Opinion
No. C 06-06609 JSW.
September 27, 2011
ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT AND MOTION TO DECERTIFY THE ACTION AS A CLASS
Now before the Court is the motion for summary judgment filed by Defendants Blue Sky Natural Beverage Co., Hansen Beverage Company and Hansen Natural Corp. (collectively "Defendants"), the motion for partial summary judgment filed by Plaintiff Chris Chavez and the motion to decertify the action as a class action filed by Defendants. Having carefully reviewed the parties' papers and the relevant authority, and good cause appearing, the Court hereby DENIES the motions for summary judgment and DENIES the motion for decertification.
FACTUAL BACKGROUND
Defendants develop, market, sell, and distribute beverages including natural or healthy sodas, fruit juices, energy sports drinks, and other beverages under a variety of brand names. (Compl., ¶¶ 20-21.) In September of 2000, Defendants acquired the Blue Sky natural soda business from the Blue Sky Natural Beverage Co., a company that had been based in and operated from Santa Fe, New Mexico since approximately 1980. ( Id. at ¶ 22.) From that time until at least May of 2006, the Blue Sky containers indicated that they originated from Santa Fe, New Mexico. ( Id. at ¶ 24.) Specifically, the cans and bottles stated "SANTA FE, NEW MEXICO" or "SANTA FE, NM." ( Id.) In addition, every can stated "CANNED FOR THE BLUE SKY NATURAL BEVERAGE COMPANY SANTA FE, NM 87501" or "CANNED UNDER THE AUTHORITY OF BLUE SKY NATURAL BEVERAGE CO., SANTA FE, NM USA." ( Id.) According to Plaintiffs, the packaging of the Blue Sky beverages also has a "particularly Southwestern look and feel" including "stylized Southwestern Indian tribal bands" across the top and bottom and "pictures of what appear to be the Sangre de Cristo mountains that border Santa Fe, New Mexico on the eastern side of the city." ( Id. at ¶ 25.) In addition, until May of 2006, Defendants' website stated "Santa Fe, New Mexico, U.S.A." and listed a phone number with an area code assigned to Santa Fe. ( Id. at ¶ 26.)
Plaintiffs contend that despite Defendants' representations, Blue Sky beverages are not actually manufactured or bottled in New Mexico. ( Id. at ¶ 30.) Plaintiffs assert that Defendants outsource all manufacturing to third parties, all located outside of New Mexico. ( Id.) In addition, Plaintiffs assert that the Blue Sky Natural Beverage Co. no longer exists in Santa Fe because one month after Hansen's acquisition, the company was dissolved in New Mexico and re-registered with the California Corporation Commission as a Delaware corporation with its principal place of business in Corona, California. ( Id. at ¶ 31.)
According to the complaint, the named Plaintiff is a former native of New Mexico and has purchased a variety of Blue Sky beverages since he was a child. ( Id. at ¶ 27.) Plaintiff relocated to California in August of 1999 and has continued to purchase Blue Sky beverages "due to the fact that he believed Blue Sky Beverages [sic] where [sic] made in Santa Fe, New Mexico and/or by a company that was located in Santa Fe, New Mexico" and Plaintiff "desired to (i) support a New Mexico company and (ii) to associate himself with a product from Santa Fe, New Mexico." ( Id. at ¶ 28.)
Plaintiff asserts that he "would not have purchased Blue Sky Beverages had he known where they were really manufactured and/or where the company that owned or controlled the canning of Blue Sky Beverages was located." ( Id. at ¶ 36.) Plaintiff claims that he relied on Defendants' misrepresentations and lost the full value of the price he paid for the Blue Sky beverages which he would not have paid had he known the true geographic origin of the product. ( Id. at ¶¶ 10, 13.)
The Court makes its factual findings based on the submitted record, DENIES Defendants' motion to strike the already-submitted evidence in the declaration submitted by attorney Seth A. Safier and finds that it needs not address Defendants' premature Daubert objections to the proposed expert Dean K. Fueroghne. In addition, the Court GRANTS the parties' administrative motions to seal. (Docket nos. 163 and 168.)
