On December 9, 2020, the Ninth Circuit issued an unpublished opinion affirming a California federal court’s denial of class certification in a lawsuit against dog food manufacturer Champion Petfoods (“Champion”). Among other things, the court’s holding reinforces that a “full refund” theory of damages is unavailable if class members derived some value from a product—even if it may have been contaminated with harmful substances.
- A group of dog owners (including named plaintiff Jennifer Reitman) filed a putative class action against Champion claiming it misleadingly marketed its dog food products as “biologically appropriate,” “regional,” “fresh,” and “never outsourced,” while failing to disclose that they contain harmful, non-fresh, unnatural, or outsourced ingredients. They also alleged that Champion failed to disclose a risk of pentobarbital contamination for some products.
- The district court concluded that while Plaintiffs had satisfied the Rule 23(a) prerequisites, common questions did not “predominate,” as required for certification under Rule 23(b)(3).
- The district court disagreed with Plaintiffs’ argument that Defendants’ “core message” was materially misleading, concluding that “every package differed and provided context to the overall [] message.” The court also rejected Plaintiffs’ suggestion of further subclasses that might meet the predominance requirement, since “the analysis would still require bag-by-bag determinations that would predominate over common questions to the class.”
- The district court also found that Plaintiffs failed to meet their burden to show a proper damages model as required by Comcast Corp. v. Behrend, 569 U.S. 27 (2013). The court concluded that Plaintiffs’ expert had wrongly calculated the difference in consumer expectations based on various corrective statements, rather than the difference in value between the dog food as marketed and the dog food as received. The district court also concluded that a “full refund” model was not appropriate for subclass members who did not actually purchase pentobarbital-contaminated dog food.
- On appeal, the Ninth Circuit affirmed the district court’s holding as to class certification and damages. In addition to agreeing that “bag-to-bag determinations predominate,” the panel confirmed that Plaintiffs’ expert’s price premium methodology was not appropriately tied to Plaintiffs’ theory of liability as required by Comcast. Perhaps most notably, the court also explained that a full refund was inappropriate even for members of the pentobarbital subclass who did purchase a contaminated bag, as Plaintiffs had not shown that the risks entailed by a contaminated bag rendered the product unusable or completely valueless.
- The panel’s rejection of the Plaintiffs’ “full refund” model contrasts with a recent order from the U.S. District Court for the Southern District of California (“Hawkins”). That order, which we discussed in our November issue, certified a full refund class for purchasers of Kroger breadcrumbs that had been wrongly labeled as containing “0g trans fats.”
- Although Hawkins is arguably in tension with the Ninth Circuit’s reasoning in Reitman, a few observations may explain why the “full refund” model was deemed less problematic in Hawkins. For example, while Plaintiffs in Reitman failed to explain how the risk of pentobarbital contamination rendered the dog food valueless, the Hawkins court concluded that the plaintiff provided “extensive support” for her contention that trans fat was so harmful that any product containing PHOs have no value—including 50 paragraphs of her complaint, and two expert reports, describing the dangers of trans fat. Moreover, all of the mislabeled breadcrumbs in Hawkins actually contained trans fats, whereas the allegedly mislabeled dog food in Reitman carried only a risk of pentobarbital contamination.
- Accordingly, class-action defendants should be prepared to oppose “full refund” models of damages not only by demonstrating a product’s efficacy and the benefits obtained by class members, but also through expert evidence highlighting the speculative nature of the risks that purportedly render the product valueless.
- The Ninth Circuit case is Reitman v. Champion Petfoods USA, Inc., 830 F. App’x 880 (9th Cir. 2020). Read more here.
