Kate T. Spelman

For Whom Rule 23(f) Tolls

NewupdateBy Kate T. Spelman

In a matter of first impression for the court, a three-judge panel of the Ninth Circuit recently held in Lambert v. Nutraceutical Corp. that the fourteen-day deadline to file a petition for interlocutory review of an order granting or denying class certification under Federal Rule of Civil Procedure 23(f) is not jurisdictional, and thus equitable exceptions apply to toll the deadline.  While other circuits have come to this same conclusion, the Ninth Circuit went one step further in holding that Rule 23(f)’s fourteen-day deadline was tolled in this case by the plaintiff’s filing of a motion for reconsideration, even though the motion itself was filed more than fourteen days after the court’s decertification order.  In so holding, the Ninth Circuit has created a circuit split that may require resolution by the U.S. Supreme Court.        

In Lambert, the plaintiff challenged the efficacy of Cobra Sexual Energy, an alleged aphrodisiac dietary supplement, under California’s consumer protection laws.  The district court initially certified a damages class under Rule 23(b)(3) based on the plaintiff’s full refund damages model, which was properly tied to the plaintiff’s theory that the product was entirely worthless.  However, the district court later decertified the class because the plaintiff had provided only the suggested retail price of the product, and not the actual average retail price necessary to calculate the full refund amount.  The plaintiff filed a motion for reconsideration twenty days after the court’s decertification order, which the court denied.  The plaintiff filed a Rule 23(f) petition less than fourteen days after that. 

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Johnson & Johnson Deactivates Aveeno Active Naturals Lawsuit with $6.75 Million Settlement

IStock_000007449611LargeBy Kate T. Spelman

On May 26, the plaintiffs in Goldemberg v. Johnson & Johnson Consumer Cos. Inc. filed a motion for preliminary approval to settle their class claims against Johnson & Johnson related to the defendant’s Aveeno Active Naturals brand of personal care products.  The lawsuit, filed in 2013 in the Southern District of New York, alleged that the Aveeno products were falsely advertised as “natural” when they in fact contain synthetic and unnatural ingredients.  In October 2016, the Court certified classes of California, New York, and Florida consumers.  The proposed settlement seeks to certify a class of Aveeno Active Naturals Products consumers nationwide.  Johnson & Johnson has agreed to fund a $6.75 million settlement, and will remove the term “Active Naturals” from the front label of its products. 

This settlement is the latest in a long line of class action settlements related to “natural” products ranging from foods to beauty care products to household cleansers.  In October 2016, for example, Unilever reached a $3.26 million settlement related to its TRESemme Naturals hair products, and in November 2016 Blue Diamond Growers settled a lawsuit related to its Almond Breeze and Nut Thins “natural” and “all natural” products for almost $9 million.  In January 2017, Method Products reached a $2.8 million settlement regarding its “natural” and/or “naturally derived” cleaning products.

These lawsuits, which follow a familiar pattern, seek to capitalize on the lack of government regulation regarding use of the term “natural” on consumer products.  Although the FDA is currently in the rulemaking process with respect to use of the term “natural” on food labeling, there is little indication as to when a final regulation will issue.  In the meantime, the debate over what constitutes a “natural” product will continue to rage in the courts.

The case is Goldemberg v. Johnson & Johnson Consumer Cos. Inc., No. 7:13-cv-03073 (S.D.N.Y.).

One Year After Campbell-Ewald v. Gomez: How Have Lower Courts Answered The “Open Question” Posed by the Supreme Court?

Supreme Court iStock_000017257808LargeBy Kate T. Spelman

It has been a year since the Supreme Court issued its highly anticipated decision in Campbell-Ewald v. Gomez.  As we reported here, the Court held in Gomez that an unaccepted offer of settlement, conveyed either as an offer of judgment under Federal Rule of Civil Procedure 68 or otherwise, was insufficient to moot a putative class representative’s claim.  The Supreme Court left open the question, however, of whether a defendant could potentially moot a plaintiff’s claim by actually tendering a reimbursement to the individual plaintiff – e.g., through depositing monies in her bank account or something similar.

How have lower federal courts responded to this open question?  The answer is two-fold. 

On the one hand, no real consensus has emerged with respect to a defendant’s ability to moot a representative plaintiff’s individual claim by tendering full relief.  Some courts have held that such a tender negates the existence of a “live claim,” whereas others have found that a named plaintiff’s individual claim cannot be mooted by an unwelcome reimbursement.  Compare Leyse v. Lifetime Entm’t Servs., LLC, No. 13 CIV. 5794 (AKH), 2016 WL 1253607, at *2 (S.D.N.Y. Mar. 17, 2016) (“[O]nce the defendant has furnished full relief, there is no basis for the plaintiff to object to the entry of judgment in its favor.”) with Bais Yaakov of Spring Valley v. Graduation Source, LLC, No. 14-cv-3232, 2016 WL 872914, at *1 (S.D.N.Y. Mar. 7, 2016) (finding that a plaintiff's TCPA claims remained live even after the defendant deposited a check with the court and assented to the requested injunctive relief). 

