February 27, 2014
Authored by: Site Default
Two recent district court decisions emphasize that food labeling class action defendants must carefully review complaints to identify what each named plaintiff contends it reviewed and whether the allegedly deceptive statements even affected the named plaintiff’s decision to purchase a product. As you might imagine, plaintiffs often string together unrelated allegations that have nothing to do with their purchases. If a defendant connects the dots and shows just how unrelated those allegations are, you have a much better chance of succeeding early in the case.
The first case involves five gallon bottled water that is municipal tap water that the seller put through a purification process. In The Chicago Faucet Shoppe, Inc. v. Nestle Waters North America, Inc., No. 12 C 08119 (N.D. Ill. 2/11/14), the plaintiff alleged that the defendant failed to disclose that the water is municipal tap water and not natural spring water. After buying the bottles for years, that plaintiff realized it was simply purchasing municipal tap water that underwent a purification process. That defendant apparently referred to “spring water” on its website, invoices, and panels on its delivery trucks. Importantly, it did not include that statement on its labels. That was crucial for purposes of the defendant’s preemption argument. Federal regulations exempt “purified water” from disclosing if the water comes from a community water system. 21 C.F.R. § 165.110(a)(3)(ii) & (a)(2)(iv). In fact, the FDA considered but rejected requiring disclosure for purified water, concluding that consumers purchasing it were more concerned with purity and not the source.
This plaintiff knew it couldn’t force the defendant to add more to its label than federal law required. Instead, it argued that it only wanted the defendant to disclose the source in marketing materials and on invoices. But marketing really is no different than labeling. The federal Food Drug & Cosmetic Act prohibits states from imposing any food labeling that is not identical to a federal standard. Because the federal regulations do not require “purified water” to disclose if it came from a municipal water source, federal law preempted this plaintiff’s claims even though it framed the targeted materials as marketing materials rather than labeling.
You may wonder why the plaintiff did not allege affirmative fraud based on statements on the website and invoices referring to Ice Mountain “spring water.” Indeed, the court wondered the same thing, so it analyzed (and rejected) an affirmative misrepresentation claim even though the plaintiff did not plead it. Of course, the most likely reason that the plaintiff did not pursue an affirmative misrepresentation claim is the near impossibility of getting such a class certified. The court did not touch on that issue, but anyone familiar with consumer fraud class actions certainly recognizes it. If the plaintiff built its case on specific statements on the website or on invoices, it would have to explain how the court could certify a class without getting mired in individual issues of who saw the website, who relied on it, and what other sources of information they possessed. That is why these types of food labeling claims tend to rely entirely on the product labeling as opposed to occasional statements on websites or other places.
The next case is Kane v. Chobani, Inc., No. 12-CV-02425-LHK (N.D. Cal. 2/20/14). This case is familiar to people following food labeling class actions and began in May 2012. Since then, the court has granted various motions to dismiss but allowed that plaintiff more opportunities to plead cognizable claims. At this point, the plaintiff was on her fourth attempt and, thankfully, it is the last one. This case is a little more typical because it is in the Northern District of California and relies on California consumer protection laws. This plaintiff has been pursuing claims falling into two categories. The first relates to Evaporated Cane Juice (“ECJ”); she alleges that ECJ is nothing more than sugar or dried can syrup, so referring to ECJ on the label is misleading and violates federal regulations requiring manufacturers to refer to ingredients by their common and usual names. The second class of claims are “all natural” claims. She alleges that using fruit and vegetable juice and turmeric for color was false and misleading because those are not “all natural.”
One of the most useful portions of this order is its discussion of California UCL claims under that statute’s “unlawful” prong. Some plaintiffs have successfully argued that they need not rely on a labeling statement that is “unlawful”; rather, they only need to plead that it is plausible that a defendant broke a law (typically, a federal food labeling requirement). In fact, a handful of other courts in the Northern District of California have accepted that rationale. But Judge Lucy Koh was having none of it. She reasoned that any UCL named plaintiff must allege that they relied on the offending statement or conduct, even under the “unlawful” prong. This will be a developing area under California consumer fraud law. At some point, the California Supreme Court or the Ninth Circuit will resolve this growing split among lower courts interpreting allegations of “unlawful” conduct and UCL claims. For now, unfortunately, the outcome in such cases may turn on which judge handles a particular case.