PROCEDURAL BACKGROUND
Plaintiff, on behalf of himself and those similarly situated, filed a putative class action complaint on September 21, 2006 in San Francisco Superior Court alleging causes of action for: (1) false advertising under California Business and Professions Code § 17500 et seq.; (2) unfair trade practices under California Business and Professions Code § 17200 et seq.; (3) violation of the Consumers Legal Remedies Act ("CLRA") under California Civil Code § 1750 et seq.; and (4) common law fraud, deceit and misrepresentation.Defendants removed the case to this Court and promptly filed a motion to dismiss on several grounds. This Court granted the motion to dismiss on the basis that Plaintiff had failed to state a cognizable injury. On appeal, Ninth Circuit Court of Appeals reversed the dismissal and remanded finding that, at the motion to dismiss stage, Plaintiff had alleged sufficient injury as a result of Defendants' purported misrepresentations as he lost the full value of what he had intended to purchase.
On remand, Plaintiff filed a motion to strike the affirmative defenses, which the Court denied. Plaintiff then sought judgment on the pleadings or, in the alternative, summary judgment on the affirmative defense of preemption. Defendants also sought judgment on the pleadings or, in the alternative, summary judgment on the claim for relief under CLRA. Plaintiff also filed a motion for class certification. On June 18, 2010, this Court granted Plaintiff's motion for judgment on the pleadings, denied Defendants' motion for judgment on the pleadings, and certified the class. Defendants filed a request for interlocutory appeal and the Ninth Circuit declined to exercise review of the certification order on August 27, 2010. Defendants also filed a motion for leave to file a motion for reconsideration of the Court's order certifying the Plaintiff class on September 28, 2010. On November 22, 2010, the Court denied leave to file the motion for reconsideration. On November 11, 2010, Plaintiff filed a motion for summary adjudication of the first two causes of action. That same day, Defendants filed a motion for summary judgment and a motion to decertify the class. On January 31, 2011, this case was reassigned to the undersigned.
The Court shall address specific additional facts in the remainder of this Order.
ANALYSIS
A. Legal Standards Applicable to Motions for Summary Judgment.
Summary judgment is proper when a "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion by" citing to, inter alia, depositions, documents, affidavits, or other materials. Fed.R.Civ.P. 56(c)(1)(A). A party may also show that such materials "do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1)(B). An issue is "genuine" only if there is sufficient evidence for a reasonable fact finder to find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). A fact is "material" if the fact may affect the outcome of the case. Id. at 248. "In considering a motion for summary judgment, the court may not weigh the evidence or make credibility determinations, and is required to draw all inferences in a light most favorable to the non-moving party." Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997).
The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery, and affidavits which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323-24 (1986). Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. Id. Once the moving party meets this initial burden, the non-moving party must go beyond the pleadings and by its own evidence set forth specific facts showing that there is a genuine issue for trial. See Fed.R.Civ.P. 56(e). The non-moving party must "identify with reasonable particularity the evidence that precludes summary judgment." Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (quoting Richards v. Combined Ins. Co., 55 F.3d 247, 251 (7th Cir. 1995)) (stating that it is not a district court's task to "scour the record in search of a genuine issue of triable fact"). If the non-moving party fails to make this showing, the moving party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 323.
B. Defendants' Motion for Summary Judgment.
1. Excluded Beverages and Class Members.
Defendants contend that the Court should grant summary judgment with regard to lines of beverages or products that bear no Blue Sky label with an affiliation with New Mexico. Defendants also argue that distributors and retail sellers should be excluded from the class. Plaintiff offers no rebuttal and agrees that these new and unaffiliated beverage lines as well as potential class members have been excluded already and are not subject to liability. Accordingly, the listed new and unaffiliated beverages are not part of this case and, as already found, distributors and retail sellers are not included in the class definition.
