Keurig K-Cup Consumers Win Class Cert of False “Recyclable” Claims

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In Smith v. Keurig, N.D. Cal. Sept.  21, 2020, the district court granted Plaintiff Kathleen Smith’s motion for certification of a class of purchasers of Keurig coffee pods (“K-Cups” or “Pods”) based on Keurig’s allegedly false representation that the Pods are “recyclable.” The decision (slip op. available here) touches on a number of familiar issues that have been brewing in food labeling cases for years.

The plaintiff’s theory of liability boils down to allegations that K-Cups are not recyclable because they fail to meet Federal Trade Commission (“FTC”) guidance for Use of Environmental Marketing Claims (“Green Guides”). Under the Green Guides, the district court had previously stated, “if a product is rendered non-recyclable because of its size or components—even if the product’s composite materials are recyclable—then labeling the product as recyclable would constitute deceptive marketing” (citing 16 C.F.R. § 260.12(d)). In addition, a marketer may make an unqualified recyclability claim only “[w]hen recycling facilities are available to a substantial majority of consumers or communities where the item is sold.” 16 C.F.R. § 260.12(b)(1).  According to the plaintiff, the K-Cups are not “recyclable” because (a) less than 60% (or a “substantial majority”) of facilities will accept the products, (b) the products’ size prevents them from being properly sorted by recycling programs, and (c) there is a lack of end markets to recycle the products.

The plaintiff’s theory provides the grounds for several causes of action, including claims under California’s Unfair Competition Law (“UCL”) and the California Consumers Legal Remedies Act (“CLRA”). The plaintiff also sought to certify her claims under Fed. R. Civ. P. 23(b)(2), in order to obtain injunctive relief.

On the UCL claim, Smith discusses whether Keurig’s advertising raises the presumption of classwide reliance available under Tobacco II in the context of internet sales. The plaintiff testified that she was aware of Keurig’s claims that its products were recyclable, believing that the recycling claims on Keurig’s website and the packaging of products she purchased on the website were true. Smith, slip op. at 9. Since the plaintiff provided evidence that she relied on those representations, and “all the class members were exposed to Keurig’s recyclability representations,” the district court found that Keurig’s “advertising campaign” warranted a presumption of classwide reliance. Id. citing Walker v. Life Ins. Co. of the Sw., 953 F.3d 624, 630 (9th Cir. 2020), In re Tobacco II Cases, 46 Cal.4th 298, 328, 207 P.3d 20, 28 (2009).

Unlike the UCL, the CLRA requires a plaintiff to establish classwide reliance on misrepresentations. Here, the plaintiff successfully argued that, under the California Environmental Marketing Claims Act (“EMCA”) recyclability is material to reasonable consumers, raising an inference of classwide reliance. The EMCA makes it unlawful to make deceptive environmental marketing claims, including “any claim contained in the [Green Guides] published by the [FTC].” Cal. Bus. & Prof. Code § 17580.5(a). As the district court observed, by “specifically outlawing” an allegedly deceptive representation, the Legislature “recognizes the materiality of [the] representation.” Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 329 (2011).

Lastly, Smith applied Davidson v. Kimberly-Clark Corp., 889 F.3d 956, 969 (9th Cir. 2018), to determine that the plaintiff had Article III standing to pursue injunctive relief. Keurig deployed the standard “can’t be fooled again” argument, i.e. that under Davidson, the plaintiff lacked Article III standing to pursue injunctive relief because she is now fully informed that the K-Cups are not “recyclable,” and therefore cannot be harmed by the representation in the future. Smith, slip op. at 18-19. However, Smith presents a factual scenario in which, absent injunctive relief, the plaintiff cannot know whether the “recyclable” representation is true. As the district court observed, “MRF’s [Materials Recovery Facilities] could evolve to capture small plastics such as Pods.” Id. Thus, the court found the plaintiff had Article III standing to seek injunctive relief under Davidson.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Time Spent on Bag Checks Constitute “Hours Worked” Under Frlekin v. Apple, Inc.

