Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Settlement in Jamba Juice “all natural” labeling case preliminarily approved, (Mar 20, 2015)

By Linda O’Brien, J.D., LL.M.

A proposed settlement by restaurant retailer Jamba Juice and specialty snack food maker Inventure Foods to resolve claims brought by two consumers regarding the labeling and marketing of the companies’ frozen smoothie kits as “all natural” has been given preliminary approval by the federal district court in San Francisco (Lilly v. Jamba Juice Company, March 18, 2015, Tigar, J.).

Since 2010, Jamba Juice Company and Inventure Foods produced at-home frozen smoothie kits for sale in retail grocery stores, big box stores, and wholesale clubs. The kits are labeled as containing “All Natural” ingredients. Aleta Lilly and David Cox purchased one or more of the varieties of smoothie kits. In June 2013, Lilly and Cox filed suit against Jamba Juice and Inventure Foods, alleging violations of California’s Consumer Legal Remedies Act (CLRA), False Advertising Law (FAL), and Unfair Competition Law (UCL). The consumers asserted that the companies mislabeled the kits as “all natural” when the kits contained ingredients that consumers would not have understood to be “natural.”

In November 2013, the court denied the defendants’ motion to dismiss. Subsequently, the plaintiffs’ moved for preliminary approval of a class action settlement for injunctive relief.

Class certification. In certifying the class, the court determined that the consumer plaintiffs had standing to seek injunctive relief for products that they later learned to be mislabeled. Although the plaintiffs are now aware of the misrepresentation and that the product they bought was not as advertised, the manufacturer might change the product to conform to the representations on the label. Unless the manufacturer is enjoined from making the same misrepresentations, consumers won’t know whether the label is accurate. Therefore, a consumer is not precluded from seeking injunctive relief against false labeling solely because the consumer learned that the label was false after purchasing the product.

Settlement terms. Under the terms of the stipulated injunction, the defendants agreed to relabel all the challenged smoothie kits so they do not describe the products as “all natural” on its website, packaging, or other advertising. The defendants are not required to remove or recall any of the challenged products in the market or inventory, and can exhaust all existing packaging inventory without violating the terms of the settlement agreement.

The court found that the proposed settlement was procedurally fair and fell within the range of possible approval. The settlement appeared to be the result of serious, informed, and non-collusive negotiations. The plaintiffs faced substantial obstacles in establishing damages on a classwide basis, there was a relatively small amount of money individual class members would be entitled to, and the risk, expense, complexity, and during of continued litigation supported the court’s determination that the settlement was substantively fair. Finally, the extent of discovery completed and the experience and views of the parties’ counsel supported approval of the settlement, the court noted.

A hearing to determine whether final approval of the settlement should be granted and the appropriateness of plaintiffs’ attorneys’ fees and incentive payments to class representatives was set for May 14.

The case is No. 13-cv-02998-JST.

Attorneys: Danielle A. Stoumbos (Finkelstein Thompson LLP) for Aleta Lilly and David Cox. Robert Stephen Niemann (Keller & Heckman LLP) for Jamba Juice Company and Inventure Foods, Inc.

Companies: Jamba Juice Company; Inventure Foods, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews