Eggs in a carton
SAN FRANCISCO — A federal appeals panel has reversed a lower court’s ruling and said Happy Egg producers don’t need to face a class action over whether their eggs are legally the product of “pasture raised” hens.
The Happy Group, which sells Happy Egg brands, advertises its hens as “free range” and “pasture raised on over 8 acres.” A complaint from Jonathan Rusoff and Joseph Gambino alleged Happy violated advertising laws in California and New York, specifically claiming that the “pasture raised” is improper because the company doesn’t meet the certification requirements of the American Humane Association or Humane Farm Animal Care, which they argue are established industry standards influencing consumer expectations.
U.S. District Judge Araceli Martínez-Olguín granted class certification, which prompted Happy to seek an interlocutory review before the U.S. Ninth Circuit Court of Appeals. Judge Daniel Bress wrote the panel’s opinion, filed Aug. 17; Judges Danny Boggs and Salvador Mendoza Jr. concurred. Boggs is on the U.S. Sixth Circuit Court of Appeals.
“Although the district court rejected key aspects of plaintiffs’ showing, it still granted their motion for class certification,” Bress wrote, explaining Martínez-Olguín found the complaint didn’t adequately establish the supposition that “pasture raised” was commonly understood based on the agency standards or a reasonable consumer understanding of the “eight acres” language.
The panel said Martínez-Olguín nonetheless certified the class “after finding that materiality and damages were common questions that predominated.”
As an initial matter, the panel said Martínez-Olguín did not abuse discretion in striking the expert opinion of Craig Morris, who has agriculture and food marketing experience and said the AHA and HFAC guidelines are the industry standard. Bress said Morris didn’t “conduct a rigorous evaluation of how a reasonable consumer understands the term ‘pasture raised.’ Instead, his methodology consisted of online research and taking pictures of egg cartons in grocery stores near his home.”
Bress further wrote that “Morris did not cite his professional experience in his discussion of egg standards — rather, he did so only when discussing commodity standard-setting more generally. Indeed, at his deposition, Dr. Morris admitted that he is ‘not an expert in egg standards.’ And Dr. Morris’ review of internal Happy Egg documents and testimony only supported his conclusions with respect to how Happy Egg may have used the AHA and HFAC standards internally, not how consumers perceived or interacted with those standards.”
With that opinion properly excluded, the panel continued, Martínez-Olguín correctly concluded Rusoff and Gambino didn’t fully show common questions of deception. Another expert, J. Michael Dennis, surveyed consumers regarding perception of the phrase “pasture raised on over 8 acres,” but with Morris’ opinion tossed, Dennis’ data had no anchor to a deception argument.
“Plaintiffs appeared to assert at oral argument that it was not necessary for them to show that a reasonable consumer would have knowledge of the AHA and HFAC standards,” Bress wrote. “That is contrary to how plaintiffs have consistently advanced their claims.”
Consumers can’t be deceived by a claim that doesn’t live up to industry standards if the same consumers don’t widely understand the standards, the panel said, as Bress specifically wrote they “have no classwide proof that ‘pasture raised’ is materially inconsistent with Happy Egg’s practices. We cannot say whether a reasonable consumer would have been deceived by false advertising or marketing if there is no common proof that something was misleading.”
For appellate review, the panel said, the question isn’t whether a reasonable jury might find Happy Egg’s labels deceptive, but what Rusoff and Gambino alleged about reasonable consumer expectations.
“Because the plaintiffs did not demonstrate that there was a single or dominant industry standard for ‘pasture raised,’ and that a reasonable consumer would perceive that representation in those terms, plaintiffs lacked common proof of deception,” Bress wrote, adding that all the other counterarguments were unpersuasive.
Bress reiterated that excluding Morris’ opinion for being unreliable is more than a typical objection to evidence but fundamentally undercuts the ability to validate certification. He further explained how other evidence failed to establish a widely accepted standard upon which egg buyers rely and said they ultimately failed to show “‘pasture raised’ has some generally accepted meaning. With their key expert sidelined, plaintiffs could not satisfy this critical element.”
Ultimately the panel said Judge Martínez-Olguín erred in granting class certification and reversed the ruling.
Rusoff and Gambino are represented by Wand Law Firm, of Long Beach, and Abiri Law, of Rancho Santa Margarita.
Happy is represented by Venebale, of Tysons, Virginia; San Francisco and Los Angeles.