The issue raised in Defendants' motion for summary judgment regarding liability for beverage product lines produced post-2003 is addressed in the Court's class certification order with regard to typicality of the plaintiff class.
2. Consumers Legal Remedies Act and Fraud Claims.
Defendants contend that the California Consumers Legal Remedies Act ("CLRA") and the fraud claims, Plaintiff's third and fourth causes of action, should be summarily dismissed as Plaintiff fails to offer proof of damages and materiality of the alleged misrepresentations.
a. Damages.
Plaintiff alleges that he suffered damages as a result of his purchase of beverages that were not actually affiliated with New Mexico. He contends that Defendants marketed the beverages with Southwestern appeal and were able to charge a premium price as a result. ( See Declaration of Seth A. Safier, Ex. G at 25:19-23, Exs. S-U.) Defendants contend that the premium charges were unrelated to the designation of the beverages' affiliation with New Mexico and that Plaintiff is comparing prices in different product markets. The record presents a dispute of material fact regarding whether and for what reason the subject beverages were set at a premium price. Accordingly, the Court cannot grant summary judgment as to the damages issue.
b. Materiality.
Defendants contend that the materiality standard under both CLRA and the fraud causes of action is judged from the viewpoint of a reasonable consumer. See Chamberlan v. Ford Motor Co., 369 F. Supp. 2d 1138, 1145 (N.D. Cal. 2005) ("Materiality is judged by the effect on the reasonable consumer, and this standard applies to CLRA claims.") (citing Consumer Advocates v. Echostar Satellite Corp., 113 Cal. App. 4th 1351, 1360 (2003)); see also Sanders v. Apple Inc., 672 F. Supp. 2d 978, 985 (N.D. Cal. 2009) (stating that the materiality standard for claims of common law fraud are judged from the perspective of a "reasonable man"). Defendants argue that Plaintiff's idiosyncratic reasons for purchasing beverages from New Mexico cannot be imputed to the reasonable consumer. However, the significance of the origins of the bottling of these beverages cannot be determined on this record as a matter of law. Materiality, here, as it usually is, a question of fact "unless the fact misrepresented is so obviously unimportant that a jury could not find that a reasonable man would have been influenced by it." In re Steroid Hormone Product Cases, 181 Cal. App. 4th 145, 157 (2010). There is testimony from Defendants that the Southwestern look and feel, including the bottling designation, was important to their marketing of the beverages. There is testimony from Plaintiff that his decision to purchase these particular beverages arose out of his loyalty to his former state of residence. The Court cannot find that the representations on the beverages were immaterial as a matter of law. Accordingly, the Court cannot grant summary judgment as to the materiality issue. Defendants' motion for summary judgment as to Plaintiff's third and fourth causes of action for violations of the CLRA and for common law fraud is DENIED.
3. False Advertising and Unfair Competition Claims.
The Court has already determined that is cannot grant Plaintiff's motion for summary judgment on these claims as there are material issues of fact that remain in dispute. Defendants' contentions in their moving papers that the designation of bottling authority was just miniscule writing and was actually a designation of origin, but merely a part of the trade dress the company purchased from Blue Sky is unavailing. Defendants have not cited, and the Court has not found, authority for the proposition that the city and state where a product is manufactured (or in this case, bottled) can form part of the product's trade dress.
The Court is also unpersuaded by Defendants' contention that Plaintiff's responses to interrogatories indicated that he actually purchased the Blue Sky beverages with the New Mexico designation after 2003. The record establishes that the interrogatory responses simply and mistakenly integrated the dates in reply, were corrected by supplemental responses, and the actual dates of purchase were explained in detail in Plaintiff's deposition.
Further, the Court is unpersuaded that Plaintiff has failed to put forth evidence that he suffered damages as a result of his allegedly mistaken purchase of beverages without actual Southwestern affiliation. As discussed above, the Court cannot determine as a matter of law that the damages claimed of premium prices is unrelated to the alleged misrepresentations or not. Because the Court finds the record is replete with disputed issues of material fact with regard to damages, the Court cannot grant summary judgment on these claims.
4. Injunction.
Defendants contend that there is nothing more to enjoin as it has eliminated the words related to Santa Fe, New Mexico on their beverages. Plaintiff, however, alleges that Defendants still represent that they have canning authority under the name Blue Sky, although the geographic designations have been removed. The Court finds that, should the representations be the basis for liability, there may be cause for enjoining such representations. The Court is unpersuaded by the defense of laches as there has been no showing of prejudice caused by the delay.
C. Plaintiff's Motion for Summary Judgment.
1. First Cause of Action for False Advertising Under Section 17500.
Plaintiff claims that Defendants violated California's False Advertising Law ("FAL"), California Business and Professions Code section 17500 et seq.
Section 17500 provides in relevant part: "It is unlawful for any person, firm, corporation or association . . . to make or disseminate or cause to be made or disseminated before the public in this state . . . any statement . . . Which is untrue or misleading, and which is known, or which by exercise of reasonable care should be known, to be untrue or misleading." Section 17500 has been broadly construed to proscribe "not only advertising which is false, but also advertising which, although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public." Kasky v. Nike, Inc., 27 Cal. 4th 939, 951 (2002). In determining whether a statement is misleading under the statute, "the primary evidence in a false advertising case in the advertising itself." Colgan v. Leatherman Tool Group, Inc., 135 Cal. App. 4th 663, 679 (2006) (citing Brockey v. Moore, 107 Cal. App. 4th 86, 100 (2003)). "The `misleading character' of a given representation `appears on applying its words to the facts.'" Id. (citing People v. Wahl, 39 Cal. App. 2d Supp. 771, 774 (1940)).
A private plaintiff bears the burden of producing evidence and demonstrating that "members of the public are likely to be deceived." Id. (citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995)). False advertising under the FAL is governed by the "reasonable consumer" test. Williams v. Gerber Products Co., 552 F.3d 934, 938 (9th Cir. 2008) (citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995)). Under the reasonable consumer standard, a plaintiff must "show that members of the public are likely to be deceived." Id. (quotation marks and citations omitted). "A `reasonable consumer' is `the ordinary consumer acting reasonably under the circumstances' and `is not versed in the art of inspecting and judging a product, in the process of its preparation or manufacture. . . .'" Colgan, 135 Cal. App. 4th at 682 (citations omitted).
Plaintiff argues that the multiple indications on the cans of Blue Sky soda that the canning and/or product originated in Santa Fe, New Mexico are literally false and therefore inherently misleading. In POM Wonderful LLC v. Purely Juice, Inc., the Central District of California court, having determined that the misrepresentations regarding the purity of the defendant's juice were literally false, found that deception was therefore presumed under the Lanham Act. 2008 WL 4222045, at *11 (C.D. Cal. July 17, 2008). The court found that "[t]he fact that [defendant's] false advertising pertained to the very nature of its juice product establishes its materiality." Id. (citing Johnson Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242, 1250 (11th Cir. 2002)) ("A plaintiff may establish this materiality requirement by proving that the defendants misrepresented an inherent quality or characteristic of the product.") The Court finds that the presumption of deception found in POM Wonderful was clearly premised upon the materiality of the literally false representations. That is, the presumption of deception is warranted where the literally false representation is about an inherent quality or characteristic of the product, and not where the representation is peripheral or would likely be considered immaterial. Because, here, the issue of materiality, based on the judgment of a reasonable consumer, remains the subject of disputed fact, the Court cannot grant summary judgment as to the first cause of action for false advertisement under Section 17200.
The Court is not persuaded by Defendants' contentions that the label on the canned beverage, normally placed on the shelves facing away from the consumer, does not constitute an advertisement. See Nagel v. Twin Laboratories, Inc., 109 Cal. App. 4th 39, 51 (2003) (finding that list of product's ingredients on the label was subject to provisions of California Business and Professions Code 17200); see also Williams v. Gerber Products Co., 523 F.3d 934, 936 (9th Cir. 2008) (finding product packaging subject to Section 17200).
