Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. Cal.: Federal court retained jurisdiction over class action against Chobani, distributors, (Aug 12, 2015)

By Michael Menzhuber, J.D., LL.M.

A consumer class action—alleging that Chobani LLC, Safeway, Inc., and the Vons Co., Inc. violated California consumer protection laws by making misrepresentations about Greek yogurt—could not be remanded to state court, according to the federal district court in San Diego. The court determined that: (1) all the requirements for removing a state action to federal court under the Class Action Fairness Act of 2005 (CAFA) were met; (2) the local controversy exception to the application of the CAFA did not apply; and (3) there was no presumption against removal (Clay v. Chobani LLC, August 10, 2015, Benitez, R.).

Background. Chayla Clay, a California resident who had purchased Chobani yogurt for personal consumption within California, filed a complaint against Chobani and two distributors of Chobani yogurt, Safeway and Vons. In her complaint, seeking to represent a California class of consumers, she alleged violations of California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA). The complaint also alleged negligent misrepresentation. According to Clay’s complaint, Chobani generated revenues estimated to be $1 billion for the year at issue and, in California alone, had collected tens of millions of dollars.

Clay filed her complaint in the San Diego Superior Court. The defendants removed the state action to the federal district court in San Diego on the ground that the district court had original jurisdiction under the CAFA. In response, Clay filed a motion to remand the case back to the state court.

Class Action Fairness Act of 2005. The CAFA provides a federal district court with original jurisdiction over a putative class action if three requirements are met. The first requirement is that the parties are minimally diverse. The court determined that the parties were minimally diverse because Clay was a citizen of California and Chobani was organized under the laws of Delaware and headquartered in New York. The second requirement is that the putative class consist of at least 100 members. The court determined that Clay’s allegation that there were hundreds of the thousands of class members satisfied the CAFA’s numerosity requirement. The third requirement is that the aggregate amount in controversy exceeds the threshold amount of $5 million. The court noted that defendants satisfy their burden of proof when they: (1) “rely on a reasonable chain of logic” based on the allegations of the complaint; and (2) present sufficient evidence to establish that the amount in controversy exceeds $5 million.

The court determined that the defendants established a “reasonable chain of logic” supported by declarations made by the Chobani executive and relying on Clay’s own allegations. The court found that: (1) although Clay’s complaint stipulated that the amount in controversy likely did not exceed the CAFA threshold amount, the class had not been certified and, therefore, Clay lacked the authority to make that stipulation; (2) Clay’s own factual allegations indicated that the amount in controversy exceeded $5,000,000; and (3) Clay did not submit any evidence indicating what she paid for the allegedly mislabeled products and from which other calculations could be reasonable extrapolated.

Clay contested the admissibility of the Chobani executive’s first declaration as hearsay on the grounds that the assertions must be supported by facts or numbers under Gaus v. Miles, Inc., 980 F.2d 564 (1992) and Lowdermilk v. U.S. Bank Nati’l Ass’n, 479 F.3d 994 (2007). The court, however, determined that neither case applied and found that, when considering the amount in controversy on a motion to remove, “summary-judgment-type” evidence, such as affidavits or declarations, are to be considered.

Local controversy exception. Clay argued that the “local controversy” exception applied. Under this exception, a district court is to decline jurisdiction under the CAFA when the matter is a “local controversy.” A matter is a “local controversy” if there is one “real” defendant that is local.

The court determined that the exception did not apply because the only “real” defendant in the case was Chobani, which was not a citizen of California. The court also noted that even if the “real” defendant requirement had been met, the exception would not apply because a related class action case against Chobani had been filed prior to the present case. Because the claims of Chobani were of substantial national interest, as demonstrated by the filing of the prior case, Clay’s action was not a true local controversy under the CAFA.

Presumption against Removal. Clay argued that removal was improper because there was a strong presumption against removal. The court disagreed, finding that there was no presumption against removal for CAFA cases.

The case is No. 14cv2258 (BEN) (DBH).

Attorneys: Jeffrey R Krinsk (Finkelstein and Krinsk LLP) for Chayla M. Clay. Dale Joseph Giali (Mayer Brown LLP) for Chobani LLC, Safeway Inc., and The Vons Companies, Inc.

Companies: Chobani LLC; Safeway Inc.; The Vons Companies, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews