Handcrafted Bourbon Class Dismissed

 A California federal court earlier this month dismissed a proposed class action claiming the makers of Jim Beam misrepresented its bourbon as “handcrafted.”  See Scott Welk v. Beam Suntory Import Co. et al., No. 3:15-cv-00328 (S.D. Cal. 8/21/15)  A victory for common sense.

This putative class action centered on the use of the word "handcrafted" on Jim Beam Bourbon bottle labels. The use of the term "Bourbon" for a type of whiskey has been traced to the 1820's, and the term began to be used consistently in Kentucky in the 1870's. According to the Kentucky Distillers' Association, Kentucky produces 95 percent of the world's bourbon supply.

The complaint asserted causes of action for violation of California's false advertising law, Cal. Bus. & Prof. Code § 17500 et seq. ("FAL"), violation of California's unfair competition law, id. at § 17200 et seq. ("UCL"), intentional misrepresentation, and negligent misrepresentation. Jim Beam filed a motion to dismiss, arguing (1) under California's safe harbor doctrine, its compliance with federal labeling law insulates it from Welk's claims, (2) Welk failed to state a plausible claim because he hasn't alleged facts to show that the label would mislead a reasonable consumer, and (3) the economic loss doctrine barred Welk's negligent misrepresentation claim.

Let's focus on the reasonable consumer issue. According to Welk, a "reasonable consumer" would believe that "Jim Beam Bourbon was crafted by hand" and that consumers have long associated this with higher quality manufacturing and high-end products. But, he alleged, Jim Beam Bourbon was actually manufactured using at least in part a mechanized and/or automated process. California UCL and FAL claims are governed by the "reasonable consumer" test. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). Under that standard, Welk must "show that members of the public are likely to be deceived." Id.  A reasonable consumer is the ordinary consumer acting reasonably under the circumstances, and is not versed in the art of inspecting and judging a product, in the process of its preparation or manufacture. See Colgan v. Leatherman Tool Grp., Inc., 135 Cal.App.4th 663, 682 (2006).  Where a court can conclude as a matter of law that members of the public are not likely to be deceived by the product packaging, dismissal is appropriate. See Werbel ex rel. v. Pepsico, Inc., 2010 WL 2673860, at *3 (N.D. Cal. July 2, 2010).

Generalized, vague, and unspecified assertions constitute mere puffery upon which a reasonable consumer could not rely. McKinney v. Google, Inc., 2011 WL 3862120, at *6 (N.D. Cal. Aug. 30, 2011).  Rather, a statement must make a specific and measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact. Vitt v. Apple Computer, Inc., 469 Fed. Appx. 605, 607 (9th Cir. 2012).

The court concluded that Welk's proposed definition of the word "handcrafted" just doesn't fit the process of making bourbon. To make bourbon, grains are ground into "mash" and cooked; then yeast is added, and the mixture ferments; then the mixture is distilled, i.e., heated until the alcohol turns to vapor; then the alcohol is cooled until it returns to liquid form, and transferred to barrels for aging. Indus. & Trade Summary, USITC Pub. No. 3373, 2000 WL 1876666 (Nov. 2000). Fermentation, distillation, and aging are necessary to meet the legal definition of bourbon. See 27 C.F.R. §§ 5.11, 5.22(b)(1)(I). Machines, including stills and other equipment, have always been necessary to make bourbon. See Henry Crowgey, Kentucky Bourbon: The Early Years of Whiskeymaking 34, 59 (2008).

Thus, a reasonable consumer wouldn't interpret the word "handcrafted" on a bourbon bottle to mean that the product is literally and completely "created by a hand process rather than by a machine." Thus, it isn't "reasonably interpreted as a statement of objective fact." Vitt, 469 Fed. Appx. at 607. Instead it's "generalized, vague, and unspecified" and therefore inactionable as "mere puffery." McKinney, 2011 WL 3862120, at *6; see also Salters, 2015 WL 2124939, at *3.

The court thus dismissed the suit with prejudice, saying no amendment would cure Welk's inadequate allegation that Jim Beam's use of the term "handcrafted" is misleading.

