• Tea Manufacturer Defeats Damages - Seeking Class Action Plaintiff in an Opinion Steeped in Comcast
  • May 8, 2014 | Author: Paul Seeley
  • Law Firm: Sheppard, Mullin, Richter & Hampton LLP - Los Angeles Office
  • In Lanovaz v. Twinings North America, Inc., 2014 WL 1652338, Case No. C-12-02646-RMW (N.D. Cal. April 24, 2014), the court granted-in-part and denied-in-part a motion for class certification in a false advertising case about tea labels. The plaintiff alleged that the defendant’s tea was “misbranded” because it advertised the tea as a “Natural Source of Antioxidants.” The plaintiff claimed that this advertising was misleading and violated California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act. The plaintiff contended that, although the tea indisputably contained flavonoids (a type of antioxidant), the Food & Drug Administration does not allow advertising about flavonoids because it has not established a recommended daily dose. Plaintiff sought class certification under Rule 23(b)(2) (for an injunctive class) and Rule 23(b)(3) (for a damages class) of the Federal Rules of Civil Procedure.

    The court rejected the plaintiff’s proposed Rule 23(b)(3) class. The court noted that, under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), a plaintiff seeking certification must “present a legally relevant damages model under Rule 23(b)(3).” Lanovaz, 2014 WL 1652338 at *6. The court determined that “The proper measure of restitution in a mislabeling case is the amount necessary to compensate the purchaser for the difference between a product as labeled and the product as received.” Id. This can be determined by “taking the market price actually paid by consumers and the true market price that reflects the unlawful, unfair, or fraudulent business practice.” Id.

    Applying Comcast, the court concluded that the three “models” offered by the plaintiff’s expert were incapable of calculating the legally correct restitution award. First, the plaintiff’s expert proposed that class-wide damages could be calculated by “refunding the entire purchase or ‘register’ price of the tea.” The court rejected this immediately, as “this is not the proper measure of damages.” Id. Second, the plaintiff’s expert proposed a “benefit of the bargain” measure, which calculated the differences in price between the defendant’s tea (with the antioxidant advertising) and other tea (without the antioxidant advertising). The court rejected this model because it failed to link the price differences to the antioxidant label and was, therefore, incapable of eliminating other explanations for the price differences. Id. Third, the plaintiff’s expert offered an “econometric” model that would have determined the portion of the defendant’s sales that was caused by the misleading antioxidant label. Ultimately, the court rejected this model after plaintiff’s expert acknowledged that he could not use it due to the lack of “any variable in sales or units sold attributed to the antioxidant claims.” Id. As none of these models could calculate the “legally relevant damages” owed to the class, the court denied certification under Rule 23(b)(3), effectively eliminating the plaintiff’s hope of securing monetary relief.

    The court reached a different result under Rule 23(b)(2). Unlike Rule 23(b)(3), a plaintiff seeking to certify an “injunction only” class does not need to demonstrate that common issues “predominate” over individual issues, rendering Comcast inapplicable. Here, whether the class was misled by this label was a common question. Id. at *4-5. Since the defendant was still using the antioxidant labeling, an injunction could be entered if the plaintiff prevailed. Thus, the court reasoned that an injunction-only class was appropriate to resolve the common issues and determine whether the defendant must remove the antioxidant label from its tea packaging. Id.

    Lanovaz continues the string of recent California district court cases that apply Comcast to require the plaintiff to submit a legally viable damages model as part of the plaintiff’s motion for class certification under Rule 23(b)(3). Like the courts in In re Pom Wonderful LLC, 2014 WL 1225184, *2-3 (C.D. Cal. March 25, 2014) and Caldera v. J.M. Smucker Co., 2014 WL 1477400, *4 (C.D. Cal. April 15, 2014), the Lanovaz court unequivocally rejected the argument that the class was entitled to a full refund. Just as importantly, the Lanovaz court indicated that Comcast is not satisfied by just comparing the prices of two products: one with the false advertising and one without. Instead, before certification is granted, the plaintiff must demonstrate that the price difference is linked to the allegedly false advertising to show that the false statements caused the class members to pay more. Only by linking the false label to the increased price will a damages expert satisfy Comcast and support certification of a Rule 23(b)(3) class.