A federal court judge has granted preliminary approval to a proposed $9 million deal between Naked Juice Co. and a class of consumers in a false advertising suit challenging “All Natural” claims for products that included Acai Machine, Protein Zone, and Mango Veggie juices.
Although the juice line was labeled “All Natural” and “Non-GMO” the products contained fibersol-2, genetically modified soy, and fructooligosaccharides, among other non-natural ingredients, according to five separate complaints filed in 2011. The suits were consolidated in the Central District of California. After discovery and four full-day mediation sessions – with months of negotiations in between – the parties reached a deal.
The settlement applies to all U.S. residents who purchased one of the covered products over a six-year period, each of whom is eligible for up to $75 in cash (with proof of purchase or other documentation) or between $5 and $45 (without). In addition to class payments, the $9 million fund will also cover the costs of notice and settlement administration, incentive awards to four of the named plaintiffs, and up to $3.12 million in class counsel fees and expenses.
Naked Juice also agreed to injunctive relief valued at $1.4 million. The company will redesign the labels, its marketing approach, and advertising copy for the covered products and eliminate the “All Natural” language. In addition, Naked Juice will substantiate the “Non-GMO” claim by funding a three-year independent testing verification program. For a five-year period, the company will pay a quality control manager to oversee the testing process and an electronic database will be created to track and verify the product ingredients for the line.
The fifth named plaintiff, Sara Sandys, objected. She challenged three aspects of the settlement: the attorney’s fees and costs, the cy pres recipients, and the sufficiency of notice to class members.
U.S. District Court Judge John A. Kronstadt overruled her objections, granting preliminary approval.
Noting that the precise amount of attorney’s fees had yet to be determined, the judge said the court will follow appropriate procedures at that point, with lodestar and other methodologies, to ensure the amount granted is appropriate. He also said that the $3.12 million amount “is approximately one-third of the total claims value of the settlement and is not per se unreasonable or greater than the percentage of fees and costs awarded in other consumer products class actions.”
Sandys pointed to the 9th U.S. Circuit Court of Appeals decision in Dennis v. Kellogg, where the federal appellate court tossed a $10.6 million settlement in a consumer false advertising class action, in part due to concerns about the cy pres recipients. But the court said the recipients in the Naked Juice case – the Mayo Clinic, the National Association of IOLTA Programs, and seven legal aid organizations – passed muster because the funds would be used “for consumer protection work” sufficiently related to the underlying claims. The Mayo Clinic, for example, told the court it would use the money to “support its nationwide education and research efforts around nutrition, vitamins, and food and beverage labels.”
The notice provisions also passed the court’s scrutiny, despite the fact that the company declined to include information about the settlement on its website.
The “extensive, arms-length negotiations before a sophisticated neutral” is “likely to produce a settlement that fairly addresses the strength of plaintiffs’ case, the risks and expense of continued litigation, and the risks associated with maintaining class action status throughout a trial,” Judge Kronstadt wrote. “In addition, the proposed settlement of $9 million, plus the injunctive relief valued at $1.4 million, is within the reasonable range of recovery for this case.”
To read the order in Pappas v. Naked Juice Co., click here.
Why it matters: The $9 million settlement in yet another consumer class action alleging the false use of the phrase “All Natural” doesn’t break any records. But it does indicate that consumers will challenge such claims and that companies will be forced to defend themselves to the tune of millions of dollars.