Federal Court Rejects Tea Class Action

A federal court in California has rejected a proposed class action in a case challenging claims on tea labels. See Alex Khasin et al. v. R.C. Bigelow Inc., No. 4:12-cv-02204 (N.D. Calif. 3/29/16),

Plaintiff Khasin sought certification of a class of all persons in California who purchased for household use one or more of several green tea products manufactured and sold by Bigelow since May 2, 2008 (a companion case covered black tea products).  

Plaintiff alleged that the front of the Green Tea Products’ packaging bore the statement, “Healthy Antioxidants,” and the back panel included the statement, “Mother Nature gave us a wonderful gift when she packed powerful antioxidants into green tea." He claimed these food labeling practices were unlawful because they were deceptive and misleading to consumers. Khasin allegedly purchased three of the Green Tea Products: Green Tea, Green Tea with Lemon, and Green Tea Naturally Decaffeinated. He allegedly read and “reasonably relied” on “the antioxidant, nutrient content and health labeling claims including the ‘healthy antioxidants,’ and ‘packed with powerful antioxidants’ claims and based and justified the decision to purchase [Bigelow’s] products in substantial part on [Bigelow’s] package labeling including the antioxidant, nutrient content and health labeling claims.” Had they not been misbranded, he would not have bought the products, or paid a “premium” for them.

Plaintiff sought class certification under Rule 23 (b)(3). At class certification, plaintiff must present a likely method for determining class damages, though it is not necessary to show that his method will work with certainty at this time. Chavez v. Blue Sky Nat. Beverage Co., 268 F.R.D. 365, 379 (N.D. Cal. 2010).  Khasin offerred three damages models: (i) a restitution calculation; (ii) statutory damages; and (iii) a nominal alternative. None, said the court, had any merit.

Khasin’s restitution calculation essentially amounted to damages totaling the full retail price of the tea. Plaintiff purportedly based his calculation on a formulation that the 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, not the full purchase price or all profits. See Brazil v. Dole Packaged Foods, LLC, No. 12-cv-01831-LHK, 2014 WL 5794873, at *5 (N.D. Cal. Nov. 6, 2014) (finding that “[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”); Ivie v. Kraft Foods Glob., Inc., No. 12-cv-02554-RMW, 2015 WL 183910, at *2 (N.D. Cal. Jan. 14, 2015) (concluding that “restitutionary damages [in a mislabeling case should] be the price premium attributable to the offending labels, and no more”).  Khasin contended that the “product as labeled” is the retail purchase price. And that because the product is legally worthless, the “product as received” has a value of $0.  

But this “full refund” method of calculating restitution has been repeatedly rejected by the courts. See, e.g., See Jones v. ConAgra Foods, Inc., No. 12-cv-01633-CRB, 2014 WL 2702726, at *23 (N.D. Cal. June 13, 2014) (rejecting the “legally worthless” damages model); Werdebaugh v. Blue Diamond Growers, No. 12-cv-2724-LHK, 2014 WL 2191901, at *22 (N.D. Cal. May 23, 2014) (“[F]ull refund model is deficient because it is based on the assumption that consumers receive no benefit whatsoever from purchasing the accused products.”); Lanovaz v. Twinings N. Am., Inc., No. 12-cv-02646-RMW, 2014 WL 1652338, at *6 (N.D. Cal. Apr. 24, 2014) (rejecting the “full refund” model as an appropriate measure of restitution). Attributing a value of $0 to the Green Tea Products assumes that every consumer had gained no benefit in the form of enjoyment, nutrition, caffeine intake, or hydration from consuming the teas. This is implausible.  In order to comply with Rule 23(b)(3) requirements, the damages calculation must contemplate “the production of evidence that attaches a dollar value to the consumer impact or advantage caused by the unlawful business practices.” Lanovaz, 2014 WL 1652338, at *6 (internal quotation marks and citations omitted). Accordingly, Khasin needed to present a damages model that can likely determine the price premium attributable only to Bigelow’s use of the allegedly misleading claim. The proposed methodology did not do so. 