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In Frlekin, et al. v. Apple, Inc., case number 15-17382, the Ninth Circuit requested that the California Supreme Court decide, as a matter of California law, whether time spent by Apple retail employees undergoing required security checks on Apple’s premises constituted “hours worked” under Wage Order 7, even though the packages, bags and technology devices checked were brought to work purely for employees’ convenience (slip op. available here). The California Supreme Court’s answer was a resounding “yes.” Frlekin v. Apple, Inc., __ F.3d __ at p. 8 (9th Cir. Sept. 2, 2020) citing Frlekin v. Apple, Inc., 8 Cal.5th 1038, 1042 (2020).

As the California Supreme Court explained, under California law, the definition of “hours worked” has two independent parts: “time during which an employee is subject to the control of an employer” and “time the employee is suffered or permitted to work, whether or not required to do so.” In the case of the Apple employees’ security checks, the California Supreme Court needed only to address the “control clause” of the minimum wage order. Frlekin, __ F.3d __ at p. 10, n. 2.

The underpinning of the California Supreme Court’s analysis under the “control clause” was that, during the searches, Apple controlled its employees in several ways. First, it had a bag search policy that employees were required to comply with under threat of discipline. Second, employees were confined to the premises while waiting and undergoing the searches, that took anywhere from 5 to 20 minutes. Third, employees had to actively participate in the search by locating a manager or security guard, moving or removing items, unzipping containers, opening packages, and removing personal Apple devices for inspection. Frlekin, 8 Cal.5th at 1046.

The fact that the employees’ packages, bags, and technology devices were brought for the employees’ own convenience did not sway the court. As “a practical matter,” employees routinely bring such items to work including, in particular, iPhones. The irony that Apple argued (unsuccessfully) that iPhones were not necessary for its own employees was lost on the Court. Frlekin, 8 Cal.5th at 1056.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Come Fly with Me Another Day– No COVID Refunds for Consumers

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Just as water only flows downhill, money seems to only flow in one direction—out of the wallets of consumers and into the coffers of corporations, nary to return. This has never been so evident as during the COVID-19 crisis, in which hundreds of thousands of consumers, taken unaware by the crisis, purchased pre-paid services that they now cannot use, or dare not to use, because of the pandemic. Although these purchases are either now worthless, or literally “worth less,” many businesses are recalcitrant to refund money for bargained-for services that they are now unable to provide.

The difficulty in obtaining “COVID refunds” is an issue that permeates every strata of pre-paid consumer services. Prior to March of 2020, consumers paid money in advance for professional sporting events, concert tickets (e.g. In re: StubHub Refund Litig., MDL No. 2951), hotels, vacation rentals, cruises, summer camps, youth sports programs, and college tuition. See Latisha Watson v. The University of Southern California, et al., No. 20-04107 (C.D. Cal., filed May 5, 2020) (seeking refunds for student tuitions for the Spring 2020 academic semester due to COVID-19). The list goes on. Then there is the airline industry.

All of the major airlines have enacted COVID-related refund and flight change policies. However, some consumers allege in recently filed actions that their chosen airlines refused to refund money for air travel that they failed to deliver. A case in point is Southwest Airlines customer Adrian Bombin, who purchased two tickets to Havana, Cuba, in February 2020. According to Bombin, Southwest cancelled the flights and could not offer any other comparable flight to Cuba. Still, the plaintiff was not given a refund, but was only offered a credit for use on a future flight. See Bombin v. Southwest Airlines Co., No. 20-01883 (E.D. Penn., filed April 13, 2020). Other consumers have filed similar actions. See Rudolph v. United Airlines Holdings Inc. et al., No. 20-02142 (N.D. Ill., filed April 6, 2020) (alleging United denied a refund for cancelled flight, and offered only rebooking or ticket credit for travel within one year); Levey v. Concesionaria Vuela Compania de Aviacion SAPI de CV et al., No. 20- 02215 (N.D. Ill., filed May 8, 2020) (alleging Mexican airline Volaris canceled several of its U.S. flights to Mexico amid the coronavirus pandemic and refused to refund its travelers or let them rebook their flights without penalty).

The problem is so widespread that the U.S. Department of Transportation (DOT) issued an enforcement notice on April 3, 2020, clarifying airlines’ refund obligations in the context of the COVID-19 public health emergency. See U.S. Department of Transportation Issues Enforcement Notice Clarifying Air Carrier Refund Requirements, Given the Impact of COVID-19. Nevertheless, some airlines remain recalcitrant to provide refunds, as is evidenced by the allegations in these later-filed class actions.

