In a recent decision, Judge Dean Pregerson of the U.S. District Court for the Central District of California decertified the class in an action against POM Wonderful over health claims about its pomegranate juice. You know the juice, it’s the one in the cooler section of the grocery store in the glass jar that looks like a purple snowman. Judge Pregerson had previously certified the class, but after discovery, particularly after plaintiffs’ expert’s testimony on damages, POM Wonderful had moved to decertify and, as the headline tells you, the court agreed. 

The decision to decertify was rooted in a recent U.S. Supreme Court case, Comcast Corp. v. Behrend, which dealt with the relationship between class certification and claimed damages. The court followed the Ninth Circuit’s interpretation of Comcast, which held that, in determining whether class certification was appropriate, “Plaintiffs must be able to show that their damages stemmed from the defendant’s actions that created the legal liability.” When applied to something that costs only a few bucks, this proposition is not easy to demonstrate.


Plaintiffs here offered two different theories, neither of which came close to persuading Judge Pregerson. First, the “Full Refund Model”: as plaintiffs’ expert testified: “[I]f the health benefits were what caused the purchase, at least predominantly, then a [full] refund would be appropriate”.   As the Church Lady might say, isn’t that special? And under the Full Refund Model, damages would be $450 million, an amount that would support some really nice legal fees for class counsel. POM argued, and that court agreed, that that model took no account of the benefits class plaintiffs would have received, such as hydration, calories and vitamins, even if the allegations about the untrue health benefits were proven. Heck, someone might simply want the bottle to use to make a snowman for a school project. There is no damages model that gets a plaintiff class those benefits for free.


More after the jump . . .

The second model fared no better. It was called the “Price Premium Model” and it compared the price of POM’s product to those of other refrigerated juices. The court interpreted the model as the equivalent of a “fraud on the market” claim under the securities laws. Such a claim requires an “efficient” market, which the market for refrigerated juices is unlikely to be. Plaintiffs tried to get around this by circular logic:


Put differently, Plaintiffs argue that because a fraud on the market gives rise to a presumption of reliance, the reverse is true, and a presumption of reliance necessarily means there has been a fraud on the market.

The court exploded this theory quite easily. The market for these juices is not efficient.


Absent such traceable market-wide influence, and where, as here, consumers buy a product for myriad reasons, damages resulting from the alleged misrepresentations will not possibly be uniform or amenable to class proof.

In other words, when you go to the grocery store, the price of a product doesn’t change because of a positive article in a health magazine, or drop the next day if the Wall Street Journal debunks the positive article. That’s not how groceries are priced. But absent proof to the contrary, a “fraud on the market” theory simply is inapplicable.


And of course this second theory had another huge flaw: lack of causation. As the court said, “Rather than draw any link between Pom’s actions and the price difference between the four-juice average benchmark price and average Pom prices, the Price Premium model simply calculates what the price difference was.”


The final nail in the class action coffin for this case was the same one that caused the Ben & Jerry’s class to fail: ascertainability. How does one figure out who is a class member when there might be 15 million people who bought the product, none of them are likely to have kept records of their purchases and there is no way to separate those purchasers who were induced by the alleged misrepresentations from those who bought the product for any other reason? The court said, much like the prior case, that you simply cannot. 


Is this another nail in the California federal court class action coffin?  At the very least, it shows that class claims will continue to be scrutinized in a practical way.  It’s really up to the plaintiffs’ bar to read these cases and start to realize that every little complainant might not be worth trying to squeeze into these class standards.