Consumer Class Actions and Mass Torts : Class Action Lawyer & Attorney : J. Russell Jackson : Skadden Law Firm : Complex Class Actions : Consumer Class Actions & Mass Torts Law Blog

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I finally got around to reading Judge Denise Cote's opinion in case that sounds like the daily menu special at Gray's Papaya:  Weiner v. Snapple Beverage Corp., No. 07 Civ. 8742 (DLC), Slip op. (S.D.N.Y. Aug. 5, 2010).  It's a doozy.  Judge Cote articulates the rigorous analysis standard, uses Daubert to exclude unreliable expert testimony on plaintiffs' damages and loss causation, analyzes the predominance of common issues, and discusses the class definition and the problem of ascertainability of class membership. 

In Weiner, the plaintiffs sued Snapple for violation of New York's consumer fraud statute (General Business Law section 349), unjust enrichment, and breach of express and implied warranties.  The class was defined as "[a]ll persons or entities who, within the State of New York, purchased for personal consumption and not for resale or assignment, a Snapple beverage marketed, advertised, and promoted as 'All Natural,' but that contained [high fructose corn syrup] from October 10, 2001 to January 1, 2009."  Plaintiffs' theory of the case was that they were defrauded into paying a premium for Snapple beverages because they were represented as "All Natural," but contained HFCS, which plaintiffs argue is not natural, although it is derived from corn and contains the sugars found in table sugar and honey.

Judge Cote does a good job of setting forth the Second Circuit authorities supporting the rigorous analysis standard, explaining that a district court may not avoid looking into the merits of plaintiffs' claim where they intersect with the class certification elements.  See slip op. at 11-13.

Then, rather than attacking the plaintiffs' fundamental premise that HFCS is not natural or the adequacy or typicality of the named plaintiffs, Judge Cote begins her analysis by considering the element of predominance.  As the court described it, the predominance requirement asks the court to "consider whether the putative class members 'could establish each of the . . . required elements of [their] claim[s] . . . using common evidence.'"  Id. at 13 (citation omitted).  Then, looking at GBL section 349, the court concludes that plaintiffs cannot establish the fact of injury or that such injury was caused by the challenged conduct on a classwide basis. 

Judge Cote acknowledged that section 349 has been held to apply an "objective" standard for whether conduct is misleading, but it still requires injury caused by the challenged conduct:  "Only by showing that plaintiffs in fact paid more for Snapple beverages as a result of Snapple's 'All Natural' labeling can plaintiffs establish the requisite elements of causation and actual injury under section 349."  Id. at 15.  As Judge Cote noted, plaintiffs cannot do that on a classwide basis.  Even the named plaintiffs testified that they bought Snapple for reasons other than the "All Natural" representation, and that they would have bought Snapple regardless.

Plaintiffs proffered the testimony of an expert economist who testified that he could develop a model that would apply to all class members under one of two theories.  But the expert had not yet developed the model, surveyed the literature, or even reviewed most of the relevant documents produced in the case.  He did not consider that Snapple did not set retail prices, that class members had no documents to prove retail prices paid, and that Snapple did not vary the wholesale cost of its beverages based on whether the flavor was "All Natural" or not marked "All Natural."  In short, his testimony was nothing more than a promise or prediction that he could come up with a valid model in the future.  The court held that this was not enough under Daubert, and thus excluded his testimony as unreliable.  Id. at 21.  As the court explained:

At a minimum, [the expert] would need to determine what 'standard economic methodologies' he will employ, identify the relevant 'class wide economic data' and 'studies and market research,' and build an actual algorithm before it could be determined whether [his] proposed methodology can reliably prove injury and causation on a classwide basis.

Id. at 23.  Interestingly, the defense expert's testimony revealed that the price consumers paid for Snapple over the class period varied significantly based on a variety of factors, including where they bought it, the quantity they bought, when they bought it.  Id. at 25-26.

In looking at the unjust enrichment claim, the court also questioned how plaintiffs would prove that they received less than what they had contractually bargained for.  Especially troubling to the court was plaintiffs' testimony that they continued to buy Snapple even after they knew that it contained HFCS.  Id. at 29.

The same issues precluded a classwide mode of proof for breach of express warranty (id. at 31), and New York law requires direct privity with plaintiffs (id. at 32).

The court went on to express serious doubts about the superiority requirement -- in particular noting how unmanageable plaintiff's class definition was.  It included people from around the world who bought Snapple in New York, regardless of where they live.  And given that none of these people can be expected to have retained reciepts, "Plaintiffs have failed to show how the potentially millions of putative class members could be ascertained using objective criteria that are administratively feasible.  Id. at 34, 35-36.

Overall, the decision in Weiner is instructive on a variety of issues, and is a must-read opinion for those who regularly oppose the certification of fraud class actions in suits involving consumer products.