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Recent years have seen federal courts applying increased scrutiny to proposed “multistate” class actions that invoke a hodgepodge of state consumer-protection laws. The main reason: The variations among these state laws are not only extensive but often case-determinative, preventing class representatives from proving their claims on a classwide basis.

These decisions have, in turn, raised another question that has divided judges, commentators, and practitioners: Does the same high bar apply to the certification of nationwide classes that are purely vehicles for settlement—meaning that the court will never have to address the practical and legal difficulties of managing an actual classwide trial involving fifty (or more) state laws? In late January the Ninth Circuit weighed in to answer that it does, in a potentially seminal opinion that could, in the words of one dissenting judge, strike a “major blow” to multistate class action settlements.

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The last few years have seen a war waged on sugar. In addition to increased media attention, USDA and the Department of Health and Human Services have set recommended sugar consumption limits. In the latest Dietary Guidelines For Americans 2015-2020, one of the five “guidelines” is to limit calories from added sugars. FDA also has new recommendations on consumption of sugar, reflected in draft guidance issued January 2017.

In addition to USDA and FDA’s guidance, other groups, such as the American Heart Association, are supporting policies that help lower the intake of sugar-sweetened beverages by the American public. One such policy is to tax drinks and food sweetened with sugar. In November 2014, 75% of voters in Berkeley, California approved a tax of 1 cent per ounce on sugar-sweetened beverages, which is said to have generated more than $2.5 million for use in community nutrition and health efforts. Consumption of sugar-sweetened beverages is also reported to be down by 20%.

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Photo credit: Getty Images
Photo credit: Getty Images

Just a week before Congress began its first extended recess of 2017, the Chairman of the House Judiciary Committee took a step towards dramatically changing the landscape of class action litigation. On Thursday, February 9, Representative Bob Goodlatte (R-Va.) introduced a bill (H.R. 985) that would “amend the procedures used in Federal court class actions” by adding a number of new hurdles to class certification in federal court.

Chairman Goodlatte was a principal author of the Class Action Fairness Act of 2005, which considerably expanded federal diversity jurisdiction over interstate class actions. He was also behind another class action reform bill introduced in 2015 that failed to clear the Senate. His new bill, dubbed the Fairness in Class Action Litigation Act of 2017, is in much the same vein—and, if passed, would represent the most sweeping revision of federal class action law to date.

Highlights from the bill:
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Sugar Cane

In a long-awaited pronouncement, on May 25, 2016 the Food and Drug Administration issued its final guidance recommending that food and beverage manufacturers discontinue their use of the term “evaporated cane juice” (ECJ) to refer to sweeteners extracted from sugar cane. As the agency explained, “the use of ‘juice’ in the name of a product that is essentially sugar is confusingly similar to the more common use of the term ‘juice’”—which FDA regulations define as a liquid, puree, or concentrate derived from “one or more fruits or vegetables.”

When the FDA first issued this Guidance, many questioned whether it would reinvigorate a genre of litigation that had recently grown quiet: class actions alleging that the use of “ECJ” on product labels and packages misled consumers. Now, thanks to the Northern District of California’s July 27 decision in Reese v. Odwalla, Inc., the answer is becoming clearer: the ECJ class action is due for a comeback.
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In Spokeo, Inc. v. Robins, the U.S. Supreme Court has issued yet another narrow decision—apparently designed to avoid a 4-4 deadlock—in another hard-fought, potentially divisive case on its docket this term. On May 16, 2016, the Court held 6-2 that the Ninth Circuit had erred in not asking whether plaintiff Robins had alleged that he suffered a “concrete” harm—actual, rather than hypothetical, damage—as a result of statutory violations by defendant Spokeo.

In reaching this decision, the Court reaffirmed that plaintiffs bringing class actions in federal court must do more than allege a “mere technical violation” of a statute or regulation. In order to demonstrate that they have a real stake in the case—or “standing”—as required in federal court by Article III of the Constitution, they must also explain how the violation in question caused them real harm. At the same time, however, the majority was careful to point out that, “in some circumstances,” plaintiffs could base standing on procedural or technical violations if coupled with a “real risk of harm.” And the Court remanded the specific question of whether Robins himself had alleged that he suffered real harm as a result of Spokeo’s technical violations.

In sending the case back to the Ninth Circuit, then, the Court left the deeper issues in the case unresolved—inviting further litigation over what its holding means in specific cases.

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Companies from Procter & Gamble and Unilever to Mars and Starbucks have recently been hit with class actions slightly different from the false advertising claims we have gotten used to seeing. Now, instead of just alleging that companies are deceiving consumers through the language used in their advertising claims, consumer plaintiffs are expanding their allegations to target visual impressions created by product packaging.

