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.

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.

As readers of our blog know, ascertainability is one of the most contentious issues in class action litigation these days.  Ascertainability is the main issue presented in Jones v. ConAgra Foods, No. 14-16327, a pending Ninth Circuit case in which the plaintiff and his amici have mounted a full-scale attack on whether the ascertainability requirement even exists.  Along with our colleagues Andy Pincus and Dan Jones, we have filed an amicus brief (pdf) on behalf of the Chamber of Commerce of the United States arguing that ascertainability is a critical requirement for class certification, and that due process forbids courts from relaxing that requirement in the name of certifying a class.

As we explain in the brief, the plaintiff in Jones proposed a consumer class whose members will be largely impossible to identify.  The putative class consists of California residents who purchased certain Hunt’s canned tomato products bearing particular labels.  Who are these people?  The answer cannot be found through objective documentation:  Consumers typically do not keep receipts or packaging from food products (or other similar products) that likely were purchased or consumed years ago.  The plaintiff in Jones says that this hurdle can be overcome by allowing absent class members to file affidavits testifying that they purchased a particular product (presumably based on their recollection).  But that testimony and recollection (under the plaintiff’s proposal) would be immune from challenge by the defendant (for example, through cross-examination).

The district court properly held (pdf) that this proposal flunked the ascertainability requirement implicit in Rule 23.  On appeal, Jones and his amici (Public Citizen and the Center for Science in the Public Interest) argue that the approach to ascertainability adopted by the district court is a recent invention of the Third Circuit in Carrera v. Bayer Corp.  (We’ve discussed Carrera extensively.)  They contend that the ascertainability requirement should be either eliminated from the class certification analysis altogether or substantially relaxed in order to clear the runway for consumer class actions.

In our brief, we explain why that view is mistaken.  Here are some of the key points from our brief:

  • The assumption by the plaintiff and his amici that the ability to certify class actions is to be promoted at every turn is deeply misguided.  Class actions are a means of dispute resolution, not an end in themselves.  As the Supreme Court recently reiterated in Wal-Mart Stores, Inc. v. Dukes, class actions are an “exception to the usual rule” that cases are litigated individually, and it is therefore critical that courts apply a “rigorous analysis” to the requirements governing class certification before a lawsuit is approved for class treatment.
  •  Ascertainability is one of those requirements that, like many other class certification requirements, is rooted in well-established principles of due process.  It seems hard to dispute that if the named plaintiff were to sue a company over a particular product on his own, he would have to prove at trial that he purchased the challenged product and that he was injured as a result.  As a matter of due process, the defendant would have to be given the opportunity to challenge the plaintiff’s evidentiary showing, including through cross-examination, and to have a court or jury resolve any factual disputes.
  • The fact that a plaintiff has chosen to bring a class action cannot alter the due process rights of defendants.  A Rule 23 class action is the sum of the individual class members’ claims within it—nothing more.  The Supreme Court made this clear in Dukes when it held that a class can’t be certified “on the premise that [the defendant] will not be entitled to litigate its * * * defenses to individual claims.”  Interpreting Rule 23 otherwise would violate the Rules Enabling Act, which embodies the due process principle that procedural rules cannot “abridge, enlarge or modify any substantive right.”  28 U.S.C. § 2072(b).
  • Ascertainability ensures that due process is honored by preserving defendants’ ability to challenge any would-be class member’s claim of eligibility and right to recovery.  Without a reliable and administratively feasible method for identifying who is in a class, defendants will have no way to bring such challenges, short of extensive individualized fact-finding and an unmanageable series of mini-trials.
  • Virtually all courts to consider the issue have insisted that plaintiffs demonstrate that a proposed class is ascertainable.  And the notion that ascertainability should be relaxed or ignored in order to make consumer class actions easier to bring runs headlong into defendants’ due process rights.
  • The policy argument advanced by the plaintiff and his amici that unascertainable class actions of this sort are beneficial cannot be squared with the evidence.  In a theme we have explored on this blog, the ordinary justification for class actions—that they offer benefits for class members who would not pursue relief on their own—is simply inapplicable to cases involving class members who can’t be identified; when such class actions are certified, only a handful of class members actually receive benefits.

We will be watching Jones v. ConAgra closely to see whether the Ninth Circuit—which oversees the so-called “Food Court”—continues to ensure that ascertainability is satisfied in class actions.  But the Ninth Circuit is not the only circuit that will address the question.  This Friday (February 6), the Eleventh Circuit will hear oral argument in Karhu v. Vital Pharmaceuticals, Inc., No. 14-11648.  (We’ve covered the district court’s decision in Karhu.)  In Karhu, plaintiffs argue that class members can be identified through claimant affidavits and retailer records.  Like the plaintiffs in Jones, the Karhu plaintiffs argue that Carrera was wrongly decided and should not be followed.

Will either circuit create a split with Carrera and other cases?  Stay tuned!