Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Certification of class in mislabeling action denied, except as to injunctive relief, (Apr 28, 2014)

By Edward L. Puzzo, J.D.

An action against a tea company, based on labeling representing the products to be a "Natural Source of Antioxidants," was granted class certification for purposes of injunctive and declaratory relief only, the federal district court in San Jose, California has ruled (Lanovaz v. Twinings North America, Inc., April 24, 2014, Whyte, R.). Under this ruling, none of the class members could receive an individualized award of monetary damages.

Nancy Lanovaz sought class certification for her claims against Twinings for allegedly mislabeling tea products in violation of the California Unfair Competition Law (UCL), the California False Advertising Law (FAL), and the Consumers Legal Remedies Act ("CLRA"). Lanovaz stated that the FDA had not established a recommended daily intake for flavonoids, a type of antioxidant; consequently FDA regulations prohibited nutrient content claims about flavonoids. Twinings violated that prohibition, Lanovaz alleged, by its "Natural Source of Antioxidants" labeling on 51 of their tea varieties.

The court explained that Fed. Rule Civ. Proc. 23(a) and the courts have set forth the criteria for certification as a class action: numerosity, adequacy of representation, ascertainability of the class, commonality of issues, and typicality of the representative plaintiffs' claims. Twinings challenged the ascertainability, commonality, and typicality elements of this purported class action.

Ascertainability. Twining argued that the proposed class lacked ascertainability because few consumers kept records, receipts, or product containers identifying which products they bought. The court did not find this argument persuasive. It was enough that the class definition described a set of common characteristics sufficient to allow a prospective plaintiff to identify himself as having a right to recover based on the description, the court continued. Here, the ascertainability element had been met, the court ruled.

Commonality and typicality. Twinings claimed that since Lanovaz had only purchased 6 out of the 51 varieties of tea included in her class action claim, the remaining 45 products could not be included in the class. The court disagreed, and found typicality, because all 51 varieties were based on the same type of tea plant and all used the same "Natural Source of Antioxidants" labeling.

Materiality. The court also found that the materiality of the allegedly "unlawful" and "deceptive" labeling was established, because Lanovaz was only required to prove that a reasonable consumer would attach importance to Twinings’ antioxidant statements, or that Twinings knew or had reason to know that its consumers were likely to regard the label statements as important in making purchasing decisions.

Damages model. The court analyzed what damages were recoverable as a result of Twinings' alleged mislabeling, and then considered whether the plaintiff presented a damages model capable of isolating those damages.

The proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received, the court explained. The court rejected a "benefit of the bargain" damages analysis — comparing the price of Twinings tea to the price of comparable products without the antioxidant label — as legally insufficient under the 2013 U.S. Supreme Court case of Comcast Corp. v. Behrend, 133 S. Ct. 1426. Under Comcast, the court explained, class certification under Fed. Rule Civ. Proc. 23(b)(3) required plaintiff to show that monetary relief resulting from the defendants’ conduct was measurable "on a class-wide basis through use of a common methodology." The court noted that plaintiff's damages expert ruled out the use of an alternative "econometric or regression analysis" damages analysis because antioxidant claims have been on Twinings tea packaging during the entire class period.

Consequently, the court ruled, plaintiff was unable to present any damages model capable of estimating the price premium attributable to Twinings’ antioxidant labels. Because the price premium attributable to the antioxidant labels was the only legally permissible measure of damages, the court continued, plaintiff failed to satisfy the requirements for class certification under Comcast.

Injunction. As part of the class action, Lanovaz sought an injunction seeking to require Twinings to cease and desist selling its products with the questioned labeling. The court granted class certification under Fed. Rule Civ. Proc. 23(b)(2), for the purposes of declaratory and injunctive relief, but denied it to the extent plaintiffs sought monetary damages, including restitution, refund, reimbursement, and disgorgement.

The case is No. C-12-02646-RMW.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Nancy Lanovaz. William Lewis Stern (Morrison & Foerster LLP) for Twinings North America, Inc.

Companies: Twinings North America, Inc.

Cases: Advertising ConsumerProtection StateUnfairTradePractices CaliforniaNews