Alternatively, plaintiff sought statutory damages under the California Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750, et seq., and/or nominal damages. Mot. at 18. Under the CLRA, any consumer who suffers damage may bring an action to recover, among other things, “[a]ctual damages, but in no case shall the total award of damages in a class action be less than one thousand dollars ($1,000).” Cal. Civ. Code § 1780(a)(1). That language sets the minimum for a total award of damages in a class action at $1,000 but does not provide for an automatic award. A plaintiff must still prove “actual damages” in order to be entitled to the $1,000 minimum award. Therefore relief under the CLRA is specifically limited to those who suffer damage, making causation a necessary element of proof. Here, Khasin failed to provide a viable theory for calculating damages under the CLRA that would be tied to his theory of liability. Plaintiff also sought nominal damages, but could not cite a single case demonstrating that nominal damages are available under his causes of action.

Alternatively, plaintiff sought Rule 23 (b)(2) certification to enjoin the defendant from continuing to mislabel the subject products. However, plaintiff had not demonstrated standing to seek injunctive relief. First, Khasin did not plausibly allege an intent to purchase Bigelow products in the future. In a class action, “[u]nless the named plaintiffs are themselves entitled to seek injunctive relief, they may not represent a class seeking that relief.” Hodgers-Durgin v. De La Vina, 199 F.3d 1037, 1045 (9th Cir. 1999). Khasin testified that he has not purchased any of the Green Tea Products since the commencement of this lawsuit.  A plaintiff may not manufacture standing for injunctive relief simply by expressing an intent to purchase the challenged product in the future. See Rahman, 2014 WL 5282106, at *6. Other courts considering these “conditional” declarations have found them unavailing. See In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 980 (C.D. Cal. 2015) (noting that “[ot]her courts have questioned whether this type of statement demonstrates there is a real and immediate threat of future injury.”). Pursuant to Article III’s standing requirements, a plaintiff must present a “sufficient likelihood” that he will be injured. City of Los Angeles v. Lyons, 461 U.S. 95, 111 (1983). The alleged injury cannot be “conjectural” or “hypothetical.” Id. at 102.

Second, said the court, standing for injunctive relief in this case requires more than simply declaring an intent to purchase the Green Tea Products in the future. Even if Khasin were to satisfactorily demonstrate a future intent to purchase the products, he had not established a likelihood of suffering the same harm he alleged. See Morgan v. Wallaby Yogurt Co., Inc., No. 13-cv-00296-WHO, 2014 WL 1017879, at *6 (N.D. Cal. Mar. 13, 2014) (“Plaintiffs must be must be threatened by the same alleged harm in order to seek injunctive relief, even if on behalf of a class of consumers.”). Plaintiffs who were previously allegedly misled by deceptive food labels and now claim to be better informed, lack standing for injunctive relief because there is no danger that they will be misled in the future by that conduct. See Ham v. Hain Celestial Grp., Inc., No. 14-cv-02044-WHO, 2014 WL 4965959, at *6 (N.D. Cal. Oct. 3, 2014) (“Because [plaintiff] is now aware that [defendant’s] products [are mislabeled], she cannot allege that she would be fraudulently induced to purchase the products in the future.”).
This, concluded the court, plaintiff lacked standing to pursue injunctive relief and failed to satisfy the requirements of Rule 23(b)(2).

 

Tea Class Action Dumped Overboard

A federal court rejected a putative class action against tea maker Twinings North America, Inc. over antioxidant labeling.  See Craig v. Twinings N. Am., Inc., No. 5:14-CV-05214 (W.D. Ark., 2/5/15).

