Practice Tip: Constitutional Standing, Numerosity, and the Beer Drinker's Burden

Class action lawsuits filed in multiple states accuse the brewer of adding excess water to the fermented mix late in the manufacturing process, slightly dropping the alcohol content of the beer prior to bottling. The attorneys make a federal case out of what would otherwise be a matter of recipe by arguing that consumers may purchase a Budweiser product with slightly less alcohol than the amount represented on the beer's label. So, presuming AB InBev changed its brewing process to save money, and the savings came at the expense of alcohol content, can the plaintiffs in these cases proceed on behalf of a class of Budweiser drinkers by alleging that AB InBev deliberately decided to leave its labels unchanged?

The answer should be “No,” because any claim would require making an individualized inquiry into each Budweiser buyer's purchase decision, i.e., whether the misstatement of a few tenths of one percent alcohol content would cause the buyer to demand a different price or switch to a different product. If the buyer would have made the exact same purchase at the exact same price even if the stated alcohol content were slightly lower, the buyer has suffered no injury from the alleged misstatement.

This two-part article discusses class action requirements and how this “injury inquiry” affects several class action criteria. Part One herein discusses different lines of reasoning that courts ' particularly in the Ninth Circuit ' have applied to circumvent the highly individualized injury inquiry and certify classes.

Class Certification and the Injury Inquiry

To certify a class action for money damages pursuant to Federal Rule of Civil Procedure 23, the class representative must first satisfy the four requirements of Rule 23(a) ' numerosity, commonality, typicality, and adequacy ' and the additional requirements of Rule 23(b)(3) ' predominance and superiority. Wal-Mart Stores v. Dukes, 131 S.Ct. 2541, 2548-49 (2011). Courts often refer to an overlapping and common-sense requirement that the class be objectively ascertainable; if the court has no means to determine who is in the class, the plaintiff cannot represent the class.

If a plaintiff can make these showings, it brings all the members of the defined class into federal court to seek damages against the common defendant. The class representative will not be allowed to represent the class unless he “possess[es] the same interest and suffer[s] the same injury shared by all members of the class he represents.” Schlesinger v. Reservists Comm. to Stop the War, 418 U.S. 208 (1974) (emphasis added) (citing Ind. Emp't Division v. Burney, 409 U. S. 540 (1973); Bailey v. Patterson, 369 U. S. 31 (1962)) (quoted in Dukes, 131 S.Ct. at 2550).

The Budweiser Cases

In the Budweiser cases, the named representatives, to a person, allege that they were injured when they “purchased AB's malt beverage products in reliance on the representations [regarding alcohol content] contained on AB's labels.” See, e.g., Richardson v. Anheuser-Busch Cos., LLC, 1:13-cv-00506, Dkt. No. 1 at 2 (D. Colo. Feb. 1, 2013).

But the plaintiffs cannot establish through direct evidence that absent class members purchased their particular Budweiser for a particular price in part because of the label's stated alcohol content. So it would seem that class certification is inappropriate for multiple reasons ' for example, predominance (the injury inquiry will predominate over any common questions), and ascertainability (it is impossible to determine who is in the class if not every purchaser).

Courts Circumventing the Injury Inquiry Based on State Law

Courts nonetheless have circumvented these problems and certified “mislabeling” class actions despite the injury inquiry by following a few different lines of reasoning. First, some courts have concluded that the injury inquiry is not an obstacle to class certification because some state consumer protection laws do not require a showing of reliance ' “injury irrelevant” reasoning. See, e.g., In re Tobacco II Cases, 46 Cal. 4th 298, 320 (2009) (noting that in California “courts repeatedly and consistently ' hold that relief under the [California unfair competition law] is available without individualized proof of deception, reliance and injury”).

Second, courts have concluded that “[e]ach alleged class member was relieved of money in the transactions”' constituting injury without regard to whether the plaintiff got exactly what it bargained for ' “commerce is injury” reasoning. Stearns v. Ticketmaster Corp., 655 F.3d 1013, 1021 (9th Cir. 2011), cert. denied, 132 S. Ct. 1970, 182 L. Ed. 2d 819 (2012); see also Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 595 (9th Cir. 2012) (noting that the commercial-transaction-qua-injury is “not a simple or a clear cut matter” but following the reasoning “in the light of our prior precedent”; citing Stearns).