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Spokeo and Wheel – Rolling Thru Recent Circuit Court Cases

By Kate T. Spelman

PillarsFive months have passed since the Supreme Court’s decision in Spokeo, Inc. v. Robins, where the Court held (on the one hand) that a “violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact,” but also (on the other hand) that a plaintiff cannot establish standing by alleging a “bare procedural violation” because “Article III standing requires a concrete injury even in the context of a statutory violation.”  In the intervening time period, Spokeo has been cited by almost 200 federal district courts attempting to apply the Supreme Court’s directives.  However, only a handful of federal courts of appeal have waded into the fray.  A review of these appellate decisions provides helpful insights into how the lower federal courts are (or should be) applying the Supreme Court’s opinion.  In fact, three general rules can be gleaned from these decisions:

First, a plaintiff may have standing to sue based solely on a defendant’s failure to disclose information when such disclosure is statutorily mandated.

In Church v. Accretive Health, Inc., the Eleventh Circuit found that the plaintiff had standing to assert a claim for violation of the Fair Debt Collections Practices Act based solely on the defendant’s alleged failure to include in its letter to the plaintiff certain disclosures required by the Act.  For example, the letter did not expressly state that it was sent by a “debt collector ... attempting to collect a debt and that any information obtained will be used for that purpose,” nor did it alert the plaintiff that “unless the consumer, within thirty days after receipt of notice, disputes the (Continued) validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.”  The plaintiffs alleged no actual damages aside from the defendant’s alleged failure to include the required disclosures.  However, the court noted that, in certain instances, a plaintiff can rest on the deprivation of a Congressionally-created right to satisfy the standing inquiry.  Because Congress had created “a new right—to receive the required disclosures in communications governed by the FDCPA—and a new injury—not receiving such disclosures,” the plaintiff satisfied Article III’s injury-in-fact requirement.   

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The Ninth Circuit Splits the Baby in California Consumer Class Action Brazil v. Dole

New-Update-IconBy Kate T. Spelman

As we recently reported, on September 12 the Ninth Circuit heard oral argument in two appeals with potentially wide-ranging implications for California consumer class actions.  Less than three weeks later, on September 30, the Ninth Circuit issued its decision in one of those appeals, Brazil v. Dole.  In Brazil, the plaintiffs challenged the “all natural fruit” labels on Dole fruit products under California’s consumer protection statutes.  The district court dismissed the plaintiffs’ unjust enrichment claim and their illegal product theory at the pleading stage, then later decertified the class based on the plaintiffs’ failure to present a viable class-wide damages model.  The district court then granted summary judgment to Dole after finding that the plaintiffs had failed to present sufficient evidence of a likelihood of consumer deception.  The plaintiff appealed. 

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Ninth Circuit Hears Oral Argument in Two Significant Consumer Class Action Appeals

Pineapple_492x328By Kate T. Spelman

On Monday September 12, the Ninth Circuit heard oral arguments in two consumer class action appeals – Brazil v. Dole and Briseno v. ConAgra – that could significantly impact California consumer protection law.  In Brazil, the plaintiffs challenged (among other things) the “all natural fruit” labels on Dole fruit products.  The district court dismissed certain claims at the pleading stage, including the plaintiffs’ theory that Dole’s products were “unlawful” under California’s unfair competition law because they were misbranded and therefore illegal to possess.  The district court later decertified the class based on the plaintiffs’ failure to present a viable class-wide damages model, then granted summary judgment to Dole based on the plaintiffs’ insufficient evidence of consumer deception.  The plaintiffs challenged all of these decisions on appeal.  During oral argument, the Ninth Circuit panel focused on the viability of the plaintiffs’ illegal product theory, questioning whether any consumer had ever been prosecuted for possessing a misbranded product under the California statute at issue.  The panel also asked the parties to address whether the court should defer to the Food and Drug Administration under the primary jurisdiction doctrine, as they did recently in Kane v. Chobani, due to the agency’s anticipated rulemaking regarding “natural” labels.

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The Impact of the Supreme Court’s Spokeo Decision is Felt Far and Wide

By Kate T. Spelman

Supreme Court iStock_000017257808LargeA month after the Supreme Court’s much-anticipated decision in Spokeo, Inc. v. Robins, the aftershocks of the ruling have already rumbled through numerous district and appellate courts.  As we previously discussed, the Supreme Court held in Spokeo that a plaintiff must show both particularized and concrete injury to establish standing under Article III.  In so holding, the Court made clear that a concrete injury must be “real” and not merely “abstract,” and that a “bare procedural violation” of a statute would not suffice. 

