Thursday, April 14, 2011
Mission inedible: dip lawsuit proceeds
In this putative class action, plaintiffs sued defendants over their Mission Guacamole and Mission Spicy Bean Dip, alleging violations of California’s UCL, FAL, and CLRA. The alleged falsehoods: (1) "0 g transfat" (both); (2) "With Garden Vegetables" (guacamole); (3) " 'Guacamole' made in 'The Authentic Tradition'"; (4) "0 g cholesterol" (bean dip); and (5)"All Natural" (bean dip). Plaintiffs alleged that the products contain "substantial and dangerous levels of artificial transfat," a substance linked to cardiovascular disease, diabetes, and cancer.
The court first found that plaintiffs had sufficiently alleged standing, because they alleged they were deceived by the labels and would not have bought the products otherwise, and that they would not have bought the products at the offered price if they hadn’t been misled. They also alleged that, instead of receiving products free of artificial trans fat or authentic guacamole, they bought artificial products that could raise their cholesterol and damage their hearts. This was sufficient injury in fact for Proposition 64, as well as for Article III standing.
Defendant argued that the alleged injury was de minimis, but cited no consumer protection precedent. In the cited ADA case, the defendants fixed the problem very quickly, but here, there’d been no attempt to correct the alleged errors.
In addition, plaintiffs sufficiently alleged actual reliance on the labels, paying more for the products and buying them instead of other brands. The combination of injury in fact and actual reliance also met Article III’s causation requirement.
Defendant argued that plaintiffs lacked standing to seek injunctive relief because they already alleged that they know better now and are not at risk of further injury because they won’t buy the products again, so redressability was absent. The court found this argument unpersuasive. Plaintiffs alleged actual injury, and if the court were to construe the law as narrowly as defendant wanted, “federal courts would be precluded from enjoining false advertising under California consumer protection laws because a plaintiff who had been injured would always be deemed to avoid the cause of the injury thereafter (‘once bitten, twice shy’) and would never have Article III standing.” The court was reluctant to allow an alleged wrongdoer to avoid jurisdiction because, by definition, a plaintiff who’s become aware of the fraud is no longer deceived by it. Given that defendant hasn’t removed its allegedly misleading ads, the claims remain on the supermarket shelves; the policy of California’s consumer protection laws allowed plaintiffs to stand for the class (at least at this stage).
The court held that disgorgement of wrongfully obtained profits was not an available remedy under the FAL, though restitution is.
The court also declined to dismiss the CLRA damages claim. Plaintiffs filed a complaint that didn’t ask for CLRA damages, then provided notice to defendants demanding correction of the alleged falsehoods. The CLRA requires that this notice be given thirty days or more prior to the commencement of an action for damages. Plaintiffs filed a first amended complaint, for the first time asking for CLRA damages, more than thirty days after this notice. The court found that this satisfied the statutory requirements and refused to dismiss the damages claim.
The court then turned to the specific statements at issue. No reasonable consumer relies on puffery, and thus it’s not actionable. “The Authentic Tradition,” both standing alone and in context, is puffery: it’s not specific and measurable or verifiable.
“All Natural,” by contrast, is a factual statement. Construing the complaint in the light most favorable to plaintiffs, the products allegedly contain artificial trans fats, which could be found to be “unnatural.”
Defendant argued that “Guacamole,” in the context of the label and the ingredients list on the package, couldn’t be misleading, because the ingredients "combine to produce a basic guacamole flavor." (Comment: sounds delightful!) However, the court found that the label and the word could deceive a reasonable consumer.
Defendant argued that the real product name is “Guacamole Flavored Dip,” "indicating the product's 'characterizing flavor,' not the presence of actual [avocados or guacamole]."
However, the word GUACAMOLE is twice as large as the smaller “flavored dip” below it. “The label also prominently displays large pictures of avocados on the front of the jar. And the dip itself is green-colored, as would be avocados.” (I will also note that my completely unscientific survey revealed that websites selling the product described it as “Guacamole dip,” meaning that you’d have to read the text in the relatively tiny picture, not the product description, to learn that it was only “flavored.”) California law prohibits misleading ads as well as false ones. Consumers are not expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list. Thus, at this stage anyway, a reasonable consumer could read the label to imply that the product is guacamole, even though it allegedly contains less than 2% avocado powder.
“With Garden Vegetables,” however, was “accurate in the context of the label as a whole, and unlikely to deceive a reasonable consumer. The product does in fact contain vegetables that can be grown in a garden”--avocado powder, dehydrated onion, garlic powder, and bell pepper. Plaintiffs didn’t specifically explain how this was misleading, and the statement didn’t claim a specific amount of vegetables.
The court found that the claims related to "0 g cholesterol" on its Spicy Bean Dip and "0 g transfat" on both products were preempted by the NLEA. FDA regulations allow products containing less than 2 mg of cholesterol can be described as cholesterol free, and provide that trans fat content shall be expressed as grams per serving. If the serving contains less than 0.5 gram, the content, when declared, shall be expressed as zero. Plaintiffs didn’t dispute that defendant complied with the regulations, but argued that these statements were misleading implications that the products are healthy. This was a preempted claim.