Supreme Court to Revisit Class-Certification Standards in Tyson Foods, Inc. v. Bouaphakeo

court-gavelToday, the Supreme Court granted review in what may be a major decision on the standards for class certification, Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146.

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Supreme Court To Decide Whether To Hear Four High-Stakes Cases Asking When A Suit May Be Litigated As A Class Action

330px-Supreme_Court_Front_DuskThe Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed. Continue Reading

Supreme Court to decide whether an offer of judgment for full relief moots a named plaintiff’s class-action claims

Supreme Court imageArticle III of the Constitution limits the jurisdiction of the federal courts to “cases” and “controversies.” The Supreme Court has held that “‘an actual controversy … be extant at all stages of review, not merely at the time the complaint is filed.’” Arizonans for Official English v. Arizona, 520 U.S. 43, 67 (1997). Accordingly, “[i]f an intervening circumstance deprives the plaintiff of a ‘personal stake in the outcome of the lawsuit,’ at any point during litigation, the action can no longer proceed and must be dismissed as moot.” Genesis HealthCare Corp. v. Symczyk, 133 S. Ct. 1523, 1528 (2013). In Genesis, the Court recognized that one “intervening circumstance” may arise under Rule 68 of the Federal Rules of Civil Procedure, which permits a party to offer to allow judgment in favor of its adversary on specified terms. A party who rejects a Rule 68 offer, but obtains a judgment “not more favorable than the unaccepted offer,” must pay the costs accrued by the offering party between the offer and judgment. (We’ve previously blogged about Genesis.) Today, the Court granted certiorari in Campbell-Ewald Company v. Gomez, No. 14-857, to determine whether a defendant’s unaccepted offer of judgment, made before a class is certified, that would fully satisfy the claim of a would-be class representative renders the plaintiff’s individual and class claims moot. The Court also granted certiorari to decide whether the derivative sovereign immunity doctrine recognized in Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940), applies only to claims for property damage caused by public works projects. Continue Reading

Did The Ninth Circuit Just Give Plaintiffs—But Not Defendants—An Automatic Appeal From Class Certification Orders?

[Editors’ note:  Today we’re featuring a guest post by Tim Fielden, who is in-house counsel at Microsoft.  His post spotlights an emerging—and important—issue in class-action litigation.] In two recent decisions, the Ninth Circuit has carved out a new path for plaintiffs seeking immediate review of the denial of class certification: voluntarily dismiss the complaint under Rule 41(a), appeal from the final judgment, and challenge the class certification denial on appeal. If this tactic gains currency, plaintiffs (but not defendants) will have the right to an immediate appeal from any adverse class certification ruling. But at least four circuits have rejected this tactic, and the maneuver contravenes a unanimous Supreme Court decision limiting review of class decisions. As a result, defendants have reason to hope that these Ninth Circuit decisions will have limited and short-lived impact.

Background

Plaintiffs have long sought early review of class certification denials without the bother of pursuing their individual claims to judgment on the merits. But in Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978), the Supreme Court rejected arguments that an order denying class certification should be immediately appealable, either as a final “collateral order” or because the denial of certification signals the “death knell” for the case when plaintiffs decide not to proceed to an appealable final judgment. The Court explained that because only Congress may expand the grounds for appellate review, “the fact that an interlocutory order may induce a party to abandon his claim before final judgment is not a sufficient reason for considering it a ‘final decision’ within the meaning of § 1291.” Id. at 477. And the Court added that the death knell doctrine unfairly “operates only in favor of plaintiffs [by giving them an immediate right to appeal] even though the class issue … will often be of critical importance to defendants as well.” Id. at 476. As a result, plaintiffs for years had only limited routes to immediate review after a denial of class certification. Absent the district court’s certification of the decision for review under 28 U.S.C. § 1292(b) or the court of appeals’ acceptance of mandamus review, a plaintiff could obtain review of a class certification denial only by taking her individual case to trial and then appealing from the judgment on the merits. In 1998, Congress created a new avenue to review, amending Rule 23 to allow parties to file a petition seeking permission for an immediate appeal of adverse class decisions, which the courts of appeals could grant or deny at their discretion.

