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Sciortino v. Pepsico, Inc.

United States District Court, N.D. California

June 28, 2016

STACY SCIORTINO, et al., Plaintiffs,
PEPSICO, INC., Defendant.


          EDWARD M. CHEN United States District Judge


         Plaintiff[1] Mary Hall brought the instant class action based on Defendant PepsiCo's alleged failure to warn consumers that its Pepsi, Diet Pepsi, and Pepsi One soft drinks (collectively, Pepsi products) contained elevated levels of 4-Methylimidazole (4-MeI), in violation of California consumer protection statutes and common law. Docket No. 68 (First Amended Complaint) (FAC) at ¶¶ 1, 7. 4-MeI is a compound formed during the manufacturing of caramel coloring, and is recognized by California as a chemical known to cause cancer. Id. at ¶¶ 16, 24. Plaintiffs' suit was on behalf of all individuals residing in California who purchased Pepsi products. Id. at ¶ 50.

         Pending before the Court is Plaintiff's motion for preliminary approval of the settlement. Docket No. 142 (Mot.). As part of the settlement agreement, the parties have also stipulated to a second amended complaint to create a nationwide class for settlement purposes. Docket No. 142 (Stip.) at 2. For the reasons stated below, the Court GRANTS Plaintiff's motion for preliminary approval.


         A. Litigation History

         On January 23, 2014, Consumer Reports published test results on the presence of 4-MeI in Pepsi products, finding that the amount was in excess of the 29 micrograms allowed per can or bottle and concluding that the results presented health risks to consumers. FAC at ¶ 34. Following the report, several consumers filed substantially similar class action suits alleging that PepsiCo failed to warn consumers of the elevated levels of 4-MeI. The Court consolidated nine actions, and appointed the firms of Pearson, Simon & Warshaw (PSW) and Glancy Binkow & Goldberg (GBG) as interim lead counsel. Docket No. 65 at 1-2. On September 17, 2014, the Court severed from the consolidated cases the Riva v. PepsiCo case, which was a standalone case for personal injury and medical monitoring claims.[2] Docket No. 75.

         On August 25, 2014, Plaintiffs filed an amended complaint alleging violations of Proposition 65 (failure to provide warnings), the Consumers Legal Remedies Act (CLRA) (misrepresentation of the safety, composition, and quality of the Pepsi products), and the Unfair Competition Law (UCL) under the unlawful, unfair, and fraudulent business practice prongs. FAC at ¶¶ 62-90. Plaintiffs sought civil penalties for violation of the Health & Safety Code, damages, restitution, and injunctive relief requiring PepsiCo to "cease and desist from engaging in the unlawful, unfair, and/or deceptive practices alleged in this Complaint." Id. at 19.

         PepsiCo moved to dismiss the amended complaint, arguing that: (1) Plaintiffs failed to comply with Proposition 65's mandatory notice provisions before filing suit; (2) the federal Food, Drug, and Cosmetic Act (FDCA) and the Food and Drug Administration's (FDA) regulations preempt the state law claims; and (3) the Court should not adjudicate the action because the FDA has primary jurisdiction over the subject matter of the suit and because there was a pending Proposition 65 action in state court. Docket No. 105 (Order on Motion to Dismiss) (Ord.) at 3.

         The Court denied PepsiCo's motion to dismiss Plaintiff Hall's Proposition 65 claims, but granted the motion to dismiss Ibusuki's Proposition 65 claim, although it noted that the dismissal had little practical effect as Hall could proceed as the named plaintiff for the Proposition 65 claim. Id. at 14. The Court also found that there was no preemption, and further declined to dismiss or stay the action under a theory of primary jurisdiction. Id. at 30-31, 37. The Court declined to stay on the basis of abstention, finding that the pending state action Center for Environmental Health v. Pepsi Beverages Co. only alleged a Proposition 65 claim and sought civil penalties, but did not allege any UCL or CLRA claims or seek restitution and monetary damages. Id. at 42-43.

         In September 2015, the parties stipulated to continuing the pending deadlines in order to pursue settlement. Docket No. 124. The parties participated in mediation before Judge Ronald M. Sabraw on November 3, 2015. Docket No. 142-1 (Warshaw Dec.) at ¶ 9. The parties did not settle the case at the time, but continued having settlement discussions over the next several months before entering into the Settlement Agreement now before the Court. Id.

         B. Settlement Agreement

         The settlement class is defined as:

All individuals in the United States and all U.S. territories (including, but not limited to, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, and the other territories and possessions of the United States), who purchased one or more of the Products from January 1, 2010, until the date of the preliminary approval of the settlement of this litigation.

Warshaw Dec., Exh. 1 (Settlement Agreement) at ¶ 4.3.

         The settlement does not involve any monetary payment; instead, it consists of "mandatory, non-opt-out, nationwide injunctive relief pursuant to Federal Rule of Civil Procedure 23(b)(2) by way of modification of the ingredients for the Products as set forth in this Settlement Agreement." Settlement Agreement at ¶ 5.1. Primarily, PepsiCo agrees to require its caramel coloring suppliers to meet certain 4-MeI levels in products shipped for sale in the United States, ensuring the 4-MeI concentration levels will not exceed the level of 100 parts per billion, and to test the covered products pursuant to an agreed protocol. Mot. at 5. This injunctive relief is the same that PepsiCo already agreed to in the state court action, Center for Environmental Health v. Pepsi Beverages Co., which was settled in 2015 Id. at 4. However, the Settlement Agreement will "enhance the CEH settlement by: (1) expanding the geographic scope of the stipulated injunction from California to nationwide; (2) increasing the duration of the injunctive relief from three years to five years." Id. (original emphasis omitted).[3]

         In exchange for the injunctive relief, the settlement class releases the following claims:

any and all claims for injunctive and/or declaratory relief of any kind or character -- whether matured or unmatured, now known or unknown, liquidated or unliquidated, preliminary or final, at law or in equity, whether before a local, state, or federal court, or state or federal administrative agency, commission, arbitrator(s) or otherwise -- that the Settlement Class Members now have or may have, from the beginning of the Class Period up until and including the Effective Date, based on or relating in any way to the alleged presence of, or labeling for, 4-MEI and/or caramel color in any Products.

         Settlement Agreement at ¶ 1.16. There is no release of any damages claims. See Settlement Agreement at ¶ 8.3.1 ("Settlement Class Members will not release claims for personal injury, wrongful death, or damages, and for that reason no notice or opt-out right is required."), ¶ 8.6.


         A. Certification of the Settlement Class

         The Court's "threshold task is to ascertain whether the proposed settlement class satisfies the requirements of Rule 23(a) of the Federal Rules of Civil Procedure applicable to all class actions, namely: (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). In addition, the ...

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