Craig allegedly purchased Twinings Irish Breakfast Tea and other varieties, and then alleged that defendant had misbranded its products.  Craig contended that Twinings mislabeled its tea as a “natural source of antioxidants” in order to charge a premium for the products. Plaintiff alleged that the “teas do not meet the minimum nutrient level threshold to make such a claim which is 10% or more of the Reference Daily Intake (‘RDI’) or the Daily Reference Value (‘DRV’) of a nutrient with a recognized RDI per reference amount customarily consumed.”  According to Craig, tea that has been labeled this way cannot be legally sold or possessed, and misbranded food has no economic value. She further contended that had she known that the misbranded teas were illegal to sell or possess, she would not have purchased the teas. Craig brought  five claims, based upon violations of the Arkansas Food, Drug, and Cosmetic Act (“AFDCA”), Ark. Code Ann. § 20-56-201, et seq.: (1)
violations of the Arkansas Deceptive Trade Practices Act (“ADTPA”), Ark. Code Ann. § 4-88-101, et seq.; (2) unjust enrichment; (3) breach of implied warranty of merchantability;  (4) breach of express warranty; and (5) negligence.

Twining moved to dismiss, arguing Craig's Complaint was preempted by the FDCA as amended by
the Nutrition Labeling and Education Act (“NLEA”). The Supreme Court has long recognized that state laws that conflict with federal law are “without effect.” Maryland v. Louisiana, 451 U.S. 725, 746 (1981).  That is, Congress has the power to preempt state laws. Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 152–53 (1982). Federal preemption occurs when: (1) Congress enacts a statute that explicitly preempts state law; (2) state law actually conflicts with federal law; or (3) federal law occupies a legislative field to such an extent that it is reasonable to conclude that Congress left no room for state regulation in that field.” See generally In re Aurora Dairy Corp. Organic Milk Mktg. & Sales Practices Litig., 621 F. 3d 781, 791-94 (8th Cir. 2010). In the instant case, only express preemption was at issue.

The FDCA grants the FDA the responsibility to protect public health by ensuring that “foods are safe, wholesome, sanitary, and properly labeled.” 21 U.S.C. § 393(b)(2). There is no private right of action under the FDCA. 21 U.S.C. § 337(a). In 1990 Congress passed the NLEA, amending the FDCA, to specifically address labeling requirements for certain food and beverage products. Pub. L. No. 101–535, 104 Stat. 2353 (1990). The NLEA provides for national uniform nutrition labeling and expressly preempts state law that is inconsistent with its requirements. 21 U.S.C. § 343–1(a).


Twinings argued that Craig was making an end-run around the private action bar by indirectly bringing a claim to obtain redress for an alleged violation of the FDA labeling regulations. While the NLEA expressly preempts state labeling laws that cover certain described foods, 21 U.S.C. § 343–1, it does not preempt requirements imposed by state law that effectively parallel the NLEA. See, e.g., N. Y. State Rest. Ass'n, 556 F.3d 114, 123 (2nd Cir. 2009); In re Simply Orange Juice Mktg. & Sales Practices Litig., 2013 WL 781785, at *3 (W.D. Mo. Mar. 1, 2013); Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 365, 370 (N.D. Cal. 2010). The purpose of the NLEA is not to preclude all state regulation of nutritional labeling, but to prevent states from adopting inconsistent requirements with respect to the labeling of nutrients. Astiana v. Ben & Jerry's Homemade, Inc., 2011 WL 2111796, at *9 (N.D. Cal. May 26, 2011); Pub. L. No. 101–535, 104 Stat. 2353, 2364 (1990). Thus, the preemption issue here was whether the label violations on which Craig based her claim impose a requirement pursuant to state law that differs from the FDCA. 

Craig’s claims were ostensibly based on the AFDCA, which impliedly adopts the federal provisions as its own. See e.g. Ark. Code Ann. 20-56-209(7) (declaring food to be “misbranded” if it falls
short of standards prescribed by the FDCA). Craig contended that any labeling violation of
the AFDCA is also a violation of the ADTPA and drives her remaining state law claims.

