SAN DIEGO (Legal Newsline) - A California federal judge this month denied preliminary approval of a proposed class action settlement in a false advertising lawsuit against the makers of Annie Chun food products.
Judge Dana Sabraw of the U.S. District Court for the Southern District of California, in his Dec. 16 order, said the proposed deal had two notable defects: the plaintiff failed to show that California law should apply to the non-California class members; and the cy pres recipients did not satisfy U.S. Court of Appeals for the Ninth Circuit standards.
Plaintiff Dennis Peterson, a resident of Lakeside, Calif., purchased an Annie Chun’s Udon Soup Bowl from a Vons grocery store in Lakeside in July 2013.
The front of the package for the soup states: “100 percent all natural ingredients” and “NO MSG ADDED.”
Peterson alleges that label, as well as the labels and packaging for 15 other Annie Chun’s products, is false and misleading because the products contain ingredients that have MSG.
In October 2014, Peterson filed a lawsuit against CJ America Inc., which produces and distributes Annie Chun’s food products, on behalf of himself and a proposed class.
In his suit, the plaintiff alleges claims for violation of California’s Consumers Legal Remedies Act, California’s False Advertising Law, the California Business and Professions Code, California’s Unfair Competition Law, and breach of express warranty.
In response to the original complaint, the defendant filed a motion to dismiss and motion to strike, which the federal court granted in part and denied in part. Specifically, the court granted CJ America’s motion to strike Peterson’s request for injunctive relief and denied the remainder of the motions.
In August, Peterson filed a first amended complaint, re-alleging his claim for injunctive relief.
Ten days later, on Aug. 28, the parties filed a notice of settlement.
The terms included: the defendant agreed to contribute $1.5 million to a settlement fund from which attorneys’ fees and expenses not to exceed $375,000, an incentive award to the plaintiff of $5,000, settlement administration expenses and cash awards to class members would be paid.
To receive a cash award, class members must submit a claim form declaring they purchased one of the subject products during the class period -- Nov. 19, 2012 to the present -- and provide proof of purchase.
For each subject product purchased during the class period, the class member would receive $1.50, with a maximum recovery of $15.
Under the proposed deal, if there were any funds remaining after payments of these expenses, those funds would be converted to a cy pres award and distributed evenly to National Farm to School Network, the Mayo Clinic, and Action for Healthy Kids.
In addition, CJ America, for a period of three years after the effective date, could not order and/or print labels or packaging of the subject products bearing the phrase “NO MSG ADDED,” and would otherwise not market and/or advertise subject products shipped to distributors and/or retail customers after the effective date as “NO MSG ADDED.”
Sabraw, in his 15-page order, said although many of the plaintiff’s arguments support a finding that the predominance requirement is satisfied, Peterson failed to address an issue relevant to the predominance inquiry -- namely, whether the statutes at issue should apply to class members outside of California.
“For California law to apply to those class members, Plaintiff must show that California has ‘a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair,’” the judge wrote. “Plaintiff did not address that issue despite his proposal to represent a nationwide class, and it is unclear from the record whether those contacts exist in this case.”
Sabraw continued, “Clearly, Defendant sells the subject products in California, and according to the First Amended Complaint, has an office in California, but Defendant’s headquarters appear to be in South Korea, and there is no information about where the marketing or labeling decisions for the subject products were made.
“Absent any evidence or argument on this issue, Plaintiff has not made a preliminary showing that the predominance requirement is met.”
The judge said with a nationwide class, as is proposed in the case, the plaintiff should have been prepared to “demonstrate the commonality of substantive law applicable to all class members.”
“Plaintiff failed to make that preliminary showing, and thus the Court declines to grant preliminary certification of the proposed class,” Sabraw wrote.
The judge also took issue with the cy pres aspect of the deal.
The Ninth Circuit requires that there be “a driving nexus between the plaintiff class and the cy pres beneficiaries.”
A cy pres award must be “guided by 1) the objectives of the underlying statute(s) and 2) the interests of the silent class members,” and must not benefit a group “too remote from the plaintiff class[.]”
Sabraw said while the plaintiff asserts that the three national organizations provide consumers with information on food labeling and food choices, he fails to provide any specific evidence to support the assertion.
The judge agreed the organizations’ missions are “noble and lofty goals,” but said none of them appears to serve the objectives of the statutes at issue or the interests of the class members.
“Although the amount of the settlement fund may be fair, reasonable and adequate, the Court has some concern about the cy pres component of the settlement,” he wrote, in denying the plaintiff’s motion.
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.