafted” on Jim Beam Bourbon bottle labels. In each case plaintiffs sued under the usual tripartite in California: the CLRA (Cal. Civ. Code § 1750 et seq.); FAL (Cal. Bus. & Prof. Code § 17500 et seq.; and UCL (Cal. Bus. & Prof. Code § 17200 et seq.). In both cases the district court dismissed with prejudice finding that the use of the impugned terms “handmade” and “handcrafted” were non-actionable puffery. Those terms were generalized, vague, statements and it was unreasonable to imbue in them that the product literally was created by hand without any involvement of equipment or automated process. This reasoning follows a Florida case with respect to Jim Beam where the court dismissing with prejudice held that “no reasonable person would understand ‘handmade’ in this context to mean literally by hand. No reasonable person would understand ‘handmade’ in this context to mean substantial equipment was not used.” Salters v. Beam Suntory, Inc., 2015 WL 2124939 (N.D.Fla. May 1, 2015).

That said, not all Defendants have been so lucky – a few plaintiffs have navigated their way out of the pleading stage. In Aliano v. Louisville Distilling Co., LLC, No. 15 C 00794, 2015 WL 4429202 (N.D. Ill. July 20, 2015), plaintiffs argued that Angel’s Envy Rye Whiskey, which is described in advertising as “hand crafted” and “small batch” was mass-produced and thus deceptive. The court permitted the Illinois Consumer Fraud and Deceptive Trade Practices Act case to proceed. It distinguished Salters noting that Angel’s Envy was a much smaller brand and a consumer could reasonably believe the phrase “hand crafted” on the finished whiskey label meant it was not mass-produced. In Hofmann v. Fifth Generation, Inc., No. 14-CV-2569 JM JLB, 2015 WL 5440330, at *8 (S.D. Cal. Mar. 18, 2015), the court deferred on this same question refusing to dismiss the complaint against the makers of Tito’s Handmade Vodka, stating that as a matter of law it could not make the determination that the reasonable consumer would not be misled.

A couple of similar cases in this area are currently pending. In Parent v. MillerCoors LLC., No. 15-cv-01204-GPC-WVG (S.D. Cal.), MillerCoors is being sued on an allegation that its Blue Moon beer misleads consumers into believing it is a “microbrew” or “craft” beer” by using those terms in its advertising and by withholding the name “MillerCoors” from its label. Plaintiff claims that the definition of “craft beer” set forth by the Brewer’s Association, a not-for-profit trade association, governs. While it is undisputed that MillerCoors does not qualify as a “Craft Brewer” pursuant to those guidelines, Miller has moved to dismiss on the basis that such guidelines are not controlling. Miller has also moved on the basis that the use of the words “craft” and “crafted” in their advertising are colorful and vague – i.e. mere puffery – and not actionable.