In Hadley v. Kellogg Sales Company, Plaintiff Stephen Hadley, who has filed at least two additional lawsuits alleging the mislabeling of breakfast foods, sought certification of four California subclasses of purchasers of Kellogg’s cereal and cereal bar products. On August 17, 2018, Judge Koh issued an order that carefully dissected Plaintiff’s request. The court concluded that Plaintiff had established the requirements for class certification for several of his proposed subclasses challenging health claims on the labels of the products at issue. Significantly, however, Judge Koh rejected Plaintiff’s attempts to certify a subclass challenging a representation made on the back of packaging of cereal bars. She also concluded that Plaintiff had not established Rule 23(b)(3)’s predominance requirement as to his deceptive omission theory of liability due to his failure to present a viable damages model.
Background. Plaintiff alleges that Kellogg’s use of statements containing terms such as “healthy,” “nutritious,” or “wholesome” on its cereal and cereal bar products misled consumers into believing that those products are healthy, when they are not because of the amount of added sugar they contain. On this basis, Plaintiff alleges violations of the FAL, CLRA, and UCL, and asserts a claim for breach of warranty. Plaintiff also predicates his consumer-protection claims on his allegations that Kellogg deceptively failed to disclose to consumers the products’ high sugar content, and that certain of the challenged statements violate FDA regulations.
Narrowly Defined Subclasses Prevent Predominance Challenge Based on Lack of Exposure, But Back-of-the-Package Statements Do Not. Kellogg argued that many of the allegedly deceptive statements did not appear on the packaging of the cereal products for a substantial portion of the class period, and that this lack of uniform exposure created significant differences regarding the legal viability of class members’ claims. The court disagreed. Judge Koh reasoned that Plaintiff sidestepped this potential problem by narrowly defining the subclasses to include only those individuals who purchased products that actually displayed the challenged statements on their packaging. Nevertheless, the court agreed with Kellogg that it could not infer class-wide exposure to the “wholesome goodness” statement that only appeared on the back panel of cereal bar packaging. The court therefore declined to certify a subclass of purchasers of the cereal bar because it would have to conduct individualized inquiries to determine which class members saw the challenged statements.
Advantage Realized Model Flunks Comcast for Omission Claims. Comcast Corp. v. Behrend, 569 U.S. 27 (2013), requires a plaintiff to establish a damages model that matches his or her theory of liability and measures damages across the entire class. Plaintiff claimed that his expert’s proposed “advantage realized model” satisfied the Comcast requirement for his theory that Kellogg deceptively failed to inform consumers about the allegedly high sugar content of its breakfast products. Under the advantage realized model, Plaintiff’s expert proposed to measure the market advantage that Kellogg obtained by omitting that information. The court concluded, however, that this model only provided a measure of nonrestitutionary disgorgement (Kellogg’s unjust enrichment), rather than restitutionary disgorgement (Plaintiff’s loss). The court explained that nonrestitutionary disgorgement is not a permissible class-wide remedy under the FAL, CLRA, or UCL, and therefore Plaintiff’s damages model was not consistent with his omission theory of liability.
Takeaway. Judge Koh’s decision in Hadley emphasizes that plaintiffs challenging multiple statements on multiple products in a single action are not excused from establishing the requirements for class certification for each product at issue and each theory of liability. Even where defendants cannot entirely defeat class certification, they should parse plaintiffs’ broad requests and direct pointed attacks to particular products or theories of liability that are susceptible to challenge on any class certification requirement. In particular, Judge Koh’s denial of class certification as to back-of-the-package statements and omission-based claims demonstrates that predominance and damages model requirements remain fruitful areas for opposing class certification.