Relatively few consumer class action cases reach trial; most are settled or resolved through motion practice. The paucity of cases tried to judgment makes it notable when, as in the case discussed here, one goes all the way to trial and appeal.
Premier Nutrition sold a product called Joint Juice that contained glucosamine and chondroitin, ingredients familiar to anyone who has browsed the supplement aisle. As the name suggests, the product was labeled and promoted for joint health. For example, the packaging stated "Use Daily for Healthy, Flexible Joints" and "A full day's supply of glucosamine combined with chondroitin helps keep cartilage lubricated and flexible." Montera v. Premier Nutrition Corp., No. 22-16375, 2024 WL 3659589 (9th Cir. Aug. 6, 2024).
According to the plaintiff, the advertising and labelling of Joint Juice was deceptive because glucosamine and chondroitin have no effect on joint function or pain. The case started as a putative nationwide class, but the district court declined to certify a nationwide class. In the wake of that decision, the plaintiffs filed separate cases, each under the laws of a different state.
The first case to proceed to trial was a class consisting of New York purchasers asserting claims under New York law. Two overlapping New York consumer protection statutes prohibit, in part, "deceptive acts or practices in the conduct of any business" and "false advertising in the conduct of any business." N.Y. Gen. Bus. Law §§ 349, 350.
Of importance to this case, the recovery available under these two statutes varies greatly. Although both permit recovery of actual damages, Section 349 authorizes statutory damages of $50, while Section 350 authorizes statutory damages of $500. Neither statute makes clear if statutory damages are calculated on a per-person or per-violation basis and, for reasons that will become apparent, there is no controlling precedent from the New York state courts that provides an answer.
The jury found in favor of the plaintiff class on both its Section 349 and Section 350 claims, finding in pertinent part that Premier Nutrition "engaged in an act or practice that [was] deceptive or misleading in a material way" and that the class suffered injury as a result. Slip op. at *3. It found that 166,249 units of Joint Juice had been sold in New York during the class period and that actual damages were about $1.5 million, based on the average purchase price. Statutory damages, of course, would be much greater. The class sought statutory damages of more than $91 million, which it reached by multiplying $550 by the number of units sold. Although the district court entered judgment on the jury verdict – rejecting Premier Nutrition's motions to decertify the class and for judgment as a matter of law or a new trial – it agreed with Premier Nutrition that an award of $91 million would be constitutionally excessive based on the standard developed in cases limiting the amount of punitive damages. Accordingly, it awarded damages of about $8.3 million, based on $50 per unit.
Both sides appealed. Premier Nutrition sought reversal, and the class argued that the district court erred in not awarding the full measure of statutory damages based on the measure of $550 per unit. A threshold issue was whether the measure of statutory damages under New York law should be calculated on a "per violation" basis or on a "per person" basis. Unless each member of the class made only one purchase, a per-violation basis will yield greater damages. It is also easier to determine, because one need only look to the number of purportedly offending products sold, instead of trying to figure out how many separate individuals purchased them.
In the absence of controlling precedent from the New York state courts, the U.S. Court of Appeals for the Ninth Circuit had to determine if the New York courts would apply the damages provisions of Sections 349 and 350 on a per-person or per-violation basis. Although the court could have certified the question to the New York Court of Appeals (the highest court in the New York court system), it declined Premier Nutrition's request to do without elaboration in a footnote, slip op. at *16 n.15, and determined the issue itself.
The court began with the text of the statutes, which create private causes of action for persons "injured by reason of any violation" of either statute. It concluded that "the plainest reading of that phrase is that a cause of action arises for each violation." Slip op. at *14. It next reviewed the history and development of Sections 349 and 350. Originally, only the state attorney general could sue to enforce them. In 1980, the legislature amended them to add a private right of action and provide for statutory damages, in part to "encourage private enforcement" and "add a strong deterrent against deceptive business practices." In 2007, it increased the amount of statutory damages available under Section 350 to $500 because the existing limit of $50 was "too low to be effective." Id. The court's review of the history of the statutes similarly pointed toward their authorization of statutory damages calculated on a per-violation basis.
Potentially pointing in the other direction was a peculiarity of New York's code of civil procedure, which prohibits maintaining a case seeking statutory damages as a class action. N.Y. C.P.L.R. § 901(b). At least one purpose of this prohibition would seem to be a way to control a defendant's exposure to class aggregation of statutory damages, suggesting that if such a case did proceed as a class action, the intent of the statute would be best served by not permitting a different mechanism to aggregate damages, i.e., to permit a per-violation calculation. The Ninth Circuit saw things differently, concluding that the unavailability of a class action suggested that statutory damages for violations of Sections 349 and 350 should be calculated on a per-violation basis, because a per-person basis in the absence of a class action would provide only a "meager incentive" that would be inadequate to "accomplish the Legislature's express goal of deterring statutory violations." Id. at *14.
Having rejected Premier Nutrition's challenge to the district court's per-violation calculation of statutory damages, the Ninth Circuit turned to the class's argument that the district court erred by not awarding the full measure of statutory damages ($550 per unit for a total of $91 million). On this issue, the class had the benefit of the Ninth Circuit's intervening decision in Wakefield v. ViSalus, Inc., 51 F.4th 1109 (9th Cir. 2022), which held that the familiar test to determine if punitive damages were constitutionally excessive did not apply to statutory damages. Rather, the standard for statutory damages asks if the award is "extremely disproportionate to the offense and 'obviously' unreasonable." Id. at 1122-23. Given that the intervening Wakefield decision rendered erroneous the district court's analysis based on the test for punitive damages, the Ninth Circuit remanded the case to the district court to apply the test announced in that decision to the statutory damages award based on the jury's verdict.
Conclusion
Readers not familiar with class action jurisprudence might wonder why the plaintiff was able to bring a class action for violation of New York consumer protection statutes as a class action in federal court in California given that the same legislature that enacted these statutes also closed the doors of the New York courthouses to class actions for their alleged violation. Those with a knack for federal civil procedure or experience in the class action field would respond with two words: Shady Grove. Specifically, the U.S. Supreme Court held in 2010 that C.P.L.R. § 901(b) is procedural for Erie purposes and, hence, had no application in federal courts exercising diversity jurisdiction. Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393 (2010). Thus, even though this case could not have been brought as a class action in the New York state courts, Shady Grove means that it could proceed as a class action in federal court in California.
The inability to bring this type of case as a class action in New York state court explains the absence of decisions from the New York state courts addressing the per-violation versus per-person issue. Without the ability to proceed as a class, the New York state courts would be an unfavorable forum for consumer false advertising claims, and plaintiffs' counsel would surely avoid them. Hence, the seemingly odd situation in which an unsettled question of New York law of importance to consumer class action cases is unlikely to be resolved by the New York courts absent certification of the question by a federal court faced with the issue.
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