In re KIND LLC “Healthy and All Natural” Litig., 2021 WL
1132147, Nos. 15md2645, 15mc2645 (S.D.N.Y. Mar. 24, 2021)
Plaintiffs sought class certification of their false
advertising claims based on the claims that KIND falsely advertised “All
Natural / Non-GMO,” “Non-GMO,” and “No Genetically Engineered Ingredients”;
KIND sought to exclude expert reports. Both were partially successful.
Plaintiffs allege that KIND products contain “a
conglomeration of chemically-synthesized and highly-processed ingredients,” that
“[t]esting … detected the presence of GMOs in at least some of the products,”
and that “approximately 90% of canola, 89% of corn, and 94% of soybeans grown
in the United States are genetically modified.” They brought NY, California,
and Florida claims.
Numerosity, adequacy, commonality, and typicality were
satisfied. “Even if a named Plaintiff did not see all of the label variants,
the typicality requirement would still be met. … The differences are slight and
all can be litigated in this action with the current class representatives.”
The class was also ascertainable. “While KIND labels varied,
all the labeling over the putative class period is allegedly deceptive. As
such, the possibility that a potential class member could join the litigation
without ever seeing the allegedly deceptive advertising cannot occur here.” Nor
was the lack of a receipt requirement fatal. “Imposing a receipt requirement
would severely constrict consumer class actions where most consumers do not
keep receipts because the purchase price is low and part of a minerun retail
transaction.”
The court thought that the three states’ laws were similar
enough on the key aspects to analyze predominance together, focusing on (1) the
deceptive act, (2) materiality, and (3) injury.
The court agreed that common questions about
deceptiveness/materiality predominated, given the extreme similarity in meaning
of the three label variants. None of the labels displayed “All Natural” on its
own, but always with “Non-GMO.” They could be proved true or false on a
classwide, as could materiality (which is an objective inquiry about reasonable
consumers under the governing laws). Nor was the fact that plaintiffs offered
various definitions of “All Natural” fatal; none of the definitions contradicted
each other. Finding commonality also served “important policy considerations”:
This consumer class action spins a
familiar tale. A large company produces similar products with different labels.
Should employing slightly different labels allow a company to escape liability?
… The labels on these products vary slightly but all are sufficiently similar
to draw potential customers to the KIND brand. Moreover, as every company does,
KIND refined its advertising strategy with the passage of time and market
research, resulting in gradual changes to its labeling. … If this Court
declined to certify the proposed classes, consumer-product companies would have
a roadmap to avoid class actions. And given the relative low cost of most
consumer products, those companies could avoid any liability for deceptive
labeling.
KIND also argued that the number of ingredients challenged
as non-natural defeated predominance. But, if a product contains (what a jury finds
to be) a single non-natural or GMO ingredient, the label is incorrect and plaintiffs
may be entitled to damages.
Plaintiffs were also prepared to have their expert quantify
the alleged price premium. A damages model for a false advertising case must
“isolate the premium due only to the allegedly misleading marketing statement.”
Plaintiffs’ expert proposed to use a hedonic regression and a conjoint analysis;
this could be workable despite the label variations. KIND’s argument to the
contrary assumed that different variations of the label would lead to different
premiums. First, a liability class could be certified even if damages weren’t
amenable to classwide proof. Second, all purchasers were exposed to allegedly
misleading advertising and therefore may have paid a premium. Third, the
differences among the labels were slight, making it unlikely that any
differences were significant.
The court also rejected KIND’s Daubert motion to
exclude the damages expert; he did all that was required at this stage: opine
what could be done to assess damages and that the data to do so were available.
A rebuttal expert from plaintiffs was, however, excluded as untimely.
Finally, superiority favored certification because a class
action was the best way to resolve this kind of dispute about a low-cost
problem, and it was already consolidated as MDL.
Plaintiffs were, however, not allowed to seek injunctive
relief under Rule 23(b)(2). Berni v. Barilla S.p.A., 964 F.3d 141 (2d Cir.
2020), held that past purchasers couldn’t maintain an injunctive class. They
weren’t definitely going to buy again, and they knew they’d been deceived
before, so they wouldn’t be fooled again. In the Second Circuit, inability to
rely on a continuing representation is not sufficient injury.
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Rebecca Tushnet 