Werdebaugh v. Blue Diamond Growers, 2014 WL 2191901, No. 12–CV–2724 (N.D. Cal. May 23, 2014)
I’m going to try, with probably limited success, to
summarize results rather than reasoning for most of this consumer class action
case in which certification of a California class was granted, and focus on the
interesting damages model bits.
Werdebaugh sued Blue Diamond for listing the sweetener on its almond
milk as “evaporated cane juice” instead of sugar, and using “All Natural” when
in fact the products allegedly contained synthetic ingredients.
Werdebaugh had standing to bring his claims for damages, but
not for injunctive relief. His
deposition testimony clearly showed that he wouldn’t have bought Blue Diamond
almond milk had he known about the alleged misbranding, which sufficed. He testified that he was unfamiliar with the
product, but “the ‘all natural’ label stood out” to him. He “stood at the shelf
and saw this packaging and picked it up, read the labels, and made the
purchase,” and the “all natural” label was a substantial reason why. Werdebaugh further testified that he was concerned
about seeing “evaporated cane juice” on the ingredients list, but did not know
that it is “the equivalent of table sugar.”
Blue Diamond argued that it was implausible for Werdebaugh
to believe that the products didn’t contain added sugars, since the nutrition
facts panel that the almond milk contained 20 grams of sugars, and anyway he
didn’t know what “evaporated cane syrup” or “dried cane syrup” was either so
his purchase decision wouldn’t be affected by using those terms either. The court disagreed. The ingredients wouldn’t necessarily have
indicated the presence of added sugars; Werdebaugh testified that he thought
the 20 grams of sugar in the product he purchased was not added sugar, but
rather was “an actual squeezed element of an almond that naturally occurs.” Though he testified that “dried cane syrup”
wouldn’t have affected his purchase decision, that just showed that he didn’t
know what it was. He’d still introduced
sufficient evidence of reliance on both statements.
Ascertainability: not a problem, especially limited to a
California class. The class was defined
based on objective criteria, and that was enough.
Numerosity: but of course.
Commonality: Blue
Diamond argued that what’s material varies from consumer to consumer. “The law is to the contrary…. Whether Blue
Diamond’s label statements constitute material misrepresentations does not
depend on the subjective motivations of individual purchasers, and the
particular mix of motivations that compelled each class member to purchase the
products in the first place is irrelevant.” Blue Diamond also argued that the allegedly
deceptive labeling statements were not specifically regulated and, therefore, were
not material, since the only official guidance came from “non-binding FDA
policy statements.” But at this stage, the only question was whether
materiality was a common question.
Finally, Blue Diamond argued that “All Natural” had no common definition
and thus was not susceptible to common proof.
But cases using that reasoning generally involved representations that
differed for each class member, such as representations made by doctors
prescribing drugs. Here, the alleged misrepresentations were the same to each
calss member, so the objective inquiry into whether “a reasonable consumer
would attach importance” to Blue Diamond’s label statements was a question
common to the class. And, unlike the Astiana
case cited by Blue Diamond, where over 90 different products with different
ingredients and different ad campaigns were challenged, Werdebaugh was only
challenging seven products, all based on their inclusion of the same ingredient
(potassium citrate). Blue Diamond didn’t
contend that differences in its products’ labels would cause prospective
consumers to understand the representations differently.
Typicality: Blue Diamond objected to including products
Werdebaugh didn’t buy—he only bought Blue Diamond Almond Breeze Shelf Stable
Chocolate Almond Milk. But every other
product included in the class definition was an almond milk product, and each bore
one or both of the same misbranded label statements. They were different
flavors, but the legal theory was identical for all claims. That’s typicality.
Blue Diamond then argued that Werdebaugh’s claims were
atypical because he didn’tread or review the back label, which contained two of
three “All Natural” statements. But Blue
Diamond didn’t persuade the court that he needed to read and rely on all
alleged misrepresentations; even if he didn’t read two repetitions of “All
Natural,” “he read the third, and Defendant provides no reason to distinguish
between the three statements.” Reading
it on the package once was enough for typicality.
Nor were defenses unique to Werdebaugh likely to become the
focus, since under California consumer protection law “individual experience
with a product is irrelevant” because “the injury under the UCL, FAL and CLRA
is established by an objective test.” Regardless of his particular motivations
for purchase, “he shares with the proposed class the same interests in
determining whether Blue Diamond products were deceptively advertised and
labeled.”
