Townsend v. Monster Beverage Corp., --- F.Supp.3d ----, 2018
WL 1662131, No. 12–2188–VAP (KKx) (C.D. Cal. Mar. 20, 2018)
The Ninth Circuit remanded this case on UCL, FAL, and CLRA
claims insofar as they challenge four specific on-label representations of
certain Monster Rehab drinks, holding that even if they weren’t strictly false,
it was plausible that the statements were misleading. The four statements were: “Hydrates Like a
Sports Drink”; “Re-hydrate”; Consume Responsibly—Max 1 can every 4 hours, with
limit 3 cans per day. Not recommended for children, people sensitive to
caffeine, pregnant women or women who are nursing.”; and “It’s an ideal combo
of the right ingredients in the right proportion to deliver the big bad buzz
that only Monster can.”
Plaintiffs argued that,“[t]o the extent that energy drinks,
including Monster Drinks, have any hydrating qualities, they do not hydrate
like a sports drink. Sports drinks contain water, salt and sugar, and are
designed to replenish the electrolytes and energy one’s body loses during
exercise.” In addition, the Hydrates and Re-hydrate statements were allegedly
misleading because “consumption of [Monster Rehab drinks] as prescribed on the
label could cause severe dehydration because the combination of caffeine and
guarana in energy drinks acts as a diuretic.” The consume responsibly/ideal
combo statements were allegedly misleading because of “potential health risks
associated with frequent consumption of Monster Drinks.”
Plaintiffs’ claims suffered numerous setbacks. First, there was Stefan Boedeker, plaintiffs’
economic damages expert who conducted a consumer survey and choice-based
conjoint analysis to determine how much, if at all, the representations at
issue contributed to the price of the product. However, with one exception, the phrases he
tested weren’t identical to the challenged statements and thus they were
unreliable/irrelevant. He tested: (1)
“Long Lasting Energy;” (2) “RE–HYDRATE to Bring You Back;” (3) “Hydrates like a
Sports Drink;” (4) “Ideal Combo of the Right Ingredients in the Right
Proportion;” and (5) “Safe level of consumption incorrectly specified on label”
or “Safe level of consumption correctly specified on label.”
“In order for Plaintiffs to meet the Rule 23(b)(3)
requirement of predominance, they must show that the same representations were
specifically made to each class member. The exact wording of each statement is
thus critical to Plaintiffs’ claims and class certification.” By substituting his own interpretations for
the exact wording, the expert rendered his tests unreliable. For example, shortening “It’s the ideal combo
of the right ingredients in the right proportion to deliver the big bad buzz
that only Monster can” to “Ideal combo of the right ingredients in the right
proportion” wasn’t just eliminating the puffery part. Whether that part was puffery was a legal
conclusion he wasn’t qualified to make, and the court didn’t accept his
conclusory assertion that he’d captured the essence of the claim, since his
expertise wasn’t in interpreting words and his survey didn’t measure
respondents’ understanding or interpretation of the statements. Moreover, the
second half of the statement was essential to understanding its meaning because
it informed the consumer what purpose the phrase “right ingredients in the
right proportion” serves. “Without the latter half of this statement, the
consumer is left guessing whether the ingredients are the ‘ideal combo’ for
energy, hydration, flavor, or any other possible attributes an energy drink
might tout.”
Similarly, by adding a reason to re-hydrate—“to bring you
back”—the survey became unreliable; the phrase became focused on energy rather
than hydration. “[A]dding language that confuses the re-hydrates and hydration
attributes with energy may be particularly critical to the analysis since Mr.
Boedeker’s survey shows that the energy attribute of a drink is a much stronger
market driver than the hydration attribute.”
The survey didn’t test “consume responsibly,” but rather described
in broad terms the type of statement that might be on such a label by providing
the options: “safe level of consumption incorrectly specified;” “safe level of
consumption correctly specified;” “no information on label regarding safe level
of consumption;” or nothing at all. This
analysis was untethered to plaintiffs’ theory of liability. “Comparing the
price impact of a correct, rather than an incorrect, safety statement is
irrelevant; only a label perceived as being correct is at issue here. Further,
assigning a safety label the descriptor of ‘correct’ or ‘incorrect’ presumes
that a consumer is making this determination at all, as well as potentially
influencing such a statement’s weight.” And “safe consumption” was materially
different from “consume responsibly.” The survey thus didn’t assess the premium
paid for “consume responsibly.”
The court additionally excluded a survey that plaintiffs’
survey expert submitted in response to earlier criticisms; by providing new
data including a different survey population, not just re-analysis of existing
results, the survey became new evidence that needed to have been disclosed
earlier.
However, his earlier survey was not inadmissible just
because he didn’t ask survey participants about why they purchased Monster energy
drinks; he asked only their understanding of each statement. How reasonable
consumers perceive and interpret the statements was relevant to whether they’d
find their truth or falsity material. One set of conclusions was unreliable,
however, because he accidentally omitted the word “bad” from the “big bad buzz”
portion of the ideal combo statement, and there was no way to tell whether this
made a difference to consumer responses.
The specific representations are key in false advertising cases, and,
since the burden on plaintiffs was to show admissibility, they failed.
