Dale Giali has appeared in state and federal trial and appellate courts in complex civil litigation, including matters alleging false advertising, violations of consumer protection laws, antitrust violations, unfair business practices, unfair competition, misappropriation of trade secrets, breach of contract, business torts, franchise agreement violations, insurance coverage and intellectual property infringement. He has litigated cases in the food & beverage, refining, real estate, produce, cable television, automobile, compact disc, semiconductor and commercial construction industries. Dale has prepared numerous cases for trial and mediation. He recently first-chaired a trial of claims under California's notorious Unfair Competition Law (Bus. & Prof. Code 17200), resulting in a complete defense verdict for his client.
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The U.S. District Court for the Central District of California recently issued an interesting decision (pdf) denying class certification in 15 consolidated consumer class actions against the maker of 5-hour ENERGY drinks.

Continue Reading Court refuses to certify 5-hour Energy false-advertising class action for lack of common proof

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.

After the oral argument in POM Wonderful LLC v. Coca-Cola Co. (pdf), No. 12-761, the Supreme Court appeared all but certain to allow competitors to sue for false advertising under the Lanham Act over labels of FDA-regulated food products.  Food manufactures have been waiting to see just how broad the ruling would be and whether it would affect the onslaught of consumer class actions challenging food and beverage labels.  The wait is over, and the POM v. Coke decision, while effecting a dramatic change in competitor actions, should have little impact on consumer class actions.

As described by the Supreme Court, here are the facts of the case:  POM markets a juice product labeled “Pomegranate Blueberry 100% Juice,” which consists entirely of pomegranate and blueberry juices.  Coke (under its Minute Maid brand) markets “Pomegranate Blueberry Flavored Blend of 5 Juices,” a competing product that contains 99.4% apple and grape juices, with pomegranate, blueberry, and raspberry juices accounting for the remaining 0.6%.  The label on the Minute Maid product features a picture of all five fruits and the words “Pomegranate Blueberry” in a larger font than the words “Flavored Blend of 5 Juices.”  Significantly, the Minute Maid label complies with the technical labeling rules set out in the federal Food, Drug, and Cosmetic Act (FDCA) and FDA’s related regulations for naming a flavored juice blend.

POM alleged that Coke’s product name and label violate the Lanham Act’s false-advertising provision because (according to POM) consumers will be fooled into thinking there is more pomegranate and blueberry juice in the product than there really is.  The district court and Ninth Circuit rejected the Lanham Act claims, accepting Coke’s argument  that because juice labeling is pervasively regulated by FDA, applying generalized principles of false advertising under the Lanham Act would destroy the uniform, national labeling standard announced by the agency under the FDCA.  As the Ninth Circuit put it, “the FDCA and its regulations bar pursuit of both the name and labeling aspect” of the Lanham Act claim because allowing the claim would “undermine the FDA’s regulations and expert judgments” about how juices may and should be included in the product name.

The Supreme Court unanimously reversed the Ninth Circuit’s decision in an opinion by Justice Kennedy.  In analyzing whether one federal statute (the FDCA) precludes a remedy available under another (the Lanham Act), the Court ruled that the FDCA and Lanham Act can be harmonized because they are “complementary and have separate scopes and purposes” and—unlike FDCA’s express preemption of state-law claims—neither statute “discloses a purpose” by Congress to bar competitor suits like POM’s.  (A more detailed discussion of the Court’s opinion is available here.)  Notably—although the Court repeatedly tells us that the FDCA and Lanham Act can get along—the opinion never actually does the hard work of harmonizing Coke’s compliance with the FDCA’s detailed rules for naming flavored juice blends with POM’s theory of liability challenging the FDCA-compliant name under a generalized theory of false advertising.

By contrast with competitor lawsuits, the Court’s decision should have virtually no impact on food labeling consumer class actions.  While the Court expressed the view that consumers will be indirect beneficiaries of competitor Lanham Act claims over allegedly misleading labels, it made clear that its decision does not address or alter the interplay between state consumer protection laws or consumer suits and the FDCA.  In other words, the decision does not in any way undermine preemption principles that would apply to state-law claims challenging labels regulated by FDA.  That’s important not just for food companies facing consumer class actions, but also to avoid a problem the Court specifically recognized in its decision: the “disuniformity that would arise from the multitude of state laws, state regulations, state administrative agency rulings, and state-court decisions that are partially forbidden by the FDCA’s pre-emption provision.”  Though the Court correctly recognizes the resulting chaos if each state could impose non-identical labeling requirements, it characterizes the potential disuniformity from the potential tension between the FDCA and the Lanham Act a result that Congress envisioned.

