Another "Natural" Food Claim Falls to Common Sense

A  federal district court recently dismissed a putative class action alleging the defendant food company mislabeled its Florida's Natural products as 100% orange juice despite the alleged addition of compounds to mask the taste caused by pasteurization. See Veal v. Citrus World Inc., No. 2:12-cv-00801 (N.D. Ala. 1/8/13).

The plaintiff asserted that because the label did not mention that flavoring and aroma are added, consumers desirous of 100% pure and fresh squeezed orange juice had been deceived into purchasing Florida’s Natural.  The plaintiff did not aver that he personally ever consumed Florida’s Natural orange juice or that he suffered any ill health effects from consumption of the same, but rather alleged only that he purchased it, repeatedly, over the six years preceding the first complaint.  The essence of his claim concerned the question of how much processing is permissible in a product labeled as “fresh” “100%” or “pure.”

Despite plaintiff’s numerous allegations as to the general conduct of the orange juice industry, the court found the plaintiff had failed to state an actual, concrete injury. He stated he did not know store-bought orange juice was not fresh squeezed, but nowhere alleged any harm from its purchase or consumption. He did not even claim that upon learning packaged orange juice was not truly “fresh”, he had to resort to squeezing his own oranges. In other words, despite plaintiff’s protestations that he did not receive the product he believed he was purchasing, he made no allegation that he had stopped purchasing what he considered to be an inferior product in favor of
purchasing what he actually sought, which is apparently unpasteurized fresh squeezed orange juice.

In an attempt to save his claim and demonstrate an injury worthy of finding standing, the plaintiff argued that he did not receive the “benefit of the bargain” of what he believed he was actually purchasing. He professed to compare the cost of defendant’s orange juice to an orange juice concentrate, and alleged the difference between them is proof of his loss. This theory did not rise to the level of a “concrete and particularized” injury as opposed to a “conjectural or hypothetical” one. Plaintiff did not allege what the “higher value charged” was or what the orange juice supposedly “would have been worth” if it was “as warranted.” He did not show what products he actually bought, when he bought them, or where he bought them, much less what he paid.

From a legal standpoint, many courts have held that “benefit of the bargain” theories of injury like plaintiff’s, where a plaintiff claims to have paid more for a product than the plaintiff would have paid had the plaintiff been fully informed (or that the plaintiff would not have purchased the product at all), do not confer standing. See In re Fruit Juice Products Marketing and Sales Practices
Litigation, 831 F.Supp.2d 507 (D. Mass. 2011); see also Birdsong v. Apple, Inc., 590 F.3d 955, 961-62 (9th Cir. 2009) (noting potential for hearing loss from improper iPod use was not sufficient to state an injury for standing); cf. Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319-21 (5th Cir. 2002); McKinnis v. Kellogg USA, 2007 WL 4766060, *4 (C.D.Cal.2007); Sugawara v. Pepsico, Inc., 2009 WL 1439115 (E.D.Cal.2009). Young v. Johnson & Johnson, 2012 WL 1372286 (D.N.J.2012).

The plaintiff also complained that even though the FDA does require that defendant label its product as “pasteurized orange juice,” all of defendant’s other alleged representations were voluntary, and thus not within the protection of the FDA. Because the court found the plaintiff lacked standing to pursue his claims, the court did not have to rely on the impact of the extensive FDA regulations governing orange juice,  Nevertheless, the court noted, defendant labeled its orange juice in accordance with FDA regulations. The plaintiff could not dispute that the defendant’s product is “squeezed from our Florida oranges” or “100% orange juice.” Rather, his focus was that the squeezing and pasteurization is performed on a massive scale, and that the pasteurization process destroyed the flavor, causing ingredients already present in orange juice to be replaced in the marketed juice.

