Bailey v. Rite Aid Corporation

Background

Thomas Bailey brought a proposed class action against Rite Aid Corporation based on Rite Aid’s marketing of over-the-counter acetaminophen gelcaps labeled “rapid release.” Bailey alleged that the labeling led consumers to believe the gelcaps worked faster than cheaper Rite Aid acetaminophen tablets, even though the products could be equally effective in the same or a faster period. He alleged that consumers therefore paid a premium and received less value than they paid for.

Bailey asserted claims under California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act, as well as a claim for unjust enrichment. The court had previously dismissed certain warranty claims and a standalone declaratory-relief claim, with permission to amend, and otherwise denied Rite Aid’s motion to dismiss. At this stage, Bailey sought certification under Federal Rule of Civil Procedure 23(b)(3), primarily for damages and restitution, and under Rule 23(b)(2), for prospective injunctive relief.

Class Definition

Bailey initially proposed a class covering all people who purchased the gelcaps in California during the applicable limitations period. At the hearing, he agreed that his theory depended on consumers seeing both the gelcaps and cheaper Rite Aid tablets at physical Rite Aid stores. The court therefore analyzed a narrower class consisting of consumers who purchased the gelcaps at brick-and-mortar Rite Aid stores in California during the class period.

Rule 23(a) Requirements

The court found numerosity satisfied. Rite Aid’s sales data showed more than 600,000 units sold in California from 2014 through 2019, generating more than $4 million in sales, and Rite Aid did not dispute Bailey’s showing.

The court also found commonality. It concluded that common evidence could address whether the “rapid release” statement was likely to deceive a reasonable consumer under the Unfair Competition Law and False Advertising Law, and whether the statement was material under the Consumer Legal Remedies Act. The court relied on evidence concerning product placement, expert Bruce Silverman’s opinions, and testimony from Rite Aid’s corporate representative. It found Rite Aid’s survey less persuasive because its answer choices did not adequately present Bailey’s theory that consumers viewed the gelcaps as faster-acting than the tablets, and its store images did not allow a clear price and label comparison.

The court found Bailey’s claims typical of the proposed damages class. Although Rite Aid argued that Bailey’s dissatisfaction resulted from the gelcaps’ acetaminophen content rather than their release speed, the court held that this did not negate Bailey’s alleged economic injury from paying more than he otherwise would have paid because of the alleged mislabeling. The court separately noted concerns about whether Bailey had standing to seek prospective injunctive relief because his testimony suggested he was unlikely to buy Rite Aid gelcaps again.

The court found the adequacy-of-representation requirement satisfied as to Bailey’s counsel and had no concerns about counsel’s ability to represent the class. But the court’s concerns about Bailey’s possible lack of standing also affected whether he could adequately represent a class seeking prospective injunctive relief.

Rule 23(b)(3) Certification

The court found that common questions predominated for the Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act claims. In particular, common evidence could address whether the “rapid release” statement was likely to deceive and material to reasonable consumers who purchased the gelcaps at physical Rite Aid stores. For the Consumer Legal Remedies Act claim, the court found that this evidence could support an inference of class-wide reliance.

The court denied without prejudice class certification for Bailey’s unjust-enrichment claim because Bailey stated at the hearing that he no longer sought certification of that claim at that point.

The court also found that damages could be measured on a class-wide basis. Bailey proposed a choice-based conjoint analysis to estimate the price premium attributable to the “rapid release” statement, followed by a calculation multiplying that premium by the number of products sold to class members. The court concluded that this model was tied to Bailey’s theory that consumers overpaid because of the alleged misrepresentation and therefore satisfied the requirement that a damages model measure damages attributable to the liability theory. The court also found that the proposed use of actual prices and quantities accounted for supply-side factors.

Rite Aid’s objections to the survey’s hypothetical product choices and possible inaccuracies did not persuade the court that certification should be denied. The court stated that such issues could affect the weight given to the analysis rather than whether damages were capable of class-wide measurement. Rite Aid did not dispute Bailey’s showing on superiority, and the court found that a class action was a superior method of resolving the controversy.

Rule 23(b)(2) Certification

The court denied without prejudice certification of a Rule 23(b)(2) class seeking prospective injunctive relief. The court found that Bailey had not shown he could satisfy typicality and adequacy requirements for that class because his testimony suggested he might not have Article III standing—a constitutional requirement that a plaintiff show a real, ongoing injury—to seek an injunction requiring future changes to Rite Aid’s labeling and marketing. The court stated that Bailey could address standing and typicality in a renewed motion.

Sealing Motions and Disposition

The court found the sealing requests overbroad and concluded that good cause had not been shown to seal information quoted or described in the order. It denied the sealing motions as to that information and otherwise granted the sealing motions for good cause shown.

Judge Yvonne Gonzalez Rogers granted Bailey’s motion for Rule 23(b)(3) class certification as to the Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act claims. The court otherwise denied without prejudice the motion for class certification, including certification under Rule 23(b)(2) and certification for unjust enrichment. The court expressly stated that its certification ruling was not a decision on the merits of Bailey’s claims.