Food, Beverage and Labeling

WebinarOn Wednesday, October 21 at 12:00 p.m. Central, Jay W. Connolly, Joseph J. Orzano and Kristine Argentine will present Seyfarth’s third installment of our 2015 Class Action Webinar Series. The presenters will discuss the current state of labeling class action litigation that has targeted food, beverage, nutrition and other industries in recent years. This webinar will provide an overview of the labeling class action landscape complete with discussion of the background giving rise to the wave of litigation and labeling claims commonly targeted by the plaintiffs’ bar. In addition, the panel will discuss the latest trends in pleading challenges, class certification, and settlements in the labeling context.

Specific topics will include:

  • Labeling Litigation Background:  How We Got Here
  • Hot Issues:  Common Marketing Claims Being Challenged
    • Organic
    • All Natural, “100% Natural,”  “Nothing Artificial” & Related Claims
    • Evaporate Cane Juice
    • Made In The USA/Place of Origin
    • Nutritional Content Disclosures/Upcoming Menu Requirements
    • “Healthy”
    • GMOs
  • How Courts Are Treating Challenges to Labeling Claims
    • Challenging the Complaint Up Front:  What Has Worked And What Hasn’t And Why
    • Challenging Attempts By Plaintiffs to Certify a Class:  Court Treatment of Certification Issues in the Labeling Context
  • Trends in Labeling Litigation Settlements

If you have any questions, please contact events@seyfarth.com.

*CLE Credit for this webinar has been awarded in the following states:  CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

There is no cost to attend this program, however, registration is required. To register for this webinar, please click here.

 

On September 1, 2015, California enacted Senate Bill 633 (“SB 633”), loosening the state’s restrictions on “Made in USA” labeling.  Under existing law, codified at Cal. Bus. & Prof. Code § 17533.7, a product may not be sold or offered for sale in California as “Made in U.S.A” if the product, or any article, unit, or part of the product, has been entirely or substantially made, manufactured, or produced outside of the United States.  In other words, Section 17533.7 requires that a product—including each of its individual components (no matter how small)—be entirely or substantially made, manufactured, or produced domestically to qualify for use of a “Made in U.S.A.” or similar label.ca_capitol_modernrelics_creativecommons

SB 633, which goes into effect on January 1, 2016, amends Section 17533.7 to provide exemptions to the “Made in U.S.A.” labeling prohibitions if: (1) all the foreign components of the product constitute no more than 5% of the final wholesale value of the manufactured product; or (2) all the foreign components of the product constitute no more than 10% of the final wholesale value of the manufactured product, and the manufacturer of the product shows that it can neither produce the components in the United States, nor obtain the components from a domestic source.

SB 633 should come as a welcome relief to many companies doing business in California.  The bill more closely aligns California law with the less restrictive domestic content standards for use of the “Made in U.S.A.” designation in all other states and under federal law.  The amendment, therefore, should reduce the complications and costs faced by businesses selling products in California that are lawfully labeled as “Made in U.S.A.” in the rest of the country.

Similarly, because SB 633 effectively repeals California’s stricter—and unique—100% domestic sourcing requirements, companies may also be able to rely on the new law to dispose of pending lawsuits.  Under the “statutory repeal” rule, when a pending action rests solely on a statutory basis, and a final judgment has not been entered, the amendment or repeal of that statute without a savings clause will terminate all pending actions based on that statute.  Younger v. Superior Court, 21 Cal. 3d 102, 109 (1978); Callet v. Alioto, 210 Cal. 65, 67–68 (1930).  Because a claim alleging violations of Section 17533.7 is wholly dependent on that statute, companies litigating “Made in U.S.A.” claims may be able to argue that the enactment of SB 633 terminates those actions in which a final judgment has not been entered.

Regardless, the enactment of SB 633 should reduce the number of lawsuits brought in California against manufacturers or retailers over their “Made in U.S.A.” labeling of products containing negligible foreign content.  And for many companies doing business in California, such a prospect should elicit a sigh of relief.

The Illinois Supreme Court recently granted a Petition for Leave to Appeal in Price v. Phillip Morris, Inc., after the Illinois Appellate Court for the Fifth District effectively reinstated a $10 Billion verdict against Philip Morris from 2003.  9 N.E.3d 599 (5th Dist. 2014).  The Illinois Supreme Court’s decision to once again weigh in on the case sets the stage for a substantive analysis of class actions and damages awards under the Illinois Consumer Fraud and Deceptive Business Practices Act, codified at 815 Ill. Comp. Stat. 505, et seq. (“Consumer Fraud Act”).

Background

In 2000, plaintiffs Sharon Price and Michael Fruth filed a class action in the Circuit Court of Madison County, Illinois against Philip Morris, Inc., alleging that it had violated the Consumer Fraud Act by fraudulently advertising its cigarettes as “light” or “low tar,” when in fact they were higher in tar and nicotine than represented and more toxic than regular cigarettes.  219 Ill. 2d. 182, 210 (Ill. 2005).  Plaintiffs did not seek damages for any alleged adverse health effects caused by Phillip Morris cigarettes but for economic damages resulting from their purchase of the product in reliance on statements which they contended were fraudulent, deceptive and unfair.  Id. at 209.

Philip Morris alleged several affirmative defenses, including one based on section 10(b) of the Consumer Fraud Act, which bars suits based on actions “specifically authorized by laws administered by any regulatory body.”   815 Ill. Comp. Stat. 505/10(b)(1).  According to Philip Morris, the Federal Trade Commission (FTC) had authorized the use of the terms “light” and “low tar” (“FTC Defense”).  219 Ill. 2d. at 215-16.

The trial court certified a class of over one million Illinois consumers who had purchased cigarettes over three decades, from 1971 to 2001.  Id. at 211-12.  The case proceeded to trial and in March 2003, the trial court awarded plaintiffs over $7 billion in actual damages and $3 billion in punitive damages.  Id. at 230-32.  In doing so, the trial court ruled that the FTC had never specifically authorized the use of the terms “light” and “low tar.”  Id. at 230-31.

On appeal, Philip Morris argued that the trial court erred by, among other things, rejecting its FTC Defense, in certifying the class and awarding damages under the model presented by Plaintiffs at trial.  Id. at 233.

In December 2005, the Illinois Supreme Court reversed the trial court’s decision, ruling that the FTC had in fact approved the use of the terms “light” and “low tar” by entering into various consent decrees in other lawsuits against cigarette manufacturers and, therefore, that the lawsuit was barred.  Id. at 265-66, 272.  The Court also expressed “grave reservations” regarding the trial court’s decision to certify the class, the proof offered by Plaintiffs at trial, and the Plaintiffs’ novel damages theory but did not actually rule on those issues.  Id. at 267-71.

In June 2008, the FTC filed an amicus brief in a case involving Philip Morris parent company, Altria Group, which was pending before the United States Supreme Court.  See Altria Grp., Inc. v. Good, 555 U.S. 70 (2008).  In its amicus brief, the FTC disavowed ever having adopted a policy authorizing the use of “light” and “low tar” descriptors.  Id. at  87.  Further, in December 2008, the FTC rescinded prior guidance it had issued regarding statements concerning the tar and nicotine yields of cigarettes, clarified that it had not defined or authorized the terms “light” or “low tar,” and stated that a manufacturer’s continued use of those terms would be subject to prohibitions against deceptive acts and practices.  9 N.E.3d at 603, 608.

Based on these new statements from the FTC, which contradicted the Illinois Supreme Court’s interpretation of FTC policy, Plaintiffs filed a petition for relief from judgment (“Petition”).  Id. at 603.  After extensive litigation concerning the timeliness of the Petition, the Plaintiffs were permitted to pursue relief from the judgment against them.    Id.   The trial court, however, ultimately denied the Petition.  It ruled that while Plaintiffs had a meritorious claim in the underlying litigation, and that the Illinois Supreme Court likely would have ruled differently in 2005 on the issue of the FTC Defense, the Supreme Court was “equally as likely” to have ruled against Plaintiffs on other issues raised on appeal, such as class certification and damages.  Id. at 604.