The court then analyzed whether this plaintiff actually relied on the alleged misstatements. This really is an interesting portion of the opinion, particularly considering how Judge Koh evaluated the plaintiff’s changing allegations over the course of the case. As to ECJ, the plaintiff initially contended she did not realize that ECJ was just another sweetener. But in other portions of the amended pleading, the plaintiff repeatedly referred to sugar and dried cane syrup interchangeably. Judge Koh did not believe it was plausible that the plaintiff could realize that “dried cane syrup” was a form of sugar, but that “evaporated cane juice” was not. Similarly, the plaintiff earlier sought a preliminary injunction (perhaps an unwise move) and submitted a declaration indicating she would not have purchased the product if she knew it contained “dried cane syrup”; again, this showed she knew that dried cane syrup was the same as sugar. And despite the court’s earlier rulings, this latest pleading failed to explain how the plaintiff could understand that dried cane syrup was a form of sugar but was oblivious to that fact regarding ECJ, particularly considering that she purported to read and rely on the label.
The plaintiff and her counsel suggested that the “cane” in ECJ could have referred to some other type of cane, such as bamboo cane or sorghum cane. But during the hearing on the plaintiff’s preliminary injunction motion (again, probably not a good idea), the plaintiff’s counsel admitted that he does not know what people might think when they see ECJ on a label or whether they may believe it is something other than sugar cane. It was too much for Judge Koh, who found the “which cane is it” argument to be nonsensical.
The plaintiff also tripped over her own allegations because she acknowledged that “fruit juice concentrate” is a well-known added sugar. In light of that admission, it was implausible that the plaintiff thought “evaporated cane juice” was something healthful when she admittedly knew that “fruit juice concentrate” was little more than sugar. Juice was juice from the court’s perspective.
The court then turned to the “all natural” claims that relied on Chobani using fruit or vegetable juice concentrate as coloring. The defendant’s labeling explicitly disclosed that it adds fruit or vegetable juice for color, and the plaintiff purported to read the label. Hoping to salvage this claim, the plaintiff now alleged that the juices added were actually processed, unnatural substances. The court was not impressed. In three prior complaints and several hearings, the plaintiff never before disclosed a theory that the juice concentrate used for coloring somehow was not “natural” due to some unidentified aspect of its processing. It was not enough that the plaintiff alleged the juices were “highly processed unnatural substances far removed from the fruits or vegetables they were supposedly derived from”; that was nothing more than a conclusory statement without any factual support. Judge Koh wanted to know how or why the juices were not natural, and this plaintiff never answered that question despite several opportunities.
Some take away points from Chicago Faucet Shoppe and Kane to consider:
- In terms of substantive law, reliance and the “unlawful” prong of California’s UCL needs clarifying. The Northern District of California likely is the federal court with the greatest volume of such claims, and some of its judges are split on whether a named plaintiff must have relied on the allegedly-unlawful statement.
- Dissect the plaintiff’s allegations and take the court step-by-step to identify: (1) what the plaintiffs actually saw or relied on; (2) what they included in the complaint as “fluff” (e.g., perceived bad facts that didn’t play a role in their purchase); (3) how their allegations may disprove their claims (e.g., they admit elsewhere that a listed ingredient is known to be “unnatural”); (4) conclusory assertions about ingredients that lack factual bases (e.g., something is “unnatural,” but the plaintiff doesn’t describe how or why); and (5) implausible assertions—courts are slowly showing more willingness to recognize that a label didn’t deceive a plaintiff merely because he or she alleged as much.
Food labeling cases continue to be a favorite among the plaintiffs’ class action bar. No doubt, the initial success in surviving motions to dismiss—often followed by quick class-wide settlements—encouraged them. Many courts, however, seem to be taking a closer and more skeptical view of these claims.
James Smith is a member of the Bryan Cave Food and Beverage Team and of the Class and Derivative Action Client Service Group. He is a partner in the firm’s Phoenix office.