The Ninth Circuit’s End Run Around Rule 23(f)

In Berger v. Home Depot USA, Inc., 741 F.3d 1061 (9th Cir. 2014), the Ninth Circuit opened a new route for plaintiffs seeking interlocutory review of the denial of class certification. In Berger, the plaintiff chose not to seek Rule 23(f) review, which the Ninth Circuit could have exercised its discretion to deny. Instead, he voluntarily dismissed his case and appealed from the final judgment. In essence, he made good on the “death knell” threat from Coopers & Lybrand: he ended his case in response to the class certification order. Ignoring Coopers & Lybrand, the Berger panel held that the Rule 41 dismissal was sufficiently adverse to the plaintiff’s interests to create appellate jurisdiction, because Berger dismissed his individual claims with prejudice without settling. Id. at 1066. Unlike in Berger, the plaintiffs in Baker v. Microsoft Corp., 2015 U.S. App. LEXIS 4317 (9th Cir. Mar. 18, 2015), sought Rule 23(f) review of the district court’s order striking class allegations, but the Ninth Circuit denied review. Months later, plaintiffs voluntarily dismissed, declaring their intent to seek review of the order striking class allegations. Before the decision in Berger, Microsoft asked the Ninth Circuit to dismiss, relying on Coopers & Lybrand and a Ninth Circuit opinion dismissing an appeal from a Rule 41(b) dismissal after the denial of class certification. In the meantime, Berger was decided. And the Baker panel, following Berger, decided that it had jurisdiction over the appeal. Neither the Baker nor Berger panels mentioned the previous (and conflicting) Ninth Circuit decision.

The Conflicts

There is a strong possibility that the panel decisions in Baker and Berger are not the end of the story. In Baker, Microsoft has filed a petition for en banc review (pdf), arguing that, among other things, Berger and Baker conflict with Coopers & Lybrand and at least one prior Ninth Circuit opinion. The petition also notes the existence of a long-standing circuit split on this issue. A 25-year-old Second Circuit decision reached the same result as Berger and Baker. See Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 179 (2d Cir. 1990). But at least four other circuits have rejected this approach to seeking appellate review of the denial of class certification. Most recently, in Camesi v. University of Pittsburgh Medical Center, 729 F.3d 239 (3d Cir. 2013), the Third Circuit held that it lacked appellate jurisdiction when workers dismissed their individual complaints with prejudice in an attempt to appeal the district court’s ruling decertifying their collective actions. The Third Circuit rejected their “procedural sleight of hand to bring about finality,” and held that “voluntary dismissals … constitute impermissible attempts to manufacture finality[.]” Id. at 245. The Fourth, Eighth, and Tenth Circuits agree that they lack jurisdiction over such an appeal. See Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 100 (4th Cir. 2011); Telco Grp., Inc. v. AmeriTrade, Inc., 552 F.3d 893, 893-94 (8th Cir. 2009) (per curiam); Bowe v. First of Denver Mortg. Investors, 613 F.2d 798, 800-02 (10th Cir. 1980). This conflict provides reason to believe that the Ninth Circuit should grant rehearing en banc. Businesses should watch further proceedings in Baker closely.

U.S. Supreme Court Agrees To Hear Spokeo, Inc. v. Robins And Decide Whether Plaintiffs Who Have Suffered No Concrete Harm Nonetheless Have Article III Standing To Sue In Federal Court

Under Article III of the U.S. Constitution, a plaintiff must allege that he or she has suffered an “injury-in-fact” to establish standing to sue in federal court. Today, the Supreme Court granted certiorari in Spokeo, Inc. v. Robins, No. 13-1339, to decide whether Congress may confer Article III standing by authorizing a private right of action based on a bare violation of a federal statute, even though the plaintiff has not suffered any concrete harm. The Court’s resolution of this question in Spokeo could affect a number of different types of class actions that have been instituted in recent years seeking potentially massive statutory damages based solely on allegations of technical violations of federal statutes—even though the plaintiff has not suffered any of the different types of “injury-in-fact” usually required to establish standing. We represent the petitioner, Spokeo, Inc. Congress has passed a number of statutes that permit recovery of statutory damages for statutory violations even in the absence of any proof of actual injury.

