Thursday, August 15, 2013

Don't call every attack on legal sufficiency a standing challenge, court says

Clancy v. The Bromley Tea Company, 2013 WL 4081632 (N.D. Cal. Aug. 9, 2013)

Clancy alleged that he bought Bromley’s products, including Pure Green Tea and 100% Organic Pure Black Tea, after relying on the packaging labels as well as Bromley’s website, both of which make health claims, including the label phrase “natural source of antioxidants.” The website makes such claims as “Antioxidants in Green and Black Tea is brimming with Antioxidants, the disease-fighting compounds that help your body stave off illness” and “Green Tea Extract May Lower Blood Pressure....” He alleged the usual California claims.

Bromley argued that Clancy lacked standing to assert claims based on products he never bought and website statements he never saw.  There’s no controlling precedent, and the cases are mixed.  Some cases agree with Bromley (except that of course a class representative always brings claims based on events s/he didn’t personally experience).  Others look for sufficient similarity between the purchased and unpurchased products; standing exists when an individualized factual inquiry wouldn’t be needed for each product (which again shows how we’ve shoved questions like commonality/predominance into the useless label “standing”).  A third rule is that, as long as the named plaintiff has standing for products s/he actually bought, the question of whether the class includes claims related to other products is properly addressed at the certification stage, where it will be evaluated in terms of typicality/adequacy.  The court analyzed the relevant Supreme Court precedents, and concluded that they only stated that a named plaintiff must have suffered injury in fact.  And, citing the Supreme Court’s recent case on affirmative action, “if the named plaintiffs in Gratz had ‘standing’ to seek to prospective relief against a school to which they were not applying, then Mr. Clancy has ‘standing’ to assert claims relating to products he did not buy.”  Sauce for the goose?

The court continued—winning my heart—that “‘standing’ does not seem to be the proper framework for that question or for this one. Transmogrifying typicality or commonality into an issue of standing would undermine the well-established principles that ‘[i]n a class action, standing is satisfied if at least one named plaintiff meets the requirements.’”  The court was unwilling to decide on the pleadings that Clancy couldn’t represent a class who purchased any different products, given the usual requirements that typicality exists when claims are “reasonably coextensive” and need not be substantially identical.  Sufficient similarity is an appropriate inquiry, “but it does not relate to standing: a plaintiff has no more standing to assert claims relating to a ‘similar’ product he did not buy than he does to assert claims relating to a ‘dissimilar’ product he did not buy. Seen this way, analyzing the ‘sufficient similarity’ of the products is not a standing inquiry, but rather an early analysis of the typicality, adequacy, and commonality requirements of Rule 23” (emphasis added).  Defendants’ best argument is that they shouldn’t be burdened with discovery regarding class allegations not specifically defined or directly connected to the named plaintiff’s alleged injiury.  But the court could address that valid concern with careful case management.

In summary:

The named plaintiff has standing to assert claims relative to the products he purchased. He does not claim to have standing to assert claims related to other products. What he does claim is that he may be a potential representative of a class of people who have such standing. He may or may not be able to certify such a class, and he may or may not be an adequate representative. But applying the concept of standing to dismiss proposed class action allegations is a category mistake.

What about statements he didn’t see before purchase? Well, he specifically pled that he read statements on Bromley’s website before buying, which should be sufficient under normal pleading standards.  To the extent Bromley sought more specificity, this was about Rule 9(b), not about standing.  And to the extent Bromley argued that more was required under the UCL, the court didn’t agree.  Bromley relied on Rice v. Fox Broad. Co., 330 F.3d 1170 (9th Cir. 2003), in which the Ninth Circuit found a plaintiff failed to allege a valid Lanham Act and UCL claim “because there is no evidence that a potential consumer could view the offending videotape jacket prior to purchase, [and thus] any deception relating to advertisement of the videos must be immaterial.” Rice didn’t hold that the named plaintiff must see the ads; “it holds that it must have been possible for potential customers to see them.”  Plus, Tobacco II provided controlling authority, and under that case the degree of specificity in the complaint was sufficient under the UCL.  When “a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.”  As for whether he could represent class members who relied on different ads, that too was a class certification issue.

Bromley also asked the court to dismiss the nationwide class allegations under Mazza.  But Mazza didn’t establish a bright-line rule against nationwide California law classes. The fact-heavy choice of law inquiry should occur during the class certification stage, after discovery.

The court turned to Bromley’s preemption arguments.  The FDCA, though it has no private right of action, does not preempt claims to enforce California’s labeling requirements, which are identical to federal requirements.  Here, Clancy was suing for conduct that allegedly violated the FDCA, but not (merely) because the conduct violated the FDCA; the duties imposed by California law exist independently of the FDA, and would still operate if the FDA ceased to exist.  Pom Wonderful was not to the contrary; it was a Lanham Act case and left open state-law claims.

Clancy’s claims would be preempted if they sought to impose requirements different from those imposed by the FDA.  Under the relevant regulations, a nutrient content claim regarding the level of antioxidants in a food may be used on a food label only if certain conditions are met, e.g., the label must exist the specific nutrient, and may only do so if a Reference Daily Intake (RDI) has been established for the nutrient.

Bromley argued that its terms, “contain” and “source of,” weren’t defined by federal regulation as characterizing the level of a nutrient, and thus that Clancy was seeking to impose additional requirements.  But the FDA hadn’t been silent about them: it had sent a warning letter to someone else indicating that “source” claims were (barred) nutrient content claims.  Thus, the claim was not preempted at this stage (stay tuned for a case finding the exact opposite!).

The court also rejected Bromley’s 9(b) challenge.  The who was Bromley; the what was nine discrete types of unlawful/deceptive claims on Bromley’s labeling, packaging, and website; the when was since 2008 through the class period; and the where was the labels and websites.  Clancy alleged violation of the law and his reasonable reliance thereon to buy products he wouldn’t have bought absent the deceptive statements, which was the how. That was enough.

Clancy’s unjust enrichment claims didn’t survive as a separate cause of action. The breach of warranty claims were also thrown out: the Song-Beverly Act didn’t apply because Bromley’s products are consumables.  The Magnuson-Moss Act didn’t apply because the representations here were product descriptions, not promises of freedom from defect or of a level of performance over a specific period; because Magnuson-Moss is “expressly ‘inapplicable to any written warranty the making or content of which is otherwise governed by Federal law,’” here the FDCA; and because Clancy failed to allege that the products at issue cost more than $5.

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