Consumer Fraud Class Action 2016 Highlights

Impact of Offers of Judgment on Class Actions

SCOTUS: Rule 68 Offer Does Not Moot Class Action

Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016)

The Supreme Court held that defendants cannot moot putative class action claims by making an offer of full relief to individual plaintiffs. “[A]n unaccepted settlement offer has no force,” Justice Ginsburg wrote for the Court. “Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.” In so holding, the Court distinguished decisions where plaintiffs had “received full redress for the injuries asserted in their complaints” from those (like the present case) where plaintiff was not actually provided any relief. Indeed, the Court specifically noted: “We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount. That question is appropriately reserved for a case in which it is not hypothetical.” View the decision.

Ninth Circuit Closes Door Left Open by Supreme Court: Depositing Payment Does Not Moot Class Action

Chen v. Allstate Ins. Co., 819 F.3d 1136, No. 13–16816, 2016 WL 1425869 (9th Cir. Apr. 12, 2016)

In Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), summarized above, the U.S. Supreme Court held that a defendant cannot moot individual or putative class action claims by making an offer of full relief to individual plaintiffs. In so holding, the Court did not “decide whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff. . . .” In Chen, the Ninth Circuit addressed this unanswered question. Defendant Allstate “deposited $20,000 in full settlement of [plaintiff’s] individual monetary claims in an escrow account ‘pending entry of a final District Court order or judgment directing the escrow agent to pay the tendered funds to [plaintiff]’” and also offered injunctive relief. Allstate argued that its actions mooted plaintiff’s claims, requiring dismissal. The Ninth Circuit disagreed, holding that “a claim becomes moot when a plaintiff actually receives complete relief on that claim, not merely when that relief is offered or tendered. Where, as here, injunctive relief has been offered, and funds have been deposited in an escrow account, relief has been offered, but it has not been received.” Thus, the court held, Allstate’s actions did not moot plaintiff’s claims. Further, the court held plaintiff could still seek certification on behalf of the class even if the district court mooted his claims by entering judgment in his favor. View the decision.

Sixth Circuit: Class Claims Mooted by Accepted Offer of Judgment

Montgomery v. Kraft Foods Global, Inc., Case No. 25-1238 (6th Cir. May 16, 2016)

The Sixth Circuit affirmed the district court’s order denying class certification of plaintiff’s consumer protection claims relating to her purchase of a Tassimo coffeemaker, holding that her acceptance of a Rule 68 offer of judgment — which included costs and attorney fees — foreclosed her appeal of this issue, because it “eliminate[d] any putative benefit from class certification.” The panel observed that SCOTUS’ decision in Campbell-Ewald “provides little instruction” because that case involved an unaccepted offer of judgment. View the decision.

Second Circuit: Satisfaction of Judgment Mooted Plaintiff’s Individual and Class Claims

Bank v. Alliance Health Networks, LLC, 2016 WL 6128043 (2d Cir. Oct. 20, 2016)

In a summary order, the Second Circuit affirmed the district court’s decision that the satisfaction of judgment in plaintiff’s favor on his individual claims mooted his class allegations brought under the Telephone Consumer Protection Act and New York’s General Business Law. The court distinguished Campbell-Ewald (summarized above) and held that because judgment was entered and plaintiff’s claims were satisfied (as plaintiff negotiated the check), his individual claims were rendered moot and he lacked standing to pursue class claims.

Purchasers With No Threat of Future Injury Lack Article III Standing to Seek Injunctive Relief

Nicosia v., Inc., 834 F.3d 220 (2d Cir. 2016)

The Second Circuit affirmed an order denying plaintiff’s motion for a preliminary injunction enjoining Amazon from selling weight loss products containing sibutramine, finding that “[a]lthough past injuries may provide a basis for standing to seek money damages, they do not confer standing to seek injunctive relief unless the plaintiff can demonstrate that she is likely to be harmed again in the future in a similar way.” Plaintiff lacked standing to pursue a preliminary injunction because Amazon had stopped selling the particular product she purchased and because Nicosia has failed to allege that she intends to use Amazon in the future to buy any products, let alone food or drug products generally or weight loss products in particular. View the decision.

Luman v. Theismann, 647 F. App’x 804, No. 14–15385, 2016 WL 1393432 (9th Cir. Apr. 8, 2016) (unpublished)

The Ninth Circuit upheld a determination that plaintiffs lacked standing to seek injunctive relief, reasoning that “[b]ecause Plaintiffs [did] not allege that they intend to purchase [defendant’s drug] SBP in the future, they cannot demonstrate a likelihood of future injury.” Indeed, the trial court held, “plaintiffs’ allegations that defendants have deceived them suggest that the probability they will be injured again by defendants’ alleged deception is infinitesimal.” View the decision.

Torrent v. Yakult U.S.A., Inc., No. SACV 15-00124-CJC(JCGx) (C.D. Cal. Jan. 5, 2016)

Plaintiff, who alleged that defendant falsely labeled its probiotic beverages as providing health benefits, had Article III and statutory standing to pursue his claim to recover restitution and declaratory relief. Nevertheless, the court simultaneously concluded that plaintiff lacked Article III standing to seek injunctive relief because he had no intention of purchasing the challenged product again, and therefore could not satisfy Article III’s standing requirement that a plaintiff seeking injunctive relief must proffer evidence that there is a sufficient likelihood that he will be wronged in the same way in the future. Ten days after the court denied plaintiff’s motion for class certification, Torrent purchased a Yakult yogurt and filed a “renewed motion” for class certification on the basis of his recent purchase. The court construed it as a motion for reconsideration and denied it, reasoning that “[a]llowing Torrent to seek injunctive relief based on his recently-expressed intention to purchase Yakult in the future would permit him to fundamentally alter his theory of the case, and would allow him to relitigate issues that this Court has already ruled on. Rule 23 does not require such a result and Local Rule 7-18 prohibits it.” View the decision.