These statutes are particularly common in the privacy and financial-services contexts. The statute at issue in Spokeo—the Fair Credit Reporting Act (FCRA)—stands at the intersection of these two fields. Among other things, it requires “consumer reporting agencies” to “follow reasonable procedures to assure maximum possible accuracy of” consumer reports. 15 U.S.C. § 1681e(b). It also requires the provision of notices to persons who provide information to a consumer reporting agency and to those who use the services of such agencies. Id. § 1681e(d). For a “willful” violation of these sections, a prevailing plaintiff may recover statutory “damages of not less than $100 or not more than $1,000,” id. § 1681n(a)(1), and also may seek punitive damages, id. § 1681n(a)(2). The plaintiff in Spokeo, Thomas Robins, seeks to recover statutory damages on behalf of a putative class for alleged violations of FCRA. Specifically, Robins alleged that Spokeo, which is a “people search engine,” is a “consumer reporting agency” subject to FCRA and that it had published inaccurate information about him, including that he was married and that he was better situated financially than he actually is. Robins also alleged that Spokeo had failed to provide the notices required under the FCRA. The district court dismissed the case for lack of standing, concluding that Robins had not alleged the injury-in-fact necessary to satisfy Article III. The Ninth Circuit reversed (pdf).

It concluded that the “creation of a private cause of action to enforce a statutory provision implies that Congress intended the enforceable provision to create a statutory right,” and that “the violation of a statutory right is usually”—on its own—“a sufficient injury in fact to confer standing” when “the statutory cause of action does not require a showing of actual harm.” Spokeo petitioned for certiorari (pdf), explaining that there is a persistent conflict among the courts of appeals over whether the allegation of a statutory violation—a bare “injury-in-law”—is sufficient to establish Article III standing. The petition also pointed to the importance of this question in light of the large number of class actions involving allegations of technical statutory violations that did not cause the plaintiff any concrete harm. The Supreme Court will hear the case next Term. We look forward to making the case for Spokeo on the merits.

Ninth Circuit Upholds FDA’s Primary Jurisdiction Over “Natural” Labeling On Cosmetics But Orders Stay Rather Than Dismissal

Plaintiffs’ lawyers love to challenge products labeled as “natural,” with hundreds of false advertising class actions filed in just the last few years. Recently, in Astiana v. Hain Celestial (pdf), the Ninth Circuit reversed the dismissal of one such class action, and in doing so, addressed some key recurring arguments made at the pleading stage in litigation over “natural” labeling.

The Hain Celestial Group makes moisturizing lotion, deodorant, shampoo, conditioner, and other cosmetics products. Hain labels these products “All Natural,” “Pure Natural,” or “Pure, Natural & Organic.” A number of named plaintiffs, including Skye Astiana, filed a putative nationwide class action, alleging that they had been duped into purchasing Hain’s cosmetics. According to plaintiffs, those cosmetics were not natural at all, but allegedly contained “synthetic and artificial ingredients ranging from benzyl alcohol to airplane anti-freeze.” Astiana claimed that she likely would not have purchased Hain’s cosmetics at market prices had she been aware of their synthetic and artificial contents. As is typical in such cases, she sought damages and injunctive relief under a variety of theories: for alleged violations of the federal Magnuson-Moss Warranty Act, California’s unfair competition and false advertising laws, and common law theories of fraud and quasi-contract.

The district court dismissed the entire case in deference to the “primary jurisdiction” of the U.S. Food and Drug Administration over natural labeling of cosmetics. On appeal, the Ninth Circuit made two important rulings to which defendants in “natural” litigation should pay special attention:

Primary Jurisdiction

Federal regulators have (with a few limited exceptions not relevant here) declined either to adopt a formal definition of the term “natural” or to regulate that term’s use on cosmetics or food labels. But both plaintiffs and defendants have pointed to informal FDA statements and letters on the subject to advance particular litigation positions. For example, in this case, Hain invoked the prudential doctrine of primary jurisdiction to argue that a case challenging labeling statements cannot go forward because the FDA, not the courts, must determine in the first instance what the challenged labeling statement means and how it should be used. (Indeed, as we have previously discussed, the primary jurisdiction doctrine has led more than a dozen courts to stay false advertising cases in which plaintiffs allege that the ingredient name “evaporated cane juice” is misleading.)

