100% good news: 7th Cir. reverses "100% grated parmesan cheese" dismissal

Bell v. Publix Super Markets, Inc., 2020 WL 7137786, -- F.3d --, Nos. 19-2581, 19-2741 (7th Cir. Dec. 7, 2020)

Note: Then-Circuit Judge Barrett was a member of the panel when this case was submitted but did not participate in the decision and judgment. The appeal was resolved by a quorum of the panel pursuant to 28 U.S.C. § 46(d).

In a victory for common sense, the court of appeals reversed the dismissal of this consumer protection claim (except for certain parts of the case; because of the way the district court handled this multidistrict litigation, it found that the appeal for some was untimely). Defendants advertise “100% Grated Parmesan Cheese.” Plaintiffs alleged that the products actually and deceptively contain between four and nine percent added cellulose powder and potassium sorbate, though the ingredients list discloses these as ingredients (they fight caking and mold, respectively).

The district court found that “100%” was ambiguous (maybe it was just 100% grated, not 100% parmesan/cheese) and any deception was dispelled by the ingredient list, and also that “common sense would tell a reasonable consumer that, despite the 100% claims, these cheese products must contain added ingredients because they are sold unrefrigerated in the main grocery aisles, alongside dried pastas and canned sauces.”

The core holding, consistent with cases from other circuits: “[A]n accurate fine-print list of ingredients does not foreclose as a matter of law a claim that an ambiguous front label deceives reasonable consumers. Many reasonable consumers do not instinctively parse every front label or read every back label before placing groceries in their carts.” This rule recognizes that ordinary shoppers aren’t judges parsing statutes, and that ambiguities can be carefully designed to deceive. It was at least plausible that, in “100% Grated Parmesan Cheese,” the 100% applied to the cheese. [Cheese is sold grated or not grated. Why would anyone ever expect to get a half grated block of cheese or think the 100% referred to the degree of gratedness?]

Context does matter. And “unreasonable or fanciful interpretations of labels or other advertising” can merit dismissal on the pleadings. Moreover, defendants can offer evidence for their [dumb, linguistically implausible] interpretation showing that consumers aren’t misled. (The court pointed out that plaintiffs said they were prepared to submit surveys showing 85-95% misleadingness, and affidavits from linguists that the most natural and plausible reading was “100% parmesan cheese that is grated.”) Misleadingness is generally a factual matter, as is appropriate in consumer protection cases (and in trademark and Lanham Act false advertising cases), and there was no reason to disregard plaintiffs’ allegations:

What matters here is how consumers actually behave—how they perceive advertising and how they make decisions. These are matters of fact, subject to proof that can be tested at trial, even if as judges we might be tempted to debate and speculate further about them. We doubt it would surprise retailers and marketers if evidence showed that many grocery shoppers make quick decisions that do not involve careful consideration of all information available to them. See, e.g., U.S. Food & Drug Admin., Guidance for Industry: Letter Regarding Point of Purchase Food Labeling (Oct. 2009) (“FDA’s research has found that with [Front of Package] labeling, people are less likely to check the Nutrition Facts label on the information panel of foods (usually, the back or side of the package).”); Karen Bradshaw Schulz, Information Flooding, 48 Ind. L. Rev. 755, 782 (2015) (when terms “like ‘low-fat’ and ‘multi-grain’ were written in big, bright letters on foods,” consumers would “focus on the bright claim rather than turning the box around to read the dull, black-and-white nutrition label on the back”) ....

Next, defendants argued that the FDA’s definition of “grated cheese” allows them to call their products “grated cheese” because that designation allows addition of cellulose and potassium sorbate. As the court pointed out, “[t]he problem lies in the ‘100%,’ especially since the pleadings provide reason to think that consumers understand ‘100% grated cheese’ to mean that the cheese does not have the additives.” Interestingly, the court also pointed to competitive reasons: a manufacturer of grated cheese without additives needs a way to differentiate its product, which couldn’t be done if these sellers also get to claim “100% cheese.”

Regardless, “average consumers are not likely to be aware of the nuances of the FDA’s regulations defining ‘grated cheese.’ … Rather, both plain meaning and the plaintiffs’ surveys and linguists plausibly indicate that a significant portion of consumers read the labels as promising pure cheese without added ingredients.”