Whether the Court was right or wrong about that, one thing is clear:  In creating food labels, food companies should consider not only what the FDCA and federal regulations say, but also analyze the potential risks of competitor lawsuits under the Lanham Act.  We will have more to say about these issues on a webinar tomorrow; interested clients or friends of the firm may register for the webinar here. 

 

 

We recently blogged about one of the recent “class standing” decisions holding that a named plaintiff has standing to represent a class on false advertising claims challenging products the named plaintiff never purchased with labels the named plaintiff never saw. According to that decision, so long as the products that were purchased by the named plaintiff were “sufficiently similar” to the products purchased by the putative class, the named plaintiff had the requisite “sufficient ‘personal stake’ in the litigation” for standing purposes. For example, a named plaintiff who purchased only a few varieties of green tea had standing to sue in the name of a nationwide class challenging similar advertising of dozens of other tea varieties.

Even as some courts have found in favor of plaintiff on this threshold standing question, however, they recognize that it is but a single step along the way to class certification. Another major hurdle these plaintiffs face is to demonstrate that their claims are “typical” of those class members who purchased different products. In a recent decision, the Northern District of California made clear that this hurdle often will be insurmountable.

In Major v. Ocean Spray Cranberries, Inc., 2013 WL 2558125 (N.D. Cal. June 10, 2013), the plaintiff alleged that Ocean Spray’s product labels were false or deceptive in violation of California’s consumer protection laws. The plaintiff herself had bought only a few Ocean Spray products. But that didn’t stop her from suing in the name of a nationwide class of all purchasers of the entire gamut of Ocean Spray’s “100% Juice” products, “Sparkling” beverages, “Juice Drinks,” and “Cherry” products.

In ruling on class certification, Judge Davila started with Rule 23(a)(3)’s requirement “that Plaintiff’s claims be typical of those that would be advanced by the proposed class.” Judge Davila explained that typicality requires that “in determining whether to certify a class a district court must ‘ensure that the named plaintiffs have incentives that align with those of absent class members so as to assure that the absentees’ interest will be fairly represented.’” Among other things, “‘a class representative must . . . suffer the same injury as the class members.’”

Judge Davila added that when these principles are applied to “cases involving several products at issue—like the one presently before the Court—district courts have held that the typicality requirement has not been met where the ‘named plaintiff . . . purchased a different product than that purchased by unnamed plaintiffs.’” Judge Davila concluded that this case was no different, and held that “the proposed class representative . . . has not met her burden of showing that her claims are typical of those of the proposed class members.”

As Judge Davila explained, “[T]he typicality requirement has not been met” because “Plaintiff’s proposed classes are so broad and indefinite that they encompass products that she herself did not purchase” and “had nothing to do with.” Thus, purchasing Ocean Spray’s “Diet Sparkling Pomegranate Blueberry drink,” as the named plaintiff did, does not satisfy the typicality requirement over the entirety of Ocean Spray’s “Sparkling” line of products, because the various products may have differing labels and nutrition claims.

Plaintiff’s counsel responded to the decision by saying they intended “to refine” the complaint “to address the court’s articulated opinion.” [San Jose Judge Sets Up Roadblock for Plaintiff’s Lawyers in Food Labeling Case (LA Daily Journal June 12, 2013).] We’ll see.

As we have blogged before, the food and beverage industry is facing a tidal wave of class action litigation alleging false advertising under state consumer protection laws. We monitor hundreds of these cases, which often present a similar standing issue – the class representative has purchased one product, say Ben & Jerry’s All Natural Chunky Monkey Ice Cream, which he says was falsely advertised as “all natural,” but seeks to represent a nationwide class of consumers challenging all varieties of Ben & Jerry’s ice cream marketed as “all natural,” including, for example, Chubby Hubby.

One of the latest decisions on this standing issue is Lanovaz v. Twinings North America, Inc., 2013 WL 2285221 (N.D. Cal. May 23, 2013). The plaintiff in that case was suing over the phrase “a natural source of antioxidants” on the label of 53 tea products sold by Twinings. But the plaintiff herself had bought only six of those products. Because she obviously wasn’t deceived by the labels on the other 47 products she never bought, Twinings moved to dismiss the claims with respect to those products for lack of standing.

Judge Whyte denied the motion (in large part), which he said raised a close question that has “divided” courts and for which “the Ninth Circuit has not provided guidance.” In Judge Whyte’s view, “courts should not be too rigid in applying standing requirements to proposed classes.” For that reason, he noted, the “deciding factor is whether the products are sufficiently similar.” If the products are “nearly identical” and involve identical challenged advertising, the named plaintiff will have the requisite “sufficient ‘personal stake’ in the litigation.”

