On Wednesday, April 19, 2017, the Ninth Circuit (with Judge O’Scannlain dissenting in part) issued an unpublished opinion reversing and remanding several of Judge Koh’s orders in Bruton v. Gerber Products Co.
Plaintiff Natalia Bruton alleged that the labels of several Gerber baby food products were “misbranded” under the federal Food Drug & Cosmetic Act (“FDCA”) and the FDA regulations adopted pursuant to that Act, violating several federal and California statutes, including California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and Consumer Legal Remedies Act (“CLRA”), and supporting a claim for unjust enrichment. For example, Plaintiff alleged that the labeling claims on the products at issue, such as “No Added Sugar” and “As Healthy as Fresh,” were impermissible because food manufacturers are allegedly “prohibited from making nutrient content claims with respect to food products intended to be consumed by children under two years old.” Among other things, Plaintiff asserted a novel theory that, even if the labels were not false or misleading to a reasonable consumer, the labeling violations barred the products from being “legally sold or possessed,” rendering them “legally worthless.” According to Plaintiff, the mere sale of a product bearing an improper label – “standing alone without any allegations of deception by Defendant, or review of or reliance on the labels by Plaintiff” – gives rise to a cause of action under California law.
Reversal of Dismissal of Plaintiff’s Claim for Unjust Enrichment/Quasi-Contract
The Ninth Circuit first reversed the district court’s dismissal of Plaintiff’s claim for unjust enrichment/quasi-contract. It acknowledged that “[a]t the time when the district court dismissed this claim, California’s case law on whether unjust enrichment could be sustained as a standalone cause of action was uncertain and inconsistent.” Slip Op. at 2. However, “since then, the California Supreme Court has clarified California law, allowing an independent claim for unjust enrichment to proceed in an insurance dispute.” Id. (citing Hartford Cas. Ins. Co. v. J.R. Mktg., L.L.C., 61 Cal. 4th 39, 54 (2015)). The Ninth Circuit accordingly reversed and remanded “for consideration of whether there are other grounds on which Bruton has failed to state a claim for unjust enrichment, or if that claim must proceed to resolution.” Id.
Reversal of Denial of Class Certification
The Court then reversed the district court’s denial of class certification on the ground that the class was not “ascertainable,” citing the recent opinion in Briseno v. ConAgra Foods, Inc., 844 F.3d 1121 (9th Cir. 2017), which this blog covered here. The district court had denied class certification on the ground that Plaintiff “failed to define an ascertainable class,” declining to address Gerber’s other certification arguments on the basis that this issue was dispositive. The district court held that the proposed class – which included individuals who purchased 69 different types of Gerber baby food products since May 2008 – could not be certified because ascertaining the members of the class was not administratively feasible given “[t]he number of products at issue in the case, the varieties included and not included in the class definition, the changes in product labeling throughout the class period, the varied and uncertain length of time it takes for products with new labels to appear on store shelves, and the fact that the same products were sold with and without the challenged label statements simultaneously.” In other words, the district court explained, “while it may be reasonable to ask consumers to submit affidavits testifying that they purchased a Gerber 2nd Foods product during the class period, asking consumers to remember whether or not they purchased a qualifying flavor in a package that bore a challenged statement is unlikely to produce reliable results.” Without addressing the issue in any detail, the Ninth Circuit reversed the district court’s ruling on the ground that the Briseno court had “held that there was no separate ‘administrative feasibility’ requirement for class certification,” and remanded “for further consideration of whether class certification is appropriate.” Slip Op. at 3.
