Chocolate pain: Ghirardelli case continues for one product

Miller v. Ghirardelli Chocolate Co., 2013 WL 1402682 (N.D. Cal.)

Miller bought Ghirardelli Chocolate Premium Baking Chips—Classic White and then sued, alleging that Ghirardelli misrepresented that this and four other products contained chocolate or white chocolate when they didn’t, asserting standard California claims.  Previous discussion.  Miller tried to replead, but the court still found that he lacked standing as to the four products he didn’t buy.

Ghirardelli, as a general matter, makes many claims about its chocolately goodness, high-quality cocoa beans, etc.  Miller alleged that the packaging for all five products at issue violated FDA regulations (incorporated into state law) by using “chocolate” on the primary label panel when the products didn’t contain any chocolate, white chocolate, cocoa butter, cacao fat, or cacao derivatives.  He alleged that “Chocolate” was used on the front panel immediately following the brand name Ghirardelli® “in a manner that suggests that it is the ‘characterizing flavor’” under FDA regulations, specifically noting that the ® followed Ghirardelli rather than “Chocolate.”  Even if the brand were “Ghirardelli Chocolate,” the regulations would allegedly require “artificial” or “imitation” statements immediately following the use of the brand.  Miller alleged that the use of the term, along with the pricing of the products similarly with Ghirardelli’s real chocolate products, misled consumers into believing that the products contained chocolate.

Miller further alleged that the packaging for the chips he bought was deceptive because references to “Classic White,” and “Premium” misled consumers into believing that the product is classic white chocolate and a premium white chocolate chip, and included the following:

The luxuriously deep flavor and smooth texture of Ghirardelli Premium Baking Chocolate delivers the ultimate chocolate indulgence. We hand-select the world's finest cocoa beans and roast them to perfection and then blend the purest ingredients to achieve our award-winning chocolate. For our Classic White Baking Chips, pure vanilla and whole milk powder combine to create rich, melt-in-your-mouth bliss. Experience the Ghirardelli difference: …

• Finest grind for smoothest texture and easiest melting.

Miller alleged that, as there was no chocolate or white chocolate in the chips, the product couldn’t deliver chocolate flavor, texture, or indulgence, and that since it wasn’t ground from cocoa beans it couldn’t contain the “finest grind.”  These phrases were allegedly especially misleading because the identical language appeared on a Ghirardelli product that did in fact contain white chocolate (that had at least 20% cocoa butter). Ghirardelli also labels other real white chocolate products as “Classic White” and “Sublime White.” 

The Ghirardelli website also listed the baking chips as “Classic White Chocolate Baking Chips” instead of “Premium Baking Chips—Classic White” and refers to the Sweet Ground White Chocolate Flavor as “Sweet Ground White Chocolate,” without the word “flavor.”   It allowed customers to choose “White Chocolate” as a shopping category, then presented the baking chips and other accused products alongside real white chocolate products.  Ghirardelli allegedly advertised using keywords such as “white chocolate” and asked consumers, “Want White Chocolate?”  The resulting links go to pages offering the accused products.  It sold a cookbook that referred to the baking chips as “Ghirardelli Classic White Chocolate Chips.”

Further, Ghirardelli allegedly trained store personnel at its retail locations to “inform customers that all the Ghirardelli products are real chocolate products.” Customers who ask for “white chocolate chips” were allegedly directed to the “Fake White Chocolate Chips” without being told that they do not contain chocolate. An investigator asked a Ghirardelli store employee “if there were any non-chocolate Ghirardelli products that he could purchase for a friend with a chocolate allergy; the employee stated (as trained to do), that there were none.”

Ghirardelli allegedly permitted its marketing partners, including grocery stores, to advertise, market, and sell the accused products as real white chocolate. Ghirardelli it provided them with information that refers to the products as “real white chocolate.” For example, the marketing material Ghirardelli provided for the baking chips told retailers that the product name is “Classic White Chocolate Chips,” and retailers used this name when displaying the chips on store shelves.

The court previously found no standing to sue for unpurchased products, but allowed Miller to replead based on his argument that the use of the “Ghirardelli Chocolate” trademark plus FDA common name regulations made the misrepresentation the same across products.  The standard for standing is whether the accused products and alleged misrepresentations were substantially similar.  The prior order concluded that, though the use of the labeling was similar, the products were ultimately too different to allow standing: “they look different; they have different uses (baking chips, drink powders, and wafers); they have different labels and different representations on packaging (in the form of the “romance” language designed to convey the experience of the product); and they are marketed and sold differently in that, for example, some are sold alongside each other, and some are sold in commercial markets and others in consumer markets.”