Critically for other defendants intending to invoke primary jurisdiction in the future, the Ninth Circuit concluded that the district court had not erred in concluding that the doctrine applied. Rather, the district court’s error was only in dismissing the case rather than staying it. As the Ninth Circuit explained, “[w]ithout doubt, defining what is ‘natural’ for cosmetics labeling is both an area within the FDA’s expertise and a question not yet addressed by the agency,” and “[o]btaining expert advice from that agency would help ensure uniformity in administration of the comprehensive regulatory regime established by the [Food Drug and Cosmetics Act.]” Significantly, as the Ninth Circuit noted, the FDA had shown “reticence to define ‘natural’” at the time Hain invoked the doctrine with respect to food labels, in light of competing demands on the agency, and there is no reason to believe the FDA is on the verge of rulemaking on ‘natural’ labeling. But that was not a reason to bar the doctrine’s application.

That said, when, as in Astiana, additional judicial proceedings are contemplated once the FDA completes its work, the Ninth Circuit held that the case should be stayed rather than dismissed. And on that basis, the Ninth Circuit reversed the district court’s dismissal. Whether the Astiana decision supports primary jurisdiction arguments outside the context of “natural” labeling on cosmetics—such as ‘natural’ statements on food labels—remains to be seen. But as we read it, the court’s core holding would seem to have broader application.

Express Preemption

Hain separately argued that the FDCA expressly preempted the plaintiffs’ claims challenging the use of the term “natural.” But because there are no regulations defining ‘natural’ or its use on cosmetics labels, the Ninth Circuit disagreed, concluding that neither plaintiffs’ claims nor their requested remedy would impose requirements different from the (non-existent) federal rules on “natural” labeling. The Court did not find persuasive Hain’s argument that the FDA’s conscious decision not to define or regulate the term “natural” supports express preemption. That said, in other settings, including in “natural” cases, defendants may still find it appropriate to point out that the FDA (or another agency) has made a conscious decision not to regulate, and that such a decision should be entitled to deference and respect, or should be taken into account in assessing whether plaintiff has stated a claim.

Supreme Court Grants Certiorari To Address Interplay of Federal Arbitration Act And State-Law Savings Clause In Arbitration Agreement

As readers of this blog know, prior to the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, the California Supreme Court (and a number of other state courts) had declared that waivers of class-wide arbitration were unenforceable as a matter of state law. But in Concepcion, the Supreme Court held that the Federal Arbitration Act (“FAA”) preempts state-law rules requiring the availability of class-wide arbitration.

How do the FAA and the Supremacy Clause of the U.S. Constitution affect the interpretation of arbitration clauses written prior to Concepcion? The Supreme Court may provide further guidance on that issue in DIRECTV, Inc. v. Imburgia, No. 14-462, in which it granted certiorari today. (We have previously blogged about Imburgia.)

At issue in Imburgia is whether an arbitration provision that specifies that it is inapplicable if its ban on class-wide procedures is unenforceable under “the law of [the customer’s] state” is (a) governed by state law without reference to FAA preemption, or (b) by state law taking into account the preemptive effect of the FAA. Stated another way, did the parties contract out of the FAA’s coverage?

Respondent Imburgia, a customer of petitioner DIRECTV, Inc. (“DTV”), filed a class action in California state court against DTV in 2007, alleging that DTV improperly charged early termination fees to its customers. DTV’s Customer Agreement contained an arbitration clause that specified that it was governed by the FAA and that arbitration would take place on an individual rather than class-wide basis. That arbitration clause also stated that “[i]f … the law of your state would find this agreement to dispense with class action procedures unenforceable, then this entire Section [i.e., the arbitration clause] … is unenforceable.”

In Discover Bank v. Superior Court, the California Supreme Court declared that consumer arbitration agreements are unconscionable under California law unless they allow for class arbitration. In light of Discover Bank, DTV did not invoke the arbitration provision when the lawsuit was filed. Shortly after the Supreme Court decided Concepcion—and held Discover Bank to be preempted by the FAA—DTV moved to compel arbitration. The trial court denied DTV’s motion.