 

Noodle Class Action Dismissed

A California federal court recently dismissed a proposed class action over alleged trans fat in defendant's Cup Noodle products. See Guttmann v. Nissin Foods (USA) Co. Inc., No. 3:15-cv-00567 (N.D. Cal. 8/17/15).  The reasoning may be interesting to our readers.

Plaintiff's complaint cited numerous studies that have associated the consumption of artificial trans-fat to increased risk of certain medical conditions such as cardiovascular heart disease, and alleged that there is ‘no safe level’ of artificial trans fat intake.  While the case was pending, the Food and Drug Administration issued a final determination that partiallyhydrogenated oils are no longer “generally recognized as safe.” 80 Fed. Reg. 34650 (June 17, 2015). Pursuant to that determination, manufacturers must remove partially-hydrogenated oils from their products within three years.

Guttmann claims that he assumed all of Nissin’s noodle products were safe to consume, because of inadequate labeling.  He also claimed he was economically harmed because he was deprived of the benefit of his bargain, having thought he got safe food when, in fact, he got unsafe food.

Guttmann was, however, a plaintiff in at least four other lawsuits regarding artificial trans-fat and food labeling, against The Quaker Oats Company, Hostess Brands, Inc., Ole Mexican Foods, and 
La Tapatia Tortilleria.  Thus, he was was aware that (i) products could be labeled “0g Trans Fat” under FDA regulations if they contained less than 0.5 grams of trans-fat, (ii) partially-hydrogenated oils contained artificial trans-fat, (iii) he could check the ingredients labels on food products to see if they contained partially-hydrogenated oils, and (iv) artificial trans-fat was linked to health risks. It was undisputed that Nissin listed partially-hydrogenated oils among the ingredients on all of its product labels, and judicial notice was taken of the contents of the product  labels. Thus, the court found that plaintiff should have been keenly aware of the alleged injury he might suffer by eating Nissin’s noodles, and he knew he could have avoided any such injury caused by Nissin by simply checking the product label. This fact was fatal to Guttmann’s claims.

Interesting procedural note: plaintiff argued that his litigation history was not contained within the pleadings, and so could not be considered in this motion to dismiss.  Although allegations of fact in a complaint are accepted as true for the purposes of adjudicating a motion to dismiss, such allegations may be rejected if contradicted by matters properly subject to judicial notice. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

On the consumer fraud claim, the court noted an act or practice cannot be unfair within the meaning of California Code Section 17200 if it caused an “injury the [plaintiff] could reasonably have avoided.” Daugherty v. American Honda Motor Co., Inc., 144 Cal. App. 4th 824, 839 (2006). Since commencing his litigation campaign, plaintiff could reasonably have avoided any injury based on Nissin’s alleged use of artificial trans-fat by reading the nutrition-facts panel and deciding not to purchase or consume them based on the presence of partially-hydrogenated oil.

And on the implied warranty claim, the court noted it need not determine whether a typical consumer could have a claim for breach of the implied warranty of merchantability because Guttmann was not a typical consumer but is "a self-appointed inspector general roving the aisles of our supermarkets. He continues on a five-year litigation campaign against artificial trans-fat and partially-hydrogenated oil" and has admitted that he has inspected products for those ingredients before. Guttmann’s apparent refusal to inspect Nissin’s noodles for an alleged defect despite his extensive knowledge of and concern for this particular ingredient was fatal to his claim for breach of the implied warranty of merchantability.

Action dismissed.

"The Rise of Empty Suit Litigation"

Two of my partners here at SHB, Victor Schwartz (of the famed “Schwartz on Torts” casebook) and Cary Silverman, just published a new article, “The Rise of “Empty Suit” Litigation®. Where Should Tort Draw the Line?”,  80 Brook. L. Rev. 599 (2015) .  