Reversal of Summary Judgment for Gerber
The Ninth Circuit first held that the district court erred in granting summary judgment for Gerber on Plaintiff’s UCL, FAL, and CLRA claims on the ground that there was no genuine dispute of material fact as to whether the labels were deceptive. As an initial matter, the Court held that “Bruton’s theory of deception does not rely on proving that any of Gerber’s labels were false.” Id. at 3. Rather, according to the Court, Plaintiff’s theory is that “the combination of (a) the presence of the claims on Gerber’s products (in violation of FDA regulations), and (b) the lack of claims on Gerber’s products (in compliance with FDA regulations), made Gerber’s labeling likely to mislead the public into believing that Gerber’s products were of higher quality than its competitors’ products.” Id. While acknowledging that Plaintiff’s “theory of deception is unusual,” the Ninth Circuit held that “even technically correct labels can be misleading.” Id. It then explained that although “it may be literally true that Gerber’s products are ‘As Healthy As Fresh,’ . . . due to external facts—that Gerber does not comply with the FDA regulations that otherwise prevent its competitors from making the same claim—Gerber’s labels mislead in their implications.” Id. at 4. The Court concluded that this “theory of deception comports with common sense” because “[s]hoppers in a supermarket aisle look for cues about quality in the products they buy”: “If a shopper sees two products on a shelf and one says ‘Supports Healthy Growth & Development,’ while the other makes no similar claim and is cheaper, a likely inference is that the first product will be viewed as healthier, explaining why it costs more.” Id. at 4. It continued: “When everyone plays by the rules, this process works reasonably well. But when the maker of one product complies with a ban on attractive label claims, and its competitor does not do so, the normal assumptions no longer hold, and consumers will possibly be left deceived.” Id. at 5. It thus held that Plaintiff had “alleged a viable claim for consumer deception.” Id. The Court then concluded that Plaintiff had offered “enough evidence of likely consumer deception” to create a genuine dispute of material fact, indicating that “[t]he key evidence is the labels,” and holding that a “reasonable jury observing Gerber’s labels and comparing them to those of its competitors could rationally conclude that Gerber’s labels were likely to deceive members of the public.” Id. It therefore reversed the district court’s grant of summary judgment for Gerber on the issue of deception. Id. at 7.
The Court then considered whether the district court erred in granting summary judgment for Gerber on Plaintiff’s claim that the labels violated the “unlawful” prong of the UCL, which “‘borrows’ predicate legal violations and treats them as independently actionable.” Id. at 7. The Ninth Circuit held that the “best reading of California precedent is that the reasonable consumer test is a requirement under the UCL’s unlawful prong only when it is an element of the predicate violation.” Id. The “predicate violation” alleged by Plaintiff was of California’s Sherman Law, “which itself incorporates standards set by FDA regulations” that “include no requirement that the public be likely to experience deception.” Id. The Court reversed the district court’s grant of summary judgment as to Plaintiff’s “unlawful” claim, indicating that a plaintiff need not demonstrate that a label is likely to mislead a reasonable consumer to prevail under the “unlawful” prong of the UCL if it otherwise violates FDA regulations.
Judge O’Scannlain’s Partial Dissent
Although he joined in the bulk of the Court’s opinion, Judge O’Scannlain dissented from “the majority’s conclusion that there is a genuine issue of material fact regarding consumer deception in this case.” Concurrence in Part and Dissent in Part at 1. He addressed the three categories of evidence proffered by Plaintiff in opposing summary judgment: (1) two FDA warning letters, (2) her own testimony, and (3) labels of Gerber and its competitors. Judge O’Scannlain first explained that the FDA warning letters “do not help Bruton, as they do not address the potential for consumers to be misled about the quality of Gerber’s products.” Id. at 2. He then explained that Plaintiff’s “testimony about her own confusion cannot satisfy the reasonable consumer standard, because ‘a few isolated examples of actual deception are insufficient’ to create a material dispute over the likelihood of general consumer deception.” Id. He noted that “[t]he majority challenges neither of these conclusions.” Id.
Judge O’Scannlain next addressed the majority’s holding “that the very label statements that Bruton challenges themselves supply sufficient evidence to satisfy California’s ‘reasonable consumer’ test,” stating that the majority’s conclusion was based on a “mistaken” reliance on Colgan v. Leatherman Tool Group, Inc., “a case that has little to say about the circumstances before us.” Id. He explained that whereas in Colgan the “Made in the U.S.A.” label at issue was false, the Bruton case “involve[s] no similar allegations of a false (or even mostly false) factual assertion.” Id. at 2-3. “How those additional, accurate label statements are inherently deceptive” is thus “far from self-evident, as it was in Colgan.” Id. at 4. He also rejected “the majority’s notion” that the challenged label statements “make Gerber’s labels objectively more ‘attractive’ to ‘a significant portion of the general consuming public,’ or that such a portion of consumers would conclude that any price or quality difference between Gerber and its competitors is due specifically to the challenged label statements (as opposed to any number of other reasons that may have led Gerber’s nationally recognized brand to carry more market power).” Id. at 4. Accordingly, Judge O’Scannlain would hold that “to carry her burden at this stage, Bruton must provide some evidence that reasonable consumers would see these truthful nutritional statements about Gerber’s products and be deceived into thinking such products are somehow better than other products that are the same nutritionally but which did not have the label statements,” and would affirm the district court’s grant of summary judgment on these claims because she failed to do so. Id. at 3-5.