Last summer in the Legal Pulse post The Ninth Circuit Rains on Plaintiffs’ Attorneys’ Class Action Pay Day, Washington Legal Foundation K.K.Legett Fellow Lauren Murphree described the U.S. Court of Appeals for the Ninth Circuit’s rejection of a class action settlement in Dennis v. Kellogg Co.
Mr. Dennis and countless other fans of Frosted Mini-Wheats claimed Kellogg’s labeling statements had unlawfully misled them. The parties ended up settling, and the district court approved the settlement. The Ninth Circuit sent the parties back to the drawing board and back to the Southern District of California. On May 3, the presiding trial judge gave preliminary approval to the new settlement.
The Ninth Circuit was understandably troubled by several aspects of the original settlement, including a $5.5 million cy pres award aimed at feeding the indigent (which was “laudable” but had “little to do with the purposes of the underlying lawsuit”) and an attorneys’ fee that came out to $2,100 an hour.
The recipients of the new settlement agreement’s smaller cy pres distribution of $4 million are three “consumer” groups: Center for Science in the Public Interest, Consumer Watchdog, and Consumers Union (Nice of the court to hand over a slush fund of cash which could fund more food labeling lawsuits, and create jobs for lawyers and court staff, likely in California). The amount of money available for allegedly harmed plaintiffs went down from $2.75 million to “$2-2.5 million.” The amount of attorneys’ fees remarkably stayed the same.
District Judge Gonzalez had some questions about these new terms. She wondered:
- How did mere identification of proper cy pres recipients result in such a severe drop in the value of the class’s claims?
- How is it that the value to the class dropped approximately 75%, while requested attorneys’ fees appear nearly constant?
Excellent questions both, but they did not forestall Judge Gonzalez from giving preliminary approval to the settlement. She did, though, order the parties to “fully address these concerns in their final approval briefing and at the final approval hearing.”
Cross-posted at WLF’s contributor page at Forbes.com
Perusing yet another class action complaint filed in the Northern District of California, Gitson v. Clover-Stornetta Farms, we were positively amused to find that on page 19, the plaintiffs’ lawyers cite a letter from the Food and Drug Administration (FDA) to WLF for the proposition that under federal law, a company’s website is definitively considered “labeling.” FDA’s letter was in response to WLF’s April 2001 petition urging the agency to establish a formal policy on the nature of information on websites like that of Clover-Stornetta Farms.
While it’s flattering that WLF’s public interest work has such enduring relevance and utility, we can’t let the plaintiffs’ invocation of FDA’s letter pass without refutation.
Clover-Stornetta Farms’s alleged transgression was to misleadingly refer to the sweetener used in some of its yogurt products as “evaporated cane juice.” Misleading or false labeling under federal law, incorporated into the California laws under which Gitson is suing, renders the product “misbranded.” And according to the complaint, because the yogurt label referred to the company’s website (which did little more than helpfully reprint the ingredient label), the website constituted labeling which equally misbranded the product. Continue reading
Cross-posted at WLF’s Forbes.com contributor page
With class action lawyers still buzzing around food makers like angry gnats in summer, targets of these labeling and marketing suits welcome any instance where a federal judge gets the fly-swatter out and slaps down a case or two. Or three, as we’re about to describe.
Evidence, Why do We Need Evidence?: Ries v. AriZona Beverages. We’ve been a bit hard on the U.S. District Court for the Northern District of California (aka “The Food Court”). We’ve even been critical of Judge Seeborg’s ruling in Ries late last year. His latest ruling in this “high fructose corn syrup (HFCS) and citric acid are not ’100% natural’” class action, however, hits the spot just like cold ice tea. The defendants moved for summary judgment based on the fact that Ries had not provided evidence that HFCS and citric acid are artificial. Judge Seeborg had granted Ries discovery last September and urged her to find such evidence.
As the judge wrote in his March 28 ruling, “Plaintiffs have not introduced any evidence showing that HFCS or citric acid are artificial.” The plaintiffs urged Judge Seeborg to “take judicial notice” of the fact that federal patents have been issued for the process of producing HFCS, which they claimed proved it was not natural. The judge saw this as “an extension of their rhetoric,” and that “In the face of a motion for summary judgment, rhetoric is no substitute for evidence.” Separately the judge also found that there was not a “scintilla of evidence” to support damages in the case, and that due to the attorneys’ failure “to prosecute this action adequately,” the class action should be decertified due to inadequate representation. Continue reading
Featured Expert Column
Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. (co-authored with Talia Zucker, Shook, Hardy & Bacon, L.L.P.)
On March 19, 2013, the Supreme Court of the United States issued a unanimous opinion in Standard Fire Insurance Company v. Knowles, No. 11-1450, 2013 WL 1104735 (2013), derailing a plaintiff’s efforts to sidestep the provisions of the Class Action Fairness Act (“CAFA”) by way of a precertification stipulation for damages of less than $5 million. With clever plaintiffs’ lawyers constantly dreaming up ways to prevent removal and avoid the rigorous proceedings in federal court, this opinion will assist defendants in future jurisdictional battles by eliminating this particular avenue for defeating jurisdiction.
Knowles had filed a putative class action lawsuit in Arkansas state court against Standard Fire Insurance Company. Knowles, 2013 WL 1104735, at *2. In describing the relief sought, the complaint provided that plaintiff and the class (which had yet to be certified) would seek to recover total aggregate damages of less than $5 million. Id. The insurance company removed the case to federal court pursuant to CAFA. Id. Although the district court found that in the absence of the stipulation the amount in controversy would have fallen just above the $5 million threshold, it remanded the case to state court in light of the stipulation. Id. The insurance company appealed the remand order, but the Eighth Circuit declined to hear the appeal. Id. The Supreme Court, however, granted the insurance company’s writ of certiorari in light of conflicting lower court viewpoints. Id.
CAFA provides federal courts with original jurisdiction over class actions in which, among other things, the matter in controversy exceeds $5 million. 28 U.S.C. § 1332(d)(2). To determine whether that sum is exceeded, the claims of the individual class members are aggregated. § 1332(d)(6). The issue presented to the Supreme Court – whether a precertification stipulation can defeat federal jurisdiction under CAFA – was answered in the negative. Knowles, 2013 WL 1104735, at *3. Continue reading
Featured Regular Expert Column
Frank Cruz-Alvarez, Shook, Hardy & Bacon, L.L.P. (co-authored with Talia Zucker, Shook, Hardy & Bacon, L.L.P.)
On January 24, 2013, in Soper v. Tire Kingdom, Inc., No. SC11-1462, — So. 3d —, 2013 WL 264441 (Fla. Jan. 24, 2013), the Florida Supreme Court took its most recent step to further distance itself from the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, — U.S. —, 131 S. Ct. 2541 (2011). Despite Wal-Mart’s comprehensive analysis of the commonality requirement for class certification, the Florida Supreme Court insists on watering down what commonality means and how it is applied.
As Florida Supreme Court Justice Charles Canady rightly observed in Soper, the Sunshine State’s class action laws have undergone a “sea change”, beginning one and a half years ago – post Wal-Mart – with the decision of Sosa v. Safeway Premium Finance Company, 73 So. 3d 91 (Fla. 2011). See Soper, 2013 WL 264441 at *2 (Canady, J., dissenting) (emphasizing that “[t]he majority’s commonality analysis in Sosa cannot be reconciled with the reasoning of Wal-Mart.”). Continue reading
Directly conflicting with three other circuit courts, the U.S. Court of Appeals for the Fifth Circuit has ruled that the Mississippi Attorney General’s parens patriae antitrust suit against various LCD display makers qualifies as a “mass action” under the Class Action Fairness Act and must be litigated in federal court (Mississippi v. AU Optronics Corp.).
Under CAFA, an action may be removed to federal court if it involves claims of 100 or more persons, includes common questions of law or fact, and seeks at least $5 million in damages. In deciding jurisdiction for the Mississippi Attorney General’s suit, the Fifth Circuit stated that the “decisive question” was “whether the suit involves the claims of ‘100 or more persons.’ If so, the suit is a mass action and removal is proper.”
The three-judge Fifth Circuit panel said that it was guided by a precedential 2008 case, Louisiana v. Allstate. In that case, a panel adopted what is now known as the “Caldwell claim-by-claim approach” and ruled that the interested persons in the case against the insurance industry were the individual policy holders and not the Louisiana Attorney General. The Fifth Circuit explained that the Caldwell approach instructs the court to “pierce the pleadings and look at the real nature of the state’s claims” to determine if the state is the plaintiff or if the state is suing on behalf of individuals. Continue reading
The Northern District of California?
Cross-posted at Forbes.com’s WLF contributor page
A decision last month in one of the many class action lawsuits targeting food makers epitomizes much of what is wrong about America’s civil justice system generally, and the latest food labeling suits in particular.
Two AriZona iced tea purchasers, on behalf of all similarly situated Californians, filed suit in The Food Court (aka The Northern District of California) under three California statutes. They argue that AriZona’s use of “natural” on some product labels is deceptive because the tea contains high fructose corn syrup and citric acid. On November 27, Judge Richard Seeborg granted in part and denied in part AriZona’s summary judgment motion, and also issued a modified certification of the suit as a class action.