However, said the court, the fact that the plaintiff may have believed defendant hired individuals to hand squeeze fresh oranges one by one into juice cartons, then boxed up and delivered the same all over the country does not translate into a concrete injury to plaintiff upon his learning that beliefs about commercially grown and produced orange juice were incorrect.  By its very definition under FDA guidelines, pasteurized orange juice is orange juice (1) that has been processed and treated with heat, (2) in which the “pulp and orange oil may [have] been adjusted in accordance with good manufacturing practice,” and (3) which may have been “adjusted” by the addition of concentrated orange juice ingredients or sweeteners. Clearly, the defendant was selling pasteurized orange juice while labeling it “pasteurized orange juice.” Although the plaintiff objected to such labeling, in the light most favorable to the plaintiff, he purchased a product labeled as pasteurized orange juice and then complained that it was pasteurized.

 No standing, complaint dismissed with no leave to amend yet again.

Seventh Circuit Sticks to Its Criticism of CopyCat Class Action

Last month we posted about a class action decision from the Seventh Circuit, in which the court of appeals approved an injunction against copycat litigation once class certification was denied.  Thorogood v. Sears, Roebuck & Co., No. 10-2407 (7th Cir., 11/02/10).

Ordinarily the ability to plead res judicata or collateral estoppel gives a litigant adequate protection against being harassed by repetitive litigation by the loser in a previous suit against him. But this case was unusual, said Judge Posner, both because it involved class action litigation and because of the specific tactics employed by class counsel. Class members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own. The defendant wants to minimize outflow of expenditures
and the class counsel wants to increase inflow of attorneys’ fees. "Both can achieve their goals if they collude to sacrifice the interests of the class.” Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements,” 59 Fla. L. Rev. 71, 79-81 (2007). And when the
central issue in a case is given class treatment and so will be resolved once and for all, a trial becomes a roll of the dice. Depending on the size of the class, a single throw may determine the outcome of an immense number of separate claims (hundreds of thousands, in this home dryer
litigation)—there is no averaging of decisions over a number of triers of fact having different abilities, priors, and biases. The risk of error becomes asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy; in such a case the defendant will be under great pressure to settle even if the merits
of the case are slight.

The plaintiff appellee filed a petition for panel rehearing, and rehearing en banc. All the judges  voted to deny the petitions, and typically that is the end of the appeal.  But the court wrote an opinion about the denial, "in view of the accusations leveled in the petition by the plaintiff’s lawyer."

On the merits, said the court, the petition ignored the principal reasons for enjoining the copycat class actions, and said virtually nothing about the All Writs Act, which was the very grounds for the prior decision.  The petition also ignored the point that class certification was improper given the nature of the plaintiff's claim, which did not present common issues that would support a class action.  It ignored the panel's criticism of the district court reasoning, and mischaracterized the scope of the injunction, as individual claims were not enjoined.

The petition's main concern was with the language used in the opinion describing plaintiff counsel as pugnacious, pertinacious to a fault, and a "nuisance." To which the panel responded that the petition ignored the facts and analysis that supported those characterizations, and the right of a court to  and the duty of a court to note unacceptable tactics.

The petition claims the panel did not treat the counsel with respect, to which the court noted that the lawyer had compared Judge Posner to Simon Cowell.

What the panel had said is that the structure of class actions gives plaintiff lawyers an incentive to negotiate settlements that enrich themselves but give scant rewards to class members. With numerous citations, the panel noted that the criticisms in the prior opinion of the tactics employed by some class action lawyers are not criticisms made by judges alone, let alone judges of the panel or judges of the Seventh Circuit.

So far from retracting any criticisms or modifying any language, the court reaffirmed its key criticisms.

Court of Appeals Enjoins Copycat Class Actions

The Seventh Circuit has held that a "copycat" class action suit cannot go forward in federal court in California after a similar class action had already been denied certification in federal court in Illinois.  Thorogood v. Sears, Roebuck & Co., No. 10-2407 (7th Cir., 11/02/10).

