For the second time in as many months, the Northern District of California has decertified a damages class in a food labeling class action because the plaintiff’s damages model was incapable of measuring only those damages attributable to a defendant’s alleged misconduct. The ruling is the latest development to illustrate the impact of the U.S. Supreme Court’s decision in Comcast Corporation v. Behrend. In Werdebaugh v. Blue Diamond Growers, the plaintiff alleged that Blue Diamond violated California’s Unfair Competition Law and False Advertising Law by using the terms “All Natural” and “evaporated cane juice” on the packaging of certain Almond Breeze almond milk products.

The court had previously certified a damages class of California purchasers. At that time, the plaintiff’s expert had proposed three damages models. In its initial decision, the court rejected two of those models, but accepted the third as viable under Comcast. The approved methodology was a regression model that, according to the plaintiff, would calculate that portion of the product’s price attributable to the allegedly false claims. In Comcast, the Supreme Court clarified that there must be a direct link between a party’s alleged misconduct and the calculation of the resulting damages. In the Court’s words, “a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to” the defendant’s misconduct.

Blue Diamond filed a motion to decertify the damages class, claiming that the methodology ultimately used by the plaintiff’s expert improperly included price premiums related to other aspects of the product (e.g., brand loyalty, advertising, seasonality, region, distribution channels). While Blue Diamond’s motion was pending, the same judge decertified a damages class in a separate case, Brazil v. Dole Packaged Foods, LLC, because a similar regression model advanced by the same expert failed to isolate the damages attributable to the defendant’s use of “all natural” on its labeling. As a result, the court held that the plaintiffs could not demonstrate the predominance of common issues, and decertified the class.

On the heels of the decertification in Brazil, the plaintiff in Werdebaugh filed a supplemental expert report, attempting to modify the damages model in an effort to address its shortcomings and avoid decertification. Blue Diamond moved to strike that supplemental report as untimely.

The district court concluded that the supplemental report was not a “supplement” under Rule 26(e), because it contained enough modifications to constitute a new report. Accordingly, the court analyzed the expert’s methodology in the original model and concluded that, among other flaws, it conflated the value of the Blue Diamond brand name with the value associated with the “All Natural” and “evaporated cane juice” labeling. Because the model could not isolate the value of only the labeling statements, the court concluded that it violated the Comcast mandate. The court went on to note that even if it had permitted the use of the updated model contained in the supplemental report, it too failed to adequately isolate other variables in a way that could “provid[e] a damages figure consistent with Plaintiff’s liability case.”

Werdebaugh and Brazil stand as prime examples of the impact of Comcast, and a strong reminder that a class plaintiff’s burden in seeking certification includes a class-wide damages model capable of isolating only those damages directly attributable to a defendant’s alleged misconduct. These cases also serve as good examples of the value, in the right case, of continuing to create a record after class certification.

Ballard Spahr’s Product Liability and Mass Tort and Consumer Class Action groups have substantial experience defending consumer class actions, including economic loss, consumer fraud and warranty claims. For more information, please contact Neal Walters at 856.761.3438 or waltersn@ballardspahr.com, Michael R. Carroll at 856.761.3452 or carrollm@ballardspahr.com, or Casey G. Watkins at 856.761.3455 or watkinsc@ballardspahr.com.


Copyright © 2014 by Ballard Spahr LLP.
www.ballardspahr.com
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

Related Practices

Product Liability and Mass Tort
Litigation