The district court’s order denying class certification in Rahman v. Mott’s LLP, 2014 U.S. Dist. LEXIS 167744 (N.D. Cal. Dec. 3, 2014), is a nail-biter in the same sense as the movies Argo and Captain Phillips. We know the outcomes will be good because history tells us that the hostages leave Iran safely and the captain of the seized container ship Alabama will be rescued unharmed by the modern-day superheroes known as Seal Team 6. But man, it sure was tense getting there. If your heart was not beating quickly when the hostages were faking their way through the Tehran airport or when the Navy commandos were leveling their rifles at the ever-more-desperate Somali pirates, you are not human.
We at the Drug and Device Law Blog are human, and although we knew that the outcome of Rahman would be good (because the district court said it would be at the beginning of the order), we had to get through some tense moments to get there.
The lawsuit is one of the sillier cases that we have seen: The plaintiff filed a class action alleging that an apple juice seller violated California’s Unfair Competition Law (UCL) by printing “No Sugar Added” on the label. Id. at *2. Why is that silly? Because there was no sugar added. The statement was completely true, yet it purportedly formed the basis for a class action claiming consumer fraud. Before you bite your nails to the nub in frustration, bear in mind that the phrase “no sugar added” is regulated under the FDCA. Under the regulations, a food seller can include “no sugar added” on a product’s label only if the product meets certain conditions, including that “the food that it resembles and for which it substitutes normally contains added sugars.” Id. at **5-6 (citing 21 C.F.R. § 101.60(c)(2)(iv)). Apparently, you can put “no sugar added” on the label of a frozen desert, but not a frozen pizza, because ice cream “normally contains added sugar” and pizza does not. You also have to state on the label that the product is not “low calorie” or “calorie reduced.” Id. at *5 (citing 21 C.F.R. § 101.60(c)(2)(v)).
We can debate the merits of these rules another time. The point for today is that the plaintiff moved to certify a class of all California residents who purchased the product bearing “No Sugar Added” starting on one date up until preliminary approval of the class. Id. at *8. The defendant mounted the usual arguments in response:
No Ascertainability. The class was not ascertainable because the defendant obviously did not know which consumers purchased its apple juice and because consumers were unlikely to have any other proof of purchase, such as receipts. The Third Circuit has held that such problems of proof make a class unascertainable because relying on the word of absent class members deprives the defendant of due process rights and because it would be impracticable to assure the accuracy of the consumers’ claims. Id. at *9 (citing Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013)). That is very sound reasoning, but the plaintiff in Rahman did not file within the Third Circuit. He filed in the Northern District of California, where the district court held that “[i]n this Circuit [the Ninth], it is enough that the class definition describes a set of common characteristics sufficient to allow a prospective plaintiff to identify himself or herself as having a right to recover.” Id. at *10. That does not seem right to us. Sure, a prospective class member can “identify himself or herself,” but what about the defendant, or the court, or the trier of fact? Exclusive reliance on self-identification was precisely the problem that the Third Circuit addressed in Carrera.
No Typicality or Adequacy. The plaintiff’s claims were neither typical of class nor was he an adequate representative mainly because the plaintiff, who was diabetic, did not actually rely on the challenged label and because he disclaimed any claim for damages. The district court, however, disagreed and found both adequacy and typicality because it was disputed whether the plaintiff relied on the label and whether he had affirmatively waive his claim to damages. Id. at *14. In the end, the district court found that the plaintiff was pursuing no claims unique to him. Id. at *16. This seems wrong to us, too. If reliance was disputed for the proposed class representative, it was likewise disputed for every class member. Because you can resolve those disputes only through proceedings on each class member’s claims, a class action won’t work. As for the plaintiff’s disavowal of damages, that is a form of claim shaving (abandoning claims on behalf of an entire class in order to make class certification more likely). That normally represents a conflict with the class and makes the class representative inadequate, and it should have led to that result here, too.
If you are keeping score, the plaintiff at this point has used a procedural device—a class action under Rule 23—to bar the defendant from contesting (1) whether absent class members purchased the product in the first place and (2) whether any of them actually read or relied on the challenged statement, even though both of those elements were disputed. That threatens to force the defendant to pay money to people whose claims have not been proven, which sounds to us like a deprivation of property without due process of law. You can feel our tension rising.
No Predominance of Common Issues. Not to worry, the predominance requirement of Rule 23(b)(3) came to the rescue, as it so often does. Notably, the district court found predominating common issues on liability, reasoning that individual proof of reliance is not required because “a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material.” Id. at *19. We’ve heard that argument before, and we don’t think it works because presumptions can be rebutted and inferences are not proof. Again, the defendant’s ability to put on a defense is being hamstrung.
On damages, the plaintiff’s mojo finally ran out. The plaintiff did not put forth any workable classwide damages model, but instead “assume[d] that once he proves liability, he will be able to reach a damages settlement.” Id. at 25 n.4. Plaintiffs are not usually so forthcoming about their true motive in seeking class certification—to multiply the potential exposure and extort an inflated settlement. But post-Comcast, failing to account for damages spells defeat. See Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The plaintiff’s resort to a liability-only class under Rule 23(c)(4) went nowhere because the district court found that neither a separate damages class nor individual proof of damages for each class member was a “particularly desirable” option. Rahman, 2014 U.S. Dist. LEXIS 167744, at **24-25. We will keep our eye on liability-only subclasses under Rule 23(c)(4) because some courts have used them as the plaintiff here suggested—to avoid Comcast. We have not reviewed all those cases, but we do know that subclasses under Rule 23(c)(4) have to meet all the requirement of Rule 23, just like any other class. The district court in Rahman seems to have recognized that and rejected the idea.
All’s well that ends well, and you can hear our sighs of relief. We just wish the district court have driven more nails in the coffin of this class action.