Date: Dec 01, 2014
The U.S. District Court for the Northern District of California recently decertified a potential class of purchasers of a product labeled as “all natural” based on a finding that the plaintiffs’ damages expert could not demonstrate class-wide damages based on the “all natural” claim. This sets a bar that plaintiffs may find difficult to overcome. However, the court allowed the case to proceed to determine whether an injunction was appropriate. The case is Brazil v. Dole Packaged Foods, LLC, Case No. 12-CV-01831-LHK (N.D. Cal. Nov. 6, 2014).
The Facts of the Case
Chad Brazil sued Dole alleging, among other things, that the “all natural fruit” labeling on certain fruit and fruit juice products was false and/or misleading because those products contained artificial ingredients. In ruling on the initial motion to certify a purchaser class, the Court accepted Plaintiff’s damages model based on regression analysis, stating that the model was likely to demonstrate class-wide damages from the sale of the products. However, at that point, the Plaintiffs’ expert had not performed any analysis.
After Plaintiffs’ expert performed a regression analysis, and explained what he had done at a deposition, Dole moved to decertify the class because the regression model could not adequately assess damages on a class-wide basis. The Court agreed. The Court rejected the Plaintiff’s damages model because it failed to demonstrate that the “all natural” claim cause the consumer to pay more for the product than they would have if the claim were not made.
One key to the Court’s reasoning was that the allegedly false claims were used throughout the entire class period, making it impossible for the expert to conduct a before-and-after analysis. The Court also noted that, in another case, the same expert had testified that “it is not possible” to run a regression analysis if the claim existed throughout the entire class period.
The expert employed a “hedonistic” model designed to try to isolate the effect of the “all natural” claim on the price of the products. The Court rejected this because the model failed to control for other variables that could affect price. The expert admitted that the hedonistic model requires that some products have the claim while others do not - yet, in analyzing the products without the claim, the expert failed to verify the status of the claims that were made for many of them. In fact, the expert made false assumptions about some of those labels. Additionally, the model failed to control for other factors affecting price, such as multiple label claims (e.g., “all natural,” “no sugar added”), advertising of the products, and differences in packaging that affected price (e.g., 16 oz. can v. four-cup pack).
Given the four-year statute of limitations, if a product has had a potentially false claim for that entire period, a plaintiff may have a difficult, if not insurmountable, challenge in proving damages. The difficulty increases with each different product claim placed on the label, which could confound a plaintiff’s ability to trace damages to any single claim.
This decision is significant, because it may provide food marketers with additional means for opposing class certification in false labeling and advertising cases.