The impact of the Supreme Court’s Comcast decision on certification of class actions, first discussed here, continues to be felt across courtrooms nationwide. Comcast made clear that a trial court must evaluate the merits of plaintiffs’ claims at the certification stage to ensure that the proposed method for measuring damages fits plaintiffs’ theories of liability. A judge in the Northern District of California recently decertified a class action (and declined to reconsider that decision), after expert discovery showed that Plaintiff’s damages model did not identify damages that were attributable to the wrongful conduct alleged by defendants.
The Plaintiff in Werdebaugh, a successor case to Comcast, alleged he relied on two allegedly false and misleading statements on the Chocolate Almond Breeze almond milk he purchased for his children: (1) identification of the sweetener in the almond milk as “evaporated cane juice” when it was actually sugar; and (2) the “All Natural” statement on the label even though the product contains synthetic ingredients. Based on an expert’s proposed regression model (which purported to estimate damages based on the troublesome labels alone while controlling for all relevant variables), the court initially certified a class of individuals who had purchased almond milk products containing these allegedly misleading statements.
But after expert discovery, defendants moved to decertify the class, and the court agreed. The court found several flaws with the expert’s actual regression analysis, including that it did not control for other important variables that impacted the price of the products, such as the effect of advertising. This failure meant that the model was not capable of determining whether price premiums were due to the use of the allegedly misleading statements on the product or simply the effect of the advertising and promotions by defendant. As a result, the court reasoned that at least some of the damages calculated by the model did not arise from defendant’s allegedly wrongful conduct, and thus, the model was inconsistent with Plaintiff’s liability case. The court also found that an “alternative” calculation of damages based on the use of a 15-year old New Jersey study on the price premium of yogurt with “All Natural” labeling was inappropriate for the claims based on almond milk sold in California.
Many consumer class actions are based on misleading statements on product labeling. But if the Werdebaugh court’s rationale, which follows from the Comcast decision, holds sway, other cases could fail due to the plaintiffs’ inability to substantiate price-based damages linked to the allegedly misleading statements.