Plaintiffs sued Kraft under the UCL, FAL, and CLRA based on allegedly false marketing of Teddy Grahams, many varieties of Ritz Crackers, Original Premium Saltine Crackers, Honey Maid Graham Crackers, Vegetable Thins and Ginger Snaps, as healthy, though they contain high levels of partially hydrogenated vegetable oil and other “unhealthy, highly-refined, highly-processed, and nutritionally empty ingredients,” and thus allegedly cause health problems including cardiovascular disease, diabetes and cancer. The court previously denied class certification without prejudice; the renewed motion limited the class to California consumers and proposed one subclass per product with the challenged label. (The court found that plaintiffs lacked standing as to varieties of Saltines they never purchased, so they could only make claims based on regular Premium Saltines, not Premium Saltines Unsalted Tops, Premium Saltines Multigrain, Premium Saltines Fat-Free and Premium Saltines Low Sodium—a list that amazes me just because I had no idea the world of saltines was so complex.)
In this tentative opinion before a hearing, the court was unwilling to certify a class seeking damages under Rule 23(b)(2), but sought clarification over whether plaintiffs would seek injunctive relief only under 23(b)(2) if it denied, as it was inclined to do, any 23(b)(3) certification (for a class seeking damages). Kraft argued that such a suit would be largely moot because it had discontinued many of the challenged labels, so the court needed more information, because 23(b)(2) certification might be warranted, but ascertainability and predominance precluded a 23(b)(3) certification.
Defining the class as including only consumers who bought products with the allegedly unlawful labels assuaged the court’s worry about ascertainability to the extent that a previous definition included consumers who might not even have seen the allegedly misleading claims and thus wouldn’t have standing. However, ascertainability was still a problem because the court thought it would be infeasible to determine whether a person was a class member—overlapping with manageability concerns. That is, these were cheap products and consumers were unlikely to have receipts or even good memories about what they bought when.
When there was no way to verify that self-identified class members suffered the alleged injury, and when consumers themselves might not be able to honestly identify themselves, certification was probably improper. Self-identification is more acceptable where “consumers are likely to have retained receipts, where the relevant purchase was a memorable bigticket item, or where the defendant would have access to a master list of either consumers or retailers who dealt with the items at issue.” The one case plaintiffs identified allowing self-identification for small-ticket purchases without written receipts was Zeisel v. Diamond Food, Inc., No. C 10–01192 JSW, 2011 U.S. Dist. LEXIS 60608 (N.D. Cal. June 7, 2011), which itself “relied upon cases involving big-ticket items or cases where there were no nuanced labeling issues involved,” and the court was unwilling to rely on it. Lack of ascertainability/manageability would also make it impossible for future courts to figure out who was and wasn’t bound by the judgment, a serious problem.
Since lack of ascertainability alone wouldn’t necessarily scuttle a class action, the court continued with the other factors. Numerosity was of course easy. As for commonality, plaintiffs identified common questions about what Kraft communicated, whether it was material, etc. Under the UCL and FAL, plaintiffs need not prove that each individual class member relied on misrepresentations if reasonable consumers were likely to be deceived. Thus, even if some class members bought the products because they liked the taste, that wouldn’t affect commonality. As for CLRA claims, individualized reliance is an element, but reliance can be presumed if material misrepresentations were made to the entire class. And materiality wasn’t suitable for adjudication at the certification stage; the court noted that plaintiffs made a sufficient threshold showing of materiality, identifying numerous Kraft documents indicating that health labeling like the challenged labels was likely to influence purchasing decisions. (However, the court noted that, among other things, the fact that one class representative made a post-suit purchase of one of the products indicated that the issue of whether the misrepresentation was material was far from clear.) As to subclasses involving one product and one label, whether a claim was material to a reasonable consumer was plainly a common question of fact.
Subclassing solved the court’s previous objections to the wide range of products and labeling claims challenged. Kraft argued that class members had different reasons to buy the products, but common injury didn’t depend on whether class members were upset about the injury for the same reasons: the question was whether liability could be determined by resolving the same factual and legal allegations.
