Posts belonging to Category Certification Rulings

Brazil v. Dole: A Cautionary Tale of Class Certification

In 2012, Plaintiff Chad Brazil filed a consumer class action against Dole, alleging that the labels on a total of 38 varieties of Dole’s packaged fruit misleadingly describe the products as “all natural,” despite Dole’s use of artificial ingredients, including chemical preservatives synthetic citric acid and ascorbic acid. See Order Granting in Part and Denying in Part Motion for Class Certification, Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 2466559, at *1-2 (N.D. Cal. May 30, 2014). Brazil then filed a motion for class certification on January 31, 2014, limiting the claims therein to 10 products and the “All Natural Fruit” label statement. Id. at *3. In May 2014, Judge Koh granted in part the plaintiff’s motion for certification under Rule 23(b)(2) to seek declaratory and injunctive relief, but denied it to the extent that monetary damages were sought under Rule 23(b)(2), reasoning they were “more properly brought under Rule 23(b)(3).” Id. at *11. Thus, the court also certified a California damages class under Rule 23(b)(3) instead, noting that, pursuant to the Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA), “[t]he proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received.” Id. at *15.

Judge Koh’s analysis of the damages models proffered by Brazil is instructive in the context of class actions involving the mislabeling of consumer products. The Brazil plaintiff offered three different damages models to the court. The court rejected the first option, the “Full Refund Model” (refunding the entire purchase price of the relevant product), as inconsistent with the plaintiff’s theory of liability “because it is based on the assumption that consumers receive no benefit whatsoever from purchasing the identified products. This cannot be the case, as consumers received benefits in the form of calories, nutrition, vitamins, and minerals.” Order Granting in Part and Denying in Part Motion for Class Certification, Brazil v. Dole Packaged Foods, LLC, 2014 WL 2466559, at *15. The court also rejected the plaintiff’s second option, the “Price Premium Model,” which proposed calculating the difference in price between the challenged products and comparable products without the “All Natural” label statements, as too speculative. Id. at *16. As Judge Koh explained, the model “‘assumed that 100% of that price difference [is] attributable to [Dole]’s alleged misrepresentations’” and thus fails under Comcast. Id. (quoting In re POM Wonderful LLC, 2014 WL 1225184, at *5 (C.D. Cal. Mar. 25, 2014)). However, the court accepted the third option, the “Regression Model,” which examined sales of the identified products before and after Dole placed the alleged misrepresentations on its product labels, using regression analysis to control for other variables that could otherwise explain changes in Dole’s sales. Id. at *17. Judge Koh found that this model sufficiently tied damages to Dole’s alleged liability under Comcast because the regression analysis “isolates the effect of the alleged misrepresentation by controlling for all other factors that may affect the price of Dole’s fruit cups and the volume of Dole’s sales.” Id. The injunction and damages classes where certified accordingly.

However, once the plaintiff’s expert report had been filed, Dole filed a motion to decertify on August 21, 2014, contending that the regression model could not adequately assess damages on a class-wide basis and that the damages and injunction classes were not ascertainable, which the court partially granted and partially denied. The court held that the plaintiff failed to tie damages to his theory of liability because “the labels for nine of the ten products certified did not actually change during the class period,” precluding the methodology proposed by the preliminarily approved Regression Model. See Order Granting in Part and Denying in Part Motion to Decertify, Brazil v. Dole Packaged Foods, LLC, 2014 WL 5794873, at *6 (N.D. Cal. Nov. 6, 2014). In granting Dole’s motion to decertify the damages class, Judge Koh opined that, ultimately, the regression analysis used instead to compensate for the unanticipated data was too speculative and failed to meet the Rule 23(b)(3) requirement that common issues predominate over individual ones. Id. at *14. She denied Dole’s motion to decertify the injunction class, however, on the grounds that it remained ascertainable. Id. at *15.

