Thursday, August 15, 2013

Standing not enough for grab bag of food allegations

Trazo v. Nestlé USA, Inc., 2013 WL 4083218 (N.D. Cal. Aug. 9, 2013) (magistrate judge)

Plaintiffs alleged they’d purchased a number of Nestlé products in reliance on false/misleading claims.  The products were the Dark Chocolate Eskimo Pie, Juicy Juice, Buitoni Shrimp and Lobster Ravioli, Dreyer’s All Natural Fruit Bars, Toll House Peanut Butter and Milk Chocolate Morsels, Toll House Dark Chocolate Morsels, Milk Chocolate Raisinets, Lean Pockets Breakfast Sandwiches, Hot Pockets Breakfast Sandwiches, Coffee Mate, Rich Milk Chocolate Cocoa, Nesquik Chocolate Syrup, and Buitoni Alfredo Sauce.

There were nine alleged legal violations: (1) products labeled or advertised “No Sugar Added” but which, in violation of FDA regulations, contain concentrated fruit juice or other added sugars, and/or provide more than 40 calories per reference amount but do not disclose that the product is not “low calorie” or “calorie reduced” and direct the consumer’s attention to the nutrition panel for further information; (2) products using the ingredient name “Evaporated Cane Juice”: (3) products using “All Natural” or “Natural,” despite artificial ingredients, flavoring, added coloring, and/or chemical preservatives; (4) products making an antioxidant claim for a nutrient lacking a Daily Value or lacking the minimum Daily Value specified for the claim made; (5) products making a nutrient content claim despite containing fat, saturated fat, sodium, or cholesterol in excess of disqualifying amounts under the regulations; (6) products using “No Sugar Added” on food intended for use by infants less than two years of age;(7) products making an unauthorized health claim; (8) products using an unlawful serving size; and (9) products packaged with nonfunctional slack-fill.  Plaintiffs brought the usual California claims.

The court here used the same reasoning on standing as the just-blogged Clancy case.  Plaintiffs alleged that they bought the named products based on Nestlé’s deceptive claims.  That gave them standing:

Nestlé may be right that claims involving other products, never seen or purchased by Plaintiffs, have no business in this case. But standing is merely a threshold inquiry that requires the class action plaintiff to demonstrate she suffered economic injury by virtue of the purchases she herself made, not for the other transactions that she seeks to represent. The court therefore confines the standing inquiry to the named plaintiffs’ individual claims alone, and defers questions of sufficient similarity to the class certification stage. (footnotes omitted)

The magistrate judge went on to reject Nestlé’s broad preemption argument, but accept some more specific arguments.  Preemption is an affirmative defense on which Nestlé bore the burden; mere assertions that plaintiffs were attempting to impose standards the FDA didn’t require were insufficient.

Here, the result was different than in Clancy: plaintiffs’ antioxidant claims against Dark Chocolate Raisinets and Dark Chocolate Toll House Morsels were based on Nestlé’s use of “source.”  While “good source” is regulated, the judge concluded that “source” was not, and that because the regulation specified “good source,” “contains,” and “provides,” without including lesser or similar terms, the FDA had decided to leave “source” unregulated, thus preempting plaintiffs’ claim.  Expressio unius est exclusio alterius.  [On the merits, regardless of the conflict with Clancy, this seems unpersuasive.  There’s little rational reason for FDA to leave “source” unregulated if it’s regulating “contains” and “provides.”]

However, the judge rejected the general idea that the FDCA impliedly preempts state-law claims, because its express preemption provision is pretty clear that identical state-law claims can stick around.  Similarly, the primary jurisdiction doctrine wasn’t applicable, absent concrete evidence that the FDA was currently involved in creating a new regulation on the subject of the lawsuit.

However, the judge agreed that the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA) expressly preempted claims relating to Hot Pockets and Lean Pockets. These acts govern all meat and poultry products through the USDA’s Food Safety and Inspection Service (FSIS), which regulates labeling.  Unlike non-meat food, meat products are preapproved by the USDA, including their labels.  Hot Pockets and Lean Pockets bear USDA approved stickers. 

The FMIA and PPIA include express preemption clauses barring any state law imposing labeling, packaging, or ingredient requirements in addition to, or different than, the federal law.  The judge concluded that, because the Sherman Law isn’t parallel to either the FMIA or PIPA, but rather the FDCA, it was preempted.  “Although the USDA adopts similar nutrition labeling regulations as imposed by the FDCA ‘to the extent possible,’ the fact remains that the USDA and FDA are able to adopt their own regulations to govern their respective realms.” (I’m not sure I fully get this—why wouldn’t the Sherman Act be preempted only to the extent it imposed non-identical requirements?  Why isn’t there any analysis of whether the claims at issue allege conduct that would violate FMIA/PIPA?  It seems that the judge concluded that USDA approval precludes any argument that there was a violation of the law that the USDA didn’t detect, which is certainly a possibility, but then the reason for preemption is not that the Sherman Law isn’t identical to federal law but rather that federal law occupies the field.  But that doesn’t seem consistent with the non-identicality language of the preemption provisions.) 

Plaintiffs argued that the FDA believes it has some jurisdiction over these products, but that’s not the question—the question is whether California has any jurisdiction.  And anyway USDA apparently has the controlling hand even when the FDA wants to exercise its jurisdiction—the FDA will only prosecute a violation if the USDA doesn’t want to do so.  Thus, to be permissible, state laws must parallel the FMIA and PIPA and FSIS regulations, not the FDCA and its regulations.

Getting more towards field preemption, the judge wrote that even if the Sherman Law’s requirements were parallel to those of FMIA/PIPA, “allowing a jury to weigh in on preapproved USDA labels would surely conflict with the federal regulatory scheme.”  It might be different if the USDA hadn’t already “passed judgment” on the products at issue, but here the USDA approved seal indicated that the USDA had determined that the labels weren’t false or misleading.  (The regulatory gap created here seems pretty obvious: USDA is not really in a great position to evaluate non-meat claims about the products, even if meat is a component.)

The judge then turned to specific nonpreempted claims.  With respect to the “No Sugar Added” claims against Eskimo Pie and Juicy Juice, the regulations provided that a product that uses “no sugar added” but that is not “low calorie” must include on its label a statement that directs the consumer to the nutrition panel for further information on sugar and calorie content. The regulation details how to identify “low calorie” foods; while plaintiffs pled that the products didn’t meet those requirements, they didn’t explain why.  Thus, their allegations were merely conclusory and insufficient.

The claim that Nestlé’s Buitoni Shrimp & Lobster Ravioli wrongly used “evaporated cane juice” to describe sugar was plausible, given the common/usual name regulations and FDA’s draft guidance on the matter. Likewise, plaintiffs successfully alleged that Coffee-Mate’s “0g Trans Fat” claim was an improper nutrient content claim because the product contained disqualifying levels of saturated fat under the regulations.

Plaintiffs alleged that Toll House Peanut Butter & Milk Chocolate Morsels were not actually “Naturally Flavored” because the product contained the artificial flavor vanillin.  But it wasn’t clear from the complaint that vanilla was a characterizing flavor of the morsels; plaintiffs needed to provide further explanation about how the use of artificially flavored vanilla made the product violate the regulations.

For reasons covered above in preemption, the court also dismissed the antioxidant claims against Dark Chocolate Morsels and Dark Chocolate Raisinets: “natural source of antioxidants” didn’t “characterize the level” of the antioxidants and thus wasn’t a nutrient content claim.

The judge also dismissed plaintiffs’ claims against statements on labels for Dark Chocolate Raisinets (“help to maintain good health”) and Rich Milk Chocolate Cocoa (“antioxidants help to protect cells from damage and calcium to build strong bones”) based on violation of the nutrient content regulations.  The relevant regulation only applied if a statement was “made in connection with an explicit or implicit statement about a nutrient,” and it wasn’t clear whether these statements were made in connection with a nutrient content claim.  But the regulations also cover “health claims” separate from “nutrient content claims,” and these were health claims, so that part of the claim survived.  Also, the good health claim wasn’t a drug claim to cure/mitigate/treat/prevent disease. But “antioxidants help to protect cells from damage and calcium to build strong bones” could be interpreted as aiming to mitigate cancerous conditions in cells; while extrinsic facts could show that Nestlé’s products weren’t intended for use as drugs, that wasn’t appropriate for a motion to dismiss.

The judge then turned to overall failure to state a claim; Nestlé challenged the specificity of the allegations.  Plaintiffs failed to allege either that a reasonable consumer would be deceived or their own interpretations.  “While regulatory violations might suggest that these statements might be misleading to a reasonable consumer, that alone is not enough to plead a claim under the FAL, CLRA, or the misleading/false advertising prongs of the UCL.”  Any repled complaint needed to “connect the dots showing how the alleged misbranding misled plaintiffs in a way that a reasonable consumer would be deceived.”  So, while the plaintiffs might have read nutrient content claims such as “0g Trans Fat” and been misled into thinking the product was overall low in fat, they failed to allege that.

The unjust enrichment, Song-Beverly Act, and Magnuson-Moss Act claims went for the usual reasons.

The class allegations also fared badly.  Nestlé’s main argument was that the complaint was “a tangled web of nine separate and unrelated misbranding theories, which are associated with an open-ended list of products that includes ones not named in the complaint.”  The complaint needed to make a prima facie showing that FRCP 23 could be satisfied.  Here, the complaint failed to allege typicality.  Since other courts used the “sufficient similarity” test to determine both typicality and standing, the judge did the same.  Claims can proceed even when the plaintiff didn’t buy the other products in the class if “product composition is less important” and “the alleged misrepresentations are sufficiently similar across product lines.”  This can occur when the challenged products are of the same kind, comprised of largely the same ingredients, and bear the same alleged mislabeling.

The test wasn’t satisfied.  Plaintiffs’ claims encompassed all products with labels containing certain key words (i.e., “health” and “all natural”), or having certain attributes (having the “wrong serving size” or containing “unlawful slack fill”), but that didn’t limit the class to sufficiently similar product lines. “No Sugar Added,” for example, “might be portrayed on different parts of the package, in different sizes, on wildly different products such as apple juice versus cheese, which would result in very different analysis to determine if the statements were false or misleading.”  All the claims here depended on similar context-specific analysis that required information about the food composition or actual labels.  The complaint didn’t provide that information, not even the names of all the challenged products.

For the same reason, the classes weren’t ascertainable.  “Courts have gone so far as to require plaintiffs to provide the actual labels relied upon. Without actual labels or product lists, how can potential class members determine whether they have purchased infringing products?” A notice to all people who bought products containing “unlawful slack fill” according to federal regulations would do nothing to inform potential class members.

Likewise, the complaint made clear that commonality couldn’t be satisfied.  Plaintiffs’ claims spanned nine different misbranding theories involving different legal and factual questions.  Plaintiffs responded that there were common questions, such as “May a food manufacturer add sugar (evaporated cane juice) to its product and then label the product as “No Sugar Added?”  But this purported common question applies only to one misbranding theory, not the class action as a whole. “While different products, if sufficiently similar, might be certified regarding one or similar misbranding theories, a class action suit involving nine unrelated theories cannot as a matter of law be certified.”

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