Monday, May 02, 2022

statutory consumer protection damages available on per-unit basis in NY, not just per-person

Montera v. Premier Nutrition Corp., 2022 WL 1225031, No. 16-cv-06980-RS (N.D. Cal. Apr. 26, 2022)

This opinion resolves challenges to expert testimony in a false advertising class action under NY’s GBL challenging the advertising of Joint Juice as touting benefits of a useless product; both parties win and lose some. The court also declined a motion to decertify the class on Article III standing grounds, signalling a coming wave of Article III argments.

Premier argued that Montera’s survey expert deviated from accepted principles of survey design because it “relies on improper closed-ended and leading questions, lacks a control, and manipulates the sample to an incorrect universe of respondents.” The general rule is that “as long as [the survey] is conducted according to accepted principles and is relevant,” the “technical inadequacies in a survey, including the format of the questions or the manner in which it was taken, bear on the weight of the evidence, not its admissibility.”

First, relying on closed-ended questions was a matter for cross-examination, not exclusion. Closed-ended questions can be appropriate “for assessing choices between well-identified options or obtaining ratings on a clear set of alternatives.” Unlike in cases excluding surveys, the questions here didn’t appear to “ultimately test[ ] reading comprehension and common sense rather than the likelihood of consumer [beliefs].” The questions were “written in clear language and give the reader the opportunity to respond affirmatively or negatively.”

Somewhat more surprisingly, the failure to include a control was not fatal. “It is unclear how a control group could be structured for this survey, which showed respondents the entire Joint Juice label, including the product name, ingredients, and images. Defendant argues the survey should have controlled for preexisting beliefs. But as Plaintiff rebuts, ‘[i]f advertising reinforces an incorrect belief, it is still false advertising.’”

And less surprisingly, excluding respondents under 35 was fine, because the evidence showed “that the typical joint juice consumer—and the type of consumer targeted by Premier—was in their forties, fifties, and sixties.” Any resulting flaws could be addressed on cross-examination. [And note the lower-case “joint juice,” yikes.]

Plaintiff also had an expert who was a professor of marketing retained to opine about the marketing and advertising of Joint Juice, and how the “message” from Joint Juice advertising influences consumers. His testimony concerning general marketing principles, the marketing strategies at play for Joint Juice, and Premier’s intended message and target audience were admissible. “[C]ourts regularly admit marketing testimony that explains what a company intended to convey through their marketing.” But his testimony about how consumers interpreted the intended message was not admissible, because it had little support other than the survey.

Plaintiff’s statutory damages expert calculated damages based on GBL §§ 349(h) and 350-e. Section 349(h) provides that “any person who has been injured by reason of any violation of this section may bring an action ... to recover his actual damages or fifty dollars, whichever is greater[.]” NSection 350-e(3) similarly states “[a]ny person who has been injured by reason of any violation of section [350] ... may bring an action ... to recover his or her actual damages or five hundred dollars, whichever is greater[.]” The expert calculated based on a per unit basis, not per person; courts have reached different answers on which is appropriate. Given the policy of the law and the fact that a person is injured each time she buys a worthless product, the court accepted per unit calculations as “consistent with the text and intent of the statute.”

Among other things, the court excluded one of defendant’s expert’s opinions about the safety of standard osteoarthritis treatments. The expert would have opined that the adverse effects of some standard treatments, such as NSAIDs or opioids, create a need for alternative treatments for osteoarthritis. “This opinion is irrelevant to the crux of this case: whether the advertising of Joint Juice is false or misleading. Glucosamine is only a viable alternative to other osteoarthritis treatments if it has positive effects for osteoarthritis patients.” This is interesting in light of my general position that a lot of advertising regulation depends on cost-benefit balancing, albeit usually subterranean. If there is some reasonable chance that glucosamine works (a fact on which I have not the slightest ability to opine), then the benefits of that chance probably should be weighed in light of the alternatives—but that doesn’t obviously mean this testimony relevant to whether a specific advertising claim is misleading. Only if people are taking away an accurate message about the chance the product works can they do that balancing for themselves.

The court also allowed in a rebuttal damages expert who would testify that actual damages were not the entire value of the product but a price premium. This was relevant, even though plaintiffs were seeking statutory damages, because to know which was greater (actual or statutory) you had to know the actual damages.

Defendants’ survey expert ran a survey which addressed why consumers purchase Joint Juice as compared to other glucosamine products. Plaintiff argued that Poret’s survey is irrelevant because it addresses why people who choose to purchase a glucosamine supplement choose Joint Juice over other supplements, and thus does not address the question at issue in this litigation. The survey “appears to have limited probative value in this case, but is nonetheless relevant.” Problems could be addressed on cross-examination.

Premier moved to decertify the class because plaintiff lacked common evidence of causation necessary for both the causation element of her substantive claims and Article III standing, and thus individualized issues will defeat predominance.

But the plaintiff alleged the requisite causal nexus between Premier’s conduct and the class’s injury, which was the money “spent on the product that did not do what it was sold to do.” And there was common evidence of causation, including common evidence about Premier’s advertising and marketing, and Joint Juice users’ use of Joint Juice to obtain joint health benefits. The survey about how consumers interpret Joint Juice’s label bolstered this evidence and predominated over individual issues as to proof of causation. Defendant’s survey didn’t change anything. That survey “looked to the reasons beyond joint health a consumer would purchase Joint Juice, and [the expert] testified in his deposition that people buy glucosamine supplements for joint health.”

Relying on TransUnion LLC v. Ramirez, 141 S.Ct. 2190 (2021), Premier argued that plaintiff didn’t show that each class member has Article III standing. Article III standing requires a “causal connection between the injury and the conduct complained of[.]” But the common causation evidence did this.

Premier argued that predominance was no longer satisfied because plaintiffs couldn’t pursue a full refund theory of liability, and individual issues will predominate as to damages because some purchasers bought Joint Juice for its other attributes, like the vitamins included in the drink. Even if all class members bought Joint Juice for its joint health benefits, Premier argued that Joint Juice nevertheless has other attributes of value and thus a price premium theory of damages would be the appropriate measure of damages.

The court disagreed. NY does not require a price premium theory. “A full refund theory of liability may be viable when a plaintiff alleges that a product is valueless.” Sometimes only a price premium theory is allowed, such as when labels indicate a consumer would get more of a product than they actually received, or that they will get more of a benefit. But if a product provides no benefit, the plaintiff may be entitled to the entire purchase price. This was a question of fact for the jury. Separately, “the availability of statutory damages on a per unit basis … establishes that predominance is satisfied as to damages, because it appears statutory damages will likely exceed any actual damages. ‘Once an injury is established, statutory damages can be precisely calculated for each class member.’”

No comments: