A recent class action in Wisconsin alleged that the defendant marketed its dog food as being natural and of high-quality and sold them at a premium price, when their advertisements were misleading at best—meaning that the products’ price was unfairly inflated.
Defendants filed a motion for summary judgment, seeking dismissal of the entire case, and Plaintiff filed his own motion for class certification. The parties also moved to exclude the opinions of experts pursuant to Federal Rule of Evidence 702 and Daubert. Judge Stadtmueller addressed Defendants’ motion to exclude two of Plaintiff’s damages experts, a survey expert and an economist. The judge noted that his decision was pivotal to the case and could drastically change the parties’ approaches to the litigation moving forward.
Rule 702 provides that parties may propound opinion testimony from a witness if that witness is qualified as an expert by way of knowledge, skill, or experience. Put another way, the Court “must determine whether the witness is qualified; whether the expert’s methodology is scientifically reliable; and whether the testimony will assist the trier of fact to understand the evidence or to determine a fact in issue,” the judge explained, quoting a decision from the Seventh Circuit.
Plaintiffs’ survey expert was a specialist in creating and conducting surveys. In this case, he was hired to conduct two. The first, called the damages survey, was aimed to test how consumers’ purchasing decisions would change when the allegedly misleading statements on Defendants’ product packaging were corrected. The offending statements, which included the phrases “Biologically Appropriate,” “Fresh Regional Ingredients,” and “Never Outsourced,” are referred to as “BAFRINO.”
The damages survey began by showing respondents unaltered photos of two bags of Defendant’s dog food. It then revealed zero to eight “corrective statements” which, as the name implies, were designed to correct the misleading nature of each BAFRINO statement. The survey expert founded the statements’ content in either governmental sources or information obtained from Defendant.
After reading the packages and seeing the corrective statements, respondents were questioned to whether they’d owned a dog at all. If they did, they were then asked at what price they’d purchase the products—whether at above or below market price. The survey expert determined that those who saw more corrective statements were less willing to pay the market price of the products, and those who saw one statement thought they would pay 10% less, and those who read all eight would pay almost 60% less.
The survey expert‘s data was provided to the economist to calculate damages on a class–wide basis. He took the sales figures for the products in Wisconsin for the class period and multiplied them by the diminution-in-value percentage obtained from respondents who’d seen seven or eight of the corrective statements. The economist determined that the class damages—namely their over payment to Defendant based on the unjustified premium price they were charged—to be roughly $9 million.
The second survey tested consumers’ reaction to the potential presence of pentobarbital in the products. It was conducted similarly to the damages survey, except survey expert concluded that there was no need to analyze diminution-in-value—it’s illegal to sell pentobarbital-laced dog food. The economist calculated that consumers would be entitled to approximately $2.25 million as a full refund for the purchase price of the products which had a risk of pentobarbital.
Judge Stadtmueller concluded that survey expert and his survey evidence must be excluded under the Daubert and Rule 702 standards. The judge explained that five of the eight corrective statements applied to allegations regarding heavy metal levels in Defendant’s products. The judge had already dismissed the heavy metal allegations in deciding Defendant’s motion to dismiss. Plaintiff nevertheless re-pleaded comparable allegations in his amended complaint. Plaintiff’s only avenue to bring heavy metals back into this case, the judge opined, was a successful appeal reversing his decision on the motion to dismiss. Plaintiff’s defiance of the judge’s orders “is neither advisable nor an effective strategy,” Stadtmueller wrote.
The judge noted that even if the survey were not entirely inadmissible, the portions relating to heavy metals would certainly be excluded.
Beyond this concern, Judge Stadtmueller detected four major flaws in the survey itself. First and foremost, it failed to actually test Plaintiff’s theory of the case. In the motion to dismiss, the judge observed that certain theories may be viable in this case, including that the food was rendered dangerous by the alleged contaminants, or that the food was over-priced in comparison to other pet foods which had greater or lesser concentrations of contaminants. But in his brief, Plaintiff rejected both of these.
Plaintiff’s claims in this case involved false and/or misleading statements made by Defendant on the labels and packaging of its dog food. These claims exclusively relate to the quality—not the safety—of the dog food, Judge Stadtmueller explained. Specifically, Plaintiff’s complaint didn’t allege that the dog food was unsafe. There were no allegations claiming physical harm to any pet caused by the dog food, and there were no allegations related to any competitor’s marketing. Nor should it, the judge said.
The judge explained that this was “a straightforward consumer protection case brought on behalf of consumers who relied on [Defendant’s] direct and specific promises that the dog food was biologically appropriate, made with fresh regional ingredients, never outsourced, and natural despite the fact that it has a risk of containing heavy metals, BPA, and pentobarbital as well as non-fresh and non-regional ingredients, thereby paying a premium price.”
Plaintiff established his theory that the foods were advertised as healthful and natural via the BAFRINO statements, but they contained undisclosed levels of contaminants. Making the BAFRINO statements while failing to disclose the contaminants was an attempt to mislead consumers into buying Defendants’ products at a premium price which, in their contaminated state, the products should not command.
“Put simply, Plaintiff feels that the BAFRINO statements improperly inflate the products’ prices. He seeks to recover the difference between his actual purchase price and the price he would have paid had he known the BAFRINO statements were less-than-truthful. This is, in turn, survey expert‘s goal in the Survey.”
However, Judge Stadtmueller found that the survey failed to test the effect of the BAFRINO statements on consumers’ purchasing decisions. To do that, the respondents should have first been shown unaltered bags of food and asked what price they would pay for that product. Next, they should have been shown bags with all of the BAFRINO statements omitted and have the same price question put to them. Plaintiff could further refine the results by removing some but not all of the statements in various combinations. These results would demonstrate the nature and magnitude of the misleading effect of the BAFRINO statements.
Instead, the plaintiff’s survey tested the irrelevant question of how consumers would react knowing what particular contaminants may be present in the products. The judge noted that Plaintiff’s theory did not turn on what is actually in the food or what effect it has on the healthfulness of the products. The sole focus, from the consumer’s perspective, was the misleading effect of the BAFRINO statements. Precisely how those statements are proved to be misleading is an entirely separate matter, Judge Stadtmueller said,
The judge also explained that “Plaintiff’s counsel should not be surprised by the Court’s position” because another of the many identical cases filed by the same set of counsel across the country, one court recently found survey expert‘s damages model “wholly deficient.” The decision’s logic mirrors that of this case, the judge said…that the corrective statements don’t align with Plaintiff’s theory of the case. And while Plaintiff’s counsel had the benefit of the other court’s decision for some time, the judge found that they made no effort to reevaluate their use of survey expert‘s testimony in this case or otherwise buttress their damages theory.
The survey’s second error was that it relied on the flawed notion that any choice of wording for the corrective statements could actually “correct” the misleading effect of the BAFRINO statements. “Language does not work that way…” the judge wrote.
The “corrective” statements were not a neutral explanation of the presence of contaminants in the products. Instead, they were “supremely provocative, intentionally preying upon consumers’ fears of harm to their pets.”
Thus, even if the judge was incorrect about the synergy between the survey and Plaintiff’s theory of the case, Judge Stadtmueller found that the survey was biased beyond repair.
The third and fourth flaws in the Survey related to its methodology. The survey didn’t even attempt to sample the population which would form a class in this case should one be certified. Plaintiff’s third amended complaint asked the judge to certify a class of Wisconsin residents who purchased Defendant’s products in Wisconsin from July 2013 to the present. Instead, the survey was targeted to a broad population consisting of all American adults. Out of the almost seven thousand people surveyed, less than 1% actually fell within the proposed class. Many of the respondents didn’t even own a dog or had ever purchased dog food. Among the dog-owners, there was no focus on those who would actually be in the market for Defendant’s premium-priced products. And as to those who did purchase those products, only a few hundred did so in the relevant time frame. The survey came nowhere close to obtaining a significant sample of the population harmed by Defendant’s BAFRINO alleged lies, the judge said, “and who would stand to recover if the class was certified.”
The final issue with the survey is the lack of a meaningful control group. The survey expert claimed that it contained multiple control groups, one for each corrective statement. Further, he claimed that among all of the random showings of the corrective statements, about half of respondents saw any particular statement, and half did not. As a result, Judge Stadtmueller held that these groups could be used as test and control groups for each statement. But two flaws were apparent in this design, the judge said. First, given the many problems with the corrective statement approach discussed above, the only true control group would be respondents who saw no corrective statements. Only 23 people, less than 0.5% of respondents, comprise this group. Moreover, even if survey expert had obtained a more sizable control group, he never attempted to analyze that group, or his own “control” groups, to provide context for the survey results. Without a valid control group, Judge Stadtmueller couldn’t conclude that the survey was reliable or helpful to the fact finder.
In light this, the judge excluded the survey expert‘s opinion and his survey evidence. The economist‘s calculations were entirely founded on the survey results. With the exclusion of those results from this case, the economist‘s opinion had to also be excluded, the judge held. Without these two opinions, the parties’ approach to class certification, summary judgment, and the litigation generally will likely be significantly altered, Judge Stadtmueller observed. In light of this, the judge denied the pending motions for summary judgment and class certification without prejudice.
Nonetheless, Defendants’ motion to exclude the opinions of the survey expert and the economist was granted.