Wednesday, May 22, 2013

A fresh face in challenges to Del Monte

It's my impression that defendant-favorable UCL-specific doctrines in California/9th Circuit law have not proved terrifically helpful in getting out of a case at the motion to dismiss stage, though I admit this is not based on any quantitative study.  Here's an example:

Kosta v. Del Monte Corp., 2013 WL 2147413 (N.D. Cal.)

Plaintiffs alleged that certain Del Monte products—Fruit Naturals fruit cups, FreshCut canned vegetables, and canned tomato products—were labeled in ways that violated the FDCA, as adopted into California law, and brought the usual California claims, including warranty claims and claims for restitution based on unjust enrichment and quasi-contract. They alleged that Del Monte unlawfully labeled products as “fresh” when they were actually thermally processed, pasteurized, and chemically preserved; labeled products “all natural,” “100% natural,” or natural despite their containing significant quantities of artificial ingredients/preservatives; failed to follow serving size guidelines, misleading consumers regarding the products’ sugar and calorie content per serving; made unlawful nutrient and antioxidant content claims (e.g., labeling products as “No Sugar Added” when they didn’t meet FDA calorie requirements for such a claim and making claims that their tomatoes were “an excellent source of” or “rich in” lycopene or lutein when they didn’t meet FDA minimums or otherwise didn’t comply with the regulations); and made unlawful and unapproved health claims for prevention/treatment of diseases such as cancer or heart disease (e.g., that the lycopene in Del Monte cooked tomatoes could “retard the aging process and stave off heart disease, cancer and major degenerative diseases”). 

On the first claim, based on Fruit Naturals, the lawsuit picks up on a related, successful Lanham Act suit against Del Monte: Plaintiffs alleged that packing the pasteurized and chemically preserved fruit in glass and plastic containers similar to those used for fresh fruit, putting them in the refrigerated produce section of the grocery store, and labeling them as “Must Be Refrigerated,” along with failing to identify ingredients as preservatives on the label, misled consumers into thinking the fruit was fresh.

Plaintiffs alleged that they read the labeling, were deceived, and bought/paid more for the products than they otherwise would have done.

The court rejected Del Monte’s preemption argument.  California can make violations of the FDCA and FDA regulations actionable under state law, and plaintiffs claimed only such violations.  “While Del Monte may disagree with Plaintiffs as to both the meaning of the FDA requirements at issue here and whether its products conform to those requirements, that disagreement does not mean that Plaintiffs are trying to impose additional requirements beyond the FDA's.” To the extent that Del Monte was arguing that it didn’t violate any regulations, that went to the merits and was beyond the scope of a motion to dismiss.

Like most courts to consider the issue (except the Pom district court on remand!), the court rejected the argument that Pom Wonderful LLC v. Coca–Cola Co., 679 F.3d 1170 (9th Cir. 2012), justified a preemption finding.  The Pom court of appeals explicitly declined to decide whether state law claims were preempted and didn’t deal with the presumption against preemption for state laws dealing with fraud and deception in the sale of food.  Pom “limited its discussion to whether the FDCA preempted Lanham Act claims that required the court to interpret FDA regulations; it did not analyze claims brought under a state law that mirrors the FDCA.”  The NLEA explicitly allows states to pass identical labeling laws, but Del Monte’s view of Pom “essentially would render [this provision] meaningless and … bar any private litigant from bringing actions predicated on a violation of analogous state labeling laws.”

Del Monte next unsuccessfully urged the court to stay or dismiss the case under the primary jurisdiction doctrine, which considers “(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity that (4) requires expertise or uniformity in administration.”  Del Monte relied on Astiana v. The Hain Celestial Group, Inc., No. C 11–6342 PJH, 2012 WL 5873585 (N.D. Cal. Nov.19, 2012), which used the doctrine to avoid deciding a misbranding case involving cosmetics labeled “all natural.”  That decision turned on the “absence of any FDA rules or regulations (or even informal policy statements) regarding the use of the word ‘natural’ on cosmetic products ....” Here, however, plaintiffs sought only to enforce existing rules.  Unlike with cosmetics, the FDA has provided informal policy guidance with minimum standards for “natural” for food.  A judicial determination of whether Del Monte complied with the rules wouldn’t risk undercutting the FDA’s expertise and authority.  Misleadingness and effect on a reasonable consumers are within courts’ expertise.

Del Monte then argued, in vain, that plaintiffs lacked constitutional and statutory standing.  But like most plaintiffs, they’d figured out how to properly allege that they bought/paid a premium they wouldn’t have paid in the absence of false advertising.  Del Monte’s citations to cases where plaintiffs alleged that products were defective were inapposite.

Then Del Monte posited that plaintiffs didn’t plausibly plead reliance and deception, since no reasonable consumer would be deceived because reasonable consumers don’t know the details of what FDA regulations require in order to use certain terms.  But the court found it plausible that a reasonable consumer would rely on “front of the package” labeling claims like “fresh,” “all natural,” and “a natural source of antioxidants” when selecting food products. Also, a reasonable consumer, finding a plastic container of fruit in the refrigerated produce section labeled “Must Be Refrigerated,” and identifying no ingredients on the label as chemical preservatives could plausibly believe that the product is fresh cut fruit, and rely on that to buy it/pay a premium for it.

The Song-Beverly Consumer Warranty Act claim failed, though, because products intended for individual consumption are excluded from it.  And the Magnuson-Moss Warranty Act claim failed because claims about nutrient contents are typically product descriptions, not written warranties (promises of freedom from defect).

Plaintiffs’ claim for restitution based on unjust enrichment/quasi-contract also survived.  Del Monte argued that unjust enrichment wasn’t a cause of action, but a general principle synonymous with restitution.  But restitution was what plaintiffs sought, as disgorgement of a benefit unjustly conferred on Del Monte, so this claim was fine. The court thought that the alleged split on the existence of a “cause of action” for “unjust enrichment” under California law was “essentially founded on semantics, drawing a distinction—between unjust enrichment, restitution, and quasi-contract—without a difference. Regardless of whether the claim is labeled one for unjust enrichment, restitution, or some other equitable theory such as quasi-contract or constructive trust, the legal basis for relief is recognized in California law.”

The court also found that plaintiffs had pled fraud with sufficient particularity.   The who was Del Monte; the what was the specific allegedly deceptive claims on; the when was since 2008 and through the class period; and the where was the labels and website.  As for how the claims were deceptive, that was discussed above.

Nor did the court grant Del Monte’s motion to strike all allegations about statements plaintiffs didn’t see and products they didn’t buy. Plaintiffs argued that they had standing to represent a class as long as the products class members bought were sufficiently similar to the ones they actually purchased.  They argued that Del Monte’s nutrient claims weren’t limited to the tomato products they bought but also included spinach/lutein claims.  The critical inquiry was whether there was sufficient similarity in the products (and the representations).  Thus, Del Monte’s objections to references to apparently unbought products and unseen ads (including statements from Del Monte’s annual SEC report, store ad banners, and website claims) weren’t well taken.  “[I]n the Court's view, these products and representations are sufficiently similar to those purchased and seen by Plaintiffs, and any concerns regarding the differences among products at issue are better resolved at the class certification stage.”  The allegations were not “redundant, immaterial, impertinent, or scandalous” within the meaning of Rule 12(f).

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