Montera v. Premier Nutrition Corporation: A Case Study In Aggregate Statutory Damages

• Published date: 16 August 2022
• Subject Matter: Consumer Protection, Litigation, Mediation & Arbitration, Class Actions, Dodd-Frank, Consumer Protection Act
• Law Firm: Jenner & Block
• Author: Alexander Smith and Jenna L. Conwisar

New York's two principal consumer fraud statutes, N.Y. G.B.L. ' 349 and 350, authorize statutory damages of $50 or $500 per violation respectively. In false advertising cases involving low-cost consumer products, these statutes pose the risk that defendants may face hundreds of millions-if not billions-of dollars in exposure if found liable at trial. And while N.Y. C.P.L.R. ' 901(b) seeks to avert this result by prohibiting courts from awarding statutory damages in class actions, the Supreme Court has held that this is a "procedural" rule that does not preclude federal courts sitting in diversity from awarding statutory damages in class actions. See generally Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2009). Since Shady Grove, plaintiffs have routinely used the threat of statutory damages under Sections 349 and 350 to bludgeon defendants into settling false advertising class actions before trial.

That threat materialized in July 2022, however, when a jury in the Northern District of California returned a verdict for the plaintiffs in a certified class action, Montera v. Premier Nutrition Corporation. Although the jury determined that the class had suffered less than $1.5 million in actual damages, the plaintiff nonetheless asserted that the class was entitled to over $91 million in statutory damages. In a result that will inevitably disappoint both plaintiffs and defendants, the Montera court awarded the class only $8.312 million in statutory damages-less than 10% of what the plaintiffs sought, but over five times the amount of actual damages.

In a critical victory for defendants, the court reduced the aggregate amount of statutory damages based on its finding that "the calculated amount of statutory damages . . . is 'so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.'" ECF No. 293 (Damages Order) at 2 (quoting St. Louis I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919)). In so holding, the court rejected the plaintiff's assertions that aggregate statutory damages do not present due process concerns and that courts have no discretion to reduce an aggregate award of statutory damages. But other aspects of the court's ruling-including its decision to calculate statutory damages on a per-product basis and its decision to award statutory damages well in excess of actual damages-illustrate that defendants continue to face a very real threat from aggregate statutory damages.

Background

Montera is one of many cases in the Northern District of California challenging the advertising of a glucosamine supplement called "Joint Juice." Although Premier claimed that Joint Juice was effective at reducing joint pain, the plaintiff alleged that Joint Juice does not relieve joint pain and is worthless. After certifying a class of California consumers in one of the related actions in 2016, the court certified a class of New York consumers in 2019-raising the possibility that these consumers would obtain...