A claim that expressly or implicitly characterizes the level of a nutrient of the type required to be in nutrition labeling may not be made on the label or in labeling of foods unless the claim is made in accordance with federal regulation. 21 C.F.R. § 101.13(b).  The labels attached to the Complaint attest that the tea is a “natural source of antioxidants,” but did not characterize the level of the antioxidants, and thus were not nutrient-content claims as defined in the regs.  “Natural” does not modify the word “source” to indicate the level of the ingredient.. The generic phrase “natural source of antioxidants” did not appear to the court to be either an express or implied nutrient-content claim. Express claims are those that make a direct statement about the level (or range) of a nutrient in the food, and implied nutrient-content claims are those that describe a food or an ingredient in a manner that suggests that a nutrient is absent or present in a certain amount (e.g., “high in oat bran”).  Here, the challenged statement did not fall under either category, as it did not make an
explicit claim or statement regarding antioxidants.

Further, tea and coffee are exempt from certain labeling requirements if they contain insignificant amounts of all of the nutrients and food components required to be included in the declaration of nutrition information.  Antioxidants are not listed in the nutrients required to be on the label.

The court concluded that Craig’s suit could not continue, as the very crux of her argument was that the term “natural source of antioxidants” is a misbranding of Twinings’ teas, and is therefore illegal.
Even if Twinings’ labels contain nutrient-content claims, the product labels do not violate the FDA’s labeling requirements because they do not characterize the level of antioxidants.  Because Craig’s allegations did not violate the FDCA, any related state law claims arising from the same facts were preempted. If allowed to proceed, the state law claims would impose liability inconsistent with the FDCA.

Turning to Craig’s false representation claim, the Court observed that while Craig alleged that “natural source of antioxidants” is a false representation affirmatively made to her by Twinings, and she relied on this representation in making the decision to purchase the teas, Craig has not suffered actual damages as contemplated by the statute.  Craig’s alleged damages were based solely upon Twinings’ alleged violation of the FDA’s general nutrient content labeling regulations. In the instant case, Craig paid for tea and received tea. The Court could not find, therefore, that this product was “not at all what defendant represented.”

 

Consumer Fraud Claims Denied; Class Decertified

A federal court ruled recently for defendant in a proposed class action about the labeling of an iced tea product. See Ries v. Arizona Beverages USA LLC, No. 10-01139 (N.D. Cal., 3/28/13).

We have posted before about plaintiffs' efforts to manufacture consumer fraud class actions out of any aspect of a product label or marketing. Here, plaintiffs brought a class action challenge defendants’ advertising, marketing, selling, and distribution of AriZona Iced Tea beverages labeled “All Natural,” “100% Natural,” and “Natural” because they allegedly contained high fructose corn syrup (HFCS) and citric acid. Problem turns out, plaintiffs could muster no proof the marketing was false.

The Complaint set forth six California state law claims for relief: under the False Advertising Law (FAL) for (1) misleading and deceptive advertising, and (2) untrue advertising; under the Unfair Competition Law (UCL), for (3) unlawful, (4) unfair, and (5) fraudulent business practices; and (6) under the Consumers Legal Remedies Act (CLRA), for injunctive and declarative relief.

The defendants filed a motion for summary judgment and plaintiffs filed a motion for class certification. The court initially certified the class under Rule 23(b)(2) for purposes of injunctive and declaratory relief only. At the close of discovery, defendants made a renewed motion for summary judgment, reviving their argument that the named plaintiffs could not support their claims, and had failed to meet their evidentiary burden of showing that defendants’ beverage labeling practices were unfair or misleading. Defendants further moved for decertification of the class.

The court noted that factual predicate for each of plaintiffs’ claims was that the beverages were falsely labeled as “all natural” despite allegedly containing HFCS and citric acid. So plaintiffs had to show that HFCS and citric acid are indeed not natural; and also that accordingly they were entitled to restitution. In their opposition to the motion for summary judgment, plaintiffs did not offer any credible evidence that HFCS is artificial and thus rendered the beverage not natural.  But plaintiffs had no credible evidence, relying primarily on the fact the ingredients were allegedly patented.  But they cited no legal authority supporting their contention that if the process to produce an ingredient is patented, that fact, in and of itself, automatically renders it artificial and no natural. This was, the court observed, merely an extension of their rhetoric that HFCS is artificial because it “cannot be grown in a garden or field, it cannot be plucked from a tree, and it cannot be found in the oceans or seas of this planet.”  The deposition testimony they cited, even when read in the light most favorable to plaintiffs, did not satisfy their evidentiary burden. It certainly did not demonstrate that it is probable that a significant portion of the consuming public could be confused by the “all natural” labeling of defendants’ products. Rather than showing that defendants were attempting to engage in unfair competition by capitalizing on any such confusion, the testimony indicated that everything in the beverages is natural, and that defendants even included labels specifying that they contain all natural tea without preservatives, artificial color, and artificial flavor to clarify that to theoretically confused customers.

