Monday, April 15, 2013

"All natural" class decertified for failure to prove deception, damages

Ries v. Arizona Beverages USA LLC, 2013 WL 1287416 (N.D. Cal.)

Plaintiffs challenged AriZona Iced Tea beverages labeled “All Natural,” “100% Natural,” and “Natural” because they contain high fructose corn syrup (HFCS) and citric acid. The court certified a class action for purposes of injunctive and declaratory relief only, then granted Arizona’s motions for summary judgment and decertification.

Plaintiffs argued that HCFS wasn’t natural because it was produced by adding a series of enzymes to processed corn starch to change the glucose present in the corn into fructose; likewise, citric acid was allegedly non-natural because it is produced from certain strains of the mold Aspergillus niger.  They alleged standard California claims.

Relying on plaintiffs’ representation that they’d prove non-naturalness through expert reports at the merits stage, the court granted certification but noted that Arizona could make a renewed motion for summary judgment on that point.  Eventually, plaintiffs moved to reopen discovery, but the court denied the motion, noting that their “efforts in obtaining discovery in this case do not begin to approach diligence.”

Plaintiffs bore the burden of showing non-naturalness, and they failed; likewise they failed to show evidence of damages.  Arizona produced an expert report to show that HFCS and citric acid were natural, as well as declarations from their HFCS suppliers reflecting that the HFCS they supply accords with the FDA natural policy as well as a certificate of the natural status of their citric acid from one of their citric acid suppliers.  While plaintiffs sought to exclude the expert report, that didn’t matter because they didn’t meet their own evidentiary burden.

Instead of offering evidence of artificiality, plaintiffs asked the court to rule that HFCS isn’t natural because patents have been issued for the process of producing it, whereas if HFCS were naturally occurring like a newly found mineral or plant it wouldn’t be subject to a utility patent.  Patent law wasn’t a proper subject of judicial notice, and plaintiffs didn’t offer authority for the proposition that “if the process to produce an ingredient is patented, that fact, in and of itself, automatically renders it artificial.” This was merely an extension of the rhetoric that HFCS was artificial because it “cannot be grown in a garden or field, it cannot be plucked from a tree, and it cannot be found in the oceans or seas of this planet.” Rhetoric was no substitute for evidence.

Plaintiffs argued that the beverage labels confused consumers who didn’t know what “all natural” means.  But the only evidence was the testimony of Don Voltaggio, an owner of Hornell Brewing Company, who testified about his decision-making in changing the labels of AriZona Iced Tea to include the language “All Natural Tea,” “No Preservatives,” “No Artificial Color,” and “No Artificial Flavor.”  He “determined after talking to customers that some people were confused by the term a hundred percent natural. They said a hundred percent natural what,” and added, “some people get all natural, understand what that means, some people don't.” Plaintiffs argue that these were admissions that the label was confusing. 

Arizona responded that this was cherry-picking, and that in context, he wasn’t admitting confusion, as he clarified with statements such as, “Since we want to communicate a clear message to consumers we started using this 100 percent natural tea [label] and then we start talking about the fact that we don't have, no preservatives, no artificial colors. Because our major competitor, Lipton, uses artificial colors, uses preservatives, so we wanted to make it clear what consumers were getting when they were buying our product.”  He repeatedly testified “[w]e don't believe [consumers] were ever confused.” Instead, the additional labels were “just a reaction to consumers who asked what's a hundred percent natural mean…. And then we followed it up with no artificial colors, no preservatives as a way to just keep everything clear in the consumers' minds.”

This wasn’t enough to satisfy plaintiffs’ burden. Likely deception under the reasonable consumer standard requires more than a possibility of misunderstanding. Something more than anecdotal evidence, such as consumer survey evidence, is required, and was absent here. Voltaggio’s testimony was ambiguous at best, and even read most favorably to plaintiffs didn’t demonstrate that it was probable that a significant portion of the consuming public could be confused by the “all natural” labeling.

Plaintiffs also failed to show damages: though the amount of restitution need not be determined with exact precision, there must be evidence supporting the amount, such as the difference between what a plaintiff paid and the value of what she received.  The court previously held that damages could be measured by evidence showing the difference between the value of a beverage billed as all-natural and the value of a comparable beverage not sold at a premium due to such claims.  Here, plaintiffs offered “not a scintilla of evidence from which a finder of fact could determine the amount of restitution or disgorgement to which plaintiffs might be entitled if this case were to proceed to trial.”

This was enough, independently, to grant summary judgment.

Decertification of the class was more appropriate than summary judgment against the class, given that counsel had been dilatory and failed adequately to prosecute the action.  Thus, counsel wasn’t an adequate representative, and decertification avoided res judicata against the class.

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