The plaintiffs hit a snag in long-running litigation against Monster Beverage Corp. when a California federal court denied their motion to certify a class of nationwide consumers numbering in the hundreds of thousands.
Multiple consumers filed suit against Monster alleging that the company violated California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and Consumers Legal Remedies Act (CLRA) by using deceptive slogans for its energy drinks. After several years of litigation, four representations remained at issue in the case: “Hydrates Like a Sports Drink”; “Rehydrate”; “Consume responsibly—Max 1 can every 4 hours, with limit 3 cans per day. Not recommended for children, people sensitive to caffeine, pregnant women or women who are nursing”; and “It’s an ideal combo of the right ingredients in the right proportion to deliver the big bad buzz that only Monster can.”
As the statements were made uniformly on the labels of particular types of Monster drinks, the plaintiffs filed a motion for class certification. Monster countered that individualized inquiries predominated, making certification inappropriate.
U.S. District Judge Virginia A. Phillips agreed with the defendant, holding that the plaintiff failed to meet the requirements of Federal Rule of Civil Procedure 23(b)(3). The UCL, FAL and CLRA are materially indistinguishable for purposes of class certification, the court said, leaving the plaintiffs with a two-part burden: first, showing that the challenged statements were material, and second, that they were likely to mislead or deceive consumers on a classwide basis.
“Plaintiffs’ evidence overwhelmingly goes to the second part of this inquiry, focusing on consumers’ understanding of the challenged statements, but they present very little evidence regarding the materiality of the statements,” the court said. “Plaintiffs thus fail to carry their burden of showing that the alleged misrepresentations at issue here justify a presumption of reliance. This, in turn, is fatal to Plaintiffs’ attempt to demonstrate affirmatively that their action for damages complies with Rule 23(b)(3).”
While the plaintiffs relied heavily on an expert report that details consumer responses to the challenged statements, the report did not provide insight into consumers’ purchasing decisions, the court said. Accordingly, the respondents were not necessarily the persons who purchased the drink. The plaintiffs argued that they could show materiality by measuring consumer understanding of the challenged statements.
But the court said the correct test for materiality required a demonstration that the statements were a factor in consumers’ purchasing decisions, and stated that the plaintiff’s report “is not tethered to consumers’ purchasing behavior. It is only probative of whether three of the statements are misleading, not material.”
With regard to the statement “Hydrates Like a Sports Drink,” the plaintiffs failed to show that it had a common meaning. In the survey, consumer responses varied, with the bulk (47.8 percent) providing miscellaneous responses. “This falls far short of showing that a significant portion of the general consuming public or of targeted consumers were misled by the Hydrates statement on the basis that the drinks do not provide electrolytes,” as the plaintiffs argued, Judge Phillips wrote.
“In sum, Plaintiffs have not shown that there is a common answer to the question of whether a reasonable consumer would consider any of the challenged statements a material misrepresentation,” the court said. “In other words, there are significant individualized issues related to proof of reliance. Consequently, the Court finds Plaintiffs cannot maintain an action under Rule 23(b)(3).”
While this finding alone was enough to defeat the plaintiffs’ motion for class certification, the court said the plaintiff also failed to demonstrate that damages were capable of measurement on a classwide basis.
In order to tie a damages model for a misleading statement to a theory of liability, a plaintiff must show that the price premium paid was for the attribute consumers believed the product contained. But the survey relied upon by the plaintiffs “suffers from focalism bias, rendering it useless for the purpose of determining price premiums attributable to the challenged statements,” the court wrote.
To read the opinion in Townsend v. Monster Beverage Corporation, click here.
Why it matters: The plaintiff failed to satisfy the requirements of Rule 23(b)(3) on two fronts: “Significant” individualized issues remained with regard to proof of reliance, and damages could not be measured on a classwide basis.