Adequacy: yep.
Predominance: not for a nationwide class per Mazza, but for a California class.
Blue Diamond then argued that there was no predominance
because Werdebaugh hadn’t identified an appropriate damages model, an argument
the court analyzed in detail. An
appropriate damages model under the Supreme Court’s recent Comcast ruling must measure only damages attributable to the
defendant’s conduct.
Restitution was available under California consumer
protection law to compensate the purchaser for the difference between a product
as labeled and the product as received. For this, Werdebaugh needed a damages
methodology that could determine the price premium attributable to Blue
Diamond’s use of the labeling statements “All Natural” and “Evaporated Cane
Juice.”
The court rejected a full refund model, because it was
wrongly based on the assumption that consumers receive no benefit whatsoever
from purchasing the accused products.
Then, the court turned to Werdebaugh’s expert’s price
premium model, which compared the price of the accused products to allegedly
comparable products without the challenged statements and calculated the entire
price difference as restitution. The
court also rejected this model. “[The expert] has no way of linking the price
difference, if any, to the allegedly unlawful or deceptive label statements or
controlling for other reasons why allegedly comparable products may have
different prices.” The comparison
product (a Whole Foods house brand) itself included the objectionable
ingredient potassium citrate; the label listed “organic evaporated cane juice”
as an ingredient until 2013; and the alternative was currently priced the same
as the challenged Blue Diamond version at Whole Foods stores in San Francisco
and Palo Alto. Werdebaugh’s deposition testimony also indicated that consumers
typically pay a premium simply by buying from Whole Foods, which the model didn’t
account for. The price premium model
just calculated what the price difference was, without tying it to a legal
theory; it didn’t account for factors that might lead consumers to prefer Blue
Diamond over “other identical products.”
These factors could include “brand loyalty or quality differences
between brand and generic products.” (If
they’re identical, why the brand loyalty?)
However, a regression model saved the day (or ruined it, if
you’re Blue Diamond). By controlling for
commonly recognized factors associated with sales—“price of the product, prices
of competing and complementary products, income, advertising, seasonality, and
regional differences”—as well as by taking into account differences in sales of
the products before and after the “All Natural”/“evaporated cane juice”
labeling, a more precise measure of damages could be calculated.
Blue Diamond argued that this model would raise individual
issues not subject to common proof because consumers experience price variation
across “products, sales channels, retailers, geographic regions, and time.” For example, “the price for the top selling
shelfstable Blue Diamond almondmilk product in 2012 varies by 26% across sales
channels, by 31% across the top three retailers, and by 40% across cities in
California.” But that’s kind of what the regression controls for, and Blue
Diamond didn’t explain how these differences would affect the measure of
damages—“price changes within regions that correspond to the introduction
and/or removal of the allegedly misleading label statements.” Even if a carton costs $4 in San Francisco
and $3 in Sacramento, that wouldn’t necessarily affect damages—the price might
have risen by a constant amount or by a percentage, but either way it could be
calculated classwide. (This would also
be easier with a class limited to California instead of nationwide.) If Blue Diamond introduced evidence that the
price increase attributable to the allegedly false labeling would be 20% in San
Francisco and 2% in Sacramento, the model might well fail under Comcast, but Blue Diamond didn’t explain
why that would happen.
Blue Diamond also argued that retail prices varied and that
it didn’t set retail prices, and that using a weighted average price measure would
undercompensate some consumers and overcompensate other, but that didn’t
address the way the model purported to measure price changes from the allegedly false advertising. The model controlled for regional
differences. Comcast doesn’t require calculations to be exact, only that a model
supporting a damages case has to be consistent with the theory of liability,
both at certification and at trial. Even with regional differences, the
regression model was sufficiently precise under Comcast, and could control for non-liability-producing factors.
Blue Diamond said that the methodology was too vague, but at
this stage what is needed is a workable model, not necessarily a model that
actually works. “Comcast did not
articulate any requirement that a damage calculation be performed at the class
certification stage,” so the fact that the expert had yet to actually run the
regressions and provide results, and would need discovery to do so, wasn’t
necessarily fatal. Blue Diamond couldn’t
succeed by attacking the specific variables of the regression the expert posed,
if the tool of regression analysis itself was appropriate, as it was.
Superiority: yep.
No comments:
Post a Comment