by John Andren, Washington Legal Foundation*
A U.S. Supreme Court ruling issued on March 19 has already had an impact on a lawsuit of the ilk that we routinely analyze here at The Legal Pulse: a food labeling class action filed under state law. The case is Standard Fire Ins. v. Knowles, one in which WLF filed an amicus brief.
The affected lawsuit is Deaton v. Frito-Lay, one of the now ubiquitous “all natural” food labeling class actions. Last year, Judge Susan Hickey of the Western District of Arkansas ordered that the lawsuit be sent down to the Arkansas state court. The plaintiffs had stipulated that the damages the class sought would be less than $5 million. Under the Class Action Fairness Act (CAFA), defendants can ask a federal court to keep a class action in that court if the damages will amount to more than $5 million. Frito-Lay had argued that the total damages could easily exceed $5 million, and that the stipulation amounted to jurisdiction-shopping and contrary to the best interest of the class. Judge Hickey cited legal precedent from the U.S. Court of Appeals for the Eighth Circuit to support her removal order.
Fast-forwarding to March 19, the Supreme Court resolved a split in the federal circuits on the question of whether the type of stipulation the Deaton plaintiffs made, when made prior to certification of the class, was appropriate under CAFA. The Court ruled unanimously that CAFA did not permit such gaming of the system, which swept away the contrary 8th Circuit precedents.
In light of Knowles, Frito-Lay asked the 8th Circuit to send Deaton back to Judge Hickey so she could reconsider her 2012 ruling. Judge Hickey reversed her previous ruling. Since the class had not yet been certified, Frito-Lay’s only job then was to show that the damages might exceed the $5 million threshold, not necessarily that they would for certain. And because Deaton had sought damages for the full purchase price of the “offending” products, and revenues for the sale of those products had exceeded $5 million for both 2010 and 2011, Frito-Lay easily met that requirement. The case will now officially play out in federal court, where it belongs.
*John Andren is an intern with Washington Legal Foundation’s Legal Studies Division who graduated from George Mason University with an economics degree. John will be attending Georgetown Law in the fall.