Thursday, May 15, 2014

With a face like that: Maybelline defeats class certification

Algarin v. Maybelline, LLC, 2014 WL 1883772, No. 12cv3000 (S.D. Cal. May 12, 2014)
This case shows the many hurdles now present for consumer class actions.  Once again, perhaps ironically, consumers have no remedy when the harm is probabalistic; only competitors would. 
Plaintiffs sued Maybelline over its Superstay 24HR product line, which allegedly did not last for 24 hours.  Plaintiffs challenged the lipcolor (labeled “SuperStay 24,” “Micro–Flex Formula,” “No Transfer,” and “Up to 24HR Wear”) and foundation (labeled “SuperStay Makeup 24HR,” “Micro–Flex Formula,” “ZeroTransfer,” and “24HR Wear”).  Products are also advertised as makeup that provides “flexible, breathable, all day comfort,” that withstands “heat, sweat and humidity.”  The main challenge was to the 24 hour/no transfer claims.  (Disclosure: I use a couple of the 24HR eye shadows.  My experience with their persistence is mixed, but I think some would mostly stay on overnight, if that were desirable.  I can’t imagine believing a “no transfer” claim, though I can imagine hoping it would be true; if it were credibly demonstrated to me I’d buy the hell out of it.)
Plaintiffs alleged that they relied on these representations; that the products didn’t last anywhere near 24 hours; and that they paid a price premium over other Maybelline products—between $1-$1.50 for the lipcolor and $1-3 for the foundation.  Maybelline does sometimes issue refunds.  Between launch and mid-2013, about 2,700 consumers contacted Maybelline regarding the lipcolor and 700 regarding the makeup.  Of those, 604 were performance complaints about the lipcolor and 97 about the makeup.
The court found that even creating subclasses for differently labeled products wouldn’t address the deficiencies precluding class certification.
Though individualized reliance is an element of a CLRA claim, if a material misrepresentation is made to the entire class, then there’s a presumption of reliance as to the class.  But “if the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action.”  Here, Maybelline introduced “unrefuted evidence of who the reasonable consumer in the target audience is and what drives her in making purchasing decisions.” Thus, the court didn’t need to hypothesize about a reasonable consumer.
Maybelline’s expert reported, in the court’s words, that “repeat purchasing is a behavioral indicator of customer satisfaction and it follows that repeat purchasers are fully informed as to the duration claims and realities when they decided to purchase the Class Products again.” 
Comment: That doesn’t preclude the possibility of bait and switch, and the Supreme Court has explicitly rejected this rationale for excusing false claims.  FTC v. Colgate-Palmolive Co., 380 U.S. 374, 389 (1965):
[A]ll of the above cases, like the present case, deal with methods designed to get a consumer to purchase a product, not with whether the product, when purchased, will perform up to expectations. We find an especially strong similarity between the present case and those cases in which a seller induces the public to purchase an arguably good product by misrepresenting his line of business, by concealing the fact that the product is reprocessed, or by misappropriating another's trademark. In each the seller has used a misrepresentation to break down what he regards to be an annoying or irrational habit of the buying public—the preference for particular manufacturers or known brands regardless of a product’s actual qualities, the prejudice against reprocessed goods, and the desire for verification of a product claim. In each case the seller reasons that when the habit is broken the buyer will be satisfied with the performance of the product he receives. Yet, a misrepresentation has been used to break the habit and … a misrepresentation for such an end is not permitted.
False claims interfere with consumers’ autonomy, which is a harm in itself; they distort the market and make it harder for producers who can deliver the promised value to compete; and this rationale ignores the mere exposure effect and other quirks of human psychology—among other things, once we’ve made a purchase, we like it more so as to defend our own judgment.  This is an important part of trademarks’ value, as Laura Bradford has detailed.
But the court reasoned that, “with cosmetics such as the ones at issue here, customers can readily discern how well they work and whether they lived up to the claimed representations.”  Thus, repeat purchasers couldn’t have been injured.  The expert report indicated that, for the lipcolor, 45% of purchasers were satisfied with the product based on repeat purchases.  In addition, duration was not the only motivating factor in making the purchases; over half of purchasers could not recall duration expectations or were satisfied with the duration of the product; 4% of the total sample expected the specific 24 hour duration, showing that duration expectations varied among purchasers; and only 9% of the total sample were one-time purchasers who expected the product to last 24 hours and were therefore “injured.”  Results for the makeup were similar, though only 32% of purchasers were satisfied and not misled by the duration claim and 14% were one-time purchasers.  I find this a mix of relevant and irrelevant conclusions—I’m leery of saying a claim made in the product name isn’t material, but if consumers often don’t believe it then I can reluctantly go with it, a lot more readily than I can accept that repeat purchase means that a deception is unproblematic.  The court, though, found it to be a matter of common sense that repeat purchase means a consumer was satisfied.
Maybelline’s evidence indicated that there were (1) a large percentage of the potential class of SuperStay purchasers are repeat purchasers who couldn’t have been misled, and (2) one-time purchasers who had no duration expectations. The court determined that these didn’t go to ascertainability, since the purchasers were still exposed to the misrepresentations, but did have effects on other certification issues. 
However, the fact that the class didn’t exclude purchasers who had received refunds already did make it overbroad.  More significantly, though the class might be ascertainable “in the sense that there are objective criteria for determining who its members are,” it wasn’t actually ascertainable because there were no records that could be used to verify membership (and we all know that a statement, even one under penalty of perjury, is worthless without a record, right?).  “Cases where self-identification alone has been deemed sufficient generally involve situations where consumers are likely to retain receipts, where the relevant purchase was a memorable ‘big ticket’ item; or where defendant would have access to a master list of consumers or retailers.” Here, these were small purchases where it was extremely unlikely that average purchasers would retain receipts or even remember that she bought the 24HR products instead of other similar Maybelline or competitor products.  (Paging Ann Bartow re: the untrustworthy female consumer.)  Plaintiffs’ own deposition testimony indicated that they didn’t retain receipts and had difficulty recalling many details about their purchases.
But lack of ascertainability wasn’t alone enough to defeat certification, as long as the definition was sufficiently definite to identify putative class members.  The problems here went deeper.
“In light of the objective evidence showing that there was a substantial number of class members who were not misled by the 24 hour claim, whether Maybelline’s conduct was false or misleading or likely to deceive is not subject to common proof on a classwide basis.”  Maybelline’s survey showed that purchasers had a variety of duration expectations, and many expected the product to last less than 24 hours or had no specific duration expectations. In addition, given Maybelline’s evidence on consumer expectations, the varying factors that influence purchasing decisions, and consumer satisfaction, plaintiffs also failed to show that materiality and reliance were subject to common proof. Plus, economic injury wasn’t a common question, since many purchasers were satisfied and even raved about the product, e.g., “This is best lipcolor ever ... I will be back for more.”
Typicality was also an insurmountable barrier.  Given the expert evidence, plaintiffs’ reliance on the alleged misrepresentations wasn’t typical.
Nor was an injunction-only class appropriate.  “Plaintiffs, and the portion of the class who purchased the Class Products expecting them to last 24 hours, are now well aware of the realities of the products. Indeed, as Maybelline contends, with cosmetics such as the products at issue here, consumers can readily discern whether or not the claimed duration is true.”  This wasn’t like a dietary supplement, where the benefits were hard to ascertain or took time to materialize.  Plaintiffs had no probability of future injury because they already knew the truth.  Future purchasers who’ve never bought the products were excluded from the class.  And plaintiffs’ sought-after restitution and disgorgement wasn’t incidental to injunctive relief.
As for a damages class, common questions didn’t predominate, for the reasons discussed above.  Plaintiffs proposed a “price premium” method to determine classwide damages: damages were the difference between the 24HR price and the price of comparable Maybelline products. But the court found it speculative whether the price premium came from the 24 hour/no transfer claims.  Perhaps higher quality ingredients, available colors, or Maybelline’s own R&D costs created the premium.  (That last can’t explain the market price, at least not without a lot more theory.)  It’s nearly impossible to find a product that’s exactly the same but without the 24 hour claim.  Plaintiffs didn’t offer any expert testimony that would aid the court in identifying the amount of the premium attributable to the 24 hour claim.  In addition, Maybelline argued that there was in fact substantial variability in retail prices among the class products and competing products, and the court agreed, because Maybelline didn’t set retail prices. A proposed “wholesale price premium” calculation wouldn’t fix the problem, since Maybelline submitted evidence that wholesale prices also varied.
Finally, the court expressed its wariness of Maybelline’s argument that its refund program precluded a finding of superiority.   Rule 23(b)(3) speaks of “other available methods for ... adjudicating the controversy.”  Though other cases have used refund programs as superior alternatives, and though the court thought this had policy appeal because it provides full relief and avoids lining lawyers’ pockets, this court (properly) declined to step outside the text of the rule.  (Because so few people seek refunds even when they’re deceived and harmed, refund programs line false advertisers’ pockets compared to class actions—is that better than lining lawyers’ pockets?)  Nonetheless, because the class wouldn’t be manageable, it wasn’t superior.

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