The district court also granted a motion for summary judgment, primarily on the grounds that Brazil’s arguments that the “All Natural Fruit” statement on Dole product labels was likely to mislead reasonable consumers generally were too conclusory to support any triable issues of fact. See Order Granting Defendant’s Motion for Summary Judgment, Brazil v. Dole Packaged Foods, LLC, 2014 WL 6901867, at *4 (N.D. Cal. Dec. 8, 2014), aff’d in part, rev’d in part, No. 14-17480, 2016 WL 5539863 (9th Cir. Sept. 30, 2016). For example, Brazil’s own testimony that he was misled, without more, and citing the FDA’s informal definition of the term “natural” as “evidence of how reasonable consumers would view” the “All Natural Fruit” label while presenting no evidence that citric acid and ascorbic acid “would not normally be expected to be in” those products, per the FDA definition, was insufficient to create a genuine dispute of material fact. Id. at *4-5.

The plaintiff appealed the district court’s orders on defendant’s motions to dismiss, for summary judgment, and on plaintiff’s motion for class certification. In an unpublished order, the Ninth Circuit recently held that summary judgment on the merits for claims under the UCL, FAL, and CLRA had been erroneously granted, finding that a reasonable consumer could have been misled by the challenged labels. Brazil v. Dole Packaged Foods, LLC, No. 14-17480, 2016 WL 5539863 (9th Cir. Sept. 30, 2016) (slip op. available here). The panel, however, affirmed the decision to grant Dole’s motion to decertify the class, agreeing that “Brazil did not explain how this [price] premium could be calculated with proof common to the class.” Slip op. at 7. The panel also affirmed dismissal of Brazil’s class-wide claim for unjust enrichment on the same grounds, noting, however, that its recent decision in Astiana v. Hain Celestial Grp., Inc. provides that “unjust enrichment claims may be pleaded in the alternative in quasi-contract” and preserving his individual claim. Id. at 8 (citing Astiana, 783 F.3d 753 (9th Cir. 2015)). The case was remanded to resolve claims on behalf of the injunction class and Brazil’s individual claim for restitution.

A final, compelling question raised in Brazil regarding plaintiff’s burden of proof, but not resolved by either Judge Koh or the Ninth Circuit and specific to claims of misbranding or mislabeling, is whether “non-binding FDA policy statements,” which do not specifically regulate labeling statements, make such statements material as a matter of law. Brazil, 2014 WL 2466559, at *8; Brazil, 2014 WL 6901867, at *6. As Judge Koh noted, “[a]bsent any evidence that reasonable consumers would not normally expect citric acid and ascorbic acid to be found in the challenged Dole products, Brazil cannot rely on FDA’s informal policy to show that those consumers were likely to have been misled,” the judge said. Brazil, 2014 WL 6901867, at *6. The Brazil opinions as a whole stress the evidentiary burden plaintiffs face in alleging class claims for product liability, generally, as well as the particular challenge of establishing a reasonable, class-wide damages calculations that will satisfy Rule 23(b)(3) under Comcast.

Authored by: 
Karen Wallace, Associate

Lubin v. Wackenhut: Decertification Order Based on Dukes Reversed by Cal. Ct. of Appeal

On November 21, 2016, the California Court of Appeal for the Second Appellate District reversed the decertification of a class of over 10,000 employees. The Court of Appeal held that the trial court should examine the plaintiffs’ theory of recovery when evaluating class certification, rather than the frequency of violations resulting from that theory. Lubin v. The Wackenhut Corporation, No. B244383, __ Cal. App. 4th __ (2nd Dist. Div. 4 Nov. 21, 2016) (slip op. available here). This is welcome news for the plaintiffs’ class action bar, as it narrows the ways in which a trial court may peek at the merits of the plaintiff’s claims at the class certification stage.

