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August 16, 2018 by Susana Cruz HodgeDownload PDF

Classes Certified in Mislabeled Keratin Products Class ActionSusana  Cruz Hodge

Yesterday, the District Court for the Southern District of New York granted class certification in Price v. L'Oréal USA Inc., case no. 1:17-cv-00614, a case involving popular L’Oreal products misrepresented to include keratin. Plaintiffs’ case is premised on the fact that the challenged products do not contain keratin and thus, plaintiffs and the Class have been damaged by paying a price premium. Plaintiffs sought a nationwide class, as well as a New York and/or California class. Not surprisingly, the District Court denied certification of the nationwide class because “some form of reliance is required under all states’ laws for a fraud claim” and “[t]he viability of each class member’s fraud claim turns on whether or not he or she relied on alleged representations that the Products contain keratin.”

Luckily, reliance did not torpedo several of the New York and California claims. The Court certified a class pursuing a New York GBL § 349 claim, finding the claim depends on generalized evidence and thus is amenable to class treatment. The plaintiffs’ New York warranty claim, however, did not survive because proof of reliance (which is typically an individual issue) is required to prove a breach of warranty claim under New York law when the claim is premised on advertising statements. Luckily for Plaintiffs, they pled a breach of contract claim in the alternative, and that claim survived (for now). While the Court noted defendant’s argument that the claim would fail because it requires privity, it correctly dismissed the argument because “it is not relevant for the purposes of this [class certification] motion.”

The California class defeated defendant’s arguments on each claim. The Court certified the class to pursue claims under California’s Unfair Competition and False Advertising Laws, as well as an express warranty claim. Since plaintiffs’ warranty claim does not require a showing of reliance, that claim is also amendable to class treatment. With respect to the UCL and FAL, the District Court rejected defendant’s argument that reliance defeated predominance, finding that a presumption or inference of reliance arises under each statute so long as the misrepresentation is material, and materiality is a common question that can be resolved for the entire class because it is judged according to an objective standard. Defendants argued plaintiffs could not show materiality and proffered an experimental study purportedly showing that “consumers’ purchase interest is unchanged by the presence or absence of the terms” related to keratin. However, the Court properly rejected this argument because defendant’s study “does not purport to show that materiality cannot be proven or disproven through common evidence,” and instead “show[s] the opposite – that common evidence such as an experimental study can shed light on the question of materiality.”

The plaintiffs also prevailed on two of the “hot topics” surrounding class certification – ascertainability and classwide damages. As is par for the course in these products cases, defendants argued that the class could not be ascertained because records of purchases do not exist and there is no other means other than self-identification to identify the class members. The Court rejected this argument because at its core, the argument raises concerns of “administrative feasibility” and not “the presence of objective criteria,” and if defendants were to have their way, this argument would mean that “class actions against manufacturers would be virtually impossible.”

Finally, with respect to damages, the conjoint analysis model saved the day for the second time this week. See In re Arris Cable Modem Consumer Litig., No. 17-cv-01834, 2018 WL 3820619 (N.D. Cal. Aug. 10, 2018). Plaintiffs’ theory of liability was that the challenged products falsely represented they contained keratin and the method proposed to determine damages, the conjoint analysis, “calculated as damages the differences between what Plaintiffs thought they were getting and what they actually got when they purchased” the products. Since payment of a price premium qualified as a measure of damages for each claim an alternative model was unnecessary. Defendants argued against the conjoint analysis, stating it lacked consideration of actual prices consumers paid for the products and failed to identify an alternate product on the market against which the challenged products could be measured. The District Court rejected this argument, finding it misconstrued the data points necessary to the model because the model relies upon “hypothetical product-feature and price variations, conducted specifically for the purposes of evaluating a specific product to tease out the value to consumers of a particular product feature.”

Defendants are likely to petition for review, so stay tuned.