Two Recent Consumer Fraud Class Action Decisions

Two recent decisions are worth noting in the emerging battleground that is “consumer fraud” litigation. Plaintiffs have turned increasingly to the state unfair and deceptive trade practices acts and consumer fraud statutes that exist in virtually every jurisdiction. Not only do these statutes potentially give plaintiff attorneys access to a wider group of product liability claimants – those with no traditional injury from a product – they also hold out the theoretical promise of class certification because of the interpretation of the reliance and causation elements of the statutory claims. Plaintiffs frequently assert that these elements do not present the predominating individual issues that cut against class certification in a traditional mass tort or complex product liability context.  Many consumer fraud statutes authorize multiple/treble damages, attorney fees and costs. Plaintiff attorneys have resorted to asserting that the law of one state (the most pro-plaintiff consumer fraud statute) should apply to plaintiffs from various other jurisdictions in a multi-state class action.  The American Tort Reform Association has a good report on this phenomenon.

First, the Supreme Court of Missouri decertified a class defined as all individuals who purchased fountain Diet Coke in the state after March 24, 1999. See Coca-Cola Co. v. Nixon, 2008 WL 1724177 (Mo. April 15, 2008). According to the opinion, since 1984, fountain Diet Coke has been sweetened with a blend of aspartame and saccharin while bottled Diet Coke has been sweetened exclusively with aspartame. Plaintiff contended that she and many other consumers would not have purchased fountain Diet Coke if they had known it contained saccharin. She further contended that the deception, itself, resulted in irreparable harm. The trial court certified the class, and defendant appealed.

Class Definition Key

The court began its analysis by noting that while the state class action rule does not explicitly mention a proper class definition, such a requirement clearly underlies each of the mandatory elements for certification. Moreover, a properly defined class is necessary to realize both the protections and benefits for which the class action device was created. A class definition that encompasses more than a relatively small number of uninjured putative members is overly broad and improper. Likewise, a proposed class definition may be improper because the putative class is indefinite. The primary concern underlying the requirement of a class capable of definition, the Court said, is that the proposed class not be amorphous, vague, or indeterminate. 2008 WL 1724177 at *4. The class definition must be sufficiently definite so that it is administratively feasible to identify members of the class, which means, first, that class membership cannot depend on individual merit determinations. Class definitions requiring merit determinations are inappropriate in that the members of the class could not be presently ascertainable; such determinations could not be made until the case is concluded. Second, class membership must be based on objective, rather than subjective, criteria.

Plaintiff's proposed class included an extremely large number of uninjured class members, that is, those who did not care if the Diet Coke they purchased contained saccharin. Many consumers had no choice of the brand of fountain diet cola they purchased at any given location, let alone the particular type of sweetener used in one brand, Diet Coke. Plaintiff's own expert witness indicated that only twenty percent of those who currently consume fountain Diet Coke would not continue to do so if they knew it contained saccharin. In other words, eighty percent of the putative class suffered no injury, even under plaintiff’s theory of damages. Because of the presumably large number of individuals who purchased fountain Diet Coke in Missouri, proposed class “could include millions who [were not injured] and thus have no grievance.” Id.

The Court also rejected proposed modifications of the class definition. If class membership was limited to those who were allegedly injured by Coca-Cola, the class definition would contain an impermissible merit determination. The circuit court would not be able to determine whether an individual is, or is not, a class member until after the completion of the litigation. If the class definition were modified to be based on an individual's dislike of saccharin, membership would depend on an individual's subjective preference. Such a modification would result in innumerable “mini-trials” to determine class membership. Id. at *5. The opinion is thus a useful reminder of the importance of a careful analysis of the class definition.

A second recent CFA decision highlights the tactical decisions associated with attempts to have CFA claims dismissed at an early stage, particularly in light of Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007), which instructed that a district court should grant a motion to dismiss if plaintiffs have not pled enough facts to state a claim to relief that is plausible on its face. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. at 1965.

In Williams ex rel. Tabiu v. Gerber Products Co., 2008 WL 1776522 (9th Cir. April 21, 2008), the Ninth Circuit reversed the trial court’s decision dismissing a putative class action alleging various tort claims and violations of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq., and California’s Consumer Legal Remedies Act, Cal. Civil Code § 1750 et seq. The plaintiffs challenged several aspects of the marketing of Fruit Juice Snacks sold as part of Gerber’s “Graduates for Toddlers.”

