Consumer Fraud Class Claim Dismissed in Beverage Case

Readers have seen our warning about the trend in food and beverage claims attacking virtually every aspect of the product's label as a supposed consumer fraud act violation. A federal court earlier this month dismissed just such a proposed class action challenging the labeling on VitaRain Tropical Mango Vitamin Enhanced Water Beverage.  See Maple v. Costco Wholesale Corp., No. 12-5166 (E.D. Wash., 8/1/13).

Plaintiffs alleged in their amended complaint that one defendant manufactured and bottled a product known as VitaRain Vitamin Enhanced Water Beverage. VitaRain came in four flavors: Tropical Mango, Raspberry Green Tea, Kiwi Strawberry, and Dragonfruit. The product was marketed and distributed by another defendant and sold at Costco warehouses throughout the
country. Plaintiffs alleged that the VitaRain Tropical Mango drink in particular was marketed as a natural product but in fact contained “unnatural” ingredients, including large amounts of “synthetic caffeine.” Specifically, plaintiffs alleged that the VitaRain Tropical Mango drink (1) lacked a front-facing disclosure that the beverage contained caffeine; (2) failed to disclose the relative amount of caffeine in the beverage; and (3) falsely claimed that the beverage is a “natural tonic” and
contains “natural caffeine.” Plaintiffs further alleged they “reasonably believed that they [had] purchased a Drink similar to vitamin water.” 

On behalf of a putative class consisting of all Washington residents who purchased the product over the four years preceding the filing of the lawsuit, the named plaintiff asserted claims for (1) violations of the Washington Consumer Protection Act; (2) misrepresentation; and (3) negligence.

Defendant Costco moved to dismiss the amended complaint, contending, inter alia, that some
of plaintiff’s claims were preempted by federal law; and that parts of the amended complaint failed to meet the pleading standards of Rules 8 and 9(b) of the Federal Rules of Civil Procedure.

To withstand dismissal, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Naked assertion[s],” “labels and conclusions,” or “formulaic recitation[s] of the elements of a cause of action will not do.” Id. at 555, 557.  A claim has facial plausibility only "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

First an interesting civil procedure issue. Ordinarily, when the district court considers matters outside the pleadings it must convert a motion to dismiss brought under Civil Rule 12(b)(6) into a Civil Rule 56 motion for summary judgment. Fed. R. Civ. P. 12(d). However, a court may consider certain materials without converting the motion to dismiss into a motion for summary judgment. See, e.g., United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Such materials include documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice.  A document may be incorporated by reference into a complaint where the
plaintiff refers extensively to the document or the document forms the basis of plaintiff’s claim. In such cases, the defendant may offer that document and the district court may treat the document as part of the complaint for the purposes of a motion to dismiss. Here, the court concluded that judicial notice of the product label was appropriate and that it could consider the labeling without converting Costco’s motion to dismiss into one for summary judgment.

Defendants argued that plaintiff’s claims were expressly preempted by the Federal Food Drug and Cosmetics Act (“FDCA”), as amended by the National Labeling and Education Act (“NLEA”), 21 U.S.C. § 301 et seq. The FDCA “comprehensively regulates food and beverage labeling.” Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1175 (9th Cir. 2012).  And specifically, they govern whether and how a label must disclose the presence of caffeine.  Here, the Amended Complaint sought "to create and impose”  two new requirements which would directly conflict with federal law: (1) a requirement that caffeinated beverages disclose the fact that they contain caffeine on the front label; and (2) a requirement that labels state the “relative amount” of caffeine by providing a “daily value” amount.  By virtue of imposing these new and conflicting requirements, defendants contended, plaintiff’s claims were preempted.  The court agreed; defendants showed that these food labeling requirements are expressly covered by the regulations. Federal law preempts any state law that would impose additional requirements on how food labels present nutrition information.  See Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011).  Specifically, the court held that federal law preempts plaintiff’s claims that (1) defendants were required to disclose that the drink contained caffeine on the front label of the drink and (2) that defendants were required to state the “relative amount” of caffeine in the drink. Therefore Costco’s motion to dismiss was granted as to these claims.

