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Not Your Everyday Grind: Seventh Circuit Panel Reverses Class Certification Denial in Keurig Competitor Case

In a decision reflecting what could be interpreted as receptivity to consumer class actions - or at least a favorable disposition toward class certification requests - the Seventh Circuit recently issued a decision reversing both the lower court's denial of class certification and its issuance of summary judgment against individual plaintiffs.

The plaintiffs in Suchanek v. Sturm Foods, Inc., alleged that defendants Sturm and Treehouse Foods, Inc. - in an effort to exploit the market for Keurig Cup-compatible coffee pods before Keurig's patent on its K-Cup filter technology expired - passed off instant coffee as high-quality drip coffee to consumers. According to the suit, defendants deliberately designed the packaging (and pricing) to make consumers believe that the product was drip coffee, roughly comparable to that sold by Keurig. Instead, the pods contained only a miniscule amount of non-soluble coffee; the rest was instant coffee, offered at drip prices. Citing a variety of state consumer protections laws, the plaintiffs' complaints alleged that consumers were misled by defendants (operating under the name Grove Square Coffee), believing that they were buying high-quality, K-Cup-compatible ground coffee.

Although the district court denied class certification on the theory that the putative class lacked commonality, the Seventh Circuit panel reversed the district court's decision, based on what the panel viewed to be common issues of whether class members were misled by the pods' packaging. According to the panel, the district court relied on a variety of factors (such as the packaging's evolution over time) in finding that class members lacked common issues sufficient to support certification. In the panel's view, however, the district court erred in ignoring the fundamental allegation that despite their differences, all members of the proposed class were allegedly misled by defendants' representations. A fair interpretation of this reasoning is that the panel did not view the new packaging as in any way "corrective."

The panel did not hold that class certification was necessarily proper, only that the district court erred in its certification analysis: "The question whether the GSC packaging was likely to mislead a reasonable consumer is common to the claims of every class member. (Note that this is an objective question, not one that depends on each purchaser's subjective understanding of the package.) The district court abused its discretion in failing to recognize that this question satisfied the commonality requirement of Rule 23(a)(2)." While the panel recognized that commonality and predominance can be an involved inquiry, the panel intimated that the district court had improperly ducked the question rather than engaging in a "rigorous analysis" of whether common issues prevailed over individual issues such that class certification was an appropriate mechanism. As the panel observed: "Every consumer fraud case involves individual elements of reliance or causation. ... [A] rule requiring 100% commonality would eviscerate consumer-fraud class actions." The panel plainly interpreted the standard applied by the district court to be unreasonably high, even though individual reliance issues frequently can and do operate to defeat class certification.

The panel also concluded that the district court erred in awarding summary judgment against the named plaintiffs on the basis that the packaging was not, in fact, misleading. Determinations as to whether packaging is misleading are generally issues better left to juries, and here, the panel observed, the district court was cursory in rejecting the plaintiffs' individual claims, essentially disregarding their evidentiary submissions.

By itself, the case is by no means reason for defense counsel to view the Seventh Circuit as a hostile forum, but recent signals from the circuit haven't exactly been encouraging. A year to the day before the August 2014 Sturm decision, Judge Richard Posner (known for his economics-based approach rather than for an overly solicitous attitude toward plaintiffs) issued an opinion in Butler v. Sears, Roebuck & Co. reinstating a class certification decision against Sears in consumer washing-machine class action litigation after the U.S. Supreme Court remanded the case to the appellate court for reconsideration after its decision in Comcast v. Behrend. In both decisions, the panels expressed their disinclination to allow the intrinsic obstacles to commonality stand in the way of an exacting determination as to common issues and as to the relative merits (and drawbacks) of the class action vehicle. As Judge Posner stated in Butler, "An issue 'central to the validity of each one of the claims' in a class action, if it can be resolved 'in one stroke,' can justify class treatment," even if there are many other individualized issues that will need to be dealt with. Whether plaintiffs will view this latest authority as an invitation to bring more proposed class actions in the Seventh Circuit remains to be seen.

This client alert is a publication of Loeb & Loeb LLP and is intended to provide information on recent legal developments. This client alert does not create or continue an attorney client relationship nor should it be construed as legal advice or an opinion on specific situations.