Thursday, May 08, 2014

record-free consumer class action certified as ascertainable

McCrary v. Elations Co., LLC, 2014 WL 1779243, No. EDCV 13–00242 (C.D. Cal. Jan. 13, 2014)

The court certified a class alleging the usual California statutory claims against a supplement called Elations, whose label claimed a “clinically-proven combination” and/or “clinically-proven formula.”

The court rejected a challenge to ascertainability on the ground that self-identification was insufficient to satisfy due process and it didn’t have any records identifying the consumers of its OTC product.  Defendant’s argument would destroy the consumer class action.  The class definition was enough to make it administratively feasible to determine membership; because the alleged misrepresentations were on the label, there was no concern about defining the class to include people who weren’t exposed to the misrepresentation (though see below).  Elations’ concern for its due process rights to challenge a putative member’s membership was misguided.  

Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), is not the law of the Ninth Circuit. It was enough that the class definition describes “a set of common characteristics sufficient to allow” a prospective plaintiff to “identify himself or herself as having a right to recover based on the description.”  To the extent Elations had individualized defenses, it was free to try them against individual claimants. 

The potential for false claims didn’t invalidate the objective criteria used to determine inclusion. Elations pointed to one former plaintiff who testified that he purchased Elations, but after further questioning at deposition, it was revealed he purchased another product.  Elations argued that class members may not remember whether they purchased Elations, and that the joint supplement market was crowded, a further source of confusion for potential class members. But sufficient notice could cure confusion, and Elations’ records could identify the retailers who sold its product, so that could help.  Plus, Elations’ marketing director explained that many of the competing supplements were sold in pill form, unlike Elations, or in flavored versions Elations didn’t have.  Thus, “proper notice regarding the form of the product and its characteristics may help reduce consumer confusion regarding class membership.”

Elations also argued that there was no precise time period when all class members would’ve bought the product with the “clinically-proven” labels. The challenged language was on the Elations label from January 28, 2009 through August 26, 2010, but Elations did not recall or re-label existing products once the label change was made.  This justified limiting the class period according to the two-year shelf life listed on the label, but not rejecting the class entirely.

Numerosity (like adequacy) was unchallenged.

Commonality is satisfied by “the existence of shared legal issues with divergent factual predicates” or a “common core of salient facts coupled with disparate legal remedies within the class.”  Here, the common legal issues were whether the claims on Elations’ packaging that it contains a “clinically-proven combination” and/or a “clinically-proven formula” were material and false.  By definition, class members were exposed to these labeling claims, creating a “common core of salient facts.”

Elations contested typicality, which requires a representative plaintiff’s claims to be “reasonably co-extensive with those of absent class members.”  Elations argued that plaintiff’s medical history of taking Vicodin created a unique defense because it may have interfered with Elations’ effectiveness in improving his joints.  Not so, since his theory was false advertising—he bought the product/paid more than he would have because of the allegedly false claims.  Also, typicality focuses on the defendant’s conduct and the plaintiff’s legal theory, not the plaintiff’s injury.  In addition, Elations’ defense was not atypical of defenses available against other class members, “as it is likely many other Elations’ users took other medications and/or suffer from other illnesses.”

The court did agree that customers who bought Elations online had to be excluded from the proposed class, because they might not have seen the label/shrinkwrap on which the clinically proven claim was made.  “Even if the websites offering Elations presented similar clinical proof claims in their marketing or description of the product, this would be insufficient because Plaintiff did not view any claims made on the website, nor did he purchase the product online.”  (This seems to contradict the general statement about typicality—his claim need not be identical.)

Turning to Rule 23(b)(3), Elations argued that unnamed class members might lack standing, and that the court would have to make individual determinations of which consumers actually viewed the clinically proven claim; of materiality; and of whether consumers actually believed the product was ineffective and caused them damage.  However, the class definition presupposed exposure to the clinical proof claims. And “a presumption of exposure is inferred where, as here, the alleged misrepresentations were on the outside of the packaging of every unit for an extended period.” Mazza was distinguishable, given the limited scope of the advertising at issue there and given that Mazza concerned an allegedly misleading omission instead of an explicit statement about effectiveness.  “Defendant does not argue, nor could it, that its clinical proof claims were of limited scope, since it placed them on the packaging of every unit of Elations sold over an 18–month period.”

As for standing, it exists if at least one named plaintiff meets the requirements of the law, which was the case here. Moreover, “at the class certification stage Plaintiff need not prove that the clinical proof claims were material to all consumers of Elations or that they relied on those claims.” Materiality raises at least an inference of reliance where material misrepresentations were made to the entire class.  Materiality is an objective test of likely deception; thus, reliance didn’t require individualized determination.

Elations argued that the court couldn’t infer reliance because “many consumers purchase Elations based on the recommendation of a doctor or friend or for reasons other than the information printed on the label.”  But Elations’ own consumer survey showed that over 75 percent of Elations purchasers believed that “proven levels” of the active ingredients were worth paying for. Plus, the falsity here went to the product’s efficacy, “the heart of a customer’s purchasing decision. Defendant cannot reasonably argue that a putative class member would purchase a product that does not work, regardless of who recommended it.” This was enough to infer reliance at this stage.

In addition, the claim that some putative class members were happy with Elations and thus were uninjured failed. Consumer protection claims don’t depend on class members’ subjective state of mind, but whether they bought a product bearing the alleged material misrepresentations. Likewise, the court rejected Elations’ argument that consumers might interpret “clinically proven” in various ways.  Whether this was deceptive was a jury question, and “clinically proven formula” had a “clearly ascertainable meaning,” “namely that identifiable sources substantiate the claims of effectiveness, and thus [was] not subject to boundless interpretations.”  As a result, common questions predominated.

The court also found that plaintiffs might be able to provide a workable damages model, even though they weren’t entitled to a full refund because they might have obtained some benefit from the product. At this stage, they didn’t have to identify a comparable “clinically proven” product by which to measure damages.  (Shouldn’t they instead have to identify a comparable non-clinically proven product to show the price difference?)   The amount of damages, even if it required individual calculation, didn’t defeat certification since none of the sought-after remedies would require an award of damages unique to any particular class member.

The class action mechanism was superior because there weren’t alternatives, given the low value of individual claims. Thus, the class was certified as limited.

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