The California Court of Appeal affirmed. The Court of Appeal held that the reference in the arbitration provision to “the law of [the customer’s] state” was ambiguous and could mean either (1) the state’s law without regard to federal law; or (2) the state’s law, as superseded by federal law (such as the FAA). The court adopted the first interpretation—i.e., that the preemptive effect of federal law does not bear on the meaning of “the law of [the customer’s] state.” Under that interpretation, the California Court of Appeal declared, the law of California is that agreements to dispense with class action procedures are unenforceable, and accordingly DTV’s arbitration clause is unenforceable. The California Supreme Court denied review. (We filed an amicus letter (pdf) in the case urging that the California Supreme Court grant review.)

Interpreting the same DTV arbitration provision, the Ninth Circuit in Murphy v. DIRECTV, Inc., 724 F.3d 1218 (9th Cir. 2013), reached the opposite conclusion. In Murphy, the Ninth Circuit held that “Section 2 of the FAA, which under Concepcion requires the enforcement of arbitration agreements that ban class procedures, is the law of California and of every other state. The Customer Agreement’s reference to state law does not signify the inapplicability of federal law,” because under the Supremacy Clause, “the Constitution [and] laws . . . of the United States are as much a part of the law of every State as its own local laws and Constitution.” Id. at 1226 (citation omitted). As a result, the Ninth Circuit concluded that the reasoning later adopted by the California court—that “the parties intended state law to govern the enforceability of the arbitration clause, even if the state law in question contravened federal law”—“is nonsensical.” Id.

The Supreme Court’s decision in Imburgia should help clarify whether a company’s good-faith effort to include in an arbitration provision language designed to comply with existing state law risks can have the unintended effect of jettisoning the protections of the FAA. The case will likely be briefed over the next several months and argued in the fall.

New Oregon class-action law purports to seize unclaimed damages for legal aid and judge-picked charities

The first bill signed by Oregon Governor Kate Brown—H.B. 2700 (pdf)—changes the rules for handling payment of damages awards in class actions in Oregon state courts. Effective immediately, including for pending actions, the new law attempts to redirect unclaimed damages under class-action settlements or judgments to the state bar’s legal aid program and to charities picked by the judge presiding over each case. In other words, Oregon has effectively mandated cy pres in every class action. (We’ve repeatedly covered—and criticized—the use of cy pres awards in class actions.)

Among other things, the new law amends Oregon Rule of Civil Procedure 32, which governs class actions in state court, to add a new subsection addressing the payment of damages in accordance with “the settlement or judgment in a class action.” The court is authorized to approve a “process” for making payments that “may include the use of claim forms.” But “any amount awarded as damages” that the court finds either hasn’t been timely claimed by class members or simply “is not practicable” to pay to class members must be distributed in the following fashion:

  • “At least 50 percent of the amount not paid to class members” must be given “to the Oregon State Bar for the funding of legal services provided through the Legal Services Program.”
  • “The remainder of the amount not paid to class members” must be given to “any entity” chosen by the court “for purposes” that are “directly related to the class action or directly beneficial to the interests of class members.”

Before enactment of this law, damages in class actions that could not be paid to class members either reverted to the defendant or—in the context of some class-action settlements—were given to a charity picked by the parties and approved by the court.

Proponents of cy pres awards often contend that class members who can’t be paid their damages are better served by a donation to a charity whose mission is related in some fashion to the goals of the class-action lawsuit. Proponents also contend that forcing defendants to pay the full amount of damages they theoretically would owe if liability were established as to all class members—and then all class members actually claimed payments—would better deter future wrongdoing.

More cynical observers of class actions note that cy pres awards are often used by class counsel to puff up the amount of money purportedly recovered in the case in order to justify a higher fee award. Sometimes the recipient of cy pres largesse is picked simply to curry favor with a judge being asked to approve the settlement—for example, a donation to the law school clinic at the judge’s alma mater. And in every case, the use of cy pres eliminates the incentive for class counsel to ensure that class members—the ostensibly injured parties—get the individualized compensation they have been awarded. And while some federal courts have begun to pay closer attention to whether class members actually recover under class settlements, this law encourages Oregon state court judges to ignore that question.

