On February 2, 2016, the Central District of California denied class certification in a claim for false advertising related to the sale of electronic cigarettes. In re NJOY, Inc. Consumer Class Action Litigation, CV 14-428, (C.D. Cal. Feb. 2, 2016). Plaintiffs, a group of consumers, brought suit under the California Consumer Legal Remedies Act, California’s Unfair Competition Law, and Florida’s Deceptive and Unfair Trade Practices Act, alleging that: (1) NJOY engaged in a false and misleading advertising campaign conveying the message that its electronic cigarettes are safer than traditional combustible tobacco cigarettes; and (2) NJOY omitted material information from its packaging, including both an ingredient list and the potential risks associated with certain ingredients.

On August 14, 2015, the Court denied Plaintiffs’ original motion for class certification without prejudice, holding in relevant part that: (1) one of the named plaintiffs lacked standing to assert an omissions claim based on NJOY’s failure to disclose ingredients; (2) Plaintiffs failed to demonstrate that NJOY’s advertising was sufficiently pervasive to warrant a presumption that all members of the class saw advertisements with the alleged implied message that its electronic cigarettes are safer than traditional combustible tobacco cigarettes; (3) Plaintiffs failed to demonstrate that they could prove, on a classwide basis, that NJOY’s failure to warn of the risks of certain ingredients on the packaging was a material omission; and (4) Plaintiffs failed to demonstrate that damages were capable of measurement on a classwide basis. The Court granted Plaintiffs leave to amend.

Plaintiffs then filed an amended motion for class certification, which fared no better. The Court denied Plaintiffs’ amended motion, holding that Plaintiffs failed to demonstrate that damages are capable of classwide measurement. In so holding, the Court rejected three damages models proposed by Plaintiffs’ expert – conjoint analysis, the direct method, and Bayesian hedonic regression – and held that Plaintiffs failed to satisfy the standards set forth in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The Court rejected the proposed conjoint analysis and direct method models because, among other deficiencies, both ignore the price at which NJOY and other e-cigarette manufacturers would be willing to sell their products. Those models focus on the consumer’s subjective valuation and do not permit the Court to calculate the true market price of NJOY e-cigarettes without the purported misrepresentations and omissions. The Court similarly concluded that the proposed Bayesian hedonic regression model is not designed to measure only those damages attributable to NJOY’s misrepresentations and/or omissions. The Court was troubled by the fact that Plaintiffs’ expert himself previously opined that Bayesian hedonic regression is not appropriate in the context of the e-cigarette market because of the immaturity of the market and lack of available pricing data.

For questions and/or comments, please contact Bryan Haynes, at 804.697.1420 or by email.