2. Second Cause of Action for Unfair Competition Under Section 17200.
Plaintiff claims that Defendants violated California's Unfair Competition Law ("UCL" or "Section 17200"), California Business and Professions Code section 17200 et seq., based on Defendants' allegedly "unlawful" business practices. See Berryman v. Merit Property Management, 152 Cal. App. 4th 1544, 1554 (2007) (holding that the `unlawful' prong of the UCL "borrows violations of other laws . . . and makes those unlawful practices actionable.") The unlawful prong of the UCL prohibits "anything that can properly be called a business practice and that at the same time is forbidden by law." Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 180 (1999). By proscribing unlawful business practices, the UCL permits injured consumers to "borrow" violations of other laws and treat them as unfair competition that is independently actionable. Id. A practice may be actionable under the UCL "if it violates any law civil or criminal, statutory or judicially made, federal, state or local." McKell v. Washington Mutual, Inc., 142 Cal. App. 4th 1457, 1474 (2006) (citations omitted). Plaintiff maintains that Defendants' business practices are unlawful because they violation Section 17500, Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and because they constitute misbranding under the Food, Drug and Cosmetic Act ("FDCA"), 21 U.S.C. § 343.
a. UCL Liability Premised Upon Violation of Section 17200.
As the Court has already found that it cannot grant summary judgment on the Plaintiff's cause of action under Section 17500, there is no viable claim to grant summary judgment premised upon that liability under Section 17200.
b. UCL Liability Premised Upon Violation of the Lanham Act.
Plaintiff alleges that Defendants' practices are unlawful under the UCL because they violate Section 43(a) of the Lanham Act which bars "false or deceptive statements in a commercial advertisement." See Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 834-35 (9th Cir. 2002). Defendants correctly contend that Plaintiff would not have standing to allege a Lanham Act violation himself as a consumer. See Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995) ("As consumers, [plaintiffs] have alleged neither commercial injury nor competitive injury. Therefore . . . they lack standing.") Defendants contend that Plaintiff cannot sue for unlawful business practices under the UCL where he cannot state a claim under the underlying legal predicate.
However, a "plaintiff suing under section 17200 does not have to prove he or she was directly harmed by the defendant's business practices. An action may be brought by any `person acting for the interests of itself, its members or the general public.'" Saunder v. Superior Court of Los Angeles County, 27 Cal. App. 4th 832, 839 (1994) (citing Cal. Bus. Prof. Code § 17204). While it is "true that a plaintiff may not `plead around an absolute bar to relief' by recasting the cause of action as a claim under the UCL, . . . California courts have repeatedly stated that a plaintiff may bring a UCL claim even when the conduct alleged to constitute unfair competition violates a statute that does not provide a private right of action." Ferrington v. McAfee, Inc., 2010 WL 3910169, at *14 (N.D. Cal. Oct. 5, 2010) (citations omitted). In order to forestall an action under the UCL, another predicate law's provision must actually bar the action. Id. (citing Cel-Tech, 20 Cal. 4th at 183). "Thus, if a statute indicates that exclusive enforcement authority shall lie with the government and explicitly precludes private enforcement, or if a statute expressly provides immunity for the conduct alleged, a plaintiff may not plead around this bar by bringing a claim under the UCL." Id.
In this claim, however, Plaintiff predicates his UCL allegations on a violation of Section 43(a) of the Lanham Act, which permits "private enforcement by individuals and business who have suffered competitive or commercial injuries, and while the courts have determined that standing is limited to such persons, Defendant cites no authority suggesting that this limitation constitutes an express, absolute bar" to recovery. See id. at *15. Accordingly, the Court finds that Plaintiff may predicate their UCL claim on the Lanham Act although they have no independent right of action under the Lanham Act itself.
