This week we take a look at a couple major recent decisions in product-labeling class actions, as well as a close call the Supreme Court will not be deciding this term.

Ninth Circuit Rejects Class Counsel’s Damages Theory, but Leaves a Side Door to Class-wide Relief Open:  The Ninth Circuit’s reversal of the lower court’s determination that an “all natural fruit” label on fruit packed in synthetic citric and ascorbic acids was not likely to deceive consumers as a matter of law has attracted a lot of attention in the world of food-labeling litigation.  The Court vacated an award of summary judgment in favor of the defendant, holding that the jury should decide the question of whether the labeling was misleading to a reasonable consumer.

Of particular interest to readers of this blog is the Ninth Circuit’s holding that the lower court did not err by decertifying the class due to difficulties in calculating damages on a class-wide basis.  The court reasoned that each purchaser’s damages were the amount the consumer paid with the understanding it was an “all-natural” product, less the subjective value of fruit packed in a man-made acid to that particular consumer—and that class counsel had offered no explanation as to how this premium could be calculated with proof common to the class.  Notably, however, the court allowed that the plaintiff could continue to pursue injunctive relief on behalf of the class on remand, providing an avenue to the recovery of class attorneys’ fees—and thus plenty incentive for plaintiffs’ attorneys to file similar claims, even in the absence of a fully-formed class damages theory.

Court Deems Sworn Statements Sufficient to Ascertain Class:  Continuing in the world of “natural” product labeling, a federal district court judge certifying three classes of purchasers of skin- and hair-care products marketed as “Active Naturals” held that class members could satisfy Rule 23’s ascertainability requirement by submitting sworn statements.  Ascertainability is often a difficult hurdle to clear for those seeking to certify classes based on the purchase of routine, day-to-day products because so few consumers retain proof of their purchase  Here, the U.S. District Court for the Southern District of New York held that the class members who contended that synthetic ingredients in the products rendered the package-labeling deceptive could establish membership through sworn statements stating they “purchased the products at issue in the necessary state during the necessary time period.”  While the court acknowledged that this “somewhat criticized method of self-reporting” had its problems, it ultimately determined that denying certification for lack of more objective proof would “severely contract the class action mechanism as a means for injured consumers to seek redress under statutes specifically designed to protect their interests.”

Uncertainty Remains as to Who Decides Class Arbitrabilty under Standard AAA Arbitration Clause:   One issue the Supreme Court will not be providing clarity on this term is whether an arbitrator or court should decide if class-wide arbitration is available under an arbitration agreement that states all “disputes shall be determined by arbitration in accordance with the rules of the American Arbitration Association.”  By denying cert in Scout Petroleum LLC v. Chesapeake Appalachia, LLC, the high court leaves standing the Third Circuit’s holding that, under this particular language, the authority to make this threshold determination belongs to the court, because the arbitration agreement does not “clearly and unmistakably” delegate the question of class-wide arbitrability to the arbitrator.   The Supreme Court’s decision not to take up the issue leaves the waters somewhat murky, as other courts have held that similarly-worded arbitration agreements meet the “clear and unmistakable” standard and thus delegate the issue of class arbitrability to the arbitrator.

Similarities between Claim Rate and Asserted Defect Rate Weigh in Favor of Approving Class Settlement:  A U.S. District Court for the Northern District of Ohio approved a class settlement of claims alleging certain washing machines were particularly susceptible to mold.  In approving the settlement, the Court observed that 7.3% of the 3.5 million class members who received notice of the settlement filed a claim for an award.  As the defendant represented that only 7% of the millions of washing machines sold had an observable defect, the court deemed the congruence in these percentages as evidence of a “favorable class reaction” supporting final approval.