Epic deceptive marketing cases are settled ... but is there a sequel brewing?

Ginger Tale

The whole story is almost impossible to summarize in our limited space.

As 2016 drew to a close, two California residents filed suit against Keurig Dr. Pepper (KDP) in Santa Cruz County Superior Court. The pair alleged that the company’s Canada Dry Ginger Ale, which claimed to be “Made from Real Ginger” in a claim on its can, was deceptively marketed and sold because it did not contain “real” ginger and misleadingly implied that the drink had health benefits. The charges included violations of the California Legal Remedies Act as well as various false advertising and unfair business practices laws and regulations; the plaintiffs sought to strip the marketing tag from the can and recover the premium they paid for a “real ginger” drink. The case was moved to the Northern District of California in early 2017.

As the case began to consolidate other suits filed in California, the plaintiffs survived two motions to dismiss before titanic discovery efforts rolled ahead in 2017. Material totaling 200,000 pages was unearthed, senior KDP marketers were deposed, and California consumers were surveyed for their opinions and feelings regarding “real ginger” and its importance to their purchasing decisions. Economists and chemists were retained. Class certification was challenged up to the Ninth Circuit, which subsequently rejected KDP’s appeal.

It was a brawl.

Fitful mediation in the summer of 2018 failed to end the battle, and trial preparations began to ramp up in November 2018 for an early January 2019 court date.

However, plaintiffs’ counsel had been making moves in other jurisdictions earlier in the year, with similar cases against KDP filed in the District of Massachusetts and the Western District of New York. The Massachusetts case was amended in August, widening it to a putative 49-state class of all states other than California. Making matters worse for KDP were a number of single-state “copycat” cases filed by new plaintiffs in Illinois, Missouri, Texas and Florida.

The Takeaway

Through machinations too complicated to outline here, the new plaintiffs collapsed their suits into a single, 49-state putative class in Missouri. The California plaintiffs’ counsel accused their counterparts in this action of recapitulating their efforts in their East Coast cases and began seeking intervention in the Missouri case. Mediators who had worked on the action since the summer were contacted, and a settlement agreement was reached in the California case on Jan. 4, 2019.

The final settlement in the California case mirrored a settlement reached in the Missouri 49-state action, which, according to the court, had been modeled on the California counsel’s efforts in the three states where it had filed suit.

The final provisions included a $.40 refund for each Canada Dry Ginger Ale product purchased in the class period, with a limit of 13 product claims without proof of purchase ($5.20 total) and 100 claims with proof of purchase ($40 total). KDP is required, through a stipulated injunction, to stop using “Made from Real Ginger” in its product packaging, and include the words “taste,” “extract” or “flavor” if “ginger,” “real ginger” or “natural ginger” is used on the label.

One key difference between the California settlement and the earlier settlement is the absence of a cap to the $.40 product payouts. The 49-state settlement capped monetary relief at $11.2 million; in the California settlement, KDP has the right to exit the settlement “if more than one million valid claims are submitted by California purchasers, meaning the parties will return to litigation. ...”

If the provision is triggered, then this monster of a case – which started small in Santa Cruz County, ballooned to encompass a settlement in every other state in the union and then was laid to rest in its “home state” – will return to haunt ad law journalists yet again.

The lesson for advertisers: Be sure you have substantiation for all claims and revise or qualify claims, where necessary, to avoid being misleading.