Nevertheless, the Court finds that Plaintiff has failed to demonstrate that the undisputed facts in the record establish that Defendants' conduct is unlawful under the Lanham Act's provisions. Section 43(a) provides a federal cause of action for false advertising and requires a prima facie showing that "(1) the defendant made a false statement either about the plaintiff's or its own product; (2) the statement was made in a commercial advertisement or promotion; (3) the statement actually deceived or has a tendency to deceive a substantial segment of its audience; (4) the deception is material, in that it is likely to influence the purchasing decision; (5) the defendant caused its false statement to enter interstate commerce; and (6) the plaintiff has been or is likely to be injured as a result of the false statement." Jarrow Formulas, 304 F.3d at 835 n. 4.
As the Court has already determined that there remain contested material facts regarding the necessary elements of materiality and damages. The Court cannot grant summary judgment under Section 17200 predicated on alleged violations of the Lanham Act.
c. UCL Liability Premised Upon Violation of the FDCA.
Lastly, Plaintiff contends that Defendants' practices are unlawful under the UCL because they violate provisions of the Food, Drug and Cosmetic Act. Section 403 of the FDCA provides that a "food shall be deemed misbranded . . . [i]f in package form unless it bear a label containing (1) the name and place of business of the manufacturer, packer, or distributor. . . ." 21 U.S.C. § 343. Plaintiff alleges that the Blue Sky cans failed to contain this necessary information accurately.
The FDCA, however, provides that "all such proceedings for the enforcement, or to restrain violations, of this chapter shall be by and in the name of the United States." 21 U.S.C. § 337(a). Because of this express bar on private enforcement and the FDA's exclusive regulatory authority over misbranding of food products, the Court finds Plaintiff may not state a private cause of action under the UCL to attempt to enforce requirements of the FDCA. See Ferrington, 2010 WL 3910169, at *15. Accordingly, the Court cannot grant summary judgment under Section 17200 predicated on alleged violations of the FDCA or any other claimed legal predicate.
D. Defendants' Motion to Decertify the Class.
1. Legal Standard on Motion to Decertify.
Pursuant to Federal Rule of Civil Procedure 23(c)(1)(C), an order certifying a class "may be altered or amended before final judgment." The party seeking decertification bears the burden of demonstrating that certification is no longer proper, in that it no longer meets the Rule 23 requirements. See Gonzales v. Arrow Financial Services, LLC, 489 F. Supp. 2d 1140, 1153 (S.D. Cal. 2007). Any doubts must be resolved in favor of ordering certification. Id. at 1154. The Court must determine whether there are common questions on the merits that can be resolved at trial, not to weigh the evidence. See, e.g., Statan v. Boeing Co., 327 F.3d 938, 954 (9th Cir. 2003).
2. Factual Changes.
Factually, Defendants contend that there are significant changes in the record regarding Plaintiff's purchase of Blue Sky beverages after 2003. Defendants contend that Plaintiff admitted in his interrogatory responses that he purchased Blue Sky beverages with references to Santa Fe, New Mexico after he had learned of the actual city of its canning. Based on this admission, Defendants argue that Plaintiff lacks standing and is therefore unfit to serve as a class representative. The Court has addressed the mistake in Plaintiff's interrogatory responses and finds this argument unpersuasive.
3. Legal Changes.
As a matter of legal changes since the Court ruled, Defendants essentially seek reconsideration, for a second time, of this Court's order dated June 18, 2010 which permitted this action to proceed as a nationwide class action of all purchasers of Blue Sky beverages for a period of four years. Defendants seek to have the Court reconsider the same legal arguments it has already addressed both in its original certification original order and in its order dated November 22, 2010 denying Defendants' first motion for reconsideration. Again, Defendants have not demonstrated that reconsideration of the Court's prior rulings is necessary or warranted.
Again, Defendants urge the Court to deny class certification because absent class members lack Article III standing. Defendants contend that although the California Supreme Court has held that state courts may permit uninjured individuals to pursue UCL actions in state court, so long as the class representative has established standing, the Supreme Court's decision in In re Tobacco II Cases did not and could not remove the standing requirements set forth in Article III, including injury-in-fact and causation. 46 Cal. 4th 298, 324 (2009). The Court does not read Tobacco II to hold that a class may include members who have not been injured by a defendant's conduct. Rather, the Tobacco II court held that Proposition 64 "was not intended to, and does not, impose section 17204's standing requirement on absent class members in a UCL class action where class requirements have otherwise been found to exist." Id. This holding appears to be in accord with federal authority construing Rule 23. Indeed, the Tobacco II court relied heavily on federal cases interpreting the requirements of Rule 23. Thus, it noted that, in general, "standing in a class action is assessed solely with respect to class representatives, not unnamed members of the class." Id. at 319 (quoting In re General Motors Corp. Dex-Cool Prod. Liab. Litig., 241 F.R.D. 305, 310 (S.D. Ill. 2007)).
The Tobacco II court also relied on Vuyanich v. Republic Nat'l Bank of Dallas, 82 F.R.D. 420 (N.D. Tex. 1979). In the Vuyanich case, the plaintiffs brought race and sex discrimination claims against their employer, and the court originally certified the plaintiffs' proposed class. The employer subsequently moved to decertify the class or, alternatively, to narrow its scope. To support its argument, the employer argued that the named plaintiffs only had standing to raise claims that he or she would be able to assert individually. The court rejected the employer's argument and stated that the employer confused the requirements of Article III with the requirements of Rule 23:
In a class action . . . the trial court initially must address whether the named plaintiffs have standing under Article III to assert their individual claims. If that initial test is met, the court must then scrutinize the putative class and its representatives to determine whether the relationship between them is such that under the requirements of Rule 23 the named plaintiffs may represent the class. The trial court generally need not address the final question of whether the class itself, after certification, has standing. If that court, guided by the nature and purpose of the substantive law on which the plaintiffs base their claims, properly applies Rule 23, then the certified class must necessarily have standing as an entity.Vuyanich, 82 F.R.D. at 428; see also 1 Newberg on Class Actions § 2:7 (4th ed.) ("In a class action, those represented are, in the words of the Supreme Court, passive members of the class. . . . These passive members need not make any individual showing of standing, because the standing issue focused on whether the plaintiff is properly before the court, not whether represented parties are absent class members are properly before the court."); Cf. Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1033-35 (8th Cir. 2010) (noting that if Tobacco II is read to permit a single injured plaintiff to represent a class of individuals who might not have a cause of action, "it is inconsistent with the doctrine of standing as applied by federal courts" and noting that "[a]lthough federal courts do not require that each member of a class submit evidence of personal standing, a class cannot be certified if it contains members that lack standing") (internal quotations and citations omitted).
The Avritt court upheld the district court's decision to deny a motion to certify a class under Section 17200, because it concluded that district court correctly concluded that "issues of individual reliance would . . . be relevant to establishing liability." 615 F.3d at 1034-35. However, in Avritt, unlike in this case, there was not evidence that the defendant engaged in a uniform course of conduct. Id. at 1035. In addition, the case is not new law, but was proffered by Defendants to the Ninth Circuit when it determined not to certify the certification order on appeal, and was briefed before this Court on Defendants' motion for reconsideration.
The only new legal authority mentioned in the current motion before the Court is the California Court of Appeal decision in Sevidal v. Target Corp., 189 Cal. App. 4th 905 (2010). In Target, the plaintiff alleged that defendant falsely advertised in a notice on its website that its clothing was made exclusive in the United States, but as the evidence in the record revealed that only 17% of consumers actually saw the notice, and thus a majority of the class members were never exposed to the alleged misrepresentation, the court was mistaken in certifying the class. Id. at 926. Because the evidence in that case conclusively demonstrated that members of the purported class were not actually exposed to the allegedly false advertising, the court determined that the proposed class was overbroad because, based on the evidence presented, "a substantial portion of the class would have no right to recover on the asserted legal claims." Id. at 923.
