Food-Court Follies: Fraud Suits Fall Apart after Plaintiffs’ Candid Admissions During Discovery

ocean sprayAs many people learned from watching legendary radio and TV show host Art Linkletter (or from simply being parents), kids say the darnedest things. Similarly, those of us who follow class actions alleging misleading labeling of consumer goods have discovered that adult plaintiffs can say the darnedest things, too.

Three plaintiffs’ candid admissions during their depositions in two product-labeling suits recently revealed their claims to be entirely baseless. Regrettably, neither the plaintiffs nor their lawyers have been held accountable for the costs these frivolous lawsuits imposed on the federal courts, the defendants, and consumers.

Major v. Ocean Spray Cranberries

Five years ago, Noelle Major filed a putative class action against Ocean Spray Cranberries, Inc. in the Food Court (a/k/a the US District Court for the Northern District of California), alleging that the statement “No Added Sugar” on various juice-beverages’ labels violated California consumer-protection laws.

Her main gripe was that Ocean Spray did not comply with a federal regulation (incorporated into California law) requiring that products which don’t qualify as reduced or low-calorie must include a “not a low-calorie food” disclaimer with the “No Added Sugar” statement.

Major moved for class certification in late 2013, and Ocean Spray sought summary judgment in early 2014. As Judge Edward Davila stated in his February 26, 2015 decision, it was unclear whether the regulation applied to Ocean Spray’s “No Added Sugar” statement. Even if Ocean Spray was out of compliance, Major still needed to prove that she relied upon the label statement when making her purchases. Of course she did, one might think. Why else would she sue?

When asked during a deposition whether she purchased Ocean Spray’s products because she thought they were low calorie, Major answered, likely to the horror of her attorneys, “no.” She also clearly understood the meaning of “No Added Sugar,” stating, “[it means] that there’s literally nothing containing sugar that’s added to this other than the natural sugar from the fruit.”

Those admissions were more than enough to support Judge Davila’s holding that Major could not demonstrate reliance and thus had no legal claim. He granted the defendant’s motion for summary judgment.

Major appealed to the US Court of Appeals for the Ninth Circuit. On May 8, 2017 in a two-and-a-half page unpublished opinion, the three-judge panel unanimously affirmed Judge Davila’s decision, noting that “Plaintiff’s own testimony established that she understood that the juice was not low calorie and that it contained the same amount of sugar as juice not made from concentrate.”

Wilson v. Frito-Lay North America, Inc.

Potato-chip aficionados Markus Wilson and Doug Campen sued Frito-Lay in 2012. Wilson alleged that the company’s failure to include a “see nutrition label for total-fat information” disclaimer alongside a “0g Trans Fat” statement on certain potato-chip bags misled him to think that “the product only made positive contributions to [his] diet.” Campen asserted that claim and also alleged that the “Made with All Natural Ingredients” label was misleading because the chips contained artificial ingredients such as yeast extract.

Frito-Lay moved for summary judgment in 2015. Northern District of California Judge Jon S. Tigar’s May 26, 2017 opinion paints the plaintiffs and their lawyers (some of whom also represented Noelle Major) in a less-than-flattering light.

The following exchange with Campen during a deposition led Judge Tigar to hold that Campen had abandoned his “0g Trans Fat” claim:

Q: What products are you challenging in this case? A: Products—the label that says “all natural.” Q: And are there any other label statements that you are challenging in this case? A: No.

On the “all natural” misleading-labeling claim, Campen had to prove that he relied on that statement. Again, he was undone by his own deposition testimony:

Q: Why have you purchased the Lay’s Honey Barbecue chips? A: Because they taste good. Q: What do you like about the Kettle Honey Barbecued flavor or chip? A: I like the barbecue flavor. Q: Are there other things you like about the product? A: Well, they taste good.

Judge Tigar held that Campen could not prove that he relied on the supposedly misleading “all natural” language.

Wilson’s deposition testimony was equally devastating to his “0g Trans Fat” claim. He stated that he “didn’t notice” the label statement on chip bags he purchased between 2000 and 2010. He reported that he bought Frito-Lay products because “they tasted good,” and “they go good with onion dip.”

As for purchases after 2010, Wilson testified that “[he] … recall[ed] there being a ‘0g Trans Fat’ statement” when he made his final purchase before filing suit. Why did he make that purchase? As explained in the Wilson opinion, it “was a token purchase that he made at the instruction of one of his attorneys, Sparky Lovelace.” Judge Tigar continued:

Mr. Wilson spoke with Mr. Lovelace about an ‘opportunity’ related to food labeling. … [He] testified that, before he filed his complaint, Mr. Lovelace told him to make a purchase and to keep the packaging and his receipt.

Judge Tigar concluded that such testimony confirmed that Wilson did not rely upon the allegedly misleading “0g Trans Fat” statement and granted Frito-Lay’s motion.

Make Them Pay

One may argue that for Ocean Spray and Frito-Lay, justice was done. They both achieved dismissal of their respective suits, and neither had to pay damages. That may all be true, but such “justice” always comes with substantial costs.

An attorney who defends food-labeling suits told the WLF Legal Pulse that the average attorneys’ fees and expenses for defending one of these cases up to and including the filing of a motion to dismiss runs $250,000-$500,000. Fighting through contesting class certification will cost on average $1.5-$3 million.

Ocean Spray successfully opposed two motions for class certification, and then had to defend an appeal to the Ninth Circuit. Frito-Lay whittled down Wilson’s and Campen’s suit through multiple motions to dismiss before obtaining summary judgment.

But that was not it for Frito-Lay. It then had to oppose the plaintiffs’ audacious request that the court appoint new “class representatives.” On August 14, Judge Tigar denied that motion, reminding the plaintiffs that their counsel not only agreed to, but suggested, an April 2014 deadline to amend their pleadings.

Grounds certainly exist in both Major and Wilson for the court to impose sanctions on the plaintiffs and their lawyers for pursuing baseless claims, though neither defendant has sought attorneys’ fees and costs. Federal courts’ reticence to sanction plays a major role in chilling such motions.

Defendants in the Food Court, for example, are aware that in June 2012, Judge Charles Breyer denied defendant King Arthur Flour’s request that the court force the plaintiff to pay “the hundreds of thousands of dollars in attorneys’ fees and expenses” invested to defend a suit that the plaintiff voluntarily dismissed. Discovery in the case revealed that the company had never sold the product at issue in the store from which plaintiff claimed to have purchased it.

Even if defendants don’t formally seek sanctions in instances where product-labeling-suit plaintiffs knowingly file bogus complaints, judges can and should invoke their inherent authority to punish frivolous litigators.

Because these drive-by consumer-fraud claims offer low risks/costs and potentially high reward, defendants’ victories alone will not ebb the tide of suits or deter baseless litigation. The suits will continue, and consumer-product businesses will continue passing on the costs of such litigation to their customers, until the judiciary makes it clear that abuse of the judicial process comes with a high price.

Also published by Forbes.com on WLF’s contributor page.

2 thoughts on “Food-Court Follies: Fraud Suits Fall Apart after Plaintiffs’ Candid Admissions During Discovery

  1. Pingback: Food roundup - Overlawyered

  2. Pingback: Top News Clips for August 26-September 1 | New Jersey Civil Justice Institute

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s