Two Federal Courts Grant Dismissal of Consumer Fraud Claims in Food and Beverage Cases
This seems to be turning into food and beverage week at Ye Olde Consumer Class Actions Blogge. First, we had our Tort Twits suing Yoo-hoo out the ying-yang. And now these two decisions, which demonstrate a judicial willingness -- even on a motion to dismiss -- to employ some common sense and dismiss claims that obviously fail to plead a plausible fraud.
The first decision -- Werberl v. Pepsico, Inc., 2010 WL 2673860 (N.D. Cal. July 2, 2010) -- was covered earlier this week by Sean Wajert over at Mass Tort Defense. I won't completely rehash the case here, other than to note that Werberl is an excellent example of a jurist who does not feel compelled to check her brain at the door when adjudicating Rule 12 motions. In Werberl, plaintiff alleged that the packaging for Cap'n Crunch's Crunch Berries cereal -- which is delicious and was a favorite of mine growing up -- is deceptive because the name and the pictures lead one to believe that it has actual berries in it when it does not. Of course, anyone who has ever seen a box of Crunch Berries knows that this allegation is pure horse puckey. (As does anyone who has actually tasted the cereal.)
Many judges faced with such a ridiculous theory still might hesitate to dismiss such claims pled under California's pro-plaintiff Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law. They might be tempted to allow some discovery, or say the theory presents a jury question. But not Judge Saundra Brown Armstrong! She began her analysis by noting that although the question whether a business practice is deceptive is generally a question of fact not suitable for resolution in a motion to dismiss, "where a court can conclude as a matter of law that members of the public are not likely to be deceived by the product packaging, dismissal is appropriate." Id. at *3.
She then looked to the facts pled in the putative class action to conclude as a matter of law that there was no deception here:
[T[here are no pictures or images of any berries or any other fruit depicted on the Cap'n Crunch cereal box. Nor are there any representations that the cereal is made with real fruit or is nutritious. Rather, the Crunch Berries -- which are not fruit -- are described as a "SWEETENED CORN & OAT CEREAL" and shown as brightly-colored balls of cereal that no reasonable consumer would believe are made from real berries. . . . [T]here simply is nothing in the Cap'n Crunch packaging that would lead a reasonable consumer to believe that the brightly-colored cereal balls depicted on the product cover and described as Crunch Berries are, in fact, made or derived from berries or fruit.
Id. at *4. Accordingly, the court dismissed the UCL, CLRA, and FAL claims. It also dismissed the intentional misrepresentation claims for lack of a misrepresentation and because any reliance by the consumer to conclude that the cereal had real berries would be unreasonable per se. The court also dismissed the breach of express and implied warranties as frivolous because there was no express or implied representation on the packaging that Crunch Berries contain real fruit. The court even refused to grant leave to amend the complaint because no amendment could cure the fact that the packaging was not deceptive as a matter of law.
Judge Armstrong's analysis is an excellent example of a court that -- faced with a motion to dismiss a ridiculous claim -- was not hamstrung by the rules to avoid applying basic common sense to a consumer fraud claim. We need more judges like that.
The second opinion I wanted to share in today's post was Mason v. The Coca-Cola Co., 2010 WL 2674445 (D.N.J. June 30, 2010). In Mason, the plaintiffs brought a putative nationwide class action against Coca-Cola alleging that Diet Coke Plus was misleading under federal and state law because "'the term "Plus" connotes a more robust amount of vitamins and minerals in the product when, in fact, that was not the case at all.'" Id. at *1.
The defendant began by invoking the primary jurisdiction doctrine and federal preemption to dismiss the claims. The court wasn't buying it. As for primary jurisdiction, the court concluded that the lawsuit asked the court to do what courts routinely do: apply federal regulations. Indeed, the court said that "[a]t its heart, this case calls for the determination of whether Plaintiffs received what they bargained for." Id. at *2.
The court also rejected the defendant's express preemption and conflict preemption arguments. It quickly dispatched the express preemption argument, reasoning that plaintiffs were simply seeking a state law remedy for a violation of federal labeling requirements, and this was not expressly preempted by the Food, Drug and Cosmetics Act. As for conflict preemption, the defendant argued that the FDA had established a regulation defining use of the term "Plus," and if the state law claim were allowed to proceed, it might result in a conflicting definition. The court strongly rejected this argument, reasoning:
Were the Court to permit the application of implied conflict preemption in this case, it would turn regulatory definitions such as 21 C.F.R. sec. 101.54(e) into suits of armor capable of immunizing parties who mislead the public from any potential civil liability, even before it is determined whether the party complied with the definition. Congress could not have intended such a perverse result when it granted the FDA authority to regulate in this area.
Id. at *4.
But once the court moved to an analysis of plaintiffs' causes of action, it applied basic common sense to conclude that plaintiffs had failed to plead consumer fraud. In analyzing the claim under the New Jersey Consumer Fraud Act, the court noted that plaintiffs must plead: (1) unlawful conduct, (2) an ascertainable loss, and (3) a causal relationship between the two. The court began its analysis by observing that although plaintiffs say that the term "Plus" connoted more vitamins and minerals than were actually in the product, the actual amount of added vitamins and minerals were listed on the product itself. Indeed, a warning letter sent by the FDA to defendant, which was attached to the complaint, indicated that:
the ingredient list includes the following added vitamins and minerals: magnesium sulfate (declared at 10% of the Daily Value (DV) for magnesium in the Nutrition Facts panel), zinc gluconate (declared at 10% of the DV for zinc), niacinamide (declared at 15% of the DV for niacin), pyridoxine hydrochloride (declared at 15% of the DV for vitamin B6), and cyanocobalamine (declared at 15% of the DV for vitamin B12).
Id. at *6. In light of these disclosures right on the product, the court held that plaintiffs had failed to allege with particularity what further expectations they had for the product or how it fell short of such expectations. Thus, they had failed to plead the first element of an NJCFA claim.
The court held that they also failed to plead the ascertainable loss element of such a claim because they do not plead how what they received was of a lesser value than what they were promised. They bought a tasty beverage, they drank a tasty beverage. They don't allege that they paid more for it than other beverages. And they don't allege that they would not have bought the Diet Coke Plus but for the allegedly fraudulent misrepresentations. Thus, they failed to plead an ascertainable loss under the NJCFA. Id. at *6-*7.
The court held that, for the same reasons, plaintiffs failed to state a claim for negligent or intentional misrepresentation. Id. at *7. And it dismissed plaintiffs' unjust enrichment claim because New Jersey does not recognize unjust enrichment as a separate tort cause of action, and where the underlying tort claims fail, the unjust enrichment claim should be dismissed as well. Id.
Unlike the court in Werberl, the court in Mason gave plaintiffs an opportunity to re-plead their claims. But given the fact that the added vitamins and minerals were fully disclosed on the Nutrition Facts section of the product label, plaintiffs will have a very difficult time pleading anything that could give rise to a fraud or misrepresentation claim.
Taken together, Werberl and Mason provide strong encouragement for courts to throw out consumer fraud claims where the contents of the food or beverage product are apparent from the product's packaging and labeling.
