Thursday, April 19, 2012

Highly limited "healthy fats" claim survives dismissal

Delacruz v. Cytosport, Inc., 2012 WL 1215243 (N.D. Cal.)
Delacruz filed a putative class action under the usual California laws based on claims about Muscle Milk Ready-to-Drink and Bars.  Though Cytosport allegedly represents the products to be healthy and nutritious (e.g., “there's no question you're getting a nutritious snack,” and the products “take[ ] the guess work out of high performance nutrition”), almost 50% of their calories come from fat, basically equivalent to a Krispy Kreme doughnut.  The products claim to blend protein, “healthy” fats, “good” carbohydrates along with vitamins and minerals to provide energy, spur muscle growth, and help recover from workouts.  However, the bars contain palm oil, which plaintiff alleged may be just as unhealthy as trans fats, especially in the processed versions Cytosport uses.  The website contains further alleged misrepresentations touting the products as useful for athletes and non-exercise enthusiasts alike.  The Ready-to-Drink product is advertised as “an ideal nutritional choice [if] you are ... on a diet.”  The FDA has sent a warning letter to Cytosport based on its label for its chocolate shake and the webpage for its bars, among other things stating that they violated the rules for the use of the term “healthy,” though that information wasn’t in the complaint.
Cytosport allegedly recommended that consumers should use the product multiple times a day, before and after workouts, and instead of or along with meals.  Plaintiff alleged that she bought the products for 6 months prior to filing her initial complaint, and that she was exposed to Cytosport’s long-term ad campaign for the products, including the packaging, which induced her to buy them.  She also alleged that she was denied the benefit of her bargain when she decided to purchase the products over competing products, which are less expensive or contain healthier ingredients; she would not have paid as much as she did for the products, or she would not have bought them at all, had she been aware of the misrepresentations.
The court concluded that “healthy fats” was the only really specific claim on the label, since consumers are likely to think that unsaturated fats are healthier than saturated fats and thus that the drink contained unsaturated fat.  The additional claim to be a “nutritional shake,” while difficult to measure concretely, “contributes to a sufficient claim of deceptive product labeling.”  The presence of the nutrient label was not to the contrary; the label doesn’t exist to correct misrepresentations made elsewhere on the label and reasonable consumers expect it to contain details confirming the representations.  However, “healthy” on its own was difficult to define and the plaintiff didn’t provide objective criteria for evaluating healthiness; the analogy to Krispy Kremes was unhelpful, so falsity/misleadingness wasn’t properly alleged as to “healthy” alone or to various other statements that weren’t alleged to be false.  Some statements, such as “Go from cover it up to take it off,” “From invisible to OMG!” and “From frumpy to fabulous,” were mere puffery, as was “ideal” in “ideal nutritional choice [if] you are ... on a diet.”
Plaintiff properly alleged an economic injury from the alleged misrepresentations. As to reliance, the court found her claim that she was “exposed to” the labels “suspiciously vague,” but because she would have to have had the labels in hand to consume the products, the court construed the complaint to imply that she read them and relied on them.  By contrast, she inadequately pled reliance on Cytosport’s long-term ad campaign, which didn’t approach the longevity and pervasiveness of that involved in Tobacco II.  She also didn’t plead that she read or relied on any website statements.
Plaintiff successfully alleged actionable misrepresentation, and her UCL unfairness claim also survived.  The court determined that the best test to use for a consumer class action under the UCL was the FTC’s definition of unfair business practices: “(1) the consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.”  If the product labeling is false and misleading, the injury to the class as a whole could be substantial even if individual injuries are minimal, and there’s no benefit to false and misleading advertising.  “While consumers could arguably avoid the injury by reading the product label in full, misleading labels would appear to qualify as an unfair business practice.”
Finally, the court addressed Cytosport’s standing challenge.  Misrepresentation, economic injury and reliance together provide UCL/FAL standing.  The CLRA standing requirement is more relaxed, in that the allegedly unlawful practice must only have caused damage to the plaintiff, not economic damage; plaintiff’s allegations also sufficed there.  Article III standing was also present; any plaintiff with UCL standing will have Article III standing, since the UCL is narrower.
Cytosport also tried preemption or at least a stay based on the primary jurisdiction doctrine, which allows courts to stay or dismiss without prejudice pending the resolution of a controversy by an administrative agency with special competence.  But Cytosport failed to show that plaintiff’s claims required FDA expertise.  She wasn’t alleging a violation of FDA regulations, but rather that Cytosport’s misrepresentations were likely to mislead a reasonable consumer.

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