Last week, Magistrate Judge Beeler in the Northern District of California certified a class of purchasers of cosmetics marketed as “organic” by The Hain Celestial Group, Inc.
In so doing, Judge Beeler weighed in on several hot spot issues for class certification, including ascertainability, consumer reliance and class-wide damages models. Her determinations seem generally in keeping with the plaintiff-happy class action climate in California, as courts recently seem reticent to deny class certification.
On June 22, 2011, plaintiffs Rosminah Brown and Eric Lohela filed a lawsuit alleging that several different Avalon Organics and Jason cosmetic products (manufactured and marketed by Hain) were falsely advertised, marketed, and sold as organic. The complaint relies heavily on the California Organic Products Act of 2003, which requires cosmetics to be made of at least 70% organic ingredients in order to be marketed as “Organic.”
Plaintiffs claimed that substantially less than 70 percent of the ingredients of several cosmetic products purchased in 2009 from both lines were certified organic, and filed suit.
Judge Beeler kept on the seeming trend of California courts in refusing to apply Carrera, and finding that self-identification of class members was enough to ascertain a class.
Citing the recent decision in Lilly v. Jamba Juice, Judge Beeler expressed concerns that requiring purchasers of small-ticket items to retain receipts effectively guts the social benefits of class actions, namely, providing a vehicle for legal redress that would be prohibitively expensive for individual purchasers of small items.
Finding that the say-so of class members was enough, the court held that where individual claims are small, a simple affidavit can be sufficient to establish membership. The court also noted the additional check of a fixed damages amount that would not change based on the number of claimants, which Judge Beeler claimed was preferable to “awaiting a world of individual claimants who drive the defendant’s bill higher with every new ‘Me, too’ that rings in.”
Although we have expressed concerns that capped damages amounts coupled with largely unchecked entry into a class can result in diluted class action awards, Judge Beeler did not address this potential problem.
Attempting to avoid certification, Hain argued that plaintiffs failed to demonstrate materiality, reliance and causation for the “organic” representations because consumers may have purchased the cosmetics for reasons other than “organic” statements, i.e., that the products contain no parabens or are not tested on animals.
Rejecting this argument, Judge Beeler held that just because consumers may consider other representations on a product does not mean that they also did not take organic into account when purchasing the product. Notably, the court stated that there can be multiple material traits that, when combined, cause consumers to purchase a product.
This conclusion could be problematic, as it weakens defendants’ ability to argue that other material factors were the “main” reason for purchasing a product (thereby negating reliance). Consumer surveys identifying more important reasons for purchase could be rendered less-than-helpful if courts find that all representations, taken in conjunction, contribute to a consumer’s purchasing decision.
Judge Beeler also found that plaintiffs had sufficiently proposed a class-wide damages model, thereby satisfying Comcast demands.
The court rejected Hain’s challenge that the expert had not actually performed any of the damages calculations proposed in his model, noting that Rule 23 only required plaintiffs to “determine whether there is an acceptable class-wide approach, not actually calculate under that approach before liability is established.”
Perhaps most troubling, at least to the defense bar, is Judge Beeler’s summary dismissal of Hain’s concern that the damages model failed to include any subtraction for consumers who were actually satisfied with the products. Aside from distinguishing case law cited by Hain, which she said was an example of faulty sampling, the court simply concluded that there was no sampling in plaintiffs’ damages models and, therefore, the models were acceptable.
There was no discussion of why a damages model that does not subtract satisfied customers is sufficient for class certification―a head-scratcher to say the least.