Forcellati v. Hyland’s, Inc., No. CV
12–1983, 2014 WL 1410264 (C.D. Cal. Apr. 9, 2014)
Plaintiff sued for violation of New
Jersey, California, and Missouri consumer protection laws (and breach of
warranty), alleging that defendants misrepresented that their homeopathic
products provide fast, safe, and effective relief from cold and flu symptoms,
while in fact the products are “nothing more than sweetened, flavored water
with ... highly diluted concentrations of the products’ so-called ‘active
ingredients.’”
The court first found that
California law could apply to everyone, given that defendants are headquartered
in the state. The burden was on
defendants to defeat the presumption that California law applied, and they didn’t. They needed to show a true conflict and that
foreign states’ interests were stronger than California’s. Citing to other
cases where defendants met that burden was insufficient. Though they did identify differences in the
various states’ consumer protection statutes and requirements for proving
breach of warranty, they didn’t show that these differences were material. Nor was quoting Mazza’s broad statement that “each of the 50 states has an interest
in setting the balance between protecting its consumers and setting limits on
when businesses may be sued for the purchase of their products” enough to show
a true conflict on these facts, or any impairment of other states’ interests by
the application of California law. “[W]hile
California recognizes that ‘a jurisdiction ordinarily has the predominant
interest in regulating conduct that occurs within its borders,’ in a false
advertising case the state from which the misrepresentation was disseminated
often has the predominant interest.” The
economic injury occurred at the point of purchase, but that doesn’t mean that
the predominant interest for choice of law purposes is in the state at the
point of purchase.
On to class certification. Ascertainability: While some courts have
found that low-dollar purchases unlikely to leave records result in
unascertainability, this court was having none of it. Ascertainability means that the class can be
defined by objective criteria, and if the class definition allows prospective
plaintiffs to determine whether they’re class members. Whether people bought the products at issue
within a defined timeframe was objective, and that was enough.
Neither class members nor defendants
would have records of purchase. Relying
primarily on Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), defendants
argued that class certification would be inappropriate because
self-identification of a class deprived them of due process rights to challenge
individual members’ claims; prevented finality because class members could
later assert that fraudulent claims diluted their recovery; and made the class
action an inferior mechanism because of the challenges of confirming class
membership. Given that facilitating
small claims is “[t]he policy at the very core of the class action mechanism,” the
court declined to follow Carrera.
First, defendants had no due process
interest in how damages are distributed.
Their interest in not paying excess damages would only be implicated if
aggregate liability couldn’t be reliably determined, or if they were entitled
to unclaimed portions of the judgment.
Neither of these situations were present. Defendants’ aggregate
liability was tied to a concrete, objective set of facts—total sales—“that will
remain the same no matter how many claims are submitted.” Plus, unclaimed funds
would likely be distributed under cy pres standards, given the relevant
statutes’ deterrence goals.
Second, class members would be bound
by a final judgment. Carrera said that fraudulent or
inaccurate claims could lead to class members arguing that the named plaintiff
wasn’t an adequate representative. Initially,
dilution of a class member’s recovery was highly unlikely as a practical
matter, even assuming that inaccurate/fraudulent claims would inevitably fail
to be screened out. “The reality is the
number of class members who actually file claims is relatively low.” As a
result, it was almost inevitable that “any fraudulent or inaccurate claimants
would merely be standing in the stead of legitimate ones, and no material
dilution would occur.” Further, even if dilution might occur, there was no
precedent justifying a fear that this would preclude a final judgment binding
class members. Defendants couldn’t
identify a single case where a class member even challenged adequacy on the grounds that the named plaintiff “proceeded
with the understanding that absent class members may get less than full
relief.” In fact, “broad collateral review of the adequacy of representation
(or the other due process requirements for binding absent class members) is not
available.” Adequate representation is
protected by the certifying court, not by collateral review. In addition, even if collateral review were
available, there would be no basis for finding inadequacy in this case, since
adequacy requires only vigorous prosecution and the absence of an
insurmountable conflict of interest. “To
the extent that fraudulent and inaccurate claims might reduce true class
members’ recovery, Plaintiffs’ recovery would be diluted to the same extent.
They therefore share absent class members’ interest in screening out potential
bad claims.” Plaintiffs proposed a fraud
analysis during the claims administration process to deal with this concern.
Third, “[t]he due process touchstone
of adequacy and fairness of representation must be judged in light of” the
alternatives to class treatment. The alternative here was nothing. “[A] diluted
recovery is surely preferable to absent class members’ only realistic
alternative: no recovery at all.”
Confirming class membership wasn’t
overly burdensome and didn’t render the class action an inferior method. “Generally, potential manageability problems
during the damages phase of a class action do not defeat certification.” Given the proposed claims administration
screening, the court was confident that there weren’t overwhelming
manageability hurdles, and the court retained flexibility to deal with problems
if they did develop. Though there was no
“surefire” way to confirm each and every claimed purchase, this just didn’t
affect defendants’ bottom line, and shouldn’t inure to their benefit. Other 9th Circuit district court cases
finding to the contrary involved an unknown number of total class members,
and/or “class definitions based on imprecise, non-objective, or complex
criteria such that people could not easily determine whether or not they were
members.” But generally in the 9th
Circuit, “classes that are objectively defined by the purchase of a low-cost
product during a prescribed timeframe are routinely certified.”
Numerosity was uncontested.
Commonality was easy: all the
plaintiffs’ claims had the same fundamental premise, which was that defendants
misrepresented their products as safely and effectively treating flu and cold symptoms
when the products in fact had no medicinal value. “If Plaintiffs can prove that homeopathy is a
‘pseudoscience,’ as they claim, and that Defendants’ products therefore
uniformly do not perform as advertised, then the putative class will be
entitled to relief under Plaintiffs’ warranty and false advertising claims.” The court therefore rejected defendants’
arguments that (i) each product used different ingredients and treated
different symptoms; (ii) whether the labels were misleading couldn’t be
established on a classwide basis; and (iii) some consumers were satisfied with the
products. The efficacy of homeopathy
would generate common answers to (i). As
to (ii), misleadingness is a classwide inquiry.
“It is simply a matter of common
sense that consumers who purchased Defendants’ products did so in reliance on
Defendants’ claims that the products provided effective relief from cold and
flu symptoms.” Finally, the argument
that satisfied customers weren’t harmed or entitled to restitution was
meritless. Plaintiffs alleged that the
products were placebos. Advertising is false if effectiveness arises solely as
a result of the placebo effect.
Likewise, given the argument that
homeopathy is uniformly ineffective, the extent to which plaintiffs’ children
differed from average children was irrelevant to typicality, as was which
particular products absent class members purchased.
On to 23(b)(3). Predominance: yes, for reasons given above.
Given the allegation of complete bunkum, “the products’ unique ingredients are
relatively unimportant and do not threaten to predominate.” Likewise, “that a large number of factors may
have gone into each consumer’s decision to purchase Defendants’ products is
immaterial here given the objective materiality of the alleged
misrepresentations.” No one would buy a product that doesn’t work.
Superiority: Defendants’ refund
program for dissatisfied consumers didn’t defeat superiority. The plain language of Rule 23 directs courts
to consider other available methods of adjudication,
not refund programs. You can’t disregard
that text just because you think you have a better idea.
However, plaintiffs lacked Article
III standing to seek injunctive relief, since they weren’t going to repurchase
the products at issue. Even if this severely undermines the efficacy of
California’s consumer protection laws, Article III still requires that result.
1 comment:
Fantastic and well reasoned decision. The carerra v bayer decision is an outlier action that if adopted would threaten to eliminate the vast class actions. Forced arbitrations and heightened ascertainability requirements immunize hucksters and illegitimate business.
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