Why Rule 23(c)(4) doesn’t save food labeling class actions.

December 10, 2014

Authored by: Site Default

In prior posts, I’ve written about the difficulties of establishing a feasible method of proving class-wide injury in food labeling class actions. Restitution is the only available remedy under the commonly-used California Unfair Competition Law, but plaintiffs can’t feasibly argue they’re entitled to a refund of the full purchase price. After all, the food they bought had some value—it satisfied hunger, provided nutrition, and presumably tasted good enough to eat. Instead, plaintiffs argue that they overpaid for the product because of the “false” labeling (e.g., “all natural”) and that they can calculate this overpayment, typically through a regression analysis. But a valid regression analysis is time-consuming, costly, and very difficult to construct—there simply are too many variables that may affect a product’s price other than whether its label said “all natural.” As a result, many courts are denying motions for class certification, finding that plaintiffs can’t establish the necessary elements of Federal Rule of Civil Procedure 23, especially predominance and superiority.

In Rahman v. Mott’s LLP, No. 13-cv-03482-SI (N.D. Cal. Dec. 3, 2014), the plaintiff tried to avoid the sticky problem of a valid methodology to establish overpayment. He argued that Mott’s improperly labeled apple juice as having “No Sugar Added” in a manner inconsistent with federal regulations. That plaintiff skipped trying to prove a feasible method of calculating class-wide damages: “While Rahman has failed to articulate a methodology for calculating damages on a class-wide basis, this appears to be a tactical choice rather than a symptom of inadequacy [of representation under Rule 23(a)(4)].” Instead, that plaintiff wanted the court to certify a liability only class under Rule 23(c)(4). The court rejected that tactic because the plaintiff never explained how certifying the class for that issue would advance anything. “Rahman has failed to articulate why a bifurcated proceeding would be more efficient or desirable. . . . [H]e has been vague as to whether he intends to later certify a damages class, allow class members to individually pursue damages, or has some other undisclosed plan for resolving this case.”

The court certainly reached the right conclusion, but Mr. Rahman’s arguments reveal additional reasons why such a Rule 23(c)(4) single issue class shouldn’t work in these situations. Again, he didn’t propose a regression analysis purporting to show that he paid $0.75 more per liter of Mott’s apple juice than he would’ve paid without its “false” label of “No Sugar Added.” Instead, he argued that he bought approximately one additional bottle of juice every two weeks than he otherwise would have. Certifying a Rule 23(c)(4) single issue class (“liability only”) would be erroneous under that theory—unless every other class member bought more apple juice because of the “false” label, there wouldn’t be any common liability. If consumers bought two bottles a week regardless of the label, there was no liability; there was no injury of any sort because the label didn’t cause consumers to do or not to do anything. But Mr. Rahman didn’t have any way of suggesting that every other class member increased the number of bottles that he or she purchased because of the labeling; in fact, he didn’t seem to address it at all. Even under his proposed Rule 23(c)(4) liability only class, he couldn’t establish liability as to the entire class—absent injury in the form of everyone purchasing more bottles of juice than the otherwise would have, there is no liability.

If you find yourself facing a food labeling class action plaintiff who hopes to use Rule 23(c)(4) to avoid a valid damages methodology, remember that injury is an essential part of his or her Unfair Competition Law claim. If your plaintiff takes an approach similar to Mr. Rahman’s, he or she shouldn’t be able to meet the necessary elements of class certification.