Defeating Class Certification In “All Natural” Labeling Actions

In important decision for food manufacturers, the Northern District of California recently denied class certification in an “all natural” putative class action. In Astiana v. Ben & Jerry’s Homemade, Inc., No. C 10-4387-PJH (N.D. Cal. Jan. 7, 2014), the plaintiff alleged that packaging and advertising for ice cream products were deceptive and misleading because those products contained alkalized cocoa but were labeled “all natural.” This case began in 2010, and the district court granted preliminary approval of a class action settlement in March 2012. Following the Ninth Circuit’s opinion in Dennis v. Kellogg Co., 697 F.3d 858 (9th Cir. 2012), however, the district court denied final approval based on problems with the claim procedure, amount requested for fees and costs, and the cy pres distribution of unclaimed funds. Thus, the case proceeded to class certification briefing.

The district court identified several problems with the proposed class as part of the renewed motion for class certification. First, the court was not satisfied that the class was ascertainable. Some cocoa could be alkalized using “natural” alkalis, but some were “non-natural” alkalis. Moreover, there was no way to identify which products contained which type of alkali. Indeed, even Ben & Jerry’s alkalized cocoa supplier testified that he did not know which alkalizing agent was used in every circumstance. Thus, the class was not ascertainable.

The district court also questioned whether commonality under Federal Rule of Civil Procedure 23(a)(2) existed, noting that “defendant has provided evidence suggesting that consumers are not likely to be deceived by the ‘all natural’ label, while plaintiff has presented no evidence in opposition.” Nonetheless, the court found that the existence of that question was arguably sufficient to establish commonality. The plaintiff did not establish typicality, however, under Rule 23(a). The plaintiff argued that her claims were typical so long as “all natural” appeared on the label. In contrast, the defendant presented evidence via an expert report that 97 percent of surveyed consumers responded “that it did not matter if the product contained cocoa processed with a synthetic alkali.” In addition, the plaintiff apparently testified that her injury consisted of her “vibe” being “disrupted” after learning from her counsel that Ben & Jerry’s might have used a synthetic alkali, but she did not provide any evidence that other putative class members shared that view.

The court next turned to predominance of common questions under Rule 23(b)(3). The defendant presented additional expert testimony showing that several factors affect consumer choice beyond the presence of a synthetic alkalizing agent. Thus, the defendant argued that materiality and reliance could not be established on a classwide basis. Similarly, the defendant argued that any entitlement to monetary relief raised individual issues regarding whether class members paid a “premium” for the product. The plaintiff, in contrast, did not provide any expert testimony on that subject. Moreover, the defendant established that it charges wholesale customers the same price regardless of flavor and regardless of whether its labels state “all natural.” It would be impossible to identify some sort of premium for those products. The defendant also showed with expert testimony that its prices did not decrease at the wholesale or retail levels even after it removed the “all natural” label, dispelling the notion of a premium.

Evaluating predominance, the court explained that “the restitution awarded to class members must correspond to a measurable amount representing the money that the defendant has acquired from each class member by virtue of its unlawful conduct.” But expert testimony may be necessary to determine the amount of an inflated price attributable to a challenged practice. Pointing to the United States Supreme Court’s opinion in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), the district court concluded that the plaintiff did not offer any appropriate evidence demonstrating the existence of a classwide method of awarding relief consistent with the plaintiff’s liability theory. Indeed, the plaintiff did not offer any expert testimony demonstrating that ice cream with the “all natural” label commanded a higher price than ice cream without it. There was no evidence of a gap between the price that the “all natural” ice cream sold for and what it purportedly should have sold for without that label. Likewise, the plaintiff did not offer evidence showing that consumers would pay a premium for “all natural” ice cream that used a natural alkali as opposed to a synthetic one.

The problems for the plaintiffs continued with respect to predominance because Ben & Jerry’s does not sell directly to retail customers and does not set retail prices. “Establishing a higher price for a comparable product would be difficult because prices in the retail market differ and are affected by the nature and location of the outlet in which they are sold.” Substantial individualized issues would exist and depend on how many packages of ice cream each class member purchased. The district court briefly touched on superiority under Rule 23(b)(3) as well, but its predominance analysis truly doomed any notion of superiority of a class action here.

This decision validates an approach to class certification and summary judgment that we have advocated in this blog and elsewhere. That is, use expert testimony to establish that individualized issues affect how consumers interpret phrases on labels and whether that labeling affects the prices consumers would pay for a product. In addition, a number of individualized factors affect the retail prices that consumers pay in the supermarket, whether they paid a “premium” for a product because of a label or for some other reason, or whether they paid a “premium” at all. To be sure, defendants face very real expenses in compiling that type of expert evidence to rebut class certification or to use on summary judgment. Those efforts, however, should be well worth it. Not only will they provide powerful ammunition for the particular class action at issue, but mounting that type of defense also signals to potential plaintiffs that proving their claims will be very difficult whenever they sue this particular defendant. Thus far, class action plaintiffs in these food labeling cases have been content to survive motions to dismiss and then press for class action settlements. If these cases lead to real burdens in terms of proof and expense for the plaintiffs’ class action firms, they may forgo filing them.

James Smith is a member of the Class & Derivative Action Client Service Group in Bryan Cave’s Phoenix office.