Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. N.J.: NJCFA claim against Gerber dismissed for failure to quantify ascertainable loss, (Jul 14, 2014)

By Edward L. Puzzo, J.D.

In an action involving health claims made for Gerber probiotic products, plaintiffs failed to quantify ascertainable loss, so their claim under the New Jersey Consumer Fraud Act must be dismissed, the federal court in Newark, New Jersey has ruled. However, the motion to dismiss plaintiffs’ claim for punitive damages under the California Consumers Legal Remedies Act was denied (In Re Gerber Probiotic Sales Practices Litigation, July 11, 2014, Linares, J.).

Plaintiffs allege that they would have purchased different formula or cereal products had they known that Gerber’s probiotic products did not provide immunity benefits. In a previous ruling in this case, the court dismissed with prejudice plaintiffs’ injunctive relief, breach of implied warranty and unjust enrichment claims. Subsequently, Gerber moved to dismiss the plaintiffs’ New Jersey Consumer Fraud Act (NJCFA) claim and request for punitive damages under the California Consumers Legal Remedies Act (CLRA).

NJCFA claim. A claim under the NJCFA, the court explained, requires unlawful behavior by the defendant, an ascertainable loss by the plaintiff, and a causal nexus between the two. There is no statutory definition for “ascertainable loss,” the court noted, but a quantifiable or measurable loss, such as an out-of-pocket loss or loss in value, is required.

Under the benefit-of-the-bargain theory, the court stated, misrepresentation of a product in order to get a consumer to purchase it will result in ascertainable loss if the plaintiff is able to quantify the difference in value between the promised product and the actual product received. Here, the court stated, plaintiffs have been unable to meet that burden.

Plaintiffs countered that under previous rulings in this case, they already established ascertainable loss under the NJCFA. But the court denied that it had previously made such a determination. Instead, stated the court, it had merely found that plaintiffs had alleged an injury sufficient to confer Article III standing. However, the court conceded, the language of a footnote in the prior ruling may have misled plaintiffs as to the nature of the court’s finding. Therefore, the court dismissed the NJCFA claim without prejudice, in order to allow plaintiffs another opportunity to allege facts sufficient to allege an ascertainable loss.

Punitive damages under CLRA. Punitive damages under the CLRA are available, the court explained, if the plaintiff can show that the defendant was guilty of one of three elements: fraud, oppression or malice. Gerber contended that plaintiffs made only conclusory assertions regarding their conduct. The court, however, disagreed.

A pleading of malice requires allegations of conduct by the defendant intended to cause injury, or conduct with a willful and conscious disregard for the rights or safety of others. Here, plaintiffs alleged that Gerber possessed specialized knowledge regarding the content and effects of the ingredients in the products, and knew or should have known that its health benefit claims were false and misleading. While Gerber contended that these claims were merely conclusory, the court stated that conclusory language may be sufficient to adequately plead malice when read in the context of facts alleging conduct. Therefore, the court ruled, plaintiffs adequately pleaded malice.

Because plaintiffs adequately pleaded malice, and, under a previous ruling, adequately pleaded fraud under Federal Rule of Civil Procedure 9(b), they pleaded two of the three alternative elements supporting a CLRA claim for punitive damages, the court found. Therefore, it was immaterial that they did not adequately plead oppression, and Gerber’s motion to dismiss the CLRA claim for punitive damages was denied, the court ruled.

The case is Civil Action No. 12-835 (JLL).

Attorneys: James E. Cecchi (Carella Byrne Cecchi Olstein Brody & Agnello, PC) for Janna Thomas. Scott A. Ohnegian (Riker, Danzig, Scherer, Hyland & Perretti, LLP) for Gerber Products Co.

Companies: Gerber Products Co.

Cases: StateUnfairTradePractices NewJerseyNews