In April 2014, the Illinois Appellate Court reversed the trial court’s denial of the Petition, effectively reinstating the $10B verdict against Phillip Morris.  Id. at 614.  On September 24, 2014, the Illinois Supreme Court granted Philip Morris’s petition for leave to appeal.

Implications

There is no doubt that the Illinois Supreme Court’s decision to review this case once again will have a profound impact on Illinois consumers, Philip Morris and litigation against tobacco manufacturers.  But the reach of the Illinois Supreme Court’s ultimate decision in this case will likely extend beyond that.

Many states have consumer fraud statutes similar to that of Illinois and the Illinois Supreme Court’s decision could therefore provide a model for class action litigation brought under different states’ statutes.   It is very likely that the Court will now address the merits of issues it previously tabled, such as the propriety of certifying such a large and diverse class of people (which covered over one million individuals and spanned purchases made in three decades), the feasibility of using consumer fraud statutes in consumer class action litigation (a proposition which has been questioned by several courts), the proof required to sustain such an action, and how damages are to be determined if and when such cases are proved.

We will keep you posted on the developments in this landmark case.

By Gerald L. Maatman, Jr. and Gina R. Merrill

A customer filed a class action lawsuit this past year against the owner of several well-known restaurants in Manhattan based on two novel theories.  First, he alleged that any restaurant that added an “automatic” gratuity to the bill ‒ even when that gratuity was plainly disclosed on the menu ‒ was engaging in a deceptive and unlawful practice under New York law.  Second, he alleged that the failure of a restaurant to post drink prices for all beverages it offered for sale was ‒ standing alone ‒ a deceptive and unlawful practice that is actionable under New York law. His pleadings sought “billions” of dollars for consumers throughout the United States, and asserted that the food service industry systematically deceived customers through these allegedly deceptive practices.

The defense brought a motion to dismiss, and in ruling on plaintiff’s claims, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York rejected each of these theories, and dismissed the plaintiff’s claims in their entirety as a matter of law this past week in Dimond, et al. v. Darden Restaurants, Inc., Case No. 13-CV-5244 (S.D.N.Y. July 10, 2014). [Full disclosure: Seyfarth Shaw LLP, and in particular the authors of this blog post, represented the defendant in this litigation.]

The decision in Dimond is important for the food service industry in particular, and all corporations in general, that face class action litigation and seek to avoid the costs and exposures associated with “bet-the-company” litigation.

Background  

The Dimond case had a complicated procedural history despite never making it past the motion to dismiss phase of litigation.  In June 2013, plaintiff filed a purported class action lawsuit claiming that the automatic gratuities charged at numerous prominent restaurants in Manhattan were unlawful.  Over the next six months, plaintiff amended the complaint four times, variously adding and dropping defendants, other named plaintiffs, and causes of action.  The dust finally settled with the filing of a fourth amended complaint in November 2013, which named as defendant Darden Restaurants, Inc., the owner of Red Lobster and Olive Garden restaurants located in Times Square and Chelsea.

The complaint alleged violations of New York General Business Law § 349 (“Section 349”), the state consumer protection statute, based on two billing practices.  The first was that the restaurants charged an automatic gratuity of 18 percent on all parties, a practice which plaintiff contended was improper despite the fact that the menus disclosed that “[a]n 18% gratuity will be added to all guest checks.”  Plaintiff also complained that not all of the beverage prices were listed on the menu and alleged that this too constituted an unfair trade practice under New York law.

The defense moved to dismiss the complaint for failure to state claim arguing, in essence, that neither practice worked to deceive consumers and that plaintiff did not identify any injury suffered as a result of the conduct.

The Court’s Opinion

The Court issued a 34-page opinion dismissing the complaint in its entirety.  Judge Failla held that while Section 349 is a broad statute intended to “cope with the numerous, ever-changing types of false and deceptive practices which plague consumers,” id. at 9, plaintiff had failed to identify any deceptive conduct.

As an initial matter, the Court rejected plaintiff’s attempt to predicate the Section 349 claims on purported violations of New York City rules and regulations, namely RCNY § 5-59 and NYCAC §20-700.  RCNY §5-59 prohibits surcharges in restaurants, while NYCAC § 20-700 is New York City’s local consumer protection statute.  The Court noted that even plaintiff had conceded that these regulations did not allow a private right of action, and Second Circuit precedent clearly foreclosed using Section 349 as an end run around another statute’s lack of private right of action.  The Court therefore held that the local regulations were irrelevant to the Section 349 claims.  (Nevertheless, the court expressed skepticism that the record established any violation of RCNY §5-59.)

The Court held that the pertinent question is whether the conduct alleged ‒ charging an automatic gratuity and listing prices for some but not all beverages ‒ was in itself deceptive under the statute.  Applying a common sense approach, the Court held that it was not.

First, the Court addressed the automatic gratuity, explaining that there is no Section 349 violation where defendants fully disclosed the terms and conditions of a transaction.  Applying this rule, the Court held that the 18% automatic gratuity did not deceive consumers because the fact of the gratuity was plainly disclosed on the menu, which stated:  “An 18% gratuity will be added to all guest checks.”  The court held that “the terms and conditions were completely and conspicuously indicated on the menu so that each patron was expressly informed as to the cost of dining at the Restaurants prior to voluntarily placing his or her order.  Plaintiff, as well as any other customer, had the option of leaving the restaurant upon seeing this disclosure.”  Id. at 17.  Judge Failla also commented that gratuities between 18% and 20% are common in New York City, undermining plaintiff’s claim that patrons had been “tricked” into paying the gratuity.  Id.

Next, the Court addressed the omission of drink prices from the menu, and held that plaintiff had failed to plead materially misleading conduct in that respect as well.  Judge Failla noted that it is not enough that the drink prices were not listed ‒ rather, plaintiff must demonstrate that he could not “reasonably obtain” the prices.  Id. at 31.  In other words, the plaintiff or any other patron could simply have asked the price of the drink, and there were no allegations suggesting that the restaurant would not provide that information or had misrepresented the beverage prices.

In addition to finding no materially misleading conduct, the Court also held that plaintiff had not established any injury as a result of the gratuity or omission of drink prices.  New York law forecloses Section 349 claims based on allegations that the consumer purchased an item that they otherwise would not have.  The Court found that, at best, this was all that plaintiff had alleged, and it was insufficient as a matter of law.
Providing further ammunition to dismiss the beverage claim, the court also found that the plaintiff lacked standing to bring suit because the complaint did not allege any injury in connection with the conduct.

Finally, the Court refused to grant leave to amend given that plaintiff had enjoyed numerous prior opportunities to perfect the pleading and had not provided a proposed pleading or any indication as to how he might cure the deficiencies in the Fourth Amended Complaint.

Implications For Corporations

Judge Failla’s practical approach to a novel question has likely stemmed the tide of copycat litigation that would surely have plagued restaurant owners in New York if the suit had been allowed to proceed.  The opinion should also provide good, persuasive law for defendants in other jurisdictions facing similar consumer claims.

Summary

Following the trial of a tobacco false advertising case dating back to 1997, a California court found that, although the defendant misrepresented to consumers the health benefits of its Marlboro Lights cigarettes, the Plaintiffs were entitled to no relief as they failed to prove entitlement to any of the limited remedies available under California’s Unfair Competition Law.

The court in Brown v. The American Tobacco Co., Inc., et al., Case No. 711400 (San Diego Superior Court Sept. 24, 2013) emphasized and underscored that restitution under California  law does not allow plaintiffs to recover “benefit of the bargain damages.”  Brown, at 11.  Instead, restitution reimburses consumers only for the difference between the value paid and the actual value of the product received.  Id.  Plaintiffs failed to show their entitlement to restitution under California law because, among other reasons, their proffered evidence improperly focused on consumers’ perceived value of the misrepresented health attributes without considering the actual market value of the entire product absent the misrepresented attribute, i.e., the product plaintiffs received.   Id.