Next, defendants contended that plaintiff had also failed to adequately plead causation, an element of the remaining consumer fraud-based allegations. Specifically, defendants argued that plaintiff had not alleged that he even read the complained-of labels before purchasing the VitaRain drink. The court noted that while the amended complaint contained detailed allegations about what was, and what was not, on the label of the VitaRain Tropical Mango drink he allegedly purchased, nowhere did he state that he actually read the label, or that his purchasing decision was driven by the alleged deceptive statements on the label.  Broad conclusory statements on causation. such as that class members have suffered "as a result of" purchasing the energy Drink, were insufficient, especially in light of Plaintiff’s failure to allege that he even read the allegedly deceptive labels prior to purchasing the drink.

Finally, on the misrepresentation claims, defendants suggested that plaintiff could not prove the reliance elements of his fraudulent misrepresentation and negligent misrepresentation claims because he had not alleged that he saw the alleged misrepresentations prior to purchasing
the drink. The court dismissed plaintiff’s misrepresentation claim for the same reason that the CPA claim was dismissed: Plaintiff failed to adequately plead reliance because he had not alleged that he based his purchasing decision on the complained-of labels or that he even read the labels
prior to purchasing the drink.  The court refused to credit the naked assertion that he would not have purchased the drink had the label not contained such statements in light of the missing averments.

Claims dismissed (with leave to amend).

 

Amicus Files Third Circuit Brief on Important Class Issue

One of the things we like to do is flag for our readers interesting arguments raised by amicus on important appeals. The Product Liability Advisory Council recently submitted a brief to the Third Circuit. weighing in on the surprising and troubling certification of a class of consumers in a vitamin case. Carrera v. Bayer Corp. et al., No.12-2621 (3d Cir. 2012).

The implicit requirement of ascertainability is an important but sometimes overlooked prerequisite to class certification. A plaintiff must offer a definition of a class that is precise, objective and presently ascertainable. A threshold requirement to a Rule 23 action is the actual existence of a class which is sufficiently definite and identifiable. See, e.g., Kline v. Sec. Guards, Inc., 196 F.R.D. 261, 266 (E.D. Pa. 2000); Reilly v. Gould, Inc., 965 F. Supp. 588, 596 (M.D. Pa. 1997); Clay v. Am. Tobacco Co., 188 F.R.D. 483 (S.D. Ill. 1999). The initial inquiry on class definition is distinct from the analysis required by Federal Rule of Civil Procedure 23. See, e.g., Sanneman v. Chrysler Corp., 191 F.R.D. 441, 446 n. 8 (E.D. Pa. 2000). This notion means, in part, that the court can see sufficient administrative feasibility in determining whether a particular person belongs to a class -- that the court can identify class members in a practical and non-burdensome manner. A “proposed class must be sufficiently identifiable,” and it must be “administratively feasible to determine whether a given individual is a member of the class.”Mueller v. CBS, Inc., 200 F.R.D. 227, 233 (W.D. Pa. 2001). A class may not be ascertainable if it will require individual inquiry into each class member’s particular situation to determine whether that plaintiff suffered the injury alleged. Similarly, a class is not ascertainable if membership depends on a particular subjective state of mind. And even when plaintiffs offer ostensibly objective criteria for membership, the court must be able to apply that objective criteria to determine who is in the class without addressing numerous fact-intensive questions. Certification is denied when determining membership in the class essentially requires a mini-hearing as to each prospective class member. E.g., Agostino v. Quest Diagnostics Inc., 256 F.R.D. 437, 478 (D.N.J. 2009); Solo v. Bausch & Lomb Inc., 2009 WL 4287706, (D. S.C. Sept. 25, 2009) (class not appropriate for certification where determining class membership would require “fact-intensive mini-trials”).

Here, the trial court certified a class of Florida residents who purchased One-A-Day WeightSmart, a multivitamin that Bayer stopped selling in January 2007 – more than five years ago. As the
experience of the named plaintiff vividly illustrated, PLAC noted, membership in the class could not be demonstrated through objective documentation. Obviously, most consumers do not keep receipts or packaging from small-value, one-use products consumed years ago, and  plaintiff could not substantiate his own purchases (or offer any evidence that anyone else’s purchases could be substantiated).

Instead, noted the amicus, plaintiff proposed to prove class membership – for himself and for
the alleged members of the class – through self-serving statements whose veracity Bayer would have no ability to challenge. As the district court’s brief order described it, plaintiff and the other class members who lack objectively verifiable evidence that they ever purchased WeightSmart could still “establish” class membership by way of “claim forms or affidavits.” The order apparently made no provision for any substantive challenge to these proposed forms or affidavits; rather, the court viewed such submissions as “sufficient” in themselves to “verify claims.”

