Wednesday, August 31, 2016

Demand letters under consumer protection statutes should not be ignored and may, in limited instances, offer a way to head off significant litigation. For instance, in Demmler v. ACH Food Companies, Inc., Case No. 15-13556 (D. Mass. Jun. 9, 2016), a federal judge dismissed the plaintiff’s purported class action after finding that the defendant had paid plaintiff more than he could individually recover even though the check was never cashed.

Demmler, individually and on behalf of a purported class, sued ACH Food Companies, Inc. (“ACH”) under Massachusetts law, alleging that ACH’s Weber BBQ sauces were deceptively labeled and advertised as “All Natural” because they contained caramel color. Demmler’s action sought money damages but not an injunction, presumably, because ACH had already stopped making “All Natural” claims by the time Demmler initially contacted them.

Before filing suit, Demmler’s attorney sent ACH a Demand for Relief seeking, both individually and for the class, “actual damages (of the greater of money spent on Product purchases or statutory damages of $25), modification of the Products’ labeling, and reimbursement for costs and attorneys’ fees.” In response, ACH sent a $75 check, which notably had no conditions or restrictions. Instead, ACH only characterized the check as “the extent of [ACH’s] willingness to compromise in the circumstances.” Demmler’s attorney rejected the check as inadequate because it only provided relief to Demmler and did not provide relief for the class. After a further exchange of letters and after Demmler filed suit, ACH sent Demmler a second, unconditional $75 check that was certified and claimed that the suit was moot. Demmler’s attorney again rejected the check.

ACH moved to dismiss the case as moot by arguing the $75 check effectively provided more relief than the court could provide and pointed out that the $75 represented three times the amount of statutory damages available to Demmler or, alternatively, the cost of 20 bottles of sauce. After evaluating all factors, the court determined that Demmler’s personal claim was moot for the reasons asserted by ACH. Of particular importance to the Court was the fact that ACH had made the check available without restrictions and conditions, such that Demmler was not required to cash the check, or even accept it, to have obtained all the relief individually available to him. Thus, the court determined that Demmler had no claim to judgment and therefore his action was moot. Further, the court found that Demmler’s claim for a share of the potential attorneys’ fees as well as his unsupported claim to sharing litigation expenses were insufficient to keep his claim alive. The court therefore granted ACH’s Motion to Dismiss and dismissed the case.

In granting ACH’s Motion to Dismiss, the court also dismissed the purported class action. The court found that because Demmler’s claim was moot, there was no basis to proceed with the class claim, especially as no motion to certify the class had been filed prior to ACH’s tendering of the check. The Court observed that there was no evidence that companies generally, or ACH in particular, tendered such payments in an effort to moot any such challenge to food labeling or advertising.

The Demmler case shows that creative responses to demand letters may prevent further litigation. However, ACH’s success in this case may be a result of the specific facts, including the fact that ACH had already ceased making the challenged “All Natural” claim before receiving the demand letter.