The court held that the evidence showed the price paid for Marlboro Lights cigarettes was not in excess of the actual market value of the product plaintiffs received (without any health benefit).  Id. at 16-17.  Thus, the restitution value was zero.  Id. at 17.  The court emphasized that:  (1) consumer purchases of Marlboro Lights did not substantially change relative to Marlboro Reds despite significant corrective actions taken by the defendant to communicate to consumers that Marlboro Lights offered no health benefits compared to Marlboro Reds; and (2) Marlboro Lights and Marlboro Reds sold for the same price during the time period of the defendant’s corrective actions.  Id. at 16-17. 

The court also found that plaintiffs were not entitled to injunctive relief.  Id. at 18-21.  Specfically, the court held that: (1) plaintiffs presented no specific evidence concerning injunctive relief; (2) it is unlikely that the misrepresentations will recur due to defendant’s marketing changes, a federal statute, and an injunction in a different case; (3) injunctive relief would be redundant because information plaintiffs desire to provide consumers has already been disseminated; (4) tobacco advertising and packaging is preempted; and (5) plaintiffs waived injunctive relief in the Master Settlement Agreement reached with numerous state attorneys general.  Id

Significance

The Brown decision illustrates and reinforces the structure of California’s UCL.  While the UCL broadly proscribes a wide swath of conduct, the remedies available are limited.  The decision also serves as a reminder to businesses that defense of UCL actions should focus on both liability and the plaintiffs’ entitlement to available remedies, or the lack thereof.

Even assuming a product’s attributes have been misrepresented to consumers, to obtain monetary relief in the form of restitution plaintiffs must still show that they paid more than the actual market value of the product they received without the misrepresented attribute.  As shown in Brown, this will undoubtedly be difficult if not impossible for plaintiffs where the defendant can show that:  (1) the challenged product sells for the same price as other products without the misrepresented attribute; and (2) consumers did not alter their behavior following any change in advertising as to the allegedly misrepresented attribute.

Businesses should also consider the applicable law governing a particular case.  State consumer protection laws and the law of restitution often vary state to state.  The court in fact noted that plaintiffs’ expert improperly relied on the same form of analysis in a case governed by Missouri law where, the court stated, unlike California, “benefit of the bargain” damages applied.  Id. at 11. 

“Shakedown Suits”

Although California’s passage of Proposition 64 made it more difficult for the plaintiffs’ bar to bring “shakedown suits” against the business community, we are witnessing a flood of false advertising class actions brought (or, more often, threatened) against consumer product manufacturers and retailers, who typically have no arbitration rights.  While some lawsuits are immediately filed, many plaintiffs’ firms serve demand letters under the California Consumers Legal Remedies Act (“CLRA”) threatening class actions that, historically, have been difficult to resolve expeditiously given their fact-intensive nature.  Facing the cost of defending such claims, many companies accept pre-filing offers to settle on an individual basis for purely economic reasons.  On September 25, 2013, however, the California Court of Appeal threw a lifeline to companies that refuse to pay such protection money.

The Court’s Opinion

In Simpson v. Kroger Corp., No. B242405, 2013 Cal. App. LEXIS 769, the complaint alleged that a “spreadable butter” product, which consists of butter mixed with canola or olive oil, was mislabeled and falsely marketed as “butter.”  On behalf of a putative class, the plaintiff alleged purported claims for unfair competition in violation of California Business and Professions Code Section 17200, false advertising in violation of California Business and Professions Code Section 17500, and violation of the CLRA.  After reviewing the packaging, which listed the product’s ingredients and otherwise disclosed what the product was, the trial court sustained a demurrer without leave to amend, finding that a reasonable consumer was not likely to be deceived.  Citing Day v. AT&T Corp., 63 Cal. App. 4th 325, 333, 74 Cal. Rptr. 2d 55 (1998), the Court of Appeal affirmed, confirming that courts “may be able to say as matter of law that contrary to the complaint’s allegations, members of the public were not likely to be deceived or misled . . . by packaging material.”