  • First, they challenged the use of the words “Fruit Juice” juxtaposed alongside images of fruits such as oranges, peaches, strawberries, and cherries, contending that this juxtaposition was deceptive because the product did not contain fruit juice from all of the fruits pictured on the packaging;
  • Second, they challenged a statement on the side panel of the packaging describing the product as made “with real fruit juice and other all natural ingredients,” even though the two most prominent ingredients were corn syrup and sugar.
  • Third, plaintiffs challenged a separate statement on the side panel; namely, that Snacks was “one of a variety of nutritious Gerber Graduates foods and juices.”
  • Fourth, they challenged Gerber’s decision to label the product a “snack” instead of a “candy,” “sweet,” or a “treat.”

     

Lower Court's Sensible Approach

Gerber filed a Rule 12(b)(6) motion, which the district court granted. 439 F.Supp.2d 1112 (S.D. Cal. 2006). Plaintiffs must allege that Defendants' statements are likely to deceive a reasonable consumer. The term “likely” means probable, not just possible. If the alleged misrepresentation would not mislead a reasonable consumer, then the allegation may be dismissed on a motion to dismiss. In determining whether a statement is misleading “the primary evidence in a false advertising case in the advertising itself.” Id. at 1115. The trial court noted that the mere depiction of fruit, or fruit like substances, is not a specific affirmative representation that the product contains those fruits. Viewing the packaging as a whole, the inescapable conclusion was that no reasonable consumer upon review of the package would conclude that the Snacks contain the juice from the actual and fruit-like substances displayed on the packaging particularly where the ingredients are specifically identified. “Where a consumer can readily and accurately determine the nutritional value and ingredients of a product, and the product packaging does not affirmatively mislead the consumer by means of specific representations, no reasonable consumer would be misled” by the words “Fruit Juice Snack” or deceived by depictions of fruit and fruit-like substances on the primary packaging label. Id. at 1116.

The motion to dismiss raises the intersection of federal pleading rules and the state law underlying the elements of the claim being alleged. The Ninth Circuit engaged in no balancing or careful melding, but rather disposed of the federal pleading requirement as clarified in Twombly by noting that “California courts, however, have recognized that whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer.” 2008 WL 1776522 at *3. The facts of this case, the panel thought, do not amount to the “rare situation” in which granting a motion to dismiss is proper. Id. at *4. The Court simply substituted its view of the potential impact of the packaging for the trial court’s view: The packaging pictures a number of different fruits, “potentially suggesting (falsely) that those fruits or their juices are contained in the product.” Id. Further, the statement that Fruit Juice Snacks was made with “fruit juice and other all natural ingredients” could “easily” be interpreted by consumers as a claim that all the ingredients in the product were natural, “which appears to be false.” Id. [That’s the good news/bad news about a de novo review standard.]

The Ninth Circuit also disagreed with the trial court’s view that reasonable consumers might be expected to look beyond the front of the box to discover the ingredient list on the side of the box.

“We do not, however, think that a busy parent walking through the aisles of a grocery store should be expected to verify that the representations on the front of the box are confirmed in the ingredient list. Instead, reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging.” Id.

That view – as unsupported by evidence as any the trial court relied on – is apparently designed to substitute the appellate court’s view of consumers in that specific environment, for an objective analysis of the packaging in a calm, or reflective atmosphere. It seems potentially inconsistent with the court’s holding that claims under these California CFA statutes are governed by a “reasonable consumer” test, unless the advertisement targets a particular disadvantaged or vulnerable group. Apparently, shoppers in grocery stores – if they are parents – are too disadvantaged and vulnerable to be expected to read the ingredients on the food they are buying for their children. What a tremendous policy decision! Sure to encourage more informed decisions by consumers. Apparently, reasonable consumers don’t read the label.

FDA Role

It is curious also in light of the treatment of the issue of the role of the FDA in this case. The trial court noted that “the FDA authorizes the manner in which Gerber labels Snacks…. The depictions of the fruit suggest that the product is fruit flavored and, as indicated on the packaging label, Snacks is a naturally flavored drink containing grape juice and natural flavors, along with corn syrup, sugar, Vitamin C, and other listed ingredients.” 439 F.Supp.2d at 1112. The Ninth Circuit rejected Gerber’s assertion that the district court concluded as an “alternate holding” that the product complied with FDA guidelines. This supposedly was not an alternate holding but simply support for the conclusion that the product was not deceptive. (The Court put off as not yet ripe any preemption challenge.)
 

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