Some courts have already applied Spokeo to dismiss claims lacking sufficient allegations of concrete injury under the Supreme Court’s rationale.  In Gubala v. Time Warner Cable, Inc., for example, where the plaintiff claimed that the defendant retained customers’ personal information in violation of the Cable Communications Policy Act, the Eastern District of Wisconsin invoked Spokeo to dismiss the plaintiff’s claims for lack of Article III standing.  The court noted that the plaintiff had not alleged “disclos[ure of] his information to a third party,” or that he had been “contacted by marketers who obtained his information from the defendant, or that he ha[d] been the victim of fraud or identity theft.”   Thus, “[g]iven the clear directive in Spokeo,” the court found that the complaint must be dismissed for failure to allege a concrete harm. 

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Ninth Circuit Defers to FDA on “Natural” and “Evaporated Cane Juice” Labeling

Tree_iStock_000004633733LargeBy Kate T. Spelman

On March 24th, the Ninth Circuit reversed the district court’s dismissal of Kane v. Chobani, LLC.  In this putative class action, plaintiffs alleged violations of California’s consumer protection laws in connection with Chobani’s use of the terms “all natural” and “evaporated cane juice” on its yogurt labels.  Specifically, the plaintiffs claimed that the yogurt maker’s use of the terms was deceptive and misleading.  The district court found that, among other things, plaintiffs failed to plausibly allege that they actually relied on the labeling in making their purchasing decisions.

Interestingly, the Ninth Circuit did not issue a substantive ruling in Chobani, but rather remanded the action with instructions for the district court to enter a stay under the primary jurisdiction doctrine.  This doctrine allows the judicial branch to defer ruling on an issue that should be decided in the first instance by an executive agency with relevant expertise.  In this case, the Ninth Circuit recognized that questions regarding proper use of the terms “natural” and “evaporated cane juice” on food products “implicated technical and policy questions” that should be addressed by the U.S. Food and Drug Administration (“FDA”).  The Ninth Circuit noted that because the FDA has recently expressed its intent to issue updated guidance on the terms “natural” and “evaporated cane juice”, a stay would not cause indefinite delay and would further the court’s interest in judicial efficiency.  This decision could have repercussions for a number of pending lawsuits regarding the use of these disputed terms on food labels.

Jury Clears Coca-Cola of Unfair Competition in Pomegranate Juice Row

New-Development-IconBy Kate T. Spelman

On Monday, jurors in the Pom Wonderful v. The Coca-Cola Company trial handed a victory to the defendant, clearing Coca-Cola of wrongdoing in connection with the labeling and marketing of its Enhanced Pomegranate Blueberry Flavored 100% Juice Blend drink.  Pom Wonderful LLC, etc. v. The Coca-Cola Company, etc., et al, CV 08-06237 (C.D. Cal. Mar. 21, 2016).  Pom Wonderful, which manufactures pomegranate blueberry juice and other pomegranate-based beverages, filed its lawsuit against Coca-Cola in 2008.  Pom alleged that Coca-Cola violated both the federal Lanham Act and California’s consumer protection statutes by labeling its juice blend as “pomegranate blueberry,” when in fact the beverage was made up primarily of apple and grape juice.  Pom claimed that it had lost sales to the tune of $77 million because Coca-Cola was able to undercut Pom’s pricing while misleading consumers into purchasing Coca-Cola’s pomegranate blueberry juice drink on the mistaken belief that the product contained more pomegranate and blueberry juice than it in fact did.  However, the jury rejected Pom’s theory of the case, perhaps influenced by Coca-Cola’s argument that Pom itself was guilty of deceptively marketing its products as heart healthy without sufficient support for such claim. 

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Surprise! An undisclosed third party may be able to compel arbitration if the issues in dispute are intertwined with the arbitration agreement.

Network_iStock_000005265503LargeBy Kate T. Spelman

A California federal district court recently granted defendant Turn, Inc.’s motion to compel arbitration of a dispute with a putative class of New York Verizon subscribers.  Henson, et al. v. Turn, Inc., No. C 15-01497 JSW (N.D. Cal. Mar. 14, 2016).  Turn, an online marketing platform, partners with Verizon to utilize subscriber information to connect advertisers with their target audience.  Verizon subscribers sued Turn to prevent the company from allegedly surreptitiously monitoring their web browsing activities.  Turn moved to dismiss or stay the action on the basis of an arbitration clause contained in the service agreements between the subscriber plaintiffs and Verizon.  Turn was not a signatory to the service agreements.

The court held that under both New York and California law, a non-signatory to an arbitration agreement may compel arbitration when the claims at issues are “intertwined with the agreement.”  In this case, because the parties’ dispute hinged on a provision in the plaintiffs’ subscriber agreements with Verizon, and because the defense of the lawsuit would necessarily require introduction of those agreements, the issues were found to be “intertwined with the agreement” such that Turn could invoke the arbitration provision contained therein.  

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