The Lubin class of security officers, employed by Wackenhut, was initially certified for Labor Code claims on the basis of on-duty meal period waivers that the security officers had signed. Following certification, the parties agreed to a statistical sampling of records to determine the merits of the class claims—specifically, to determine how many class members had signed on-duty meal waivers that did not include required revocation language. Then, the United States Supreme Court issued its ruling on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), in which the high court cast doubt on the acceptability of using statistical sampling to prove liability in an employment class action. The defendant in Lubin moved for decertification based on Dukes, on the grounds that the agreed-upon sampling of meal break waivers would violate Dukes’ proscription of “trial by formula.” The trial court took further briefing in light of Brinker Rest. Corp. v. Superior Court, 53 Cal. 4th 1004 (2012), and then decertified the class. The Lubin plaintiffs appealed.

The Court of Appeal, citing Brinker, held that the answer to the “ultimate question” for class certification “hinges on ‘whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.’” Slip op. at 8 (internal citations omitted). In pushing against the trial court’s application of Dukes, the Court of Appeal pointed to the clarification in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1048 (2016) (stating that Dukes does not “stand for the broad proposition that a representative sample is an impermissible means of establishing classwide liability”). Slip op. at 12. Further, the Court of Appeal criticized the trial court for examining, in its class certification analysis, the damages issue of whether employees actually experienced meal period violations. Notably, the Court of Appeal held that the trial court’s “standard requiring plaintiffs to ‘conclusively establish’ that Wackenhut had a policy that violated wage and hour laws is improper because plaintiffs’ burden at class certification is to produce substantial evidence.” Id. at 41 (emphasis in original).

With Lubin, the impact of Dukes has been reduced, and class action plaintiffs in California can now more easily certify claims based on solid theories of liability, even if the actual impact of those theories does not necessarily result in widespread damages. However, defendants may see this as a dilution of what it means to have a certified class, given that the bar has, in a sense, been lowered.

Authored by: 
Jonathan Lee, Associate

Vaquero v. Ashley Furniture: 9th Cir. Ruling Clarifies, Eases Class Certification Requirements

In June, the Ninth Circuit Court of Appeals issued a ruling that could provide a significant boon to class action plaintiffs. In Vaquero v. Ashley Furniture Industries, Inc., et al. (9th Cir. June 8, 2016) (slip op. available here), the appellate panel affirmed a district court order granting certification in a wage and hour class action. In doing so, the court considered the applicability of several United States Supreme Court opinions from recent years, finding in favor of the Vaquero plaintiffs in each instance.

The Vaquero plaintiffs were commission-only salespeople who alleged that they were required to perform additional, non-sales work without being paid the requisite minimum wage for these tasks. The lower court certified the class, and the defendant-employer appealed, citing landmark U.S. Supreme Court cases Wal-Mart Stores, Inc. v. Dukes (564 U.S. 338 (2011)) and Comcast Corp. v. Behrend (133 S. Ct. 1426 (2013)), neither of which involved wage and hour issues.

Examining the commonality requirement, which requires that plaintiffs’ claims be capable of classwide resolution, the Ninth Circuit rejected the defendants’ reliance on Dukes. The appeals court distinguished Dukes from Vaquero, pointing out that the former was a Title VII discrimination case involving millions of employees and innumerable managerial decisions across thousands of store locations, while the present case has a proposed class of 600 employees who perform the same work, and whose injury is focused and objective as compared to Dukes. Thus, the Ninth Circuit in Vaquero limited the impact of Dukes on wage and hour commonality analyses.

As for the predominance requirement (that issues of law and fact predominate over individual issues), the court again shot down the defendants’ reasoning, this time with regard to Comcast, a consumer antitrust class action where the Supreme Court found a lack of predominance because the plaintiffs used a faulty damages model and were unable to demonstrate that their damages could be determined on a classwide basis. The panel concluded that the defendants’ interpretation of Comcast—that predominance cannot be found unless damages can be determined on a classwide basis—was too broad, and instead held that the plaintiffs need only “prove that damages resulted from the defendant’s conduct” in order to prevail. Slip op. at 8. Here, there was no doubt that the class members’ injuries had been caused by the employer’s conduct, unlike in the much more attenuated context of an antitrust action in Comcast. Id. at 9.

