In Rusoff v. The Happy Group, Inc., No. 24-7706, the Ninth Circuit reversed the district court’s decision to certify a class of consumers alleging that the “free range” and “pasture raised on over 8 acres” labels on the defendant’s egg cartons were deceptive because the defendant allegedly failed to comply with dominant industry standards for pasture-raised eggs. The district court had certified New York and California classes under Rule 23(b)(3), finding that two elements of the states’ respective consumer protection laws—materiality and damages—were common issues that predominated. The district court, however, concluded that deception was not a common issue, and plaintiffs failed to make the required showing to support their theory. On interlocutory appeal under Rule 23(f), the Ninth Circuit held that the district court erred in certifying the classes based on its materiality and damages findings alone: “the lack of a classwide showing on deception cannot be overcome by supposedly common issues of materiality and damages that are unmoored from any classwide showing of actionable wrongdoing.”
This case is important for defendants who face lawsuits involving factually accurate advertising claims that are alleged to be misleading based on consumer interpretation. In Rusoff, the plaintiffs’ theory was that the “pasture raised on over 8 acres” label was deceptive because the defendant failed to comply with dominant industry standards. Accordingly, the Ninth Circuit framed the issue as follows: “whether the ‘pasture raised’ labeling is at odds with the industry standard, and whether a reasonable consumer would be deceived into thinking that ‘pasture raised’ conveyed adherence to such a standard.” The plaintiffs failed to show that there was a single or dominant industry standard for the phrase “pasture raised” and that a consumer would perceive the phrase to mean compliance with that standard. The plaintiffs supported their theory with two experts: one who opined on industry standards and another who conducted a consumer perception survey. The district court excluded the opinion about industry standards under Daubert as unreliable, and without that opinion, the other opinion alone was insufficient to establish classwide deception.
The Ninth Circuit’s decision underscores the importance of Daubert scrutiny at the class certification stage. When a key expert is excluded for unreliable methodology, the evidentiary gap can be fatal to predominance under Rule 23(b)(3), and plaintiffs cannot sidestep the deception element by relying on other common issues.