Articles from June 2017

In April, the Ninth Circuit issued a decision that bodes well for consumer-plaintiffs suing for deceptive advertising based on foods with label claims that may technically be true, but are nonetheless misleading. See Bruton v. Gerber Products Company, No. 15-15173 (9th Cir., April 19, 2017) (slip op. available here). The three-judge panel reversed and remanded the Northern District of California’s denial of certification, among other orders. The court of appeals’ order provides a roadmap to consumers seeking relief after purchasing foods with labels that may be literally true, but still are deceptive.

In 2012, Plaintiff Natalia Bruton sued Gerber and its parent company, Nestle, in the Northern District of California after purchasing baby food labeled with health claims that violated Food and Drug Administration (FDA) regulations. She sought class certification in 2013, arguing the “No Added Sugar,” “As Healthy As Fresh,” and similar health claims were misleading and violated California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA). Bruton argued that even if the health claims were technically true, they were nevertheless misleading in context, as the offending products appeared on supermarket shelves alongside other foodmakers’ offerings whose labels lacked such claims.

The district court granted summary judgment to Gerber, finding that, because the label claims were literally true, there was no likelihood that a reasonable consumer would be deceived by the representations, as required to make out a claim under the CLRA, UCL, or FAL. The district court also denied the plaintiff’s motion for class certification for lack of “ascertainability,” finding that plaintiff’s suggested method of utilizing self-identifying affidavits from class members “administratively unfeasible,” due to the number of products at issue, the variations in product labeling during the class period, the uncertain length of time it takes for newly-labeled products to appear in stores, among other reasons. Bruton v. Gerber Products Company, No. 12-CV-02412-LHK (N.D. Cal. June 23, 2014), Order Denying Plaintiff’s Motion for Class Certification, at 15. Thus, the court concluded that the plaintiff did not put forth a class definition that was “sufficiently definite so that it is administratively feasible to determine whether a particular person is a class member.” Id. at 15 (citing Sethavanish v. ZonePerfect Nutrition Co., 2014 WL 580696 at *4) (internal citations omitted).

In reversing and remanding the district court’s summary judgment decision, the Ninth Circuit panel found that “Bruton’s theory of deception does not rely on proving that any of Gerber’s labels were false.” Slip op. at 3. The court of appeals accepted the plaintiff’s argument that the labels, while “technically true,” were misleading in context: “[W]hen the maker of one product complies with a ban on attractive label claims, and its competitor does not do so, the normal assumptions no longer hold, and consumers will possibly be left deceived.” Id. at 5. The panel also reversed the denial of certification, finding the decision was inconsistent with a Ninth Circuit decision, Briseno v. ConAgra Foods, Inc., 844 F.3d 1121 (9th Cir. 2017), which was decided after the district court issued its ruling. In Briseno, the Ninth Circuit held there was no separate “administrative feasibility” requirement for class certification. “Administrative feasibility,” the panel said here, was different terminology for the same concept—the notion that a class is not manageable because its members cannot be easily identified. Slip op. at 3. This portion of the ruling was remanded for the lower court to further consider whether class certification is appropriate.

The Bruton case shows that label claims can be literally true, yet still deceptive to consumers, such as food products that do not normally contain added sugars that claim they have “No Sugar Added.” Plaintiffs seeking relief after being misled by labels have yet another Ninth Circuit ruling to rely upon to bolster their consumer claims.

Authored by:
Cody Padgett, Associate
CAPSTONE LAW APC

In product labeling class actions, consumer plaintiffs must provide a damages methodology that is both admissible under Fed. R. Evid. 702 (i.e. survives a challenge under Daubert v. Merrell Dow Pharms. Inc., 509 U.S. 579 (1973)) and satisfies the requirements of Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1433 (2013) (“a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to that theory”).

In In re: Dial Complete Marketing and Sales Practices Litigation, MDL Case No. 11-md-2263-SM, 2017 DNH 051 (D.N.H. March 27, 2017) (“In re: Dial”) (slip op. available here), the court found that the plaintiffs met both aspects of this challenge. In re: Dial was a consolidated, multi-district class action brought by consumers in multiple states, including California, Florida, and Illinois, against Dial based on alleged misrepresentations of the antibacterial properties of its “Dial Complete” soap. Slip op. at 3. The court denied Dial’s motion to strike the testimony of the plaintiffs’ expert, Stefan Boedeker, and held that the expert’s damages model based on conjoint analysis methodology “satisfies the requirements of Comcast and Rule 23.” Id. at 30. However, what sets apart In re: Dial from previous cases discussing conjoint analysis is its in-depth discussion of the economic principles of the methodology.

The plaintiffs in In re: Dial alleged that the label on “Dial Complete” soap contained a number of statements that were false and misleading, including claims that the product “Kills 99.99% of Germs,” that it is “#1 Doctor Recommended,” and that Dial Complete “Kills more germs than any other liquid hand soap.” Slip op. at 3. The expert’s task was to isolate a “measurable monetary portion” of the price of the soap attributable to the falsely-claimed product features. Id. at 19. The court began by noting that the expert’s conjoint analysis methodology “consists of three steps: data collection, data analysis and damages calculation” and then described in detail how the expert-designed “Choice Based Conjoint” consumer survey worked. Id. at 6-10. Then, observing that “conjoint analysis is a well-accepted economic methodology,” the court had no problem dismissing Dial’s criticisms of the expert’s survey as “going to the weight, not the admissibility,” of the expert’s testimony. Id. at 13-17.

The court’s decision had, in certain respects, an academic depth to its analysis, explaining economic concepts like demand curves (“a visual depiction of the relationship between a product’s price and quantity demanded”) and marginal consumers (“the last consumer willing to pay for a product at a given price and, consequently, the first to leave if the price is increased”), and how those concepts and research data combined to permit an expert to perform a “calculation [that] will yield the price premium associated with the ‘Kills 99.99% of Germs’ claim.” Slip op. at 25-27. Finally, the court rejected Dial’s expert’s critique of the damages model that it is “unconnected to supply side market forces” with a cogent explanation of why a “traditional” supply and demand approach was problematic and why the plaintiffs’ expert’s model, holding the number of products actually sold constant on the supply/demand graph, actually “captured the full measure of damages suffered by consumers who actually bought the allegedly misrepresented product.” Id. at 28.

The court’s illuminating discussion of surveys, economics, and conjoint analysis should be required reading for any litigator planning to develop a damages model for class certification.

Authored By:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC