Brown v. Hain Celestial Group, Inc., No. C 11-03082, 2014 WL 6306581 (N.D. Cal. Nov. 14, 2014)
Hain has staved off class actions several times, but not here: the court certified a class of purchasers of Avalon Organics and Jason cosmetic products, based on allegations that they were labeled “organic” when they weren’t, in violation of California’s Organic Products Act (COPA), the UCL, the CLRA, and express warranty. Before 2011, the product lines contained less than 70% organic ingredients, with few exceptions. In 2011, Hain changed the formulations and labels of substantially all the products. Plaintiffs bought products from the two lines, in the belief that they were completely/mostly made from organic ingredients, and were willing to pay more for that feature.
Federal law governing foods requires that food labeled “organic” or “made with organic” must be at least 70% organic. This doesn’t apply to cosmetics, but plaintiffs alleged that the federal definition shaped consumer expectations for all organic products, including cosmetics. Moreover, COPA requires that cosmetic products advertised, marketed, sold, labeled, or represented as organic in California be made of at least 70% organic ingredients; plaintiffs alleged that COPA was a “legislative determination” that it is deceptive to represent as organic cosmetic products that have insufficient organic content.
Jason’s tagline “Pure, Natural & Organic” and Avalon Organics’s name and “pro-organic” pledge on their front labels allegedly misled consumers, given that they didn’t comply with the 70% rule, whether measured by weight or volume. For example, only the 9th out of 19 listed ingredients in Jason Face Wash was certified organic, which can’t possibly be 70%. (Hain argued that after the 2011 reformulation, Avalon Organics products contained more than 70% organic ingredients; plaintiffs disagreed. The answer turned on whether one could count water added to reconstitute dehydrated aloe powder as part of the percentage of organic ingredients. If yes, then the products all had more than 70% organic ingredients; if no, they didn’t.)
Hain challenged the class definitions as containing non-actionable products and as non-ascertainable because based on self-identification without receipts. The court found that the class definition for Jason products tracked the temporal use of the “Pure, Natural, & Organic” tagline, and properly excluded products that are USDA-certified as organic. The Avalon Organics class was similar; post-June 2011 purchasers were part of the class, but if water used to rehydtrate aloe powder counts towards the 70% threshold, they’d lose on the merits—something the court wasn’t going to resolve before certification.
As for ascertainability, the court rejected the Third Circuit rule requiring receipts or external identification of class members as gutting the Rule 23(b)(3) class action precisely where it’s most needed—where individual harm is small but aggregate impact significant. While reliance on affidavits can be problematic, the analysis must be case by case. Extreme variety in covered products might make memory and affidavits unreliable, but here all but 8 of 362 products were the same with regard to the organic claims and product formulations used as the basis for the claims; the 8 were Jason products that weren’t popular. Consumers could reasonably be expected to recall the word “organic,” which was even part of the Avalon Organics name. Given the likelihood that consumers could correctly recall their purchases, self-identification by affidavit was acceptable for a small-ticket claim, especially since the alternative would be lack of redress for false advertising. This conclusion was bolstered by the fact that “total damages” would be proved and fixed at trial, because they were restitutionary. Hain’s profit “will be measured without regard to any individual plaintiff; then, after the total figure is set, individual claimants will divide the award.”
Numerosity, commonality, typicality, and adequacy were satisfied. Because COPA, the UCL, and the CLRA all use an objective reasonable consumer standard, once the claim was proved material to that objective reasonable consumer, inferences of reliance and causation would arise. Hain argued that both Avalon Organics and Jason products bore “other label statements (such as ‘no parabens’ and ‘no animal testing’) that surely influenced some consumers’ purchase decisions.” But that didn’t destroy typicality, given the inference of reliance that would arise from material misrepresentations. One plaintiff bought from an online vendor and paid less than wholesale; this didn’t make him atypical, only affected his individual damages. Here, as distinct from in cases where certification was denied for want of typicality, uniform misrepresentations about one word on the products’ labels were at issue across the entire class:
Whatever the precise formulations and uses of Hain’s various products, and whatever additional reasons consumers had for buying them, the plaintiffs’ claims against them are simple and uniform: the products were presented as organic when, under COPA, they were not. The plaintiffs’ claims, in other words, have nothing to do with the unique characteristics of the various Hain products; they have to do only with what is allegedly shared by all those products. The court thus thinks that the plaintiffs’ core claims can be adequately proved, for example, by someone who has bought shampoo for someone who has bought hand cream.
For similar reasons, the court found predominance. While, accepting Hain’s characterizations, 6 of 184 Jason products had no organic representation, and 2 had 70% organic content, that represented only a small percentage of products that could be easily excluded and didn’t destroy predominance.
Nor would materiality, reliance, and causation raise individual issues under California law given the objective reasonable consumer standard. This standard “reflects the UCL’s focus on the defendant’s conduct, rather than the plaintiff’s damages, in service of the statute’s larger purpose of protecting the general public against unscrupulous business practices.” Moreover, even if other representations also motivated purchases, there can be more than one material reason for purchase. “This is how consumers shop: they buy products all the time for more than one reason.” In addition, plaintiffs adequately showed that, if they proved their claims on the merits, they could show that an “organic premium” existed and would’ve been paid by all consumers, regardless of their reasons for purchase. Thus all would have suffered injury regardless of purchase motive.
This brought the court to the issue of damages models. The plaintiffs offered the declaration of Dr. Stephen Hamilton, chair of the Department of Economic s at California Polytechnic State University, San Luis Obispo. He calculated Hain’s revenue/profit from sales of the products at issues, and also calculated a price premium for the “organic” attribute, not based on individualized information about class members. Hain challenged Hamilton’s models with testimony from an economist, arguing that his methods wrongly defined restitutions and flunked the Supreme Court’s requirements for damages models set forth in Comcast.
Under circuit precedent, plaintiffs needed to present a damages model that ties damages to their theory of liability. And, to comport with due process, the court must “preserve” the defendant’s right “to raise any individual defenses it might have at the damages phase.” The court concluded that plaintiffs adequately showed that damages could be calculated on a classwide basis in a way adequately tied to the plaintiffs’ liability theory. Hamilton used three different methods to separate out the “organic” premium from other product features. The fact that he hadn’t performed the calculations dictated by his models wasn’t dispositive; in part this was apparently because discovery was ongoing. “The point for Rule 23 purposes is to determine whether there is an acceptable class-wide approach, not to actually calculate under that approach before liability is established.” Hain could offer any defenses to individual claims in the damages phase.
The class action, naturally, was superior to no lawsuit, which was the only realistic alternative.