However, the court thought the proposed classes failed 23(b)(3)’s predominance requirement: individualized issues of damages were too important. The court was troubled by other things, but not decisively so. Kraft argued that the Teddy Grahams and Ritz I subclasses still involved numerous products, but the former contained more than one product only insofar as the container sizes differed, which wasn’t enough variation. The court was more worried by the varieties of Ritz crackers—Kraft allegedly falsely claimed that “Reduced Fat, Whole Wheat, Hint of Salt, or Low Sodium” were all “sensible” choices, but the legal and factual underpinnings of why they weren’t sensible would seem to differ. Plaintiffs responded that the ingredients rendering the crackers nonsensible were the same for all the varieties, but the court would still find that four different products with two different labels was too many for one subclass.
Kraft also argued that the subclasses were challenging too many labels. This only related to Teddy Grahams and Honey Maid, since the others involved either only one label or the labels “sensible snacking” and “sensible solution,” “which are sufficiently similar that the Court cannot imagine Kraft to argue that different legal and factual questions would resolve the merits of Plaintiffs' claims as to one as distinct from the other.” The most problematic was the Teddy Grahams subclass, which challenged four labels: “sensible snacking,” “sensible solution,” “smart choices,” or “help support kids' growth and development.” These differed enough to prevent common questions from resolving the claims of all members. For Honey Maid, challenging “wholesome” also differed from “sensible snacking/solution,” and the court was inclined to narrow the class.
The court was less impressed by Kraft’s argument that there couldn’t be commonality when the same challenged words were used on a number of different package designs for the same product. Plenty of cases have found predominance where one allegedly fraudulent message was conveyed across TV, print ads, and product labels, and Kraft couldn’t cite cases in its favor on this argument. Though there were other problems with the proposed classes, it would be “manifestly unjust” for a court to reject predominance simply because a company didn’t use the allegedly fraudulent claim for an extended period of time or because it periodically made minor changes to the packaging containing the challenged claim.
Kraft argued that some of the packaging during the subclass periods didn’t bear the allegedly fraudulent representations, but consumers who bought those packages wouldn’t be part of the class in the first place; this was just another version of the ascertainability argument, or could be seen as going to damages from the challenged labels rather than to liability.
Kraft’s most successful argument was on individualized damages methods. Plaintiffs had the burden of showing that restitution could be calculated by methods of common proof. Nonrestitutionary disgorgement wasn’t available in a UCL class action, so awarding full disgorgement wasn’t allowed, since the class members “undeniably” received some benefit from the products, and a large portion of the sales wouldn’t be tainted by misrepresentations due to “customer loyalty and other factors” driving sales. Plaintiffs’ second theory was that Kraft should pay restitution of a premium charged for misleading health and wellness claims, compared to the same products before the claims were used. The amount of such a premium might be established on a classwide basis, but individual class members would still need to prove how many purchases they made, where and when, to determine how much they were owed. “While this method has been approved in a few analogous class actions, memory issues as to what products were purchased where and in what quantities, as well as price differences at the vast array of retail establishments that sell the Products render this Court unwilling to find that common questions of law or fact will predominate as to the resolution of class members' claims, due to the individualized nature of the damages calculations.” Thus, predominance wasn’t met due to manageability concerns.
The court rejected Kraft’s arguments against typicality, including the argument that plaintiffs were atypical because they bought and ate other foods with the same ingredients they alleged were unhealthy here. This was irrelevant because the issue was misleadingness, not whether plaintiffs bought other products that may or may not have made any healthfulness claims. Their purchases were relevant to individual reliance, but that wasn’t an element for the UCL and FAL claims, and the CLRA claim would only survive as a class action if the misrepresentations were material and individual reliance could be presumed.
The court also rejected various challenges to plaintiffs’ adequacy, though finding it a close question given the class representatives’ unfamiliarity with the complaint and the addition and removal of a law firm as co-counsel. The court cautioned counsel to “include, involve and respect the class representatives sufficiently if the case moves forward.”
The court left final resolution of certification for a hearing focusing on ascertainability, damages calculation, and other lingering issues.