In this matter, there is no evidence before the Court that the consumers of Defendants' beverages were not exposed to the allegedly false labeling. The only undisputed evidence before the Court is that all of the beverages included in the class definition did, in fact, have the notation that the beverages were canned in or under the authority of a company in Santa Fe, New Mexico. Although there is dispute of fact as to whether any particular class member may have been affected by the geographic disclosure on the cans or whether the allegedly premium pricing was as a result of the geographic designation, there is no dispute that the proposed class representative alleges both that he purchased the beverages based on the representations on the cans and that he would not have otherwise paid the additional price the particular beverages cost to him. The Court finds, again, that although Tobacco II "does not stand for the proposition that a consumer who was never exposed to an alleged false or misleading advertising or promotional campaign is entitled to restitution," it "allows a class representative who actually relied on the defendants' misleading advertising campaign to represent other class members who may have lost money by means of the unfair practice." See Pfizer Inc. v. Superior Court, 182 Cal. App. 4th 622, 632 (2010). Here, because the evidence in this matter indicates that absent class members were exposed to the same labeling which affected the class representative, there is no basis for decertification of the class. See also Stearns v. Ticketmaster Corp., ___ F.3d ___, 2011 WL 3659354, at *5 (9th Cir. Aug. 22, 2011) (holding that class does not lack standing under Article III where it has not been shown that class members have suffered actual injury in fact connected to the conduct of defendants; case law "keys on the representative party, not all of the class members"). All class members — those who purchased the subject beverages during the time of their alleged mislabeling — were apparently exposed to the labels equally. See Webb v. Carter's Inc., 272 F.R.D. 489, 499-500 (C.D. Cal. 2011) (holding that it was improper to certify a class of consumers under a breach of warranty theory where product did not contain a defect that was substantially certain to result in injury to all class members). The theory of liability in this case is the unfair business practice of mislabeling beverages which, if demonstrated to affect purchasers of the product, should affect all members of the class as defined in this Court's order certifying the class. On this record, the Court cannot decertify the class.
E. Defendants' Request to Certify an Interlocutory Appeal.
In their reply papers, Defendants request that, should the Court deny their motion for decertification of the class, the Court should immediately certify the issue for interlocutory appeal. Pursuant to 28 U.S.C. § 1292(b), the Court has discretion to certify an interlocutory order for appeal when (1) the order involves a controlling issue of law; (2) there is substantial ground for differences of opinion as to that question; and (3) an immediate appeal may materially advance the ultimate termination of the litigation. 28 U.S.C. § 1292(b). Certification for interlocutory appeal should be applied sparingly and only granted in exceptional situations in which allowing an interlocutory appeal would avoid protracted and expensive litigation. See, e.g., Coopers Lybrand v. Livesay, 437 U.S. 463, 475 (1978); In re Cement Antitrust Litigation, 673 F.2d 1020, 1026 (9th Cir. 1982); United States v. Woodbury, 263 F.2d 784, 788 n. 11 (9th Cir. 1959). The party seeking certification of an interlocutory order has the burden of establishing the existence of such exceptional circumstances. Coopers Lybrand, 437 U.S. at 475. A court has substantial discretion to decide whether to grant a motion for certification. Valdovinos v. McGrath, 2007 WL 2023505 at *2 (N.D. Cal. July 12, 2007) (citing Brown v. Oneonta, 916 F. Supp. 176, 180 (N.D.N.Y. 1996)). The Court concludes that Defendants have not met this burden. Specifically, Defendants fail to demonstrate that granting an interlocutory appeal here would avoid protracted and expensive litigation or that exceptional circumstances exist which warrant an interlocutory appeal. The Ninth Circuit has already declined to hear this precise issue on appeal. Accordingly, Defendants' request to certify an interlocutory appeal is DENIED.