Miller argued that the use of “Chocolate” under “Ghirardelli” in the five products violated the UCL’s unlawful prong because it violated federal regulations that have been borrowed by California law.  Ghirardelli argued that the placement of the words on the packaging didn’t inherently convey something to consumers, but was rather only a logo: no one expects that “Dunkin’ Donuts” coffee will taste like donuts.  Determining a product’s nature or characterizing flavor requires review of the label, and the labels here were dissimilar.  Miller responded that “Ghirardelli® Chocolate” was not a logo, but rather a trademark followed by a product description underneath, and also that “Chocolate” does suggest a product’s nature and characterizing flavor, as shown by FDA regulations thereof.  Other analogies weren’t apposite, presumably because they obviously couldn’t be true (e.g., donut coffee).  At least at the pleading stage, “chocolate” had a specific regulatory meaning, and Ghirardelli used it wrongly on the primary display panel.

The argument that logos couldn’t be dispositive made a lot of sense, but Miller made the point that here, these products were not “coffee or bagels or mugs or baking dishes or almond syrup or whatever other products Ghirardelli might brand. They are all items that look like white chocolate with front labels that all say—above the product description—‘Ghirardelli® Chocolate.’” If “chocolate” includes “white chocolate,” then the injuries suffered by putative class members would be indistinguishable for the five products.  But the problem was that the unlawfulness claim was based on the FDA’s requirement that the statement of identity of the commodity on the principal display panel of a food in package form be “the name ... required by any applicable Federal law or regulation.”  The identity of the commodity here was “white chocolate,” not “chocolate,” so standing had to be based on an examination of the entire label.  With the labels in play, the five products and alleged misrepresentations weren’t sufficiently similar.

Turning to Miller’s claims based on the baking chips, they survived.  Miller argued that using “Chocolate” without stating that the products were “Imitation,” “Artificial” and/or “Artificially Flavored,” Ghirardelli violated the California Sherman Law's incorporation of three FDA regulations defining white chocolate, regulating “imitation” and “artificially flavored,” and regulating the “common or usual name.”

California has adopted by statute all food labeling regulations and definitions/standards of identity under the FDCA, whether in force at the time of California’s law or later adopted.  The FDA then requires the principal display panel of a food package to display a statement of identity, which (as relevant here) has to be the name specified by law. The FDA has provided standards of identity for chocolate and white chocolate, which it requires to contain not less than 20% by weight of cacao fat. Other regulations mandate prominent labeling for imitation products; an imitation food “is a substitute for and resembles another food but is nutritionally inferior to that food,” as determined by comparing the percentages of the “essential nutrients” in the substitute and in the food for which it substitutes. Likewise, the FDA requires products to be labeled as “artificial,” “artificially flavored,” or “naturally flavored,” depending on their content.

Ghirardelli argued that the Sherman Law unconstitutionally delegated the legislature’s lawmaking function by incorporating federal regulations promulgated on or after their effective date—as the white chocolate regulation was.  The court rejected this argument.  “An unconstitutional delegation of authority occurs only when a legislative body (1) leaves the resolution of fundamental policy issues to others or (2) fails to provide adequate direction for the implementation of that policy.” Where a public agency makes the basic policy decisions and provides sufficient safeguards to prevent arbitrary use of delegated power, there is no unconstitutional delegation.  The Sherman Law provided that any person could object to incorporation into California law and trigger a delay and review period, leading to a noticed public evidentiary hearing.  This process meant that the Sherman Law was not unconstitutional.  “The California legislature did not abdicate its authority and instead cross-referenced a comprehensive regulatory framework that already applies to products such as Ghirardelli's products anyway.”

Ghirardelli then argued that the predicate regulatory violations weren’t well pleaded. As to the imitation regulation, it argued that Miller failed to plead nutritional inferiority, the presence of artificial flavor used to simulate the characterizing flavor, or that the product has a common name. But the complaint gave notice of the claims, and the allegations were more than merely labels or general assertions.  Ghirardelli had enough information to answer the complaint.