Plaintiff Lauren Ries claims she purchased an “All Natural Green Tea” at a gas station in 2006 because (among other reasons) she was thirsty and wanted something healthier than a soda. She couldn’t recall the price and doesn’t have a receipt. Plaintiff Serena Algozer says she bought various AriZona teas over several years but doesn’t recall the prices, doesn’t remember what label statements she relied on, and, doesn’t have receipts. Continue reading
Cross-posted at WLF’s Forbes.com contributor page
As class-actions continue to proliferate and cy pres provisions become increasingly common in settlement agreements, judicial oversight of these provisions has become increasingly meaningful. Cy pres provisions–which allocate a portion of the settlement funds to charities–are meant to compensate absent class members and prevent the defendant from benefitting from any unclaimed funds. The rise of cy pres has been followed by the specter of impropriety, as plaintiffs’ firms, defendants or judges may be connected to the benefitting organization. Cy pres arrangements further undermine the benevolent pretense of class action lawsuits, as they do precious little to compensate the supposedly injured class members. However, judges have recently been signaling their willingness to reject cy pres terms where they do not fulfill their purpose. A judge in the Southern District of California recently rejected an entire settlement agreement based on its cy pres provisions, following on the heels of Dennis v. Kellogg (which we blogged about here) and expressly relying on that case.
The case, In Re: Groupon, Inc. had been brought based on Groupon’s “allegedly improper expiration dates and other purportedly objectionable provisions (e.g., requirements that gift certificates be used in a single transaction, that cash refunds will not be made for unused portion, and inclusion of class action waivers and mandatory arbitration provisions)”–stipulations which hardly shock the conscience. Before the parties could agree on a forum for adjudication, the parties entered into settlement negotiations and jointly supported the proposed settlement. Continue reading
Cross-posted at Forbes.com’s WLF contributor site
One of the hallmarks of frivolous litigation is a class composed of arguably uninjured plaintiffs who often receive little in the way of remuneration for the asserted wrong. That remuneration is reserved for the lawyers, and the class is thus relegated to receiving coupons or promises to refrain from future behavior. Where the plaintiffs have not endured any real harm, litigation merely burdens the docket while enriching plaintiffs’ lawyers. However, a recent opinion in the United States District Court for the Southern District of California may bode well for defendants who encounter this type of litigation, particularly in data breach cases.
In an order for In re: Sony Gaming Networks, the district court granted leave for plaintiffs to amend their complaint after determining that they had not satisfied the burden of pleading a cognizable injury. This opinion adds to case-law saying the same; in 2011, another California court dismissed some of the claims against Google for its data collection under the Google Street View program due to the plaintiffs’ lack of monetary damages. Continue reading
Cross-posted at WLF’s Forbes.com contributor site
In our June 21 post, “Natural” Selection: Survival of the Litigious, we noted that consumer class action target Ben & Jerry’s decided to settle with the “deceived” plaintiffs once a judge on “The Food Court” (aka the U.S. District Court for the Northern District of California) denied their motion to dismiss. The plaintiffs in Astiana v. Ben & Jerry’s were claiming that because the company used cocoa processed with a synthetic ingredient, it couldn’t lawfully call its ice cream ”all natural.”
We learned today (hat tip to Shook, Hardy & Bacon and its excellent Food & Beverage Litigation Update) that presiding Judge Hamilton rejected the settlement on September 12. Ruling from the bench, she found the proposed settlement legally unconscionable. The proposal had set up a $7.5 million fund for the plaintiffs. Under the cy pres doctrine, the court would distribute any amount remaining after plaintiffs had asserted their claims to “not-for-profit charities related to food or nutrition in the United States.” For themselves, the class action attorneys sought $1.8 million in fees.
According to an attorney present at the September 12 hearing, Judge Hamilton stated that she had incomplete information on how the cy pres funds would be rewarded. A Ninth Circuit ruling from last July, Dennis v. Kellogg Co. (see our post on that here) may have given Judge Hamilton pause. The plaintiffs devoted a lengthy footnote (n. 6) in their proposed settlement explaining why their cy pres proposal was not disconnected from the misleading advertising claims, as the appeals court found in Kellogg (there, Kellogg products were to be donated to a food bank). Yesterday, both parties filed a motion with the judge seeking a status conference and noted that they had “new information” to share, so perhaps Ben & Jerry’s and the class action lawyers will provide specifics on the possible cy pres recipients.
Interestingly, one of the members of the nationwide class in Astiana, Illinois resident Colleen Tobin, not only filed an objection to the settlement but has filed her own nationwide class action against Ben & Jerry’s in a New Jersey federal court (Tobin v. Conopco and Ben & Jerry’s). She filed suit September 13, the day after Judge Hamilton rejected the Astiana settlement, alleging that Ben & Jerry’s ice cream was not all natural due to synthetic cocoa and because it contained genetically modified organisms. On September 21, Tobin filed a motion to transfer her suit to—you guessed it—the Northern District of California, where it seemingly could be consolidated with the Astiana class action. It remains unclear whether Ben & Jerry’s will contest the motion.
We will keep an eye on this case to see if it enters The Food Court, and if so, what impact it will have on the settlement of Astiana.