Food-Labeling Suit’s Successful Class Certification is Cause for Concern in California

Featured Expert Contributor—Civil Justice/Class Actions

Frank Cruz-Alvarez, Shook, Hardy & Bacon L.L.P., with Rachel Forman, Shook, Hardy & Bacon L.L.P.

California is broadening the legal landscape of food-labeling class actions to the dismay of the food and beverage industry.  The Southern District of California in Hilsley v. Ocean Spray Cranberries, Inc. et al. has thrown the doors open for class certification in food-labeling cases.  The court issued an opinion partially certifying a class of consumers consisting of California citizens who purchased one of various Ocean Spray Cranberries, Inc. (“Ocean Spray”) products, such as Ocean Spray Cran Apple or Cran Raspberry, that contain labels which state, “‘No . . . artificial flavors’ when in fact the products contain artificial flavoring chemicals that simulate the advertised fruit flavors.”  Id. at “2.

Plaintiff Crystal Hilsley (“Plaintiff”) brought a purported class action against Ocean Spray and Arnold Worldwide LLC (“Arnold”) (collectively, “Defendants”), alleging six causes of action for violations of the California Consumer Legal Remedies Act (“CLRA”), the unlawful prong of the Unfair Competition Law (“UCL”), the unfair prong of the UCL, California’s False Advertising Law (“CAL”), and breach of express warranty and breach of implied warranty.  See id. at *3-4.  In the complaint, Plaintiff claims that certain Ocean Spray products are labeled to say that they do not contain artificial flavors when they do, in fact, contain artificially synthesized “malic acid” and “fumaric acid” to flavor the products.  Id. at *2-3.

The district court analyzed class certification under the framework set forth in Comcast Corp. v. Behrend, 133 S. Ct 1426 (2013).  The court first addressed the requirements of Rule 23(a).  As to numerosity, Defendants conceded this point.  As to commonality, Plaintiff argued that the requirement is satisfied because there were numerous questions common to the class such as whether the representation “No artificial flavor” was likely to deceive; whether that representation was material; and the proper method for calculating damages.

In response, Defendants argued there was no commonality because “Plaintiff has provided no evidence that malic acid and fumaric acid function as flavors in these Products” and those ingredients actually serve as “non-flavored acidulants that control the acidity” of the products.  Id. at 6-7.  The court rejected Defendants’ argument, stating that Defendants incorrectly wanted the court to make a merits determination, which is not proper on class certification.  Id. at *8-9.

As to typicality, Defendants attacked the Plaintiff as a “guru-for-hire,” “health coach,” and “label guru,” and argued that her financial incentive is not typical of other class members and could actually harm the class.  The court, however, disagreed and emphasized that the focus of typicality is on the Plaintiff’s claims, not her personal background, and whether those claims are typical of the purported class.  It found the typicality requirement to be met because all class members were alleged to have purchased the products, been deceived by the labeling, and lost money as a result.  Id. at *10-12.

On adequacy, despite Defendants arguments that Plaintiff was recruited by her counsel to be a class representative and dilatory and uncooperative during discovery, the court concluded that:  (1) counsel recruiting Plaintiff was more of a violation of the Rules of Professional Conduct and did not make Plaintiff an inadequate class representative, and (2) Defendants never sought relief from the court to rectify Plaintiff’s behavior during discovery to their own detriment.  Moreover, Plaintiff’s alleged false testimony during her deposition was not so egregious as to render her an inadequate class representative.  Id. at *12-18.

The court then turned to Plaintiff’s showing under Rule 23(b)(3) “that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy” and that “the questions of law or fact common to class members predominate.”  As to Plaintiff’s claims under California’s CLRA, UCL and FAL, the court found common issues predominated because the statutes require an objective test—would a reasonable person have considered Defendants’ representation material—which is amenable to a class action.  As to the breach of express warranty claim, because the Plaintiff did not need to prove individual reliance, the claim is likewise amenable to a class action.  Id. at *18-20.  At this juncture, the court rejected certification of Plaintiff’s claim for breach of implied warranty—vertical privity is required between the plaintiff and the defendant which necessarily requires individual inquiries as to where Plaintiff and the class members bought their Ocean Spray products.  Id. at *20-21.

On damages, the court conducted the rigorous analysis of Plaintiff’s proposed damages models required under Comcast.  Plaintiff proposed two price-premium damages models that she claimed were consistent with her theory of liability and the strictures of Comcast.  One model—devised by expert witness Dr. Goedde’s—was based off of a consumer survey of California juice prices completely unrelated to Ocean Spray products.  The court rejected this model because it was unrelated to Plaintiff’s legal theories or the alleged labeling misrepresentations.  The other model—created by a second expert, Dr. Belch—proffered consumer-survey results based on the “contingent valuation methodology,” and the results showed that customers preferred Ocean Spray products that did not contain artificial flavors and were willing to pay more for them.  Dr. Goedde then applied the findings to Ocean Spray’s actual unit sales during the class period to arrive at an appropriate amount for restitution—the remedy available for Plaintiff’s causes of action.

The court found that this combination of analyses by Plaintiff’s experts “demonstrated a damages framework” to satisfy predominance on Plaintiff’s CLRA, UCL, and FAL claims.  The court, however, rejected the application of the framework to the breach of express warranty claim because Plaintiff failed to make the required demonstration, necessarily denying certification of that claim.  Id. at *22-33.

The court granted Plaintiff’s motion for class certification under Rule 23(b)(3) on her CLRA, UCL, and FAL claims only and granted certification for an injunctive relief class under Rule 23(b)(2).

Hilsley adds new fuel to food-labeling litigation.  Although packaged-food businesses have responded to years of class-action lawsuits with labeling modifications that make their products less-inviting targets, decisions like Hilsley show that plaintiffs’ lawyers are equally creative and determined to keep the claims coming.  This is especially true for products labeled as “natural” or free of artificial ingredients when those products arguably do contain synthetic ingredients, regardless of their purpose.  That new angle might just be enough to survive something as rigorous as the class-certification analysis required under Comcast, as evidenced by this case.

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