This decision conflicts with one
I blogged last week holding that the FDA didn’t have an enforceable
position on evaporated cane juice.
Plaintiffs alleged that they bought multiple flavors of
Chobani’s Greek Yogurt, and alleged that the labels were false and misleading
in three ways: (1) The labels described their sweetener as evaporated cane
juice (ECJ), which is just sugar, aka dried cane syrup; this term falsely concealed
the nature of the sweetener and violated FDA regulations requiring ingredients
to be identified by their “common and usual names,” as well as the standard of
identity for yogurt, which doesn’t list ECJ as an authorized sweetener.
(2) Chobani’s website
said, “The 7g of sugar listed on the nutrition facts panels … comes from a
naturally occurring type of sugar found in all dairy products called ‘lactose.’
This lactose often called ‘milk sugar,’ is the only sugar you'll find as we
don't add sugar to our yogurt.” It also
said, “Does Chobani Champions contain extra sugar? No way! Just because
Champions is made for kids doesn't mean that we need to add extra sugar. You
won't find any high fructose corn syrup or artificial ingredients, flavors, or
colors in our yogurt. Just low-fat milk … ; [and] real fruit, lightly sweetened
with evaporated cane juice ….”
(3) Chobani allegedly falsely claimed that the yogurt contained
“[o]nly natural ingredients” and were “all natural,” but actually included artificial
ingredients, specifically the use of of “fruit or vegetable juice” “for
color.”
Plaintiffs alleged the usual California claims in the usual
ways. Chobani argued first that they
failed to plead reliance. Reliance can
be shown if the defendant’s misrepresentation or nondisclosure was an immediate
cause of the plaintiff’s injury-producing conduct. The court found that plaintiffs showed
reliance as to the ECJ claims: they alleged that use of the term concealed the
fact that the ingredient was essentially white sugar or dried cane syrup; that,
based on the labels, they believed that the yogurt contained “only natural
sugars from milk and fruit and did not contain added sugars or syrups”; and
that they wouldn’t have bought the products if they’d known the truth.
However, plaintiffs’ allegations suggested that they
understood that dried cane syrup was a form of sugar, but “failed to allege
what they believed evaporated cane juice to be if not a form of sugar.” Thus, since ECJ was on the label, it was
implausible on these allegations for them to conclude that only milk and fruit
provided the sugars in the yogurt. But
the ECJ claims still survived, since plaintiffs sufficiently alleged that the
term ECJ was deceptive, concealing that the ingredient is little different than
ordinary white sugar and suggesting that it was akin to natural sugar
cane. Plaintiffs did allege that natural
sugar cane is “healthy and nutritious, containing vitamins, minerals, enzymes,
fibers, and phytonutrients,” unlike ECJ.
“Moreover, to the extent ECJ suggests that the product is derived from a
juice, it may have plausibly suggested that the product is healthier than
refined sugars and syrups.”
Also, the court found that plaintiffs didn’t sufficiently
allege reliance on the “no sugar added” claims. They didn’t allege they ever
saw Chobani’s website, on which the claims resided, and thus they couldn’t have
relied on them. In re Tobacco II didn’t change the result, since that case involved
a long-term ad campaign; plaintiffs are still required to allege facts showing
that the ads at issue were an immediate cause of the purchase decision. Plaintiffs argued that the website statements
violated FDA labeling requirements, rendering the yogurts misbranded and
unlawful to sell; further, they alleged, they wouldn’t have bought the products
if they’d known they weren’t lawfully on the market. But that wasn’t enough to
show reliance; this theory would “eviscerate the enhanced standing requirements
imposed by Proposition 64” and Kwikset,
which requires actual reliance on the allegedly deceptive or misleading
statements. Plus, there was no allegation of a duty to disclose the alleged
noncompliance with labeling laws.
Likewise, plaintiffs failed to allege reliance on the “all
natural” representations; allegations that they wouldn’t have bought the
products if they’d known that some of the yogurts were colored “artificially”
using “fruit or vegetable juice concentrate” were insufficient because the
label explicitly disclosed that Chobani added “fruit or vegetable juice
concentrate [for color].” Thus, the
reliance allegations were implausible.
With only the ECJ claims remaining, the court found that
plaintiffs had adequately alleged injury, even though Chobani argued that the
product contained exactly what was in the ingredient list. That ignored the theory of harm accepted by Kwikset: plaintiffs wouldn’t have bought
the product but for the alleged misrepresentation.
Plaintiffs didn’t allege they purchased all Chobani flavors,
or any Chobani Champions products. The
allegedly deceptive use of ECJ was substantially similar across all the
products, but plaintiffs didn’t allege facts sufficient to show that the products
they didn’t purchase were substantially similar, and both kinds of similarity
were required; claims based on unpurchased products were dismissed without
prejudice.
The court then found that it was plausible that a reasonable
consumer could be deceived by the misstatements: “it is plausible that
Defendant's use of the term ECJ suggests that ECJ is a healthier alternative to
refined sugar and may conceal the fact that ECJ is” basically white sugar (why
do you think Chobani used the term, especially in the face of FDA guidance
suggesting the contrary?).
The court also rejected Chobani’s preemption arguments,
including the fruitless argument that the FDCA lacks a private cause of action
and thus must intend that states not grant a cause of action for violating the
law. But the FDCA specifically
contemplates state law enforcement of “identical” rules. Pom
Wonderful didn’t change that; it was limited to the Lanham Act and didn’t
deal with the presumption against federal preemption of state health/safety
law. Cases involving Class III medical
devices and fraud on the FDA claims were also inapposite; there was no “comparably
rigorous review” or premarket approval for foods here, and the extensive
regulation of Class III medical devices gave preemption a different context
than the FDA’s “substantial, but more limited oversight of food labeling
requirements” that explicitly recognized a state role. Plaintiffs weren’t suing because the conduct
at issue violated the FDCA, but rather because it violated state law identical
to the federal requirements.
Chobani argued that express preemption applied. Plaintiffs alleged that the use of ECJ
violated the FDA’s requirement that ingredients be referred to by their “common
and usual name.” Chobani noted that
plaintiffs were relying on draft guidance about ECJ specifically stating that
it was nonbinding. But this specific
document was consistent with the general regulation about common and usual
names, and an agency’s interpretation of its own regulation, even if set forth in
an informal document, is “controlling unless plainly erroneous or inconsistent
with the regulation.” The FDA also expressed the same view about ECJ in several
warning letters, which while informal and advisory, also communicated the
agency’s position. For purposes of a
motion to dismiss, this was sufficient to show that plaintiffs’ claims were
identical to FDA regulations.
Plaintiffs also alleged that using ECJ in the ingredients
violated the standard of identity for yogurt, which sets forth a list of
approved “[n]utritive carbohydrate sweeteners” that may be included in a
product designated as a yogurt. The
list includes “[s]ugar (sucrose), beet or cane,” but it wasn’t entirely clear
that ECJ was permitted. However, the court
declined to resolve the issue, dismissing the claims on primary jurisdiction
grounds.
The core ECJ claim wasn’t dismissed on primary jurisdiction
grounds, because the informal guidance on ECJ meant that the court wouldn’t
have to resolve an issue of first impression without the FDA’s input. But the
FDA had proposed a new standard of identity for yogurt allowing any “safe and suitable
sweetening ingredients,” and plaintiffs didn’t allege that ECJ wasn’t safe or
suitable. The FDA had also suggested
that it wouldn’t enforce violations of the current standard of identity for
companies complying with the proposed one, making the primary jurisdiction
doctrine appropriate.
Nearing the end of the analysis: plaintiffs argued that Rule
9(b) didn’t apply to their UCL unlawfulness claim, since it wasn’t based on
fraud. The court disagreed because the underlying allegations were that the product
labels were misleading and deceptive and that’s what made them unlawful. But plaintiffs did plead with sufficient
particularity; they didn’t have to identify the exact days on which they bought
the products and they did plead the general timeframe of purchases. Chobani didn’t show that it used a term other
than ECJ during the alleged purchase period, so plaintiffs didn’t need further
specificity.
Kane v. Chobani, Inc., 2013 WL 3776172 (N.D. Cal.)
Plaintiffs sought a preliminary injunction against the sale
of allegedly mislabeled yogurts, and the court denied the motion.
The court first rejected plaintiffs’ argument that, under
California law, they weren’t required to show irreparable harm. The court disagreed about the substance of
California law, which generally does require irreparable harm. Anyway, choice of law principles supported
the application of federal law to this question of civil procedure, where the
determination wouldn’t alter the final outcome of the litigation, since a
permanent injunction would still be available if plaintiffs ultimately
prevailed.
Accepting that plaintiffs had shown likely success on the
merits, they still hadn’t shown irreparable harm. The court rejected their arguments that they
didn’t need to show irreparable harm because they were acting as private attorneys
general (that’s not enough); because they were seeking to enjoin a public
nuisance (there was no specific California law declaring mislabeled food to be
a public nuisance, nor did plaintiffs plead the existence of a public nuisance
or a special injury to the plaintiffs of a character different in kind from
that suffered by the general public, as required for public nuisance standing);
and that they were seeking to enforce statutory provisions, allowing an
inference of irreparable harm. This last
argument in favor of a presumption of irreparable harm, even assuming the
precedent behind it transferred from federal statutes to state ones, was probably
no longer good law after eBay and Winter.
Those cases at least require strong evidence of a legislative intent to abrogate
the irreparable harm element, and there was no such evidence with respect to
the consumer protection claims. (Also,
California cases following the pre-eBay rule
that no irreparable harm must be shown when an injunction is authorized by
statute only apply that rule to government agencies, which plaintiffs weren’t.)
Anyway, California law requires courts to balance the harm
to the parties, including by considering irreparable harm to the
plaintiffs. The harm here to Chobani
would be great—relabeling in accordance with any injunction wouldn’t be
possible before the yogurt expired, so it would lose millions.
And plaintiffs and other consumers were not likely to suffer
irreparable harm. Plaintiffs argued that
Chobani’s labels deceived people into over-consuming sugar, which has a
negative impact on public health. The
court wasn’t persuaded that consumers were likely to be confused about the
sugar connection: “The fact that the name of the ingredient discloses that it
is derived from cane seriously undermines any contention that consumers are
unlikely to be under the impression that the ingredient is or contains sugar.” More significantly, the labels explicitly
disclose the total amount of sugar; failing to disclose the portion of sugar
from ECJ—the added sugar—wasn’t a problem without any evidence that a consumer
who knows the total amount of sugar would suffer health effects from not
knowing how much is from ECJ.
The other harms plaintiffs identified—buying yogurt they
otherwise wouldn’t have bought, and having competitors lose market position as
a result of the mislabeling—were monetary and compensable with damages, thus
not irreparable; also alleged harms to competition were vague and speculative. (I thought in trademark cases market position
was always irreparable!)
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