Even worse, the potential of a cy pres award sometimes is used to justify the certification of particularly dubious class actions. For example, take a putative class whose members can’t be identified. Class certification should be denied because the class isn’t ascertainable. But if cy pres were mandatory, the would-be class counsel can always say “so what—let’s just figure out the defendant’s aggregate liability, pay the handful of class members we can identify, and then give the rest away in cy pres in order to punish the defendant.” And never mind, of course, that this procedure would deprive the defendant of the right to cross-examine absent class members or assert individualized defenses. Indeed, there are strong arguments that the use of cy pres—particularly in a litigated case where the defendant has not agreed to it—is unconstitutional (pdf).

Chief Justice Roberts has said that the U.S. Supreme Court might be interested in hearing a case that presents appropriate questions about the use of cy pres awards in class-action settlements in federal court. Of course, if the case arises in federal court, those questions might be framed in terms of Federal Rule of Civil Procedure 23(e), which tasks federal judges with assessing the fairness of class settlements. If the case arises from the Oregon courts—which may be a possibility thanks to H.B. 2700—more fundamental questions of due process would be raised, with potentially much larger ramifications for class-action litigation.

Third Circuit Hears Oral Argument Over Whether FTC Has Authority To Regulate Data Security

After much anticipation, the Third Circuit heard oral arguments (audio) last Tuesday in the interlocutory appeal in FTC v. Wyndham Worldwide Corp. We have written previously about this case, which likely will be a significant one in the privacy and data-security field. At issue is whether Section 5 of the FTC Act authorizes the FTC to regulate data security at all, as well as what constitutes “unfairness” in the data-security context. The case may have a large impact on future FTC enforcement actions and major implications for class action litigation.

But after all the build up, the panel of the Third Circuit hearing argument might change the script. Questioning by the judges (Thomas Ambro, Jane Roth, and Anthony Scirica) indicated that the panel was seriously considering a ruling that the FTC should have brought any unfairness claim in an FTC administrative action in the first instance (as it did in the LabMD action), not in federal district court. If that happens, we will have to wait even longer to learn whether the federal courts agree with the FTC’s views on the scope and contours of its unfairness authority in the data-security context.

Counsel for the FTC and for Wyndham spent large portions of the oral argument emphasizing the positions they had briefed. Wyndham’s counsel, for example, argued at length that negligence alone cannot satisfy an “unfairness” standard, that businesses had not received adequate notice of what triggers such liability, and that the FTC had not adequately alleged substantial injury. But the panel may not reach those issues. Instead, the court focused on the threshold question of whether the FTC had the authority in the first place to sue in federal court under Section 13(b) of the FTC Act. That section permits “the Commission [to] seek, and after proper proof, the court [to] issue, a permanent injunction,” but limits such relief to “proper cases.”

Is the Wyndham action a “proper case”? According to the FTC—which invoked decisions of the Ninth Circuit and the Seventh Circuit for support—it is “proper” to sue whenever the FTC alleges a violation of a law that the FTC enforces. For its part, Wyndham did not disagree, instead arguing that such a rule would have practical benefits—including that, in its view, the company would get a fairer shake in federal court than in an FTC administrative action. But the Third Circuit panel appeared to be unconvinced on this point, and focused instead on whether a case presenting novel and complex issues should first be brought in an administrative action. In fact, the panel asked the parties to provide supplemental briefing on the point.

It is always perilous to read the tea leaves after an oral argument. But it is an understatement to say that the Third Circuit’s panel was dropping some hints, especially by requesting further briefing on whether the FTC action belongs in federal court. There is therefore a substantial possibility that the court will send the action to the FTC for administrative adjudication in the first instance.

That result would serve to underscore a point we have made before—that post hoc litigation is a poor way to impose data-security standards. Litigation moves forward in fits and starts, and by its nature is unlikely to produce clear rules or standards in complex areas like data security. In short, it is an unpredictable and expensive method of forging broadly applicable standards. All stakeholders—both businesses and their consumers and employees—are likely to suffer from a lack of meaningful direction if data-security standards are generated via litigation. With the cyber threat continuing to grow—from garden-variety hackers to sophisticated operations that may be sponsored by foreign governments—consensus-based standard setting is far more likely to provide practical guidance for American businesses that seek to protect private information, intellectual property, and business-critical systems from the continuing cyber onslaught.