Relying on “common sense” about lack of refrigeration did not justify dismissing the claim. As the plaintiffs pointed out, “pure grated Parmesan cheese can be shelf-stable for a long time without refrigeration.” And “today’s grocery shoppers can often spot unrefrigerated cartons of pure grated Parmesan sold beside the cheese wheels that source them.” True, defendants’ products are shelved in the main grocery aisles instead. “But since pure grated Parmesan can be and sometimes is sold unrefrigerated, common sense is not a substitute here for evidence, and certainly not as a matter of law.”

The court also rejected defendants’ alternative preemption argument.

The FDCA expressly bars states from “directly or indirectly establish[ing] under any authority ... any requirement for a food which is the subject of a standard of identity ... that is not identical to such standard of identity or that is not identical to the requirement of section 343(g)” of the Act. The FDA’s standard of identity for “grated cheeses” allows the defendants to add anticaking agents (cellulose powder) and antimycotics (potassium sorbate) and to call the product “grated cheese.” In fact, the standard of identity requires defendants to call their products “Grated Parmesan Cheese.” “If only one variety of cheese is used, the name of the food is ‘grated ____ cheese’, the name of the cheese filling the blank.”

That provision is silent about the addition of “100%.” Given the FDCA, a remedy requiring further disclosures would be preempted. But plaintiffs “seek only to stop defendants from voluntarily adding deceptive language to the federally permitted labels.” Preventing deception wouldn’t establish a new requirement different from the standard of identity, especially given that the FDCA already provides generally that “a food shall be deemed to be misbranded” if its labeling is “false or misleading in any particular.”  “[S]tate-law claims challenging defendants’ voluntary addition of ‘100%’ to their labels are not preempted…. After all, there are all sorts of potentially misleading additions that standards of identity do not explicitly ban.” For example, a false claim that the cheese was from Italy wouldn’t violate the standard of identity, but that wouldn’t require preemption. “The FDCA’s preemption provision means that, while states may not require sellers to add further labeling that is not required by federal law, they may prevent sellers from voluntarily adding deceptive content that is not required by federal law.”

Nor was there conflict preemption/a safe harbor. Though defendants argued that the FDA actually approved Kraft’s use of the “100% Grated Parmesan Cheese” label in 1999 and 2000, that wasn’t what happened. In 1999, the FDA issued Kraft a temporary permit “to market test a product designated as ‘100% Grated Parmesan Cheese’ that deviates from the U.S. standards of identity for Parmesan cheese and grated cheeses” in that it used “a different enzyme technology that fully cures the cheese in 6 months rather than 10 months.” In 2000, the FDA extended the permit. The technology was the focus of the permit, and there was no indication that the FDA assessed the potential deceptiveness of “100% Grated Parmesan Cheese” or approved that label.

Judge Kanne concurred to emphasize that, “while lawyers and judges can find ambiguity in just about anything, that’s not what we expect of the reasonable consumer.” On a motion to dismiss, it’s not enough for defendants to “proffer some alternative, nondeceptive reading of the front label—or fashion the label precisely so that it can bear one plausibly non-deceptive reading—regardless of whether the reasonable consumer (or some significant portion of reasonable consumers) would read it that way,” even when the ingredient list resolves the ambiguity. The district court’s alternative rule would allow a court to announce “as a matter of law that a statement is not deceptive even where it could deceive reasonable consumers as a matter of fact. It assumes reasonable consumers not only notice ambiguities but then investigate to resolve them, either by scouring the fine print or, even less likely, reading up on the shelf life of Parmesan cheese. It assumes too much.”

“[I]f a plaintiff’s interpretation of a challenged statement is not facially illogical, implausible, or fanciful, then a court may not conclude that it is nondeceptive as a matter of law.”  In concluding that the challenged statement was ambiguous, the district court necessarily found that reasonable consumers may interpret the statement in multiple, plausible ways. That meant that likelihood of deception was a factual question that couldn’t be resolved on the pleadings. The deception didn’t have to be “clear”: “Determining that a statement is not ‘clearly misleading’ on the pleadings robs the jury of the opportunity to determine, as a matter of fact, whether the statement is ‘clearly misleading,’ just ‘misleading,’ or ‘not misleading at all.’” Also, a consumer’s interpretation isn’t implausible as a matter of law “just because fine print elsewhere on the label could clarify an ambiguity that a reasonable consumer might not have even noticed in the first place.”