The court was equally rigorous as to defendant’s survey
expert, who was qualified to opine on the reliability/design of a consumer
survey about materiality, but not to opine on the quantitative analysis (which
he argued produced an unrealistically large damages number) because he lacked
the relevant statistical background.
The motion for class certification failed mostly because plaintiffs
failed to show that a presumption of reliance was justified. The admissible
parts of plaintiffs’ survey showed how respondents understood the Hydrates,
Re-hydrate, and Consume Responsibly statements, but didn’t provide insight into
their purchasing decisions; the survey didn’t even target people who bought
Monster branded energy drinks. [No role
for common sense, apparently.] “While a
challenged statement need not be the sole or even dominant factor in consumers’
purchasing decisions, a survey needs ‘to assess whether the challenged
statements were in fact material to [consumers’] purchases, as opposed to, or
in addition to, price, promotions, retail positioning, taste, texture or brand
recognition.’”
The conjoint analysis could potentially show materiality by
determining the statements’ value to consumers. But it was only admissible as
to the Hydrates claim. And plaintiffs
didn’t show that the Hydrates statement had a common meaning. The survey asked “What does the statement
that Monster Rehab is a ‘... triple threat that quenches thirst, hydrates like
a sports drink, and brings you back after a hard day’s night’ mean?” and “Does
the statement that Monster Rehab Energy Drink ‘Rehydrates’ or that it ‘...
hydrates like a sports drink’ say or suggest that Monster Rehab has the same
level of electrolytes as a sports drink?” But no question showed how consumers
understand the Hydrates statement alone.
Consumers’ responses also didn’t support the deceptiveness
theory. For the first question, 24.2% of
respondents stated they understood the statement to mean “energizes;” 24.2%
said “rehydrates/aids rehydration;” 15.9% stated “thirst quenching;” 5.1%
replied “electrolytes mention/additives;” and 47.8% provided miscellaneous
responses. Plaintiffs’ misleadingness theory, that the Monster product does not
contain electrolytes like a sports drink, was only mentioned by 5% of
respondents. Also, their answers didn’t
support any single common understanding of the Hydrates statement across the class;
“this indicates that claims related to this statement require an individual
inquiry.”
In response to a specific question asking consumers to compare
the electrolyte content of a sports drink versus a Monster Rehab Energy drink,
80.6% of respondents stated that Monster Rehab definitely or probably has the
same amount of electrolytes as a sports drink. Still, the court considered the
unprompted responses more important, and also it was unclear whether the
Re-hydrate statement or the Hydrates statement led consumers to this
conclusion. Answers to the open-ended questions indicated that electrolytes were
more often associated with the Re-hydrate statement than the Hydrates
statement.
Nor did plaintiffs show that the Hydrates statement was
material to all class members. When their survey expert asked in an open-ended
format why respondents chose defendants’ energy drinks as opposed to another
brand, so few respondents listed hydration as a purchase driver that he didn’t
it as a quantifiable reason. Even when respondents were prompted, only 25.2% of
respondents selected hydration as a purchase motivator. In Boedeker’s survey, only 7.3% of respondents
selected the Hydrates statement as a factor in their purchasing decision, out
of a list of 16 attributes. Thus,
plaintiffs didn’t show the existence of a common answer to the question of
whether a reasonable consumer would consider any of the challenged statements a
material misrepresentation.
Plaintiffs also didn’t present a damages model consistent
with their theory of liability. They tried to rely on Boedeker’s model, but his
survey suffered from focalism bias, “rendering it useless for the purpose of
determining price premiums attributable to the challenged statements.” In the list of 16 attributes driving
purchase, respondents chose flavor most often (42.8% of respondents); then
price (25.9%); then energy (25.3%); then brand (23.8%); Re-hydrates came in at 8.7%
and Hydrates like a Sports Drink at 7.3%.
But in determining price premium, Boedeker examined only flavor, the
challenged statements, the ingredients label, and the price. The court agreed that presenting the claims
out of context and failing to include other important attributes artificially
inflated the importance of the challenged claims. The court didn’t believe the
conclusion that “the attributes that ranked 8th, 9th, 10th, and 11th out of 16
attributes, with less than 10% of all survey respondents even mentioning each
attribute as important to their purchasing decision, constitute approximately
81% of the value of the overall product …. At the maximum price point …, the
challenged statements would constitute 52% of the value of the beverage. These
incongruous results support Defendants’ complaint that Mr. Boedeker’s survey
fatally suffers from focalism bias.”
Plaintiffs failed to justify the selection of attributes; the court
suggested that the expert could have reproduced the conjoint analysis with
different variable attributes to see if the estimated price premium is
reliable, controlled for other highly-valued attributes, or tried to price
these other attributes.
Finally, the failure to show that Hydrates statement had a
common, deceptive meaning compounded the problem. “In order to tie a damages model for a
misleading statement to a theory of liability, a plaintiff must show that the
price premium paid was for the attribute consumers believed the product
contained. In other words, Plaintiffs here would have to show that consumers
paid a price premium for a drink they believe contained electrolytes in order
for it to align with their theory of liability.”
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