Jeremy M. Creelan
On August 19, U.S. District Judge Percy Andersen of the Central District of California dismissed a putative class action brought by Alexander Forouzesh on behalf of Starbucks customers who have purchased cold drinks there. Plaintiff alleged that Starbucks indicated on its website that customers would receive a certain number of ounces of “beverage” in their cold drinks, but in practice Starbucks employees were trained to fill each cup with liquid up to a visible “fill line” and then fill the rest of the cup with ice, leading to the liquid contained in each cup to fall short of the ounces listed on the website. Plaintiff alleged that this constituted violations of California’s Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law, and a breach of express and implied warranties, among other common law claims. On a motion to dismiss decided without oral argument, the District Court rejected Plaintiff’s claims, principally because “[I]f children have figured out that including ice in a cold beverage decreases the amount of liquid they will receive, the Court has no difficulty concluding that a reasonable consumer would not be deceived into thinking that when they order an iced tea, that the drink they receive will include both ice and tea and that for a given size cup, some portion of the drink will be ice rather than whatever liquid beverage the consumer ordered.” The opinion is available here. Alexander Forouzesh v. Starbucks Corporation, case number 2:16-cv-03830 in the U.S. District Court for the Central District of California.
California Supreme Court Clarifies Proper Methodologies for Awarding Attorney’s Fees in Class Action Cases
On August 11, the California Supreme Court issued a ruling in Lafitte et al. v. Robert Half Int’l, Inc., that clarified the proper methodologies for awarding attorney’s fees in class action cases. In a class action alleging employment law violations under California law, the trial court approved a settlement of $19 million after a class had been certified, and a fee award of $6.3 million (which was one third of the settlement). The trial court approved that fee award based upon not only the percentage of the common fund settlement, but also after performing a reasonableness “cross-check” of the amount against the information provided by the plaintiffs’ counsel using a lodestar method. That calculation revealed that the proposed amount would mean a multiplier over lodestar of 2.03 to 2.13. Given the complexity, duration, and contingency risk involved in the matter, the trial court (and the intermediate Court of Appeal) found the requested amount to be reasonable. The Supreme Court affirmed, and provided a lengthy discussion of the two methods of calculating a fee award in class actions. The Court made clear that its earlier opinion in Serrano v. Priest (1977) requiring use of the lodestar method, rather than a percentage of common fund method, applied only to cases brought under the “private attorney general” doctrine. In other cases involving a common fund for recovery by class members, the Court found that using a percentage method would not be per se unreasonable, particularly where the court performs a cross-check based on the lodestar method to confirm the reasonableness of the award. Interestingly, Judge Liu wrote a separate concurrence to encourage courts to improve the reasonableness of attorney fee awards by using several measures recommended by the Task Force on Selection of Class Counsel convened by the Court of Appeals for the Third Circuit. Those measures include reviewing and conditionally approving the terms of attorney compensation at the start of a litigation, and in larger cases that do not involve sophisticated plaintiffs, appointing “class guardians” to play “devil’s advocate” and present arguments to the court concerning the reasonableness of requested fees. Click here to view the opinion.
In a move that has been anticipated since 2014, the U.S. Food & Drug Administration recently announced changes to the “Nutrition Facts” label required to be placed on packaged foods. See the FDA’s page on Changes to the Nutrition Facts Label. The changes reflect numerous scientific research findings as well as changes in behavior of American consumers since 1993 when the label was last updated. Among other changes, the serving sizes of foods will increase or decrease: for example, somewhat depressingly, serving sizes for ice cream will increase to reflect the reality that consumers eat more than a half cup of ice cream when they indulge their ice cream craving, while serving sizes for yogurt will decrease because Americans eat less yogurt than they used to when they eat that healthy snack. Additionally, recognizing that packaging affects how much consumers eat, products that contain between one and two servings must be labeled as one serving. For instance, a 12-ounce can of soda and a 20-ounce bottle of soda will each have to list the nutrition information for the entire container as one serving.
Other changes include, for example:
- Vitamin D and Potassium will be newly added to the label, reflecting that Americans do not get enough of either;
- “Added sugars,” in grams and as percent Daily Value, will now be included on the label. The FDA explains that on average Americans obtain 13 percent of their calories from added sugars, e.g., from sweetened beverages and snacks.
- “Total Fat,” “Saturated Fat,” and “Trans Fat” will remain on the label, but “Calories from Fat” will be removed because research shows the type of fat is more important than the amount.
Manufacturers must adopt the new label by July 26, 2018, but manufacturers with less than $10 million in annual sales will have an additional year to comply.
The FDA provides the following example comparing the existing and new labels:
Yesterday, the U.S. House of Representatives passed the Defend Trade Secrets Act of 2016, the much-debated federal legislation that provides a civil right of action under the existing Economic Espionage Act of 1996 to prevent or redress a theft of trade secrets. The bill as reported to the House on April 26 is here. The legislation enjoyed strong support from legislators of both political parties and major business trade organizations, passing the Senate unanimously and the House 410-2. The bill authorizes a trade secret owner to file suit in U.S. District Courts for injunctive relief and damages and, most controversially, provides for seizure of the trade secret via an ex parte proceeding upon specific findings by the court, including immediate and irreparable injury, under “extraordinary circumstances.” In the event of such seizure, a hearing must be held on notice within seven days. In theory, the legislation could help to harmonize trade secret law on a national basis, but the bill expressly disclaims any preemption of state law, thereby layering this new federal right of action atop existing state-law causes of action for trade secret misappropriation. President Obama is expected to sign the legislation.