Implications

Although Simpson certainly does not guarantee the dismissal of every false advertising claim, it provides a potential early exit strategy at the pleading stage where it is clear from the factual circumstances that no reasonable consumer could have been misled.  It also reiterates the importance for companies to consider class action risk with respect to all decisions related to product labeling and advertising.

The Ninth Circuit recently held that a declaration from the defendant’s comptroller stating that the defendant’s sales of the challenged product during the class period exceeded $5 million was sufficient to satisfy the amount-in-controversy requirement of the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2) (“CAFA”).   Watkins v. Vital Pharmaceuticals, Inc., No. 13-55755 (9th Cir. July 2, 2013).  The Ninth Circuit reversed the federal trial court’s remand of the action to state court and directed the federal court to exercise jurisdiction over the case.  The decision adds clarity to what evidence may be adduced to establish federal court jurisdiction under CAFA and provides guidance to businesses seeking to remove state court putative class actions to federal court.

Background

Plaintiff Gabe Watkins (“Plaintiff”) filed a putative class action against Vital Pharmaceuticals, Inc. (“Vital”) in California state court alleging that Vital distributed ZERO IMPACT protein bars that were erroneously marketed and labeled as having little to no impact on blood sugar.  Plaintiff asserted California state law claims and alleged a nationwide class of consumers.

Vital removed the action to federal court under CAFA.  CAFA provides an alternative basis for federal court subject matter jurisdiction, but requires, among other things, that the combined claims of all class members exceed $5 million exclusive of interest and costs.  At issue on appeal, was whether the amount-in-controversy requirement was met.

Vital submitted two declarations in support of its assertion that more than $5 million was in controversy.  First, Vital submitted a declaration from its counsel.  Defense counsel’s declaration pointed out Plaintiff’s own allegations in his Complaint regarding the amount in controversy.  Specifically, Plaintiff alleged that “the aggregate damages sustained by the Class are likely in the millions of dollars.”  The declaration also referred to the fact that Plaintiff sought, in addition to damages, restitution, disgorgement of profits, and attorneys’ fees based on sales to thousands of consumers nationwide.  Second, Vital submitted a declaration from its comptroller.  In that declaration, the defendant’s comptroller stated that Vital’s nationwide sales of its ZERO IMPACT bars during the four-year class period exceeded $5 million.

Despite Vital’s showing, the district court remanded the case to state court.  The district court held that Vital did not meet its burden of proving CAFA’s amount in controversy requirement.  The district court found defense counsel’s declaration vague and conclusory and downplayed the sales data as mere averments without mentioning the comptroller’s declaration.

On appeal, the Ninth Circuit agreed with Vital that the undisputed declaration from its comptroller was sufficient to establish that CAFA’s $5 million amount in controversy requirement was met.

Implications

The Vital Pharmaceuticals decision provides guidance to businesses seeking removal of putative class actions from state to federal court under CAFA and to lower courts considering remand of removed cases.  It is unclear, however, whether federal district courts in the Ninth Circuit would reach the same result under different facts and with a more aggressive plaintiff’s attorney.  For example, the Ninth Circuit specifically noted that: (1) the comptroller’s declaration went uncontroverted by Plaintiff; and (2) Plaintiff filed a document stating that he took no position on Vital’s appeal and that he declined to file a brief.  That said, Plaintiff’s counsel here may have recognized and been swayed by the difficulty in challenging the sales data proffered by Vital Pharmaceuticals.

