In November 2012, the United States District Court for the Northern District of California certified a class of consumers who purchased certain brands of iced tea beverages labeled “100% Natural” or “All Natural” despite allegedly containing high levels of high-fructose corn syrup (HFCS) and citric acid. Ries v. AriZona Beverages USA LLC, 287 F.R.D. 523 (N.D. Cal. 2012). The plaintiffs successfully argued that a class claiming the iced tea manufacturers violated California consumer protection statutes1 should be certified because all class members were exposed to allegedly misleading labels found on the drinks. In analyzing the Fed. R. Civ. P. 23(a) factors,2 the court disregarded the factual variations in class members’ purchase decisions, concluding that they have “marginal legal significance for purposes of state law, and Rule 23’s commonality requirement . . . .” Id. at 538.
Like many other courts recently, the Ries court relied heavily on the California Supreme Court’s opinion in In re Tobacco II Cases, 46 Cal. 4th 298, 306, 93 Cal. Rptr. 3d 559 (2009), in certifying its consumer fraud class. Citing Tobacco II, the Ries court determined that the focus of the various consumer protection statutes “is on the defendant’s conduct . . . rather than the subjective state of mind of the individual consumer.” Ries, 287 F.R.D. at 537 (quotation marks & citation omitted). Accordingly, the court held that “variation among class members in their motivation for purchasing the product, the factual circumstances behind their purchase, or the price that they paid” is immaterial. Id. In the eyes of many courts, the Tobacco II decision eliminated any requirement of individualized proof of deception, reliance or injury for claims brought under the various California statutes.
The willingness of courts to accept this interpretation of Tobacco II has made class certification seemingly automatic under California consumer protection law. Over the past three years, multiple federal district courts have cited Tobacco II as authority for disregarding individual issues of materiality and reliance that might otherwise defeat commonality and predominance in a Rule 23 analysis of consumer protection claims. In In re Pom Wonderful LLC Marketing & Sales Practices Litigation, No. ML 10-02199, 2012 WL 4490860 (C.D. Cal. Sept. 28, 2012), the court certified a class of consumers asserting UCL, CLRA, and FAL claims against a producer of juice products that advertised allegedly false health benefit claims. In Chavez v. Blue Sky Natural Beverage Co., 268 F.R.D. 365 (N.D. Cal. 2010), the court certified a class action against a beverage company that allegedly misrepresented the origins of its products. And in Keegan v. American Honda Motor Co., 284 F.R.D. 504 (C.D. Cal. 2012), the court certified a class of car purchasers alleging a UCL claim resulting from the manufacturer’s alleged failure to disclose defective suspensions in its vehicles. The common thread in each of these opinions is a district court judge who maintains that individualized proof of reliance and causation is not required for consumer protection claims under California law.
In many of these cases, certification of a class without any analysis of individual consumer behavior is a death knell for the defendant that has been robbed of its most potent argument. Frequently, a defendant company who loses at class certification will turn quickly to settlement. However, the most recent opinion from the Ries court, granting the defendants’ motion for summary judgment, highlights effective weapons that remain at consumer product companies’ disposal. Ries v. AriZona Beverages USA LLC, No. 10-01139, 2013 WL 1287416 (N.D. Cal. March 28, 2013) (“Ries II”). While class certification is a major milestone in any consumer products class action, the Ries II decision highlights the importance of focusing on the merits of the claims themselves and developing a record with expert and individual testimony that attacks the merits of those claims.
The defendants were able to win their case a mere four months after the court certified its class by simply taking aim at claims that it knew had no basis in fact. The Ries II court noted that the “factual predicate for each of plaintiffs’ claims under [the California consumer protection laws was] that AriZona Iced Tea beverages are falsely labeled as ‘all natural’ despite containing HFCS and citric acid, two ingredients that plaintiffs contend are not natural.” Ries II, 2013 WL 1287416 at *4. The plaintiffs initially alleged that HFCS is not a natural product because it “is produced by adding a series of enzymes to processed corn starch to change the glucose present in the corn into fructose,” while citric acid is “man-made because it is produced from certain strains of . . . mold.” Id. at *1. As the court recognized, “all of the violations alleged by plaintiffs [were] dependent [on] proving that HFCS and citric acid are not ‘natural’ and therefore the labels are false. . . .” Id. at *4.
In opposing the plaintiffs’ allegations, the defendants produced an expert report establishing that HFCS and citric acid are natural and declarations from suppliers that established that the products were natural and in accord with the FDA’s “natural policy.” Id. The plaintiffs’ sole evidence was that HFCS “is not natural because patents have been issued for the process of producing it.” Id. at *5. The plaintiffs cited no legal authority supporting their contention and were chided by the court for merely extending “their rhetoric that HFCS is artificial because it ‘cannot be grown in a garden or field, it cannot be plucked from a tree, and it cannot be found in the oceans or seas of this planet.’” Id. (citation omitted).
Recognizing the lack of evidence supporting their claims, the court noted that the plaintiffs “appear[ed] to abandon their position that the AriZona Iced Tea labels are false” and instead “adopt[ed] a new position that the labels violate the UCL, FAL, and CLRA because they confuse consumers who do not know what ‘all natural’ means.” Id. The plaintiffs had been left with no alternative but to devise an entirely new case theory at the eleventh hour, using “cherry-picked” testimony from the deposition of one of the defendant’s owners. Id. at *6. Consistent with the rest of the defendants’ case, however, the owner was well-prepared and offered thorough, repetitive testimony focused on dissuading the notion that any consumers were confused by the labeling. Id. at *7. At the end of the day, the plaintiffs had “neither intrinsic evidence that the labels are false (because HFCS and citric acid are not natural) or extrinsic evidence that a significant portion of the consuming public would be confused by them.” Id.
The main takeaway of the Ries II decision for consumer product manufacturers is twofold. First, it is a reminder that while defeating class certification is critical, it is equally important to establish an evidentiary record focused on defeating the merits of plaintiffs’ claims. Sensibly, consumer fraud defendants often focus their efforts on developing evidence of the individualized nature of consumer behavior. As consumer protection law in California trends more plaintiff-friendly, however, companies and their lawyers should not lose sight of their ability to defeat the fundamental claims asserted by illuminating the weaknesses in plaintiffs’ factual allegations and carving through their rhetoric.
Second, Ries II suggests that defendants may remain well-poised to prevail despite a negative class certification order if they are armed with expert and layperson testimony and prepared to adapt to plaintiffs’ evolving and often last-minute positions. From the outset, the focus should be on developing a thorough and robust evidentiary record that incorporates the defendant’s affirmative story while aiming at the merits of the plaintiffs’ claims. Class certification does not automatically equal defeat if defendants have prepared their case with an eye toward trial and are positioned to attack at the close of discovery.
This advisory was previously published by Law360.