This one-sided procedure clearly violates a defendant's fundamental right to present individualized defenses, a right that is protected by the Due Process Clause. That right cannot be vitiated merely because the case is a putative class action or because the claims at issue have low dollar values.

Nor is the right to challenge class membership a mere technicality, noted PLAC. The named plaintiff himself had no definitive evidence that he purchased the product at issue in his suit. To the contrary, there was a real question, flagged by PLAC, whether he ever bought WeightSmart, given his erroneous recollection of the product’s packaging and the time period when it was on the market. Other potential class members would face similar challenges in proving that they purchased WeightSmart. Contrary to the district court's view, these were not minor manageability issues that should not prevent certification of a class.  That view, noted PLAC, confused Bayer’s fundamental rights with minor procedural issues that can be disregarded in service of class certification.

PLAC correctly pointed out the real danger in decisions like this: establishing a rule of law that defendants can be held liable to consumers without any real proof that those consumers purchased the defendants’ products, and sending a message that administrative convenience can override the basic due-process right to defend oneself in litigation.


 

Federal Court Denies Class Certification in Vitamin Consumer Case

A federal court late last month declined to certify a proposed class action in which plaintiffs challenged alleged claims about the weight-loss properties of One-A-Day WeightSmart vitamins. Gray v. Bayer Corp., No. 08-4716 (D.N.J. 7/21/11).  Our readers will be interested in the discussion of the predominance and superiority requirements for class actions.

Plaintiff alleged that the packaging of One-A-Day WeightSmart falsely claimed that the vitamin enhances a user’s metabolism. Plaintiff filed a complaint against Bayer alleging claims based on intentional and negligent misrepresentation, and the New Jersey Consumer Fraud Act (NJCFA), N.J.S.A. 56:8-1, et seq.;  plaintiff later moved  to certify a class of purchasers of One-A-Day WeightSmart pursuant to Rule 23(b)(3), which requires that a plaintiff establish that the questions of law or fact common to the class members predominate over any questions affecting only individual members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

As plaintiff’s proposed nationwide class called for the application of state substantive law, the court first looked to determine which state’s law governed the claims. Plaintiff argued that New Jersey had the most significant relationship to the claims because all of the decisions with respect to marketing allegedly took place in New Jersey, and all of the alleged operative misrepresentations originated in New Jersey, at Bayer’s headquarters. Defendant noted that because consumers purchased One-A-Day WeightSmart throughout the United States and thereby received the alleged misrepresentations in various jurisdictions other than New Jersey, the consumer fraud laws of the states where the product was purchased should apply. The court agreed that .the place where the
putative class members received Bayer’s alleged representations and the place where the consumers acted in reliance upon those representations, were key factors pointing to the law of the individual states where the product was purchased. (Consumers purchased One-A-Day WeightSmart at retail locations nationwide, not from Bayer itself.)

Moreover, to apply the NJCFA to all the out-of-state consumers in this case would be to ignore the interests of potentially fifty other jurisdictions. Simply because New Jersey has struck a particular balance between consumer protection and the promotion of business within its borders does not suggest that its interest in deterrence should displace the differing policy goals of its fellow states. Those states have instead struck their own legislative balances, awarding compensation based on differing standards of, inter alia, intent, causation, reliance, and damages. The interests of interstate comity and the competing interests of the states counseled against the blanket application of one state’s law over the laws of other interested states.

Thus, the court had to next consider whether variations in state laws presented the types of insuperable obstacles which render class action litigation unmanageable. See In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 529 (3d Cir. 2004). Where the applicable law derives from the law of the 50 states, as opposed to a unitary federal cause of action, differences in state law will compound any disparities among class members from the different states. It is plaintiff’s burden to
credibly demonstrate, through an extensive analysis of state law variances, that class certification does not present insuperable obstacles. 

Here, plaintiff failed to carry this burden.The court acknowledged a “brewing issue” in the Third Circuit over whether the NJCFA could be applied in a national class action. But the better view was that the court would be required to apply distinct standards of, inter alia, intent, causation, reliance, and damages in order to adjudicate plaintiff’s claims under each state’s consumer fraud law. Litigating plaintiff’s claims based on law from potentially fifty-one different jurisdictions would likely require a multitude of mini-trials to determine Bayer’s liability to each statewide group of consumers. Such a procedure would be an inefficient use of  judicial resources and would defeat the purported economies of class treatment.

The court therefore concluded that plaintiff’s proposed nationwide class failed both the predominance and superiority requirements under Rule 23(b)(3). 

Bayer argued that the alternative proposed Florida class was not ascertainable because claims under the Florida consumer fraud act are subject to a four-year statute of limitations and thus the claims of some Florida class members would be barred -- an issue requiring an individual analysis. Plaintiff was, however, granted leave to file a revised motion for class certification with respect to a more ascertainable Florida class only.

 

Federal Court Misses Opportunity To Support Common Sense

A federal court last week refused to dismiss most claims by a putative class challenging health claims in vitaminwater beverage labeling. Ackerman v. Coca-Cola Co., CV-09-0395 (E.D.N.Y., 7/21/10).

Here at MassTort Defense we have warned companies about the dangers of consumer fraud class actions and highlighted some of the many ridiculous, far-fetched, beyond belief claims that plaintiffs make about being misled about some product.  This one is near the top of the list. Plaintiffs allege that the name, "vitaminwater," along with a description of the vitamins in the water are somehow deceptive because they supposedly mislead people to believe that the beverages do not have sugar or calories in them. Plaintiffs are not alleging that vitaminwater doesn't have water or doesn't have vitamins or that the particular vitamins in vitaminwater fail to provide the benefit claimed. Rather, they claim that vitaminwater’s labeling and marketing are misleading because they "bombard" consumers with a message that supposedly draws consumer attention away from the significant amount of sugar in the product. About the sugar? The FDA-mandated label on each bottle bears the true facts about the amount of sugar per serving.

(The opinion also rejected defendant's argument that the claim was expressly and/or impliedly preempted by statutes and regulations preventing states from imposing labeling requirements that are different from those imposed by the FDA.)

The complaint alleged claims of unlawful business acts and practices in violation of California Business and Professions Code (“Cal. BPC”) § 17200 et seq. (“Unfair Competition Law” or “UCL”); Cal. BPC § 17500 et seq. (“False Advertising Law” or “FAL”); and California’s Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq. (“CLRA”); (2) unfair business acts and practices in violation of California UCL; (3) fraudulent business acts and practices in violation of California UCL; (4) misleading and deceptive advertising in violation of California FAL; (5) untrue advertising in violation of California FAL; (6) unfair methods of competition or unfair or fraudulent acts or
practices in violation of § 1770(a)(7) of the CLRA; (7) deceptive acts or practices in violation of
New York General Business law (“GBL”) § 349; (8) false advertising in violation of New York
GBL § 350; (9) violation of New Jersey Consumer Fraud Act (“NJCFA”), N.J.S.A. 56:8-1 et
seq.; (10) breach of an express warranty; (11) breach of an implied warranty of merchantability;
(12) deceit and/or misrepresentation; and (13) unjust enrichment.

The claims were brought on behalf of three purported classes of plaintiffs: all California Residents who purchased vitaminwater at any time from January 15, 2005 to the present, (the “California Class”); all New York residents who purchased vitaminwater at any time from January 30, 2003 to the present, (the “New York Class”); and all New Jersey residents who purchased vitaminwater at any time from January 22, 2003 to the present (the “New Jersey Class”).

So what's misleading? The court found that plaintiffs had sufficiently pleaded that the collective effect of the marketing statements was to mislead a reasonable consumer into believing that vitaminwater is either composed solely of vitamins and water, or that it is a beneficial source of nutrients.   Despite the fact that the sugar content was plain as day to anyone who would look at the label. The court found that the fact that the actual sugar content of vitaminwater was accurately stated in an FDA-mandated label on the product does not eliminate the possibility that "reasonable" consumers may be misled. The court relied on Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008), for the notion that the mere fact that an FDA-mandated nutritional panel provided
accurate nutritional information on a product did not bar claims that reasonable consumers could
be misled. Reasonable consumers should not, said the court, be expected to look beyond representations on the front of the box to discover the truth from the ingredient list in smaller print on the side of the box. But unlike the Gerber case, there were no allegations here that the packaging for vitaminwater contained any false statements or pictures. As noted, plaintiffs concede that vitaminwater actually contains the vitamins the marketing says it does. And it hardly seems like an unfair burden on a "reasonable" consumer to turn from the word "vitaminwater" on one part of the bottle to the label in close proximity on the very same bottle.