The article focuses on litigation where an individual or class action plaintiff has suffered no real harm, physical, emotional or economic.  These include:

·         claims for recovery of speculative emotional harm;

·         liability for the estimated cost of medical monitoring following exposure to a potentially harmful substance absent a physical injury;

·         class action litigation claiming that a product’s actual value was lower than the purchase price or that the resale value of a product diminished because of an alleged latent defect, even when the product functioned properly for most or all consumers; and

·         class actions challenging product labeling or advertising on behalf of all consumers where few, if any, of them were actually misled.

Empty Suit Litigation®” addresses both individual claims where there has been no real injury or economic loss, and class actions that rely on speculative or expert-driven theories of harm or class-wide damages.

Definitely worth checking out.  

 

Another All Natural Class Shot Down

A federal court rejected a proposed class of  New York consumers challenging the “all natural” labeling of four Crisco oils that allegedly contained genetically modified ingredients.   See Ault v. J.M. Smucker Co., No.13-03409 (S.D.N.Y., 8/6/15).

On May 21, 2013, Plaintiff Adrianna Ault filed a complaint alleging that Defendant violated N.Y. Gen. Bus. Law ("GBL") §§ 349 and 350, and breached an express warranty by labeling certain Crisco cooking oils as "All Natural." Plaintiffs proposed class included: consumers who purchased one or more of the following products in New York: Crisco Pure Vegetable Oil and/or Crisco Pure Com Oil between February 15,2 009 and June 1, 2014; and/or Crisco Pure Canola Oil and/or Crisco Natural Blend Oil between June 1, 2010 and June 1, 2014.

According to Plaintiff, the "All Natural" label was deceptive for two reasons. First, Defendant allegedly purchased from third parties the crude soy, canola, and corn oils from which it
manufactures its cooking oils. Some of such crude oils were allegedly derived from GMO crops, and Defendant allegedly did not differentiate between GMO and non-GMO crops when purchasing crude oils.  Second, Plaintiff argued that the "All Natural" label was misleading because the Natural
Label Oils were "heavily processed" using chemicals: after Defendant purchases source oils from its suppliers, it allegedly refined the oils using a multi-step process,  Plaintiff argued that, as a result, the Natural Label Oils are chemically altered and highly processed, and cannot be considered "natural."

Plaintiffs moved for class certification.  Defendant responded that class certification is improper because the term "natural" is not susceptible to a uniform meaning. The Food and Drug Administration has declined to adopt a definition of "natural," Consumers define "natural" in diverse ways. Defendant pointed to a survey conducted by its expert, which determined that 55% of respondents could not define or did not even know what "All Natural" cooking oil meant.

Defendant argued that class certification must also fail because consumers bought the Natural Label Oils for many reasons unrelated to whether the products were "natural." According to the  Survey, respondents' most common considerations in deciding whether to purchase cooking oil were price and brand awareness.  Only 1.6% of respondents indicated that whether an oil was "natural" factored into their purchasing decision. Under the New York General Business Law, the plaintiff must demonstrate that she "sustained injury as a result" of defendant's action, and the plaintiff must show that she suffered a loss "because of' the defendant's "deceptive act." Rodriguez v. It 's Just Lunch, Int 'l, 300 F.R.D. 125, 147 (S.D.N.Y. 2014). Defendant argued this element highlighted individual issues among the class members.

The court noted that class action law recognizes an "implied requirement of ascertainability." In re Initial Pub. Offering Sec. Litig., 471 F.3d 24, 30 (2d Cir. 2006). A class is ascertainable if it is "readily identifiable, such that the court can determine who is in the class and, thus, bound by the ruling." Charrons v. Pinnacle Group NY LLC, 269 F.R.D. 221, 229 (S.D.N.Y.2010). The class must be "defined by objective criteria that are administratively feasible," and identifying class members should not "require a mini-hearing on the merits of each case." Id.

Here, it was undisputed that many potential class members will not have retained records of their
cooking oil purchases.  Plaintiffs argued that some class members could be identified by retailer records.  But, the court concluded, this fell well short of establishing ascertainability. While the criteria may be objective, Plaintiff had not shown that it was "administratively feasible." See Charrons, 269 F.R.D. at 229. The mere assertion that "records exist to identify many class members" does not suffice. Defendant sold to retailers and distributors, not to consumers, and therefore has no records regarding the ultimate purchasers of the Natural Label Oils. Plaintiffs' information did not relate exclusively to New York retailers, and there was no evidence concerning what percentage of sales this data represents, nor whether such data would identify more than a small percentage of class members.

