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Kombucha Mislabeled, Pays Up

A California federal judge on Tuesday granted preliminary approval to an $8.25 million deal struck between consumers and GT’s Kombucha and Whole Foods Market Inc. over mislabeling claims regarding the product’s antioxidant, alcohol and sugar content.

U.S. District Judge Philip S. Gutierrez, after in September denying a prior proposed deal, signed off on this agreement, which in addition to the monetary payout to the class, requires certain labeling changes by Millennium Products Inc., the maker of the carbonated fermented tea drink known as kombucha.

“The maximum settlement amount of $8.25 million … represents approximately 21 percent of the estimated potential recovery, which falls well within the range of possible approval,” the judge wrote.

Jonathan Retta, Kirsten Schofield and Jessica Manire had alleged in a fifth amended complaint that Millennium mislabeled its GT’s Kombucha product by using the term “antioxidant” when the drink allegedly doesn’t contain any; saying the drink was “nonalcoholic” when it actually does contain alcohol; and understating the amount of sugar in the drink.

Their suit was consolidated in November with a related action in which consumers Nina Pedro and Rosalind Lewis alleged that the fermented beverage leaks and can explode due to inadequate packaging and excessive carbonation.

Under the proposed deal, Millennium has agreed to stop ordering and printing labels with the term “antioxidant,” add a warning label that the drink contains naturally occurring alcohol, add a warning label that “contents are under pressure” and that a failure to refrigerate can “increase pressure, causing product to leak or gush,” and also ensure the accuracy of sugar content representation on the labels.

The judge’s order certified the consumer class; appointed Retta, Schofield and Manire as class representatives; appointed Bursor and Fisher PA as class counsel; and also ordered memoranda for the justification of proposed $2,000 incentive awards for the class representatives and for future attorneys’ fees requests.

Between March 2011 and October 2016, Millennium sold nearly 275 million bottles of kombucha to distributors, according to the ruling. The class that was certified Wednesday includes people in the U.S. who purchased one or more of Millennium’s kombucha drinks from March 11, 2011, to the notice date, which could comprise millions of consumers.

The suit harks back to March 2015, when the Beverly Hills, California-based Millennium was named as the sole defendant at the time. It wasn’t until the fourth amended complaint that the plaintiffs added retailer Whole Foods, which sells and distributes GT’s Kombucha in its stores, to the suit.

The complaint ultimately alleged violations of California’s Consumer Legal Remedies Act, Unfair Competition Law and False Advertising Law; New York’s Deceptive and Unfair Trade Practices Act and General Business Law; and other claims including fraud and unjust enrichment.

Judge Gutierrez in September denied preliminary approval of an earlier settlement deal due to, among other things, the relationship between the amount of the settlement fund and alleged harm suffered by class members.

He had also expressed concern over the disparity in value between the cash and voucher options in terms of the award to be distributed to class members. In the current deal, the cash award was upped to $3.50 for each purchased product, and a voucher is assigned the equivalent value.

The judge noted that since the maximum recovery at trial could amount to $38 million, the $8.25 million deal here falls within the range of approval, “in particular considering the risks and expenses associated with continued litigation.”

Representatives for Millennium, Whole Foods and the consumer class didn’t immediately respond to requests for comment Wednesday.

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