Although these airlines contend that they have operated within the law, it is evident that the opportunity or ability of most consumers to engage in air travel has all but been severely curtailed or eliminated due to the pandemic. Offering travel credit is not a solution under these circumstances. Consumers are subject to numerous travel restrictions, possible quarantine on arrival, a risk of infection through close contact with other air travelers, and now, unpredictable flight cancellations that risk loss of airfare in many cases. The possibility that travelers may someday receive the air travel is not a solution in these unprecedented times. Sometimes “someday” means never.

We plan to keep the filed cases Bombin, Rudolph, and Levey on our radar and see where they land.

Authored by:
Robert Friedl, Senior Counsel
CAPSTONE LAW APC

Wal-Mart’s Record Seating Settlement in Williamson: $65 Million

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On December 6, 2018, Judge Edward Davila approved a $65 million PAGA settlement for Wal-Mart’s failure to provide seats to its front-end cashiers. Williamson v. Wal-Mart Stores, Inc., No. 5:09-cv-03339-EJD (N.D. Cal. Dec. 6, 2018), Order Granting Motion for Preliminary Approval (slip op. available here). This represents the largest PAGA settlement in the history of the statute. In addition, the settlement provided for injunctive relief in the form of a “Seating Pilot Program” for these employees.

Suitable seating is one of the worker protections covered by California’s Wage Orders, which have the same dignity as statutes, are remedial in nature, and are to be broadly construed to effectuate the goal of protecting the comfort and welfare of employees. Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004, 1027 (2012). The suitable seating requirement at issue is contained in section 14(A) of the of the Wage Order and states: “All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”

Although this sentence has been in the Wage Orders for decades and was originally included as a protection for women and children, its meaning was frequently debated by employers, who argued that it was only applicable if the employer believed that seating would have no effect on the job—essentially rendering it a nullity. However, in 2016, the California Supreme Court in Kilby v. CVS Pharmacy, Inc., 63 Cal.4th 1 (2016), issued its interpretation. As the Supreme Court explained, first, “[t]here is no principled reason for denying an employee a seat when he spends a substantial part of his workday at a single location performing tasks that could reasonably be done while seated, merely because his job duties include other tasks that must be done standing.” Furthermore, “[t]he inquiry does not turn on the individual assignments given to each employee, but on consideration of the overall job duties performed at the particular location by any employee while working there, and whether those tasks reasonably permit seated work.” Finally, it stated:

When evaluating whether the “nature of the work reasonably permits the use of seats,” courts must examine subsets of an employee’s total tasks and duties by location, such as those performed at a cash register or a teller window, and consider whether it is feasible for an employee to perform each set of location-specific tasks while seated . . . . An employee may be entitled to a seat to perform tasks at a particular location even if his job duties include other standing tasks, so long as provision of a seat would not interfere with performance of standing tasks . . . the frequency and duration of those tasks with respect to each other, and whether sitting, or the frequency of transition between sitting and standing, would unreasonably interfere with other standing tasks or the quality and effectiveness of overall job performance.

Id. at 10, 17-18.

The Wal-Mart settlement was reached when the parties were less than a month away from trial, and after nearly a decade of litigation. Notably, unlike many PAGA settlements, because the Williamson case was one of the first suitable seating cases filed, it faced unique challenges, such as a dispute regarding if Wage Order claims could be brought under PAGA. Moreover, unlike many PAGA actions, this was an already-certified class action.

Although, at first blush, the settlement may seem like an extraordinary gift to the plaintiffs, a closer analysis shows that it is in fact quite reasonable. The settlement involved approximately 99,000 employees and 2,610,921 pay periods. Thus, the settlement provided for approximately $25 per pay period. The PAGA statute provides for default penalties of $100 for each initial violation and $200 for each subsequent violation. Accordingly, when weighed against Wal-Mart’s potential exposure at trial, the settlement amounts to only approximately 12.45% of its exposure.

Authored by:
Arnab Banerjee, Senior Counsel
CAPSTONE LAW APC