Tuesday, May 08, 2012

Class action spreads

News story on the proposed settlement here.

In re Ferrero Litigation, 278 F.R.D. 552 (S.D. Cal. 2011)

Plaintiffs moved for class certification of their California consumer protection claims against Ferrero based on alleged misrepresentations that Nutella was part of a healthy breakfast for children, and the court granted the motion.  Plaintiffs alleged that they bought Nutella for their childred in reliance on ads suggesting that Nutella was nutritious, a healthy choice, etc. and showing children being fed the product.  In fact, Nutella has high levels of sugar and fat, which help make it so yummy.

Numerosity was easy: 10.1% of American households purchased Nutella in 2010; net sales from 2007-2010 were over $213 million.  Typicality was also easy.  Commonality requires shared injury—a common contention capable of classwide resolution, though divergent factual predicates or remedies are allowable. Ferrero argued that plaintiffs failed under Wal-Mart, but the court disagreed.  The claims were based on a common ad campaign, and included common questions such as whether the ads misrepresented that Nutella was healthier, more nutritious, or a greater contributor to a healthy breakfast than it actually was.  Adequacy was also satisfied: there were no conflicts between class representatives, counsel, and the class.

Rule 23(b)(3) requires more: predominance and superiority.  Plaintiffs identified several predominating common questions: what message was communicated, misleadingness, materiality, deceptive omissions, and proper calculation of damages/scope of injunctive relief.  Ferrero naturally disagreed: for example, one named plaintiff didn’t regret her purchase and continued using the spread after she learned its sugar content, and another testified that her children loved Nutella and were upset when she took it away (that fact seems pretty irrelevant).  More generally, Ferrero argued that the case involved class members’ individual expectations, dietary preferences, nutritional knowledge, and imperfect market substitutes.  The court concluded that all the class members’ claims shared a common contention: that Ferrero made a material misrepresentation of Nutella’s nutritional benefits stemming from a common advertising campaign.  Superiority was easy: individual claims wouldn’t be economically feasible.

Ferrero argued that it would violate due process to apply California law nationwide.  Ferrero is a Delaware corporation with NJ headquarters, and its only California employees are field reps responsible for sales to retailers, not to consumers.  Only 15 of its 166 field employees are in California, and sales are about 12.5% of national sales, proportional to population.

California presumes against extraterritorial application of its law, and plaintiffs didn’t show a California nexus to the non-California class members.  Thus, the court would only certify a California class. 

As for the class period, plaintiffs wanted to start it in 2000.  But the challenged ad campaign began in August 2009, and shortly thereafter Ferrero began using a label claiming that Nutella is part of a “balanced breakfast.”  Also, the statute of limitations is 4 years (UCL) or 3 (CLRA/UCL).  The court found that the class period should start as of August 2009.

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