Antitrust Law Daily Wrap Up, ADVERTISING—D.D.C.: Claims against energy drink manufacturer remanded to state court, (Aug 7, 2013)

By Jody Coultas, J.D.

The federal district court in the District of Columbia remanded an energy drink purchaser’s District of Columbia Consumer Protection Procedures Act (CPPA) claim against Monster Beverage Corp. to the Superior Court of the District of Columbia (Zuckman v. Monster Beverage Corp., August 6, 2013, Bates, J.).

The purchaser alleged that Monster misrepresented that Monster Energy drinks were “completely safe,” and by failing to disclose the material adverse health effects potentially caused by the drinks. The purchaser sought $1,500 for each CPPA violation, restitution for each drink purchaser, an injunction requiring Monster to disclose that the drinks have not been found “completely safe” and capable of causing negative health effects, and attorney fees and costs. Monster removed the action based on diversity jurisdiction and the Class Action Fairness Act.

Federal courts have diversity jurisdiction over an action where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and concerns citizens of different states.

The purchaser’s statutory damages were insufficient to find that the court had diversity jurisdiction over the issue, according to the court. Separate and distinct claims of two or more plaintiffs cannot be aggregated in order to satisfy the jurisdictional amount requirement. Therefore, the only damages that could be considered in the $75,000 jurisdictional consideration were those the purchaser was personally entitled to recover. Monster argued that the purchaser bought more than 50 cans, and that the claims alleged that viewing allegedly misleading advertising resulted in a CPPA violation. However, the claims were only based on actual purchases of the energy drink in the District of Columbia. Purchasers in other states and views of the advertising were not at issue. The purchaser argued he only purchased 3 to 5 cans of the original flavor and 15 to 20 cans total. The amount in controversy was at most $30,000.

Including the potential attorney’s fees did not bring the amount in controversy above the $75,000 threshold for diversity jurisdiction, according to the court. Monster argued that the attorney’s fees would exceed $75,000. Attorney fees are part of the amount in controversy if they are provided for by statute. However, a named plaintiff’s fees cannot be aggregated with those of the general public in order to satisfy the $75,000 threshold. Attorney fees could be calculated using a reasonable contingency fee, such as 33%. Thus, the attorney’s fees would be around $10,000.

The court held that Monster’s claims about the costs of complying with the purchaser’s proposed injunction were too speculative to serve as a basis for determining the amount in controversy. Monster argued that compliance with the proposed injunction would cause more than $75,000 in lost revenue. Injunctive relief does not meet the amount in controversy when it only affects future sales.

The purchaser’s restitution claims also did not bring the amount in controversy above the diversity jurisdiction minimum, according to the court. Restitution claims are not aggregated for purposes of satisfying the $75,000 requirement, except where two or more plaintiffs unite to enforce a single right in which they have a common and undivided interest. Disgorgement claims seek to hold defendants generally liable for a refund of all moneys acquired as a result of their illegal activities. However, the CPPA restitution claim was not a claim for disgorgement. The purchaser sought restitution for the amount paid by, and owed to, each D.C. purchaser of Monster Energy drinks, rather than a lump, undivided sum, possessed by Monster. The claim was for individualized relief based on purchasers rather than a return of all Monster’s allegedly unlawful profits. Therefore, the restitution claims amounted to $60 for the 20 cans the purchaser bought in the District of Columbia.

The claims fell outside of the Class Action Fairness Act (CAFA), according to the court. Monster argued that the court had subject-matter jurisdiction pursuant to CAFA. However, the purchaser did not attempt to comply with Rule 23 of the D.C. Superior Court Rules of Civil Procedure, did not seek class action certification, and specifically stated that he was bringing his case as a representative action under the CPPA. Therefore, the action was not a class action.

The case is No. 12-1978 (JDB).

Attorneys: Stan M. Doerrer (Finkelstein Thompson LLP) for Michael Zuckman. Michael M. Maya (Covington & Burling LLP) for Monster Beverage Corp.

Companies: Monster Beverage Corp.

Cases: Advertising StateUnfairTradePractices ConsumerProtection DistrictofColumbiaNews