Tropical concoctions with names like Mango-a-go-go, Strawberries Wild, Caribbean Passion, Orange Dream Machine, and Razzmatazz may remind you of a carefree day at the beach, but Jamba Juice—the national smoothie chain and purveyor of these fruity smoothie kits—has been undergoing a much less relaxing experience.
Jamba Juice is currently involved in an “all natural” labeling litigation that has spanned almost two years, and counting. The case is Lilly v. Jamba Juice Co., Case No. 13-cv-02998-JST (N.D. Cal.). Plaintiffs initially filed a proposed class action under a variety of consumer-friendly California statutes: the California Consumer Legal Remedies Act, the California False Advertising Law, the California Unfair Competition Law, the California Business and Professional Code, and the California Commercial Code. Last September, Judge Tigar certified a class of all persons in California who purchased one of the above-referenced Smoothie Kit Products. Plaintiffs alleged that the smoothie kits were labeled “all natural” despite containing ascorbic acid, xantham gum, gelatin, steviol glycosides, and modified corn starch. Just last week, Judge Tigar issued an order granting preliminary approval of a class action settlement for injunctive relief in connection with these smoothie kits.
The order granting preliminary approval of the class action settlement first considered whether plaintiffs have standing to obtain injunctive relief, noting the requirement that a plaintiff must allege that a “real or immediate threat exists that she will be wronged again.” The question before the court was whether a plaintiff can ever have standing to seek an injunction against a product she knows to be mislabeled. In line with other California district court decisions cited in the order, Judge Tigar found that plaintiffs do have standing in these situations, because to hold otherwise “would effectively preclude consumers from ever obtaining prospective relief against mislabeling.” Judge Tigar cited decisions finding that the intent of the California Legislature in creating its various consumer protection statutes would be undermined by a contrary holding. Judge Tigar concluded that even when a consumer discovers that a certain representation about a product is false, “she doesn’t know that another, later representation by the same manufacturer is also false. . . .A material representation injures the consumer not only when it is untrue, but also when it is unclear whether or not it is true.” Judge Tigar also noted that “basic economics” supports the notion that the past-purchaser plaintiff will suffer a potential injury in the absence of an injunction.
Notably, the court also found that a willingness to consider a future purchase is sufficient to have standing to represent a 23(b)(2) class. Jamba Juice had previously disputed whether the named plaintiff’s declaration of future intent to purchase the challenged products was sufficient to confer standing, arguing that she lacked a “real and immediate threat of injury” because she didn’t claim a definite intent to make a future purchase of the challenged products.
With respect to the merits of the proposed class settlement, the order first laid out the proposed settlement terms, which require an immediate relabeling of the challenged products and Jamba Juice website to remove any “all natural” description. The settlement does not require a recall or removal of the challenged products from inventory, but rather requires that Jamba Juice no longer print any non-compliant labels for the challenged products after the end of this month. In return, plaintiffs and all members of the settlement class will be prohibited from filing any injunctive action seeking to enjoin defendants from labeling the challenged products containing the challenged ingredients as “all natural.”
The court noted that the Ninth Circuit maintains a “strong judicial policy” favoring the settlement of class actions. The court also noted that trial judges exercise great discretion in deciding to approve or reject settlement proposals, and must be vigilant in evaluating the fairness of proposed settlements. According to the authorities relied on by Judge Tigar, a proposed settlement must appear to be “the product of serious, informed, non-collusive negotiations,” must have “no obvious deficiencies,” must “not improperly grant preferential treatment to class representatives or segments of the class,” and must fall “within the range of possible approval.”
In granting preliminary approval to the proposed 23(b)(2) settlement, Judge Tigar noted the class’s difficulty in showing that they could establish damages on a classwide basis and their failure to present a damages model. Accordingly, a damages class was not certified. The judge was careful to note that “[n]othing in this order should be read as a comment on the ability (or lack of ability) of plaintiffs in other consumer cases to demonstrate classwide damages when the request is supported by an adequate damages model.”
Finally, the court addressed the issue of notice to absent class members. While noting that the Ninth Circuit does not appear to have directly addressed the issue of whether class notice is required when a 23(b)(2) class action is settled, the court relied on the reasoning of a 2012 S.D.N.Y. case to find that class notice is not necessary here because, “even if notified of the settlement, the settlement class would not have the right to opt out from the injunctive settlement, and the settlement does not release the monetary claims of class members.”