Third, courts have held that “when the same material misrepresentations have actually been communicated to each member of a class, an inference of reliance arises as to the entire class” ' “presumed injury” reasoning. Mazza, 666 F.3d at 595 (majority noting that California law allows potential presumption of reliance where misrepresentation is “uniformly made” to consumers, but holding that misrepresentations at issue were not uniformly made); id. at 597 (Nelson, J. dissenting) (recognizing same California law on presumption of reliance, citing Vasquez v. Super. Ct., 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964, 973 n. 9 (1971) and Tobacco II).

By reasoning: 1) that injury is irrelevant under state law; 2) that everyone is injured in every economic transaction regardless of the particular circumstances of their purchase; or 3) that under state law each potential class member can be presumed to have been injured by a manufacturer's mislabeling, the courts circumvent any obstacle the injury inquiry would present to class certification.

Conclusion

Next month, Part Two of this article will discuss constitutional standing and the often-neglected numerosity requirement for class certification, which should be immune to these lines of reasoning, particularly in an industry as driven by advertising as the beer industry. Finally, the article concludes in the second part that this is not simply a technical legal argument, but rather ensures that the class-action mechanism is actually helping injured consumers, and not simply enriching lawyers ' plaintiff and defense.

Andrew Tuck is a Senior Associate at Alston & Bird LLP with a litigation practice focusing on appeals, class actions, and antitrust matters. In the interest of full disclosure, the author notes that his wife's family runs a Budweiser distributorship.

In 1861, a Hessian named Adolphus Busch, who came to St. Louis, MO in 1857, married Lilly Eberhard Anheuser, the daughter of a local brewer. In the Old Country, Busch's family ran a winery and brewery supply business, and after service in the U.S. Army during the Civil War, Busch began his own brewer's supply store in St. Louis. Eventually, he purchased part of the Anheuser family brewery and, in 1880, renamed the operation the Anheuser-Busch Company ' main product: Budweiser beer.

Busch developed Budweiser after visiting Bohemia with his compatriot Carl Conrad, a liquor importer. The pair were purportedly inspired by the pale lagers brewed since 1245 in the town of Budweis, and sought to market their beer as a lighter alternative in an American beer market dominated by darker brew. Now, almost 150 years after Busch's creation (and more than 750 years after brewing began in Budweis), lawyers claim that the company, now called Anheuser-Busch InBev (AB InBev), has taken the inspiration for paleness too far ' accusing the company of “watering down” its beer.

Class Action Suits

Class action lawsuits filed in multiple states accuse the brewer of adding excess water to the fermented mix late in the manufacturing process, slightly dropping the alcohol content of the beer prior to bottling. The attorneys make a federal case out of what would otherwise be a matter of recipe by arguing that consumers may purchase a Budweiser product with slightly less alcohol than the amount represented on the beer's label. So, presuming AB InBev changed its brewing process to save money, and the savings came at the expense of alcohol content, can the plaintiffs in these cases proceed on behalf of a class of Budweiser drinkers by alleging that AB InBev deliberately decided to leave its labels unchanged?

The answer should be “No,” because any claim would require making an individualized inquiry into each Budweiser buyer's purchase decision, i.e., whether the misstatement of a few tenths of one percent alcohol content would cause the buyer to demand a different price or switch to a different product. If the buyer would have made the exact same purchase at the exact same price even if the stated alcohol content were slightly lower, the buyer has suffered no injury from the alleged misstatement.

This two-part article discusses class action requirements and how this “injury inquiry” affects several class action criteria. Part One herein discusses different lines of reasoning that courts ' particularly in the Ninth Circuit ' have applied to circumvent the highly individualized injury inquiry and certify classes.

Class Certification and the Injury Inquiry

To certify a class action for money damages pursuant to Federal Rule of Civil Procedure 23, the class representative must first satisfy the four requirements of Rule 23(a) ' numerosity, commonality, typicality, and adequacy ' and the additional requirements of Rule 23(b)(3) ' predominance and superiority. Wal-Mart Stores v. Dukes , 131 S.Ct. 2541, 2548-49 (2011). Courts often refer to an overlapping and common-sense requirement that the class be objectively ascertainable; if the court has no means to determine who is in the class, the plaintiff cannot represent the class.