These suits typically raise one—or both—of two theories. First, they often allege that defendants have violated federal and state regulations by including too much nonfunctional empty space—or “slack fill”—in their packages. Second, even if the defendants’ practices do not violate such regulations, their packages are still deceptive and unlawful because they run afoul of the “reasonable consumer” standard. Put differently, the defendants have intentionally manipulated their packaging, the theory goes, in order to dupe ordinary consumers into believing they are getting more product than they actually are—whether that means consistently underfilling lattes, dumping too much ice into iced coffees, or housing small amounts of product in oversized containers. These two distinct theories, often raised together, belong to a common genre of litigation that is relatively new but growing: the “slack fill-inspired” class action.

These cases have had a mixed track record so far, and the pace of new filings continues unabated. But recently, on March 17, 2016, the Ninth Circuit issued a decision that could give companies a potent tool in combatting these suits. That decision, Ebner v. Fresh, Inc., confirmed that the district court had properly dismissed with prejudice the plaintiff’s complaint, which alleged both that (1) Fresh had used deceptively large packaging that was misleading to “the reasonable consumer,” and (2) its packaging violated California’s slack fill rules.

The Ninth Circuit in Ebner rejected both of these commonly-used theories, making the Court’s reasoning instructive for companies facing similar slack fill-inspired class actions going forward. But it is worth noting that this decision is no get-out-of-litigation-free card: as we will explain, companies must still pay close attention to the specific slack fill rules applicable to their products in order to minimize their exposure to these opportunistic class actions.

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Green Tea

Federal judges often find themselves confronting a familiar conundrum in consumer class actions that challenge misleading practices. The typical plaintiff will file a suit after somehow discovering that one of the defendant’s advertisements, product labels, or other representations is “false” or “misleading.” The self-nominated “representative” asks the court to certify a class of all consumers “similarly situated”—that is, other consumers who bought the product or were exposed to the misleading message. The plaintiff then seeks not only compensation for the class, but also an injunction or ban prohibiting the defendant from making the challenged claims going forward.

Since an injunction is to stop the likelihood of irreparable future harm, the deceptively tricky question that judges face is whether the named plaintiff can seek an injunction prohibiting the misleading claims when she herself is no longer at risk of being deceived by something she now knows is false. In other words, if the named plaintiff won’t get fooled again, does she have standing to obtain injunctive relief on the class’s behalf? One California Federal court’s take: fool the plaintiff twice, shame on him.

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Door Slam

Handed down January 20, 2016, the Supreme Court’s decision in Campbell-Ewald Co. v. Gomez was a major blow to what class action practitioners call the pick-off strategy: using a Rule 68 offer of complete relief to “pick off” a putative class representative, thereby mooting the class action suit. In Campbell-Ewald the Court rejected this tactic by a 6-3 vote, holding that an unaccepted offer of judgment under Rule 68 does not moot a class action, even where the offer provides everything the named plaintiff has asked for—that is, where the plaintiff “won’t take ‘yes’ for an answer.”

In reaching this decision, though, the Court left open the important question of “whether the result would be different if a defendant deposits the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount.” This was a wrinkle that had plainly intrigued several of the justices.

Writing in dissent, for example, Chief Justice John Roberts pointedly noted that the “good news” was that “the majority’s analysis may have come out differently if [the defendant] had deposited the offered funds with the District Court.” Justice Samuel Alito likewise noted in dissent that the majority’s decision “does not prevent a defendant who actually pays complete relief—either directly to the plaintiff or to a trusted intermediary—from seeking dismissal on mootness grounds.” And at oral argument, even Justices Anthony Kennedy and Stephen Breyer—who ultimately voted with the majority—mused whether “the case is over” if the defendant not only makes an offer of complete relief but deposits a certified check in the full amount of the judgment with the court or in an independent account.

The ink has barely dried on the Campbell-Ewald opinion, but already at least one court, the Ninth Circuit, has answered the door left open by the decision. Its response: slamming it shut.

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Cocoa Beans

The continuing use of child and forced labor in parts of the world is, without question, a humanitarian tragedy. Less clear, though, is whether consumer class actions in the United States are a suitable tool for addressing this problem.

Should retailers and manufacturers be subject to suit under consumer protection statutes if they fail to disclose the difficult-to-quantify risk that their suppliers—or their suppliers’ suppliers—may use forced labor? Do these companies have a legal duty to disclose such risks directly on their products’ labels and packages? And if so, what is the limiting principle here—what types of information must a company disclose on the limited “real estate” of its products’ packaging, and which can it safely omit?

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