Beyond the usual substantive advice—maintaining effective compliance and document management systems, for example—our class action defense team suggests that companies implement the following relatively straightforward procedural tips to avoid class actions.
May 2014 was an active month for evaporated cane juice (“ECJ”) litigation in the U.S. District Court for the Northern District of California. Six courts issued opinions that involved the application of the primary jurisdiction doctrine to ECJ claims. The primary jurisdiction doctrine allows courts to stay or dismiss a complaint without prejudice, pending the resolution of an issue within the special competence of an administrative agency. Many defendants have moved to dismiss ECJ claims based on this doctrine.
In Lanovaz v. Twinings North America, Inc., 2014 WL 1652338, Case No. C-12-02646-RMW (N.D. Cal. April 24, 2014), the court granted-in-part and denied-in-part a motion for class certification in a false advertising case about tea labels. The plaintiff alleged that the defendant’s tea was “misbranded” because it advertised the tea as a “Natural Source of Antioxidants.” The plaintiff claimed that this advertising was misleading and violated California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The plaintiff contended that, although the tea indisputably contained flavonoids (a type of antioxidant), the Food & Drug Administration does not allow advertising about flavonoids because it has not established a recommended daily dose. Plaintiff sought class certification under Rule 23(b)(2) (for an injunctive class) and Rule 23(b)(3) (for a damages class) of the Federal Rules of Civil Procedure.
On April 15, 2014, in the case Caldera v. The J.M. Smucker Co., CV 12-4936-GHK, J.M. (C.D. Cal.), Smucker Company (“Defendant”) defeated the plaintiff’s motion for class certification in a case challenging the labels on Defendant’s Crisco shortening and Uncrustables food products. The lawsuit claimed that Defendant had mislabeled its Crisco shortening with false claims about its healthfulness (such as “50% Less Saturated Fat than Butter”), and that it misleadingly labeled its Uncrustables products as “wholesome” when they contain transfat and high-fructose corn syrup. As with many California food label class actions, the plaintiff brought suit under California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), the Consumer Legal Remedies Act (“CLRA”), and breach of express and implied warranties. The plaintiff sought restitution on behalf of the purchasers of the Crisco and Uncrustable products.
In Swearingen v. Santa Cruz Natural, Inc., No. C 13-04291 (N.D. Cal. April 2, 2014), Judge Illston of the U.S. District Court for the Northern District of California granted defendant’s motion to dismiss based on the primary jurisdiction doctrine. The court held that the determination of the issue of whether the use of the term “evaporated cane juice” violates Food and Drug Administration (“FDA”) regulations is best left to the FDA, and that deference to the FDA is appropriate as the FDA is engaged in active rulemaking on the issue. Judge Illston’s decision demonstrates a growing divide on the application of primary jurisdiction in the “evaporated cane juice” arena.
In Americana Art China Company, Inc. v. Foxfire Printing & Packaging, Inc., 743 F.3d 243 (7th Cir. Feb. 18, 2014), the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s attorneys’ fees award in a class action settlement arising from the defendant’s faxing of thousands of unsolicited advertisements in violation of the federal Telephone Consumer Protection Act. In doing so, the Seventh Circuit reaffirmed the district court’s discretionary power to use the lodestar method, rather than the percentage method, to determine an appropriate fee award for class counsel. The Seventh Circuit held that the lodestar methodology was properly applied and permissible under the circumstances.
In In re Kosmos Energy Ltd. Securities Litigation, No. 3:12-CV-373-B, 2014 U.S. Dist. LEXIS 36365 (N.D. Tex. Mar. 19, 2014), the United States District Court for the Northern District of Texas (Boyle, J.) denied lead plaintiff’s class certification motion in a consolidated action alleging claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (“1933 Act”), 15 U.S.C. §§ 77k, 77l(a)(2), 77o. The 1933 Act regulates registration and offering statements by holding issuers and other offering participants strictly liable for material misstatements and omissions. Reliance is not an element of the claim. Plaintiff’s class certification motion rested on the notion that 1933 Act claims presumptively deserve class treatment. The district court, however, rejected the continued vitality of this notion in light of the recent “evolution of the case authority on class certification” requiring “a more skeptical view with a more exacting review process.” The district court’s decision recognizes that, as with other substantive areas of law, this “evolution” applies in securities law cases. Hence, historically “pro-plaintiff” approaches to class certification in securities cases (including cases based on 1933 Act claims) must yield to the newly evolved class certification standards.
On March 25, 2014, the court in In re: POM Wonderful LLC Marketing and Sales Practices Litigation, Case No. ML 10-02199 DDP (C.D. Cal.), granted a motion by defendant POM Wonderful LLC (“POM”) to decertify a previously certified class of consumers who purchased certain POM juice products. The court granted POM’s motion because plaintiff failed to present a damages model that satisfied Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), and because the class was not ascertainable.
In Morgan v. Wallaby Yogurt Co., Inc., the U.S. District Court for the Northern District of California denied defendant’s motion to dismiss a class action complaint alleging violations of the UCL, FAL, and CLRA for mislabeling yogurt products, but struck plaintiffs’ prayer for injunctive relief. The Court held that plaintiffs had standing to bring the UCL, FAL, and CLRA claims, as well as standing to prosecute claims for products the plaintiff did not purchase. Morgan provides companies with an insight into the standing threshold for class actions challenging food product labels.
In the past four years, droves of call recording class actions have been filed in state and federal courts across California. The gist of each is that a company violates the law when its customer service department records calls with its customers without first providing notice that the calls may be recorded. In a recent published decision, the California Court of Appeal may have sounded the death knell for these class actions. The Court of Appeal affirmed the trial court’s denial of a class certification motion, holding that individualized issues predominated.