All Alerts & Newsletters

Brazil v. Dole: Ninth Circuit Reverses Summary Judgment on Consumer Deception Liability But Upholds Class Decertification

Oct.04.2016

Is it misleading for an advertiser to claim that its product is “All Natural” when it contains only ingredients that can be found in nature, but some of these otherwise natural ingredients are made through an artificial process? In one of its most closely watched cases, Brazil v. Dole Packaged Foods, the Court of Appeals for the Ninth Circuit handed down a decision last Friday holding that the answer to this question is for a jury to decide.

While the eight-page opinion will have little direct influence as precedent, because the court declined to designate the decision for publication, it sends important signals regarding consumer class action law in the Ninth Circuit, which is the busiest in the nation for such cases.

The case involved a plaintiff’s allegations that Dole had deceived consumers by advertising that its packaged fruit products were “All Natural Fruit” despite containing “man-made” citric and ascorbic acid preservatives—ingredients that are otherwise found commonly in nature. In the District Court, Dole had won summary judgment on liability, successfully arguing that the plaintiff’s own, idiosyncratic beliefs about what “natural” means were insufficient to create a triable issue of fact.

The three-judge panel unanimously reversed the District Court’s grant of summary judgment, reasoning that the plaintiff’s evidence, which included recent FDA warning letters to other food sellers, “could allow a trier of fact to conclude that Dole’s description of its products as ‘All Natural Fruit’ is misleading to a reasonable consumer.” In a circuit where the question of “whether a business practice is deceptive is typically, but not always, a question of fact for the jury to decide,” the District Court’s decision was one of the relatively few to find that the plaintiffs had not done enough to proceed to trial. By reversing, the Ninth Circuit took this useful District Court decision out of the arsenal that companies defending against consumer class actions could use.

However, in a silver-lining for the defense, the Court reaffirmed the decertification of the damages class, holding that the plaintiff’s “price premium” model could not support a class-wide damages calculation consistent with the Supreme Court’s guidance in Comcast Corp. v. Behrend.

Summary Judgment Reversed: FDA Warning Letters Enough to Create Issue of Fact

In the decision below, District Court Judge Lucy Koh (who has since been nominated to the Ninth Circuit) found that plaintiff Brazil had not come forward with enough evidence “to create a genuine dispute of material fact.” Brazil had claimed that many of Dole’s products were misleadingly labeled as “All Natural Fruit” because they allegedly contained “man-made” citric acid and ascorbic acid used as chemical preservatives. But he had little evidence to show that “reasonable consumers” would interpret “natural” to exclude the synthetic versions of these naturally occurring ingredients.

Other than offering testimony regarding his own, personal interpretation of Dole’s “natural” claim, Brazil cited the FDA’s informal definition of “natural” and various FDA warning letters sent to other companies about their misleading use of the term “natural.” However, he cited no evidence, such as consumer surveys or FDA pronouncements regarding Dole specifically, to show that citric acid and ascorbic acid “would not normally be expected in” Dole’s fruit. In Judge Koh’s view, Brazil could not prove deception on his class claims based on only “one isolated example of deception”—that is, his own.

The Ninth Circuit disagreed, finding that Brazil’s evidence was enough to “allow a trier of fact to find that the synthetic citric and ascorbic acids in Dole’s products were not ‘natural.’” The court focused especially on the warning letters, in which FDA accused other food sellers of using “natural” deceptively “because the products in question included synthetic citric acid, among other substances.” While courts in the Ninth Circuit do not recognize FDA warning letters as conclusive agency determinations, they have often grappled with just how much evidentiary weight to give such letters—especially when, as in Brazil, these letters target similar practices used by other companies in the defendant’s industry. After Brazil, expect consumer plaintiffs to continue relying on these warning letters as evidence—not only against their original recipients, but against others in the same industries, as well.

Decertification Affirmed: Plaintiff’s Expert Failed to Deliver What Was Promised in Certification Motion

In a silver lining for industry defendants, the Ninth Circuit upheld the District Court’s decision to decertify Brazil’s damages class. Judge Koh had originally certified the class before the close of fact and expert discovery, but later reversed her earlier decision after all the evidence was in. She found that, while acceptable in theory, the actual methodology used by Brazil’s damages expert could not, in practice, isolate the specific impact—or “premium”—on Dole’s price attributable to the “All Natural Fruit” label, as required by the Supreme Court’s decision in Comcast v. Behrend. As the District Court explained, “The Court agrees with Dole that Brazil has failed to show how [his] regression model controls for other variables affecting price.” The Ninth Circuit affirmed: “Brazil did not explain how this premium could be calculated with proof common the class,” so common questions no longer predominated.

Conclusion and Practice Pointers

Because the Ninth Circuit declined to publish its opinion in Brazil v. Dole Packaged Foods, its value as precedent is limited. What’s more, the decision mainly reinforces the status quo in the Ninth Circuit’s consumer class action law: (1) a defendant’s liability for consumer deception is typically a question for the trier of fact and so can rarely be decided on a motion for summary judgment, let alone a motion to dismiss; and (2) under Comcast v. Behrend, plaintiffs must come forward with sophisticated expert methodologies that convincingly measure the impact of the defendant’s false advertising on its products’ prices amid a sea of confounding variables.

Even so, the Brazil decision suggests two important takeaways for consumer products companies. First, companies should keep a close eye on the warnings, investigations, and other messages from the FDA and other regulators to competitors in their industry. Today’s warning letter, even if resolved in the recipient’s favor, may generate tomorrow’s wave of class action litigation, and Brazil indicates that the Ninth Circuit takes such letters seriously as evidence of potential consumer deception.

Second, Brazil underscores that the first certification motion is not necessarily the last opportunity that defendants have to effectively contest class treatment. Although the pressure for a defendant to settle inevitably increases once a damages class is certified, so too does the burden on the plaintiff to actually prove his claims using common proof. More specifically, plaintiffs face the especially complex task of making sure their damages model actually shows a measurable increase in a product’s price while controlling for the many other factors that influence pricing. Methodologies that sound feasible in theory at the initial certification stage may well prove unworkable once the facts are in—exactly the case in Brazil, as well as several other recent decisions granting decertification in the Ninth Circuit. Even after a class is certified, then, defendants can still regain a litigation advantage by continuing to develop the record with an eye towards showing that the plaintiffs’ damage model has fallen short of their initial promises.

Email Twitter LinkedIn Facebook Google+

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Christopher A. Cole
Partner – Washington, D.C.
Phone: +1 202.624.2701
Email: ccole@crowell.com
Michelle Gillette
Partner – San Francisco
Phone: +1 415.365.7445
Email: mgillette@crowell.com
Josh Thomas Foust
Counsel – San Francisco
Phone: +1 415.986.2800
Email: jfoust@crowell.com