Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Class in mislabeling claims against almond milk producer decertified, (Dec 16, 2014)

By Linda O’Brien, J.D., LL.M.

A class of purchasers challenging the labeling of almond milk products as “All Natural” and “evaporated cane juice” was decertified by the federal district court in San Jose, California for failure to meet the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) (Werdebaugh v. Blue Diamond Growers, December 15, 2014, Koh, L.).

Blue Diamond Growers is a leading producer of almond milk products and snack foods and sells its products to retailers and distributors for eventual sale to consumers at grocery and other retail stores. After purchasing several cartons of Blue Diamond’s almond milk, Chris Werdebaugh filed a putative class action suit, alleging, in part, violations of California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA). Specifically, Werdebaugh contended that the terms “All Natural” and “evaporated cane juice” on the product’s label were false, misleading, and unlawful.

In October 2013, the court denied Blue Diamond’s motion to dismiss. In January 2014, Werdebaugh’s motion for class certification of a damages class was granted. After Werdebaugh filed an amended complaint, Blue Diamond moved to decertify the damages class.

Following the U.S. Supreme Court decision in Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013), the court noted that, to satisfy the predominance requirement, a plaintiff must present a damages model that is consistent with his theory of injury. In this case, the plaintiff’s damages model sought to prove restitution damages and the proper measure of restitution was the difference between the product as labeled and the product as received. Therefore, Werdebaugh was required to present a damages methodology that could determine the price premium attributable to Blue Diamond’s use of “All Natural” and “evaporated can juice” on the product labels.

In granting the plaintiff’s motion for class certification, the court preliminary approved his expert’s proposed “before and after” regression analysis that would have compared differences in sales of the products before and after Blue Diamond began using the labeling language. After discovery, the plaintiff’s expert instead conducted a hedonic regression analysis which compared the prices of Blue Diamond’s products with the prices of comparable products.

The court found that the plaintiff’s damages methodology was flawed. In the court’s view, the damages model combined the effect of the alleged mislabeling with the value of the Blue Diamond brand and failed to control key factors impacting price, such as advertising, seasonality, income, and regional price differences. Furthermore, the expert’s reliance on a 2007 study regarding yogurt products to calculate the price premium was rejected because the study offered no reasonable insight into the purchases of almond milk beverages. Finally, the expert failed to ensure the accuracy of his assumptions in developing the damages model. Thus, the court concluded that the plaintiff’s damages model could not reasonably determine the measure of damages attributable to the defendant’s alleged wrongful conduct and therefore failed to satisfy the predominance requirement of Rule 23(b)(3).

The case is No. 12-CV-02724-LHK.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Chris Werdebaugh. Lawrence M. Cirelli (Hanson Bridgett LLP) for Blue Diamond Growers.

Companies: Blue Diamond Growers

Cases: Advertising StateUnfairTradePractices CaliforniaNews