As many plaintiffs do, the argument was made that self-identification was also a feasible method for determining class membership; however, there was no proof of  how such self-identification would be authenticated. Most courts reject such an approach, especially when there were a variety of related products only some of which fall within the class definition. Often, putative class members are unlikely to remember accurately every purchase during the class period, and soliciting  declarations from putative class members regarding their history of purchases would invite them to speculate, or worse. Here, defendant was selling nine different brands of cooking oil, only four of which ever bore the challenged label. Permitting potential class members to self-identify would require them to specifically recall each variety of Crisco cooking oil they purchased during the class period. Adding to the confusion, the "All Natural" label appeared on the four brands at different times, and the proposed class period was defined differently for the Vegetable and Corn Oils  than the Canola and Natural Blend Oils.  Based on the class definition, therefore, an individual who purchased Crisco Corn Oil in 2009 would be a member of the class, but one who purchased Canola Oil that same year would not. "Who could possibly recall that level of detail six years (or more) later?"  Indeed, the named Plaintiff herself could not recall the number of bottles of Crisco cooking oil  she had purchased during the class period.

The court turned next to commonality and predominance. Commonality requires plaintiffs' claims to "depend upon a common contention" that is  "capable of class-wide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). The determining factor is not whether common questions exist, but rather "the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation." !d. The predominance requirement "is a more demanding criterion than the commonality inquiry under Rule 23(a)." Moore v. PaineWebber, Inc. , 306 F.3d 1247, 1252 (2d Cir. 2002). Class-wide issues predominate if "resolution of some of the legal or factual questions ... can be achieved through generalized proof," and are "more substantial than the issues subject only to individualized proof." Id.  Although individualized damages determinations alone traditionally did not preclude certification under Rule 23(b )(3), the fact that "damages may have to be ascertained on an individual basis" is a factor that courts "must consider in deciding whether issues susceptible to generalized proof outweigh individual issues." Roach v. T.L. Cannon Corp., 778 F.3d 401, 408-09 (2d Cir. 2015). A plaintiffs damages model "must be consistent with its liability case," and  must "measure only those damages attributable to that theory." Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1433 (2013). 

Here, plaintiff asserts that the injury to Plaintiff and class members was subject to common
proof' because the inclusion of the "All Natural" label had the effect of increasing the price of
the cooking oils for everyone.  Yet, Plaintiff offered no evidence that a price premium actually existed for cooking oils labeled "All Natural," nor had she proposed a reliable method for determining the existence or amount of any such price premium.  This plaintiffs proposed a survey to identify the allege price premium.  But such a methodology is not "consistent with [Plaintiffs] liability case," see Comcast Corp., 133 S. Ct. at 1433, because it made no attempt to calculate the amount that consumers actually overpaid due to the "All Natural" label. Rather than analyzing actual pricing and sale data for the Natural Label Oils, plaintiffs' expert merely proposed to ask some unspecified subsection of Crisco customers what they would pay for a hypothetical Crisco product. Moreover, this analysis further compounded the problems with the ascertainability of the class, by designating potential class members- many of whom may be unidentifiable--as the very individuals who will determine the amount of damages to which they are entitled.

Accordingly, Plaintiffs motion for class certification under Rule 23(b)(3) was denied.

 

Iowa and New Hampshire Won't Decide Top Legal Blog

 The Expert Institute is ranking the best legal blogs - as chosen by the folks that count: readers. To nominate a favorite blog, readers click this link and vote electronically.

 

Might I suggest for your consideration our friends at the Drug And Device Law Blog;  as well as my colleagues at Lowering the Bar; the Missouri and Kansas Class Action Blog,

 

Of course, your humble blogger would not mind a few mentions of MassTortDefense as well if readers were so inclined.

Polls are open until 8/21 I am told.

 

 

 

 

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