Judge Whyte then held that because 51 varieties of the tea in question were made from the same plant as the varieties plaintiff purchased, the named plaintiff had standing to assert class claims as to them all. But the remaining two types of tea came from a different plant (i.e., a different source of the “natural antioxidants” touted on the label). Judge Whyte concluded that the plaintiff could not bring class claims with respect to these products because they were “significantly different” from the ones the plaintiff had purchased.

We think Judge Whyte chose the wrong side of this split in authority. Just as class actions can’t be used to transform the substantive law, the Supreme Court has similarly made clear that plaintiffs cannot clothe themselves with standing they would otherwise not possess merely by suing in the name of a putative class. E.g., Lewis v. Casey, 518 U.S. 343, 357 (1996).

As we’ve covered on the blog, the Supreme Court recently denied review of a related standing issue in the context of a securities fraud claim in which the plaintiff had purchased only some of the securities as to which he sought to bring class claims. Hopefully the Court will step in soon to resolve the disagreement by lower courts over so-called “class standing”—a divide that Lanovaz demonstrates is deepening.

The federal Food Drug and Cosmetic Act (“FDCA”)—along with the implementing regulations promulgated by the FDA—sets out a detailed national standard for much of what appears on food and beverage labeling. See 21 U.S.C. §§ 301, et seq.; 21 C.F.R. §§ 101, et seq.; Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, 1175 (9th Cir. 2012). This national labeling law expressly preempts states from enacting different requirements for labels, including requirements imposed by courts under the guise of redressing a “misleading” or “fraudulent” label. 21 U.S.C. § 343-1; Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011).

Preemption under the FDCA served as a bulwark against the first wave of false advertising consumer class actions against the food and beverage industry. Most of those complaints essentially attempted to impose state-law labeling requirements that differed from the federal requirements, and courts therefore dismissed the claims as expressly preempted. See, e.g., Turek, supra; Carrea v. Dreyer’s Grand Ice Cream, Inc. (pdf), 475 Fed. App’x 113 (9th Cir. 2012).

In response, the plaintiffs’ bar adapted by refocusing class action litigation on labeling statements that they asserted were not covered by a federal requirement. The hundreds of cases challenging “natural” labeling statements are an example. In most respects, FDA has declined to regulate the use of the term “natural” on food and beverage labels, claiming that, “[f]rom a food science perspective, it is difficult to define a food product that is ‘natural’ because the food has probably been processed and is no longer a product of the earth.”  No federal requirement, no preemption of the state-law consumer claims, plaintiffs say.

Moreover, in the last 16 months, the plaintiffs’ bar has debuted a new theory that it hopes will allow them to evade preemption. They rely on California’s wholesale incorporation of the FDCA’s labeling law into the law of California. Cal. Health & Safety Code § 110100. Alleged violations of the FDCA are thus transformed into violations of California’s Sherman Food Drug and Cosmetic Law. And violations of the Sherman law, in turn, may be alleged as predicate acts in support of claims for violation of California’s consumer protection laws, including the Unfair Competition Law (a/k/a Section 17200). Plaintiffs argue that because state law imposes identical requirements to the federal requirements (indeed, the same FDCA requirements), liability under state law is not preempted.

But is indirect enforcement of the FDCA via a “state-law delivery device” compatible with Congress’s refusal to create a private right of action for violation of the FDCA? (California’s Sherman Law also does not allow for private enforcement.) Plaintiffs tried and failed to use a similar strategy in the context of medical devices, which are also governed by the FDCA. Specifically, the Supreme Court has held that Section 337 of the FDCA (the exclusive-enforcement provision) impliedly bars suits by private litigants “for noncompliance with” federal law, and that the express-preemption provision of the Medical Device Amendments preempts any state-law claim if the result of the litigation might be to require (or forbid) any conduct not already required (or forbidden) by federal law. Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 349 n.4 (2001); Riegel v. Medtronic, Inc., 552 U.S. 312, 330 (2008). Taken together, the exclusive-enforcement and express-preemption provisions

create a narrow gap through which a plaintiff’s state-law claim must fit if it is to escape express or implied preemption. The plaintiff must be suing for conduct that violates the FDCA (or else his claim is expressly preempted . . .), but the plaintiff must not be suing because the conduct violates the FDCA (such a claim would be impliedly preempted . . .).

Bryant v. Medtronic, Inc. (pdf), 623 F.3d 1200, 1204 (8th Cir. 2010) (emphasis in original).