On February 22, 2016, the Court of Appeals for the 9th Circuit revived a putative class action brought by named plaintiffs Alessandra Balser and Ruth Kresha on behalf of consumers against The Hain Celestial Group, Inc. The plaintiffs alleged in their complaint that Hain’s use of the word “natural” and “100% vegetarian” on its products’ packaging is misleading and deceptive under California’s consumer protection law because the products contain synthetic ingredients.
Judge Real of the Central District of California dismissed the complaint without leave to amend in a brief opinion in 2013. Finding that “it is undisputed that ‘natural’ is a vague and ambiguous term,” the District Court rejected as implausible the plaintiffs’ definition of that term as “existing in or produced by nature; not artificial.” In particular, the Court found that “shampoos and lotions do not exist in nature, there are no shampoo trees, cosmetics are manufactured.” Citing Hain’s clarifications on its product labels and website, the Court further found that the company’s uses of the term “100% vegetarian” to mean “without animal products” and without “parabens, sulfates, or phthalates” were sufficiently clear that no reasonable consumer could be deceived.
On January 29, 2016, U.S. District Judge David Hurd in the Northern District of New York ordered Greek Yogurt maker Chobani to end its recent advertisements negatively referencing the products of its biggest competitors, Yoplait (General Mills) and Dannon.
Chobani’s series of advertisements that began running in early January 2016 advertised their “Chobani Simply 100 Greek Yogurt,” which has “100 calories per serving with no preservatives or artificial ingredients.” In one of the advertisements, a woman reads the ingredients on a cup of Yoplait Greek 100 Yogurt while a voice is heard saying, "Potassium sorbate? Really? That stuff is used to kill bugs." In another advertisement, a woman throws a container of Dannon’s Light and Fit into a trash can as a voiceover questions, "Sucralose? Why? That stuff has chlorine added to it." As found by the court, sucralose is an artificial sweetener and potassium sorbate is preservative that prevents yeast and mold growth; both are used in many food products and they have been found safe by the federal government.
In his 2016 State of the State address, Governor Andrew M. Cuomo bemoaned the absence of federal definitions of terms commonly used on food labels, such as “all natural.” He indicated his plan to have New York State health officials develop such definitions and provide a stamp of approval indicating adherence to the State’s definitions that would be placed on food packaging labels. Presumably, this initiative will undergo a public comment process before any definitions are finalized or the parameters of the approval process are set. But questions regarding whether such state efforts to define these terms would be found to be pre-empted by federal regulation if challenged will inevitably arise, particularly given the FDA’s November 2015 notice seeking public comments on the use of “natural” on food labels. The Governor’s speech is available here and his remarks about food labeling can be found at 1:04:40. Click here for a transcript of Gov. Cuomo’s speech.
During its next term, the Supreme Court will consider whether class action defendants can end the cases against them simply by offering complete relief to individually named plaintiffs and offering nothing to the classes those plaintiffs purport to represent.
The legal issue involves the intersection of two Federal Rules of Civil Procedure, namely the effect that Rule 68—which allows defendants to serve offers of judgment on specified terms and requires plaintiffs to respond to them—has on Rule 23, which governs class actions. Some circuit courts have held that when a Rule 68 offer of judgment offers a plaintiff all the relief available to him, he can have no further interest in litigation and his legal claims are moot. In the class action context, at least one circuit has further held that when a defendant makes a complete offer of judgment under Rule 68 before the plaintiff has moved for class certification, the plaintiff can have no interest in representing the class. Under this analysis, the plaintiff’s class claims are moot in addition to his or her individual claims.
US Supreme Court Considers Whether Mere Statutory Violation Provides Standing in Spokeo, Inc. v. Robins
The plaintiff, Thomas Robins, filed a putative class action in federal district court in California alleging that Spokeo, Inc., willfully violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq.. Robins alleged that Spokeo published inaccurate information about him, and thus threatened his employment prospects.
Among other requirements, the FCRA requires consumer credit reporting agencies to “follow reasonable procedures to assure maximum possible accuracy of” consumer reports, 15 U.S.C. § 1681e(b), and includes a private right of action for consumers to obtain actual damages for violation of these requirements.
The district court dismissed Robins’ complaint under FRCP 12(b)(1) for lack of Article III standing. The district court reasoned that he lacked standing because he had failed to allege that the statutory violations he identified had caused him any “actual or imminent harm.”
The Ninth Circuit reversed, finding that “the violation of a statutory right is usually a sufficient injury in fact to confer standing.” The court rejected the argument that, to have standing under Article III, a plaintiff must allege actual harm instead of just the violation of a statutory right.