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.
Posts
No comments:
Post a Comment