Premium Price Alone Is Not Actionable

Boris v. Wal-Mart Stores, Inc., --- F. App’x ---, No. 14–55752, 2016 WL 1622207 (9th Cir. Apr. 25, 2016) (unpublished)

Plaintiff alleged that Wal-Mart deceptively marketed its Equate Migraine medication in violation of several state consumer protection statutes because although Equate Extra Strength contains the same active ingredients in the same amount, Wal-Mart charged two to three times more for Equate Migraine. Plaintiff contended that this increased price and different packaging color scheme were deceptive because customers were led to believe that Equate Migraine was better than Equate Extra Strength. The Ninth Circuit affirmed an order dismissing the action, observing that the “fatal flaw in all of Boris’ claims is his assertion that the mere fact of the proximate presentation of the two products with their different colors and prices is sufficient to run afoul of those laws, even though the ingredients and their amounts are listed on the packages.” View the decision.

Parent v. MillerCoors LLC, No. 3:15-cv-01204, 2016 WL 3348818 (S.D. Cal. June 16, 2016)

Plaintiff’s first amended complaint alleged that he had regularly paid a premium when he purchased Blue Moon beer, based on his impression that Blue Moon is a “craft beer.” Plaintiff pointed to Blue Moon’s packaging and website, its “artfully crafted” trademark, and its “placement among other craft beers” at retail sellers. Plaintiff argued that although the internet advertisements “stop short of calling Blue Moon a craft beer, they feature all of the elements necessary to depict a craft beer.” The court granted defendant’s motion to dismiss, holding that the challenged internet advertisements contained only “mere puffery” and did not amount to actionable misrepresentations. Despite images suggesting a comparatively small-scale brewing operation, the advertisements do not claim that the depicted brewery was the only place Blue Moon was produced, that it was invented by an independent brewery, or that it is currently brewed by a small, independent brewery. Moreover, the court held that the alleged “premium price” of Blue Moon, and its placement among other craft beers in retail stores, could not constitute a representation. View the decision.

Slack-Fill in Accurately Labeled Package Held to Be Not Misleading as a Matter of Law

Ebner v. Fresh, Inc., 838 F.3d 958, No. 13–56644, 2016 WL 1056088 (9th Cir. Sept. 27, 2016)

Plaintiff alleged that the “vastly oversized tubes and boxes” of Fresh’s Sugar lip balm deceived consumers about the quantity of product that each tube contained because only 75 percent of the product actually advances up the tube. Plaintiff asserted that the omission of a statement about product accessibility rendered the otherwise-accurate net weight statement deceptive. The Ninth Circuit affirmed an order dismissing the complaint, finding plaintiff’s claim implausible. “It is undisputed that the Sugar label discloses the correct weight of included lip product. Dispenser tubes that use a screw mechanism to push up a solid bullet of lip product are commonplace in the market. The reasonable consumer understands the general mechanics of these dispenser tubes and further understands that some of the product may be left in the tube to anchor the bullet in place.” On denial of panel rehearing and rehearing en banc, the Ninth Circuit issued a new opinion affirming the dismissal. View the decision.

Bush v. Mondelez Int’l., Inc., No. 16-cv-02460-RS, 2016 WL 5886886 (N.D. Cal. Oct. 7, 2016)

Relying on the Ninth Circuit’s 2016 decision in Ebner, the district court granted the defendant food manufacturer’s motion to dismiss plaintiff’s claim that it underfilled its packages. “Here, as in Ebner, it is undisputed that the Go-Pak product labels disclose the net weight of included product, as well as the number of cookies or crackers per container. Opaque containers with slack-fill at the top are common in the snack market . . . No reasonable consumer expects the overall size of the packaging to reflect precisely the quantity of product contained therein.” The court was persuaded by the fact that “there is no deceptive act to be dispelled. The Go-Pak product’s weight label and nutrition facts panel do not contradict other representations on or inferences from Mondelez’s packaging.” Bush subsequently filed a second amended complaint alleging for the first time that the labeling overstated the actual amount of cookies or crackers in the packages. In December, the district court once again granted the defendant’s motion to dismiss, ruling that the labeling was accurate and not misleading. View the decision.

“Natural” Food Claims Stayed Pending Conclusion of FDA Proceedings

Kane v. Chobani, LLC, 645 F. App’x 593, No. 14–15670, 2016 WL 1161782 (9th Cir. Mar. 24, 2016) (unpublished)

In this putative class action, the district court granted a motion to dismiss plaintiffs’ complaint that “Chobani deceptively and unlawfully labels its yogurt as ‘natural’ in violation of FDA regulations, and . . . deceptively and unlawfully uses the term ‘evaporated cane juice’ to describe its yogurt’s added sugar ingredient.” The Ninth Circuit vacated the lower court’s order and remanded for entry of an order staying the proceedings pending resolution of the Food and Drug Administration’s contemplated regulation of the terms “evaporated cane juice” and “natural.” View the decision.

In re Kind LLC “Healthy & All Natural” Litig., No. 15-MD-2645 (WHP), 2016 WL 4991471 (S.D.N.Y. Sept. 15, 2016)

The district court stayed plaintiffs’ claims challenging “all natural” labeling on defendant’s snack foods on primary jurisdiction grounds, holding that the claims are particularly in the FDA’s discretion and noting that “the FDA seems to be prepared to address core issues in this case, including what types of processed foods may be labeled ‘natural’ and whether genetically engineered foods may be labeled ‘natural.’” The court also noted that staying this action until the FDA offers guidance at the federal level “would almost certainly help harmonize court rulings.” Plaintiffs have since asked the court to lift the stay. View the decision.