The first class action in the package of related cases was filed in state court in Illinois but removed to federal court under the Class Action Fairness Act.  Thorogood, a Tennessean, bought a Kenmore-brand clothes dryer from Sears (Kenmore is a Sears brand name). The words “stainless steel” were imprinted on the dryer, and point-of-sale advertising explained that this meant that the drum in which the clothes are dried was made of stainless steel. Thorogood claimed to have thought that this meant that the drum was made entirely of stainless steel, whereas part of the front of the drum—a part the user would see only if he craned his head inside the drum—is made of a ceramic-coated steel. 

The district court certified a multi-state class of Kenmore-brand clothes dryer purchasers. On appeal, the Seventh Circuit called the case “a notably weak candidate for class treatment.” Not only did common issues of law or fact not predominate over the issues particular to each purchaser of a stainless steel Kenmore dryer, as Rule 23(b)(3) requires, there were, the court said, “no common issues of law or fact.” 547 F.3d at 746-47.  It was well-nigh inconceivable, said the court,  that the other members of the class had the same understanding of Sears’s advertising as Thorogood claimed to have. Sears hadn’t advertised the dryers as preventing rust stains on clothes; and it’s not as if such stains are a common concern of owners of dryers—there was no suggestion of that either.

Stainless steel appliances are popular even among consumers, undoubtedly the vast majority, who do not expect a dryer to cause rust stains. Stainless steel does not rust, and that is certainly a plus, clothing stains to one side. But ceramic doesn’t rust either.  Advertisements for clothes dryers mention a host of features that might matter to consumers, such as price, size, electrical usage, appearance, speed, and controls, but not the prevention of clothing stains attributable to rust. The litigation of the class members’ claims would thus have devolved into a series of individual hearings in which each class member who wanted to pursue relief against Sears would testify to what he understood to be the meaning of a label or an  advertisement that identified a clothes dryer as containing a stainless steel drum. Few if any of them would have shared Thorogood’s alleged concerns, which, were a confabulation, said the court.

After the court of appeals thus ordered the first class decertified, thus shrinking the suit to Thorogood’s individual claim, Sears made Thorogood an offer of judgment under Rule 68 of $20,000 inclusive of attorneys’ fees. The district judge, believing that Thorogood should receive no attorneys’ fees, dismissed the suit. The Seventh Circuit affirmed the district court’s denial of attorneys’ fees and dismissal of the suit. 595 F.3d 759 (7th Cir. 2010).

The same plaintiffs' lawyer then brought Murray v. Sears, Roebuck & Co., No. 4:09-cv-
5744-CW (N.D. Cal.). Murray was a member of Thorogood’s class, and he brought essentially the identical claim in California.  Sears Roebuck sought an injunction halting the new class action in front of Judge Leinenweber, who had presided over and eventually dismissed Thorogood’s original class suit, but he ruled that Sears could obtain adequate relief against being harassed by repetitive litigation by pleading collateral estoppel in Murray’s suit in California. Sears appealed, asking the court to to reverse the district court's denial of  Sears’s motion to enjoin the virtually identical class action suit.

The Seventh Circuit (Judge Posner writing) noted that the class in Murray’s case was smaller than
Thorogood’s because it was limited to California purchasers, but it was still very large. The claims in Murray’s original complaint, when Sears pleaded the defense of collateral estoppel, were identical to Thorogood’s; they challenged the same advertising for the same models of clothes dryer. Murray acknowledged that he was alleging “a similar general set of operative facts as alleged in the Thorogood case.”  That caused the California court to find for Sears on collateral estoppel grounds.  So re judicata saves the day, just like the Illinois district court predicted in denying the requested injunction.

But (wouldn't be a blog-worthy case without the but) Murray then amended his complaint to allege additional facts in an effort to show that he had a different case, perhaps one more amenable to class action treatment. On the basis of the amendment, the district judge in California reversed his earlier ruling, and having thus rejected the defense of collateral estoppel allowed discovery to begin.