On our view, Buckman and its progeny bar any state-law claim for which the existence of the federal regulatory scheme is a “critical element.” This implied preemption issue, as applied to food labeling false advertising claims, is currently joined in several pending motions in the Northern District of California. See, e.g., Kane v. Chobani, No. 12-cv-2425 (N.D. Cal), Dkt. No. 97; Trazo v. Nestlé USA, Inc., No. 12-cv-2272 (N.D. Cal.), Dkt. No. 64; Samet v. Procter & Gamble Co., No. 12-cv-1891 (N.D. Cal.), Dkt. Nos. 85, 87; Bruton v. Gerber Prods. Co., No. 12-cv-2412 (N.D. Cal.), Dkt. No. 47.

We expect decisions on these motions in the near future and will blog on the results when decisions are issued.

 

Plaintiff Christopher Rapczynski testified that he purchased Skinnygirl Margarita mix “because I love my wife,” she “said she liked it,” and she “has my three children and works very hard.” Those all may be good reasons for a nice Valentine’s Day present, but not for bringing a class action. As the Southern District of New York recently held, Rapczynski was an inadequate class representative—not for lack of love—but because he hadn’t relied on the allegedly false claim on the product’s label about which he was suing. For that and other reasons, the court denied certification of a putative class of Skinnygirl purchasers. See Rapczinsky v. Skinnygirl Cocktails LLC (pdf), 2013 WL 93636 (S.D.N.Y. Jan. 9, 2013).

Rapczynski had filed a putative false advertising class action against the makers and distributors of Skinnygirl Margaritas, alleging that the “All Natural” statement on the product label was misleading because the product contains sodium benzoate (a preservative) and mixto (a tequila byproduct). (The Skinnygirl brand was created by reality TV star Bethenny Frankel, but as fans of her show know (and non-fans can learn from Wikipedia), she sold the brand for an obscene amount.)

The court found that Rapczynski was not an adequate representative of the class and that his claims were not typical of those of the putative class members because his deposition testimony confirmed that he hadn’t relied on the allegedly false statement, a necessary element of claims for breach of express warranty and promissory estoppel under New York law. Rapczynski admitted that he had bought the product to thank his wife and because he knew that she enjoyed it, rather than because of anything on the label. His statements further established that “he would have bought that product regardless of price” and that “his belief with respect to its naturalness was irrelevant to his purchasing decision.”

The court also held that Rapczynski’s claims were not typical of those of a putative class of New York purchasers because he had bought the product outside of New York state and thus was attempting “to assert the class’s rights under at least two statutes that do not guard against the [out-of-state] transactions which allegedly caused him injury.”

The court’s denial of class certification serves as a reminder that the deposition of a class representative can be the key to defeating class certification. It is also a reminder that consumers buy products for all sorts of reasons—including ones that have absolutely nothing to do with the representations alleged in a false-advertising or breach-of-warranty complaint. Although not every class representative may be as candid as Rapczynski, the cases serves as a good illustration of the kinds of arguments that defendants in false advertising class actions can develop to show either that the proposed class representative is atypical and inadequate or that the reliance or causation elements of the plaintiffs’ claims turn on an endless series of individualized determinations, thus precluding class certification.

The plaintiffs’ bar often uses adventuresome choice-of-law arguments to attempt to grease the skids towards certification of nationwide classes.  Earlier this year, in a blockbuster decision, the Ninth Circuit rejected one of plaintiffs’ key arguments in Mazza v. American Honda Motor Co. (pdf), 666 F.3d 581 (9th Cir. 2012).  In that case, the plaintiffs had argued that California consumer-protection law should apply to the claims of all putative class members nationwide because the alleged wrongdoing supposedly emanated from that state.  The Ninth Circuit held that the plaintiffs’ approach would contravene fundamental principles of federalism by ignoring the materially different consumer protection laws of the other states where the challenged transactions actually occurred.  (Mayer Brown represented defendant Honda; here is our report on the decision.)

Since then, plaintiffs in consumer false advertising cases have scrambled to find ways to answer Mazza. One tactic—used frequently against food companies—is to bring nationwide class claims under the federal Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. §§ 2301 et seq. Plaintiffs assumed that the existence of a federal claim—allowing the entire nationwide class’s claims to be evaluated under federal law—would do the trick. Plaintiffs thus often allege that statements on a product label, such as “All-Natural Ingredients,” constitute a written warranty by the manufacturer under the MMWA and that a breach of that warranty occurred when consumers did not realize the advertised benefits.

Continue Reading Class Action Bar Targets Food Companies for False Advertising Lawsuits, Using Magnuson-Moss Warranty Act to Try to Evade Ninth Circuit’s Mazza Decision