On June 30, Davis Polk secured an appellate victory for its client Ferrara Candy Company, the maker of SweeTARTS, in the United States Court of Appeals for the Ninth Circuit. The panel unanimously affirmed approval of a nationwide, injunctive-relief-only class action settlement reached in 2019.
The lawsuit was one of several brought by plaintiffs’ lawyers on behalf of California consumers who purchased products that allegedly contained synthetic malic acid. Plaintiffs claimed that SweeTARTS were misbranded and deceptively marketed on the basis that they contain “No Artificial Flavors.” The complaint sought injunctive relief, restitution and damages on behalf of the class, based on a purported “price premium” that class members paid.
The parties engaged in pre-discovery mediation and reached a favorable settlement, in which Ferrara agreed to implement modifications to product packaging without offering monetary compensation to the class. Under the terms of the settlement, the parties agreed to expand the definition of the class to include consumers nationwide, and class members were required to waive future damages claims. Three individuals, including the director of the Center for Class Action Fairness—a frequent objector to class action settlements—filed objections, including on the grounds that (i) the promised relief did not provide any meaningful benefit to the class as distinct from future purchasers, and (ii) the release of the right to pursue damages claims was improper in the absence of compensation.
After a hearing, the district court overruled those objections and granted approval of the settlement. One of the objectors appealed, again arguing that the settlement provided no meaningful relief and that it is impermissible for a class action settlement to waive the right of class members to pursue damages claims when a settlement affords purely injunctive relief. In its opinion affirming the district court’s decision to approve the settlement, the Ninth Circuit rejected these arguments. The court agreed that the settlement provided value to the class on the ground that purchasers of the SweeTARTS products at issue “tend to be repeat buyers who would derive value from the Settlement’s injunctive relief upon each future purchase.” The court also agreed with our argument that approval of the settlement—including the nationwide release of money damages claims—was consistent with governing Ninth Circuit law.
The Davis Polk litigation team includes partner Neal A. Potischman, counsel Andrew Yaphe and associate Catherine Kennedy. All members of the Davis Polk team are based in the Northern California office.