Last month a California judge granted Blue Diamond's motion to de-certify a class of California plaintiffs in Werdebaugh v. Blue Diamond Growers, No. 12-cv-02724 (N.D. Ca. Dec. 15, 2014). There plaintiffs brought suit alleging that Blue Diamond violated California's Unfair Competition Law and False Advertising Law by (1) labeling products as "all natural" when they in fact contained synthetic ingredients; and (2) listing "evaporated cane juice" as an ingredient instead of sugar.
The judge initially certified the class of California plaintiffs on the basis of their proposed damages model, which was supposed to measure the impact of the labeling statements on price. Id. at 7. Defendants successfully argued, however, the model ultimately submitted by plaintiffs failed to do so. Defendants argued that the model conflated the value of Blue Diamond's brand with the alleged label misrepresentations and failed to account for other factors, including advertising.
The court agreed, finding that the model was "incapable of isolating the damages attributable to Defendant's alleged wrongdoing." Id. at 20 (citing Comcast v. Behrend, 133 S.Ct. 1426, 1433 (2013)). This was enough to decertify the class because it was "essential that [plaintiff's] model control for brand loyalty." Id. at 21. Moreover, the court found that the model did not control for the impact of advertising, leaving the court "unable to determine how much of the purported price premium is due to Defendant's use of the at-issue labeling claims, as opposed to Defendant's successful advertising campaigns." Id. at 23. In analyzing the damages model, the Court also rejected plaintiffs' argument that "the Court is limited to reviewing 'the soundness of the methodology' in the abstract at the class certification stage." Id. at 26. Rather, the Court held, "the Court is obligated to do more than rubberstamp a proposed damages class merely because a plaintiff's expert purports to have used a peer reviewed methodology such as a regression analysis." Id.
Blue Diamond highlights the importance of a vigorous attack on plaintiffs' damages model at the class certification stage, particularly following the Supreme Court's recent decision in Comcast v. Behrend. Courts, like the District Court here, have shown willingness to dig in and scrutinize the viability of damages models before certifying a class.