A judge has certified a class of consumers accusing Twinings North America of misbranding its teas as a ‘natural source of antioxidants’, but said they cannot seek monetary damages because they have not come up with a viable legal theory for how to calculate them.
This decision matters because it impacts the kind of fees plaintiffs’ attorneys are likely to make from such cases - which in turn affects how likely they are to bring them in the first place, say legal experts.
And it's just the latest in a string of consumer food cases where the judge has rejected damages classes based on the inability to calculate class wide damages.
Plaintiffs failed to present a damages model that satisfied the court
But first, some brief background on the case: Nancy Lanovaz - who filed a class action lawsuit in May 2012 - claims Twinings violated federal regulations (which California has incorporated into state law) by describing its flavonoid-packed green, black and white tea blends as a ‘Natural Source of Antioxidants’.
While flavonoids have antioxidant properties, the FDA does not permit nutrient content claims about them as there is no established recommended daily intake, says Lanovaz, who is seeking to represent everyone that has purchased the teas in California since May 2008.
In his April 24 order, California federal Judge Ronald Whyte said he would allow the class to pursue injunctive relief (to determine whether Twinings must change its labels), under the Federal Rule of Civil Procedure 23(b)(2), but that was it. No monetary damages (ie. no restitution, refunds, reimbursement etc).
In order to certify a class under 23(b)(3), which would permit damages, Lanovaz needed to accurately estimate how much more shoppers had paid for the teas with the contested claim than they would have paid for the same teas without the claim, but had failed to do so, he said.
“Plaintiffs do not present any damages model capable of estimating the price premium attributable to Twinings’ antioxidant labels.”
Friede: If this decision stands, the likelihood that plaintiffs’ lawyers will recover massive fees is substantially reduced
So why are food law attorneys paying so much attention to his decision?
Arnold Friede, senior food and drug law attorney with Sandler, Travis & Rosenberg, P.A. in Miami told FoodNavigator-USA: “The opinion is extremely important because of the kind of evidence on damages a plaintiff needs in order to get past the class certification stage.
“The attorneys’ fee awards in successful damages class actions typically are much higher than they are in successful injunction class actions. So, if Judge Whyte’s decision stands, and if it is applied by courts in other cases of this kind, the likelihood that plaintiffs’ lawyers will recover massive fees is substantially reduced.
“Thus, the attractiveness to the plaintiffs’ bar of bringing cases of this kind would be seriously diminished.”
David Biderman: This should deter filings
David Biderman, a partner in Perkins Coie’s Consumer Class Action Defense practice, added: “The lawyers claimed [that consumers in the class paid] a price premium because of supposedly false labeling, but they could not tell the court how that could be calculated on a class wide basis. They basically said: ‘The class was injured, but we are unable to tell the court how.’ "
In an injunction-only class, the class members get zero damages, ie. “no monetary benefit”, he said. And given that the court must take into account the benefit conferred to the class when determining attorneys’ fees, the lawyers are likely to earn much less than they were banking on, he said.
“This is one of a number of consumer food cases that have rejected damages classes based on the inability to calculate class wide damages—based largely on the Supreme Court’s decision in Comcast [Comcast Corp. v. Behrend, which held that there can be no class where a plaintiff does not show there is a way to calculate damages on a class-wide basis].
“Defendants have had a string of victories lately in cases such as the POM class action before Judge Praegerson (where a class was decertified), Caldera v JM Smucker, and the Ben & Jerry’s case before Judge Hamilton (click HERE ). These decisions will make it harder for certification of a damages class and should deter filings.”
Polovoy: Rulings like Lanovaz certainly make particular types of food labeling cases more risky
Kristen Polovoy of Montgomery, McCracken, Walker & Rhoads LLP, also agreed that Judge Whyte’s order “raises the specter of reduced fees for plaintiffs’ counsel in injunctive relief class actions”.
However, “it does not altogether close the door to monetary counsel fee awards,” she claimed.
“Courts have broad discretion to determine what constitutes a reasonable fee... So, if plaintiffs’ counsel can convince a court that injunctive relief has a monetary value - and that the basis for calculating this is reliable - then fee awards could still be sizeable.
“Nevertheless, because plaintiffs’ lawyers usually shine the spotlight on the dollar value of the settlement brought before a court for approval, rulings like Lanovaz certainly make particular types of food labeling cases more risky and less attractive to the plaintiffs’ bar.”
How should experts calculate damages?
Lanovaz’s expert, Dr. Oral Capps, proposed three models for calculating damages in the Twinings case:
1 - Refunding the entire purchase price of the tea - The court rejected this immediately.
2 - Comparing the price of the product under a ‘benefit of the bargain’ rule or price-premium model - (where you compare the price of Twinings tea to that of ‘comparable’ products without the disputed claims). But the court also rejected this because Dr Capps had “no way of linking the price difference, if any, to the antioxidant label or controlling for other reasons why comparable’ products may have different prices”.
3 - Applying an econometric or regression analysis - (which would calculate the percentage of sales attributed specifically to the disputed claims made by Twinings). The court said this could be legally relevant, but it was not applicable in this particular case as the antioxidant claim had been on pack since 2003 and throughout the entire class period (which started in 2008).
The case is Lanovaz et al v Twinings North America Inc 5:12-cv-02646 in the Northern District of California.