On March 17, 2016, the United States Court of Appeals for the Ninth Circuit issued its decision in Ebner v. Fresh, Inc., No. 13-56644, 2016 WL 1056088 (9th Cir. Mar. 17, 2016), dismissing, without leave to amend, a putative class action alleging that defendant Fresh, Inc. (“Fresh”) violated California’s False Advertising Law, Unfair Competition Law and Consumers Legal Remedies Act by selling a lip product which, by design of the product’s container, resulted in consumers being able to use only a portion of the total product in the container.
In her Complaint, Plaintiff Angela Ebner alleged that Fresh deceived consumers about the quantity of lip balm in its Sugar Lip Treatment product, which was packaged in a 29 gram tube. The product is sold in a dispenser tube that uses a screw mechanism to push the lip product to the top of the tube. The tube is packaged and sold in a large cardboard box. Both the tube and the cardboard box have labels indicating the net weight of the lip product. Although Fresh accurately identified the true net weight of the product on the tube, Ebner alleged that the 4.3 gram net weight representation was nonetheless misleading because the tube’s screw mechanism allows only 75% of the product to advance up the tube, leaving 25% of the product from advancing beyond the plastic stop device in the tube. Ebner further alleged that the “vastly oversized” tube, which contained a weighted metallic bottom and was wrapped in oversized packaging, misled consumers into believing that each unit contains more lip product than it does. Based on these allegations, Ebner asserted four causes of action on behalf of a putative class of consumers who purchased Sugar Lip Treatment: (1) violation of California’s False Advertising Law, Cal. Bus. & Prof. Code § 17500 et seq.; (2) violation of the California Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq.; (3) violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.; and (4) unjust enrichment.
Fresh moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, contending, inter alia, that its conduct was affirmatively authorized by state and federal statutes and that its 4.3 gram net weight label was an accurate reflection of the amount of lip product in the container.
On September 11, 2013, the United States District Court for the Central District of California granted Fresh’s Motion to Dismiss, without leave to amend, finding, in relevant part, that: (1) Fresh’s labeling was permitted under California’s safe harbor doctrine; (2) Fresh was not profiting off the allegedly inaccessible portion of the product; and (3) Fresh’s packaging was not deceptive or misleading.
On September 19, 2013, Ebner appealed the District Court’s ruling to the United States Court of Appeals for the Ninth Circuit. On appeal, she argued that: (1) her claims regarding the design and packaging could not be dismissed as a matter of law because the district court had mischaracterized the design and packaging allegations; (2) she had alleged sufficient facts showing that a reasonable consumer could be deceived by Fresh’s design and packaging; and (3) the district court had incorrectly interpreted California’s safe harbor law.
The Ninth Circuit held oral argument on January 11, 2016, and issued its decision affirming the District Court’s ruling on March 17, 2016. In particular, the Ninth Circuit held that California’s safe harbor doctrine, which precludes plaintiffs from bringing claims based on conduct affirmatively permitted by statute, shielded Fresh from Ebner’s claim that the product’s weight label was deceptive and misleading. Because state and federal statute requires Fresh to state the net weight of the product on the label, Fresh could not be liable under California’s unfair competition statutes from complying with the law.
On the other hand, the Ninth Circuit held that the safe harbor doctrine did not shield Fresh from Ebner’s contention that Fresh’s omission of clarifying information regarding the product’s full accessibility was misleading, explaining that “there is no law expressly permitting the omission of supplemental statements.” Notwithstanding this finding, the Ninth Circuit held that Ebner could not state an omission claim under California’s unfair competition statutes. It explained that California’s consumer protection statutes require a plaintiff to show that members of the public are “likely to be deceived” by a business’ practices. The Court found that such deception was “not plausible” in connection with consumers’ purchase of Sugar Lip Treatment, because a reasonable consumer “understands these dispenser tubes and further understands that some product may be left in the tube to anchor the bullet in place.” The Ninth Circuit similarly rejected Ebner’s assertion that the product’s “oversized” packaging was deceptive, noting that “the reasonable consumer also understands that some additional weight at the bottom of the tube—not consisting of product—may be required to keep the tube upright” and that “no reasonable consumer expects the weight or overall size of the packaging to reflect directly the quantity of product contained therein.” The Court also affirmed the District Court’s decision to deny leave to amend, noting that “amendment would be futile” because Ebner could not plausibly allege deceptive design and packaging.
The Ninth Circuit’s decision in Ebner is encouraging to manufacturers and retailers, as it recognizes the reality that consumers, especially consumers of cosmetics products, are knowledgeable and aware of what they are buying. It also sends a message to district courts that, when evaluating claims brought under California’s unfair competition and false advertising statutes, they must examine such claims through the eyes of a reasonable consumer, not the least-sophisticated consumer. While manufacturers and retailers should not rely on the Ebner decision to push stronger claims, it does provide another weapon in their arsenals when defending against consumer class actions.
The Ebner decision may also signal a heightened skepticism by the judiciary to consumer class actions. In Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 6901867 (N.D. Cal. Dec. 8, 2014), Judge Lucy Koh, who was recently nominated for appointment to the Ninth Circuit, granted summary judgment to defendant Dole Packaged Foods, LLC (“Dole”) in a false advertising class action, holding that Dole’s frozen packaged fruit labels were not likely to deceive consumers. Citing Plaintiff Chad Brazil’s (“Brazil”) “insufficient evidence that the ‘All Natural Fruit’ label statement on the challenged Dole products was likely to mislead reasonable consumers,” Judge Koh noted that Brazil had failed to show that a reasonable consumer would not normally expect the allegedly synthetic ingredients to be found in the challenged Dole products. Thus, as in Ebner, Judge Koh viewed the case through the sensibilities of a reasonable consumer.
In line with this trend, district courts have relied on other avenues by which to dispense with consumer class actions. In Jones v. ConAgra Foods, Inc., No. C 12-01633 CRB, 2014 WL 2702726 (N.D. Cal. June 13, 2014), currently on appeal before the Ninth Circuit, a district court denied the plaintiffs’ attempt to certify a class in part because the class was not ascertainable. In explaining its decision, the court wrote: “The variety of products and of labels, combined with the lack of receipts and the low cost of the purchases, means that consumers are unlikely to accurately self-identify. Plaintiffs have offered no verifiable means of identifying class members.” Other circuits have also focused on the ascertainability question, with varying results. Last July, in Mullins v. Direct Digital, LLC, No. 15-1776, 2015 WL 4546159, at *1 (7th Cir. July 28, 2015), the Seventh Circuit Court of Appeals declined to apply a “heightened” ascertainability standard when it affirmed the lower court’s decision to certify a class of consumers who alleged that the seller of a dietary supplement committed consumer fraud by making false and misleading representations about the supplement’s effectiveness. It explicitly declined to apply the heightened standard established by the Third Circuit in Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), arguing that the Third Circuit’s requirement “has the effect of skewing the balance that district courts must strike when deciding whether to certify classes.” Given this circuit split, it may just be a matter of time before the Supreme Court weighs in on these issues. With the recent passing of Justice Antonin Scalia, who was reliably skeptical of class actions,this area of law is ripe for development.