Finally, Vaquero references the recent Supreme Court decision in Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016) (finding that representative evidence can be used to show both damages and liability) (previously covered on the ILJ here), noting that: “[t]he Supreme Court has not disturbed our precedent” and “the need for individual damages calculations does not, alone, defeat class certification.” Slip op. at 10. The Vaquero ruling not only paves the way for certification of this class of 600 Ashley Furniture employees, but will no doubt be helpful to many more California employees in the future.

Authored by: 
Robin Hall, Associate

Falco v. Nissan: New Cert Decision Bodes Well for Plaintiffs in Auto Defect Class Actions

A recent decision by Judge Dean D. Pregerson of the Central District of California, Falco, et al. v. Nissan North America, Inc., bodes well for plaintiffs seeking to certify a car defect class action. No. CV 13-00686 (C.D. Cal. April 5, 2016) (slip op. available here) (Mr. Falco is represented by Capstone Law APC). Judge Pregerson rejected several of the auto manufacturer defendant’s most popular tropes, namely, that the plaintiffs cannot identify a “single” common defect, that most class members did not experience the defect, that the defect is not safety-related, and that the plaintiffs cannot establish a cognizable damages theory.

The Falco plaintiffs alleged that the class vehicles (various model year Nissan Pathfinder, Maxima, Quest, Altima, Xterra, and Frontier vehicles) all suffered from a defectively designed Timing Chain Tensioning System that was prone to fail prematurely and that posed a safety risk. Nissan opposed certification claiming that there was no single defect, and therefore no commonality, because Nissan had issued various iterations of the slack guide in the Tensioning System with different parts over time. Citing the Ninth Circuit’s decisions in Chamberlan v. Ford Motor Co., 402 F.3d 952 (9th Cir. 2005), and Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168 (9th Cir. 2010), the court held that “[i]n these consumer defect cases, commonality can be found in the very legal and factual question of the defect[]” where “the same defect is alleged across all class vehicles, and the assertion is supported by sufficient evidence . . . .” Slip op. at 11. Similarly, the court held that the predominance requirement was satisfied because “[t]he actual proof of common defect, or Defendant’s knowledge and subsequent actions, go to the merits of the claim, but common evidence will be used to prove the claim either way.” Id. at 19.

The district court also rejected Nissan’s claims that (1) there were individual issues regarding each class member’s knowledge about the defect based on information available on the Internet, (2) that “the vast majority [of class members] never experience a timing chain problem,” and (3) that the defect was not safety-related and was simply a “noise that consumers may not find troublesome.” Slip op. at 18. Concluding that common issues predominate, the court reasoned, “the evidence cited by Plaintiffs in their moving papers is sufficient at the this stage of the case to make out allegations common among the class as to the alleged vehicle defects, the effects of the alleged defect could have on the vehicle in terms of safety, and Nissan’s knowledge of the defect.” Id. at 19. With respect to class-wide damages, the court found that the plaintiffs sufficiently provided a common damages formula based on the average cost of repair. It noted that that class members spent money “that they would not have needed to spend had Nissan either disclosed the effect or repaired itself. Thus, return of the average cost of repair would provide restitution to these class members because they have already spent that money to repair or diagnose their vehicles.” Id. at 30. Additionally, the court stated that by receiving restitution under the fraud and breach of warranty claims, “the class would be getting the benefit of their bargain because they would be put in the same position they would have had the car not been sold with the defective timing chain system—it is the cost necessary to make the vehicles conform to the value Plaintiffs thought they were getting in the price tendered.” Id. at 31.

Nissan has sought permission to appeal Judge Pregerson’s decision pursuant to Federal Rule of Civil Procedure 23(f), which the plaintiffs have opposed. If the Falco decision stands, the opinion, together with the plaintiffs’ briefing on the motion, will provide a roadmap for rebutting defendants’ key arguments in opposition to class certification in a car defect action. 

Authored By:
Jordan Lurie, Of Counsel