On the restitution issue, the court noted there must be evidence that supports the amount of restitution necessary to restore to the plaintiff, meaning the difference between what the plaintiff paid and the value of what the plaintiff received.  Plaintiffs had no such evidence to support their prayer for restitution and disgorgement. Plaintiffs offered not a scintilla of evidence from which a finder of fact could determine the amount of restitution or disgorgement to which plaintiffs might be entitled if this case were to proceed to trial. This failure alone provided an independent and sufficient basis to grant defendants summary judgment.  

The court also found that plaintiffs' failures undermined the finding of adequacy of representation under Rule 23(a)(4). The class was therefore decertified. One wonders why it was certified in the first place.


The class was decertified, the motion for summary judgment was granted, and a motion to exclude expert opinion testimony was denied as moot.

Claim Against Starbucks For Hot Tea Rejected

A federal appeals court has upheld the exclusion of plaintiffs' experts in a design defect case alleging Starbucks Coffee Co.'s tea/coffee cup design caused severe burns to an elderly customer. See Moltner v. Starbucks Coffee Co., No. 09-4943 (2d Cir. 11/2/10).

Plaintiff alleged she purchased a venti-sized cup of tea, served double-cupped and lidded. She had difficulty removing the lid, and in the course of her attempts to pry it off, she alleged that the tea spilled onto her left leg, causing severe burns.

In support of her design defect claim, she presented the reports of four experts. The District Court for the Southern District of New York excluded the experts under Daubert and granted the coffee maker summary judgment.

The Second Circuit unanimously agreed that proof from Moltner's these design defect experts failed to meet the standards of Federal Rule of Evidence 702.  As the district court discussed, and the court of appeals affirmed, the first (Diller) report was unreliable because its conclusions were conclusory, devoid of any factual or analytical basis, and this report thus did not demonstrate a sufficient level of intellectual rigor. The second (Dr. Gerstman) report likewise was unreliable because it does not state the basis or analysis from which its conclusions were derived.  Third, the (Anders) report was the product of a method of testing that was insufficiently reliable and lacked “the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” The report by a fourth expert (DiMaria), which supported Moltner's negligence claim, was properly barred because it would not assist the jury in determining whether Starbucks breached its duty of care to the plaintiff.

We note this decision not so much for the Daubert analysis (which is not lengthy), but because it strikes us as another good example of what is wrong with so much product liability litigation today.  An elderly woman with serious injury is a sympathetic plaintiff in front of a jury.  But such a case should never get to a jury. The panel also rejected Moltner’s theory of negligence as infirm as a matter of law under Fung-Yee Ng v. Barnes & Noble, Inc., 764 N.Y.S.2d 183, 183-84 (1st Dep’t 2003) (“‘Double cupping’ is a method well known in the industry as a way of preventing a cup of hot tea from burning one’s hand.”).  Products are not defective just because they are capable of being involved in an injury.  Products need not be designed to prevent any injury no matter what the consumer does with the product.   Almost every design choice, including something as simple as double cupping, may have potential impact on the relative risks of injury.   A proper negligence analysis supports the decision to minimize the risk of injuries, yet juries are often incapable of confirming that analysis when confronted with a sympathetic plaintiff.  And while they should, juries confronted with a seriously injured plaintiff may find it difficult to recognize the proper role of personal responsibility in cases like this: regardless of the design of the cup or lid, when you are dealing with a very hot beverage, you must exercise precaution; it's a matter of common sense, common knowledge, common awareness. Hence the need for rules keeping out junk science and the need for courts to grant summary judgment.