In one of the many food labeling cases flooding the dockets of California federal courts, U.S. District Court Judge Edward J. Davila denied certification of two proposed classes of consumers that included potential class members who had purchased products other than the ones purchased by the named plaintiff.  See Major v. Ocean Spray Cranberries, Inc., No. 5:12-cv-3067 (June 10, 2013).  Judge Davila held that the proposed classes were overbroad and that class definition was inappropriate for certification due to lack of typicality under Rule 23 of the Federal Rules of Civil Procedure. 

Plaintiffs challenging food and beverage labels have been aggressively asserting claims and alleging putative classes that include products the plaintiffs have not purchased.  In response, food and beverage manufacturers have challenged at the pleadings stage plaintiffs’ standing to assert claims on behalf of putative class members for products the named plaintiff had not purchased.  These challenges have been met with mixed results. 

This decision is significant in that it severely restricted the scope of potential classes to include only those products purchased by the named plaintiff or plaintiffs.  The decision, however, is not binding on other federal trial courts and the law in this area remains unsettled.          

Factual Background

Plaintiff Noelle Major claimed to have purchased five Ocean Spray products:  (1) Blueberry Juice Cocktail; (2) 100% Juice Cranberry & Pomegranate; (3) Diet Sparkling Pomegranate Blueberry; (4) Light Cranberry; and (5) Ruby Cherry.  Plaintiff alleged that these and other Ocean Spray products contained packaging and labeling that were unlawful, false or misleading.  Specifically, Plaintiff claimed that Ocean Spray made improper:  “no sugar  added” claims; no artificial colors, flavors, or preservatives claims; “healthy” claims; and antioxidant claims.

Plaintiff asserted claims typical of claims made in food labeling lawsuits in California:  (1) violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200 et seq.; (2) violation of the California False Advertising Law (“FAL”), Cal. Bus. & Prof. Code § 17500 et. seq.; (3) violation of the California Consumers Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et seq.; (4) restitution based on unjust enrichment or quasi-contract; (5) breach of warranty in violation of the California Song-Beverly Act, Cal. Civ. Code § 1790 et seq.; and (6) breach of warranty in violation of the Magnuson-Moss Act, 15 U.S.C. § 2301. 

The Court considered two different proposed classes – the class alleged in Plaintiff’s pleading and the class Plaintiff sought to be certified.  In Plaintiff’s pleading, she alleged a class of persons based on the purported misrepresentations.  For example, Plaintiff alleged a class that included all persons who purchased products during the class period that were represented to contain no artificial colors, flavors, or preservatives but which contained artificial flavors, colors, or preservatives.  Plaintiff, however, then sought certification of a class of persons who purchased products from four juice product lines from which Plaintiff purchased products not just the particular flavors within the product lines that were purchased by Plaintiff.  Thus, the class Plaintiff sought to certify included many different flavors of products than the ones purchased by Plaintiff. 

The Court held that both classes failed due to lack of typicality.  The principle reason cited for that finding was that both proposed classes included products not purchased by Plaintiff.  The Court stated:  “In the context of cases involving several products at issue…district courts have held that the typicality requirement has not been met where the ‘named plaintiff … purchased a different product than that purchased by unnamed plaintiffs.”  Accordingly, “[t]he primary reason behind the Court’s determination that the typicality requirement has not been met is that Plaintiff’s proposed classes are so broad and indefinite that they encompass products that she herself did not purchase.”  The Court noted that Plaintiff purchased just five products. 

The Court noted that Plaintiff failed to link any of the unpurchased flavors to any alleged misbranding issue in the case.  Plaintiff also apparently failed to show that the labels and nutrition claims on different flavors were not unique to differently-flavored products.  As an example, the Court noted that Plaintiff’s claim as to blueberry-flavored sparkling juice was specific to blueberry-related representations.  As a result, it was unclear how those representations could be linked to differently-flavored sparkling juice.   

Implications

While the Ocean Spray decision represents a favorable outcome for the food and beverage industry, businesses should operate with caution as these areas of law are constantly evolving and it is unclear the extent to which other trial and appellate courts will reach the same result.  It is important for food and beverage manufacturers, distributers and retailers to keep abreast of the steadily evolving law in these areas.