Rebecca Tushnet

Gunaratna v. Dennis Gross Cosmetology LLC, No. CV
20-2311-MWF (GJSx), 2023 WL 5505052 (C.D. Cal. Apr. 4, 2023)

Previously, the court
denied a motion to dismiss plaintiffs’ claim that “C + Collagen” was
misleading because defendant’s product had no collagen. Now, a class is
certified.

Defendant argued that individual issues predominated because
the court would have to probe each person’s understanding of the phrase “C +
Collagen.” The Ninth Circuit previously held that it is an error of law and
“per se” abuse of discretion to deny class certification for claims under the
CLRA and UCL (and implicitly the FAL), based on a lack of “evidence that
consumers uniformly interpret the statement in a particular manner.” Instead, “CLRA
and UCL claims are ideal for class certification because they will not require
the court to investigate class members’ individual interaction with the
product.”

Also, plaintiffs did have common proof: a consumer survey.
Defendant argued that the results weren’t uniform, but “the ambiguity (if any)
here can only be about what the ‘+’ in ‘C + Collagen’ conveys, because the
meaning of ‘collagen’ itself is not up for debate. Unlike the word ‘natural,’
collagen does have a single, controlling definition.” There’s just one
dictionary definition!

Plaintiffs’ survey showed that, of those participants that
provided an opinion, 95.2% believed that the products contained collagen after
viewing images of the them. Furthermore, 51.7% of participants indicated they
would be at least somewhat less satisfied if they learned that the products
contained amino acids as opposed to collagen. And 49.2% indicated they would be
at least somewhat less likely to purchase them again after learning the truth.

Defendant noted that only about half the sample indicated
that the presence of collagen was material. That half considered it material “does
not suggest to the Court a lack of materiality”:

Though the case law does not
establish any uniform percentage that allows a court to conclude that the
evidence shows that deception and materiality are susceptible to common proof
(or sufficient to create genuine issues of fact), it would seem to the Court,
that any percentage that a qualified expert determines is statistically
significant should be sufficient for both certification and summary judgment.

Other courts have allowed lower percentages to show common
proof on a motion for class certification, “especially where there is no
question that all potential class members were exposed to the message because
it was on all relevant products sold to the class.” (Citing cases presuming
materiality where 37.1%, 24%, and 25% gave answers indicating materiality.)

Defendant’s own survey also provided some evidence of
materiality. The survey asked participants, previous purchasers of C + Collagen,
to select the most important characteristic that made them buy the product the
first time. Out of the 19 possible “product characteristics,” the
characteristic selected by the largest proportion of respondents (46.7%) was “C
+ Collagen.”

Deception and materiality were thus susceptible to
class-wide proof and plaintiffs didn’t need not show individual reliance
because reliance is presumed upon a showing of class-wide exposure and
materiality.

The class-wide damages model was also tied to their theory
of liability. In calculating restitution damages under the California statutes,
the law “requires only that some reasonable basis of computation of damages be
used, and the damages may be computed even if the result reached is an
approximation.” The proposed conjoint model could do that. The proposed survey
would test the “collagen” claim as compared to the importance attached to
labels describing the desired effects of collagen, such as “anti-wrinkle;”
“Leaves skin plump with moisture;” “anti-aging;” and “You want: Supple skin,
intense hydration.” This would directly test how consumers value the effects of
collagen as compared to the collagen claim itself. And anyway defendant’s
criticisms went to weight, not admissibility. The damages model didn’t need to
isolate and test various possible interpretations of a challenged term; it
could assume that the plaintiff’s theory of liability (falsity/misleadingness)
was true at the class certification stage. Courts might reject a damages model
when plaintiffs haven’t yet shown that the theory of liability was itself
capable of class-wide proof, but that wasn’t the case here.

Defendant also made the argument I’ve seen emerging for a
while: that, under TransUnion, Article III precluded a class
action.  But “TransUnion does not
require that Plaintiffs prove standing as to all members of the class in order
to certify the class. Indeed, the Ninth Circuit recently rejected the argument
that a class may not be certified if it ‘potentially includes more than a de
minimis number of uninjured class members.’” Instead, district courts should
consider if the class is defined in a manner that will lead to the predominance
of individualized issues regarding standing in light of TransUnion.

But a purchaser class was  “defined in a way that ensures that all
members will have suffered a concrete economic injury in the form of a price
premium, if Plaintiffs succeed on the merits.” Defendant argued that the class
would include consumers who didn’t rely on the claim, but they paid a price
premium anyway (if plaintiffs show that), and reliance/causation is presumed
where there’s class-wide exposure to a prominent message. (I think this is the
right result, but it shows the, uh, underdetermined parts of TransUnion,
also on display here:
(when) can legislatures decide to presume reliance?)