If a plaintiff can make these showings, it brings all the members of the defined class into federal court to seek damages against the common defendant. The class representative will not be allowed to represent the class unless he “possess[es] the same interest and suffer[s] the same injury shared by all members of the class he represents.” Schlesinger v. Reservists Comm. to Stop the War , 418 U.S. 208 (1974) (emphasis added) (citing Ind. Emp't Division v. Burney, 409 U. S. 540 (1973); Bailey v. Patterson , 369 U. S. 31 (1962)) (quoted in Dukes , 131 S.Ct. at 2550).

The Budweiser Cases

In the Budweiser cases, the named representatives, to a person, allege that they were injured when they “purchased AB's malt beverage products in reliance on the representations [regarding alcohol content] contained on AB's labels.” See, e.g., Richardson v. Anheuser-Busch Cos., LLC, 1:13-cv-00506, Dkt. No. 1 at 2 (D. Colo. Feb. 1, 2013).

But the plaintiffs cannot establish through direct evidence that absent class members purchased their particular Budweiser for a particular price in part because of the label's stated alcohol content. So it would seem that class certification is inappropriate for multiple reasons ' for example, predominance (the injury inquiry will predominate over any common questions), and ascertainability (it is impossible to determine who is in the class if not every purchaser).

Courts Circumventing the Injury Inquiry Based on State Law

Courts nonetheless have circumvented these problems and certified “mislabeling” class actions despite the injury inquiry by following a few different lines of reasoning. First, some courts have concluded that the injury inquiry is not an obstacle to class certification because some state consumer protection laws do not require a showing of reliance ' “injury irrelevant” reasoning. See, e.g., In re Tobacco II Cases, 46 Cal. 4th 298, 320 (2009) (noting that in California “courts repeatedly and consistently ' hold that relief under the [California unfair competition law] is available without individualized proof of deception, reliance and injury”).

Second, courts have concluded that “[e]ach alleged class member was relieved of money in the transactions”' constituting injury without regard to whether the plaintiff got exactly what it bargained for ' “commerce is injury” reasoning. Stearns v. Ticketmaster Corp. , 655 F.3d 1013, 1021 (9th Cir. 2011), cert. denied, 132 S. Ct. 1970, 182 L. Ed. 2d 819 (2012); see also Mazza v. Am. Honda Motor Co., Inc. , 666 F.3d 581, 595 (9th Cir. 2012) (noting that the commercial-transaction-qua-injury is “not a simple or a clear cut matter” but following the reasoning “in the light of our prior precedent”; citing Stearns ).

Third, courts have held that “when the same material misrepresentations have actually been communicated to each member of a class, an inference of reliance arises as to the entire class” ' “presumed injury” reasoning. Mazza , 666 F.3d at 595 (majority noting that California law allows potential presumption of reliance where misrepresentation is “uniformly made” to consumers, but holding that misrepresentations at issue were not uniformly made); id . at 597 (Nelson, J. dissenting) (recognizing same California law on presumption of reliance, citing Vasquez v. Super. Ct. , 4 Cal.3d 800, 94 Cal.Rptr. 796, 484 P.2d 964, 973 n. 9 (1971) and Tobacco II).

By reasoning: 1) that injury is irrelevant under state law; 2) that everyone is injured in every economic transaction regardless of the particular circumstances of their purchase; or 3) that under state law each potential class member can be presumed to have been injured by a manufacturer's mislabeling, the courts circumvent any obstacle the injury inquiry would present to class certification.

Conclusion

Next month, Part Two of this article will discuss constitutional standing and the often-neglected numerosity requirement for class certification, which should be immune to these lines of reasoning, particularly in an industry as driven by advertising as the beer industry. Finally, the article concludes in the second part that this is not simply a technical legal argument, but rather ensures that the class-action mechanism is actually helping injured consumers, and not simply enriching lawyers ' plaintiff and defense.

Andrew Tuck is a Senior Associate at Alston & Bird LLP with a litigation practice focusing on appeals, class actions, and antitrust matters. In the interest of full disclosure, the author notes that his wife's family runs a Budweiser distributorship.