As a matter of law, plaintiffs should not be permitted to move forward with a claim about the presence of an ingredient that is clearly disclosed on the Nutrition Facts label, exactly where FDA tells the manufacturer to put that information.  And, of course, the problem with allowing the claim to proceed past the motion to dismiss claim is that the case will proceed through expensive discovery to reach a stage where common sense prevails and summary judgment is granted -- if a defendant is not blackmailed into settling.  And a common thread in many of these consumer fraud class actions is the fundamental notion by plaintiffs' attorneys --implicit in their theory-- that the public must be stupid, cannot read labels, and cannot make legitimate product choices for itself. In fact, the public speaks just fine with its wallets and pocketbooks. Fortified beverages are not new and are one of the fastest-growing market segments. Consumers are indeed able to read nutrition labels and ingredient listings and make smart choices, for themselves, without the help of the plaintiffs' bar.  Contrast this case with recent comon sense decisions.

Court Dismisses Vitamin Consumer Class Action

A federal court has dismissed a class action that accused Bayer Corp. of misrepresenting the cancer-preventing nature of its men's vitamin products. Johns v. Bayer Corp. et al., (S.D. Cal. Feb. 9, 2010).

Readers of MassTortDefense know how a government investigation or advocacy group's criticism of a product can spawn products liability and other class action litigation.  But can plaintiffs walk too closely in the footsteps of the government?

Plaintiff David Johns filed a putative class action alleging that defendants misrepresented on product packaging, commercial advertisements, their website, and in other marketing materials, that one of the product line's key ingredients, selenium, has the ability to reduce the risk of prostate cancer in men. Plaintiff alleges that, despite emerging evidence, selenium does not in fact prevent or reduce the risk of prostate cancer. Plaintiff alleged he purchased one bottle of Men’s Health in July 2009 for approximately $8.  He alleges he read the information regarding selenium on the product packaging and relied on those statements in making his purchasing decision.

Plaintiff then brought a proposed class action on behalf of all persons in the United States or, alternatively, all California residents, who since 2005 purchased the men's health vitamin products. Plaintiff alleged claims for: (1) violation of California’s Unfair Competition Law, California Business & Professions Code § 17200 (“UCL”), (2) violation of the Consumers Legal Remedies Act, California Civil Code § 1750 (“CLRA”), and (3) unjust enrichment.

Defendants moved to strike key aspects of the complaint because the allegations seemingly were simply borrowed from the language of an FTC investigation of the vitamin product line. Defendants argued that these allegations violated plaintiff’s duty under Rule 11 to conduct a reasonable factual investigation into the allegations to be made in a complaint. Attorneys have a duty to make a reasonable inquiry into whether the factual contentions made in a complaint have evidentiary support. Fed. R. Civ. Pro. 11(b).

That FTC lawsuit resulted in a settlement and consent decree; there was no adjudication on the merits and no admission of wrongdoing or fault on the part of Bayer.  Thus, quotes from the government pleadings were, at best, a repetition of mere allegations, including of a special interest advocacy group that had complained to the government.  The federal court thus struck these allegations. See also In re Connectics, 542 F. Supp. 2d 996, 1005-06 (N.D. Cal. 2008).  Because the court granted defendants’ motion to strike the various paragraphs of the complaint, there were no factual allegations remaining to support the claim that defendants’ advertising was deceptive. Accordingly, the motion to dismiss was granted without prejudice.

The court went on to address several issues "as guidance if Plaintiff chooses to file an amended
complaint."  The court noted that in two recent opinions, the Supreme Court had clarified the  standard of review for Rule 12(b)(6) motions. See Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). To survive a motion to dismiss under this standard, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 570).  For example, the court pointed out a standing issue: plaintiff did not allege that he saw any advertisements for one of the products in the line, Men’s 50+, nor that he read the packaging on the product, nor that he even considered purchasing the product. Plaintiff cannot expand the scope of his claims to include a product he did not purchase or advertisements relating to a product that he did not rely upon. The statutory standing requirements of the UCL and CLRA are narrowly prescribed and do not permit such generalized allegations.