It doesn’t matter that people willingly paid the price, even
if they didn’t care about collagen:

If anticompetitive behavior
distorted the market – all consumers overpaid. Defendant does not get to price
discriminate between those who understood the label and those who did not. The
market price is set by supply and demand, and it is always the case that there
are likely consumers who would pay more than the fair market price, but that
does not mean those consumers should have to pay supra-competitive prices. A
price-fixing cartel cannot claim that their inflated prices are not illegal as
to the consumers who are satisfied with the value of the overpriced products.
It is the distortion of the fair market value that results in injury to all
purchasers of the relevant products.

Although it was “possible (if not likely)” that the court
would grant summary judgment to plaintiffs on literal falsity, it wasn’t ready
to do so without further briefing:

Falsity in this action is not about
what consumers believe “collagen” means because the only admissible scientific
evidence establishes that there is only one scientifically-accepted definition
of “collagen.” Where consumers believe “collagen” comes from is simply
irrelevant. Consumers often do not know the sources from which the ingredients
in their products are derived. And the Court is troubled, if not exasperated,
by the fact that a prominent skincare company has repeatedly taken the position
that if reasonable consumers believe, based on the labeling of the Products,
that the Products contain a specific ingredient, the falsity of the labeling
does not turn on whether the Products actually contain that ingredient, but on
whether consumers understand where that ingredient comes from. That position is
untenable.

Instead, falsity turned on how reasonable consumers would
interpret the “+”: containing collagen, or supporting it with vitamin C? And
plaintiffs’ survey “more than suffices” to create a fact issue. Further, there
was currently no admissible evidence showing that a statistically significant
portion of consumers interpret the plus sign to mean “boost,” given that the
court excluded that part of defendant’s survey.

So why not grant summary judgment? Plaintiffs’ survey didn’t
give participants the opportunity, either through a closed- or open-ended
question, to answer that C + Collagen means that vitamin C boosts collagen.
Plus, merits discovery hadn’t closed yet, and defendant could take another bite
at a survey on the “boost” theory. “If, at the close of discovery, no such
evidence is in the record, Plaintiffs are free to move for summary adjudication
on the issue of falsity.”

The court also rejected defendant’s argument that plaintiffs
had to show that consumers wanted “animal” collagen:

Since animals are the only source
of collagen, anyone who desires “collagen” inevitably desires “animal”
collagen. Gunaratna’s testimony that she does not want to place raw animal parts
on her face, does not prove that she did not want collagen in her skin cream,
any more than a deponent’s testimony that they do not want to consume fish
bladder would prove a lack of desire for Guinness beer, as Plaintiffs cleverly
analogize.

Defendant was free to attack the reasonableness of plaintiffs’
reliance on the “C + Collagen” Claim, given their stated goals and desires for
better skin; given that they did not fully understand where collagen comes
from; given the “collagen amino acids” qualifier in other parts of the product
packing; and given the vegan symbol on the back of the outer packaging.

The court also pointed out that, as to materiality, “the
internal emails and documents are replete with communications indicating that
the ‘collagen’ label was highly important to consumers, and in turn to the
retailers and Defendant. For example, when the company used other names,
Sephora thought they weren’t “strong” or “hard-hitting” enough. Plus,
“[r]epresentations about specific ingredients’ presence or absence in a product
are almost self-evidently material in that an advertiser is intending to make a
consequential effect on a consumer.”

Defendant also argued that there could be no proof of
damages because it set the price of the products before choosing a name. But
the majority of sales are through retailers, and it’s those prices that are the
most probative on price. Anyway, were that true, there would have been a lot
fewer sales, making the price premium measure inherently conservative. (Both parties
agreed that the market was competitive.) “[T]he fact that a defendant did not
adjust its price based on the misrepresentation does not disprove the existence
of a price premium.”

from Blogger http://tushnet.blogspot.com/2023/09/court-certifies-ccollagen-class-even-if.html

Hall v. Marriott Int’l, Inc., No. 19cv1715-JO-AHG, 2023 WL
4417265, — F.R.D. – (S.D. Cal. Mar. 30, 2023)

Previous
opinion in this case about allegedly deceptive/inadequately disclosed mandatory
“resort fees.” The court ends up certifying an issues California class, but
rejecting the damages methodology for calculating class damages.

Marriott’s booking process shows prices starting “from” a
particular rate:

“from 420 USD/night” ad

Clicking on “view rates” gets further information:

still says 420 at bottom but now there’s a message at top in blue

If a resort fee applied, a notice would appear at the top of
the screen in blue, bolded text that is outlined by a blue box, stating “Please
note,” “USD 35 daily destination amenity fee will be added to the room rate.”
The second page in the booking process also reflects the available rooms (e.g.,
queen or king room) and corresponding rates, without the resort fee included.

Once a consumer selects a particular room, they arrive at
the third page in the booking flow:

at last the fees are at the bottom in the total

The subtotal shows a charge for “USD/night” and a separate
charge for “USD taxes and fees,” which includes the resort fee. A more detailed
breakdown of the charges showing the amount of the resort fee is available if
the consumer clicks the “Summary of Charges” dropdown box:

at checkout the total is correct

Plaintiffs alleged both that Marriott inadequately disclosed
resort fees on its own website and on the sites of third party online travel
agencies. They brought the usual
California claims.