Food Court Grants Summary Judgment In Class Action Targeting “No Sugar Added” Label

As readers of this blog are well aware, manufacturers and retailers have faced a tidal wave of consumer class actions alleging false advertising in recent years. In these cases, the plaintiffs bemoan how they were deceived by the labels or advertising of all kinds of products – from yogurt to waffles to dog food to shampoo. But no matter how implausible these claims may be, judges often allow them to survive motions to dismiss (often multiple times), which inevitably ratchets up the pressure to settle. For companies that stick it out and take discovery of the named plaintiff, however, there can be a payoff. Sometimes, the plaintiff’s own testimony can halt an expensive class action in its tracks.

That is exactly what happened in Major v. Ocean Spray Cranberries, Inc. Major was a putative class action filed in the Northern District of California. A California purchaser alleged that Ocean Spray’s 100% Juice products violated California’s consumer protection statutes. Specifically, she alleged that the statement “No Sugar Added” deceived her because (1) the juice labels did not include a disclaimer (one required by federal regulations) explaining that the products were not a low-calorie food, and (2) the products contained “juices from concentrate,” which the plaintiff characterized as a form of added sugar. The truth of the matter, however, came out at the plaintiff’s deposition. Armed with admissions demonstrating that plaintiff wasn’t even remotely deceived by the term “No Sugar Added,” Ocean Spray moved for partial summary judgment on precisely the same claims that were the subject of the plaintiff’s pending motion for class certification. Judge Davila agreed with Ocean Spray and granted the motion for summary judgment, which in turn rendered the plaintiff’s motion for class certification moot.

First, the plaintiff’s testimony demonstrated that the absence of a disclaimer that the juices were not low calorie had zero effect on her decision to purchase Ocean Spray’s juices. When asked whether she purchased the 100% Juice products because she thought they were “a reduced calorie product,” the plaintiff said no. And when she was asked whether she thought the juices were low calorie products at the time she purchased them, she also said no. In other words, she had not been even remotely deceived by the absence of the disclaimer because (1) she knew the juices were not low in calories and (2) calorie content was not a motivating factor for her purchase. In response, the plaintiff argued that she had understood “No Sugar Added’ to mean “better and healthier.” Judge Davila agreed with Ocean Spray, however, that this argument was just an improper attempt to “amend her Complaint ‘on the fly’” and in any event, the plaintiff hadn’t identified the particular statements on the juice labels that proclaimed the products to be “better.” The plaintiff’s deposition testimony also disproved her second theory of deception alleged in the complaint (i.e., that including “concentrated fruit juice” as an ingredient belied the “No Sugar Added” labeling statement). She testified that she understood the term “No Sugar Added” to mean that “there’s literally nothing containing sugar that’s added to this other than the natural sugar from the fruit.”

Ocean Spray was able to show that its juice (1) was accurately portrayed under the relevant regulations as having “no sugar added” and (2) satisfied the plaintiff’s own understanding of what “no sugar added” means. As a factual matter, the plaintiff’s allegation in the complaint that Ocean Spray’s products contained “concentrated fruit juice” was untrue; Ocean Spray produced undisputed evidence that its juices were “fruit juice from concentrate.” The difference between the two seemingly similar terms is critical: Ocean Spray’s evidence showed that “juices from concentrate, such as Defendant’s products, contain the same ratio of water to sugar solids and other compounds that exist naturally,” which is “is in contrast to products containing fruit juice concentrate, which do contain a higher level of sugar than would exist naturally.” Because “products[] made with juice from concentrate[] contain the same amount of sugar that would have existed naturally,” the court held that “the products cannot be said to contain ‘added sugars.’” And this factual showing also “conform[ed] to plaintiffs’ understanding” that “no sugar added” means no sugar beyond “the natural sugar from the fruit.” As a result, the plaintiff could not meet her burden of showing a factual dispute over whether she was deceived about the sugar content in Ocean Spray juice. To be sure, not every plaintiff will provide deposition testimony that will so neatly end a case. But the Major decision demonstrates that settlement is far from the only option when a judge denies a motion to dismiss, even in a false advertising case.

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