District Court Rejects Nationwide Class, But Certifies California-Only Consumer Class After Conducting Rigorous Analysis of Damages Models Under Comcast

In Werdebaugh v. Blue Diamond Growers, the plaintiff brought suit in the United States District Court for the Northern District of California to certify a nationwide class of consumers who purchased Blue Diamond almond milk products containing allegedly false and deceptive labels.  He alleged violations of California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act.  The plaintiff moved for certification of a class seeking injunctive relief under Federal Rule of Civil Procedure 23(b)(2) and restitution and damages under Rule 23(b)(3).

The Court found that the nationwide class did not satisfy the predominance requirement of Rule 23(b)(3) because it would require application of the laws of all 50 states.  Therefore, the court narrowed the class to include only California consumers.  Because the case involved multiple common claims for small sums of money, making individual actions unlikely, the court found that the superiority requirement of Rule 23(b)(3) was satisfied as to the narrowed class.

Although the plaintiff introduced sufficient evidence to show that he relied on the allegedly deceptive labels in making his purchasing decisions and therefore had standing to pursue a damages claim under Rule 23(b)(3), the court found that he lacked standing to bring a claim for injunctive relief under Rule 23(b)(2) as he did not allege that he intended to purchase the products in the future.

In discussing Rule 23(b)(3)’s predominance requirement, the court also engaged in a lengthy analysis of the plaintiff’s damages models, stating that, pursuant to the Supreme Court’s decision in Comcast Corp. v. Behrend, a plaintiff seeking certification under 23(b)(3) “must present a damages model that is consistent with its liability case.”  After noting that the measure of restitution in a product mislabeling suit is based on the difference between the value of the product as labeled and the value of the product as received, the court engaged in a “rigorous analysis” of the three damages models offered by plaintiff’s expert.  The court rejected the first, a full refund model that would result in recovery of the entire purchase price, because it was based on an erroneous assumption that no benefits were received from the products and would not lead to damages based on the allegedly misleading labels.  Next, the court found that the price premium model, which compared the price of the defendant’s products to comparable products and refunded the difference, was not appropriate under Comcast because it did not link the price difference to the labels or account for differences between the challenged and comparable products.  The third model, a regression model, involved a determination of the defendant’s gains based on sales of its products before and after the labels were used while controlling for other variables.  The court held that this model was sufficiently precise under Comcast because it would compare identical products with and without the challenged labels and would control for factors unrelated to the allegedly deceptive labeling.  Thus, this was the only model that would trace the damages to the theory of liability.  The court’s discussion emphasized the importance of conducting a rigorous analysis to ensure a plaintiff’s damages model comports with Comcast before certification is appropriate under 23(b)(3).

Werdebaugh v. Blue Diamond Growers, No.: 5:12–cv–02724, slip op. (N.D. Cal. May 23, 2014).

 

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