The court dismissed all equitable claims because plaintiffs
lacked standing to seek injunctive relief, and the court lacked jurisdiction
over the equitable claims because damages hadn’t been shown to be inadequate.

CLRA: Plaintiffs had two theories of deception: (1) bait and
switch based on the initial ad for the room rate that was unattainable without
paying the resort fee, and (2) inadequate disclosure of the resort fee—the blue
box was in smaller print, a different color font, and at the top instead of
next to the price information at the bottom. The “taxes and fees” disclosure
was allegedly confusing because it does not explicitly specify “resort fees”
and causes consumers to believe that the fees are entirely government related.

Theory 1: On the one hand, “explicit and conspicuous
qualifying disclosures can render allegedly deceptive statements non-deceptive
as a matter of law,” but, “[e]ven when there is no question that the initial
deception was cured by a later disclosure, a company can still be liable for
deceptive practices that cause consumers to be lured in and ‘swept up’ in the
buying process.” The latter situation occurs when deception causes “consumers
to invest significant amounts of time and become so swept up in the buying
process that later qualifying disclosures cannot cure the original deception,”
and is exemplified by a brick and mortar store advertising 40% off in the
window, which led consumers to enter, shop, decide to buy, and stand in
line.  By the time qualifying disclosures
were made, the consumers were “invested in the decision to buy and swept up in
the momentum of events.” The plaintiffs had spent 40 minutes or more shopping,
waited in lines of 15 or more people, and felt pressured to purchase once they
reached the front of the line due to embarrassment.

By contrast, 
“Marriott’s disclosures regarding the total price of the hotel stays are
conspicuously disclosed by the end of the internet booking process.” The
initial “from” (which I think is deceptive, since it’s not attainable) was
followed by disclosure of additional fees multiple times. The plaintiffs didn’t
invest significant time in the purchase process—at most 10 minutes total, and
the higher price appeared on the second page of the booking flow. The
plaintiffs were aware that the price increased throughout the booking process.

However, there were disputed issues of fact regarding the
deceptiveness of Marriott’s booking process and the adequacy of its disclosures.
“Unlike its disclosure of the total price, Marriott does not repeatedly and
conspicuously disclose resort fees throughout the booking process.” There were
genuine and material factual disputes about whether consumers would notice and
understand the disclosures due to their font size, color, and placement within
the context of the entire transaction. “Indeed, Plaintiffs point to survey
evidence, that approximately 50% of consumers do not notice these disclosures
and do not know they paid resort fees.”

Negligent misrepresentation failed because nondisclosure is
not the same thing as making a false statement.

Marriott could not be held liable for allegedly deceptive
statements on third-party sites. There was no evidence that Marriott controlled
how they presented resort fee information. Under the CLRA, vicarious liability requires
evidence of “personal participation in the unlawful practices and unbridled
control” over those deceptive practices.

Marriott’s class action waiver defense failed as to the
named plaintiffs, but could still be raised as to unnamed class members.
Marriott bears the burden of proof on this issue, and pointed to no evidence in
the record that the named plaintiffs had notice of Marriott’s terms and
conditions and assented to them; even the terms and conditions they purportedly
agreed to were absent from the record. However, Marriott sufficiently preserved
and maintained its right to assert a class action waiver defense against the
proposed class members.

Marriott also failed to show a lack of reliance. A plaintiff
can show reliance by showing that the misrepresentation or omission at issue “played
a substantial part … in influencing his decision,” or by showing that the
misrepresentation or omission was material. A plaintiff need not show that
“[the challenged] misrepresentations were the sole or even the decisive cause
of the injury-producing conduct.” Reliance for omissions is satisfied if the
plaintiff demonstrates that “had the omitted information been disclosed [the
plaintiff] would have been aware of it and behaved differently.” There was a
triable issue, despite testimony from the lead plaintiffs that they chose
Marriott on factors unrelated to resort fees, such as total price. Although
this testimony may demonstrate that resort fees were not “the sole or even the
decisive cause” of plaintiffs’ decisions to book their hotel rooms, it does not
establish that resort fees were not a “substantial part” in their decision
making.

The court found that it couldn’t certify a nationwide class,
but Rule 23(a) was satisfied with respect to a California class. The Rule 23(b)
problem was predominance. First, the proposed class definition encompassed a
“potentially significant number” of unharmed consumers who saw the disclosure,
which might be about 50% on plaintiffs’ own survey. Second, the proposed
damages model likewise didn’t distinguish between injured and uninjured class
members. The expert calculated the total amount of resort fees paid during the
class period, but not all of that would reflect injury.

Still, the court certified a liability-only class. “Most
critically, all of the essential liability elements of Plaintiffs’ CLRA and
common law fraud claims can be resolved on a classwide basis using Plaintiffs’
common evidence.” This would also advance judicial economy, given the small size
of individual recovery and large numbers of individual class members.

from Blogger http://tushnet.blogspot.com/2023/08/hall-v.html