Ordinarily the ability to plead res judicata or collateral estoppel gives a litigant adequate protection against being harassed by repetitive litigation by the loser in a previous suit against him. But this case was unusual, said Judge Posner, both because it involved class action litigation and because of the specific tactics employed by class counsel. Class members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own.  The defendant wants to minimize outflow of expenditures
and the class counsel wants to increase inflow of attorneys’ fees. "Both can achieve their goals if they collude to sacrifice the interests of the class.” Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements,” 59 Fla. L. Rev. 71, 79-81 (2007). And when the
central issue in a case is given class treatment and so will be resolved once and for all, a trial becomes a roll of the dice. Depending on the size of the class, a single throw may determine the outcome of an immense number of separate claims (hundreds of thousands, in the dryer
litigation)—there is no averaging of decisions over a number of triers of fact having different abilities, priors, and biases. The risk of error becomes asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy; in such a case the defendant will be under great pressure to settle even if the merits
of the case are slight.

Moreover, in most class action suits, there is far more evidence that plaintiffs may be able to discover in defendants’ records (including emails, the vast and ever-expanding volume of
which has made the cost of discovery soar) than vice versa. Usually the defendants’ conduct is the focus of the litigation and it is in their records, generally much more extensive than the plaintiffs’ (especially when as in a consumer class action the plaintiffs are individuals
rather than corporations or other institutions), that the plaintiffs will want to go in search of a smoking gun.

There is no way in which Sears could recoup the expense of responding to Murray’s discovery requests and of filing preclusion defenses against even more soon-to-be-filed duplicative class actions in other states. The harm it faces from the denial of the injunction was irreparable and its remedy at law against settlement extortion nonexistent, found the Seventh Circuit.  Sears’s action under the All Writs Act was its only means, other than submitting to plaintiffs' lawyer’s  demands, of avoiding being drowned in the discovery bog.

Here, despite the artful pleading in the amneded complaint in California, there was nothing materially new in Murray’s complaint that should have allowed allow an escape from the bar of collateral estoppel. The critical issue was and is what consumers would understand by representations that the Kenmore dryer has a stainless steel drum. The finding in the first court was that common issues did not predominate in Thorogood’s suit; neither did they in Murray’s; the differences between the suits did not bear on that particulat finding.  Yet, the California court did not agree.

Sears’s motion had been filed under the “All Writs Act,” which authorizes a federal court to issue “all writs necessary or appropriate in aid of [its] jurisdiction and agreeable to the usages and
principles of law,” 28 U.S.C. § 1651(a), and which has been interpreted to empower a federal court “to issue such commands . . . as may be necessary or appropriate to effectuate and prevent the frustration of orders it has previously issued in its exercise of jurisdiction otherwise obtained.” United States v. N.Y. Tel. Co., 434 U.S. 159, 172 (1977). Abuse of litigation is a conventional ground for the issuance of an injunction under the All Writs Act, because without an injunction a defendant might have to plead the defense of res judicata or collateral estoppel in a myriad of jurisdictions in order to ward off a judgment, not without risks, and would be helpless against settlement extortion pressures.

The court of appeals left the details of the injunction to be worked out by the district judge, but noted that it had ordered the class decertified inthe first case because of the absence of issues common to all the class members. That ruling—as the injunction must make clear—does not preclude any of the class members from filing individual suits, should they choose. For it was not a ruling on the merits of any class member’s claim (including Thorogood’s). All that would be precluded is the filing (by members of Thorogood’s class, which includes the members of Murray’s class, or by the lawyers for those classes) of class action suits that are indistinguishable, so far as lack of commonality among class members’ claims is concerned, from Thorogood’s.  The plaintiff lawyers should be included in the injunction, as has been done in other cases. See In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 333 F.3d at 769; Newby v. Enron Corp., 302 F.3d 295, 300-03 (5th Cir. 2002).